{"collection":"philosophy-ethics","full_text_available":true,"graph_url":"https://unchartedknowledge.5gfusion.net/v2/api/page/gutenberg_39949/graph","html_url":"https://unchartedknowledge.5gfusion.net/v2/page/gutenberg_39949","id":"gutenberg_39949","license":"Public Domain (US)","rights_basis":"gutenberg_metadata_copyright_false","source":"gutenberg","source_url":"https://www.gutenberg.org/ebooks/39949","summary":null,"tags":["Category: Essays, Letters & Speeches","Category: Philosophy & Ethics","Category: Sociology","Economics","Science"],"text":"Produced by David Garcia, Marilynda Fraser-Cunliffe and\nthe Online Distributed Proofreading Team at\nhttp://www.pgdp.net (This book was produced from scanned\nimages of public domain material from the Google Print\nproject.)\n\n\n\n\n\n\n\n\n\n  THE PLACE OF SCIENCE\n  IN MODERN CIVILISATION\n\n\n\n\n  BOOKS BY THORSTEIN VEBLEN\n\n    THE THEORY OF THE LEISURE CLASS\n    THE THEORY OF BUSINESS ENTERPRISE\n    THE INSTINCT OF WORKMANSHIP\n    IMPERIAL GERMANY AND THE INDUSTRIAL REVOLUTION\n    THE NATURE OF PEACE AND THE TERMS OF ITS PERPETUATION\n    THE HIGHER LEARNING IN AMERICA\n    THE VESTED INTERESTS AND THE STATE OF THE INDUSTRIAL ARTS\n    THE PLACE OF SCIENCE IN MODERN CIVILISATION\n\n\n\n\n  THE PLACE OF SCIENCE\n  IN\n  MODERN CIVILISATION\n\n  AND OTHER ESSAYS\n\n  _by_\n\n  THORSTEIN VEBLEN\n\n\n  _New York_\n  B. W. HUEBSCH\n  _Mcmxix_\n\n\n\n\n  COPYRIGHT,  1919\n  BY B. W. HUEBSCH\n\n  PRINTED IN THE UNITED STATES OF AMERICA\n\n\n\n\nPUBLISHER'S NOTE\n\n\nThese essays are here reprinted from various periodicals, running over\na period of about twenty years. The selection is due to Messrs. Leon\nArdzrooni, Wesley C. Mitchell and Walter W. Stewart.\n\nIt is unlikely that more than a few public libraries possess files so\ncomplete as to give access to all of these essays, and even if the\nmagazines were readily obtainable at libraries they would almost\ncertainly have to be read in those institutions. The nature of the\nmaterial, its timeliness (Mr. Veblen deals with ideas in such a manner\nas to give the date of composition a secondary importance), and the fact\nthat it would otherwise be lost to all save diligent excavators, explain\nits preservation in this form.\n\nThe courtesy of the periodicals in which the papers first appeared, in\npermitting their reproduction, is gratefully acknowledged.\n\n\n\n\nCONTENTS\n\n\n                                                        PAGE\n  THE PLACE OF SCIENCE IN MODERN CIVILISATION              1\n  THE EVOLUTION OF THE SCIENTIFIC POINT OF VIEW           32\n  WHY IS ECONOMICS NOT AN EVOLUTIONARY SCIENCE?           56\n  THE PRECONCEPTIONS OF ECONOMIC SCIENCE. I.              82\n   \"        \"         \"     \"        \"    II.            114\n   \"        \"         \"     \"        \"    III.           148\n  PROFESSOR CLARK'S ECONOMICS                            180\n  THE LIMITATIONS OF MARGINAL UTILITY                    231\n  GUSTAV SCHMOLLER'S ECONOMICS                           252\n  INDUSTRIAL AND PECUNIARY EMPLOYMENTS                   279\n  ON THE NATURE OF CAPITAL. I.                           324\n   \"  \"     \"    \"    \"     II.                          352\n  SOME NEGLECTED POINTS IN THE THEORY OF SOCIALISM       387\n  THE SOCIALIST ECONOMICS OF KARL MARX. I.               409\n   \"      \"         \"      \"   \"    \"   II.              431\n  THE MUTATION THEORY AND THE BLOND RACE                 457\n  THE BLOND RACE AND THE ARYAN CULTURE                   477\n  AN EARLY EXPERIMENT IN TRUSTS                          497\n\n\n\n\nTHE PLACE OF SCIENCE IN MODERN CIVILISATION[1]\n\n\nIt is commonly held that modern Christendom is superior to any and all\nother systems of civilised life. Other ages and other cultural regions\nare by contrast spoken of as lower, or more archaic, or less mature. The\nclaim is that the modern culture is superior on the whole, not that it\nis the best or highest in all respects and at every point. It has, in\nfact, not an all-around superiority, but a superiority within a closely\nlimited range of intellectual activities, while outside this range many\nother civilisations surpass that of the modern occidental peoples. But\nthe peculiar excellence of the modern culture is of such a nature as to\ngive it a decisive practical advantage over all other cultural schemes\nthat have gone before or that have come into competition with it. It has\nproved itself fit to survive in a struggle for existence as against\nthose civilisations which differ from it in respect of its distinctive\ntraits.\n\nModern civilisation is peculiarly matter-of-fact. It contains many\nelements that are not of this character, but these other elements do not\nbelong exclusively or characteristically to it. The modern civilised\npeoples are in a peculiar degree capable of an impersonal, dispassionate\ninsight into the material facts with which mankind has to deal. The apex\nof cultural growth is at this point. Compared with this trait the rest\nof what is comprised in the cultural scheme is adventitious, or at the\nbest it is a by-product of this hard-headed apprehension of facts. This\nquality may be a matter of habit or of racial endowment, or it may be an\noutcome of both; but whatever be the explanation of its prevalence, the\nimmediate consequence is much the same for the growth of civilisation. A\ncivilisation which is dominated by this matter-of-fact insight must\nprevail against any cultural scheme that lacks this element. This\ncharacteristic of western civilisation comes to a head in modern\nscience, and it finds its highest material expression in the technology\nof the machine industry. In these things modern culture is creative and\nself-sufficient; and these being given, the rest of what may seem\ncharacteristic in western civilisation follows by easy consequence. The\ncultural structure clusters about this body of matter-of-fact knowledge\nas its substantial core. Whatever is not consonant with these opaque\ncreations of science is an intrusive feature in the modern scheme,\nborrowed or standing over from the barbarian past.\n\nOther ages and other peoples excel in other things and are known by\nother virtues. In creative art, as well as in critical taste, the\nfaltering talent of Christendom can at the best follow the lead of the\nancient Greeks and the Chinese. In deft workmanship the handicraftsmen\nof the middle Orient, as well as of the Far East, stand on a level\nsecurely above the highest European achievement, old or new. In\nmyth-making, folklore, and occult symbolism many of the lower barbarians\nhave achieved things beyond what the latter-day priests and poets know\nhow to propose. In metaphysical insight and dialectical versatility many\norientals, as well as the Schoolmen of the Middle Ages, easily surpass\nthe highest reaches of the New Thought and the Higher Criticism. In a\nshrewd sense of the religious verities, as well as in an unsparing faith\nin devout observances, the people of India or Thibet, or even the\nmediaeval Christians, are past-masters in comparison even with the select\nof the faith of modern times. In political finesse, as well as in\nunreasoning, brute loyalty, more than one of the ancient peoples give\nevidence of a capacity to which no modern civilised nation may aspire.\nIn warlike malevolence and abandon, the hosts of Islam, the Sioux\nIndian, and the \"heathen of the northern sea\" have set the mark above\nthe reach of the most strenuous civilised warlord.\n\nTo modern civilised men, especially in their intervals of sober\nreflection, all these things that distinguish the barbarian\ncivilisations seem of dubious value and are required to show cause why\nthey should not be slighted. It is not so with the knowledge of facts.\nThe making of states and dynasties, the founding of families, the\nprosecution of feuds, the propagation of creeds and the creation of\nsects, the accumulation of fortunes, the consumption of\nsuperfluities--these have all in their time been felt to justify\nthemselves as an end of endeavor; but in the eyes of modern civilised\nmen all these things seem futile in comparison with the achievements of\nscience. They dwindle in men's esteem as time passes, while the\nachievements of science are held higher as time passes. This is the one\nsecure holding-ground of latter-day conviction, that \"the increase and\ndiffusion of knowledge among men\" is indefeasibly right and good. When\nseen in such perspective as will clear it of the trivial perplexities of\nworkday life, this proposition is not questioned within the horizon of\nthe western culture, and no other cultural ideal holds a similar\nunquestioned place in the convictions of civilised mankind.\n\nOn any large question which is to be disposed of for good and all the\nfinal appeal is by common consent taken to the scientist. The solution\noffered in the name of science is decisive so long as it is not set\naside by a still more searching scientific inquiry. This state of things\nmay not be altogether fortunate, but such is the fact. There are other,\nolder grounds of finality that may conceivably be better, nobler,\nworthier, more profound, more beautiful. It might conceivably be\npreferable, as a matter of cultural ideals, to leave the last word with\nthe lawyer, the duelist, the priest, the moralist, or the college of\nheraldry. In past times people have been content to leave their\nweightiest questions to the decision of some one or other of these\ntribunals, and, it cannot be denied, with very happy results in those\nrespects that were then looked to with the greatest solicitude. But\nwhatever the common-sense of earlier generations may have held in this\nrespect, modern common-sense holds that the scientist's answer is the\nonly ultimately true one. In the last resort enlightened common-sense\nsticks by the opaque truth and refuses to go behind the returns given by\nthe tangible facts.\n\n_Quasi lignum vitae in paradiso Dei, et quasi lucerna fulgoris in domo\nDomini_, such is the place of science in modern civilisation. This\nlatterday faith in matter-of-fact knowledge may be well grounded or it\nmay not. It has come about that men assign it this high place, perhaps\nidolatrously, perhaps to the detriment of the best and most intimate\ninterests of the race. There is room for much more than a vague doubt\nthat this cult of science is not altogether a wholesome growth--that the\nunmitigated quest of knowledge, of this matter-of-fact kind, makes for\nrace-deterioration and discomfort on the whole, both in its immediate\neffects upon the spiritual life of mankind, and in the material\nconsequences that follow from a great advance in matter-of-fact\nknowledge.\n\nBut we are not here concerned with the merits of the case. The question\nhere is: How has this cult of science arisen? What are its cultural\nantecedents? How far is it in consonance with hereditary human nature?\nand, What is the nature of its hold on the convictions of civilised men?\n\n       *       *       *       *       *\n\nIn dealing with pedagogical problems and the theory of education,\ncurrent psychology is nearly at one in saying that all learning is of a\n\"pragmatic\" character; that knowledge is inchoate action inchoately\ndirected to an end; that all knowledge is \"functional\"; that it is of\nthe nature of use. This, of course, is only a corollary under the main\npostulate of the latter-day psychologists, whose catchword is that The\nIdea is essentially active. There is no need of quarreling with this\n\"pragmatic\" school of psychologists. Their aphorism may not contain the\nwhole truth, perhaps, but at least it goes nearer to the heart of the\nepistemological problem than any earlier formulation. It may confidently\nbe said to do so because, for one thing, its argument meets the\nrequirements of modern science. It is such a concept as matter-of-fact\nscience can make effective use of; it is drawn in terms which are, in\nthe last analysis, of an impersonal, not to say tropismatic, character;\nsuch as is demanded by science, with its insistence on opaque cause and\neffect. While knowledge is construed in teleological terms, in terms of\npersonal interest and attention, this teleological aptitude is itself\nreducible to a product of unteleological natural selection. The\nteleological bent of intelligence is an hereditary trait settled upon\nthe race by the selective action of forces that look to no end. The\nfoundations of pragmatic intelligence are not pragmatic, nor even\npersonal or sensible.\n\nThis impersonal character of intelligence is, of course, most evident on\nthe lower levels of life. If we follow Mr. Loeb, e.g., in his inquiries\ninto the psychology of that life that lies below the threshold of\nintelligence, what we meet with is an aimless but unwavering motor\nresponse to stimulus.[2] The response is of the nature of motor impulse,\nand in so far it is \"pragmatic,\" if that term may fairly be applied to\nso rudimentary a phase of sensibility. The responding organism may be\ncalled an \"agent\" in so far. It is only by a figure of speech that these\nterms are made to apply to tropismatic reactions. Higher in the scale of\nsensibility and nervous complication instincts work to a somewhat\nsimilar outcome. On the human plane, intelligence (the selective effect\nof inhibitive complication) may throw the response into the form of a\nreasoned line of conduct looking to an outcome that shall be expedient\nfor the agent. This is naive pragmatism of the developed kind. There is\nno longer a question but that the responding organism is an \"agent\" and\nthat his intelligent response to stimulus is of a teleological\ncharacter. But that is not all. The inhibitive nervous complication may\nalso detach another chain of response to the given stimulus, which does\nnot spend itself in a line of motor conduct and does not fall into a\nsystem of uses. Pragmatically speaking, this outlying chain of response\nis unintended and irrelevant. Except in urgent cases, such an idle\nresponse seems commonly to be present as a subsidiary phenomenon. If\ncredence is given to the view that intelligence is, in its elements, of\nthe nature of an inhibitive selection, it seems necessary to assume some\nsuch chain of idle and irrelevant response to account for the further\ncourse of the elements eliminated in giving the motor response the\ncharacter of a reasoned line of conduct. So that associated with the\npragmatic attention there is found more or less of an irrelevant\nattention, or idle curiosity. This is more particularly the case where\na higher range of intelligence is present. This idle curiosity is,\nperhaps, closely related to the aptitude for play, observed both in man\nand in the lower animals.[3] The aptitude for play, as well as the\nfunctioning of idle curiosity, seems peculiarly lively in the young,\nwhose aptitude for sustained pragmatism is at the same time relatively\nvague and unreliable.\n\nThis idle curiosity formulates its response to stimulus, not in terms of\nan expedient line of conduct, nor even necessarily in a chain of motor\nactivity, but in terms of the sequence of activities going on in the\nobserved phenomena. The \"interpretation\" of the facts under the guidance\nof this idle curiosity may take the form of anthropomorphic or animistic\nexplanations of the \"conduct\" of the objects observed. The\ninterpretation of the facts takes a dramatic form. The facts are\nconceived in an animistic way, and a pragmatic animus is imputed to\nthem. Their behavior is construed as a reasoned procedure on their part\nlooking to the advantage of these animistically conceived objects, or\nlooking to the achievement of some end which these objects are conceived\nto have at heart for reasons of their own.\n\nAmong the savage and lower barbarian peoples there is commonly current a\nlarge body of knowledge organised in this way into myths and legends,\nwhich need have no pragmatic value for the learner of them and no\nintended bearing on his conduct of practical affairs. They may come to\nhave a practical value imputed to them as a ground of superstitious\nobservances, but they may also not.[4] All students of the lower\ncultures are aware of the dramatic character of the myths current among\nthese peoples, and they are also aware that, particularly among the\npeaceable communities, the great body of mythical lore is of an idle\nkind, as having very little intended bearing on the practical conduct of\nthose who believe in these myth-dramas. The myths on the one hand, and\nthe workday knowledge of uses, materials, appliances, and expedients on\nthe other hand, may be nearly independent of one another. Such is the\ncase in an especial degree among those peoples who are prevailingly of a\npeaceable habit of life, among whom the myths have not in any great\nmeasure been canonised into precedents of divine malevolence.\n\nThe lower barbarian's knowledge of the phenomena of nature, in so far as\nthey are made the subject of deliberate speculation and are organised\ninto a consistent body, is of the nature of life-histories. This body of\nknowledge is in the main organised under the guidance of an idle\ncuriosity. In so far as it is systematised under the canons of curiosity\nrather than of expediency, the test of truth applied throughout this\nbody of barbarian knowledge is the test of dramatic consistency. In\naddition to their dramatic cosmology and folk legends, it is needless to\nsay, these peoples have also a considerable body of worldly wisdom in a\nmore or less systematic form. In this the test of validity is\nusefulness.[5]\n\nThe pragmatic knowledge of the early days differs scarcely at all in\ncharacter from that of the maturest phases of culture. Its highest\nachievements in the direction of systematic formulation consist of\ndidactic exhortations to thrift, prudence, equanimity, and shrewd\nmanagement--a body of maxims of expedient conduct. In this field there\nis scarcely a degree of advance from Confucius to Samuel Smiles. Under\nthe guidance of the idle curiosity, on the other hand, there has been a\ncontinued advance toward a more and more comprehensive system of\nknowledge. With the advance in intelligence and experience there come\ncloser observation and more detailed analysis of facts.[6] The\ndramatisation of the sequence of phenomena may then fall into somewhat\nless personal, less anthropomorphic formulations of the processes\nobserved; but at no stage of its growth--at least at no stage hitherto\nreached--does the output of this work of the idle curiosity lose its\ndramatic character. Comprehensive generalisations are made and\ncosmologies are built up, but always in dramatic form. General\nprinciples of explanation are settled on, which in the earlier days of\ntheoretical speculation seem invariably to run back to the broad vital\nprinciple of generation. Procreation, birth, growth, and decay\nconstitute the cycle of postulates within which the dramatised processes\nof natural phenomena run their course. Creation is procreation in these\narchaic theoretical systems, and causation is gestation and birth. The\narchaic cosmological schemes of Greece, India, Japan, China, Polynesia,\nand America, all run to the same general effect on this head.[7] The\nlike seems true for the Elohistic elements in the Hebrew scriptures.\n\nThroughout this biological speculation there is present, obscurely in\nthe background, the tacit recognition of a material causation, such as\nconditions the vulgar operations of workday life from hour to hour. But\nthis causal relation between vulgar work and product is vaguely taken\nfor granted and not made a principle for comprehensive generalisations.\nIt is overlooked as a trivial matter of course. The higher\ngeneralisations take their color from the broader features of the\ncurrent scheme of life. The habits of thought that rule in the\nworking-out of a system of knowledge are such as are fostered by the\nmore impressive affairs of life, by the institutional structure under\nwhich the community lives. So long as the ruling institutions are those\nof blood-relationship, descent, and clannish discrimination, so long the\ncanons of knowledge are of the same complexion.\n\nWhen presently a transformation is made in the scheme of culture from\npeaceable life with sporadic predation to a settled scheme of predaceous\nlife, involving mastery and servitude, gradations of privilege and\nhonor, coercion and personal dependence, then the scheme of knowledge\nundergoes an analogous change. The predaceous, or higher barbarian,\nculture is, for the present purpose, peculiar in that it is ruled by an\naccentuated pragmatism. The institutions of this cultural phase are\nconventionalised relations of force and fraud. The questions of life are\nquestions of expedient conduct as carried on under the current relations\nof mastery and subservience. The habitual distinctions are distinctions\nof personal force, advantage, precedence, and authority. A shrewd\nadaptation to this system of graded dignity and servitude becomes a\nmatter of life and death, and men learn to think in these terms as\nultimate and definitive. The system of knowledge, even in so far as its\nmotives are of a dispassionate or idle kind, falls into the like terms,\nbecause such are the habits of thought and the standards of\ndiscrimination enforced by daily life.[8]\n\nThe theoretical work of such a cultural era, as, for instance, the\nMiddle Ages, still takes the general shape of dramatisation, but the\npostulates of the dramaturgic theories and the tests of theoretic\nvalidity are no longer the same as before the scheme of graded servitude\ncame to occupy the field. The canons which guide the work of the idle\ncuriosity are no longer those of generation, blood-relationship, and\nhomely life, but rather those of graded dignity, authenticity, and\ndependence. The higher generalisations take on a new complexion, it may\nbe without formally discarding the older articles of belief. The\ncosmologies of these higher barbarians are cast in terms of a\nfeudalistic hierarchy of agents and elements, and the causal nexus\nbetween phenomena is conceived animistically after the manner of\nsympathetic magic. The laws that are sought to be discovered in the\nnatural universe are sought in terms of authoritative enactment. The\nrelation in which the deity, or deities, are conceived to stand to facts\nis no longer the relation of progenitor, so much as that of suzerainty.\nNatural laws are corollaries under the arbitrary rules of status imposed\non the natural universe by an all-powerful Providence with a view to the\nmaintenance of his own prestige. The science that grows in such a\nspiritual environment is of the class represented by alchemy and\nastrology, in which the imputed degree of nobility and prepotency of the\nobjects and the symbolic force of their names are looked to for an\nexplanation of what takes place.\n\nThe theoretical output of the Schoolmen has necessarily an accentuated\npragmatic complexion, since the whole cultural scheme under which they\nlived and worked was of a strenuously pragmatic character. The current\nconcepts of things were then drawn in terms of expediency, personal\nforce, exploit, prescriptive authority, and the like, and this range of\nconcepts was by force of habit employed in the correlation of facts for\npurposes of knowledge even where no immediate practical use of the\nknowledge so gained was had in view. At the same time a very large\nproportion of the scholastic researches and speculations aimed directly\nat rules of expedient conduct, whether it took the form of a philosophy\nof life under temporal law and custom, or of a scheme of salvation under\nthe decrees of an autocratic Providence. A naive apprehension of the\ndictum that all knowledge is pragmatic would find more satisfactory\ncorroboration in the intellectual output of scholasticism than in any\nsystem of knowledge of an older or a later date.\n\nWith the advent of modern times a change comes over the nature of the\ninquiries and formulations worked out under the guidance of the idle\ncuriosity--which from this epoch is often spoken of as the scientific\nspirit. The change in question is closely correlated with an analogous\nchange in institutions and habits of life, particularly with the changes\nwhich the modern era brings in industry and in the economic organisation\nof society. It is doubtful whether the characteristic intellectual\ninterests and teachings of the new era can properly be spoken of as less\n\"pragmatic,\" as that term is sometimes understood, than those of the\nscholastic times; but they are of another kind, being conditioned by a\ndifferent cultural and industrial situation.[9] In the life of the new\nera conceptions of authentic rank and differential dignity have grown\nweaker in practical affairs, and notions of preferential reality and\nauthentic tradition similarly count for less in the new science. The\nforces at work in the external world are conceived in a less animistic\nmanner, although anthropomorphism still prevails, at least to the degree\nrequired in order to give a dramatic interpretation of the sequence of\nphenomena.\n\nThe changes in the cultural situation which seem to have had the most\nserious consequences for the methods and animus of scientific inquiry\nare those changes that took place in the field of industry. Industry in\nearly modern times is a fact of relatively greater preponderance, more\nof a tone-giving factor, than it was under the regime of feudal status.\nIt is the characteristic trait of the modern culture, very much as\nexploit and fealty were the characteristic cultural traits of the\nearlier time. This early-modern industry is, in an obvious and\nconvincing degree, a matter of workmanship. The same has not been true\nin the same degree either before or since. The workman, more or less\nskilled and with more or less specialised efficiency, was the central\nfigure in the cultural situation of the time; and so the concepts of the\nscientists came to be drawn in the image of the workman. The\ndramatisations of the sequence of external phenomena worked out under\nthe impulse of the idle curiosity were then conceived in terms of\nworkmanship. Workmanship gradually supplanted differential dignity as\nthe authoritative canon of scientific truth, even on the higher levels\nof speculation and research. This, of course, amounts to saying in other\nwords that the law of cause and effect was given the first place, as\ncontrasted with dialectical consistency and authentic tradition. But\nthis early-modern law of cause and effect--the law of efficient\ncauses--is of an anthropomorphic kind. \"Like causes produce like\neffects,\" in much the same sense as the skilled workman's product is\nlike the workman; \"nothing is found in the effect that was not contained\nin the cause,\" in much the same manner.\n\nThese dicta are, of course, older than modern science, but it is only in\nthe early days of modern science that they come to rule the field with\nan unquestioned sway and to push the higher grounds of dialectical\nvalidity to one side. They invade even the highest and most recondite\nfields of speculation, so that at the approach to the transition from\nthe early-modern to the late-modern period, in the eighteenth century,\nthey determine the outcome even in the counsels of the theologians. The\ndeity, from having been in mediaeval times primarily a suzerain concerned\nwith the maintenance of his own prestige, becomes primarily a creator\nengaged in the workmanlike occupation of making things useful for man.\nHis relation to man and the natural universe is no longer primarily that\nof a progenitor, as it is in the lower barbarian culture, but rather\nthat of a talented mechanic. The \"natural laws\" which the scientists of\nthat era make so much of are no longer decrees of a preternatural\nlegislative authority, but rather details of the workshop specifications\nhanded down by the master-craftsman for the guidance of handicraftsmen\nworking out his designs. In the eighteenth-century science these natural\nlaws are laws specifying the sequence of cause and effect, and will bear\ncharacterisation as a dramatic interpretation of the activity of the\ncauses at work, and these causes are conceived in a quasi-personal\nmanner. In later modern times the formulations of causal sequence grow\nmore impersonal and more objective, more matter-of-fact; but the\nimputation of activity to the observed objects never ceases, and even in\nthe latest and maturest formulations of scientific research the dramatic\ntone is not wholly lost. The causes at work are conceived in a highly\nimpersonal way, but hitherto no science (except ostensibly mathematics)\nhas been content to do its theoretical work in terms of inert magnitude\nalone. Activity continues to be imputed to the phenomena with which\nscience deals; and activity is, of course, not a fact of observation,\nbut is imputed to the phenomena by the observer.[10] This is, also of\ncourse, denied by those who insist on a purely mathematical formulation\nof scientific theories, but the denial is maintained only at the cost of\nconsistency. Those eminent authorities who speak for a colorless\nmathematical formulation invariably and necessarily fall back on the\n(essentially metaphysical) preconception of causation as soon as they go\ninto the actual work of scientific inquiry.[11]\n\nSince the machine technology has made great advances, during the\nnineteenth century, and has become a cultural force of wide-reaching\nconsequence, the formulations of science have made another move in the\ndirection of impersonal matter-of-fact. The machine process has\ndisplaced the workman as the archetype in whose image causation is\nconceived by the scientific investigators. The dramatic interpretation\nof natural phenomena has thereby become less anthropomorphic; it no\nlonger constructs the life-history of a cause working to produce a given\neffect--after the manner of a skilled workman producing a piece of\nwrought goods--but it constructs the life-history of a process in which\nthe distinction between cause and effect need scarcely be observed in an\nitemised and specific way, but in which the run of causation unfolds\nitself in an unbroken sequence of cumulative change. By contrast with\nthe pragmatic formulations of worldly wisdom these latter-day theories\nof the scientists appear highly opaque, impersonal, and matter-of-fact;\nbut taken by themselves they must be admitted still to show the\nconstraint of the dramatic prepossessions that once guided the savage\nmyth-makers.\n\nIn so far as touches the aims and the animus of scientific inquiry, as\nseen from the point of view of the scientist, it is a wholly fortuitous\nand insubstantial coincidence that much of the knowledge gained under\nmachine-made canons of research can be turned to practical account. Much\nof this knowledge is useful, or may be made so, by applying it to the\ncontrol of the processes in which natural forces are engaged. This\nemployment of scientific knowledge for useful ends is technology, in the\nbroad sense in which the term includes, besides the machine industry\nproper, such branches of practice as engineering, agriculture, medicine,\nsanitation, and economic reforms. The reason why scientific theories can\nbe turned to account for these practical ends is not that these ends are\nincluded in the scope of scientific inquiry. These useful purposes lie\noutside the scientist's interest. It is not that he aims, or can aim, at\ntechnological improvements. His inquiry is as \"idle\" as that of the\nPueblo myth-maker. But the canons of validity under whose guidance he\nworks are those imposed by the modern technology, through habituation to\nits requirements; and therefore his results are available for the\ntechnological purpose. His canons of validity are made for him by the\ncultural situation; they are habits of thought imposed on him by the\nscheme of life current in the community in which he lives; and under\nmodern conditions this scheme of life is largely machine-made. In the\nmodern culture, industry, industrial processes, and industrial products\nhave progressively gained upon humanity, until these creations of man's\ningenuity have latterly come to take the dominant place in the cultural\nscheme; and it is not too much to say that they have become the chief\nforce in shaping men's daily life, and therefore the chief factor in\nshaping men's habits of thought. Hence men have learned to think in the\nterms in which the technological processes act. This is particularly\ntrue of those men who by virtue of a peculiarly strong susceptibility in\nthis direction become addicted to that habit of matter-of-fact inquiry\nthat constitutes scientific research.\n\nModern technology makes use of the same range of concepts, thinks in the\nsame terms, and applies the same tests of validity as modern science. In\nboth, the terms of standardisation, validity, and finality are always\nterms of impersonal sequence, not terms of human nature or of\npreternatural agencies. Hence the easy copartnership between the two.\nScience and technology play into one another's hands. The processes of\nnature with which science deals and which technology turns to account,\nthe sequence of changes in the external world, animate and inanimate,\nrun in terms of brute causation, as do the theories of science. These\nprocesses take no thought of human expediency or inexpediency. To make\nuse of them they must be taken as they are, opaque and unsympathetic.\nTechnology, therefore, has come to proceed on an interpretation of these\nphenomena in mechanical terms, not in terms of imputed personality nor\neven of workmanship. Modern science, deriving its concepts from the same\nsource, carries on its inquiries and states its conclusions in terms of\nthe same objective character as those employed by the mechanical\nengineer.\n\nSo it has come about, through the progressive change of the ruling\nhabits of thought in the community, that the theories of science have\nprogressively diverged from the formulations of pragmatism, ever since\nthe modern era set in. From an organisation of knowledge on the basis of\nimputed personal or animistic propensity the theory has changed its base\nto an imputation of brute activity only, and this latter is conceived in\nan increasingly matter-of-fact manner; until, latterly, the pragmatic\nrange of knowledge and the scientific are more widely out of touch than\never, differing not only in aim, but in matter as well. In both domains\nknowledge runs in terms of activity, but it is on the one hand knowledge\nof what had best be done, and on the other hand knowledge of what takes\nplace; on the one hand knowledge of ways and means, on the other hand\nknowledge without any ulterior purpose. The latter range of knowledge\nmay serve the ends of the former, but the converse does not hold true.\n\nThese two divergent ranges of inquiry are to be found together in all\nphases of human culture. What distinguishes the present phase is that\nthe discrepancy between the two is now wider than ever before. The\npresent is nowise distinguished above other cultural eras by any\nexceptional urgency or acumen in the search for pragmatic expedients.\nNeither is it safe to assert that the present excels all other\ncivilisations in the volume or the workmanship of that body of knowledge\nthat is to be credited to the idle curiosity. What distinguishes the\npresent in these premises is (1) that the primacy in the cultural scheme\nhas passed from pragmatism to a disinterested inquiry whose motive is\nidle curiosity, and (2) that in the domain of the latter the making of\nmyths and legends in terms of imputed personality, as well as the\nconstruction of dialectical systems in terms of differential reality,\nhas yielded the first place to the making of theories in terms of\nmatter-of-fact sequence.[12]\n\nPragmatism creates nothing but maxims of expedient conduct. Science\ncreates nothing but theories.[13] It knows nothing of policy or utility,\nof better or worse. None of all that is comprised in what is to-day\naccounted scientific knowledge. Wisdom and proficiency of the pragmatic\nsort does not contribute to the advance of a knowledge of fact. It has\nonly an incidental bearing on scientific research, and its bearing is\nchiefly that of inhibition and misdirection. Wherever canons of\nexpediency are intruded into or are attempted to be incorporated in the\ninquiry, the consequence is an unhappy one for science, however happy it\nmay be for some other purpose extraneous to science. The mental attitude\nof worldly wisdom is at cross-purposes with the disinterested scientific\nspirit, and the pursuit of it induces an intellectual bias that is\nincompatible with scientific insight. Its intellectual output is a body\nof shrewd rules of conduct, in great part designed to take advantage of\nhuman infirmity. Its habitual terms of standardisation and validity are\nterms of human nature, of human preference, prejudice, aspiration,\nendeavor, and disability, and the habit of mind that goes with it is\nsuch as is consonant with these terms. No doubt, the all-pervading\npragmatic animus of the older and non-European civilisations has had\nmore than anything else to do with their relatively slight and slow\nadvance in scientific knowledge. In the modern scheme of knowledge it\nholds true, in a similar manner and with analogous effect, that training\nin divinity, in law, and in the related branches of diplomacy, business\ntactics, military affairs, and political theory, is alien to the\nskeptical scientific spirit and subversive of it.\n\nThe modern scheme of culture comprises a large body of worldly wisdom,\nas well as of science. This pragmatic lore stands over against science\nwith something of a jealous reserve. The pragmatists value themselves\nsomewhat on being useful as well as being efficient for good and evil.\nThey feel the inherent antagonism between themselves and the scientists,\nand look with some doubt on the latter as being merely decorative\ntriflers, although they sometimes borrow the prestige of the name of\nscience--as is only good and well, since it is of the essence of worldly\nwisdom to borrow anything that can be turned to account. The reasoning\nin these fields turns about questions of personal advantage of one kind\nor another, and the merits of the claims canvassed in these discussions\nare decided on grounds of authenticity. Personal claims make up the\nsubject of the inquiry, and these claims are construed and decided in\nterms of precedent and choice, use and wont, prescriptive authority, and\nthe like. The higher reaches of generalisation in these pragmatic\ninquiries are of the nature of deductions from authentic tradition, and\nthe training in this class of reasoning gives discrimination in respect\nof authenticity and expediency. The resulting habit of mind is a bias\nfor substituting dialectical distinctions and decisions _de jure_ in the\nplace of explanations _de facto_. The so-called \"sciences\" associated\nwith these pragmatic disciplines, such as jurisprudence, political\nscience, and the like, are a taxonomy of credenda. Of this character was\nthe greater part of the \"science\" cultivated by the Schoolmen, and large\nremnants of the same kind of authentic convictions are, of course, still\nfound among the tenets of the scientists, particularly in the social\nsciences, and no small solicitude is still given to their cultivation.\nSubstantially the same value as that of the temporal pragmatic inquiries\nbelongs also, of course, to the \"science\" of divinity. Here the\nquestions to which an answer is sought, as well as the aim and method of\ninquiry, are of the same pragmatic character, although the argument runs\non a higher plane of personality, and seeks a solution in terms of a\nremoter and more metaphysical expediency.\n\n       *       *       *       *       *\n\nIn the light of what has been said above, the questions recur: How far\nis the scientific quest of matter-of-fact knowledge consonant with the\ninherited intellectual aptitudes and propensities of the normal man?\nand, What foothold has science in the modern culture? The former is a\nquestion of the temperamental heritage of civilised mankind, and\ntherefore it is in large part a question of the circumstances which have\nin the past selectively shaped the human nature of civilised mankind.\nUnder the barbarian culture, as well as on the lower levels of what is\ncurrently called civilised life, the dominant note has been that of\ncompetitive expediency for the individual or the group, great or small,\nin an avowed struggle for the means of life. Such is still the ideal of\nthe politician and business man, as well as of other classes whose\nhabits of life lead them to cling to the inherited barbarian traditions.\nThe upper-barbarian and lower-civilised culture, as has already been\nindicated, is pragmatic, with a thoroughness that nearly bars out any\nnon-pragmatic ideal of life or of knowledge. Where this tradition is\nstrong there is but a precarious chance for any consistent effort to\nformulate knowledge in other terms than those drawn from the prevalent\nrelations of personal mastery and subservience and the ideals of\npersonal gain.\n\nDuring the Dark and Middle Ages, for instance, it is true in the main\nthat any movement of thought not controlled by considerations of\nexpediency and conventions of status are to be found only in the obscure\ndepths of vulgar life, among those neglected elements of the population\nthat lived below the reach of the active class struggle. What there is\nsurviving of this vulgar, non-pragmatic intellectual output takes the\nform of legends and folk-tales, often embroidered on the authentic\ndocuments of the Faith. These are less alien to the latest and highest\nculture of Christendom than are the dogmatic, dialectical, and chivalric\nproductions that occupied the attention of the upper classes in mediaeval\ntimes. It may seem a curious paradox that the latest and most perfect\nflower of the western civilisation is more nearly akin to the spiritual\nlife of the serfs and villeins than it is to that of the grange or the\nabbey. The courtly life and the chivalric habits of thought of that past\nphase of culture have left as nearly no trace in the cultural scheme of\nlater modern times as could well be. Even the romancers who ostensibly\nrehearse the phenomena of chivalry, unavoidably make their knights and\nladies speak the language and the sentiments of the slums of that time,\ntempered with certain schematised modern reflections and speculations.\nThe gallantries, the genteel inanities and devout imbecilities of\nmediaeval high-life would be insufferable even to the meanest and most\nromantic modern intelligence. So that in a later, less barbarian age the\nprecarious remnants of folklore that have come down through that vulgar\nchannel--half savage and more than half pagan--are treasured as\ncontaining the largest spiritual gains which the barbarian ages of\nEurope have to offer.\n\nThe sway of barbarian pragmatism has, everywhere in the western world,\nbeen relatively brief and relatively light; the only exceptions would be\nfound in certain parts of the Mediterranean seaboard. But wherever the\nbarbarian culture has been sufficiently long-lived and unmitigated to\nwork out a thoroughly selective effect in the human material subjected\nto it, there the pragmatic animus may be expected to have become supreme\nand to inhibit all movement in the direction of scientific inquiry and\neliminate all effective aptitude for other than worldly wisdom. What the\nselective consequences of such a protracted regime of pragmatism would\nbe for the temper of the race may be seen in the human flotsam left by\nthe great civilisations of antiquity, such as Egypt, India, and Persia.\nScience is not at home among these leavings of barbarism. In these\ninstances of its long and unmitigated dominion the barbarian culture has\nselectively worked out a temperamental bias and a scheme of life from\nwhich objective, matter-of-fact knowledge is virtually excluded in favor\nof pragmatism, secular and religious. But for the greater part of the\nrace, at least for the greater part of civilised mankind, the regime of\nthe mature barbarian culture has been of relatively short duration, and\nhas had a correspondingly superficial and transient selective effect. It\nhas not had force and time to eliminate certain elements of human nature\nhanded down from an earlier phase of life, which are not in full\nconsonance with the barbarian animus or with the demands of the\npragmatic scheme of thought. The barbarian-pragmatic habit of mind,\ntherefore, is not properly speaking a temperamental trait of the\ncivilised peoples, except possibly within certain class limits (as,\n_e.g._, the German nobility). It is rather a tradition, and it does not\nconstitute so tenacious a bias as to make head against the strongly\nmaterialistic drift of modern conditions and set aside that increasingly\nurgent resort to matter-of-fact conceptions that makes for the primacy\nof science. Civilised mankind does not in any great measure take back\natavistically to the upper-barbarian habit of mind. Barbarism covers too\nsmall a segment of the life-history of the race to have given an\nenduring temperamental result. The unmitigated discipline of the higher\nbarbarism in Europe fell on a relatively small proportion of the\npopulation, and in the course of time this select element of the\npopulation was crossed and blended with the blood of the lower elements\nwhose life always continued to run in the ruts of savagery rather than\nin those of the high-strung, finished barbarian culture that gave rise\nto the chivalric scheme of life.\n\nOf the several phases of human culture the most protracted, and the one\nwhich has counted for most in shaping the abiding traits of the race, is\nunquestionably that of savagery. With savagery, for the purpose in hand,\nis to be classed that lower, relatively peaceable barbarism that is not\ncharacterised by wide and sharp class discrepancies or by an unremitting\nendeavor of one individual or group to get the better of another. Even\nunder the full-grown barbarian culture--as, for instance, during the\nMiddle Ages--the habits of life and the spiritual interests of the great\nbody of the population continue in large measure to bear the character\nof savagery. The savage phase of culture accounts for by far the greater\nportion of the life-history of mankind, particularly if the lower\nbarbarism and the vulgar life of later barbarism be counted in with\nsavagery, as in a measure they properly should. This is particularly\ntrue of those racial elements that have entered into the composition of\nthe leading peoples of Christendom.\n\nThe savage culture is characterised by the relative absence of\npragmatism from the higher generalisations of its knowledge and beliefs.\nAs has been noted above, its theoretical creations are chiefly of the\nnature of mythology shading off into folklore. This genial spinning of\napocryphal yarns is, at its best, an amiably inefficient formulation of\nexperiences and observations in terms of something like a life-history\nof the phenomena observed. It has, on the one hand, little value, and\nlittle purpose, in the way of pragmatic expediency, and so it is not\nclosely akin to the pragmatic-barbarian scheme of life; while, on the\nother hand, it is also ineffectual as a systematic knowledge of\nmatter-of-fact. It is a quest of knowledge, perhaps of systematic\nknowledge, and it is carried on under the incentive of the idle\ncuriosity. In this respect it falls in the same class with the civilised\nman's science; but it seeks knowledge not in terms of opaque\nmatter-of-fact, but in terms of some sort of spiritual life imputed to\nthe facts. It is romantic and Hegelian rather than realistic and\nDarwinian. The logical necessities of its scheme of thought are\nnecessities of spiritual consistency rather than of quantitative\nequivalence. It is like science in that it has no ulterior motive beyond\nthe idle craving for a systematic correlation of data; but it is unlike\nscience in that its standardisation and correlation of data run in terms\nof the free play of imputed personal initiative rather than in terms of\nthe constraint of objective cause and effect.\n\nBy force of the protracted selective discipline of this past phase of\nculture, the human nature of civilised mankind is still substantially\nthe human nature of savage man. The ancient equipment of congenital\naptitudes and propensities stands over substantially unchanged, though\noverlaid with barbarian traditions and conventionalities and readjusted\nby habituation to the exigencies of civilised life. In a measure,\ntherefore, but by no means altogether, scientific inquiry is native to\ncivilised man with his savage heritage, since scientific inquiry\nproceeds on the same general motive of idle curiosity as guided the\nsavage myth-makers, though it makes use of concepts and standards in\ngreat measure alien to the myth-makers' habit of mind. The ancient human\npredilection for discovering a dramatic play of passion and intrigue in\nthe phenomena of nature still asserts itself. In the most advanced\ncommunities, and even among the adepts of modern science, there comes up\npersistently the revulsion of the native savage against the inhumanly\ndispassionate sweep of the scientific quest, as well as against the\ninhumanly ruthless fabric of technological processes that have come out\nof this search for matter-of-fact knowledge. Very often the savage need\nof a spiritual interpretation (dramatisation) of phenomena breaks\nthrough the crust of acquired materialistic habits of thought, to find\nsuch refuge as may be had in articles of faith seized on and held by\nsheer force of instinctive conviction. Science and its creations are\nmore or less uncanny, more or less alien, to that fashion of craving for\nknowledge that by ancient inheritance animates mankind. Furtively or by\nan overt breach of consistency, men still seek comfort in marvelous\narticles of savage-born lore, which contradict the truths of that\nmodern science whose dominion they dare not question, but whose findings\nat the same time go beyond the breaking point of their jungle-fed\nspiritual sensibilities.\n\nThe ancient ruts of savage thought and conviction are smooth and easy;\nbut however sweet and indispensable the archaic ways of thinking may be\nto the civilised man's peace of mind, yet such is the binding force of\nmatter-of-fact analysis and inference under modern conditions that the\nfindings of science are not questioned on the whole. The name of science\nis after all a word to conjure with. So much so that the name and the\nmannerisms, at least, if nothing more of science, have invaded all\nfields of learning and have even overrun territory that belongs to the\nenemy. So there are \"sciences\" of theology, law, and medicine, as has\nalready been noted above. And there are such things as Christian\nScience, and \"scientific\" astrology, palmistry, and the like. But within\nthe field of learning proper there is a similar predilection for an air\nof scientific acumen and precision where science does not belong. So\nthat even that large range of knowledge that has to do with general\ninformation rather than with theory--what is loosely termed\nscholarship--tends strongly to take on the name and forms of theoretical\nstatement. However decided the contrast between these branches of\nknowledge on the one hand, and science properly so called on the other\nhand, yet even the classical learning, and the humanities generally,\nfall in with this predilection more and more with each succeeding\ngeneration of students. The students of literature, for instance, are\nmore and more prone to substitute critical analysis and linguistic\nspeculation, as the end of their endeavors, in the place of that\ndiscipline of taste and that cultivated sense of literary form and\nliterary feeling that must always remain the chief end of literary\ntraining, as distinct from philology and the social sciences. There is,\nof course, no intention to question the legitimacy of a science of\nphilology or of the analytical study of literature as a fact in cultural\nhistory, but these things do not constitute training in literary taste,\nnor can they take the place of it. The effect of this straining after\nscientific formulations in a field alien to the scientific spirit is as\ncurious as it is wasteful. Scientifically speaking, these\nquasi-scientific inquiries necessarily begin nowhere and end in the same\nplace; while in point of cultural gain they commonly come to nothing\nbetter than spiritual abnegation. But these blindfold endeavors to\nconform to the canons of science serve to show how wide and unmitigated\nthe sway of science is in the modern community.\n\nScholarship--that is to say an intimate and systematic familiarity with\npast cultural achievements--still holds its place in the scheme of\nlearning, in spite of the unadvised efforts of the short-sighted to\nblend it with the work of science, for it affords play for the ancient\ngenial propensities that ruled men's quest of knowledge before the\ncoming of science or of the outspoken pragmatic barbarism. Its place may\nnot be so large in proportion to the entire field of learning as it was\nbefore the scientific era got fully under way. But there is no intrinsic\nantagonism between science and scholarship, as there is between\npragmatic training and scientific inquiry. Modern scholarship shares\nwith modern science the quality of not being pragmatic in its aim. Like\nscience it has no ulterior end. It may be difficult here and there to\ndraw the line between science and scholarship, and it may even more be\nunnecessary to draw such a line; yet while the two ranges of discipline\nbelong together in many ways, and while there are many points of contact\nand sympathy between the two; while the two together make up the modern\nscheme of learning; yet there is no need of confounding the one with the\nother, nor can the one do the work of the other. The scheme of learning\nhas changed in such manner as to give science the more commanding place,\nbut the scholar's domain has not thereby been invaded, nor has it\nsuffered contraction at the hands of science, whatever may be said of\nthe weak-kneed abnegation of some whose place, if they have one, is in\nthe field of scholarship rather than of science.\n\n       *       *       *       *       *\n\nAll that has been said above has of course nothing to say as to the\nintrinsic merits of this quest of matter-of-fact knowledge. In point of\nfact, science gives its tone to modern culture. One may approve or one\nmay deprecate the fact that this opaque, materialistic interpretation of\nthings pervades modern thinking. That is a question of taste, about\nwhich there is no disputing. The prevalence of this matter-of-fact\ninquiry is a feature of modern culture, and the attitude which critics\ntake toward this phenomenon is chiefly significant as indicating how far\ntheir own habit of mind coincides with the enlightened common-sense of\ncivilised mankind. It shows in what degree they are abreast of the\nadvance of culture. Those in whom the savage predilection or the\nbarbarian tradition is stronger than their habituation to civilised life\nwill find that this dominant factor of modern life is perverse, if not\ncalamitous; those whose habits of thought have been fully shaped by the\nmachine process and scientific inquiry are likely to find it good. The\nmodern western culture, with its core of matter-of-fact knowledge, may\nbe better or worse than some other cultural scheme, such as the classic\nGreek, the mediaeval Christian, the Hindu, or the Pueblo Indian. Seen in\ncertain lights, tested by certain standards, it is doubtless better; by\nother standards, worse. But the fact remains that the current cultural\nscheme, in its maturest growth, is of that complexion; its\ncharacteristic force lies in this matter-of-fact insight; its highest\ndiscipline and its maturest aspirations are these.\n\nIn point of fact, the sober common-sense of civilised mankind accepts no\nother end of endeavor as self-sufficient and ultimate. That such is the\ncase seems to be due chiefly to the ubiquitous presence of the machine\ntechnology and its creations in the life of modern communities. And so\nlong as the machine process continues to hold its dominant place as a\ndisciplinary factor in modern culture, so long must the spiritual and\nintellectual life of this cultural era maintain the character which the\nmachine process gives it.\n\nBut while the scientist's spirit and his achievements stir an\nunqualified admiration in modern men, and while his discoveries carry\nconviction as nothing else does, it does not follow that the manner of\nman which this quest of knowledge produces or requires comes near\nanswering to the current ideal of manhood, or that his conclusions are\nfelt to be as good and beautiful as they are true. The ideal man, and\nthe ideal of human life, even in the apprehension of those who most\nrejoice in the advances of science, is neither the finikin skeptic in\nthe laboratory nor the animated slide-rule. The quest of science is\nrelatively new. It is a cultural factor not comprised, in anything like\nits modern force, among those circumstances whose selective action in\nthe far past has given to the race the human nature which it now has.\nThe race reached the human plane with little of this searching knowledge\nof facts; and throughout the greater part of its life-history on the\nhuman plane it has been accustomed to make its higher generalisations\nand to formulate its larger principles of life in other terms than those\nof passionless matter-of-fact. This manner of knowledge has occupied an\nincreasing share of men's attention in the past, since it bears in a\ndecisive way upon the minor affairs of workday life; but it has never\nuntil now been put in the first place, as the dominant note of human\nculture. The normal man, such as his inheritance has made him, has\ntherefore good cause to be restive under its dominion.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _The American Journal of Sociology_,\nVol. XI, March, 1906.\n\n[2] Jacques Loeb, _Heliotropismus der Thiere_, and _Comparative\nPsychology and Physiology of the Brain_.\n\n[3] Cf. Gross, _Spiele der Thiere_, chap. 2 (esp. pp. 65-76), and chap.\n5; _The Play of Man_, Part III, sec. 3; Spencer, _Principles of\nPsychology_, secs. 533-35.\n\n[4] The myths and legendary lore of the Eskimo, the Pueblo Indians, and\nsome tribes of the northwest coast afford good instances of such idle\ncreations. Cf. various _Reports_ of the Bureau of American Ethnology;\nalso, e.g., Tylor, _Primitive Culture_, esp. the chapters on \"Mythology\"\nand \"Animism.\"\n\n[5] \"Pragmatic\" is here used in a more restricted sense than the\ndistinctively pragmatic school of modern psychologists would commonly\nassign the term. \"Pragmatic,\" \"teleological,\" and the like terms have\nbeen extended to cover imputation of purpose as well as conversion to\nuse. It is not intended to criticise this ambiguous use of terms, nor to\ncorrect it; but the terms are here used only in the latter sense, which\nalone belongs to them by force of early usage and etymology. \"Pragmatic\"\nknowledge, therefore, is such as is designed to serve an expedient end\nfor the knower, and is here contrasted with the imputation of expedient\nconduct to the facts observed. The reason for preserving this\ndistinction is simply the present need of a simple term by which to mark\nthe distinction between worldly wisdom and idle learning.\n\n[6] Cf. Ward, _Pure Sociology_, esp. pp. 437-48.\n\n[7] Cf., e.g., Tylor, _Primitive Culture_, chap. 8.\n\n[8] Cf. James, _Psychology_, chap. 9, esp. sec. 5.\n\n[9] As currently employed, the term \"pragmatic\" is made to cover both\nconduct looking to the agent's preferential advantage, expedient\nconduct, and workmanship directed to the production of things that may\nor may not be of advantage to the agent. If the term be taken in the\nlatter meaning, the culture of modern times is no less \"pragmatic\" than\nthat of the Middle Ages. It is here intended to be used in the former\nsense.\n\n[10] Epistemologically speaking, activity is imputed to phenomena for\nthe purpose of organising them into a dramatically consistent system.\n\n[11] Cf., e.g., Karl Pearson, _Grammar of Science_, and compare his\nideal of inert magnitudes as set forth in his exposition with his actual\nwork as shown in chaps. 9, 10, and 12, and more particularly in his\ndiscussions of \"Mother Right\" and related topics in _The Chances of\nDeath_.\n\n[12] Cf. James, _Psychology_, Vol. II, chap. 28, pp. 633-71, esp. p. 640\nnote.\n\n[13] Cf. Ward, _Principles of Psychology_, pp. 439-43.\n\n\n\n\nTHE EVOLUTION OF THE SCIENTIFIC POINT OF VIEW[1]\n\n\nA discussion of the scientific point of view which avowedly proceeds\nfrom this point of view itself has necessarily the appearance of an\nargument in a circle; and such in great part is the character of what\nhere follows. It is in large part an attempt to explain the scientific\npoint of view in terms of itself, but not altogether. This inquiry does\nnot presume to deal with the origin or the legitimation of the\npostulates of science, but only with the growth of the habitual use of\nthese postulates, and the manner of using them. The point of inquiry is\nthe changes which have taken place in the secondary postulates involved\nin the scientific point of view--in great part a question of the\nprogressive redistribution of emphasis among the preconceptions under\nwhose guidance successive generations of scientists have gone to their\nwork.\n\n       *       *       *       *       *\n\nThe sciences which are in any peculiar sense modern take as an\n(unavowed) postulate the fact of consecutive change. Their inquiry\nalways centers upon some manner of process. This notion of process about\nwhich the researches of modern science cluster, is a notion of a\nsequence, or complex, of consecutive change in which the _nexus_ of the\nsequence, that by virtue of which the change inquired into is\nconsecutive, is the relation of cause and effect. The consecution,\nmoreover, runs in terms of persistence of quantity or of force. In so\nfar as the science is of a modern complexion, in so far as it is not of\nthe nature of taxonomy simply, the inquiry converges upon a matter of\nprocess; and it comes to rest, provisionally, when it has disposed of\nits facts in terms of process. But modern scientific inquiry in any case\ncomes to rest only provisionally; because its prime postulate is that of\nconsecutive change, and consecutive change can, of course, not come to\nrest except provisionally. By its own nature the inquiry cannot reach a\nfinal term in any direction. So it is something of a homiletical\ncommonplace to say that the outcome of any serious research can only be\nto make two questions grow where one question grew before. Such is\nnecessarily the case because the postulate of the scientist is that\nthings change consecutively. It is an unproven and unprovable\npostulate--that is to say, it is a metaphysical preconception--but it\ngives the outcome that every goal of research is necessarily a point of\ndeparture; every term is transitional.[2]\n\nA hundred years ago, or even fifty years ago, scientific men were not in\nthe habit of looking at the matter in this way. At least it did not\nthen seem a matter of course, lying in the nature of things, that\nscientific inquiry could not reach a final term in any direction.\nTo-day it is a matter of course, and will be so avowed without argument.\nStated in the broadest terms, this is the substantial outcome of that\nnineteenth-century movement in science with which the name of Darwin is\nassociated as a catch-word.\n\nThis use of Darwin's name does not imply that this epoch of science is\nmainly Darwin's work. What merit may belong to Darwin, specifically, in\nthese premises, is a question which need not detain the argument. He\nmay, by way of creative initiative, have had more or less to do with\nshaping the course of things scientific. Or, if you choose, his voice\nmay even be taken as only one of the noises which the wheels of\ncivilisation make when they go round. But by scientifically colloquial\nusage we have come to speak of pre-Darwinian and post-Darwinian science,\nand to appreciate that there is a significant difference in the point of\nview between the scientific era which preceded and that which followed\nthe epoch to which his name belongs.\n\nBefore that epoch the animus of a science was, on the whole, the animus\nof taxonomy; the consistent end of scientific inquiry was definition and\nclassification,--as it still continues to be in such fields of science\nas have not been affected by the modern notion of consecutive change.\nThe scientists of that era looked to a final term, a consummation of the\nchanges which provoked their inquiry, as well as to a first beginning of\nthe matters with which their researches were concerned. The questions of\nscience were directed to the problem, essentially classificatory, of\nhow things had been in the presumed primordial stable equilibrium out of\nwhich they, putatively, had come, and how they should be in the\ndefinitive state of settlement into which things were to fall as the\noutcome of the play of forces which intervened between this primordial\nand the definitive stable equilibrium. To the pre-Darwinian taxonomists\nthe center of interest and attention, to which all scientific inquiry\nmust legitimately converge, was the body of natural laws governing\nphenomena under the rule of causation. These natural laws were of the\nnature of rules of the game of causation. They formulated the immutable\nrelations in which things \"naturally\" stood to one another before causal\ndisturbance took place between them, the orderly unfolding of the\ncomplement of causes involved in the transition over this interval of\ntransient activity, and the settled relations that would supervene when\nthe disturbance had passed and the transition from cause to effect had\nbeen consummated,--the emphasis falling on the consummation.\n\nThe characteristic feature by which post-Darwinian science is contrasted\nwith what went before is a new distribution of emphasis, whereby the\nprocess of causation, the interval of instability and transition between\ninitial cause and definitive effect, has come to take the first place in\nthe inquiry; instead of that consummation in which causal effect was\nonce presumed to come to rest. This change of the point of view was, of\ncourse, not abrupt or catastrophic. But it has latterly gone so far that\nmodern science is becoming substantially a theory of the process of\nconsecutive change, which is taken as a sequence of cumulative change,\nrealized to be self-continuing or self-propagating and to have no final\nterm. Questions of a primordial beginning and a definitive outcome have\nfallen into abeyance within the modern sciences, and such questions are\nin a fair way to lose all claim to consideration at the hands of the\nscientists. Modern science is ceasing to occupy itself with the natural\nlaws--the codified rules of the game of causation--and is concerning\nitself wholly with what has taken place and what is taking place.\n\n       *       *       *       *       *\n\nRightly seen from this ultra-modern point of view, this modern science\nand this point of view which it affects are, of course, a feature of the\ncurrent cultural situation,--of the process of life as it runs along\nunder our eyes. So also, when seen from this scientific point of view,\nit is a matter of course that any marked cultural era will have its own\ncharacteristic attitude and animus toward matters of knowledge, will\nbring under inquiry such questions of knowledge as lie within its\npeculiar range of interest, and will seek answers to these questions\nonly in terms that are consonant with the habits of thought current at\nthe time. That is to say, science and the scientific point of view will\nvary characteristically in response to those variations in the prevalent\nhabits of thought which constitute the sequence of cultural development;\nthe current science and the current scientific point of view, the\nknowledge sought and the manner of seeking it, are a product of the\ncultural growth. Perhaps it would all be better characterised as a\nby-product of the cultured growth.\n\n       *       *       *       *       *\n\nThis question of a scientific point of view, of a particular attitude\nand animus in matters of knowledge, is a question of the formation of\nhabits of thought; and habits of thought are an outcome of habits of\nlife. A scientific point of view is a consensus of habits of thought\ncurrent in the community, and the scientist is constrained to believe\nthat this consensus is formed in response to a more or less consistent\ndiscipline of habituation to which the community is subjected, and that\nthe consensus can extend only so far and maintain its force only so long\nas the discipline of habituation exercised by the circumstances of life\nenforces it and backs it up. The scheme of life, within which lies the\nscheme of knowledge, is a consensus of habits in the individuals which\nmake up the community. The individual subjected to habituation is each a\nsingle individual agent, and whatever affects him in any one line of\nactivity, therefore, necessarily affects him in some degree in all his\nvarious activities. The cultural scheme of any community is a complex of\nthe habits of life and of thought prevalent among the members of the\ncommunity. It makes up a more or less congruous and balanced whole, and\ncarries within it a more or less consistent habitual attitude toward\nmatters of knowledge--more or less consistent according as the\ncommunity's cultural scheme is more or less congruous throughout the\nbody of the population; and this in its turn is in the main a question\nof how nearly uniform or consonant are the circumstances of experience\nand tradition to which the several classes and members of the community\nare subject.\n\nSo, then, the change which has come over the scientific point of view\nbetween pre-Darwinian and post-Darwinian times is to be explained, at\nleast in great part, by the changing circumstances of life, and\ntherefore of habituation, among the people of Christendom during the\nlife-history of modern science. But the growth of a scientific point of\nview begins farther back than modern Christendom, and a record of its\ngrowth would be a record of the growth of human culture. Modern science\ndemands a genetic account of the phenomena with which it deals, and a\ngenetic inquiry into the scientific point of view necessarily will have\nto make up its account with the earlier phases of cultural growth. A\nlife-history of human culture is a large topic, not to be attempted here\neven in the sketchiest outline. The most that can be attempted is a\nhasty review of certain scattered questions and salient points in this\nlife-history.\n\n       *       *       *       *       *\n\nIn what manner and with what effect the idle curiosity of mankind first\nbegan to tame the facts thrown in its way, far back in the night of\ntime, and to break them in under a scheme of habitual interpretation;\nwhat may have been the earliest norms of systematic knowledge, such as\nwould serve the curiosity of the earliest generations of men in a way\nanalogous to the service rendered the curiosity of later generations by\nscientific inquiry--all that is, of course, a matter of long-range\nconjecture, more or less wild, which cannot be gone into here. But among\nsuch peoples of the lower cultures as have been consistently observed,\nnorms of knowledge and schemes for its systematization are always found.\nThese norms and systems of knowledge are naive and crude, perhaps, but\nthere is fair ground for presuming that out of the like norms and\nsystems in the remoter ages of our own antecedents have grown up the\nsystems of knowledge cultivated by the peoples of history and by their\nrepresentatives now living.\n\nIt is not unusual to say that the primitive systems of knowledge are\nconstructed on animistic lines; that animistic sequence is the rule to\nwhich the facts are broken in. This seems to be true, if \"animism\" be\nconstrued in a sufficiently naive and inchoate sense. But this is not\nthe whole case. In their higher generalisations, in what Powell calls\ntheir \"sophiology,\" it appears that the primitive peoples are guided by\nanimistic norms; they make up their cosmological schemes, and the like,\nin terms of personal or quasi-personal activity, and the whole is thrown\ninto something of a dramatic form. Through the early cosmological lore\nruns a dramatic consistency which imputes something in the way of\ninitiative and propensity to the phenomena that are to be accounted for.\nBut this dramatisation of the facts, the accounting for phenomena in\nterms of spiritual or quasi-spiritual initiative, is by no means the\nwhole case of primitive men's systematic knowledge of facts. Their\ntheories are not all of the nature of dramatic legend, myth, or\nanimistic life-history, although the broader and more picturesque\ngeneralisations may take that form. There always runs along by the side\nof these dramaturgic life-histories, and underlying them, an obscure\nsystem of generalisations in terms of matter-of-fact. The system of\nmatter-of-fact generalisations, or theories, is obscurer than the\ndramatic generalisations only in the sense that it is left in the\nbackground as being less picturesque and of less vital interest, not in\nthe sense of being less familiar, less adequately apprehended, or less\nsecure. The peoples of the lower cultures \"know\" that the broad scheme\nof things is to be explained in terms of creation, perhaps of\nprocreation, gestation, birth, growth, life and initiative; and these\nmatters engross the attention and stimulate speculation. But they know\nequally well the matter of fact that water will run down hill, that two\nstones are heavier than one of them, that an edge-tool will cut softer\nsubstances, that two things may be tied together with a string, that a\npointed stick may be stuck in the ground, and the like. There is no\nrange of knowledge that is held more securely by any people than such\nmatters of fact; and these are generalisations from experience; they are\ntheoretical knowledge, and they are a matter of course. They underlie\nthe dramatical generalisations of the broad scheme of things, and are so\nemployed in the speculations of the myth-makers and the learned.\n\nIt may be that the exceptional efficiency of a given edge-tool, _e.g._,\nwill be accounted for on animistic or quasi-personal grounds,--grounds\nof magical efficacy; but it is the exceptional behavior of such a tool\nthat calls for explanation on the higher ground of animistic potency,\nnot its work-day performance of common work. So also if an edge-tool\nshould fail to do what is expected of it as a matter of course, its\nfailure may require an explanation in other terms than matter-of-fact.\nBut all that only serves to bring into evidence the fact that a scheme\nof generalisations in terms of matter-of-fact is securely held and is\nmade use of as a sufficient and ultimate explanation of the more\nfamiliar phenomena of experience. These commonplace matter-of-fact\ngeneralisations are not questioned and do not clash with the higher\nscheme of things.\n\nAll this may seem like taking pains about trivialities. But the data\nwith which any scientific inquiry has to do are trivialities in some\nother bearing than that one in which they are of account.\n\nIn all succeeding phases of culture, developmentally subsequent to the\nprimitive phase supposed above, there is found a similar or analogous\ndivision of knowledge between a higher range of theoretical explanations\nof phenomena, an ornate scheme of things, on the one hand, and such an\nobscure range of matter-of-fact generalisations as is here spoken of, on\nthe other hand. And the evolution of the scientific point of view is a\nmatter of the shifting fortunes which have in the course of cultural\ngrowth overtaken the one and the other of these two divergent methods\nof apprehending and systematising the facts of experience.\n\nThe historians of human culture have, no doubt justly, commonly dealt\nwith the mutations that have occurred on the higher levels of\nintellectual enterprise, in the more ambitious, more picturesque, and\nless secure of these two contrasted ranges of theoretical knowledge;\nwhile the lower range of generalisations, which has to do with work-day\nexperience, has in great part been passed over with scant ceremony as\nlying outside the current of ideas, and as belonging rather among the\nthings which engage the attention than among the modes, expedients and\ncreations of this attention itself. There is good reason for this\nrelative neglect of the work-day matters of fact. It is on the higher\nlevels of speculative generalisation that the impressive mutations in\nthe development of thought have taken place, and that the shifting of\npoints of view and the clashing of convictions have drawn men into\ncontroversy and analysis of their ideas and have given rise to schools\nof thought. The matter-of-fact generalisations have met with relatively\nfew adventures and have afforded little scope for intellectual\ninitiative and profoundly picturesque speculation. On the higher levels\nspeculation is freer, the creative spirit has some scope, because its\nexcursions are not so immediately and harshly checked by material facts.\n\nIn these speculative ranges of knowledge it is possible to form and to\nmaintain habits of thought which shall be consistent with themselves and\nwith the habit of mind and run of tradition prevalent in the community\nat the time, though not thereby consistent with the material actualities\nof life in the community. Yet this range of speculative generalisation,\nwhich makes up the higher learning of the barbarian culture, is also\ncontrolled, checked, and guided by the community's habits of life; it,\ntoo, is an integral part of the scheme of life and is an outcome of the\nhabituation enforced by experience. But it does not rest immediately on\nmen's dealings with the refractory phenomena of brute creation, nor is\nit guided, undisguised and directly, by the habitual material\n(industrial) occupations. The fabric of institutions intervenes between\nthe material exigencies of life and the speculative scheme of things.\n\nThe higher theoretical knowledge, that body of tenets which rises to the\ndignity of a philosophical or scientific system, in the early culture,\nis a complex of habits of thought which reflect the habits of life\nembodied in the institutional structure of society; while the lower,\nmatter-of-fact generalisations of work-day efficiency--the trivial\nmatters of course--reflect the workmanlike habits of life enforced by\nthe commonplace material exigencies under which men live. The\ndistinction is analogous, and indeed, closely related, to the\ndistinction between \"intangible\" and \"tangible\" assets. And the\ninstitutions are more flexible, they involve or admit a larger margin of\nerror, or of tolerance, than the material exigencies. The latter are\nsystematised into what economists have called \"the state of the\nindustrial arts,\" which enforce a somewhat rigorous standardisation of\nwhatever knowledge falls within their scope; whereas the institutional\nscheme is a matter of law and custom, politics and religion, taste and\nmorals, on all of which matters men have opinions and convictions, and\non which all men \"have a right to their own opinions.\" The scheme of\ninstitutions is also not necessarily uniform throughout the several\nclasses of society; and the same institution (as, _e.g._, slavery,\nownership, or royalty) does not impinge with the same effect on all\nparties touched by it. The discipline of any institution of servitude,\n_e.g._, is not the same for the master as for the serf, etc. If there is\na considerable institutional discrepancy between an upper and a lower\nclass in the community, leading to divergent lines of habitual interest\nor discipline; if by force of the cultural scheme the institutions of\nsociety are chiefly in the keeping of one class, whose attention is then\nlargely engrossed with the maintenance of the scheme of law and order;\nwhile the workmanlike activities are chiefly in the hands of another\nclass, in whose apprehension the maintenance of law and order is at the\nbest a wearisome tribulation, there is likely to be a similarly\nconsiderable divergence or discrepancy between the speculative\nknowledge, cultivated primarily by the upper class, and the work-day\nknowledge which is primarily in the keeping of the lower class. Such, in\nparticular, will be the case if the community is organised on a coercive\nplan, with well-marked ruling and subject classes. The important and\ninteresting institutions in such a case, those institutions which fill a\nlarge angle in men's vision and carry a great force of authenticity, are\nthe institutions of coercive control, differential authority and\nsubjection, personal dignity and consequence; and the speculative\ngeneralisations, the institutions of the realm of knowledge, are created\nin the image of these social institutions of status and personal force,\nand fall into a scheme drawn after the plan of the code of honor. The\nwork-day generalisations, which emerge from the state of the industrial\narts, concomitantly fall into a deeper obscurity, answering to the depth\nof indignity to which workmanlike efficiency sinks under such a cultural\nscheme; and they can touch and check the current speculative knowledge\nonly remotely and incidentally. Under such a bifurcate scheme of\nculture, with its concomitant two-cleft systematisation of knowledge,\n\"reality\" is likely to be widely dissociated from fact--that is to say,\nthe realities and verities which are accepted as authentic and\nconvincing on the plane of speculative generalisation; while science has\nno show--that is to say, science in that modern sense of the term which\nimplies a close contact, if not a coincidence, of reality with fact.\n\nWhereas, if the institutional fabric, the community's scheme of life,\nchanges in such a manner as to throw the work-day experience into the\nforeground of attention and to center the habitual interest of the\npeople on the immediate material relations of men to the brute\nactualities, then the interval between the speculative realm of\nknowledge, on the one hand, and the work-day generalisations of fact, on\nthe other hand, is likely to lessen, and the two ranges of knowledge are\nlikely to converge more or less effectually upon a common ground. When\nthe growth of culture falls into such lines, these two methods and norms\nof theoretical formulation may presently come to further and fortify one\nanother, and something in the way of science has at least a chance to\narise.\n\n       *       *       *       *       *\n\nOn this view there is a degree of interdependence between the cultural\nsituation and the state of theoretical inquiry. To illustrate this\ninterdependence, or the concomitance between the cultural scheme and the\ncharacter of theoretical speculation, it may be in place to call to mind\ncertain concomitant variations of a general character which occur in the\nlower cultures between the scheme of life and the scheme of knowledge.\nIn this tentative and fragmentary presentation of evidence there is\nnothing novel to be brought forward; still less is there anything to be\noffered which carries the weight of authority.\n\nOn the lower levels of culture, even more decidedly than on the higher,\nthe speculative systematisation of knowledge is prone to take the form\nof theology (mythology) and cosmology. This theological and cosmological\nlore serves the savage and barbaric peoples as a theoretical account of\nthe scheme of things, and its characteristic traits vary in response to\nthe variations of the institutional scheme under which the community\nlives. In a prevailingly peaceable agricultural community, such, _e.g._,\nas the more peaceable Pueblo Indians or the more settled Indians of the\nMiddle West, there is little coercive authority, few and slight class\ndistinctions involving superiority and inferiority; property rights are\nfew, slight and unstable; relationship is likely to be counted in the\nfemale line. In such a culture the cosmological lore is likely to offer\nexplanations of the scheme of things in terms of generation or\ngermination and growth. Creation by fiat is not obtrusively or\ncharacteristically present. The laws of nature bear the character of an\nhabitual behavior of things, rather than that of an authoritative code\nof ordinances imposed by an overruling providence. The theology is\nlikely to be polytheistic in an extreme degree and in an extremely loose\nsense of the term, embodying relatively little of the suzerainty of God.\nThe relation of the deities to mankind is likely to be that of\nconsanguinity, and as if to emphasise the peaceable, non-coercive\ncharacter of the divine order of things, the deities are, in the main,\nvery apt to be females. The matters of interest dealt with in the\ncosmological theories are chiefly matters of the livelihood of the\npeople, the growth and care of the crops, and the promotion of\nindustrial ways and means.\n\nWith these phenomena of the peaceable culture may be contrasted the\norder of things found among a predatory pastoral people--and pastoral\npeoples tend strongly to take on a predatory cultural scheme. Such a\npeople will adopt male deities, in the main, and will impute to them a\ncoercive, imperious, arbitrary animus and a degree of princely dignity.\nThey will also tend strongly to a monotheistic, patriarchal scheme of\ndivine government; to explain things in terms of creative fiat; and to a\nbelief in the control of the natural universe by rules imposed by divine\nordinance. The matters of prime consequence in this theology are matters\nof the servile relation of man to God, rather than the details of the\nquest of a livelihood. The emphasis falls on the glory of God rather\nthan on the good of man. The Hebrew scriptures, particularly the\nJahvistic elements, show such a scheme of pastoral cultural and\npredatory theoretical generalisations.\n\nThe learning cultivated on the lower levels of culture might be gone\ninto at some length if space and time permitted, but even what has been\nsaid may serve to show, in the most general way, what are the\ncharacteristic marks of this savage and barbarian lore. A similarly\nsummary characterisation of a cultural situation nearer home will bear\nmore directly on the immediate topic of inquiry. The learning of\nmediaeval Christendom shows such a concomitance between the scheme of\nknowledge and the scheme of institutions, somewhat analogous to the\nbarbaric Hebrew situation. The mediaeval scheme of institutions was of a\ncoercive, authoritative character, essentially a scheme of graded\nmastery and graded servitude, in which a code of honor and a bill of\ndifferential dignity held the most important place. The theology of that\ntime was of a like character. It was a monotheistic, or rather a\nmonarchical system, and of a despotic complexion. The cosmological\nscheme was drawn in terms of fiat; and the natural philosophy was\noccupied, in the main and in its most solemn endeavors, with the\ncorollaries to be subsumed under the divine fiat. When the philosophical\nspeculation dealt with facts it aimed to interpret them into systematic\nconsistency with the glory of God and the divine purpose. The\n\"realities\" of the scholastic lore were spiritual, quasi-personal,\nintangible, and fell into a scale of differential dignity and\nprepotency. Matter-of-fact knowledge and work-day information were not\nthen fit topics of dignified inquiry. The interval, or discrepancy,\nbetween reality and actuality was fairly wide. Throughout that era, of\ncourse, work-day knowledge also continually increased in volume and\nconsistency; technological proficiency was gaining; the effective\ncontrol of natural processes was growing larger and more secure; showing\nthat matter-of-fact theories drawn from experience were being extended\nand were made increasing use of. But all this went on in the field of\nindustry; the matter-of-fact theories were accepted as substantial and\nultimate only for the purposes of industry, only as technological\nmaxims, and were beneath the dignity of science.\n\nWith the transition to modern times industry comes into the foreground\nin the west-European scheme of life, and the institutions of European\ncivilisation fall into a more intimate relation with the exigencies of\nindustry and technology. The technological range of habituation\nprogressively counts for more in the cultural complex, and the\ndiscrepancy between the technological discipline and the discipline of\nlaw and order under the institutions then in force grows progressively\nless. The institutions of law and order take on a more impersonal, less\ncoercive character. Differential dignity and invidious discriminations\nbetween classes gradually lose force.\n\nThe industry which so comes into the foreground and so affects the\nscheme of institutions is peculiar in that its most obvious and\ncharacteristic trait is the workmanlike initiative and efficiency of the\nindividual handicraftsman and the individual enterprise of the petty\ntrader. The technology which embodies the theoretical substance of this\nindustry is a technology of workmanship, in which the salient factors\nare personal skill, force and diligence. Such a technology, running as\nit does in great part on personal initiative, capacity, and application,\napproaches nearer to the commonplace features of the institutional\nfabric than many another technological system might; and its\ndisciplinary effects in some considerable measure blend with those of\nthe institutional discipline. The two lines of habituation, in the great\nera of handicraft and petty trade, even came to coalesce and fortify one\nanother; as in the organisation of the craft gilds and of the industrial\ntowns. Industrial life and usage came to intrude creatively into the\ncultural scheme on the one hand and into the scheme of authentic\nknowledge on the other hand. So the body of matter-of-fact knowledge, in\nmodern times, is more and more drawn into the compass of theoretical\ninquiry; and theoretical inquiry takes on more and more of the animus\nand method of technological generalisation. But the matter-of-fact\nelements so drawn in are construed in terms of workmanlike initiative\nand efficiency, as required by the technological preconceptions of the\nera of handicraft.\n\nIn this way, it may be conceived, modern science comes into the field\nunder the cloak of technology and gradually encroaches on the domain of\nauthentic theory previously held by other, higher, nobler, more\nprofound, more spiritual, more intangible conceptions and systems of\nknowledge. In this early phase of modern science its central norm and\nuniversal solvent is the concept of workmanlike initiative and\nefficiency. This is the new organon. Whatever is to be explained must\nbe reduced to this notation and explained in these terms; otherwise the\ninquiry does not come to rest. But when the requirements of this\nnotation in terms of workmanship have been duly fulfilled the inquiry\ndoes come to rest.\n\nBy the early decades of the nineteenth century, with a passable degree\nof thoroughness, other grounds of validity and other interpretations of\nphenomena, other vouchers for truth and reality, had been eliminated\nfrom the quest of authentic knowledge and from the terms in which\ntheoretical results were conceived or expressed. The new organon had\nmade good its pretensions. In this movement to establish the hegemony of\nworkmanlike efficiency--under the style and title of the \"law of\ncausation,\" or of \"efficient cause\"--in the realm of knowledge, the\nEnglish-speaking communities took the lead after the earlier scientific\nonset of the south-European communities had gone up in the smoke of war,\npolitics and religion during the great era of state-making. The ground\nof this British lead in science is apparently the same as that of the\nBritish lead in technology which came to a head in the Industrial\nRevolution; and these two associated episodes of European civilisation\nare apparently both traceable to the relatively peaceable run of life,\nand so of habituation, in the English-speaking communities, as\ncontrasted with the communities of the continent.[3]\n\nAlong with the habits of thought peculiar to the technology of\nhandicraft, modern science also took over and assimilated much of the\ninstitutional preconceptions of the era of handicraft and petty trade.\nThe \"natural laws,\" with the formulation of which this early modern\nscience is occupied, are the rules governing natural \"uniformities of\nsequence\"; and they punctiliously formulate the due procedure of any\ngiven cause creatively working out the achievement of a given effect,\nvery much as the craft rules sagaciously specified the due routine for\nturning out a staple article of merchantable goods. But these \"natural\nlaws\" of science are also felt to have something of that integrity and\nprescriptive moral force that belongs to the principles of the system of\n\"natural rights\" which the era of handicraft has contributed to the\ninstitutional scheme of later times. The natural laws were not only held\nto be true to fact, but they were also felt to be right and good. They\nwere looked upon as intrinsically meritorious and beneficent, and were\nheld to carry a sanction of their own. This habit of uncritically\nimputing merit and equity to the \"natural laws\" of science continued in\nforce through much of the nineteenth century; very much as the habitual\nacceptance of the principles of \"natural rights\" has held on by force of\ntradition long after the exigencies of experience out of which these\n\"rights\" sprang ceased to shape men's habits of life.[4] This\ntraditional attitude of submissive approval toward the \"natural laws\" of\nscience has not yet been wholly lost, even among the scientists of the\npassing generation, many of whom have uncritically invested these \"laws\"\nwith a prescriptive rectitude and excellence; but so far, at least, has\nthis animus progressed toward disuse that it is now chiefly a matter for\nexpatiation in the pulpit, the accredited vent for the exudation of\neffete matter from the cultural organism.\n\nThe traditions of the handicraft technology lasted over as a commonplace\nhabit of thought in science long after that technology had ceased to be\nthe decisive element in the industrial situation; while a new\ntechnology, with its inculcation of new habits of thought, new\npreconceptions, gradually made its way among the remnants of the old,\naltering them, blending with them, and little by little superseding\nthem. The new technological departure, which made its first great epoch\nin the so-called industrial revolution, in the technological ascendancy\nof the machine-process, brought a new and characteristic discipline into\nthe cultural situation. The beginnings of the machine-era lie far back,\nno doubt; but it is only of late, during the past century at the most,\nthat the machine-process can be said to have come into the dominant\nplace in the technological scheme; and it is only later still that its\ndiscipline has, even in great part, remodeled the current preconceptions\nas to the substantial nature of what goes on in the current of phenomena\nwhose changes excite the scientific curiosity. It is only relatively\nvery lately, whether in technological work or in scientific inquiry,\nthat men have fallen into the habit of thinking in terms of process\nrather than in terms of the workmanlike efficiency of a given cause\nworking to a given effect.\n\nThese machine-made preconceptions of modern science, being habits of\nthought induced by the machine technology in industry and in daily life,\nhave of course first and most consistently affected the character of\nthose sciences whose subject matter lies nearest to the technological\nfield of the machine-process; and in these material sciences the\nshifting to the machine-made point of view has been relatively very\nconsistent, giving a highly impersonal interpretation of phenomena in\nterms of consecutive change, and leaving little of the ancient\npreconceptions of differential reality or creative causation. In such a\nscience as physics or chemistry, _e.g._, we are threatened with the\ndisappearance or dissipation of all stable and efficient substances;\ntheir place being supplied, or their phenomena being theoretically\nexplained, by appeal to unremitting processes of inconceivably\nhigh-pitched consecutive change.\n\nIn the sciences which lie farther afield from the technological domain,\nand which, therefore, in point of habituation, are remoter from the\ncenter of disturbance, the effect of the machine discipline may even yet\nbe scarcely appreciable. In such lore as ethics, _e.g._, or political\ntheory, or even economics, much of the norms of the regime of handicraft\nstill stands over; and very much of the institutional preconceptions of\nnatural rights, associated with the regime of handicraft in point of\ngenesis, growth and content, is not only still intact in this field of\ninquiry, but it can scarcely even be claimed that there is ground for\nserious apprehension of its prospective obsolescence. Indeed, something\neven more ancient than handicraft and natural rights may be found\nsurviving in good vigor in this \"moral\" field of inquiry, where tests of\nauthenticity and reality are still sought and found by those who\ncultivate these lines of inquiry that lie beyond the immediate sweep of\nthe machine's discipline. Even the evolutionary process of cumulative\ncausation as conceived by the adepts of these sciences is infused with a\npreternatural, beneficent trend; so that \"evolution\" is conceived to\nmean amelioration or \"improvement.\" The metaphysics of the machine\ntechnology has not yet wholly, perhaps not mainly, superseded the\nmetaphysics of the code of honor in those lines of inquiry that have to\ndo with human initiative and aspiration. Whether such a shifting of the\npoint of view in these sciences shall ever be effected is still an open\nquestion. Here there still are spiritual verities which transcend the\nsweep of consecutive change. That is to say, there are still current\nhabits of thought which definitively predispose their bearers to bring\ntheir inquiries to rest on grounds of differential reality and invidious\nmerit.\n\nFOOTNOTES:\n\n[1] Read before the Kosmos Club, at the University of California, May 4,\n1908. Reprinted by permission from the _University of California\nChronicle_, Vol. X, No. 4.\n\n[2] It is by no means unusual for modern scientists to deny the truth of\nthis characterization, so far as regards this alleged recourse to the\nconcept of causation. They deny that such a concept--of efficiency,\nactivity, and the like--enters, or can legitimately enter, into their\nwork, whether as an instrument of research or as a means or guide to\ntheoretical formulation. They even deny the substantial continuity of\nthe sequence of changes that excite their scientific attention. This\nattitude seems particularly to commend itself to those who by preference\nattend to the mathematical formulations of theory and who are chiefly\noccupied with proving up and working out details of the system of theory\nwhich have previously been left unsettled or uncovered. The concept of\ncausation is recognized to be a metaphysical postulate, a matter of\nimputation, not of observation; whereas it is claimed that scientific\ninquiry neither does nor can legitimately, nor, indeed, currently, make\nuse of a postulate more metaphysical than the concept of an idle\nconcomitance of variation, such as is adequately expressed in terms of\nmathematical function.\n\nThe contention seems sound, to the extent that the\nmaterials--essentially statistical materials--with which scientific\ninquiry is occupied are of this non-committal character, and that the\nmathematical formulations of theory include no further element than that\nof idle variation. Such is necessarily the case because causation is a\nfact of imputation, not of observation, and so cannot be included among\nthe data; and because nothing further than non-committal variation can\nbe expressed in mathematical terms. A bare notation of quantity can\nconvey nothing further.\n\nIf it were the intention to claim only that the conclusions of the\nscientists are, or should be, as a matter of conservative caution,\novertly stated in terms of function alone, then the contention might\nwell be allowed. Causal sequence, efficiency or continuity is, of\ncourse, a matter of metaphysical imputation. It is not a fact of\nobservation, and cannot be asserted of the facts of observation except\nas a trait imputed to them. It is so imputed, by scientists and others,\nas a matter of logical necessity, as a basis of a systematic knowledge\nof the facts of observation.\n\nBeyond this, in their exercise of scientific initiative, as well as in\nthe norms which guide the systematisation of scientific results, the\ncontention will not be made good--at least not for the current phase of\nscientific knowledge. The claim, indeed, carries its own refutation. In\nmaking such a claim, both in rejecting the imputation of metaphysical\npostulates and in defending their position against their critics, the\narguments put forward by the scientists run in causal terms. For the\npolemical purposes, where their antagonists are to be scientifically\nconfuted, the defenders of the non-committal postulate of concomitance\nfind that postulate inadequate. They are not content, in this precarious\nconjuncture, simply to attest a relation of idle quantitative\nconcomitance (mathematical function) between the allegations of their\ncritics, on the one hand, and their own controversial exposition of\nthese matters on the other hand. They argue that they do not \"make use\nof\" such a postulate as \"efficiency,\" whereas they claim to \"make use\nof\" the concept of function. But \"make use of\" is not a notion of\nfunctional variation but of causal efficiency in a somewhat gross and\nhighly anthropomorphic form. The relation between their own thinking and\nthe \"principles\" which they \"apply\" or the experiments and calculations\nwhich they \"institute\" in their \"search\" for facts, is not held to be of\nthis non-committal kind. It will not be claimed that the shrewd insight\nand the bold initiative of a man eminent in the empirical sciences bear\nno more efficient or consequential a relation than that of mathematical\nfunction to the ingenious experiments by which he tests his hypotheses\nand extends the secure bounds of human knowledge. Least of all is the\nmasterly experimentalist himself in a position to deny that his\nintelligence counts for something more efficient than idle concomitance\nin such a case. The connection between his premises, hypotheses, and\nexperiments, on the one hand, and his theoretical results, on the other\nhand, is not felt to be of the nature of mathematical function.\nConsistently adhered to, the principle of \"function\" or concomitant\nvariation precludes recourse to experiment, hypotheses or\ninquiry--indeed, it precludes \"recourse\" to anything whatever. Its\nnotation does not comprise anything so anthropomorphic.\n\nThe case is illustrated by the latter-day history of theoretical\nphysics. Of the sciences which affect a non-committal attitude in\nrespect of the concept of efficiency and which claim to get along with\nthe notion of mathematical function alone, physics is the most outspoken\nand the one in which the claim has the best _prima facie_ validity. At\nthe same time, latter-day physicists, for a hundred years or more, have\nbeen much occupied with explaining how phenomena which to all appearance\ninvolve action at a distance do not involve action at a distance at all.\nThe greater theoretical achievements of physics during the past century\nlie within the sweep of this (metaphysical) principle that action at a\ndistance does not take place, that apparent action at a distance must be\nexplained by effective contact, through a continuum, or by a material\ntransference. But this principle is nothing better than an unreasoning\nrepugnance on the part of the physicists to admitting action at a\ndistance. The requirement of a continuum involves a gross form of the\nconcept of efficient causation. The \"functional\" concept, concomitant\nvariation, requires no contact and no continuum. Concomitance at a\ndistance is quite as simple and convincing a notion as concomitance\nwithin contact or by the intervention of a continuum, if not more so.\nWhat stands in the way of its acceptance is the irrepressible\nanthropomorphism of the physicists. And yet the great achievements of\nphysics are due to the initiative of men animated with this\nanthropomorphic repugnance to the notion of concomitant variation at a\ndistance. All the generalisations on undulatory motion and translation\nbelong here. The latter-day researches in light, electrical\ntransmission, the theory of ions, together with what is known of the\nobscure and late-found radiations and emanations, are to be credited to\nthe same metaphysical preconception, which is never absent in any\n\"scientific\" inquiry in the field of physical science. It is only the\n\"occult\" and \"Christian\" \"Sciences\" that can dispense with this\nmetaphysical postulate and take recourse to \"absent treatment.\"\n\n[3] A broad exception may perhaps be taken at this point, to the effect\nthat this sketch of the growth of the scientific animus overlooks the\nscience of the Ancients. The scientific achievements of classical\nantiquity are a less obscure topic to-day than ever before during modern\ntimes, and the more there is known of them the larger is the credit\ngiven them. But it is to be noted that, (_a_) the relatively large and\nfree growth of scientific inquiry in classical antiquity is to be found\nin the relatively peaceable and industrial Greek communities (with an\nindustrial culture of unknown pre-Hellenic antiquity), and (_b_) that\nthe sciences best and chiefly cultivated were those which rest on a\nmathematical basis, if not mathematical sciences in the simpler sense of\nthe term. Now, mathematics occupies a singular place among the sciences,\nin that it is, in its pure form, a logical discipline simply; its\nsubject matter being the logic of quantity, and its researches being of\nthe nature of an analysis of the intellect's modes of dealing with\nmatters of quantity. Its generalisations are generalisations of logical\nprocedure, which are tested and verified by immediate self-observation.\nSuch a science is in a peculiar degree, but only in a peculiar degree,\nindependent of the detail-discipline of daily life, whether\ntechnological or institutional; and, given the propensity--the\nintellectual enterprise, or \"idle curiosity\"--to go into speculation in\nsuch a field, the results can scarcely vary in a manner to make the\nvariants inconsistent among themselves; nor need the state of\ninstitutions or the state of the industrial arts seriously color or\ndistort such analytical work in such a field. Mathematics is peculiarly\nindependent of cultural circumstances, since it deals analytically with\nmankind's native gifts of logic, not with the ephemeral traits acquired\nby habituation.\n\n[4] \"Natural laws,\" which are held to be not only correct formulations\nof the sequence of cause and effect in a given situation but also\nmeritoriously right and equitable rules governing the run of events,\nnecessarily impute to the facts and events in question a tendency to a\ngood and equitable, if not beneficent, consummation; since it is\nnecessarily the consummation, the effect considered as an accomplished\noutcome, that is to be adjudged good and equitable, if anything. Hence\nthese \"natural laws,\" as traditionally conceived, are laws governing the\naccomplishment of an end--that is to say, laws as to how a sequence of\ncause and effect comes to rest in a final term.\n\n\n\n\nWHY IS ECONOMICS NOT AN EVOLUTIONARY SCIENCE?[1]\n\n\nM. G. De Lapouge recently said, \"Anthropology is destined to\nrevolutionise the political and the social sciences as radically as\nbacteriology has revolutionised the science of medicine.\"[2] In so far\nas he speaks of economics, the eminent anthropologist is not alone in\nhis conviction that the science stands in need of rehabilitation. His\nwords convey a rebuke and an admonition, and in both respects he speaks\nthe sense of many scientists in his own and related lines of inquiry. It\nmay be taken as the consensus of those men who are doing the serious\nwork of modern anthropology, ethnology, and psychology, as well as of\nthose in the biological sciences proper, that economics is helplessly\nbehind the times, and unable to handle its subject-matter in a way to\nentitle it to standing as a modern science. The other political and\nsocial sciences come in for their share of this obloquy, and perhaps on\nequally cogent grounds. Nor are the economists themselves buoyantly\nindifferent to the rebuke. Probably no economist to-day has either the\nhardihood or the inclination to say that the science has now reached a\ndefinitive formulation, either in the detail of results or as regards\nthe fundamental features of theory. The nearest recent approach to such\na position on the part of an economist of accredited standing is\nperhaps to be found in Professor Marshall's Cambridge address of a year\nand a half ago.[3] But these utterances are so far from the jaunty\nconfidence shown by the classical economists of half a century ago that\nwhat most forcibly strikes the reader of Professor Marshall's address is\nthe exceeding modesty and the uncalled-for humility of the spokesman for\nthe \"old generation.\" With the economists who are most attentively\nlooked to for guidance, uncertainty as to the definitive value of what\nhas been and is being done, and as to what we may, with effect, take to\nnext, is so common as to suggest that indecision is a meritorious work.\nEven the Historical School, who made their innovation with so much\nhome-grown applause some time back, have been unable to settle down\ncontentedly to the pace which they set themselves.\n\nThe men of the sciences that are proud to own themselves \"modern\" find\nfault with the economists for being still content to occupy themselves\nwith repairing a structure and doctrines and maxims resting on natural\nrights, utilitarianism, and administrative expediency. This aspersion is\nnot altogether merited, but is near enough to the mark to carry a sting.\nThese modern sciences are evolutionary sciences, and their adepts\ncontemplate that characteristic of their work with some complacency.\nEconomics is not an evolutionary science--by the confession of its\nspokesmen; and the economists turn their eyes with something of envy and\nsome sense of baffled emulation to these rivals that make broad their\nphylacteries with the legend, \"Up to date.\"\n\nPrecisely wherein the social and political sciences, including\neconomics, fall short of being evolutionary sciences, is not so plain.\nAt least, it has not been satisfactorily pointed out by their critics.\nTheir successful rivals in this matter--the sciences that deal with\nhuman nature among the rest--claim as their substantial distinction that\nthey are realistic: they deal with facts. But economics, too, is\nrealistic in this sense: it deals with facts, often in the most\npainstaking way, and latterly with an increasingly strenuous insistence\non the sole efficacy of data. But this \"realism\" does not make economics\nan evolutionary science. The insistence on data could scarcely be\ncarried to a higher pitch than it was carried by the first generation of\nthe Historical School; and yet no economics is farther from being an\nevolutionary science than the received economics of the Historical\nSchool. The whole broad range of erudition and research that engaged the\nenergies of that school commonly falls short of being science, in that,\nwhen consistent, they have contented themselves with an enumeration of\ndata and a narrative account of industrial development, and have not\npresumed to offer a theory of anything or to elaborate their results\ninto a consistent body of knowledge.\n\nAny evolutionary science, on the other hand, is a close-knit body of\ntheory. It is a theory of a process, of an unfolding sequence. But here,\nagain, economics seems to meet the test in a fair measure, without\nsatisfying its critics that its credentials are good. It must be\nadmitted, _e.g._, that J. S. Mill's doctrines of production,\ndistribution, and exchange, are a theory of certain economic processes,\nand that he deals in a consistent and effective fashion with the\nsequences of fact that make up his subject-matter. So, also, Cairnes's\ndiscussion of normal value, of the rate of wages, and of international\ntrade, are excellent instances of a theoretical handling of economic\nprocesses of sequence and the orderly unfolding development of fact.\nBut an attempt to cite Mill and Cairnes as exponents of an evolutionary\neconomics will produce no better effect than perplexity, and not a great\ndeal of that. Very much of monetary theory might be cited to the same\npurpose and with the like effect. Something similar is true even of late\nwriters who have avowed some penchant for the evolutionary point of\nview; as, _e.g._, Professor Hadley,--to cite a work of unquestioned\nmerit and unusual reach. Measurably, he keeps the word of promise to the\near; but any one who may cite his _Economics_ as having brought\npolitical economy into line as an evolutionary science will convince\nneither himself nor his interlocutor. Something to the like effect may\nfairly be said of the published work of that later English strain of\neconomists represented by Professors Cunningham and Ashley, and Mr.\nCannan, to name but a few of the more eminent figures in the group.\n\nOf the achievements of the classical economists, recent and living, the\nscience may justly be proud; but they fall short of the evolutionist's\nstandard of adequacy, not in failing to offer a theory of a process or\nof a developmental relation, but through conceiving their theory in\nterms alien to the evolutionist's habits of thought. The difference\nbetween the evolutionary and the pre-evolutionary sciences lies not in\nthe insistence on facts. There was a great and fruitful activity in the\nnatural sciences in collecting and collating facts before these sciences\ntook on the character which marks them as evolutionary. Nor does the\ndifference lie in the absence of efforts to formulate and explain\nschemes of process, sequence, growth, and development in the\npre-evolutionary days. Efforts of this kind abounded, in number and\ndiversity; and many schemes of development, of great subtlety and\nbeauty, gained a vogue both as theories of organic and inorganic\ndevelopment and as schemes of the life history of nations and societies.\nIt will not even hold true that our elders overlooked the presence of\ncause and effect in formulating their theories and reducing their data\nto a body of knowledge. But the terms which were accepted as the\ndefinitive terms of knowledge were in some degree different in the early\ndays from what they are now. The terms of thought in which the\ninvestigators of some two or three generations back definitively\nformulated their knowledge of facts, in their last analyses, were\ndifferent in kind from the terms in which the modern evolutionist is\ncontent to formulate his results. The analysis does not run back to the\nsame ground, or appeal to the same standard of finality or adequacy, in\nthe one case as in the other.\n\nThe difference is a difference of spiritual attitude or point of view in\nthe two contrasted generations of scientists. To put the matter in other\nwords, it is a difference in the basis of valuation of the facts for the\nscientific purpose, or in the interest from which the facts are\nappreciated. With the earlier as with the later generation the basis of\nvaluation of the facts handled is, in matters of detail, the causal\nrelation which is apprehended to subsist between them. This is true to\nthe greatest extent for the natural sciences. But in their handling of\nthe more comprehensive schemes of sequence and relation--in their\ndefinitive formulation of the results--the two generations differ. The\nmodern scientist is unwilling to depart from the test of causal relation\nor quantitative sequence. When he asks the question, Why? he insists on\nan answer in terms of cause and effect. He wants to reduce his solution\nof all problems to terms of the conservation of energy or the\npersistence of quantity. This is his last recourse. And this last\nrecourse has in our time been made available for the handling of schemes\nof development and theories of a comprehensive process by the notion of\na cumulative causation. The great deserts of the evolutionist\nleaders--if they have great deserts as leaders--lie, on the one hand, in\ntheir refusal to go back of the colorless sequence of phenomena and seek\nhigher ground for their ultimate syntheses, and, on the other hand, in\ntheir having shown how this colorless impersonal sequence of cause and\neffect can be made use of for theory proper, by virtue of its cumulative\ncharacter.\n\nFor the earlier natural scientists, as for the classical economists,\nthis ground of cause and effect is not definitive. Their sense of truth\nand substantiality is not satisfied with a formulation of mechanical\nsequence. The ultimate term in their systematisation of knowledge is a\n\"natural law.\" This natural law is felt to exercise some sort of a\ncoercive surveillance over the sequence of events, and to give a\nspiritual stability and consistence to the causal relation at any given\njuncture. To meet the high classical requirement, a sequence--and a\ndevelopmental process especially--must be apprehended in terms of a\nconsistent propensity tending to some spiritually legitimate end. When\nfacts and events have been reduced to these terms of fundamental truth\nand have been made to square with the requirements of definitive\nnormality, the investigator rests his case. Any causal sequence which is\napprehended to traverse the imputed propensity in events is a\n\"disturbing factor.\" Logical congruity with the apprehended propensity\nis, in this view, adequate ground of procedure in building up a scheme\nof knowledge or of development. The objective point of the efforts of\nthe scientists working under the guidance of this classical tradition,\nis to formulate knowledge in terms of absolute truth; and this absolute\ntruth is a spiritual fact. It means a coincidence of facts with the\ndeliverances of an enlightened and deliberate common sense.\n\nThe development and the attenuation of this preconception of normality\nor of a propensity in events might be traced in detail from primitive\nanimism down through the elaborate discipline of faith and metaphysics,\noverruling Providence, order of nature, natural rights, natural law,\nunderlying principles. But all that may be necessary here is to point\nout that, by descent and by psychological content, this constraining\nnormality is of a spiritual kind. It is for the scientific purpose an\nimputation of spiritual coherence to the facts dealt with. The question\nof interest is how this preconception of normality has fared at the\nhands of modern science, and how it has come to be superseded in the\nintellectual primacy by the latter-day preconception of a non-spiritual\nsequence. This question is of interest because its answer may throw\nlight on the question as to what chance there is for the indefinite\npersistence of this archaic habit of thought in the methods of economic\nscience.\n\n       *       *       *       *       *\n\nUnder primitive conditions, men stand in immediate personal contact with\nthe material facts of the environment; and the force and discretion of\nthe individual in shaping the facts of the environment count obviously,\nand to all appearance solely, in working out the conditions of life.\nThere is little of impersonal or mechanical sequence visible to\nprimitive men in their every-day life; and what there is of this kind in\nthe processes of brute nature about them is in large part inexplicable\nand passes for inscrutable. It is accepted as malignant or beneficent,\nand is construed in the terms of personality that are familiar to all\nmen at first hand,--the terms known to all men by first-hand knowledge\nof their own acts. The inscrutable movements of the seasons and of the\nnatural forces are apprehended as actions guided by discretion, will\npower, or propensity looking to an end, much as human actions are. The\nprocesses of inanimate nature are agencies whose habits of life are to\nbe learned, and who are to be coerced, outwitted, circumvented, and\nturned to account, much as the beasts are. At the same time the\ncommunity is small, and the human contact of the individual is not wide.\nNeither the industrial life nor the non-industrial social life forces\nupon men's attention the ruthless impersonal sweep of events that no man\ncan withstand or deflect, such as becomes visible in the more complex\nand comprehensive life process of the larger community of a later day.\nThere is nothing decisive to hinder men's knowledge of facts and events\nbeing formulated in terms of personality--in terms of habit and\npropensity and will power.\n\nAs time goes on and as the situation departs from this archaic\ncharacter,--where it does depart from it,--the circumstances which\ncondition men's systematisation of facts change in such a way as to\nthrow the impersonal character of the sequence of events more and more\ninto the foreground. The penalties for failure to apprehend facts in\ndispassionate terms fall surer and swifter. The sweep of events is\nforced home more consistently on men's minds. The guiding hand of a\nspiritual agency or a propensity in events becomes less readily\ntraceable as men's knowledge of things grows ampler and more searching.\nIn modern times, and particularly in the industrial countries, this\ncoercive guidance of men's habits of thought in the realistic direction\nhas been especially pronounced; and the effect shows itself in a\nsomewhat reluctant but cumulative departure from the archaic point of\nview. The departure is most visible and has gone farthest in those\nhomely branches of knowledge that have to do immediately with modern\nmechanical processes, such as engineering designs and technological\ncontrivances generally. Of the sciences, those have wandered farthest on\nthis way (of integration or disintegration, according as one may choose\nto view it) that have to do with mechanical sequence and process; and\nthose have best and longest retained the archaic point of view intact\nwhich--like the moral, social, or spiritual sciences--have to do with\nprocess and sequence that is less tangible, less traceable by the use of\nthe senses, and that therefore less immediately forces upon the\nattention the phenomenon of sequence as contrasted with that of\npropensity.\n\nThere is no abrupt transition from the pre-evolutionary to the\npost-evolutionary standpoint. Even in those natural sciences which deal\nwith the processes of life and the evolutionary sequence of events the\nconcept of dispassionate cumulative causation has often and effectively\nbeen helped out by the notion that there is in all this some sort of a\nmeliorative trend that exercises a constraining guidance over the course\nof causes and effects. The faith in this meliorative trend as a concept\nuseful to the science has gradually weakened, and it has repeatedly been\ndisavowed; but it can scarcely be said to have yet disappeared from the\nfield.\n\nThe process of change in the point of view, or in the terms of\ndefinitive formulation of knowledge, is a gradual one; and all the\nsciences have shared, though in an unequal degree, in the change that is\ngoing forward. Economics is not an exception to the rule, but it still\nshows too many reminiscences of the \"natural\" and the \"normal,\" of\n\"verities\" and \"tendencies,\" of \"controlling principles\" and \"disturbing\ncauses\" to be classed as an evolutionary science. This history of the\nscience shows a long and devious course of disintegrating\nanimism,--from the days of the scholastic writers, who discussed usury\nfrom the point of view of its relation to the divine suzerainty, to the\nPhysiocrats, who rested their case on an \"_ordre naturel_\" and a \"_loi\nnaturelle_\" that decides what is substantially true and, in a general\nway, guides the course of events by the constraint of logical\ncongruence. There has been something of a change from Adam Smith, whose\nrecourse in perplexity was to the guidance of \"an unseen hand,\" to Mill\nand Cairnes, who formulated the laws of \"natural\" wages and \"normal\"\nvalue, and the former of whom was so well content with his work as to\nsay, \"Happily, there is nothing in the laws of Value which remains for\nthe present or any future writer to clear up: the theory of the subject\nis complete.\"[4] But the difference between the earlier and the later\npoint of view is a difference of degree rather than of kind.\n\nThe standpoint of the classical economists, in their higher or\ndefinitive syntheses and generalisations, may not inaptly be called the\nstandpoint of ceremonial adequacy. The ultimate laws and principles\nwhich they formulated were laws of the normal or the natural, according\nto a preconception regarding the ends to which, in the nature of things,\nall things tend. In effect, this preconception imputes to things a\ntendency to work out what the instructed common sense of the time\naccepts as the adequate or worthy end of human effort. It is a\nprojection of the accepted ideal of conduct. This ideal of conduct is\nmade to serve as a canon of truth, to the extent that the investigator\ncontents himself with an appeal to its legitimation for premises that\nrun back of the facts with which he is immediately dealing, for the\n\"controlling principles\" that are conceived intangibly to underlie the\nprocess discussed, and for the \"tendencies\" that run beyond the\nsituation as it lies before him. As instances of the use of this\nceremonial canon of knowledge may be cited the \"conjectural history\"\nthat plays so large a part in the classical treatment of economic\ninstitutions, such as the normalized accounts of the beginnings of\nbarter in the transactions of the putative hunter, fisherman, and\nboat-builder, or the man with the plane and the two planks, or the two\nmen with the basket of apples and the basket of nuts.[5] Of a similar\nimport is the characterisation of money as \"the great wheel of\ncirculation\"[6] or as \"the medium of exchange.\" Money is here discussed\nin terms of the end which, \"in the normal case,\" it should work out\naccording to the given writer's ideal of economic life, rather than in\nterms of causal relation.\n\nWith later writers especially, this terminology is no doubt to be\ncommonly taken as a convenient use of metaphor, in which the concept of\nnormality and propensity to an end has reached an extreme attenuation.\nBut it is precisely in this use of figurative terms for the formulation\nof theory that the classical normality still lives its attenuated life\nin modern economics; and it is this facile recourse to inscrutable\nfigures of speech as the ultimate terms of theory that has saved the\neconomists from being dragooned into the ranks of modern science. The\nmetaphors are effective, both in their homiletical use and as a\nlabor-saving device,--more effective than their user designs them to be.\nBy their use the theorist is enabled serenely to enjoin himself from\nfollowing out an elusive train of causal sequence. He is also enabled,\nwithout misgivings, to construct a theory of such an institution as\nmoney or wages or land-ownership without descending to a consideration\nof the living items concerned, except for convenient corroboration of\nhis normalised scheme of symptoms. By this method the theory of an\ninstitution or a phase of life may be stated in conventionalised terms\nof the apparatus whereby life is carried on, the apparatus being\ninvested with a tendency to an equilibrium at the normal, and the theory\nbeing a formulation of the conditions under which this putative\nequilibrium supervenes. In this way we have come into the usufruct of a\ncost-of-production theory of value which is pungently reminiscent of the\ntime when Nature abhorred a vacuum. The ways and means and the\nmechanical structure of industry are formulated in a conventionalised\nnomenclature, and the observed motions of this mechanical apparatus are\nthen reduced to a normalised scheme of relations. The scheme so arrived\nat is spiritually binding on the behavior of the phenomena contemplated.\nWith this normalised scheme as a guide, the permutations of a given\nsegment of the apparatus are worked out according to the values assigned\nthe several items and features comprised in the calculation; and a\nceremonially consistent formula is constructed to cover that much of the\nindustrial field. This is the deductive method. The formula is then\ntested by comparison with observed permutations, by the polariscopic use\nof the \"normal case\"; and the results arrived at are thus authenticated\nby induction. Features of the process that do not lend themselves to\ninterpretation in the terms of the formula are abnormal cases and are\ndue to disturbing causes. In all this the agencies or forces causally at\nwork in the economic life process are neatly avoided. The outcome of the\nmethod, at its best, is a body of logically consistent propositions\nconcerning the normal relations of things--a system of economic\ntaxonomy. At its worst, it is a body of maxims for the conduct of\nbusiness and a polemical discussion of disputed points of policy.\n\nIn all this, economic science is living over again in its turn the\nexperiences which the natural sciences passed through some time back. In\nthe natural sciences the work of the taxonomist was and continues to be\nof great value, but the scientists grew restless under the regime of\nsymmetry and system-making. They took to asking why, and so shifted\ntheir inquiries from the structure of the coral reefs to the structure\nand habits of life of the polyp that lives in and by them. In the\nscience of plants, systematic botany has not ceased to be of service;\nbut the stress of investigation and discussion among the botanists\nto-day falls on the biological value of any given feature of structure,\nfunction, or tissue rather than on its taxonomic bearing. All the talk\nabout cytoplasm, centrosomes, and karyokinetic process, means that the\ninquiry now looks consistently to the life process, and aims to explain\nit in terms of cumulative causation.\n\nWhat may be done in economic science of the taxonomic kind is shown at\nits best in Cairnes's work, where the method is well conceived and the\nresults effectively formulated and applied. Cairnes handles the theory\nof the normal case in economic life with a master hand. In his\ndiscussion the metaphysics of propensity and tendencies no longer\navowedly rules the formulation of theory, nor is the inscrutable\nmeliorative trend of a harmony of interests confidently appealed to as\nan engine of definitive use in giving legitimacy to the economic\nsituation at a given time. There is less of an exercise of faith in\nCairnes's economic discussions than in those of the writers that went\nbefore him. The definitive terms of the formulation are still the terms\nof normality and natural law, but the metaphysics underlying this\nappeal to normality is so far removed from the ancient ground of the\nbeneficent \"order of nature\" as to have become at least nominally\nimpersonal and to proceed without a constant regard to the humanitarian\nbearing of the \"tendencies\" which it formulates. The metaphysics has\nbeen attenuated to something approaching in colorlessness the\nnaturalist's conception of natural law. It is a natural law which, in\nthe guise of \"controlling principles,\" exercises a constraining\nsurveillance over the trend of things; but it is no longer conceived to\nexercise its constraint in the interest of certain ulterior human\npurposes. The element of beneficence has been well-nigh eliminated, and\nthe system is formulated in terms of the system itself. Economics as it\nleft Cairnes's hand, so far as his theoretical work is concerned, comes\nnear being taxonomy for taxonomy's sake.\n\nNo equally capable writer has come as near making economics the ideal\n\"dismal\" science as Cairnes in his discussion of pure theory. In the\ndays of the early classical writers economics had a vital interest for\nthe laymen of the time, because it formulated the common sense\nmetaphysics of the time in its application to a department of human\nlife. But in the hands of the later classical writers the science lost\nmuch of its charm in this regard. It was no longer a definition and\nauthentication of the deliverances of current common sense as to what\nought to come to pass; and it, therefore, in large measure lost the\nsupport of the people out of doors, who were unable to take an interest\nin what did not concern them; and it was also out of touch with that\nrealistic or evolutionary habit of mind which got under way about the\nmiddle of the century in the natural sciences. It was neither vitally\nmetaphysical nor matter-of-fact, and it found comfort with very few\noutside of its own ranks. Only for those who by the fortunate accident\nof birth or education have been able to conserve the taxonomic animus\nhas the science during the last third of a century continued to be of\nabsorbing interest. The result has been that from the time when the\ntaxonomic structure stood forth as a completed whole in its symmetry and\nstability the economists themselves, beginning with Cairnes, have been\ngrowing restive under its discipline of stability, and have made many\nefforts, more or less sustained, to galvanise it into movement. At the\nhands of the writers of the classical line these excursions have chiefly\naimed at a more complete and comprehensive taxonomic scheme of\npermutations; while the historical departure threw away the taxonomic\nideal without getting rid of the preconceptions on which it is based;\nand the later Austrian group struck out on a theory of process, but\npresently came to a full stop because the process about which they\nbusied themselves was not, in their apprehension of it, a cumulative or\nunfolding sequence.\n\n       *       *       *       *       *\n\nBut what does all this signify? If we are getting restless under the\ntaxonomy of a monocotyledonous wage doctrine and a cryptogamic theory of\ninterest, with involute, loculicidal, tomentous and moniliform variants,\nwhat is the cytoplasm, centrosome, or karyokinetic process to which we\nmay turn, and in which we may find surcease from the metaphysics of\nnormality and controlling principles? What are we going to do about it?\nThe question is rather, What are we doing about it? There is the\neconomic life process still in great measure awaiting theoretical\nformulation. The active material in which the economic process goes on\nis the human material of the industrial community. For the purpose of\neconomic science the process of cumulative change that is to be\naccounted for is the sequence of change in the methods of doing\nthings,--the methods of dealing with the material means of life.\n\nWhat has been done in the way of inquiry into this economic life\nprocess? The ways and means of turning material objects and\ncircumstances to account lie before the investigator at any given point\nof time in the form of mechanical contrivances and arrangements for\ncompassing certain mechanical ends. It has therefore been easy to accept\nthese ways and means as items of inert matter having a given mechanical\nstructure and thereby serving the material ends of man. As such, they\nhave been scheduled and graded by the economists under the head of\ncapital, this capital being conceived as a mass of material objects\nserviceable for human use. This is well enough for the purposes of\ntaxonomy; but it is not an effective method of conceiving the matter for\nthe purpose of a theory of the developmental process. For the latter\npurpose, when taken as items in a process of cumulative change or as\nitems in the scheme of life, these productive goods are facts of human\nknowledge, skill, and predilection; that is to say, they are,\nsubstantially, prevalent habits of thought, and it is as such that they\nenter into the process of industrial development. The physical\nproperties of the materials accessible to man are constants: it is the\nhuman agent that changes,--his insight and his appreciation of what\nthese things can be used for is what develops. The accumulation of goods\nalready on hand conditions his handling and utilisation of the materials\noffered, but even on this side--the \"limitation of industry by\ncapital\"--the limitation imposed is on what men can do and on the\nmethods of doing it. The changes that take place in the mechanical\ncontrivances are an expression of changes in the human factor. Changes\nin the material facts breed further change only through the human\nfactor. It is in the human material that the continuity of development\nis to be looked for; and it is here, therefore, that the motor forces of\nthe process of economic development must be studied if they are to be\nstudied in action at all. Economic action must be the subject-matter of\nthe science if the science is to fall into line as an evolutionary\nscience.\n\nNothing new has been said in all this. But the fact is all the more\nsignificant for being a familiar fact. It is a fact recognised by common\nconsent throughout much of the later economic discussion, and this\ncurrent recognition of the fact is a long step towards centering\ndiscussion and inquiry upon it. If economics is to follow the lead or\nthe analogy of the other sciences that have to do with a life process,\nthe way is plain so far as regards the general direction in which the\nmove will be made.\n\nThe economists of the classical trend have made no serious attempt to\ndepart from the standpoint of taxonomy and make their science a genetic\naccount of the economic life process. As has just been said, much the\nsame is true for the Historical School. The latter have attempted an\naccount of developmental sequence, but they have followed the lines of\npre-Darwinian speculations on development rather than lines which modern\nscience would recognise as evolutionary. They have given a narrative\nsurvey of phenomena, not a genetic account of an unfolding process. In\nthis work they have, no doubt, achieved results of permanent value; but\nthe results achieved are scarcely to be classed as economic theory. On\nthe other hand, the Austrians and their precursors and their coadjutors\nin the value discussion have taken up a detached portion of economic\ntheory, and have inquired with great nicety into the process by which\nthe phenomena within their limited field are worked out. The entire\ndiscussion of marginal utility and subjective value as the outcome of a\nvaluation process must be taken as a genetic study of this range of\nfacts. But here, again, nothing further has come of the inquiry, so far\nas regards a rehabilitation of economic theory as a whole. Accepting\nMenger as their spokesman on this head, it must be said that the\nAustrians have on the whole showed themselves unable to break with the\nclassical tradition that economics is a taxonomic science.\n\nThe reason for the Austrian failure seems to lie in a faulty conception\nof human nature,--faulty for the present purpose, however adequate it\nmay be for any other. In all the received formulations of economic\ntheory, whether at the hands of English economists or those of the\nContinent, the human material with which the inquiry is concerned is\nconceived in hedonistic terms; that is to say, in terms of a passive and\nsubstantially inert and immutably given human nature. The psychological\nand anthropological preconceptions of the economists have been those\nwhich were accepted by the psychological and social sciences some\ngenerations ago. The hedonistic conception of man is that of a lightning\ncalculator of pleasures and pains, who oscillates like a homogeneous\nglobule of desire of happiness under the impulse of stimuli that shift\nhim about the area, but leave him intact. He has neither antecedent nor\nconsequent. He is an isolated, definitive human datum, in stable\nequilibrium except for the buffets of the impinging forces that displace\nhim in one direction or another. Self-imposed in elemental space, he\nspins symmetrically about his own spiritual axis until the parallelogram\nof forces bears down upon him, whereupon he follows the line of the\nresultant. When the force of the impact is spent, he comes to rest, a\nself-contained globule of desire as before. Spiritually, the hedonistic\nman is not a prime mover. He is not the seat of a process of living,\nexcept in the sense that he is subject to a series of permutations\nenforced upon him by circumstances external and alien to him.\n\nThe later psychology, reenforced by modern anthropological research,\ngives a different conception of human nature. According to this\nconception, it is the characteristic of man to do something, not simply\nto suffer pleasures and pains through the impact of suitable forces. He\nis not simply a bundle of desires that are to be saturated by being\nplaced in the path of the forces of the environment, but rather a\ncoherent structure of propensities and habits which seeks realisation\nand expression in an unfolding activity. According to this view, human\nactivity, and economic activity among the rest, is not apprehended as\nsomething incidental to the process of saturating given desires. The\nactivity is itself the substantial fact of the process, and the desires\nunder whose guidance the action takes place are circumstances of\ntemperament which determine the specific direction in which the activity\nwill unfold itself in the given case. These circumstances of temperament\nare ultimate and definitive for the individual who acts under them, so\nfar as regards his attitude as agent in the particular action in which\nhe is engaged. But, in the view of the science, they are elements of the\nexisting frame of mind of the agent, and are the outcome of his\nantecedents and his life up to the point at which he stands. They are\nthe products of his hereditary traits and his past experience,\ncumulatively wrought out under a given body of traditions,\nconventionalities, and material circumstances; and they afford the point\nof departure for the next step in the process. The economic life history\nof the individual is a cumulative process of adaptation of means to\nends that cumulatively change as the process goes on, both the agent and\nhis environment being at any point the outcome of the last process. His\nmethods of life to-day are enforced upon him by his habits of life\ncarried over from yesterday and by the circumstances left as the\nmechanical residue of the life of yesterday.\n\nWhat is true of the individual in this respect is true of the group in\nwhich he lives. All economic change is a change in the economic\ncommunity,--a change in the community's methods of turning material\nthings to account. The change is always in the last resort a change in\nhabits of thought. This is true even of changes in the mechanical\nprocesses of industry. A given contrivance for effecting certain\nmaterial ends becomes a circumstance which affects the further growth of\nhabits of thought--habitual methods of procedure--and so becomes a point\nof departure for further development of the methods of compassing the\nends sought and for the further variation of ends that are sought to be\ncompassed. In all this flux there is no definitively adequate method of\nlife and no definitive or absolutely worthy end of action, so far as\nconcerns the science which sets out to formulate a theory of the process\nof economic life. What remains as a hard and fast residue is the fact of\nactivity directed to an objective end. Economic action is teleological,\nin the sense that men always and everywhere seek to do something. What,\nin specific detail, they seek, is not to be answered except by a\nscrutiny of the details of their activity; but, so long as we have to do\nwith their life as members of the economic community, there remains the\ngeneric fact that their life is an unfolding activity of a teleological\nkind.\n\nIt may or may not be a teleological process in the sense that it tends\nor should tend to any end that is conceived to be worthy or adequate by\nthe inquirer or by the consensus of inquirers. Whether it is or is not,\nis a question with which the present inquiry is not concerned; and it is\nalso a question of which an evolutionary economics need take no account.\nThe question of a tendency in events can evidently not come up except on\nthe ground of some preconception or prepossession on the part of the\nperson looking for the tendency. In order to search for a tendency, we\nmust be possessed of some notion of a definitive end to be sought, or\nsome notion as to what is the legitimate trend of events. The notion of\na legitimate trend in a course of events is an extra-evolutionary\npreconception, and lies outside the scope of an inquiry into the causal\nsequence in any process. The evolutionary point of view, therefore,\nleaves no place for a formulation of natural laws in terms of definitive\nnormality, whether in economics or in any other branch of inquiry.\nNeither does it leave room for that other question of normality, What\nshould be the end of the developmental process under discussion?\n\nThe economic life history of any community is its life history in so far\nas it is shaped by men's interest in the material means of life. This\neconomic interest has counted for much in shaping the cultural growth of\nall communities. Primarily and most obviously, it has guided the\nformation, the cumulative growth, of that range of conventionalities and\nmethods of life that are currently recognized as economic institutions;\nbut the same interest has also pervaded the community's life and its\ncultural growth at points where the resulting structural features are\nnot chiefly and most immediately of an economic bearing. The economic\ninterest goes with men through life, and it goes with the race\nthroughout its process of cultural development. It affects the cultural\nstructure at all points, so that all institutions may be said to be in\nsome measure economic institutions. This is necessarily the case, since\nthe base of action--the point of departure--at any step in the process\nis the entire organic complex of habits of thought that have been shaped\nby the past process. The economic interest does not act in isolation,\nfor it is but one of several vaguely isolable interests on which the\ncomplex of teleological activity carried out by the individual proceeds.\nThe individual is but a single agent in each case; and he enters into\neach successive action as a whole, although the specific end sought in a\ngiven action may be sought avowedly on the basis of a particular\ninterest; as _e.g._, the economic, aesthetic, sexual, humanitarian,\ndevotional interests. Since each of these passably isolable interests is\na propensity of the organic agent man, with his complex of habits of\nthought, the expression of each is affected by habits of life formed\nunder the guidance of all the rest. There is, therefore, no neatly\nisolable range of cultural phenomena that can be rigorously set apart\nunder the head of economic institutions, although a category of\n\"economic institutions\" may be of service as a convenient caption,\ncomprising those institutions in which the economic interest most\nimmediately and consistently finds expression, and which most\nimmediately and with the least limitation are of an economic bearing.\n\nFrom what has been said it appears that an evolutionary economics must\nbe the theory of a process of cultural growth as determined by the\neconomic interest, a theory of a cumulative sequence of economic\ninstitutions stated in terms of the process itself. Except for the want\nof space to do here what should be done in some detail if it is done at\nall, many efforts by the later economists in this direction might be\ncited to show the trend of economic discussion in this direction. There\nis not a little evidence to this effect, and much of the work done must\nbe rated as effective work for this purpose. Much of the work of the\nHistorical School, for instance, and that of its later exponents\nespecially, is too noteworthy to be passed over in silence, even with\nall due regard to the limitations of space.\n\nWe are now ready to return to the question why economics is not an\nevolutionary science. It is necessarily the aim of such an economics to\ntrace the cumulative working-out of the economic interest in the\ncultural sequence. It must be a theory of the economic life process of\nthe race or the community. The economists have accepted the hedonistic\npreconceptions concerning human nature and human action, and the\nconception of the economic interest which a hedonistic psychology gives\ndoes not afford material for a theory of the development of human\nnature. Under hedonism the economic interest is not conceived in terms\nof action. It is therefore not readily apprehended or appreciated in\nterms of a cumulative growth of habits of thought, and does not provoke,\neven if it did lend itself to, treatment by the evolutionary method.\nAt the same time the anthropological preconceptions current in that\ncommon-sense apprehension of human nature to which economists have\nhabitually turned has not enforced the formulation of human nature\nin terms of a cumulative growth of habits of life. These received\nanthropological preconceptions are such as have made possible the\nnormalized conjectural accounts of primitive barter with which\nall economic readers are familiar, and the no less normalized\nconventional derivation of landed property and its rent, or the\nsociologico-philosophical discussions of the \"function\" of this or\nthat class in the life of society or of the nation.\n\nThe premises and the point of view required for an evolutionary\neconomics have been wanting. The economists have not had the materials\nfor such a science ready to their hand, and the provocation to strike\nout in such a direction has been absent. Even if it has been possible at\nany time to turn to the evolutionary line of speculation in economics,\nthe possibility of a departure is not enough to bring it about. So long\nas the habitual view taken of a given range of facts is of the taxonomic\nkind and the material lends itself to treatment by that method, the\ntaxonomic method is the easiest, gives the most gratifying immediate\nresults, and best fits into the accepted body of knowledge of the range\nof facts in question. This has been the situation in economics. The\nother sciences of its group have likewise been a body of taxonomic\ndiscipline, and departures from the accredited method have lain under\nthe odium of being meretricious innovations. The well-worn paths are\neasy to follow and lead into good company. Advance along them visibly\nfurthers the accredited work which the science has in hand. Divergence\nfrom the paths means tentative work, which is necessarily slow and\nfragmentary and of uncertain value.\n\nIt is only when the methods of the science and the syntheses resulting\nfrom their use come to be out of line with habits of thought that\nprevail in other matters that the scientist grows restive under the\nguidance of the received methods and standpoints, and seeks a way out.\nLike other men, the economist is an individual with but one\nintelligence. He is a creature of habits and propensities given through\nthe antecedents, hereditary and cultural, of which he is an outcome; and\nthe habits of thought formed in any one line of experience affect his\nthinking in any other. Methods of observation and of handling facts\nthat are familiar through habitual use in the general range of\nknowledge, gradually assert themselves in any given special range of\nknowledge. They may be accepted slowly and with reluctance where their\nacceptance involves innovation; but, if they have the continued backing\nof the general body of experience, it is only a question of time when\nthey shall come into dominance in the special field. The intellectual\nattitude and the method of correlation enforced upon us in the\napprehension and assimilation of facts in the more elementary ranges of\nknowledge that have to do with brute facts assert themselves also when\nthe attention is directed to those phenomena of the life process with\nwhich economics has to do; and the range of facts which are habitually\nhandled by other methods than that in traditional vogue in economics has\nnow become so large and so insistently present at every turn that we are\nleft restless, if the new body of facts cannot be handled according to\nthe method of mental procedure which is in this way becoming habitual.\n\nIn the general body of knowledge in modern times the facts are\napprehended in terms of causal sequence. This is especially true of that\nknowledge of brute facts which is shaped by the exigencies of the modern\nmechanical industry. To men thoroughly imbued with this matter-of-fact\nhabit of mind the laws and theorems of economics, and of the other\nsciences that treat of the normal course of things, have a character of\n\"unreality\" and futility that bars out any serious interest in their\ndiscussion. The laws and theorems are \"unreal\" to them because they are\nnot to be apprehended in the terms which these men make use of in\nhandling the facts with which they are perforce habitually occupied. The\nsame matter-of-fact spiritual attitude and mode of procedure have now\nmade their way well up into the higher levels of scientific knowledge,\neven in the sciences which deal in a more elementary way with the same\nhuman material that makes the subject-matter of economics, and the\neconomists themselves are beginning to feel the unreality of their\ntheorems about \"normal\" cases. Provided the practical exigencies of\nmodern industrial life continue of the same character as they now are,\nand so continue to enforce the impersonal method of knowledge, it is\nonly a question of time when that (substantially animistic) habit of\nmind which proceeds on the notion of a definitive normality shall be\ndisplaced in the field of economic inquiry by that (substantially\nmaterialistic) habit of mind which seeks a comprehension of facts in\nterms of a cumulative sequence.\n\nThe later method of apprehending and assimilating facts and handling\nthem for the purposes of knowledge may be better or worse, more or less\nworthy or adequate, than the earlier; it may be of greater or less\nceremonial or aesthetic effect; we may be moved to regret the incursion\nof underbred habits of thought into the scholar's domain. But all that\nis beside the present point. Under the stress of modern technological\nexigencies, men's every-day habits of thought are falling into the lines\nthat in the sciences constitute the evolutionary method; and knowledge\nwhich proceeds on a higher, more archaic plane is becoming alien and\nmeaningless to them. The social and political sciences must follow the\ndrift, for they are already caught in it.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _The Quarterly Journal of Economics_,\nvol. xii, July, 1898.\n\n[2] \"The Fundamental Laws of Anthropo-sociology,\" _Journal of Political\nEconomy_, December, 1897, p. 54. The same paper, in substance, appears\nin the _Rivista Italiana di Sociologia_ for November, 1897.\n\n[3] \"The Old Generation of Economists and the New,\" _Quarterly Journal\nof Economics_, January, 1897, p. 133.\n\n[4] _Political Economy_, Book III, chap. i.\n\n[5] Marshall, _Principles of Economics_ (2d ed.), Book V, chap. ii, p.\n395, note.\n\n[6] Adam Smith, _Wealth of Nations_ (Bohn ed.), Book II, chap. ii, p.\n289.\n\n\n\n\nTHE PRECONCEPTIONS OF ECONOMIC SCIENCE[1]\n\nI\n\n\nIn an earlier paper[2] the view has been expressed that the economics\nhanded down by the great writers of a past generation is substantially a\ntaxonomic science. A view of much the same purport, so far as concerns\nthe point here immediately in question, is presented in an admirably\nlucid and cogent way by Professor Clark in a recent number of this\njournal.[3] There is no wish hereby to burden Professor Clark with a\nputative sponsorship of any ungraceful or questionable generalisations\nreached in working outward from this main position, but expression may\nnot be denied the comfort which his unintended authentication of the\nmain position affords. It is true, Professor Clark does not speak of\ntaxonomy, but employs the term \"statics,\" which is perhaps better suited\nto his immediate purpose. Nevertheless, in spite of the high authority\ngiven the term \"statics,\" in this connection, through its use by\nProfessor Clark and by other writers eminent in the science, it is\nfairly to be questioned whether the term can legitimately be used to\ncharacterize the received economic theories. The word is borrowed from\nthe jargon of physics, where it is used to designate the theory of\nbodies at rest or of forces in equilibrium. But there is much in the\nreceived economic theories to which the analogy of bodies at rest or of\nforces in equilibrium will not apply. It is perhaps not too much to say\nthat those articles of economic theory that do not lend themselves to\nthis analogy make up the major portion of the received doctrines. So,\nfor instance, it seems scarcely to the point to speak of the statics of\nproduction, exchange, consumption, circulation. There are, no doubt,\nappreciable elements in the theory of these several processes that may\nfairly be characterized as statical features of the theory; but the\ndoctrines handed down are after all, in the main, theories of the\nprocess discussed under each head, and the theory of a process does not\nbelong in statics. The epithet \"statical\" would, for instance, have to\nbe wrenched somewhat ungently to make it apply to Quesnay's classic\n_Tableau Economique_ or to the great body of Physiocratic speculations\nthat take their rise from it The like is true for Books II. and III. of\nAdam Smith's _Wealth of Nations_, as also for considerable portions of\nRicardo's work, or, to come down to the present generation, for much of\nMarshall's _Principles_, and for such a modern discussion as Smart's\n_Studies in Economics_, as well as for the fruitful activity of the\nAustrians and of the later representatives of the Historical School.\n\nBut to return from this terminological digression. While economic\nscience in the remoter past of its history has been mainly of a\ntaxonomic character, later writers of all schools show something of a\ndivergence from the taxonomic line and an inclination to make the\nscience a genetic account of the economic life process, sometimes even\nwithout an ulterior view to the taxonomic value of the results obtained.\nThis divergence from the ancient canons of theoretical formulation is to\nbe taken as an episode of the movement that is going forward in\nlatter-day science generally; and the progressive change which thus\naffects the ideals and the objective point of the modern sciences seems\nin its turn to be an expression of that matter-of-fact habit of mind\nwhich the prosy but exacting exigencies of life in a modern industrial\ncommunity breed in men exposed to their unmitigated impact.\n\nIn speaking of this matter-of-fact character of the modern sciences it\nhas been broadly characterized as \"evolutionary\"; and the evolutionary\nmethod and the evolutionary ideals have been placed in antithesis to the\ntaxonomic methods and ideals of pre-evolutionary days. But the\ncharacteristic attitude, aims, and ideals which are so designated here\nare by no means peculiar to the group of sciences that are professedly\noccupied with a process of development, taking that term in its most\nwidely accepted meaning. The latter-day inorganic sciences are in this\nrespect like the organic. They occupy themselves with \"dynamic\"\nrelations and sequences. The question which they ask is always, What\ntakes place next, and why? Given a situation wrought out by the forces\nunder inquiry, what follows as the consequence of the situation so\nwrought out? or what follows upon the accession of a further element of\nforce? Even in so non-evolutionary a science as inorganic chemistry the\ninquiry consistently runs on a process, an active sequence, and the\nvalue of the resulting situation as a point of departure for the next\nstep in an interminable cumulative sequence. The last step in the\nchemist's experimental inquiry into any substance is, What comes of the\nsubstance determined? What will it do? What will it lead to, when it is\nmade the point of departure in further chemical action? There is no\nultimate term, and no definitive solution except in terms of further\naction. The theory worked out is always a theory of a genetic\nsuccession of phenomena, and the relations determined and elaborated\ninto a body of doctrine are always genetic relations. In modern\nchemistry no cognisance is taken of the honorific bearing of reactions\nor molecular formulae. The modern chemist, as contrasted with his ancient\ncongener, knows nothing of the worth, elegance, or cogency of the\nrelations that may subsist between the particles of matter with which he\nbusies himself, for any other than the genetic purpose. The spiritual\nelement and the elements of worth and propensity no longer count.\nAlchemic symbolism and the hierarchical glamour and virtue that once\nhedged about the nobler and more potent elements and reagents are almost\naltogether a departed glory of the science. Even the modest imputation\nof propensity involved in the construction of a scheme of coercive\nnormality, for the putative guidance of reactions, finds little\ncountenance with the later adepts of chemical science. The science has\noutlived that phase of its development at which the taxonomic feature\nwas the dominant one.\n\nIn the modern sciences, of which chemistry is one, there has been a\ngradual shifting of the point of view from which the phenomena which the\nscience treats of are apprehended and passed upon; and to the historian\nof chemical science this shifting of the point of view must be a factor\nof great weight in the development of chemical knowledge. Something of a\nlike nature is true for economic science; and it is the aim here to\npresent, in outline, some of the successive phases that have passed over\nthe spiritual attitude of the adepts of the science, and to point out\nthe manner in which the transition from one point of view to the next\nhas been made.\n\n       *       *       *       *       *\n\nAs has been suggested in the paper already referred to, the\ncharacteristic spiritual attitude or point of view of a given generation\nor group of economists is shown not so much in their detail work as in\ntheir higher syntheses--the terms of their definitive formulations--the\ngrounds of their final valuation of the facts handled for purpose of\ntheory. This line of recondite inquiry into the spiritual past and\nantecedents of the science has not often been pursued seriously or with\nsingleness of purpose, perhaps because it is, after all, of but slight\nconsequence to the practical efficiency of the present-day science.\nStill, not a little substantial work has been done towards this end by\nsuch writers as Hasbach, Oncken, Bonar, Cannan, and Marshall. And much\nthat is to the purpose is also due to writers outside of economics, for\nthe aims of economic speculation have never been insulated from the work\ngoing forward in other lines of inquiry. As would necessarily be the\ncase, the point of view of economists has always been in large part the\npoint of view of the enlightened common sense of their time. The\nspiritual attitude of a given generation of economists is therefore in\ngood part a special outgrowth of the ideals and preconceptions current\nin the world about them.\n\nSo, for instance, it is quite the conventional thing to say that the\nspeculations of the Physiocrats were dominated and shaped by the\npreconception of Natural Rights. Account has been taken of the effect of\nnatural-rights preconceptions upon the Physiocratic schemes of policy\nand economic reform as well as upon the details of their doctrines.[4]\nBut little has been said of the significance of these preconceptions for\nthe lower courses of the Physiocrats' theoretical structure. And yet\nthat habit of mind to which the natural-rights view is wholesome and\nadequate is answerable both for the point of departure and for the\nobjective point of the Physiocratic theories, both for the range of\nfacts to which they turned and for the terms in which they were content\nto formulate their knowledge of the facts which they handled. The\nfailure of their critics to place themselves at the Physiocratic point\nof view has led to much destructive criticism of their work; whereas,\nwhen seen through Physiocratic eyes, such doctrines as those of the net\nproduct and of the barrenness of the artisan class appear to be\nsubstantially true.\n\nThe speculations of the Physiocrats are commonly accounted the first\narticulate and comprehensive presentation of economic theory that is in\nline with later theoretical work. The Physiocratic point of view may,\ntherefore, well be taken as the point of departure in an attempt to\ntrace that shifting of aims and norms of procedure that comes into view\nin the work of later economists when compared with earlier writers.\n\nPhysiocratic economics is a theory of the working-out of the Law of\nNature (_loi naturelle_) in its economic bearing, and this Law of Nature\nis a very simple matter.\n\n     Les lois naturelles sont ou physiques ou morales.\n\n     On entend ici, par loi physique, _le cours regle de tout\n     evenement physique de l'ordre naturel, evidemment le plus\n     avantageux au genre humain_.\n\n     On entend ici, par loi morale, _la regle de toute action\n     humaine de l'ordre morale, conforme a l'ordre physique\n     evidemment le plus avantageux au genre humain_.\n\n     Ces lois forment ensemble ce qu'on appelle la _loi\n     naturelle_. Tous les hommes et toutes les puissances humaines\n     doivent etre soumis a ces lois souveraines, instituees par\n     l'Etre-Supreme: elles sont immuables et irrefragables, et les\n     meilleures lois possible.[5]\n\nThe settled course of material facts tending beneficently to the highest\nwelfare of the human race,--this is the final term in the Physiocratic\nspeculations. This is the touchstone of substantiality. Conformity to\nthese \"immutable and unerring\" laws of nature is the test of economic\ntruth. The laws are immutable and unerring, but that does not mean that\nthey rule the course of events with a blind fatality that admits of no\nexception and no divergence from the direct line. Human nature may,\nthrough infirmity or perversity, willfully break over the beneficent\ntrend of the laws of nature; but to the Physiocrat's sense of the matter\nthe laws are none the less immutable and irrefragable on that account.\nThey are not empirical generalisations on the course of phenomena, like\nthe law of falling bodies or of the angle of reflection; although many\nof the details of their action are to be determined only by observation\nand experience, helped out, of course, by interpretation of the facts of\nobservation under the light of reason. So, for instance, Turgot, in his\n_Reflections_, empirically works out a doctrine of the reasonable course\nof development through which wealth is accumulated and reaches the\nexisting state of unequal distribution; so also his doctrines of\ninterest and of money. The immutable natural laws are rather of the\nnature of canons of conduct governing nature than generalisations of\nmechanical sequence, although in a general way the phenomena of\nmechanical sequence are details of the conduct of nature working\naccording to these canons of conduct. The great law of the order of\nnature is of the character of a propensity working to an end, to the\naccomplishment of a purpose. The processes of nature working under the\nquasi-spiritual stress of this immanent propensity may be characterised\nas nature's habits of life. Not that nature is conscious of its travail,\nand knows and desires the worthy end of its endeavors; but for all that\nthere is a quasi-spiritual nexus between antecedent and consequent in\nthe scheme of operation in which nature is engaged. Nature is not uneasy\nabout interruptions of its course or occasional deflections from the\ndirect line through an untoward conjunction of mechanical causes, nor\ndoes the validity of the great overruling law suffer through such an\nepisode. The introduction of a mere mechanically effective causal factor\ncannot thwart the course of Nature from reaching the goal to which she\nanimistically tends. Nothing can thwart this teleological propensity of\nnature except counter-activity or divergent activity of a similarly\nteleological kind. Men can break over the law, and have short-sightedly\nand willfully done so; for men are also agents who guide their actions\nby an end to be achieved. Human conduct is activity of the same kind--on\nthe same plane of spiritual reality or competency--as the course\nof Nature, and it may therefore traverse the latter. The remedy\nfor this short-sighted traffic of misguided human nature is\nenlightenment,--\"instruction publique et privee des lois de l'ordre\nnaturel.\"[6]\n\nThe nature in terms of which all knowledge of phenomena--for the present\npurpose economic phenomena--is to be finally synthesised is, therefore,\nsubstantially of a quasi-spiritual or animistic character. The laws of\nnature are in the last resort teleological: they are of the nature of a\npropensity. The substantial fact in all the sequences of nature is the\nend to which the sequence naturally tends, not the brute fact of\nmechanical compulsion or causally effective forces. Economic theory is\naccordingly the theory (1) of how the efficient causes of the _ordre\nnaturel_ work in an orderly unfolding sequence, guided by the\nunderlying natural laws--the propensity immanent in nature to establish\nthe highest well-being of mankind, and (2) of the conditions imposed\nupon human conduct by these natural laws in order to reach the ordained\ngoal of supreme human welfare. The conditions so imposed on human\nconduct are as definitive as the laws and the order by force of which\nthey are imposed; and the theoretical conclusions reached, when these\nlaws and this order are known, are therefore expressions of absolute\neconomic truth. Such conclusions are an expression of reality, but not\nnecessarily of fact.\n\nNow, the objective end of this propensity that determines the course of\nnature is human well-being. But economic speculation has to do with the\nworkings of nature only so far as regards the _ordre physique_. And the\nlaws of nature in the _ordre physique_, working through mechanical\nsequence, can only work out the physical well-being of man, not\nnecessarily the spiritual. This propensity to the physical well-being of\nman is therefore the law of nature to which economic science must bring\nits generalisations, and this law of physical beneficence is the\nsubstantial ground of economic truth. Wanting this, all our speculations\nare vain; but having its authentication they are definitive. The great,\ntypical function, to which all the other functioning of nature is\nincidental if not subsidiary, is accordingly that of the alimentation,\nnutrition of mankind. In so far, and only in so far as the physical\nprocesses contribute to human sustenance and fullness of life, can they,\ntherefore, further the great work of nature. Whatever processes\ncontribute to human sustenance by adding to the material available for\nhuman assimilation and nutrition, by increasing the substance disposable\nfor human comfort, therefore count towards the substantial end. All\nother processes, however serviceable in other than this physiological\nrespect, lack the substance of economic reality. Accordingly, human\nindustry is productive, economically speaking, if it heightens the\neffectiveness of the natural processes out of which the material of\nhuman sustenance emerges; otherwise not. The test of productivity, of\neconomic reality in material facts, is the increase of nutritive\nmaterial. Whatever employment of time or effort does not afford an\nincrease of such material is unproductive, however profitable it may be\nto the person employed, and however useful or indispensable it may be to\nthe community. The type of such productive industry is the husbandman's\nemployment, which yields a substantial (nutritive) gain. The artisan's\nwork may be useful to the community and profitable to himself, but its\neconomic effect does not extend beyond an alteration of the form in\nwhich the material afforded by nature already lies at hand. It is\nformally productive only, not really productive. It bears no part in the\ncreative or generative work of nature; and therefore it lacks the\ncharacter of economic substantiality. It does not enhance nature's\noutput of vital force. The artisan's labors, therefore, yield no net\nproduct, whereas the husbandman's labors do.\n\nWhatever constitutes a material increment of this output of vital force\nis wealth, and nothing else is. The theory of value contained in this\nposition has not to do with value according to men's appraisement of the\nvaluable article. Given items of wealth may have assigned to them\ncertain relative values at which they exchange, and these conventional\nvalues may differ more or less widely from the natural or intrinsic\nvalue of the goods in question; but all that is beside the substantial\npoint. The point in question is not the degree of predilection shown by\ncertain individuals or bodies of men for certain goods. That is a matter\nof caprice and convention, and it does not directly touch the\nsubstantial ground of the economic life. The question of value is a\nquestion of the extent to which the given item of wealth forwards the\nend of nature's unfolding process. It is valuable, intrinsically and\nreally, in so far as it avails the great work which nature has in hand.\n\nNature, then, is the final term in the Physiocratic speculations. Nature\nworks by impulse and in an unfolding process, under the stress of a\npropensity to the accomplishment of a given end. This propensity, taken\nas the final cause that is operative in any situation, furnishes the\nbasis on which to cooerdinate all our knowledge of those efficient causes\nthrough which Nature works to her ends. For the purpose of economic\ntheory proper, this is the ultimate ground of reality to which our quest\nof economic truth must penetrate. But back of Nature and her works there\nis, in the Physiocratic scheme of the universe, the Creator, by whose\nall-wise and benevolent power the order of nature has been established\nin all the strength and beauty of its inviolate and immutable\nperfection. But the Physiocratic conception of the Creator is\nessentially a deistic one: he stands apart from the course of nature\nwhich he has established, and keeps his hands off. In the last resort,\nof course, \"Dieu seul est producteur. Les hommes travaillent,\nreceuillent, economisent, conservent; mais _economiser_ n'est pas\n_produire_.\"[7] But this last resort does not bring the Creator into\neconomic theory as a fact to be counted with in formulating economic\nlaws. He serves a homiletical purpose in the Physiocratic speculations\nrather than fills an office essential to the theory. He comes within the\npurview of the theory by way of authentication rather than as a subject\nof inquiry or a term in the formulation of economic knowledge. The\nPhysiocratic God can scarcely be said to be an economic fact, but it is\notherwise with that Nature whose ways and means constitute the\nsubject-matter of the Physiocratic inquiry.\n\nWhen this natural system of the Physiocratic speculation is looked at\nfrom the side of the psychology of the investigators, or from that of\nthe logical premises employed, it is immediately recognised as\nessentially animistic. It runs consistently on animistic ground; but it\nis animism of a high grade,--highly integrated and enlightened, but,\nafter all, retaining very much of that primitive force and naivete which\ncharacterise the animistic explanations of phenomena in vogue among the\nuntroubled barbarians. It is not the disjected animism of the vulgar,\nwho see a willful propensity--often a willful perversity--in given\nobjects or situations to work towards a given outcome, good or bad. It\nis not the gambler's haphazard sense of fortuitous necessity or the\nhousewife's belief in lucky days, numbers or phases of the moon. The\nPhysiocrat's animism rests on a broader outlook, and does not proceed by\nsuch an immediately impulsive imputation of propensity. The teleological\nelement--the element of propensity--is conceived in a large way, unified\nand harmonised, as a comprehensive order of nature as a whole. But it\nvindicates its standing as a true animism by never becoming fatalistic\nand never being confused or confounded with the sequence of cause and\neffect. It has reached the last stage of integration and definition,\nbeyond which the way lies downward from the high, quasi-spiritual ground\nof animism to the tamer levels of normality and causal uniformities.\n\nThere is already discernible a tone of dispassionate and colorless\n\"tendency\" about the Physiocratic animism, such as to suggest a\nwavering towards the side of normality. This is especially visible in\nsuch writers as the half-protestant Turgot. In his discussion of the\ndevelopment of farming, for instance, Turgot speaks almost entirely of\nhuman motives and the material conditions under which the growth takes\nplace. There is little metaphysics in it, and that little does not\nexpress the law of nature in an adequate form. But, after all has been\nsaid, it remains true that the Physiocrat's sense of substantiality is\nnot satisfied until he reaches the animistic ground; and it remains true\nalso that the arguments of their opponents made little impression on the\nPhysiocrats so long as they were directed to other than this animistic\nground of their doctrine. This is true in great measure even of Turgot,\nas witness his controversy with Hume. Whatever criticism is directed\nagainst them on other grounds is met with impatience, as being\ninconsequential, if not disingenuous.[8]\n\nTo an historian of economic theory the source and the line of derivation\nwhereby this precise form of the order-of-nature preconception reached\nthe Physiocrats are of first-rate importance; but it is scarcely a\nquestion to be taken up here,--in part because it is too large a\nquestion to be handled here, in part because it has met with adequate\ntreatment at more competent hands,[9] and in part because it is somewhat\nbeside the immediate point under discussion. This point is the logical,\nor perhaps better the psychological, value of the Physiocrats'\npreconception, as a factor in shaping their point of view and the terms\nof their definitive formulation of economic knowledge. For this purpose\nit may be sufficient to point out that the preconception in question\nbelongs to the generation in which the Physiocrats lived, and that it is\nthe guiding norm of all serious thought that found ready assimilation\ninto the common-sense views of that time. It is the characteristic and\ncontrolling feature of what may be called the common-sense metaphysics\nof the eighteenth century, especially so far as concerns the enlightened\nFrench community.\n\nIt is to be noted as a point bearing more immediately on the question in\nhand that this imputation of final causes to the course of phenomena\nexpresses a spiritual attitude which has prevailed, one might almost\nsay, always and everywhere, but which reached its finest, most effective\ndevelopment, and found its most finished expression, in the\neighteenth-century metaphysics. It is nothing recondite; for it meets us\nat every turn, as a matter of course, in the vulgar thinking of\nto-day,--in the pulpit and in the market place,--although it is not so\ningenuous, nor does it so unquestionedly hold the primacy in the\nthinking of any class to-day as it once did. It meets us likewise, with\nbut little change of features, at all past stages of culture, late or\nearly. Indeed, it is the most generic feature of human thinking, so far\nas regards a theoretical or speculative formulation of knowledge.\nAccordingly, it seems scarcely necessary to trace the lineage of this\ncharacteristic preconception of the era of enlightenment, through\nspecific channels, back to the ancient philosophers or jurists of the\nempire. Some of the specific forms of its expression--as, for instance,\nthe doctrine of Natural Rights--are no doubt traceable through mediaeval\nchannels to the teachings of the ancients; but there is no need of going\nover the brook for water, and tracing back to specific teachings the\nmain features of that habit of mind or spiritual attitude of which the\ndoctrines of Natural Rights and the Order of Nature are specific\nelaborations only. This dominant habit of mind came to the generation of\nthe Physiocrats on the broad ground of group inheritance, not by lineal\ndevolution from any one of the great thinkers of past ages who had\nthrown its deliverances into a similarly competent form for the use of\nhis own generation.\n\n       *       *       *       *       *\n\nIn leaving the Physiocratic discipline and the immediate sphere of\nPhysiocratic influence for British ground, we are met by the figure of\nHume. Here, also, it will be impracticable to go into details as to the\nremoter line of derivation of the specific point of view that we come\nupon on making the transition, for reasons similar to those already\ngiven as excuse for passing over the similar question with regard to the\nPhysiocratic point of view. Hume is, of course, not primarily an\neconomist; but that placid unbeliever is none the less a large item in\nany inventory of eighteenth-century economic thought. Hume was not\ngifted with a facile acceptance of the group inheritance that made the\nhabit of mind of his generation. Indeed, he was gifted with an alert,\nthough somewhat histrionic, skepticism touching everything that was well\nreceived. It is his office to prove all things, though not necessarily\nto hold fast that which is good.\n\nAside from the strain of affectation discernible in Hume's skepticism,\nhe may be taken as an accentuated expression of that characteristic bent\nwhich distinguishes British thinking in his time from the thinking of\nthe Continent, and more particularly of the French. There is in Hume,\nand in the British community, an insistence on the prosy, not to say the\nseamy, side of human affairs. He is not content with formulating his\nknowledge of things in terms of what ought to be or in terms of the\nobjective point of the course of things. He is not even content with\nadding to the teleological account of phenomena a chain of empirical,\nnarrative generalisations as to the usual course of things. He insists,\nin season and out of season, on an exhibition of the efficient causes\nengaged in any sequence of phenomena; and he is skeptical--irreverently\nskeptical--as to the need or the use of any formulation of knowledge\nthat outruns the reach of his own matter-of-fact, step-by-step argument\nfrom cause to effect.\n\nIn short, he is too modern to be wholly intelligible to those of his\ncontemporaries who are most neatly abreast of their time. He\nout-Britishes the British; and, in his footsore quest for a perfectly\ntame explanation of things, he finds little comfort, and indeed scant\ncourtesy, at the hands of his own generation. He is not in sufficiently\nnaive accord with the range of preconceptions then in vogue.\n\nBut, while Hume may be an accentuated expression of a national\ncharacteristic, he is not therefore an untrue expression of this phase\nof British eighteenth-century thinking. The peculiarity of point of view\nand of method for which he stands has sometimes been called the critical\nattitude, sometimes the inductive method, sometimes the materialistic or\nmechanical, and again, though less aptly, the historical method. Its\ncharacteristic is an insistence on matter of fact.\n\nThis matter-of-fact animus that meets any historian of economic doctrine\non his introduction to British economics is a large, but not the\nlargest, feature of the British scheme of early economic thought. It\nstrikes the attention because it stands in contrast with the relative\nabsence of this feature in the contemporary speculations of the\nContinent. The most potent, most formative habit of thought concerned\nin the early development of economic teaching on British ground is best\nseen in the broader generalisations of Adam Smith, and this more potent\nfactor in Smith is a bent that is substantially identical with that\nwhich gives consistency to the speculations of the Physiocrats. In Adam\nSmith the two are happily combined, not to say blended; but the\nanimistic habit still holds the primacy, with the matter-of-fact as a\nsubsidiary though powerful factor. He is said to have combined deduction\nwith induction. The relatively great prominence given the latter marks\nthe line of divergence of British from French economics, not the line of\ncoincidence; and on this account it may not be out of place to look more\nnarrowly into the circumstances to which the emergence of this\nrelatively greater penchant for a matter-of-fact explanation of things\nin the British community is due.\n\nTo explain the characteristic animus for which Hume stands, on grounds\nthat might appeal to Hume, we should have to inquire into the peculiar\ncircumstances--ultimately material circumstances--that have gone to\nshape the habitual view of things within the British community, and that\nso have acted to differentiate the British preconceptions from the\nFrench, or from the general range of preconceptions prevalent on the\nContinent. These peculiar formative circumstances are no doubt to some\nextent racial peculiarities; but the racial complexion of the British\ncommunity is not widely different from the French, and especially not\nwidely different from certain other Continental communities which are\nfor the present purpose roughly classed with the French. Race difference\ncan therefore not wholly, nor indeed for the greater part, account for\nthe cultural difference of which this difference in preconceptions is an\noutcome. Through its cumulative effect on institutions the race\ndifference must be held to have had a considerable effect on the habit\nof mind of the community; but, if the race difference is in this way\ntaken as the remoter ground of an institutional peculiarity, which in\nits turn has shaped prevalent habits of thought, then the attention may\nbe directed to the proximate causes, the concrete circumstances, through\nwhich this race difference has acted, in conjunction with other ulterior\ncircumstances, to work out the psychological phenomena observed. Race\ndifferences, it may be remarked, do not so nearly coincide with national\nlines of demarcation as differences in the point of view from which\nthings are habitually apprehended or differences in the standards\naccording to which facts are rated.\n\nIf the element of race difference be not allowed definitive weight in\ndiscussing national peculiarities that underlie the deliverances of\ncommon sense, neither can these national peculiarities be confidently\ntraced to a national difference in the transmitted learning that enters\ninto the common-sense view of things. So far as concerns the concrete\nfacts embodied in the learning of the various nations within the\nEuropean culture, these nations make up but a single community. What\ndivergence is visible does not touch the character of the positive\ninformation with which the learning of the various nations is occupied.\nDivergence is visible in the higher syntheses, the methods of handling\nthe material of knowledge, the basis of valuation of the facts taken up,\nrather than in the material of knowledge. But this divergence must be\nset down to a cultural difference, a difference of point of view, not to\na difference in inherited information. When a given body of information\npasses the national frontiers it acquires a new complexion, a new\nnational, cultural physiognomy. It is this cultural physiognomy of\nlearning that is here under inquiry, and a comparison of early French\neconomics (the Physiocrats) with early British economics (Adam Smith) is\nhere entered upon merely with a view to making out what significance\nthis cultural physiognomy of the science has for the past progress of\neconomic speculation.\n\nThe broad features of economic speculation, as it stood at the period\nunder consideration, may be briefly summed up, disregarding the element\nof policy, or expediency, which is common to both groups of economists,\nand attending to their theoretical work alone. With the Physiocrats, as\nwith Adam Smith, there are two main points of view from which economic\nphenomena are treated: (_a_) the matter-of-fact point of view or\npreconception, which yields a discussion of causal sequences and\ncorrelations; and (_b_) what, for want of a more expressive word, is\nhere called the animistic point of view or preconception, which yields a\ndiscussion of teleological sequences and correlations,--a discussion of\nthe function of this and that \"organ,\" of the legitimacy of this or the\nother range of facts. The former preconception is allowed a larger scope\nin the British than in the French economics: there is more of\n\"induction\" in the British. The latter preconception is present in both,\nand is the definitive element in both; but the animistic element is more\ncolorless in the British, it is less constantly in evidence, and less\nable to stand alone without the support of arguments from cause to\neffect. Still, the animistic element is the controlling factor in the\nhigher syntheses of both; and for both alike it affords the definitive\nground on which the argument finally comes to rest. In neither group of\nthinkers is the sense of substantiality appeased until this\nquasi-spiritual ground, given by the natural propensity of the course of\nevents, is reached. But the propensity in events, the natural or normal\ncourse of things, as appealed to by the British speculators, suggests\nless of an imputation of will-power, or personal force, to the\npropensity in question. It may be added, as has already been said in\nanother place, that the tacit imputation of will-power or spiritual\nconsistency to the natural or normal course of events has progressively\nweakened in the later course of economic speculation, so that in this\nrespect, the British economists of the eighteenth century may be said to\nrepresent a later phase of economic inquiry than the Physiocrats.\n\n       *       *       *       *       *\n\nUnfortunately, but unavoidably, if this question as to the cultural\nshifting of the point of view in economic science is taken up from the\nside of the causes to which the shifting is traceable, it will take the\ndiscussion back to ground on which an economist must at best feel\nhimself to be but a raw layman, with all a layman's limitations and\nineptitude, and with the certainty of doing badly what might be done\nwell by more competent hands. But, with a reliance on charity where\ncharity is most needed, it is necessary to recite summarily what seems\nto be the psychological bearing of certain cultural facts.\n\nA cursory acquaintance with any of the more archaic phases of human\nculture enforces the recognition of this fact,--that the habit of\nconstruing the phenomena of the inanimate world in animistic terms\nprevails pretty much universally on these lower levels. Inanimate\nphenomena are apprehended to work out a propensity to an end; the\nmovements of the elements are construed in terms of quasi-personal\nforce. So much is well authenticated by the observations on which\nanthropologists and ethnologists draw for their materials. This\nanimistic habit, it may be said, seems to be more effectual and\nfar-reaching among those primitive communities that lead a predatory\nlife.\n\nBut along with this feature of archaic methods of thought or of\nknowledge, the picturesqueness of which has drawn the attention of all\nobservers, there goes a second feature, no less important for the\npurpose in hand, though less obtrusive. The latter is of less interest\nto the men who have to do with the theory of cultural development,\nbecause it is a matter of course. This second feature of archaic thought\nis the habit of also apprehending facts in non-animistic, or impersonal,\nterms. The imputation of propensity in no case extends to all the\nmechanical facts in the case. There is always a substratum of matter of\nfact, which is the outcome of an habitual imputation of causal sequence,\nor, perhaps better, an imputation of mechanical continuity, if a new\nterm be permitted. The agent, thing, fact, event, or phenomenon, to\nwhich propensity, will-power, or purpose, is imputed, is always\napprehended to act in an environment which is accepted as spiritually\ninert. There are always opaque facts as well as self-directing agents.\nAny agent acts through means which lend themselves to his use on other\ngrounds than that of spiritual compulsion, although spiritual compulsion\nmay be a large feature in any given case.\n\nThe same features of human thinking, the same two complementary methods\nof correlating facts and handling them for the purposes of knowledge,\nare similarly in constant evidence in the daily life of men in our own\ncommunity. The question is, in great part, which of the two bears the\ngreater part in shaping human knowledge at any given time and within any\ngiven range of knowledge or of facts.\n\nOther features of the growth of knowledge, which are remoter from the\npoint under inquiry, may be of no less consequence to a comprehensive\ntheory of the development of culture and of thought; but it is of course\nout of the question here to go farther afield. The present inquiry will\nhave enough to do with these two. No other features are correlative with\nthese, and these merit discussion on account of their intimate bearing\non the point of view of economics. The point of interest with respect to\nthese two correlative and complementary habits of thought is the\nquestion of how they have fared under the changing exigencies of human\nculture; in what manner they come, under given cultural circumstances,\nto share the field of knowledge between them; what is the relative part\nof each in the composite point of view in which the two habits of\nthought express themselves at any given cultural stage.\n\nThe animistic preconception enforces the apprehension of phenomena in\nterms generically identical with the terms of personality or\nindividuality. As a certain modern group of psychologists would say, it\nimputes to objects and sequences an element of habit and attention\nsimilar in kind, though not necessarily in degree, to the like spiritual\nattitude present in the activities of a personal agent. The\nmatter-of-fact preconception, on the other hand, enforces a handling of\nfacts without imputation of personal force or attention, but with an\nimputation of mechanical continuity, substantially the preconception\nwhich has reached a formulation at the hands of scientists under the\nname of conservation of energy or persistence of quantity. Some\nappreciable resort to the latter method of knowledge is unavoidable at\nany cultural stage, for it is indispensable to all industrial\nefficiency. All technological processes and all mechanical contrivances\nrest, psychologically speaking, on this ground. This habit of thought is\na selectively necessary consequence of industrial life, and, indeed, of\nall human experience in making use of the material means of life. It\nshould therefore follow that, in a general way, the higher the culture,\nthe greater the share of the mechanical preconception in shaping human\nthought and knowledge, since, in a general way, the stage of culture\nattained depends on the efficiency of industry. The rule, while it does\nnot hold with anything like extreme generality, must be admitted to hold\nto a good extent; and to that extent it should hold also that, by a\nselective adaptation of men's habits of thought to the exigencies of\nthose cultural phases that have actually supervened, the mechanical\nmethod of knowledge should have gained in scope and range. Something of\nthe sort is borne out by observation.\n\nA further consideration enforces the like view. As the community\nincreases in size, the range of observation of the individuals in the\ncommunity also increases; and continually wider and more far-reaching\nsequences of a mechanical kind have to be taken account of. Men have to\nadapt their own motives to industrial processes that are not safely to\nbe construed in terms of propensity, predilection, or passion. Life in\nan advanced industrial community does not tolerate a neglect of\nmechanical fact; for the mechanical sequences through which men, at an\nappreciable degree of culture, work out their livelihood, are no\nrespecters of persons or of will-power. Still, on all but the higher\nindustrial stages, the coercive discipline of industrial life, and of\nthe scheme of life that inculcates regard for the mechanical facts of\nindustry, is greatly mitigated by the largely haphazard character of\nindustry, and by the great extent to which man continues to be the prime\nmover in industry. So long as industrial efficiency is chiefly a matter\nof the handicraftsman's skill, dexterity, and diligence, the attention\nof men in looking to the industrial process is met by the figure of the\nworkman, as the chief and characteristic factor; and thereby it comes to\nrun on the personal element in industry.\n\nBut, with or without mitigation, the scheme of life which men perforce\nadopt under exigencies of an advanced industrial situation shapes their\nhabits of thought on the side of their behavior, and thereby shapes\ntheir habits of thought to some extent for all purposes. Each individual\nis but a single complex of habits of thought, and the same psychical\nmechanism that expresses itself in one direction as conduct expresses\nitself in another direction as knowledge. The habits of thought formed\nin the one connection, in response to stimuli that call for a response\nin terms of conduct, must, therefore, have their effect when the same\nindividual comes to respond to stimuli that call for a response in terms\nof knowledge. The scheme of thought or of knowledge is in good part a\nreverberation of the scheme of life. So that, after all has been said,\nit remains true that with the growth of industrial organization and\nefficiency there must, by selection and by adaptation, supervene a\ngreater resort to the mechanical or dispassionate method of apprehending\nfacts.\n\nBut the industrial side of life is not the whole of it, nor does the\nscheme of life in vogue in any community or at any cultural stage\ncomprise industrial conduct alone. The social, civic, military, and\nreligious interests come in for their share of attention, and between\nthem they commonly take up by far the larger share of it. Especially is\nthis true so far as concerns those classes among whom we commonly look\nfor a cultivation of knowledge for knowledge's sake. The discipline\nwhich these several interests exert does not commonly coincide with the\ntraining given by industry. So the religious interest, with its canons\nof truth and of right living, runs exclusively on personal relations and\nthe adaptation of conduct to the predilections of a superior personal\nagent. The weight of its discipline, therefore, falls wholly on the\nanimistic side. It acts to heighten our appreciation of the spiritual\nbearing of phenomena and to discountenance a matter-of-fact apprehension\nof things. The skeptic of the type of Hume has never been in good repute\nwith those who stand closest to the accepted religious truths. The\nbearing of this side of our culture upon the development of economics is\nshown by what the mediaeval scholars had to say on economic topics.\n\nThe disciplinary effects of other phases of life, outside of the\nindustrial and the religious, is not so simple a matter; but the\ndiscussion here approaches nearer to the point of immediate\ninquiry,--namely, the cultural situation in the eighteenth century, and\nits relation to economic speculation,--and this ground of interest in\nthe question may help to relieve the topic of the tedium that of right\nbelongs to it.\n\nIn the remoter past of which we have records, and even in the more\nrecent past, Occidental man, as well as man elsewhere, has eminently\nbeen a respecter of persons. Wherever the warlike activity has been a\nlarge feature of the community's life, much of human conduct in society\nhas proceeded on a regard for personal force. The scheme of life has\nbeen a scheme of personal aggression and subservience, partly in the\nnaive form, partly conventionalised in a system of status. The\ndiscipline of social life for the present purpose, in so far as its\ncanons of conduct rest on this element of personal force in the\nunconventionalised form, plainly tends to the formation of a habit of\napprehending and cooerdinating facts from the animistic point of view. So\nfar as we have to do with life under a system of status, the like\nremains true, but with a difference. The regime of status inculcates an\nunremitting and very nice discrimination and observance of distinctions\nof personal superiority and inferiority. To the criterion of personal\nforce, or will-power, taken in its immediate bearing on conduct, is\nadded the criterion of personal excellence-in-general, regardless of the\nfirst-hand potency of the given person as an agent. This criterion of\nconduct requires a constant and painstaking imputation of personal\nvalue, regardless of fact. The discrimination enjoined by the canons of\nstatus proceeds on an invidious comparison of persons in respect of\nworth, value, potency, virtue, which must, for the present purpose, be\ntaken as putative. The greater or less personal value assigned a given\nindividual or a given class under the canons of status is not assigned\non the ground of visible efficiency, but on the ground of a dogmatic\nallegation accepted on the strength of an uncontradicted categorical\naffirmation simply. The canons of status hold their ground by force of\npreemption. Where distinctions of status are based on a putative worth\ntransmitted by descent from honorable antecedents, the sequence of\ntransmission to which appeal is taken as the arbiter of honor is of a\nputative and animistic character rather than a visible mechanical\ncontinuity. The habit of accepting as final what is prescriptively right\nin the affairs of life has as its reflex in the affairs of knowledge the\nformula, _Quid ab omnibus, quid ubique creditur credendum est_.\n\nEven this meager account of the scheme of life that characterises a\nregime of status should serve to indicate what is its disciplinary\neffect in shaping habits of thought, and therefore in shaping the\nhabitual criteria of knowledge and of reality. A culture whose\ninstitutions are a framework of invidious comparisons implies, or rather\ninvolves and comprises, a scheme of knowledge whose definitive standards\nof truth and substantiality are of an animistic character; and, the more\nundividedly the canons of status and ceremonial honor govern the conduct\nof the community, the greater the facility with which the sequence of\ncause and effect is made to yield before the higher claims of a\nspiritual sequence or guidance in the course of events. Men consistently\ntrained to an unremitting discrimination of honor, worth, and personal\nforce in their daily conduct, and to whom these criteria afford the\ndefinitive ground of sufficiency in cooerdinating facts for the purposes\nof life, will not be satisfied to fall short of the like definitive\nground of sufficiency when they come to cooerdinate facts for the\npurposes of knowledge simply. The habits formed in unfolding his\nactivity in one direction, under the impulse of a given interest, assert\nthemselves when the individual comes to unfold his activity in any other\ndirection, under the impulse of any other interest. If his last resort\nand highest criterion of truth in conduct is afforded by the element of\npersonal force and invidious comparison, his sense of substantiality or\ntruth in the quest of knowledge will be satisfied only when a like\ndefinitive ground of animistic force and invidious comparison is\nreached. But when such ground is reached he rests content and pushes the\ninquiry no farther. In his practical life he has acquired the habit of\nresting his case on an authentic deliverance as to what is absolutely\nright. This absolutely right and good final term in conduct has the\ncharacter of finality only when conduct is construed in a ceremonial\nsense; that is to say, only when life is conceived as a scheme of\nconformity to a purpose outside and beyond the process of living. Under\nthe regime of status this ceremonial finality is found in the concept of\nworth or honor. In the religious domain it is the concept of virtue,\nsanctity, or tabu. Merit lies in what one is, not in what one does. The\nhabit of appeal to ceremonial finality, formed in the school of status,\ngoes with the individual in his quest of knowledge, as a dependence upon\na similarly authentic norm of absolute truth,--a similar seeking of a\nfinal term outside and beyond the range of knowledge.\n\nThe discipline of social and civic life under a regime of status, then,\nreenforces the discipline of the religious life; and the outcome of the\nresulting habituation is that the canons of knowledge are cast in the\nanimistic mold and converge to a ground of absolute truth, and this\nabsolute truth is of a ceremonial nature. Its subject-matter is a\nreality regardless of fact.\n\nThe outcome, for science, of the religious and social life of the\ncivilisation of status, in Occidental culture, was a structure of\nquasi-spiritual appreciations and explanations, of which astrology,\nalchemy, and mediaeval theology and metaphysics are competent, though\nsomewhat one-sided, exponents. Throughout the range of this early\nlearning the ground of correlation of phenomena is in part the supposed\nrelative potency of the facts correlated; but it is also in part a\nscheme of status, in which facts are scheduled according to a\nhierarchical gradation of worth or merit, having only a ceremonial\nrelation to the observed phenomena. Some elements (some metals, for\ninstance) are noble, others base; some planets, on grounds of ceremonial\nefficacy, have a sinister influence, others a beneficent one; and it is\na matter of serious consequence whether they are in the ascendant, and\nso on.\n\nThe body of learning through which the discipline of animism and\ninvidious comparison transmitted its effects to the science of economics\nwas what is known as natural theology, natural rights, moral philosophy,\nand natural law. These several disciplines or bodies of knowledge had\nwandered far from the naive animistic standpoint at the time when\neconomic science emerged, and much the same is true as regards the time\nof the emergence of other modern sciences. But the discipline which\nmakes for an animistic formulation of knowledge continued to hold the\nprimacy in modern culture, although its dominion was never altogether\nundivided or unmitigated. Occidental culture has long been largely an\nindustrial culture; and, as already pointed out, the discipline of\nindustry, and of life in an industrial community, does not favor the\nanimistic preconception. This is especially true as regards industry\nwhich makes large use of mechanical contrivances. The difference in\nthese respects between Occidental industry and science, on the one hand,\nand the industry and science of other cultural regions, on the other\nhand, is worth noting in this connection. The result has been that the\nsciences, as that word is understood in later usage, have come forward\ngradually, and in a certain rough parallelism with the development of\nindustrial processes and industrial organisation. It is possible to hold\nthat both modern industry (of the mechanical sort) and modern science\ncenter about the region of the North Sea. It is still more palpably true\nthat within this general area the sciences, in the recent past, show a\nfamily likeness to the civil and social institutions of the communities\nin which they have been cultivated, this being true to the greatest\nextent of the higher or speculative sciences; that is, in that range of\nknowledge in which the animistic preconception can chiefly and most\neffectively find application. There is, for instance, in the eighteenth\ncentury a perceptible parallelism between the divergent character of\nBritish and Continental culture and institutions, on the one hand, and\nthe dissimilar aims of British and Continental speculation, on the other\nhand.\n\nSomething has already been said of the difference in preconceptions\nbetween the French and the British economists of the eighteenth century.\nIt remains to point out the correlative cultural difference between the\ntwo communities, to which it is conceived that the difference in\nscientific animus is in great measure due. It is, of course, only the\ngeneral features, the general attitude of the speculators, that can be\ncredited to the difference in culture. Differences of detail in the\nspecific doctrines held could be explained only on a much more detailed\nanalysis than can be entered on here, and after taking account of facts\nwhich cannot here be even allowed for in detail.\n\nAside from the greater resort to mechanical contrivances and the larger\nscale of organisation in British industry, the further cultural\npeculiarities of the British community run in the same general\ndirection. British religious life and beliefs had less of the element of\nfealty--personal or discretionary mastery and subservience--and more of\na tone of fatalism. The civil institutions of the British had not the\nsame rich personal content as those of the French. The British subject\nowned allegiance to an impersonal law rather than to the person of a\nsuperior. Relatively, it may be said that the sense of status, as a\ncoercive factor, was in abeyance in the British community. Even in the\nwarlike enterprise of the British community a similar characteristic is\ntraceable. Warfare is, of course, a matter of personal assertion.\nWarlike communities and classes are necessarily given to construing\nfacts in terms of personal force and personal ends. They are always\nsuperstitious. They are great sticklers for rank and precedent, and\nzealously cultivate those distinctions and ceremonial observances in\nwhich a system of status expresses itself. But, while warlike enterprise\nhas by no means been absent from the British scheme of life, the\ngeographical and strategic isolation of the British community has given\na characteristic turn to their military relations. In recent times\nBritish warlike operations have been conducted abroad. The military\nclass has consequently in great measure been segregated out from the\nbody of the community, and the ideals and prejudices of the class have\nnot been transfused through the general body with the same facility and\neffect that they might otherwise have had. The British community at home\nhas seen the campaign in great part from the standpoint of the \"sinews\nof war.\"\n\nThe outcome of all these national peculiarities of circumstance and\nculture has been that a different scheme of life has been current in the\nBritish community from what has prevailed on the Continent. There has\nresulted the formation of a different body of habits of thought and a\ndifferent animus in their handling of facts. The preconception of causal\nsequence has been allowed larger scope in the correlation of facts for\npurposes of knowledge; and, where the animistic preconception has been\nresorted to, as it always has in the profounder reaches of learning, it\nhas commonly been an animism of a tamer kind.\n\nTaking Adam Smith as an exponent of this British attitude in theoretical\nknowledge, it is to be noted that, while he formulates his knowledge in\nterms of a propensity (natural laws) working teleologically to an end,\nthe end or objective point which controls the formulation has not the\nsame rich content of vital human interest or advantage as is met with in\nthe Physiocratic speculations. There is perceptibly less of an imperious\ntone in Adam Smith's natural laws than in those of the contemporary\nFrench economists. It is true, he sums up the institutions with which he\ndeals in terms of the ends which they should subserve, rather than in\nterms of the exigencies and habits of life out of which they have\narisen; but he does not with the same tone of finality appeal to the end\nsubserved as a final cause through whose coercive guidance the complex\nof phenomena is kept to its appointed task. Under his hands the\nrestraining, compelling agency retires farther into the background, and\nappeal is taken to it neither so directly nor on so slight provocation.\n\nBut Adam Smith is too large a figure to be disposed of in a couple of\nconcluding paragraphs. At the same time his work and the bent which he\ngave to economic speculation are so intimately bound up with the aims\nand bias that characterise economics in its next stage of development\nthat he is best dealt with as the point of departure for the Classical\nSchool rather than merely as a British counterpart of Physiocracy. Adam\nSmith will accordingly be considered in immediate connection with the\nbias of the classical school and the incursion of utilitarianism into\neconomics.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _The Quarterly Journal of Economics_,\nvol. xiii, Jan., 1899.\n\n[2] \"Why is Economics not an Evolutionary Science?\" _Quarterly Journal\nof Economics_, July, 1898.\n\n[3] \"The Future of Economic Theory,\" _ibid._, October, 1898.\n\n[4] See, for instance, Hasbach, _Allgemeine philosophische Grundlagen\nder von Francois Quesnay und Adam Smith begruendeten politischen\nOekonomie_.\n\n[5] Quesnay, _Droit Naturel_, ch. v. (Ed. Daire, _Physiocrates_, pp.\n52-53).\n\n[6] Quesnay, _Droit Naturel_, ch. v (Ed. Daire, _Physiocrates_, p. 53).\n\n[7] Dupont de Nemours, _Correspondance avec J.-B. Say_ (Ed. Daire,\n_Physiocrates_, premiere partie, p. 399).\n\n[8] See, for instance, the concluding chapters of La Riviere's _Ordre\nNaturel des Societes Politiques_.\n\n[9] E.g., Hasbach, _loc. cit._; Bonar, _Philosophy and Political\nEconomy_, Book II; Ritchie, _Natural Rights_.\n\n\n\n\nTHE PRECONCEPTIONS OF ECONOMIC SCIENCE[1]\n\nII\n\n\nAdam Smith's animistic bent asserts itself more plainly and more\neffectually in the general trend and aim of his discussion than in the\ndetails of theory. \"Adam Smith's _Wealth of Nations_ is, in fact, so far\nas it has one single purpose, a vindication of the unconscious law\npresent in the separate actions of men when these actions are directed\nby a certain strong personal motive.\"[2] Both in the _Theory of the\nMoral Sentiments_ and in the _Wealth of Nations_ there are many passages\nthat testify to his abiding conviction that there is a wholesome trend\nin the natural course of things, and the characteristically optimistic\ntone in which he speaks for natural liberty is but an expression of this\nconviction. An extreme resort to this animistic ground occurs in his\nplea for freedom of investment.[3]\n\nIn the proposition that men are \"led by an invisible hand,\" Smith does\nnot fall back on a meddling Providence who is to set human affairs\nstraight when they are in danger of going askew. He conceives the\nCreator to be very continent in the matter of interference with the\nnatural course of things. The Creator has established the natural order\nto serve the ends of human welfare; and he has very nicely adjusted the\nefficient causes comprised in the natural order, including human aims\nand motives, to this work that they are to accomplish. The guidance of\nthe invisible hand takes place not by way of interposition, but through\na comprehensive scheme of contrivances established from the beginning.\nFor the purpose of economic theory, man is conceived to be consistently\nself-seeking; but this economic man is a part of the mechanism of\nnature, and his self-seeking traffic is but a means whereby, in the\nnatural course of things, the general welfare is worked out. The scheme\nas a whole is guided by the end to be reached, but the sequence of\nevents through which the end is reached is a causal sequence which is\nnot broken into episodically. The benevolent work of guidance was\nperformed in first establishing an ingenious mechanism of forces and\nmotives capable of accomplishing an ordained result, and nothing beyond\nthe enduring constraint of an established trend remains to enforce the\ndivine purpose in the resulting natural course of things.\n\nThe sequence of events, including human motives and human conduct, is a\ncausal sequence; but it is also something more, or, rather, there is\nalso another element of continuity besides that of brute cause and\neffect, present even in the step-by-step process whereby the natural\ncourse of things reaches its final term. The presence of such a\nquasi-spiritual or non-causal element is evident from two (alleged)\nfacts. (1) The course of things may be deflected from the direct line of\napproach to that consummate human welfare which is its legitimate end.\nThe natural trend of things may be overborne by an untoward conjuncture\nof causes. There is a distinction, often distressingly actual and\npersistent, between the legitimate and the observed course of things. If\n\"natural,\" in Adam Smith's use, meant necessary, in the sense of\ncausally determined, no divergence of events from the natural or\nlegitimate course of things would be possible. If the mechanism of\nnature, including man, were a mechanically competent contrivance for\nachieving the great artificer's design, there could be no such episodes\nof blundering and perverse departure from the direct path as Adam Smith\nfinds in nearly all existing arrangements. Institutional facts would\nthen be \"natural.\"[4] (2) When things have gone wrong, they will right\nthemselves if interference with the natural course ceases; whereas, in\nthe case of a causal sequence simply, the mere cessation of interference\nwill not leave the outcome the same as if no interference had taken\nplace. This recuperative power of nature is of an extra-mechanical\ncharacter. The continuity of sequence by force of which the natural\ncourse of things prevails is, therefore, not of the nature of cause and\neffect, since it bridges intervals and interruptions in the causal\nsequence.[5] Adam Smith's use of the term \"real\" in statements of\ntheory--as, for example, \"real value,\" \"real price\"[6]--is evidence to\nthis effect. \"Natural\" commonly has the same meaning as \"real\" in this\nconnection.[7] Both \"natural\" and \"real\" are placed in contrast with the\nactual; and, in Adam Smith's apprehension, both have a substantiality\ndifferent from and superior to facts. The view involves a distinction\nbetween reality and fact, which survives in a weakened form in the\ntheories of \"normal\" prices, wages, profits, costs, in Adam Smith's\nsuccessors.\n\nThis animistic prepossession seems to pervade the earlier of his two\nmonumental works in a greater degree than the later. In the _Moral\nSentiments_ recourse is had to the teleological ground of the natural\norder more freely and with perceptibly greater insistence. There seems\nto be reason for holding that the animistic preconception weakened or,\nat any rate, fell more into the background as his later work of\nspeculation and investigation proceeded. The change shows itself also in\nsome details of his economic theory, as first set forth in the\n_Lectures_, and afterwards more fully developed in the _Wealth of\nNations_. So, for instance, in the earlier presentation of the matter,\n\"the division of labor is the immediate cause of opulence\"; and this\ndivision of labor, which is the chief condition of economic well-being,\n\"flows from a direct propensity in human nature for one man to barter\nwith another.\"[8] The \"propensity\" in question is here appealed to as a\nnatural endowment immediately given to man with a view to the welfare of\nhuman society, and without any attempt at further explanation of how man\nhas come by it. No causal explanation of its presence or character is\noffered. But the corresponding passage of the _Wealth of Nations_\nhandles the question more cautiously.[9] Other parallel passages might\nbe compared, with much the same effect. The guiding hand has withdrawn\nfarther from the range of human vision.\n\nHowever, these and other like filial expressions of a devout optimism\nneed, perhaps, not be taken as integral features of Adam Smith's\neconomic theory, or as seriously affecting the character of his work as\nan economist. They are the expression of his general philosophical and\ntheological views, and are significant for the present purpose chiefly\nas evidences of an animistic and optimistic bent. They go to show what\nis Adam Smith's accepted ground of finality,--the ground to which all\nhis speculations on human affairs converge; but they do not in any\ngreat degree show the teleological bias guiding his formulation of\neconomic theory in detail.\n\nThe effective working of the teleological bias is best seen in Smith's\nmore detailed handling of economic phenomena--in his discussion of what\nmay loosely be called economic institutions--and in the criteria and\nprinciples of procedure by which he is guided in incorporating these\nfeatures of economic life into the general structure of his theory. A\nfair instance, though perhaps not the most telling one, is the\ndiscussion of the \"real and nominal price,\" and of the \"natural and\nmarket price\" of commodities, already referred to above.[10] The \"real\"\nprice of commodities is their value in terms of human life. At this\npoint Smith differs from the Physiocrats, with whom the ultimate terms\nof value are afforded by human sustenance taken as a product of the\nfunctioning of brute nature; the cause of the difference being that the\nPhysiocrats conceived the natural order which works towards the material\nwell-being of man to comprise the non-human environment only, whereas\nAdam Smith includes man in this concept of the natural order, and,\nindeed, makes him the central figure in the process of production. With\nthe Physiocrats, production is the work of nature: with Adam Smith, it\nis the work of man and nature, with man in the foreground. In Adam\nSmith, therefore, labor is the final term in valuation. This \"real\"\nvalue of commodities is the value imputed to them by the economist under\nthe stress of his teleological preconception. It has little, if any,\nplace in the course of economic events, and no bearing on human affairs,\napart from the sentimental influence which such a preconception in favor\nof a \"real value\" in things may exert upon men's notions of what is the\ngood and equitable course to pursue in their transactions. It is\nimpossible to gauge this real value of goods; it cannot be measured or\nexpressed in concrete terms. Still, if labor exchanges for a varying\nquantity of goods, \"it is their value which varies, not that of the\nlabor which purchases them.\"[11] The values which practically attach to\ngoods in men's handling of them are conceived to be determined without\nregard to the real value which Adam Smith imputes to the goods; but, for\nall that, the substantial fact with respect to these market values is\ntheir presumed approximation to the real values teleologically imputed\nto the goods under the guidance of inviolate natural laws. The real, or\nnatural, value of articles has no causal relation to the value at which\nthey exchange. The discussion of how values are determined in practice\nruns on the motives of the buyers and sellers, and the relative\nadvantage enjoyed by the parties to the transaction.[12] It is a\ndiscussion of a process of valuation, quite unrelated to the \"real,\" or\n\"natural,\" price of things, and quite unrelated to the grounds on which\nthings are held to come by their real, or natural, price; and yet, when\nthe complex process of valuation has been traced out in terms of human\nmotives and the exigencies of the market, Adam Smith feels that he has\nonly cleared the ground. He then turns to the serious business of\naccounting for value and price theoretically, and making the ascertained\nfacts articulate with his teleological theory of economic life.[13]\n\nThe occurrence of the words \"ordinary\" and \"average\" in this connection\nneed not be taken too seriously. The context makes it plain that the\nequality which commonly subsists between the ordinary or average rates,\nand the natural rates, is a matter of coincidence, not of identity. Not\nonly are there temporary deviations, but there may be a permanent\ndivergence between the ordinary and the natural price of a commodity; as\nin case of a monopoly or of produce grown under peculiar circumstances\nof soil or climate.[14]\n\nThe natural price coincides with the price fixed by competition, because\ncompetition means the unimpeded play of those efficient forces through\nwhich the nicely adjusted mechanism of nature works out the design to\naccomplish which it was contrived. The natural price is reached through\nthe free interplay of the factors of production, and it is itself an\noutcome of production. Nature, including the human factor, works to turn\nout the goods; and the natural value of the goods is their appraisement\nfrom the standpoint of this productive process of nature. Natural value\nis a category of production: whereas, notoriously exchange value or\nmarket price is a category of distribution. And Adam Smith's theoretical\nhandling of market price aims to show how the factors of human\npredilection and human wants at work in the higgling of the market\nbring about a result in passable consonance with the natural laws that\nare conceived to govern production.\n\nThe natural price is a composite result of the blending of the three\n\"component parts of the price of commodities,\"--the natural wages of\nlaborer, the natural profits of stock, and the natural rent of land; and\neach of these three components is in its turn the measure of the\nproductive effect of the factor to which it pertains. The further\ndiscussion of these shares in distribution aims to account for the facts\nof distribution on the ground of the productivity of the factors which\nare held to share the product between them. That is to say, Adam Smith's\npreconception of a productive natural process as the basis of his\neconomic theory dominates his aims and procedure, when he comes to deal\nwith phenomena that cannot be stated in terms of production. The causal\nsequence in the process of distribution is, by Adam Smith's own showing,\nunrelated to the causal sequence in the process of production; but,\nsince the latter is the substantial fact, as viewed from the standpoint\nof a teleological natural order, the former must be stated in terms of\nthe latter before Adam Smith's sense of substantiality, or \"reality,\" is\nsatisfied. Something of the same kind is, of course, visible in the\nPhysiocrats and in Cantillon. It amounts to an extension of the\nnatural-rights preconception to economic theory. Adam Smith's discussion\nof distribution as a function of productivity might be traced in detail\nthrough his handling of Wages, Profits, and Rent; but, since the aim\nhere is a brief characterisation only, and not an exposition, no farther\npursuit of this point seems feasible.\n\nIt may, however, be worth while to point out another line of influence\nalong which the dominance of the teleological preconception shows itself\nin Adam Smith. This is the normalisation of data, in order to bring them\ninto consonance with an orderly course of approach to the putative\nnatural end of economic life and development. The result of this\nnormalisation of data is, on the one hand, the use of what James Steuart\ncalls \"conjectural history\" in dealing with past phases of economic\nlife, and, on the other hand, a statement of present-day phenomena in\nterms of what legitimately ought to be according to the God-given end of\nlife rather than in terms of unconstrued observation. Account is taken\nof the facts (supposed or observed) ostensibly in terms of causal\nsequence, but the imputed causal sequence is construed to run on lines\nof teleological legitimacy.\n\nA familiar instance of this \"conjectural history,\" in a highly and\neffectively normalized form, is the account of \"that early and rude\nstate of society which precedes both the accumulation of stock and the\nappropriation of land.\"[15] It is needless at this day to point out that\nthis \"early and rude state,\" in which \"the whole produce of labor\nbelongs to the laborer,\" is altogether a figment. The whole narrative,\nfrom the putative origin down, is not only supposititious, but it is\nmerely a schematic presentation of what should have been the course of\npast development, in order to lead up to that ideal economic situation\nwhich would satisfy Adam Smith's preconception.[16] As the narrative\ncomes nearer the region of known latter-day facts, the normalisation of\nthe data becomes more difficult and receives more detailed attention;\nbut the change in method is a change of degree rather than of kind. In\nthe \"early and rude state\" the coincidence of the \"natural\" and the\nactual course of events is immediate and undisturbed, there being no\nrefractory data at hand; but in the later stages and in the present\nsituation, where refractory facts abound, the cooerdination is difficult,\nand the coincidence can be shown only by a free abstraction from\nphenomena that are irrelevant to the teleological trend and by a\nlaborious interpretation of the rest. The facts of modern life are\nintricate, and lend themselves to statement in the terms of the theory\nonly after they have been subjected to a \"higher criticism.\"\n\nThe chapter \"Of the Origin and Use of Money\"[17] is an elegantly\nnormalised account of the origin and nature of an economic institution,\nand Adam Smith's further discussion of money runs on the same lines. The\norigin of money is stated in terms of the purpose which money should\nlegitimately serve in such a community as Adam Smith considered right\nand good, not in terms of the motives and exigencies which have resulted\nin the use of money and in the gradual rise of the existing method of\npayment and accounts. Money is \"the great wheel of circulation,\" which\neffects the transfer of goods in process of production and the\ndistribution of the finished goods to the consumers. It is an organ of\nthe economic commonwealth rather than an expedient of accounting and a\nconventional repository of wealth.\n\nIt is perhaps superfluous to remark that to the \"plain man,\" who is not\nconcerned with the \"natural course of things\" in a consummate\n_Geldwirtschaft_, the money that passes his hand is not a \"great wheel\nof circulation.\" To the Samoyed, for instance, the reindeer which serves\nhim as unit of value is wealth in the most concrete and tangible form.\nMuch the same is true of coin, or even of bank-notes, in the\napprehension of unsophisticated people among ourselves to-day. And yet\nit is in terms of the habits and conditions of life of these \"plain\npeople\" that the development of money will have to be accounted for if\nit is to be stated in terms of cause and effect.\n\n       *       *       *       *       *\n\nThe few scattered passages already cited may serve to illustrate how\nAdam Smith's animistic or teleological bent shapes the general structure\nof his theory and gives it consistency. The principle of definitive\nformulation in Adam Smith's economic knowledge is afforded by a putative\npurpose that does not at any point enter causally into the economic life\nprocess which he seeks to know. This formative or normative purpose or\nend is not freely conceived to enter as an efficient agent in the events\ndiscussed, or to be in any way consciously present in the process. It\ncan scarcely be taken as an animistic agency engaged in the process. It\nsanctions the course of things, and gives legitimacy and substance to\nthe sequence of events, so far as this sequence may be made to square\nwith the requirements of the imputed end. It has therefore a ceremonial\nor symbolical force only, and lends the discussion a ceremonial\ncompetency; although with economists who have been in passable agreement\nwith Adam Smith as regards the legitimate end of economic life this\nceremonial consistency, or consistency _de jure_ has for many purposes\nbeen accepted as the formulation of a causal continuity in the phenomena\nthat have been interpreted in its terms. Elucidations of what normally\nought to happen, as a matter of ceremonial necessity, have in this way\ncome to pass for an account of matters of fact.\n\nBut, as has already been pointed out, there is much more to Adam Smith's\nexposition of theory than a formulation of what ought to be. Much of the\nadvance he achieved over his predecessors consists in a larger and more\npainstaking scrutiny of facts, and a more consistent tracing out of\ncausal continuity in the facts handled. No doubt, his superiority over\nthe Physiocrats, that characteristic of his work by virtue of which it\nsuperseded theirs in the farther growth of economic science, lies to\nsome extent in his recourse to a different, more modern ground of\nnormality,--a ground more in consonance with the body of preconceptions\nthat have had the vogue in later generations. It is a shifting of the\npoint of view from which the facts are handled; but it comes in great\npart to a substitution of a new body of preconceptions for the old, or a\nnew adaptation of the old ground of finality, rather than an elimination\nof all metaphysical or animistic norms of valuation. With Adam Smith, as\nwith the Physiocrats, the fundamental question, the answer to which\naffords the point of departure and the norm of procedure, is a question\nof substantiality or economic \"reality.\" With both, the answer to this\nquestion is given naively, as a deliverance of common sense. Neither is\ndisturbed by doubts as to this deliverance of common sense or by any\nneed of scrutinising it. To the Physiocrats this substantial ground of\neconomic reality is the nutritive process of Nature. To Adam Smith it is\nLabor. His reality has the advantage of being the deliverance of the\ncommon sense of a more modern community, and one that has maintained\nitself in force more widely and in better consonance with the facts of\nlatter-day industry. The Physiocrats owe their preconception of the\nproductiveness of nature to the habits of thought of a community in\nwhose economic life the dominant phenomenon was the owner of\nagricultural land. Adam Smith owes his preconception in favor of labor\nto a community in which the obtrusive economic feature of the immediate\npast was handicraft and agriculture, with commerce as a scarcely\nsecondary phenomenon.\n\nSo far as Adam Smith's economic theories are a tracing out of the causal\nsequence in economic phenomena, they are worked out in terms given by\nthese two main directions of activity,--human effort directed to the\nshaping of the material means of life, and human effort and discretion\ndirected to a pecuniary gain. The former is the great, substantial\nproductive force: the latter is not immediately, or proximately,\nproductive.[18] Adam Smith still has too lively a sense of the nutritive\npurpose of the order of nature freely to extend the concept of\nproductiveness to any activity that does not yield a material increase\nof the creature comforts. His instinctive appreciation of the\nsubstantial virtue of whatever effectually furthers nutrition, even\nleads him into the concession that \"in agriculture nature labors along\nwith man,\" although the general tenor of his argument is that the\nproductive force with which the economist always has to count is human\nlabor. This recognised substantiality of labor as productive is, as has\nalready been remarked, accountable for his effort to reduce to terms of\nproductive labor such a category of distribution as exchange value.\n\nWith but slight qualification, it will hold that, in the causal sequence\nwhich Adam Smith traces out in his economic theories proper (contained\nin the first three books of the _Wealth of Nations_), the causally\nefficient factor is conceived to be human nature in these two\nrelations,--of productive efficiency and pecuniary gain through\nexchange. Pecuniary gain--gain in the material means of life through\nbarter--furnishes the motive force to the economic activity of the\nindividual; although productive efficiency is the legitimate, normal end\nof the community's economic life. To such an extent does this concept\nof man's seeking his ends through \"truck, barter, and exchange\" pervade\nAdam Smith's treatment of economic processes that he even states\nproduction in its terms, and says that \"labor was the first price, the\noriginal purchase-money, that was paid for all things.\"[19] The human\nnature engaged in this pecuniary traffic is conceived in somewhat\nhedonistic terms, and the motives and movements of men are normalised to\nfit the requirements of a hedonistically conceived order of nature. Men\nare very much alike in their native aptitudes and propensities;[20] and,\nso far as economic theory need take account of these aptitudes and\npropensities, they are aptitudes for the production of the \"necessaries\nand conveniences of life,\" and propensities to secure as great a share\nof these creature comforts as may be.\n\nAdam Smith's conception of normal human nature--that is to say, the\nhuman factor which enters causally in the process which economic theory\ndiscusses--comes, on the whole, to this: Men exert their force and skill\nin a mechanical process of production, and their pecuniary sagacity in a\ncompetitive process of distribution, with a view to individual gain in\nthe material means of life. These material means are sought in order to\nthe satisfaction of men's natural wants through their consumption. It is\ntrue, much else enters into men's endeavors in the struggle for wealth,\nas Adam Smith points out; but this consumption comprises the legitimate\nrange of incentives, and a theory which concerns itself with the\nnatural course of things need take but incidental account of what does\nnot come legitimately in the natural course. In point of fact, there are\nappreciable \"actual,\" though scarcely \"real,\" departures from this rule.\nThey are spurious and insubstantial departures, and do not properly come\nwithin the purview of the stricter theory. And, since human nature is\nstrikingly uniform, in Adam Smith's apprehension, both the efforts put\nforth and the consumptive effect accomplished may be put in quantitative\nterms and treated algebraically, with the result that the entire range\nof phenomena comprised under the head of consumption need be but\nincidentally considered; and the theory of production and distribution\nis complete when the goods or the values have been traced to their\ndisappearance in the hands of their ultimate owners. The reflex effect\nof consumption upon production and distribution is, on the whole,\nquantitative only.\n\nAdam Smith's preconception of a normal teleological order of procedure\nin the natural course, therefore, affects not only those features of\ntheory where he is avowedly concerned with building up a normal scheme\nof the economic process. Through his normalising the chief causal factor\nengaged in the process, it affects also his arguments from cause to\neffect.[21] What makes this latter feature worth particular attention\nis the fact that his successors carried this normalisation farther, and\nemployed it with less frequent reference to the mitigating exceptions\nwhich Adam Smith notices by the way.\n\nThe reason for that farther and more consistent normalisation of human\nnature which gives us the \"economic man\" at the hands of Adam Smith's\nsuccessors lies, in great part, in the utilitarian philosophy that\nentered in force and in consummate form at about the turning of the\ncentury. Some credit in the work of normalisation is due also to the\nfarther supersession of handicraft by the \"capitalistic\" industry that\ncame in at the same time and in pretty close relation with the\nutilitarian views.\n\n       *       *       *       *       *\n\nAfter Adam Smith's day, economics fell into profane hands. Apart from\nMalthus, who, of all the greater economists, stands nearest to Adam\nSmith on such metaphysical heads as have an immediate bearing upon the\npremises of economic science, the next generation do not approach their\nsubject from the point of view of a divinely instituted order; nor do\nthey discuss human interests with that gently optimistic spirit of\nsubmission that belongs to the economist who goes to his work with the\nfear of God before his eyes. Even with Malthus the recourse to the\ndivinely sanctioned order of nature is somewhat sparing and temperate.\nBut it is significant for the later course of economic theory that,\nwhile Malthus may well be accounted the truest continuer of Adam Smith,\nit was the undevout utilitarians that became the spokesmen of the\nscience after Adam Smith's time.\n\nThere is no wide breach between Adam Smith and the utilitarians, either\nin details of doctrine or in the concrete conclusions arrived at as\nregards questions of policy. On these heads Adam Smith might well be\nclassed as a moderate utilitarian, particularly so far as regards his\neconomic work. Malthus has still more of a utilitarian air,--so much so,\nindeed, that he is not infrequently spoken of as a utilitarian. This\nview, convincingly set forth by Mr. Bonar,[22] is no doubt well borne\nout by a detailed scrutiny of Malthus's economic doctrines. His\nhumanitarian bias is evident throughout, and his weakness for\nconsiderations of expediency is the great blemish of his scientific\nwork. But, for all that, in order to an appreciation of the change that\ncame over classical economics with the rise of Benthamism, it is\nnecessary to note that the agreement in this matter between Adam Smith\nand the disciples of Bentham, and less decidedly that between Malthus\nand the latter, is a coincidence of conclusions rather than an identity\nof preconceptions.[23]\n\nWith Adam Smith the ultimate ground of economic reality is the design of\nGod, the teleological order; and his utilitarian generalisations, as\nwell as the hedonistic character of his economic man, are but methods of\nthe working out of this natural order, not the substantial and\nself-legitimating ground. Shifty as Malthus's metaphysics are, much the\nsame is to be said for him.[24] Of the utilitarians proper the converse\nis true, although here, again, there is by no means utter consistency.\nThe substantial economic ground is pleasure and pain: the teleological\norder (even the design of God, where that is admitted) is the method of\nits working-out.\n\nIt may be unnecessary here to go into the farther implications,\npsychological and ethical, which this preconception of the utilitarians\ninvolves. And even this much may seem a taking of excessive pains with a\ndistinction that marks no tangible difference. But a reading of the\nclassical doctrines, with something of this metaphysics of political\neconomy in mind, will show how, and in great part why, the later\neconomists of the classical line diverged from Adam Smith's tenets in\nthe early years of the century, until it has been necessary to interpret\nAdam Smith somewhat shrewdly in order to save him from heresy.\n\nThe post-Bentham economics is substantially a theory of value. This is\naltogether the dominant feature of the body of doctrines; the rest\nfollows from, or is adapted to, this central discipline. The doctrine of\nvalue is of very great importance also in Adam Smith; but Adam Smith's\neconomics is a theory of the production and apportionment of the\nmaterial means of life.[25] With Adam Smith, value is discussed from the\npoint of view of production. With the utilitarians, production is\ndiscussed from the point of view of value. The former makes value an\noutcome of the process of production: the latter make production the\noutcome of a valuation process.\n\nThe point of departure with Adam Smith is the \"productive power of\nlabor.\"[26] With Ricardo it is a pecuniary problem concerned in the\ndistribution of ownership;[27] but the classical writers are followers\nof Adam Smith, and improve upon and correct the results arrived at by\nhim, and the difference of point of view, therefore, becomes evident in\ntheir divergence from him, and the different distribution of emphasis,\nrather than in a new and antagonistic departure.\n\nThe reason for this shifting of the center of gravity from production to\nvaluation lies, proximately, in Bentham's revision of the \"principles\"\nof morals. Bentham's philosophical position is, of course, not a\nself-explanatory phenomenon, nor does the effect of Benthamism extend\nonly to those who are avowed followers of Bentham; for Bentham is the\nexponent of a cultural change that affects the habits of thought of the\nentire community. The immediate point of Bentham's work, as affecting\nthe habits of thought of the educated community, is the substitution of\nhedonism (utility) in place of achievement of purpose, as a ground of\nlegitimacy and a guide in the normalisation of knowledge. Its effect is\nmost patent in speculations on morals, where it inculcates determinism.\nIts close connection with determinism in ethics points the way to what\nmay be expected of its working in economics. In both cases the result is\nthat human action is construed in terms of the causal forces of the\nenvironment, the human agent being, at the best, taken as a mechanism of\ncommutation, through the workings of which the sensuous effects wrought\nby the impinging forces of the environment are, by an enforced process\nof valuation, transmuted without quantitative discrepancy into moral or\neconomic conduct, as the case may be. In ethics and economics alike the\nsubject-matter of the theory is this valuation process that expresses\nitself in conduct, resulting, in the case of economic conduct, in the\npursuit of the greatest gain or least sacrifice.\n\nMetaphysically or cosmologically considered, the human nature into the\nmotions of which hedonistic ethics and economics inquire is an\nintermediate term in a causal sequence, of which the initial and the\nterminal members are sensuous impressions and the details of conduct.\nThis intermediate term conveys the sensuous impulse without loss of\nforce to its eventuation in conduct. For the purpose of the valuation\nprocess through which the impulse is so conveyed, human nature may,\ntherefore, be accepted as uniform; and the theory of the valuation\nprocess may be formulated quantitatively, in terms of the material\nforces affecting the human sensory and of their equivalents in the\nresulting activity. In the language of economics, the theory of value\nmay be stated in terms of the consumable goods that afford the incentive\nto effort and the expenditure undergone in order to procure them.\nBetween these two there subsists a necessary equality; but the\nmagnitudes between which the equality subsists are hedonistic\nmagnitudes, not magnitudes of kinetic energy nor of vital force, for the\nterms handled are sensuous terms. It is true, since human nature is\nsubstantially uniform, passive, and unalterable in respect of men's\ncapacity for sensuous affection, there may also be presumed to subsist a\nsubstantial equality between the psychological effect to be wrought by\nthe consumption of goods, on the one side, and the resulting expenditure\nof kinetic or vital force, on the other side; but such an equality is,\nafter all, of the nature of a coincidence, although there should be a\nstrong presumption in favor of its prevailing on an average and in the\ncommon run of cases. Hedonism, however, does not postulate uniformity\nbetween men except in the respect of sensuous cause and effect.\n\nThe theory of value which hedonism gives is, therefore, a theory of cost\nin terms of discomfort. By virtue of the hedonistic equilibrium reached\nthrough the valuation process, the sacrifice or expenditure of sensuous\nreality involved in acquisition is the equivalent of the sensuous gain\nsecured. An alternative statement might perhaps be made, to the effect\nthat the measure of the value of goods is not the sacrifice or\ndiscomfort undergone, but the sensuous gain that accrues from the\nacquisition of the goods; but this is plainly only an alternative\nstatement, and there are special reasons in the economic life of the\ntime why the statement in terms of cost, rather than in terms of\n\"utility,\" should commend itself to the earlier classical economists.\n\nOn comparing the utilitarian doctrine of value with earlier theories,\nthen, the case stands somewhat as follows. The Physiocrats and Adam\nSmith contemplate value as a measure of the productive force that\nrealises itself in the valuable article. With the Physiocrats this\nproductive force is the \"anabolism\" of Nature (to resort to a\nphysiological term): with Adam Smith it is chiefly human labor directed\nto heightening the serviceability of the materials with which it is\noccupied. Production causes value in either case. The post-Bentham\neconomics contemplates value as a measure of, or as measured by, the\nirksomeness of the effort involved in procuring the valuable goods. As\nMr. E. C. K. Gonner has admirably pointed out,[28] Ricardo--and the\nlike holds true of classical economics generally--makes cost the\nfoundation of value, not its cause. This resting of value on cost takes\nplace through a valuation. Any one who will read Adam Smith's\ntheoretical exposition to as good purpose as Mr. Gonner has read Ricardo\nwill scarcely fail to find that the converse is true in Adam Smith's\ncase. But the causal relation of cost to value holds only as regards\n\"natural\" or \"real\" value in Adam Smith's doctrine. As regards market\nprice, Adam Smith's theory does not differ greatly from that of Ricardo\non this head. He does not overlook the valuation process by which market\nprice is adjusted and the course of investment is guided, and his\ndiscussion of this process runs in terms that should be acceptable to\nany hedonist.\n\n       *       *       *       *       *\n\nThe shifting of the point of view that comes into economics with the\nacceptance of utilitarian ethics and its correlate, the associationist\npsychology, is in great part a shifting to the ground of causal sequence\nas contrasted with that of serviceability to a preconceived end. This is\nindicated even by the main fact already cited,--that the utilitarian\neconomists make exchange value the central feature of their theories,\nrather than the conduciveness of industry to the community's material\nwelfare. Hedonistic exchange value is the outcome of a valuation process\nenforced by the apprehended pleasure-giving capacities of the items\nvalued. And in the utilitarian theories of production, arrived at from\nthe standpoint so given by exchange value, the conduciveness to welfare\nis not the objective point of the argument. This objective point is\nrather the bearing of productive enterprise upon the individual\nfortunes of the agents engaged, or upon the fortunes of the several\ndistinguishable classes of beneficiaries comprised in the industrial\ncommunity; for the great immediate bearing of exchange values upon the\nlife of the collectivity is their bearing upon the distribution of\nwealth. Value is a category of distribution. The result is that, as is\nwell shown by Mr. Cannan's discussion,[29] the theories of production\noffered by the classical economists have been sensibly scant, and have\nbeen carried out with a constant view to the doctrines on distribution.\nAn incidental but telling demonstration of the same facts is given, by\nProfessor Buecher;[30] and in illustration may be cited Torrens's _Essay\non the Production of Wealth_, which is to a good extent occupied with\ndiscussions of value and distribution. The classical theories of\nproduction have been theories of the production of \"wealth\"; and\n\"wealth,\" in classical usage, consists of material things having\nexchange value. During the vogue of the classical economics the accepted\ncharacteristic by which \"wealth\" has been defined has been its\namenability to ownership. Neither in Adam Smith nor in the Physiocrats\nis this amenability to ownership made so much of, nor is it in a similar\ndegree accepted as a definite mark of the subject-matter of the science.\n\nAs their hedonistic preconception would require, then, it is to the\npecuniary side of life that the classical economists give their most\nserious attention, and it is the pecuniary bearing of any given\nphenomenon or of any institution that commonly shapes the issue of the\nargument. The causal sequence about which the discussion centers is a\nprocess of pecuniary valuation. It runs on distribution, ownership,\nacquisition, gain, investment, exchange.[31] In this way the doctrines\non production come to take a pecuniary coloring; as is seen in a less\ndegree also in Adam Smith, and even in the Physiocrats, although these\nearlier economists very rarely, if ever, lose touch with the concept of\ngeneric serviceability as the characteristic feature of production. The\ntradition derived from Adam Smith, which made productivity and\nserviceability the substantial features of economic life, was not\nabruptly put aside by his successors, though the emphasis was\ndifferently distributed by them in following out the line of\ninvestigation to which the tradition pointed the way. In the classical\neconomics the ideas of production and of acquisition are not commonly\nheld apart, and very much of what passes for a theory of production is\noccupied with phenomena of investment and acquisition. Torrens's _Essay_\nis a case in point, though by no means an extreme case.\n\nThis is as it should be; for to the consistent hedonist the sole motive\nforce concerned in the industrial process is the self-regarding motive\nof pecuniary gain, and industrial activity is but an intermediate term\nbetween the expenditure or discomfort undergone and the pecuniary gain\nsought. Whether the end and outcome is an invidious gain for the\nindividual (in contrast with or at the cost of his neighbors), or an\nenhancement of the facility of human life on the whole, is altogether a\nby-question in any discussion of the range of incentives by which men\nare prompted to their work or the direction which their efforts take.\nThe serviceability of the given line of activity, for the life purposes\nof the community or for one's neighbors, \"is not of the essence of this\ncontract.\" These features of serviceability come into the account\nchiefly as affecting the vendibility of what the given individual has to\noffer in seeking gain through a bargain.[32]\n\nIn hedonistic theory the substantial end of economic life is individual\ngain; and for this purpose production and acquisition may be taken as\nfairly coincident, if not identical. Moreover, society, in the\nutilitarian philosophy, is the algebraic sum of the individuals; and the\ninterest of the society is the sum of the interests of the individuals.\nIt follows by easy consequence, whether strictly true or not, that the\nsum of individual gains is the gain of the society, and that, in serving\nhis own interest in the way of acquisition, the individual serves the\ncollective interest of the community. Productivity or serviceability is,\ntherefore, to be presumed of any occupation or enterprise that looks to\na pecuniary gain; and so, by a roundabout path, we get back to the\nancient conclusion of Adam Smith, that the remuneration of classes or\npersons engaged in industry coincides with their productive contribution\nto the output of services and consumable goods.\n\nA felicitous illustration of the working of this hedonistic norm in\nclassical economic doctrine is afforded by the theory of the wages of\nsuperintendence,--an element in distribution which is not much more than\nsuggested in Adam Smith, but which receives ampler and more painstaking\nattention as the classical body of doctrines reaches a fuller\ndevelopment. The \"wages of superintendence\" are the gains due to\npecuniary management. They are the gains that come to the director of\nthe \"business,\"--not those that go to the director of the mechanical\nprocess or to the foreman of the shop. The latter are wages simply. This\ndistinction is not altogether clear in the earlier writers, but it is\nclearly enough contained in the fuller development of the theory.\n\nThe undertaker's work is the management of investment. It is altogether\nof a pecuniary character, and its proximate aim is \"the main chance.\" If\nit leads, indirectly, to an enhancement of serviceability or a\nheightened aggregate output of consumable goods, that is a fortuitous\ncircumstance incident to that heightened vendibility on which the\ninvestor's gain depends. Yet the classical doctrine says frankly that\nthe wages of superintendence are the remuneration of superior\nproductivity,[33] and the classical theory of production is in good part\na doctrine of investment in which the identity of production and\npecuniary gain is taken for granted.\n\nThe substitution of investment in the place of industry as the central\nand substantial fact in the process of production is due not to the\nacceptance of hedonism simply, but rather to the conjunction of hedonism\nwith an economic situation of which the investment of capital and its\nmanagement for gain was the most obvious feature. The situation which\nshaped the common-sense apprehension of economic facts at the time was\nwhat has since been called a capitalistic system, in which pecuniary\nenterprise and the phenomena of the market were the dominant and\ntone-giving facts. But this economic situation was also the chief ground\nfor the vogue of hedonism in economics; so that hedonistic economics may\nbe taken as an interpretation of human nature in terms of the\nmarket-place. The market and the \"business world,\" to which the business\nman in his pursuit of gain was required to adapt his motives, had by\nthis time grown so large that the course of business events was beyond\nthe control of any one person; and at the same time those far-reaching\norganisations of invested wealth which have latterly come to prevail and\nto coerce the market were not then in the foreground. The course of\nmarket events took its passionless way without traceable relation or\ndeference to any man's convenience and without traceable guidance\ntowards an ulterior end. Man's part in this pecuniary world was to\nrespond with alacrity to the situation, and so adapt his vendible\neffects to the shifting demand as to realise something in the outcome.\nWhat he gained in his traffic was gained without loss to those with whom\nhe dealt, for they paid no more than the goods were worth to them. One\nman's gain need not be another's loss; and, if it is not, then it is net\ngain to the community.\n\nAmong the striking remoter effects of the hedonistic preconception, and\nits working out in terms of pecuniary gain, is the classical failure to\ndiscriminate between capital as investment and capital as industrial\nappliances. This is, of course, closely related to the point already\nspoken of. The appliances of industry further the production of goods,\ntherefore capital (invested wealth) is productive; and the rate of its\naverage remuneration marks the degree of its productiveness.[34] The\nmost obvious fact limiting the pecuniary gain secured by means of\ninvested wealth is the sum invested. Therefore, capital limits the\nproductiveness of industry; and the chief and indispensable condition to\nan advance in material well-being is the accumulation of invested\nwealth. In discussing the conditions of industrial improvement, it is\nusual to assume that \"the state of the arts remains unchanged,\" which\nis, for all purposes but that of a doctrine of profits per cent., an\nexclusion of the main fact. Investments may, further, be transferred\nfrom one enterprise to another. Therefore, and in that degree, the means\nof production are \"mobile.\"\n\n       *       *       *       *       *\n\nUnder the hands of the great utilitarian writers, therefore, political\neconomy is developed into a science of wealth, taking that term in the\npecuniary sense, as things amenable to ownership. The course of things\nin economic life is treated as a sequence of pecuniary events, and\neconomic theory becomes a theory of what should happen in that\nconsummate situation where the permutation of pecuniary magnitudes takes\nplace without disturbance and without retardation. In this consummate\nsituation the pecuniary motive has its perfect work, and guides all the\nacts of economic man in a guileless, colorless, unswerving quest of the\ngreatest gain at the least sacrifice. Of course, this perfect\ncompetitive system, with its untainted \"economic man,\" is a feat of the\nscientific imagination, and is not intended as a competent expression of\nfact. It is an expedient of abstract reasoning; and its avowed\ncompetency extends only to the abstract principles, the fundamental laws\nof the science, which hold only so far as the abstraction holds. But, as\nhappens in such cases, having once been accepted and assimilated as\nreal, though perhaps not as actual, it becomes an effective constituent\nin the inquirer's habits of thought, and goes to shape his knowledge of\nfacts. It comes to serve as a norm of substantiality or legitimacy; and\nfacts in some degree fall under its constraint, as is exemplified by\nmany allegations regarding the \"tendency\" of things.\n\nTo this consummation, which Senior speaks of as \"the natural state of\nman,\"[35] human development tends by force of the hedonistic character\nof human nature; and in terms of its approximation to this natural\nstate, therefore, the immature actual situation had best be stated. The\npure theory, the \"hypothetical science\" of Cairnes, \"traces the\nphenomena of the production and distribution of wealth up to their\ncauses, in the principles of human nature and the laws and\nevents--physical, political, and social--of the external world.\"[36] But\nsince the principles of human nature that give the outcome in men's\neconomic conduct, so far as it touches the production and distribution\nof wealth, are but the simple and constant sequence of hedonistic cause\nand effect, the element of human nature may fairly be eliminated from\nthe problem, with great gain in simplicity and expedition. Human nature\nbeing eliminated, as being a constant intermediate term, and all\ninstitutional features of the situation being also eliminated (as being\nsimilar constants under that natural or consummate pecuniary _regime_\nwith which the pure theory is concerned), the laws of the phenomena of\nwealth may be formulated in terms of the remaining factors. These\nfactors are the vendible items that men handle in these processes of\nproduction and distribution; and economic laws come, therefore, to be\nexpressions of the algebraic relations subsisting between the various\nelements of wealth and investment,--capital, labor, land, supply and\ndemand of one and the other, profits, interest, wages. Even such items\nas credit and population become dissociated from the personal factor,\nand figure in the computation as elemental factors acting and reacting\nthough a permutation of values over the heads of the good people whose\nwelfare they are working out.\n\n       *       *       *       *       *\n\nTo sum up: the classical economics, having primarily to do with the\npecuniary side of life, is a theory of a process of valuation. But since\nthe human nature at whose hands and for whose behoof the valuation takes\nplace is simple and constant in its reaction to pecuniary stimulus, and\nsince no other feature of human nature is legitimately present in\neconomic phenomena than this reaction to pecuniary stimulus, the valuer\nconcerned in the matter is to be overlooked or eliminated; and the\ntheory of the valuation process then becomes a theory of the pecuniary\ninteraction of the facts valued. It is a theory of valuation with the\nelement of valuation left out,--a theory of life stated in terms of the\nnormal paraphernalia of life.\n\nIn the preconceptions with which classical economics set out were\ncomprised the remnants of natural rights and of the order of nature,\ninfused with that peculiarly mechanical natural theology that made its\nway into popular vogue on British ground during the eighteenth century\nand was reduced to a neutral tone by the British penchant for the\ncommonplace--stronger at this time than at any earlier period. The\nreason for this growing penchant for the commonplace, for the\nexplanation of things in causal terms, lies partly in the growing resort\nto mechanical processes and mechanical prime movers in industry, partly\nin the (consequent) continued decline of the aristocracy and the\npriesthood, and partly in the growing density of population and the\nconsequent greater specialisation and wider organisation of trade and\nbusiness. The spread of the discipline of the natural sciences, largely\nincident to the mechanical industry, counts in the same direction; and\nobscurer factors in modern culture may have had their share.\n\nThe animistic preconception was not lost, but it lost tone; and it\npartly fell into abeyance, particularly so far as regards its avowal. It\nis visible chiefly in the unavowed readiness of the classical writers to\naccept as imminent and definitive any possible outcome which the\nwriter's habit or temperament inclined him to accept as right and good.\nHence the visible inclination of classical economists to a doctrine of\nthe harmony of interests, and their somewhat uncircumspect readiness to\nstate their generalisations in terms of what ought to happen according\nto the ideal requirements of that consummate _Geldwirtschaft_ to which\nmen \"are impelled by the provisions of nature.\"[37] By virtue of their\nhedonistic preconceptions, their habituation to the ways of a pecuniary\nculture, and their unavowed animistic faith that nature is in the right,\nthe classical economists knew that the consummation to which, in the\nnature of things, all things tend, is the frictionless and beneficent\ncompetitive system. This competitive ideal, therefore, affords the\nnormal, and conformity to its requirements affords the test of absolute\neconomic truth. The standpoint so gained selectively guides the\nattention of the classical writers in their observation and apprehension\nof facts, and they come to see evidence of conformity or approach to the\nnormal in the most unlikely places. Their observation is, in great part,\ninterpretative, as observation commonly is. What is peculiar to the\nclassical economists in this respect is their particular norm of\nprocedure in the work of interpretation. And, by virtue of having\nachieved a standpoint of absolute economic normality, they became a\n\"deductive\" school, so called, in spite of the patent fact that they\nwere pretty consistently employed with an inquiry into the causal\nsequence of economic phenomena.\n\nThe generalisation of observed facts becomes a normalisation of them, a\nstatement of the phenomena in terms of their coincidence with, or\ndivergence from, that normal tendency that makes for the actualisation\nof the absolute economic reality. This absolute or definitive ground of\neconomic legitimacy lies beyond the causal sequence in which the\nobserved phenomena are conceived to be interlinked. It is related to the\nconcrete facts neither as cause nor as effect in any such way that the\ncausal relation may be traced in a concrete instance. It has little\ncausally to do either with the \"mental\" or with the \"physical\" data with\nwhich the classical economist is avowedly employed. Its relation to the\nprocess under discussion is that of an extraneous--that is to say, a\nceremonial--legitimation. The body of knowledge gained by its help and\nunder its guidance is, therefore, a taxonomic science.\n\nSo, by way of a concluding illustration, it may be pointed out that\nmoney, for instance, is normalised in terms of the legitimate economic\ntendency. It becomes a measure of value and a medium of exchange. It has\nbecome primarily an instrument of pecuniary commutation, instead of\nbeing, as under the earlier normalisation of Adam Smith, primarily a\ngreat wheel of circulation for the diffusion of consumable goods. The\nterms in which the laws of money, as of the other phenomena of pecuniary\nlife, are formulated, are terms which connote its normal function in the\nlife history of objective values as they live and move and have their\nbeing in the consummate pecuniary situation of the \"natural\" state. To a\nsimilar work of normalisation we owe those creatures of the myth-maker,\nthe quantity theory and the wages-fund.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _The Quarterly Journal of Economics_,\nVol. XIII, July. 1899.\n\n[2] Bonar, _Philosophy and Political Economy_, pp. 177, 178.\n\n[3] \"Every individual is continually exerting himself to find out the\nmost advantageous employment for whatever capital he can command. It is\nhis own advantage, and not that of the society, which he has in view.\nBut the study of his own advantage naturally, or rather necessarily,\nleads him to prefer that employment which is most advantageous to the\nsociety.... By directing that industry in such a manner as its produce\nmay be of the greatest value, he intends only his own gain; and he is in\nthis, as in many other cases, led by an invisible hand to promote an end\nwhich was no part of his intention. Nor is it always the worse for\nsociety that it was no part of it. By pursuing his own interest he\nfrequently promotes that of the society more effectually than when he\nreally intends to promote it.\" _Wealth of Nations_, Book IV, chap. ii.\n\n[4] The discrepancy between the actual, causally determined situation\nand the divinely intended consummation is the metaphysical ground of all\nthat inculcation of morality and enlightened policy that makes up so\nlarge a part of Adam Smith's work. The like, of course, holds true for\nall moralists and reformers who proceed on the assumption of a\nprovidential order.\n\n[5] \"In the political body, however, the wisdom of nature has\nfortunately made ample provision for remedying many of the bad effects\nof the folly and injustice of man; in the same manner as it has done in\nthe natural body, for remedying those of his sloth and intemperance.\"\n_Wealth of Nations_, Book IV, chap. ix.\n\n[6] _E.g._, \"the real measure of the exchangeable value of all\ncommodities.\" _Wealth of Nations_, Book I, chap, v, and repeatedly in\nthe like connection.\n\n[7] _E.g._, Book I, chap. vii: \"When the price of any commodity is\nneither more nor less than what is sufficient to pay the rent of the\nland, the wages of the labor, and the profits of the stock employed in\nraising, preparing, and bringing it to market, according to their\n_natural_ rates, the commodity is then sold for what may be called its\n_natural_ price.\" \"The actual price at which any commodity is commonly\nsold is called its market price. It may be either above, or below or\nexactly the same with its natural price.\"\n\n[8] _Lectures of Adam Smith_ (Ed. Cannan, 1896), p. 169.\n\n[9] \"This division of labor, from which so many advantages are derived,\nis not originally the effect of any human wisdom, which foresees and\nintends that general opulence to which it gives occasion. It is the\nnecessary though very slow and gradual consequence of a certain\npropensity in human nature which has in view no such extensive\nutility,--the propensity to truck, barter, and exchange one thing for\nanother. Whether this propensity be one of those original principles in\nhuman nature of which no further account can be given, or whether, as\nseems more probable, it be the necessary consequence of the faculties of\nreason and speech, it belongs not to our present subject to inquire.\"\n_Wealth of Nations_, Book I, chap. ii.\n\n[10] _Wealth of Nations_, Book I, chaps, v.-vii.\n\n[11] _Wealth of Nations_, Book I, chap. v.\n\n[12] As, _e.g._, the entire discussion of the determination of Wages,\nProfits and Rent, in Book I, chaps, viii.-xi.\n\n[13] \"There is in every society or neighborhood an ordinary or average\nrate both of wages and profit in every different employment of labor and\nstock. This rate is naturally regulated, ... partly by the general\ncircumstances of the society.... There is, likewise, in every society or\nneighborhood an ordinary or average rate of rent, which is regulated,\ntoo.... These ordinary or average rates may be called the natural rates\nof wages, profit, and rent, at the time and place in which they commonly\nprevail. When the price of any commodity is neither more nor less than\nwhat is sufficient to pay the rent of the land, the wages of the labor,\nand the profits of the stock employed in raising, preparing, and\nbringing it to market, according to their natural rates, the commodity\nis then sold for what may be called its natural price.\" _Wealth of\nNations_, Book I, chap. vii.\n\n[14] \"Such commodities may continue for whole centuries together to be\nsold at this high price; and that part of it which resolves itself into\nthe rent of land is, in this case, the part which is generally paid\nabove its natural rate.\" Book I, chap. vii.\n\n[15] _Wealth of Nations_, Book I, chap, vi; also chap. viii.\n\n[16] For an instance of how these early phases of industrial development\nappear, when not seen in the light of Adam Smith's preconception, see,\namong others, Buecher, _Entstchung der Volkswirtschaft_.\n\n[17] Book I, chap. iv.\n\n[18] See _Wealth of Nations_, Book II, chap. v, \"Of the Different\nEmployment of Capitals.\"\n\n[19] _Wealth of Nations_, Book I, chap. v. See also the plea for free\ntrade, Book IV, chap. ii: \"But the annual revenue of every society is\nalways precisely equal to the exchangeable value of the whole annual\nproduce of its industry, or, rather, is precisely the same thing with\nthat exchangeable value.\"\n\n[20] \"The difference of natural talents in different men is in reality\nmuch less than we are aware of.\" _Wealth of Nations_, Book I, chap. ii.\n\n[21] \"Mit diesen philosophischen Ueberzeugungen tritt nun Adam Smith an\ndie Welt der Enfahrung heran, und es ergiebt sich ihm die Richtigkeit\nder Principien. Der Reiz der Smith'schen Schriften beruht zum grossen\nTeile darauf, dass Smith die Principien in so innige Verbindung mit dem\nThatsaechlichen gebracht. Hie und da werden dann auch die Principien, was\ndurch diese Verbindung veranlasst wird, an ihren Spitzen etwas\nabgeschliffen, ihre allzuscharfe Auspraegung dadurch vermieden.\nNichtsdestoweniger aber bleiben sie stets die leitenden Grundgedanken.\"\nRichard Zeyss, _Adam Smith und der Eigennutz_ (Tuebingen, 1889), p. 110.\n\n[22] See, _e.g._, _Malthus and his Work_, especially Book III, as also\nthe chapter on Malthus in _Philosophy and Political Economy_, Book III,\nModern Philosophy: Utilitarian Economics, chap. i, \"Malthus.\"\n\n[23] Ricardo is here taken as a utilitarian of the Benthamite color,\nalthough he cannot be classed as a disciple of Bentham. His hedonism is\nbut the uncritically accepted metaphysics comprised in the common sense\nof his time, and his substantial coincidence with Bentham goes to show\nhow well diffused the hedonist preconception was at the time.\n\n[24] _Cf._ Bonar, _Malthus and his Work_, pp. 323-336.\n\n[25] His work is an inquiry into \"the Nature and Causes of the Wealth of\nNations.\"\n\n[26] \"The annual labor of every nation is the fund which originally\nsupplies it with all the necessaries and conveniences of life which it\nannually consumes, and which consist always either in the immediate\nproduce of that labor or in what is purchased with that produce from\nother nations.\" _Wealth of Nations_, \"Introduction and Plan,\" opening\nparagraph.\n\n[27] \"The produce of the earth--all that is derived from its surface by\nthe united application of labor, machinery, and capital--is divided\namong three classes of the community.... To determine the laws which\nregulate this distribution, is the principal problem of political\neconomy.\" _Political Economy_, Preface.\n\n[28] In the introductory essay to his edition of Ricardo's _Political\nEconomy_. See, _e.g._, paragraphs 9 and 24.\n\n[29] _Theories of Production and Distribution_, 1776-1848.\n\n[30] _Entstehung der Volkswirtschaft_ (second edition). _Cf._ especially\nchaps. ii, iii, vi, and vii.\n\n[31] \"Even if we put aside all questions which involve a consideration\nof the effects of industrial institutions in modifying the habits and\ncharacter of the classes of the community, ... that enough still remains\nto constitute a separate science, the mere enumeration of the chief\nterms of economics--wealth, value, exchange, credit, money, capital, and\ncommodity--will suffice to show.\" Shirres, _Analysis of the Ideas of\nEconomics_ (London, 1893), pp. 8 and 9.\n\n[32] \"If a commodity were in no way useful, ... it would be destitute of\nexchangeable value; ... (but), possessing utility, commodities derive\ntheir exchangeable value from two sources,\" etc. Ricardo, _Political\nEconomy_, chap, i, sect. I.\n\n[33] _Cf._, for instance, Senior, _Political Economy_ (London, 1872),\nparticularly pp. 88, 89, and 130-135, where the wages of superintendence\nare, somewhat reluctantly, classed under profits; and the work of\nsuperintendence is thereupon conceived as being, immediately or\nremotely, an exercise of \"abstinence\" and a productive work. The\nillustration of the bill-broker is particularly apt. The like view of\nthe wages of superintendence is an article of theory with more than one\nof the later descendants of the classical line.\n\n[34] _Cf._ Boehm-Bawerk, _Capital and Interest_, Books II and IV, as well\nas the Introduction and chaps. iv and v of Book I. Boehm-Bawerk's\ndiscussion bears less immediately on the present point than the\nsimilarity of the terms employed would suggest.\n\n[35] _Political Economy_, p. 87.\n\n[36] _Character and Logical Method of Political Economy_ (New York,\n1875), p. 71. Cairnes may not be altogether representative of the high\ntide of classicism, but his characterisation of the science is none the\nless to the point.\n\n[37] Senior, _Political Economy_, p. 87.\n\n\n\n\nTHE PRECONCEPTIONS OF ECONOMIC SCIENCE[1]\n\nIII\n\n\nIn what has already been said, it has appeared that the changes which\nhave supervened in the preconceptions of the earlier economists\nconstitute a somewhat orderly succession. The feature of chief interest\nin this development has been a gradual change in the received grounds of\nfinality to which the successive generations of economists have brought\ntheir theoretical output, on which they have been content to rest their\nconclusions, and beyond which they have not been moved to push their\nanalysis of events or their scrutiny of phenomena. There has been a\nfairly unbroken sequence of development in what may be called the canons\nof economic reality; or, to put it in other words, there has been a\nprecession of the point of view from which facts have been handled and\nvalued for the purpose of economic science.\n\nThe notion which has in its time prevailed so widely, that there is in\nthe sequence of events a consistent trend which it is the office of the\nscience to ascertain and turn to account,--this notion may be well\nfounded or not. But that there is something of such a consistent trend\nin the sequence of the canons of knowledge under whose guidance the\nscientist works is not only a generalisation from the past course of\nthings, but lies in the nature of the case; for the canons of knowledge\nare of the nature of habits of thought, and habit does not break with\nthe past, nor do the hereditary aptitudes that find expression in habit\nvary gratuitously with the mere lapse of time. What is true in this\nrespect, for instance, in the domain of law and institutions is true,\nlikewise, in the domain of science. What men have learned to accept as\ngood and definitive for the guidance of conduct and of human relations\nremains true and definitive and unimpeachable until the exigencies of a\nlater, altered situation enforce a variation from the norms and canons\nof the past, and so give rise to a modification of the habits of thought\nthat decide what is, for the time, right in human conduct. So in science\nthe ancient ground of finality remains a good and valid test of\nscientific truth until the altered exigencies of later life enforce\nhabits of thought that are not wholly in consonance with the received\nnotions as to what constitutes the ultimate, self-legitimating term--the\nsubstantial reality--to which knowledge in any given case must\npenetrate.\n\nThis ultimate term or ground of knowledge is always of a metaphysical\ncharacter. It is something in the way of a preconception, accepted\nuncritically, but applied in criticism and demonstration of all else\nwith which the science is concerned. So soon as it comes to be\ncriticised, it is in a way to be superseded by a new, more or less\naltered formulation; for criticism of it means that it is no longer fit\nto survive unaltered in the altered complex of habits of thought to\nwhich it is called upon to serve as fundamental principle. It is subject\nto natural selection and selective adaptation, as are other conventions.\nThe underlying metaphysics of scientific research and purpose,\ntherefore, changes gradually and, of course, incompletely, much as is\nthe case with the metaphysics underlying the common law and the schedule\nof civil rights. As in the legal framework the now avowedly useless and\nmeaningless preconceptions of status and caste and precedent are even\nyet at the most metamorphosed and obsolescent rather than\noverpassed,--witness the facts of inheritance, vested interests, the\noutlawry of debts through lapse of time, the competence of the State to\ncoerce individuals into support of a given policy,--so in the science\nthe living generation has not seen an abrupt and traceless disappearance\nof the metaphysics that fixed the point of view of the early classical\npolitical economy. This is true even for those groups of economists who\nhave most incontinently protested against the absurdity of the classical\ndoctrines and methods. In Professor Marshall's words, \"There has been no\nreal breach of continuity in the development of the science.\"\n\nBut, while there has been no breach, there has none the less been\nchange,--more far-reaching change than some of us are glad to recognise;\nfor who would not be glad to read his own modern views into the\nconvincing words of the great masters?\n\nSeen through modern eyes and without effort to turn past gains to modern\naccount, the metaphysical or preconceptional furniture of political\neconomy as it stood about the middle of this century may come to look\nquite curious. The two main canons of truth on which the science\nproceeded, and with which the inquiry is here concerned, were: (_a_) a\nhedonistic-associational psychology, and (_b_) an uncritical conviction\nthat there is a meliorative trend in the course of events, apart from\nthe conscious ends of the individual members of the community. This\naxiom of a meliorative developmental trend fell into shape as a belief\nin an organic or quasi-organic (physiological)[2] life process on the\npart of the economic community or of the nation; and this belief carried\nwith it something of a constraining sense of self-realising cycles of\ngrowth, maturity and decay in the life history of nations or\ncommunities.\n\nNeglecting what may for the immediate purpose be negligible in this\noutline of fundamental tenets, it will bear the following construction.\n(_a_) On the ground of the hedonistic or associational psychology, all\nspiritual continuity and any consequent teleological trend is tacitly\ndenied so far as regards individual conduct, where the later psychology,\nand the sciences which build on this later psychology, insist upon and\nfind such a teleological trend at every turn. (_b_) Such a spiritual or\nquasi-spiritual continuity and teleological trend is uncritically\naffirmed as regards the non-human sequence or the sequence of events in\nthe affairs of collective life, where the modern sciences diligently\nassert that nothing of the kind is discernible, or that, if it is\ndiscernible, its recognition is beside the point, so far as concerns the\npurposes of the science.\n\nThis position, here outlined with as little qualification as may be\nadmissible, embodies the general metaphysical ground of that classical\npolitical economy that affords the point of departure for Mill and\nCairnes, and also for Jevons. And what is to be said of Mill and Cairnes\nin this connection will apply to the later course of the science, though\nwith a gradually lessening force.\n\nBy the middle of the century the psychological premises of the science\nare no longer so neat and succinct as they were in the days of Bentham\nand James Mill. At J. S. Mill's hands, for instance, the naively\nquantitative hedonism of Bentham is being supplanted by a sophisticated\nhedonism, which makes much of an assumed qualitative divergence between\nthe different kinds of pleasures that afford the motives of conduct.\nThis revision of hedonistic dogma, of course, means a departure from the\nstrict hedonistic ground. Correlated with this advance more closely in\nthe substance of the change than in the assignable dates, is a\nconcomitant improvement--at least, set forth as an improvement--upon the\nreceived associational psychology, whereby \"similarity\" is brought in to\nsupplement \"contiguity\" as a ground of connection between ideas. This\nchange is well shown in the work of J. S. Mill and Bain. In spite of all\nthe ingenuity spent in maintaining the associational legitimacy of this\nnew article of theory, it remains a patent innovation and a departure\nfrom the ancient standpoint. As is true of the improved hedonism, so it\nis true of the new theory of association that it is no longer able to\nconstrue the process which it discusses as a purely mechanical process,\na concatenation of items simply. Similarity of impressions implies a\ncomparison of impressions by the mind in which the association takes\nplace, and thereby it implies some degree of constructive work on the\npart of the perceiving subject. The perceiver is thereby construed to be\nan agent in the work of perception; therefore, he must be possessed of a\npoint of view and an end dominating the perceptive process. To perceive\nthe similarity, he must be guided by an interest in the outcome, and\nmust \"attend.\" The like applies to the introduction of qualitative\ndistinctions into the hedonistic theory of conduct. Apperception in the\none case and discretion in the other cease to be the mere registration\nof a simple and personally uncolored sequence of permutations enforced\nby the factors of the external world. There is implied a spiritual--that\nis to say, active--\"teleological\" continuity of process on the part of\nthe perceiving or of the discretionary agent, as the case may be.\n\nIt is on the ground of their departure from the stricter hedonistic\npremises that Mill and, after him, Cairnes are able, for instance, to\noffer their improvement upon the earlier doctrine of cost of production\nas determining value. Since it is conceived that the motives which guide\nmen in their choice of employments and of domicile differ from man to\nman and from class to class, not only in degree, but in kind, and since\nvarying antecedents, of heredity and of habit, variously influence men\nin their choice of a manner of life, therefore the mere quantitative\npecuniary stimulus cannot be depended on to decide the outcome without\nrecourse. There are determinable variations in the alacrity with which\ndifferent classes or communities respond to the pecuniary stimulus; and\nin so far as this condition prevails, the classes or communities in\nquestion are non-competing. Between such non-competing groups the norm\nthat determines values is not the unmitigated norm of cost of production\ntaken absolutely, but only taken relatively. The formula of cost of\nproduction is therefore modified into a formula of reciprocal demand.\nThis revision of the cost-of-production doctrine is extended only\nsparingly, and the emphasis is thrown on the pecuniary circumstances on\nwhich depend the formation and maintenance of non-competing groups.\nConsistency with the earlier teaching is carefully maintained, so far as\nmay be; but extra-pecuniary factors are, after all, even if reluctantly,\nadmitted into the body of the theory. So also, since there are higher\nand lower motives, higher and lower pleasures,--as well as motives\ndiffering in degree,--it follows that an unguided response even to the\nmere quantitative pecuniary stimuli may take different directions, and\nso may result in activities of widely differing outcome. Since\nactivities set up in this way through appeal to higher and lower motives\nare no longer conceived to represent simply a mechanically adequate\neffect of the stimuli, working under the control of natural laws that\ntend to one beneficent consummation, therefore the outcome of activity\nset up even by the normal pecuniary stimuli may take a form that may or\nmay not be serviceable to the community. Hence _laissez-faire_ ceases to\nbe a sure remedy for the ills of society. Human interests are still\nconceived normally to be at one; but the detail of individual conduct\nneed not, therefore, necessarily serve these generic human interests.[3]\nTherefore, other inducements than the unmitigated impact of pecuniary\nexigencies may be necessary to bring about a coincidence of class or\nindividual endeavor with the interests of the community. It becomes\nincumbent on the advocate of _laissez-faire_ to \"prove his minor\npremise.\" It is no longer self-evident that: \"Interests left to\nthemselves tend to harmonious combinations, and to the progressive\npreponderance of the general good.\"[4]\n\nThe natural-rights preconception begins to fall away as soon as the\nhedonistic mechanics have been seriously tampered with. Fact and right\ncease to coincide, because the individual in whom the rights are\nconceived to inhere has come to be something more than the field of\nintersection of natural forces that work out in human conduct. The\nmechanics of natural liberty--that assumed constitution of things by\nforce of which the free hedonistic play of the laws of nature across the\nopen field of individual choice is sure to reach the right outcome--is\nthe hedonistic psychology; and the passing of the doctrine of natural\nrights and natural liberty, whether as a premise or as a dogma,\ntherefore coincides with the passing of that mechanics of conduct on the\nvalidity of which the theoretical acceptance of the dogma depends. It\nis, therefore, something more than a coincidence that the half-century\nwhich has seen the disintegration of the hedonistic faith and of the\nassociational psychology has also seen the dissipation, in scientific\nspeculations, of the concomitant faith in natural rights and in that\nbenign order of nature of which the natural-rights dogma is a corollary.\n\nIt is, of course, not hereby intended to say that the later\npsychological views and premises imply a less close dependence of\nconduct on environment than do the earlier ones. Indeed, the reverse may\nwell be held to be true. The pervading characteristic of later thinking\nis the constant recourse to a detailed analysis of phenomena in causal\nterms. The modern catchword, in the present connection, is \"response to\nstimulus\"; but the manner in which this response is conceived has\nchanged. The fact, and ultimately the amplitude, at least in great part,\nof the reaction to stimulus, is conditioned by the forces in impact; but\nthe constitution of the organism, as well as its attitude at the moment\nof impact, in great part decides what will serve as a stimulus, as well\nas what the manner and direction of the response will be.\n\nThe later psychology is biological, as contrasted with the metaphysical\npsychology of hedonism. It does not conceive the organism as a causal\nhiatus. The causal sequence in the \"reflex arc\" is, no doubt,\ncontinuous; but the continuity is not, as formerly, conceived in terms\nof spiritual substance transmitting a shock: it is conceived in terms of\nthe life activity of the organism. Human conduct, taken as the reaction\nof such an organism under stimulus, may be stated in terms of tropism,\ninvolving, of course, a very close-knit causal sequence between the\nimpact and the response, but at the same time imputing to the organism a\nhabit of life and a self-directing and selective attention in meeting\nthe complex of forces that make up its environment. The selective play\nof this tropismatic complex that constitutes the organism's habit of\nlife under the impact of the forces of the environment counts as\ndiscretion.\n\nSo far, therefore, as it is to be placed in contrast with the hedonistic\nphase of the older psychological doctrines, the characteristic feature\nof the newer conception is the recognition of a selectively\nself-directing life process in the agent. While hedonism seeks the\ncausal determinant of conduct in the (probable) outcome of action, the\nlater conception seeks this determinant in the complex of propensities\nthat constitutes man a functioning agent, that is to say, a personality.\nInstead of pleasure ultimately determining what human conduct shall be,\nthe tropismatic propensities that eventuate in conduct ultimately\ndetermine what shall be pleasurable. For the purpose in hand, the\nconsequence of the transition to the altered conception of human nature\nand its relation to the environment is that the newer view formulates\nconduct in terms of personality, whereas the earlier view was content to\nformulate it in terms of its provocation and its by-product. Therefore,\nfor the sake of brevity, the older preconceptions of the science are\nhere spoken of as construing human nature in inert terms, as contrasted\nwith the newer, which construes it in terms of functioning.\n\nIt has already appeared above that the second great article of the\nmetaphysics of classical political economy--the belief in a meliorative\ntrend or a benign order of nature--is closely connected with the\nhedonistic conception of human nature; but this connection is more\nintimate and organic than appears from what has been said above. The two\nare so related as to stand or fall together, for the latter is but the\nobverse of the former. The doctrine of a trend in events imputes purpose\nto the sequence of events; that is, it invests this sequence with a\ndiscretionary, teleological character, which asserts itself in a\nconstraint over all the steps in the sequence by which the supposed\nobjective point is reached. But discretion touching a given end must be\nsingle, and must alone cover all the acts by which the end is to be\nreached. Therefore, no discretion resides in the intermediate terms\nthrough which the end is worked out. Therefore, man being such an\nintermediate term, discretion cannot be imputed to him without violating\nthe supposition. Therefore, given an indefeasible meliorative trend in\nevents, man is but a mechanical intermediary in the sequence. It is as\nsuch a mechanical intermediate term that the stricter hedonism construes\nhuman nature.[5] Accordingly, when more of teleological activity came to\nbe imputed to man, less was thereby allowed to the complex of events. Or\nit may be put in the converse form: When less of a teleological\ncontinuity came to be imputed to the course of events, more was thereby\nimputed to man's life process. The latter form of statement probably\nsuggests the direction in which the causal relation runs, more nearly\nthan the former. The change whereby the two metaphysical premises in\nquestion have lost their earlier force and symmetry, therefore, amounts\nto a (partial) shifting of the seat of putative personality from\ninanimate phenomena to man.\n\nIt may be mentioned in passing, as a detail lying perhaps afield, yet\nnot devoid of significance for latter-day economic speculation, that\nthis elimination of personality, and so of teleological content, from\nthe sequence of events, and its increasing imputation to the conduct of\nthe human agent, is incident to a growing resort to an apprehension of\nphenomena in terms of process rather than in terms of outcome, as was\nthe habit in earlier schemes of knowledge. On this account the\ncategories employed are, in a gradually increasing degree, categories of\nprocess,--\"dynamic\" categories. But categories of process applied to\nconduct, to discretionary action, are teleological categories: whereas\ncategories of process applied in the case of a sequence where the\nmembers of the sequence are not conceived to be charged with discretion,\nare, by the force of this conception itself, non-teleological,\nquantitative categories. The continuity comprised in the concept of\nprocess as applied to conduct is consequently a spiritual, teleological\ncontinuity: whereas the concept of process under the second head, the\nnon-teleological sequence, comprises a continuity of a quantitative,\ncausal kind, substantially the conservation of energy. In its turn the\ngrowing resort to categories of process in the formulation of knowledge\nis probably due to the epistemological discipline of modern mechanical\nindustry, the technological exigencies of which enforce a constant\nrecourse to the apprehension of phenomena in terms of process, differing\ntherein from the earlier forms of industry, which neither obtruded\nvisible mechanical process so constantly upon the apprehension nor so\nimperatively demanded an articulate recognition of continuity in the\nprocesses actually involved. The contrast in this respect is still more\npronounced between the discipline of modern life in an industrial\ncommunity and the discipline of life under the conventions of status and\nexploit that formerly prevailed.\n\nTo return to the benign order of nature, or the meliorative trend,--its\npassing, as an article of economic faith, was not due to criticism\nleveled against it by the later classical economists on grounds of its\nepistemological incongruity. It was tried on its merits, as an alleged\naccount of facts; and the weight of evidence went against it. The belief\nin a self-realising trend had no sooner reached a competent and\nexhaustive statement--_e.g._, at Bastiat's hands, as a dogma of the\nharmony of interests specifically applicable to the details of economic\nlife--than it began to lose ground. With his usual concision and\nincisiveness, Cairnes completed the destruction of Bastiat's special\ndogma, and put it forever beyond a rehearing. But Cairnes is not a\ndestructive critic of the classical political economy, at least not in\nintention: he is an interpreter and continuer--perhaps altogether the\nclearest and truest continuer--of the classical teaching. While he\nconfuted Bastiat and discredited Bastiat's peculiar dogma, he did not\nthereby put the order of nature bodily out of the science. He qualified\nand improved it, very much as Mill qualified and improved the tenets of\nthe hedonistic psychology. As Mill and the ethical speculation of his\ngeneration threw more of personality into the hedonistic psychology, so\nCairnes and the speculators on scientific method (such as Mill and\nJevons) attenuated the imputation of personality or teleological content\nto the process of material cause and effect. The work is of course, by\nno means, an achievement of Cairnes alone; but he is, perhaps, the best\nexponent of this advance in economic theory. In Cairnes's redaction this\nfoundation of the science became the concept of a colorless normality.\n\nIt was in Cairnes's time the fashion for speculators in other fields\nthan the physical sciences to look to those sciences for guidance in\nmethod and for legitimation of the ideals of scientific theory which\nthey were at work to realize. More than that, the large and fruitful\nachievements of the physical sciences had so far taken men's attention\ncaptive as to give an almost instinctive predilection for the methods\nthat had approved themselves in that field. The ways of thinking which\nhad on this ground become familiar to all scholars occupied with any\nscientific inquiry, had permeated their thinking on any subject\nwhatever. This is eminently true of British thinking.\n\nIt had come to be a commonplace of the physical sciences that \"natural\nlaws\" are of the nature of empirical generalisations simply, or even of\nthe nature of arithmetical averages. Even the underlying preconception\nof the modern physical sciences--the law of the conservation of energy,\nor persistence of quantity--was claimed to be an empirical\ngeneralisation, arrived at inductively and verified by experiment. It is\ntrue the alleged proof of the law took the whole conclusion for granted\nat the start, and used it constantly as a tacit axiom at every step in\nthe argument which was to establish its truth; but that fact serves\nrather to emphasise than to call in question the abiding faith which\nthese empiricists had in the sole efficacy of empirical generalisation.\nHad they been able overtly to admit any other than an associational\norigin of knowledge, they would have seen the impossibility of\naccounting on the mechanical grounds of association for the premise on\nwhich all experience of mechanical fact rests. That any other than a\nmechanical origin should be assigned to experience, or that any other\nthan a so-conceived empirical ground was to be admitted for any general\nprinciple, was incompatible with the prejudices of men trained in the\nschool of the associational psychology, however widely they perforce\ndeparted from this ideal in practice. Nothing of the nature of a\npersonal element was to be admitted into these fundamental empirical\ngeneralisations; and nothing, therefore, of the nature of a\ndiscretionary or teleological movement was to be comprised in the\ngeneralisations to be accepted as \"natural laws.\" Natural laws must in\nno degree be imbued with personality, must say nothing of an ulterior\nend; but for all that they remained \"laws\" of the sequences subsumed\nunder them. So far is the reduction to colorless terms carried by Mill,\nfor instance, that he formulates the natural laws as empirically\nascertained sequences simply, even excluding or avoiding all imputation\nof causal continuity, as that term is commonly understood by the\nunsophisticated. In Mill's ideal no more of organic connection or\ncontinuity between the members of a sequence is implied in subsuming\nthem under a law of causal relationship than is given by the ampersand.\nHe is busied with dynamic sequences, but he persistently confines\nhimself to static terms.\n\nUnder the guidance of the associational psychology, therefore, the\nextreme of discontinuity in the deliverances of inductive research is\naimed at by those economists--Mill and Cairnes being taken as\ntypical--whose names have been associated with deductive methods in\nmodern science. With a fine sense of truth they saw that the notion of\ncausal continuity, as a premise of scientific generalisation, is an\nessentially metaphysical postulate; and they avoided its treacherous\nground by denying it, and construing causal sequence to mean a\nuniformity of coexistences and successions simply. But, since a strict\nuniformity is nowhere to be observed at first hand in the phenomena with\nwhich the investigator is occupied, it has to be found by a laborious\ninterpretation of the phenomena and a diligent abstraction and allowance\nfor disturbing circumstances, whatever may be the meaning of a\ndisturbing circumstance where causal continuity is denied. In this work\nof interpretation and expurgation the investigator proceeds on a\nconviction of the orderliness of the natural sequence. \"Natura non facit\nsaltum\": a maxim which has no meaning within the stricter limits of the\nassociational theory of knowledge.\n\nBefore anything can be said as to the orderliness of the sequence, a\npoint of view must be chosen by the speculator, with respect to which\nthe sequence in question does or does not fulfill this condition of\norderliness; that is to say, with respect to which it is a sequence. The\nendeavor to avoid all metaphysical premises fails here as everywhere.\nThe associationists, to whom economics owes its transition from the\nolder classical phase to the modern or quasi-classical, chose as their\nguiding point of view the metaphysical postulate of congruity,--in\nsubstance, the \"similarity\" of the associationist theory of knowledge.\nThis must be called their _proton pseudos_, if associationism pure and\nsimple is to be accepted. The notion of congruity works out in laws of\nresemblance and equivalence, in both of which it is plain to the modern\npsychologist that a metaphysical ground of truth, antecedent to and\ncontrolling empirical data, is assumed. But the use of the postulate of\ncongruence as a test of scientific truth has the merit of avoiding all\nopen dealing with an imputed substantiality of the data handled, such as\nwould be involved in the overt use of the concept of causation. The\ndata are congruous among themselves, as items of knowledge; and they may\ntherefore be handled in a logical synthesis and concatenation on the\nbasis of this congruence alone, without committing the scientist to an\nimputation of a kinetic or motor relation between them. The metaphysics\nof process is thereby avoided, in appearance. The sequences are uniform\nor consistent with one another, taken as articles of theoretical\nsynthesis simply; and so they become elements of a system or discipline\nof knowledge in which the test of theoretical truth is the congruence of\nthe system with its premises.\n\nIn all this there is a high-wrought appearance of matter-of-fact, and\nall metaphysical subreption of a non-empirical or non-mechanical\nstandard of reality or substantiality is avoided in appearance. The\ngeneralisations which make up such a system of knowledge are, in this\nway, stated in terms of the system itself; and when a competent\nformulation of the alleged uniformities has been so made in terms of\ntheir congruity or equivalence with the prime postulates of the system,\nthe work of theoretical inquiry is done.\n\nThe concrete premises from which proceeds the systematic knowledge of\nthis generation of economists are certain very concise assumptions\nconcerning human nature, and certain slightly less concise\ngeneralisations of physical fact,[6] presumed to be mechanically\nempirical generalisations. These postulates afford the standard of\nnormality. Whatever situation or course of events can be shown to\nexpress these postulates without mitigation is normal; and wherever a\ndeparture from this normal course of things occurs, it is due to\ndisturbing causes,--that is to say, to causes not comprised in the main\npremises of the science,--and such departures are to be taken account\nof by way of qualification. Such departures and such qualification are\nconstantly present in the facts to be handled by the science; but, being\nnot congruous with the underlying postulates, they have no place in the\nbody of the science. The laws of the science, that which makes up the\neconomist's theoretical knowledge, are laws of the normal case. The\nnormal case does not occur in concrete fact. These laws are, therefore,\nin Cairnes's terminology, \"hypothetical\" truths; and the science is a\n\"hypothetical\" science. They apply to concrete facts only as the facts\nare interpreted and abstracted from, in the light of the underlying\npostulates. The science is, therefore, a theory of the normal case, a\ndiscussion of the concrete facts of life in respect of their degree of\napproximation to the normal case. That is to say, it is a taxonomic\nscience.\n\nOf course, in the work actually done by these economists this standpoint\nof rigorous normality is not consistently maintained; nor is the\nunsophisticated imputation of causality to the facts under discussion\nconsistently avoided. The associationist postulate, that causal sequence\nmeans empirical uniformity simply, is in great measure forgotten when\nthe subject-matter of the science is handled in detail. Especially is it\ntrue that in Mill the dry light of normality is greatly relieved by a\nstrong common sense. But the great truths or laws of the science remain\nhypothetical laws; and the test of scientific reality is congruence with\nthe hypothetical laws, not coincidence with matter-of-fact events.\n\nThe earlier, more archaic metaphysics of the science, which saw in the\norderly correlation and sequence of events a constraining guidance of an\nextra-causal, teleological kind, in this way becomes a metaphysics of\nnormality which asserts no extra-causal constraint over events, but\ncontents itself with establishing correlations, equivalencies,\nhomologies, and theories concerning the conditions of an economic\nequilibrium. The movement, the process of economic life, is not\noverlooked, and it may even be said that it is not neglected; but the\npure theory, in its final deliverances, deals not with the dynamics, but\nwith the statics of the case. The concrete subject-matter of the science\nis, of course, the process of economic life,--that is unavoidably the\ncase,--and in so far the discussion must be accepted as work bearing on\nthe dynamics of the phenomena discussed; but even then it remains true\nthat the aim of this work in dynamics is a determination and taxis of\nthe outcome of the process under discussion rather than a theory of the\nprocess as such. The process is rated in terms of the equilibrium to\nwhich it tends or should tend, not conversely. The outcome of the\nprocess, taken in its relation of equivalence within the system, is the\npoint at which the inquiry comes to rest. It is not primarily the point\nof departure for an inquiry into what may follow. The science treats of\na balanced system rather than of a proliferation. In this lies its\ncharacteristic difference from the later evolutionary sciences. It is\nthis characteristic bent of the science that leads its spokesman,\nCairnes, to turn so kindly to chemistry rather than to the organic\nsciences, when he seeks an analogy to economics among the physical\nsciences.[7] What Cairnes has in mind in his appeal to chemistry is, of\ncourse, the received, extremely taxonomic (systematic) chemistry of his\nown time, not the tentatively genetic theories of a slightly later day.\n\n       *       *       *       *       *\n\nIt may seem that in the characterisation just offered of the standpoint\nof normality in economics there is too strong an implication of\ncolorlessness and impartiality. The objection holds as regards much of\nthe work of the modern economists of the classical line. It will hold\ntrue even as to much of Cairnes's work; but it cannot be admitted as\nregards Cairnes's ideal of scientific aim and methods. The economists\nwhose theories Cairnes received and developed, assuredly did not pursue\nthe discussion of the normal case with an utterly dispassionate animus.\nThey had still enough of the older teleological metaphysics left to give\ncolor to the accusation brought against them that they were advocates of\n_laissez-faire_. The preconception of the utilitarians,--in substance\nthe natural-rights preconception,--that unrestrained human conduct will\nresult in the greatest human happiness, retains so much of its force in\nCairnes's time as is implied in the then current assumption that what is\nnormal is also right. The economists, and Cairnes among them, not only\nare concerned to find out what is normal and to determine what\nconsummation answers to the normal, but they also are at pains to\napprove that consummation. It is this somewhat uncritical and often\nunavowed identification of the normal with the right that gives\ncolorable ground for the widespread vulgar prejudice, to which Cairnes\ndraws attention,[8] that political economy \"sanctions\" one social\narrangement and \"condemns\" another. And it is against this uncritical\nidentification of two essentially unrelated principles or categories\nthat Cairnes's essay on \"Political Economy and Laissez-faire,\" and in\ngood part also that on Bastiat, are directed. But, while this is one of\nthe many points at which Cairnes has substantially advanced the ideals\nof the science, his own concluding argument shows him to have been but\nhalf-way emancipated from the prejudice, even while most effectively\ncombating it.[9] It is needless to point out that the like prejudice is\nstill present in good vigor in many later economists who have had the\nfull benefit of Cairnes's teachings on this head.[10] Considerable as\nCairnes's achievement in this matter undoubtedly was, it effected a\nmitigation rather than an elimination of the untenable metaphysics\nagainst which he contended.\n\nThe advance in the general point of view from animistic teleology to\ntaxonomy is shown in a curiously succinct manner in a parenthetical\nclause of Cairnes's in the chapter on Normal Value.[11] With his\nacceptance of the later point of view involved in the use of the new\nterm, Cairnes becomes the interpreter of the received theoretical\nresults. The received positions are not subjected to a destructive\ncriticism. The aim is to complete them where they fall short and to cut\noff what may be needless or what may run beyond the safe ground of\nscientific generalisation. In his work of redaction, Cairnes does not\navow--probably he is not sensible of--any substantial shifting of the\npoint of view or any change in the accepted ground of theoretic reality.\nBut his advance to an unteleological taxonomy none the less changes the\nscope and aim of his theoretical discussion. The discussion of Normal\nValue may be taken in illustration.\n\nCairnes is not content to find (with Adam Smith) that value will\n\"naturally\" coincide with or be measured by cost of production, or even\n(with Mill) that cost of production must, in the long run, \"necessarily\"\ndetermine value. \"This ... is to take a much too limited view of the\nrange of this phenomenon.\"[12] He is concerned to determine not only\nthis general tendency of values to a normal, but all those\ncharacteristic circumstances as well which condition this tendency and\nwhich determine the normal to which values tend. His inquiry pursues the\nphenomena of value in a normal economic system rather than the manner\nand rate of approach of value relations to a teleologically or\nhedonistically defensible consummation. It therefore becomes an\nexhaustive but very discriminating analysis of the circumstances that\nbear upon market values, with a view to determine what circumstances are\nnormally present; that is to say, what circumstances conditioning value\nare commonly effective and at the same time in consonance with the\npremises of economic theory. These effective conditions, in so far as\nthey are not counted anomalous and, therefore, to be set aside in the\ntheoretical discussion, are the circumstances under which a hedonistic\nvaluation process in any modern industrial community is held perforce to\ntake place,--the circumstances which are held to enforce a recognition\nand rating of the pleasure-bearing capacity of facts. They are not, as\nunder the earlier cost-of-production doctrines, the circumstances which\ndetermine the magnitude of the forces spent in the production of the\nvaluable article. Therefore, the normal (natural) value is no longer (as\nwith Adam Smith, and even to some extent with his classical successors)\nthe primary or initial fact in value theory, the substantial fact of\nwhich the market value is an approximate expression and by which the\nlatter is controlled. The argument does not, as formerly, set out from\nthat expenditure of personal force which was once conceived to\nconstitute the substantial value of goods, and then construe market\nvalue to be an approximate and uncertain expression of this substantial\nfact. The direction in which the argument runs is rather the reverse of\nthis. The point of departure is taken from the range of market values\nand the process of bargaining by which these values are determined. This\nlatter is taken to be a process of discrimination between various kinds\nand degrees of discomfort, and the average or consistent outcome of such\na process of bargaining constitutes normal value. It is only by virtue\nof a presumed equivalence between the discomfort undergone and the\nconcomitant expenditure, whether of labor or of wealth, that the normal\nvalue so determined is conceived to be an expression of the productive\nforce that goes into the creation of the valuable goods. Cost being only\nin uncertain equivalence with sacrifice or discomfort, as between\ndifferent persons, the factor of cost falls into the background; and the\nprocess of bargaining, which is in the foreground, being a process of\nvaluation, a balancing of individual demand and supply, it follows that\na law of reciprocal demand comes in to supplant the law of cost. In all\nthis the proximate causes at work in the determination of values are\nplainly taken account of more adequately than in earlier\ncost-of-production doctrines; but they are taken account of with a view\nto explaining the mutual adjustment and interrelation of elements in a\nsystem rather than to explain either a developmental sequence or the\nworking out of a foreordained end.\n\nThis revision of the cost-of-production doctrine, whereby it takes the\nform of a law of reciprocal demand, is in good part effected by a\nconsistent reduction of cost to terms of sacrifice,--a reduction more\nconsistently carried through by Cairnes than it had been by earlier\nhedonists, and extended by Cairnes's successors with even more\nfar-reaching results. By this step the doctrine of cost is not only\nbrought into closer accord with the neo-hedonistic premises, in that it\nin a greater degree throws the stress upon the factor of personal\ndiscrimination, but it also gives the doctrine a more general bearing\nupon economic conduct and increases its serviceability as a\ncomprehensive principle for the classification of economic phenomena. In\nthe further elaboration of the hedonistic theory of value at the hands\nof Jevons and the Austrians the same principle of sacrifice comes to\nserve as the chief ground of procedure.\n\n       *       *       *       *       *\n\nOf the foundations of later theory, in so far as the postulates of later\neconomists differ characteristically from those of Mill and Cairnes,\nlittle can be said in this place. Nothing but the very general features\nof the later development can be taken up; and even these general\nfeatures of the existing theoretic situation can not be handled with the\nsame confidence as the corresponding features of a past phase of\nspeculation. With respect to writers of the present or the more recent\npast the work of natural selection, as between variants of scientific\naim and animus and between more or less divergent points of view, has\nnot yet taken effect; and it would be over-hazardous to attempt an\nanticipation of the results of the selection that lies in great part yet\nin the future. As regards the directions of theoretical work suggested\nby the names of Professor Marshall, Mr. Cannan, Professor Clark, Mr.\nPierson, Professor Loria, Professor Schmoller, the Austrian group,--no\noff-hand decision is admissible as between these candidates for the\nhonor, or, better, for the work, of continuing the main current of\neconomic speculation and inquiry. No attempt will here be made even to\npass a verdict on the relative claims of the recognised two or three\nmain \"schools\" of theory, beyond the somewhat obvious finding that, for\nthe purpose in hand, the so-called Austrian school is scarcely\ndistinguishable from the neo-classical, unless it be in the different\ndistribution of emphasis. The divergence between the modernised\nclassical views, on the one hand, and the historical and Marxist\nschools, on the other hand, is wider,--so much so, indeed, as to bar out\na consideration of the postulates of the latter under the same head of\ninquiry with the former. The inquiry, therefore, confines itself to the\none line standing most obviously in unbroken continuity with that body\nof classical economics whose life history has been traced in outline\nabove. And, even for this phase of modernised classical economics, it\nseems necessary to limit discussion, for the present, to a single\nstrain, selected as standing peculiarly close to the classical source,\nat the same time that it shows unmistakable adaptation to the later\nhabits of thought and methods of knowledge.\n\nFor this later development in the classical line of political economy,\nMr. Keynes's book may fairly be taken as the maturest exposition of the\naims and ideals of the science; while Professor Marshall excellently\nexemplifies the best work that is being done under the guidance of the\nclassical antecedents. As, after a lapse of a dozen or fifteen years\nfrom Cairnes's days of full conviction, Mr. Keynes interprets the aims\nof modern economic science, it has less of the \"hypothetical\" character\nassigned it by Cairnes; that is to say, it confines its inquiry less\nclosely to the ascertainment of the normal case and the interpretative\nsubsumption of facts under the normal. It takes fuller account of the\ngenesis and developmental continuity of all features of modern economic\nlife, gives more and closer attention to institutions and their history.\nThis is, no doubt, due, in part at least, to impulse received from\nGerman economists; and in so far it also reflects the peculiarly vague\nand bewildered attitude of protest that characterises the earlier\nexpositions of the historical school. To the same essentially extraneous\nsource is traceable the theoretic blur embodied in Mr. Keynes's attitude\nof tolerance towards the conception of economics as a \"normative\"\nscience having to do with \"economic ideals,\" or an \"applied economics\"\nhaving to do with \"economic precepts.\"[13] An inchoate departure from\nthe consistent taxonomic ideals shows itself in the tentative resort to\nhistorical and genetic formulations, as well as in Mr. Keynes's\npervading inclination to define the scope of the science, not by\nexclusion of what are conceived to be non-economic phenomena, but by\ndisclosing a point of view from which all phenomena are seen to be\neconomic facts. The science comes to be characterised not by the\ndelimitation of a range of facts, as in Cairnes,[14] but as an inquiry\ninto the bearing which all facts have upon men's economic activity. It\nis no longer that certain phenomena belong within the science, but\nrather that the science is concerned with any and all phenomena as seen\nfrom the point of view of the economic interest. Mr. Keynes does not go\nfully to the length which this last proposition indicates. He finds[15]\nthat political economy \"treats of the phenomena arising out of the\neconomic activities of mankind in society\"; but, while the discussion by\nwhich he leads up to this definition might be construed to say that all\nthe activities of mankind in society have an economic bearing, and\nshould therefore come within the view of the science, Mr. Keynes does\nnot carry out his elucidation of the matter to that broad conclusion.\nNeither can it be said that modern political economy has, in practice,\ntaken on the scope and character which this extreme position would\nassign it.\n\nThe passage from which the above citation is taken is highly significant\nalso in another and related bearing, and it is at the same time highly\ncharacteristic of the most effective modernised classical economics. The\nsubject-matter of the science has come to be the \"economic activities\"\nof mankind, and the phenomena in which these activities manifest\nthemselves. So Professor Marshall's work, for instance, is, in aim, even\nif not always in achievement, a theoretical handling of human activity\nin its economic bearing,--an inquiry into the multiform phases and\nramifications of that process of valuation of the material means of life\nby virtue of which man is an economic agent. And still it remains an\ninquiry directed to the determination of the conditions of an\nequilibrium of activities and a quiescent normal situation. It is not in\nany eminent degree an inquiry into cultural or institutional development\nas affected by economic exigencies or by the economic interest of the\nmen whose activities are analysed and portrayed. Any sympathetic reader\nof Professor Marshall's great work--and that must mean every\nreader--comes away with a sense of swift and smooth movement and\ninteraction of parts; but it is the movement of a consummately conceived\nand self-balanced mechanism, not that of a cumulatively unfolding\nprocess or an institutional adaptation to cumulatively unfolding\nexigencies. The taxonomic bearing is, after all, the dominant feature.\nIt is significant of the same point that even in his discussion of such\nvitally dynamic features of the economic process as the differential\neffectiveness of different laborers or of different industrial plants,\nas well as of the differential advantages of consumers, Professor\nMarshall resorts to an adaptation of so essentially taxonomic a category\nas the received concept of rent. Rent is a pecuniary category, a\ncategory of income, which is essentially a final term, not a category of\nthe motor term, work or interest.[16] It is not a factor or a feature of\nthe process of industrial life, but a phenomenon of the pecuniary\nsituation which emerges from this process under given conventional\ncircumstances. However far-reaching and various the employment of the\nrent concept in economic theory has been, it has through all\npermutations remained, what it was to begin with, a rubric in the\nclassification of incomes. It is a pecuniary, not an industrial\ncategory. In so far as resort is had to the rent concept in the\nformulation of a theory of the industrial process,--as in Professor\nMarshall's work,--it comes to a statement of the process in terms of its\nresidue. Let it not seem presumptuous to say that, great and permanent\nas is the value of Professor Marshall's exposition of quasi-rents and\nthe like, the endeavor which it involves to present in terms of a\nconcluded system what is of the nature of a fluent process has made the\nexposition unduly bulky, unwieldy, and inconsequent.\n\nThere is a curious reminiscence of the perfect taxonomic day in Mr.\nKeynes's characterisation of political economy as a \"positive science,\"\n\"the sole province of which is to establish economic uniformities\";[17]\nand, in this resort to the associationist expedient of defining a\nnatural law as a \"uniformity,\" Mr. Keynes is also borne out by Professor\nMarshall.[18] But this and other survivals of the taxonomic terminology,\nor even of the taxonomic canons of procedure, do not hinder the\neconomists of the modern school from doing effective work of a character\nthat must be rated as genetic rather than taxonomic. Professor\nMarshall's work in economics is not unlike that of Asa Gray in botany,\nwho, while working in great part within the lines of \"systematic botany\"\nand adhering to its terminology, and on the whole also to its point of\nview, very materially furthered the advance of the science outside the\nscope of taxonomy.\n\nProfessor Marshall shows an aspiration to treat economic life as a\ndevelopment; and, at least superficially, much of his work bears the\nappearance of being a discussion of this kind. In this endeavor his work\nis typical of what is aimed at by many of the later economists. The aim\nshows itself with a persistent recurrence in his _Principles_. His\nchosen maxim is, \"Natura non facit saltum,\"--a maxim that might well\nserve to designate the prevailing attitude of modern economists towards\nquestions of economic development as well as towards questions of\nclassification or of economic policy. His insistence on the continuity\nof development and of the economic structure of communities is a\ncharacteristic of the best work along the later line of classical\npolitical economy. All this gives an air of evolutionism to the work.\nIndeed, the work of the neo-classical economics might be compared,\nprobably without offending any of its adepts, with that of the early\ngeneration of Darwinians, though such a comparison might somewhat\nshrewdly have to avoid any but superficial features. Economists of the\npresent day are commonly evolutionists, in a general way. They commonly\naccept, as other men do, the general results of the evolutionary\nspeculation in those directions in which the evolutionary method has\nmade its way. But the habit of handling by evolutionist methods the\nfacts with which their own science is concerned has made its way among\nthe economists to but a very uncertain degree.\n\nThe prime postulate of evolutionary science, the preconception\nconstantly underlying the inquiry, is the notion of a cumulative causal\nsequence; and writers on economics are in the habit of recognising that\nthe phenomena with which they are occupied are subject to such a law of\ndevelopment. Expressions of assent to this proposition abound. But the\neconomists have not worked out or hit upon a method by which the inquiry\nin economics may consistently be conducted under the guidance of this\npostulate. Taking Professor Marshall as exponent, it appears that, while\nthe formulations of economic theory are not conceived to be arrived at\nby way of an inquiry into the developmental variation of economic\ninstitutions and the like, the theorems arrived at are held, and no\ndoubt legitimately, to apply to the past,[19] and with due reserve also\nto the future, phases of the development. But these theorems apply to\nthe various phases of the development not as accounting for the\ndevelopmental sequence, but as limiting the range of variation. They say\nlittle, if anything, as to the order of succession, as to the derivation\nand the outcome of any given phase, or as to the causal relation of one\nphase of any given economic convention or scheme of relations to any\nother. They indicate the conditions of survival to which any innovation\nis subject, supposing the innovation to have taken place, not the\nconditions of variational growth. The economic laws, the \"statements of\nuniformity,\" are therefore, when construed in an evolutionary bearing,\ntheorems concerning the superior or the inferior limit of persistent\ninnovations, as the case may be.[20] It is only in this negative,\nselective bearing that the current economic laws are held to be laws of\ndevelopmental continuity; and it should be added that they have hitherto\nfound but relatively scant application at the hands of the economists,\neven for this purpose.\n\nAgain, as applied to economic activities under a given situation, as\nlaws governing activities in equilibrium, the economic laws are, in the\nmain, laws of the limits within which economic action of a given purpose\nruns. They are theorems as to the limits which the economic (commonly\nthe pecuniary) interest imposes upon the range of activities to which\nthe other life interests of men incite, rather than theorems as to the\nmanner and degree in which the economic interest creatively shapes the\ngeneral scheme of life. In great part they formulate the normal\ninhibitory effect of economic exigencies rather than the cumulative\nmodification and diversification of human activities through the\neconomic interest, by initiating and guiding habits of life and of\nthought. This, of course, does not go to say that economists are at all\nslow to credit the economic exigencies with a large share in the growth\nof culture; but, while claims of this kind are large and recurrent, it\nremains true that the laws which make up the framework of economic\ndoctrine are, when construed as generalisations of causal relation, laws\nof conservation and selection, not of genesis and proliferation. The\ntruth of this, which is but a commonplace generalisation, might be\nshown in detail with respect to such fundamental theorems as the laws of\nrent, of profits, of wages, of the increasing or diminishing returns of\nindustry, of population, of competitive prices, of cost of production.\n\nIn consonance with this quasi-evolutionary tone of the neo-classical\npolitical economy, or as an expression of it, comes the further\nclarified sense that nowadays attaches to the terms \"normal\" and\neconomic \"laws.\" The laws have gained in colorlessness, until it can no\nlonger be said that the concept of normality implies approval of the\nphenomena to which it is applied.[21] They are in an increasing degree\nlaws of conduct, though they still continue to formulate conduct in\nhedonistic terms; that is to say, conduct is construed in terms of its\nsensuous effect, not in terms of its teleological content. The light of\nthe science is a drier light than it was, but it continues to be shed\nupon the accessories of human action rather than upon the process\nitself. The categories employed for the purpose of knowing this economic\nconduct with which the scientists occupy themselves are not the\ncategories under which the men at whose hands the action takes place\nthemselves apprehend their own action at the instant of acting.\nTherefore, economic conduct still continues to be somewhat mysterious to\nthe economists; and they are forced to content themselves with\nadumbrations whenever the discussion touches this central, substantial\nfact.\n\nAll this, of course, is intended to convey no dispraise of the work\ndone, nor in any way to disparage the theories which the passing\ngeneration of economists have elaborated, or the really great and\nadmirable body of knowledge which they have brought under the hand of\nthe science; but only to indicate the direction in which the inquiry in\nits later phases--not always with full consciousness--is shifting as\nregards its categories and its point of view. The discipline of life in\na modern community, particularly the industrial life, strongly\nreenforced by the modern sciences, has divested our knowledge of\nnon-human phenomena of that fullness of self-directing life that was\nonce imputed to them, and has reduced this knowledge to terms of opaque\ncausal sequence. It has thereby narrowed the range of discretionary,\nteleological action to the human agent alone; and so it is compelling\nour knowledge of human conduct, in so far as it is distinguished from\nthe non-human, to fall into teleological terms. Foot-pounds, calories,\ngeometrically progressive procreation, and doses of capital, have not\nbeen supplanted by the equally uncouth denominations of habits,\npropensities, aptitudes, and conventions, nor does there seem to be any\nprobability that they will be; but the discussion which continues to run\nin terms of the former class of concepts is in an increasing degree\nseeking support in concepts of the latter class.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _The Quarterly Journal of Economics_.\nVol. XIV, Feb., 1900.\n\n[2] So, _e.g._, Roscher, Comte, the early socialists, J. S. Mill, and\nlater Spencer, Schaeffle, Wagner.\n\n[3] \"Let us not confound the statement that _human_ interests are at one\nwith the statement that _class_ interests are at one. The latter I\nbelieve to be as false as the former is true.... But accepting the major\npremises of the syllogism, that the interests of human beings are\nfundamentally the same, how as to the minor?--how as to the assumption\nthat people know their interests in the sense in which they are\nidentical with the interests of others, and that they spontaneously\nfollow them _in this sense_?\"--Cairnes, Essays in Political Economy\n(London, 1873), p. 245. This question cannot consistently be asked by an\nadherent of the stricter hedonism.\n\n[4] Bastiat, quoted by Cairnes, _Essays_, p. 319.\n\n[5] It may be remarked, by the way, that the use of the differential\ncalculus and similar mathematical expedients in the discussion of\nmarginal utility and the like, proceeds on this psychological ground,\nand that the theoretical results so arrived at are valid to the full\nextent only if this hedonistic psychology is accepted.\n\n[6] See, _e.g._, Cairnes, _Character and Logical Method_ (New York), p.\n71.\n\n[7] _Character and Logical Method_, p. 62.\n\n[8] _Essays in Political Economy_, pp. 260-264.\n\n[9] See especially _Essays_, pp. 263, 264.\n\n[10] It may be interesting to point out that the like identification of\nthe categories of normality and right gives the dominant note of Mr.\nSpencer's ethical and social philosophy, and that later economists of\nthe classical line are prone to be Spencerians.\n\n[11] \"Normal value (called by Adam Smith and Ricardo 'natural value,'\nand by Mill 'necessary value,' but best expressed, it seems to me, by\nthe term which I have used).\" _Leading Principles_ (New York), p. 45.\n\n[12] _Leading Principles_, p. 45.\n\n[13] _Scope and Method of Political Economy_ (London, 1891), chaps. i\nand ii.\n\n[14] _Character and Logical Method_; _e.g._, Lecture II, especially pp.\n53, 54, and 71.\n\n[15] _Scope and Method of Political Economy_, chap. iii, particularly p.\n97.\n\n[16] \"Interest\" is, of course, here used in the sense which it has in\nmodern psychological discussion.\n\n[17] _Scope and Method of Political Economy_, p. 46.\n\n[18] _Principles of Economics_, Vol. I, Book I, chap, vi, sect. 6,\nespecially p. 105 (3d edition).\n\n[19] See, _e.g._, Professor Marshall's \"Reply\" to Professor Cunningham\nin the _Economic Journal_ for 1892, pp. 508-113.\n\n[20] This is well illustrated by what Professor Marshall says of the\nRicardian law of rent in his \"Reply,\" cited above.\n\n[21] See, _e.g._, Marshall, _Principles_, Book I, chap, vi, sect. 6, pp.\n105-108. The like dispassionateness is visible in most other modern\nwriters on theory; as, _e.g._, Clark, Cannan, and the Austrians.\n\n\n\n\nPROFESSOR CLARK'S ECONOMICS[1]\n\n\nFor some time past economists have been looking with lively anticipation\nfor such a comprehensive statement of Mr. Clark's doctrines as is now\noffered. The leading purpose of the present volume[2] is \"to offer a\nbrief and provisional statement of the more general laws of progress\";\nalthough it also comprises a more abridged restatement of the laws of\n\"Economic Statics\" already set forth in fuller form in his _Distribution\nof Wealth_. Though brief, this treatise is to be taken as systematically\ncomplete, as including in due correlation all the \"essentials\" of Mr.\nClark's theoretical system. As such, its publication is an event of\nunusual interest and consequence.\n\nMr. Clark's position among this generation of economists is a notable\nand commanding one. No serious student of economic theory will, or can\nafford to, forego a pretty full acquaintance with his development of\ndoctrines. Nor will any such student avoid being greatly influenced by\nthe position which Mr. Clark takes on any point of theory on which he\nmay speak, and many look confidently to him for guidance where it is\nmost needed. Very few of those interested in modern theory are under no\nobligations to him. He has, at the same time, in a singular degree the\ngift of engaging the affections as well as the attention of students in\nhis field. Yet the critic is required to speak impersonally of Mr.\nClark's work as a phase of current economic theory.\n\nIn more than one respect Mr. Clark's position among economists recalls\nthe great figures in the science a hundred years ago. There is the same\nrigid grasp of the principles, the \"essentials,\" out of which the broad\ntheorems of the system follow in due sequence and correlation; and like\nthe leaders of the classical era, while Mr. Clark is always a\ntheoretician, never to be diverted into an inconsistent makeshift, he is\nmoved by an alert and sympathetic interest in current practical\nproblems. While his aim is a theoretical one, it is always with a view\nto the theory of current affairs; and his speculations are animated with\na large sympathy and an aggressive interest in the amelioration of the\nlot of man.\n\nHis relation to the ancient adepts of the science, however, is something\nmore substantial than a resemblance only. He is, by spiritual\nconsanguinity, a representative of that classical school of thought that\ndominated the science through the better part of the nineteenth century.\nThis is peculiarly true of Mr. Clark, as contrasted with many of those\ncontemporaries who have fought for the marginal-utility doctrines.\nUnlike these spokesmen of the Austrian wing, he has had the insight and\ncourage to see the continuity between the classical position and his\nown, even where he advocates drastic changes in the classical body of\ndoctrines. And although his system of theory embodies substantially all\nthat the consensus of theorists approves in the Austrian contributions\nto the science, yet he has arrived at his position on these heads not\nunder the guidance of the Austrian school, but, avowedly, by an unbroken\ndevelopment out of the position given by the older generation of\neconomists.[3] Again, in the matter of the psychological postulates of\nthe science, he accepts a hedonism as simple, unaffected, and uncritical\nas that of Jevons or of James Mill. In this respect his work is as true\nto the canons of the classical school as the best work of the\ntheoreticians of the Austrian observance. There is the like unhesitating\nappeal to the calculus of pleasure and pain as the indefeasible ground\nof action and solvent of perplexities, and there is the like readiness\nto reduce all phenomena to terms of a \"normal,\" or \"natural,\" scheme of\nlife constructed on the basis of this hedonistic calculus. Even in the\nready recourse to \"conjectural history,\" to use Steuart's phrase, Mr.\nClark's work is at one with both the early classical and the late\n(Jevons-Austrian) marginal-utility school. It has the virtues of both,\ncoupled with the graver shortcomings of both. But, as his view exceeds\ntheirs in breadth and generosity, so his system of theory is a more\ncompetent expression of current economic science than what is offered by\nthe spokesmen of the Jevons-Austrian wing. It is as such, as a competent\nand consistent system of current economic theory, that it is here\nintended to discuss Mr. Clark's work, not as a body of doctrines\npeculiar to Mr. Clark or divergent from the main current.\n\n       *       *       *       *       *\n\nSince hedonism came to rule economic science, the science has been in\nthe main a theory of distribution,--distribution of ownership and of\nincome. This is true both of the classical school and of those theorists\nwho have taken an attitude of ostensible antagonism to the classical\nschool. The exceptions to the rule are late and comparatively few, and\nthey are not found among the economists who accept the hedonistic\npostulate as their point of departure. And, consistently with the spirit\nof hedonism, this theory of distribution has centered about a doctrine\nof exchange value (or price) and has worked out its scheme of (normal)\ndistribution in terms of (normal) price. The normal economic community,\nupon which theoretical interest has converged, is a business community,\nwhich centers about the market, and whose scheme of life is a scheme of\nprofit and loss. Even when some considerable attention is ostensibly\ndevoted to theories of consumption and production, in these systems of\ndoctrine the theories are constructed in terms of ownership, price, and\nacquisition, and so reduce themselves in substance to doctrines of\ndistributive acquisition.[4] In this respect Mr. Clark's work is true to\nthe received canons. The \"Essentials of Economic Theory\" are the\nessentials of the hedonistic theory of distribution, with sundry\nreflections on related topics. The scope of Mr. Clark's economics,\nindeed, is even more closely limited by concepts of distribution than\nmany others, since he persistently analyses production in terms of\nvalue, and value is a concept of distribution.\n\n       *       *       *       *       *\n\nAs Mr. Clark justly observes (p. 4), \"The primitive and general facts\nconcerning industry ... need to be known before the social facts can\nprofitably be studied.\" In these early pages of the treatise, as in\nother works of its class, there is repeated reference to that more\nprimitive and simple scheme of economic life out of which the modern\ncomplex scheme has developed, and it is repeatedly indicated that in\norder to an understanding of the play of forces in the more advanced\nstages of economic development and complication, it is necessary to\napprehend these forces in their unsophisticated form as they work out in\nthe simple scheme prevalent on the plane of primitive life. Indeed, to\na reader not well acquainted with Mr. Clark's scope and method of\neconomic theorising, these early pages would suggest that he is\npreparing for something in the way of a genetic study,--a study of\neconomic institutions approached from the side of their origins. It\nlooks as if the intended line of approach to the modern situation might\nbe such as an evolutionist would choose, who would set out with showing\nwhat forces are at work in the primitive economic community, and then\ntrace the cumulative growth and complication of these factors as they\npresently take form in the institutions of a later phase of the\ndevelopment. Such, however, is not Mr. Clark's intention. The effect of\nhis recourse to \"primitive life\" is simply to throw into the foreground,\nin a highly unreal perspective, those features which lend themselves to\ninterpretation in terms of the normalised competitive system. The best\nexcuse that can be offered for these excursions into \"primitive life\" is\nthat they have substantially nothing to do with the main argument of the\nbook, being of the nature of harmless and graceful misinformation.\n\nIn the primitive economic situation--that is to say, in savagery and the\nlower barbarism--there is, of course, no \"solitary hunter,\" living\neither in a cave or otherwise, and there is no man who \"makes by his own\nlabor all the goods that he uses,\" etc. It is, in effect, a highly\nmeretricious misrepresentation to speak in this connection of \"the\neconomy of a man who works only for himself,\" and say that \"the inherent\nproductive power of labor and capital is of vital concern to him,\"\nbecause such a presentation of the matter overlooks the main facts in\nthe case in order to put the emphasis on a feature which is of\nnegligible consequence. There is no reasonable doubt but that, at least\nsince mankind reached the human plane, the economic unit has been not a\n\"solitary hunter,\" but a community of some kind; in which, by the way,\nwomen seem in the early stages to have been the most consequential\nfactor instead of the man who works for himself. The \"capital\" possessed\nby such a community--as, _e.g._, a band of California \"Digger\"\nIndians--was a negligible quantity, more valuable to a collector of\ncurios than to any one else, and the loss of which to the \"Digger\"\nsquaws would mean very little. What was of \"vital concern\" to them,\nindeed, what the life of the group depended on absolutely, was the\naccumulated wisdom of the squaws, the technology of their economic\nsituation.[5] The loss of the basket, digging-stick, and mortar, simply\nas physical objects, would have signified little, but the conceivable\nloss of the squaw's knowledge of the soil and seasons, of food and fiber\nplants, and of mechanical expedients, would have meant the present\ndispersal and starvation of the community.\n\nThis may seem like taking Mr. Clark to task for an inconsequential gap\nin his general information on Digger Indians, Eskimos, and palaeolithic\nsociety at large. But the point raised is not of negligible consequence\nfor economic theory, particularly not for any theory of \"economic\ndynamics\" that turns in great part about questions of capital and its\nuses at different stages of economic development. In the primitive\nculture the quantity and the value of mechanical appliances is\nrelatively slight; and whether the group is actually possessed of more\nor less of such appliances at a given time is not a question of\nfirst-rate importance. The loss of these objects--tangible assets--would\nentail a transient inconvenience. But the accumulated, habitual\nknowledge of the ways and means involved in the production and use of\nthese appliances is the outcome of long experience and experimentation;\nand, given this body of commonplace technological information, the\nacquisition and employment of the suitable apparatus is easily arranged.\nThe great body of commonplace knowledge made use of in industry is the\nproduct and heritage of the group. In its essentials it is known by\ncommon notoriety, and the \"capital goods\" needed for putting this\ncommonplace technological knowledge to use are a slight\nmatter,--practically within the reach of every one. Under these\ncircumstances the ownership of \"capital-goods\" has no great\nsignificance, and, as a practical fact, interest and wages are unknown,\nand the \"earning power of capital\" is not seen to be \"governed by a\nspecific power of productivity which resides in capital-goods.\" But the\nsituation changes, presently, by what is called an advance \"in the\nindustrial arts.\" The \"capital\" required to put the commonplace\nknowledge to effect grows larger, and so its acquisition becomes an\nincreasingly difficult matter. Through \"difficulty of attainment\" in\nadequate quantities, the apparatus and its ownership become a matter of\nconsequence; increasingly so, until presently the equipment required for\nan effective pursuit of industry comes to be greater than the common man\ncan hope to acquire in a lifetime. The commonplace knowledge of ways and\nmeans, the accumulated experience of mankind, is still transmitted in\nand by the body of the community at large; but, for practical purposes,\nthe advanced \"state of the industrial arts\" has enabled the owners of\ngoods to corner the wisdom of the ancients and the accumulated\nexperience of the race. Hence \"capital,\" as it stands at that phase of\nthe institution's growth contemplated by Mr. Clark.\n\nThe \"natural\" system of free competition, or, as it was once called,\n\"the obvious and simple system of natural liberty,\" is accordingly a\nphase of the development of the institution of capital; and its claim to\nimmutable dominion is evidently as good as the like claim of any other\nphase of cultural growth. The equity, or \"natural justice,\" claimed for\nit is evidently just and equitable only in so far as the conventions of\nownership on which it rests continue to be a secure integral part of the\ninstitutional furniture of the community; that is to say, so long as\nthese conventions are part and parcel of the habits of thought of the\ncommunity; that is to say, so long as these things are currently held to\nbe just and equitable. This normalised present, or \"natural,\" state of\nMr. Clark, is, as near as may be, Senior's \"Natural State of Man,\"--the\nhypothetically perfect competitive system; and economic theory consists\nin the definition and classification of the phenomena of economic life\nin terms of this hypothetical competitive system.\n\nTaken by itself, Mr. Clark's dealing with the past development might be\npassed over with slight comment, except for its negative significance,\nsince it has no theoretical connection with the present, or even with\nthe \"natural\" state in which the phenomena of economic life are assumed\nto arrange themselves in a stable, normal scheme. But his dealings with\nthe future, and with the present in so far as the present situation is\nconceived to comprise \"dynamic\" factors, is of substantially the same\nkind. With Senior's \"natural state of man\" as the base-line of normality\nin things economic, questions of present and future development are\ntreated as questions of departure from the normal, aberrations and\nexcesses which the theory does not aim even to account for. What is\noffered in place of theoretical inquiry when these \"positive perversions\nof the natural forces themselves\" are taken up (_e.g._, in chapters\nxxii.-xxix.) is an exposition of the corrections that must be made to\nbring the situation back to the normal static state, and solicitous\nadvice as to what measures are to be taken with a view to this\nbeneficent end. The problem presented to Mr. Clark by the current\nphenomena of economic development is: how can it be stopped? or, failing\nthat, how can it be guided and minimised? Nowhere is there a sustained\ninquiry into the dynamic character of the changes that have brought the\npresent (deplorable) situation to pass, nor into the nature and trend of\nthe forces at work in the development that is going forward in this\nsituation. None of this is covered by Mr. Clark's use of the word\n\"dynamic.\" All that it covers in the way of theory (chapters xii.-xxi.)\nis a speculative inquiry as to how the equilibrium reestablished itself\nwhen one or more of the quantities involved increases or decreases.\nOther than quantitive changes are not noticed, except as provocations to\nhomiletic discourse. Not even the causes and the scope of the quantitive\nchanges that may take place in the variables are allowed to fall within\nthe scope of the theory of economic dynamics.\n\nSo much of the volume, then, and of the system of doctrines of which the\nvolume is an exposition, as is comprised in the later eight chapters\n(pp. 372-554), is an exposition of grievances and remedies, with only\nsporadic intrusions of theoretical matter, and does not properly\nconstitute a part of the theory, whether static or dynamic. There is no\nintention here to take exception to Mr. Clark's outspoken attitude of\ndisapproval toward certain features of the current business situation or\nto quarrel with the remedial measures which he thinks proper and\nnecessary. This phase of his work is spoken of here rather to call\nattention to the temperate but uncompromising tone of Mr. Clark's\nwritings as a spokesman for the competitive system, considered as an\nelement in the Order of Nature, and to note the fact that this is not\neconomic theory.[6]\n\nThe theoretical section specifically scheduled as Economic Dynamics\n(chapters xii.-xxi.), on the other hand, is properly to be included\nunder the caption of Statics. As already remarked above, it presents a\ntheory of equilibrium between variables. Mr. Clark is, indeed, barred\nout by his premises from any but a statical development of theory. To\nrealise the substantially statical character of his Dynamics, it is only\nnecessary to turn to his chapter xii. (Economic Dynamics). \"A highly\ndynamic condition, then, is one in which the economic organism changes\nrapidly and yet, at any time in the course of its changes, is relatively\nnear to a certain static model\" (p. 196). \"The actual shape of society\nat any one time is not the static model of that time; but it tends to\nconform to it; and in a very dynamic society is more nearly like it than\nit would be in one in which the forces of change are less active\" (p.\n197). The more \"dynamic\" the society, the nearer it is to the static\nmodel; until in an ideally dynamic society, with a frictionless\ncompetitive system, to use Mr. Clark's figure, the static state would be\nattained, except for an increase in size,--that is to say, the ideally\nperfect \"dynamic\" state would coincide with the \"static\" state. Mr.\nClark's conception of a dynamic state reduces itself to a conception of\nan imperfectly static state, but in such a sense that the more highly\nand truly \"dynamic\" condition is thereby the nearer to a static\ncondition. Neither the static nor the dynamic state, in Mr. Clark's\nview, it should be remarked, is a state of quiescence. Both are states\nof more or less intense activity, the essential difference being that in\nthe static state the activity goes on in perfection, without lag, leak,\nor friction; the movement of parts being so perfect as not to disturb\nthe equilibrium. The static state is the more \"dynamic\" of the two. The\n\"dynamic\" condition is essentially a deranged static condition: whereas\nthe static state is the absolute perfect, \"natural\" taxonomic norm of\ncompetitive life. This dynamic-static state may vary in respect of the\nmagnitude of the several factors which hold one another in equilibrium,\nbut these are none other than quantitive variations. The changes which\nMr. Clark discusses under the head of dynamics are all of this\ncharacter,--changes in absolute or relative magnitude of the several\nfactors comprised in the equation.\n\n       *       *       *       *       *\n\nBut, not to quarrel with Mr. Clark's use of the terms \"static\" and\n\"dynamic,\" it is in place to inquire into the merits of this class of\neconomic science apart from any adventitious shortcomings. For such an\ninquiry Mr. Clark's work offers peculiar advantages. It is lucid,\nconcise, and unequivocal, with no temporising euphemisms and no politic\naffectations of sentiment. Mr. Clark's premises, and therewith the aim\nof his inquiry, are the standard ones of the classical English school\n(including the Jevons-Austrian wing). This school of economics stands\non the pre-evolutionary ground of normality and \"natural law,\" which the\ngreat body of theoretical science occupied in the early nineteenth\ncentury. It is like the other theoretical sciences that grew out of\nthe rationalistic and humanitarian conceptions of the eighteenth\ncentury in that its theoretical aim is taxonomy--definition and\nclassification--with the purpose of subsuming its data under a rational\nscheme of categories which are presumed to make up the Order of Nature.\nThis Order of Nature, or realm of Natural Law, is not the actual run of\nmaterial facts, but the facts so interpreted as to meet the needs of the\ntaxonomist in point of taste, logical consistency, and sense of justice.\nThe question of the truth and adequacy of the categories is a question\nas to the consensus of taste and predilection among the taxonomists;\n_i.e._, they are an expression of trained human nature touching the\nmatter of what ought to be. The facts so interpreted make up the\n\"normal,\" or \"natural,\" scheme of things, with which the theorist has to\ndo. His task is to bring facts within the framework of this scheme of\n\"natural\" categories. Coupled with this scientific purpose of the\ntaxonomic economist is the pragmatic purpose of finding and advocating\nthe expedient course of policy. On this latter head, again, Mr. Clark is\ntrue to the animus of the school.\n\nThe classical school, including Mr. Clark and his contemporary\nassociates in the science, is hedonistic and utilitarian,--hedonistic in\nits theory and utilitarian in its pragmatic ideals and endeavors. The\nhedonistic postulates on which this line of economic theory is built up\nare of a statical scope and character, and nothing but statical theory\n(taxonomy) comes out of their development.[7] These postulates, and the\ntheorems drawn from them, take account of none but quantitive\nvariations, and quantitive variation alone does not give rise to\ncumulative change, which proceeds on changes in kind.\n\nEconomics of the line represented at its best by Mr. Clark has never\nentered this field of cumulative change. It does not approach questions\nof the class which occupy the modern sciences,--that is to say,\nquestions of genesis, growth, variation, process (in short, questions of\na dynamic import),--but confines its interest to the definition and\nclassification of a mechanically limited range of phenomena. Like other\ntaxonomic sciences, hedonistic economics does not, and cannot, deal with\nphenomena of growth except so far as growth is taken in the quantitative\nsense of a variation in magnitude, bulk, mass, number, frequency. In its\nwork of taxonomy this economics has consistently bound itself, as Mr.\nClark does, by distinctions of a mechanical, statistical nature, and has\ndrawn its categories of classification on those grounds. Concretely, it\nis confined, in substance, to the determination of and refinements upon\nthe concepts of land, labor, and capital, as handed down by the great\neconomists of the classical era, and the correlate concepts of rent,\nwages, interest and profits. Solicitously, with a painfully meticulous\ncircumspection, the normal, mechanical metes and bounds of these several\nconcepts are worked out, the touchstone of the absolute truth aimed at\nbeing the hedonistic calculus. The facts of use and wont are not of the\nessence of this mechanical refinement. These several categories are\nmutually exclusive categories, mechanically speaking. The circumstance\nthat the phenomena covered by them are not mechanical facts is not\nallowed to disturb the pursuit of mechanical distinctions among them.\nThey nowhere overlap, and at the same time between them they cover all\nthe facts with which this economic taxonomy is concerned. Indeed, they\nare in logical consistency, required to cover them. They are\nhedonistically \"natural\" categories of such taxonomic force that their\nelemental lines of cleavage run through the facts of any given economic\nsituation, regardless of use and wont, even where the situation does not\npermit these lines of cleavage to be seen by men and recognised by use\nand wont; so that, _e.g._, a gang of Aleutian Islanders slushing about\nin the wrack and surf with rakes and magical incantations for the\ncapture of shell-fish are held, in point of taxonomic reality, to be\nengaged on a feat of hedonistic equilibration in rent, wages, and\ninterest. And that is all there is to it. Indeed, for economic theory of\nthis kind, that is all there is to any economic situation. The\nhedonistic magnitudes vary from one situation to another, but, except\nfor variations in the arithmetical details of the hedonistic balance,\nall situations are, in point of economic theory, substantially alike.[8]\n\nTaking this unfaltering taxonomy on its own recognisances, let us follow\nthe trail somewhat more into the arithmetical details, as it leads\nalong the narrow ridge of rational calculation, above the tree-tops, on\nthe levels of clear sunlight and moonshine. For the purpose in hand--to\nbring out the character of this current economic science as a working\ntheory of current facts, and more particularly \"as applied to modern\nproblems of industry and public policy\" (title-page)--the sequence to be\nobserved in questioning the several sections into which the theoretical\nstructure falls is not essential. The structure of classical theory is\nfamiliar to all students, and Mr. Clark's redaction offers no serious\ndeparture from the conventional lines. Such divergence from conventional\nlines as may occur is a matter of details, commonly of improvements in\ndetail; and the revisions of detail do not stand in such an organic\nrelation to one another, nor do they support and strengthen one another\nin such a manner, as to suggest anything like a revolutionary trend or a\nbreaking away from the conventional lines.\n\nSo as regards Mr. Clark's doctrine of Capital. It does not differ\nsubstantially from the doctrines which are gaining currency at the hands\nof such writers as Mr. Fisher or Mr. Fetter; although there are certain\nformal distinctions peculiar to Mr. Clark's exposition of the \"Capital\nConcept.\" But these peculiarities are peculiarities of the method of\narriving at the concept rather than peculiarities substantial to the\nconcept itself. The main discussion of the nature of capital is\ncontained in chapter ii. (Varieties of Economic Goods). The conception\nof capital here set forth is of fundamental consequence to the system,\npartly because of the important place assigned capital in this system of\ntheory, partly because of the importance which the conception of capital\nmust have in any theory that is to deal with problems of the current\n(capitalistic) situation. Several classes of capital-goods are\nenumerated, but it appears that in Mr. Clark's apprehension--at variance\nwith Mr. Fisher's view--persons are not to be included among the items\nof capital. It is also clear from the run of the argument, though not\nexplicitly stated, that only material, tangible, mechanically definable\narticles of wealth go to make up capital. In current usage, in the\nbusiness community, \"capital\" is a pecuniary concept, of course, and is\nnot definable in mechanical terms; but Mr. Clark, true to the hedonistic\ntaxonomy, sticks by the test of mechanical demarcation and draws the\nlines of his category on physical grounds; whereby it happens that any\npecuniary conception of capital is out of the question. Intangible\nassets, or immaterial wealth, have no place in the theory; and Mr. Clark\nis exceptionally subtle and consistent in avoiding such modern notions.\nOne gets the impression that such a notion as intangible assets is\nconceived to be too chimerical to merit attention, even by way of\nprotest or refutation.\n\nHere, as elsewhere in Mr. Clark's writings, much is made of the doctrine\nthat the two facts of \"capital\" and \"capital-goods\" are conceptually\ndistinct, though substantially identical. The two terms cover virtually\nthe same facts as would be covered by the terms \"pecuniary capital\" and\n\"industrial equipment.\" They are for all ordinary purposes coincident\nwith Mr. Fisher's terms, \"capital value\" and \"capital,\" although Mr.\nClark might enter a technical protest against identifying his categories\nwith those employed by Mr. Fisher.[9] \"Capital is this permanent fund of\nproductive goods, the identity of whose component elements is forever\nchanging. Capital-goods are the shifting component parts of this\npermanent aggregate\" (p. 29). Mr. Clark admits (pp. 29-33) that capital\nis colloquially spoken and thought of in terms of value, but he insists\nthat in point of substantial fact the working concept of capital is\n(should be) that of \"a fund of productive goods,\" considered as an\n\"abiding entity.\" The phrase itself, \"a fund of productive goods,\" is a\ncuriously confusing mixture of pecuniary and mechanical terms, though\nthe pecuniary expression, \"a fund,\" is probably to be taken in this\nconnection as a permissible metaphor.\n\nThis conception of capital, as a physically \"abiding entity\" constituted\nby the succession of productive goods that make up the industrial\nequipment, breaks down in Mr. Clark's own use of it when he comes (pp.\n37-38) to speak of the mobility of capital; that is to say, so soon as\nhe makes use of it. A single illustration of this will have to suffice,\nthough there are several points in his argument where the frailty of the\nconception is patent enough. \"The transfer of capital from one industry\nto another is a dynamic phenomenon which is later to be considered. What\nis here important is the fact that it is in the main accomplished\nwithout entailing transfers of capital-goods. An instrument wears itself\nout in one industry, and instead of being succeeded by a like instrument\nin the same industry, it is succeeded by one of a different kind which\nis used in a different branch of production\" (p. 38),--illustrated on\nthe preceding page by a shifting of investment from a whaling-ship to a\ncotton-mill. In all this it is plain that the \"transfer of capital\"\ncontemplated is a shifting of investment, and that it is, as indeed Mr.\nClark indicates, not a matter of the mechanical shifting of physical\nbodies from one industry to the other. To speak of a transfer of\n\"capital\" which does not involve a transfer of \"capital-goods\" is a\ncontradiction of the main position, that \"capital\" is made up of\n\"capital-goods.\" The continuum in which the \"abiding entity\" of capital\nresides is a continuity of ownership, not a physical fact. The\ncontinuity, in fact, is of an immaterial nature, a matter of legal\nrights, of contract, of purchase and sale. Just why this patent state of\nthe case is overlooked, as it somewhat elaborately is, is not easily\nseen. But it is plain that, if the concept of capital were elaborated\nfrom observation of current business practice, it would be found that\n\"capital\" is a pecuniary fact, not a mechanical one; that it is an\noutcome of a valuation, depending immediately on the state of mind of\nthe valuers; and that the specific marks of capital, by which it is\ndistinguishable from other facts, are of an immaterial character. This\nwould, of course, lead, directly, to the admission of intangible assets;\nand this, in turn, would upset the law of the \"natural\" remuneration of\nlabor and capital to which Mr. Clark's argument looks forward from the\nstart. It would also bring in the \"unnatural\" phenomena of monopoly as a\nnormal outgrowth of business enterprise.\n\nThere is a further logical discrepancy avoided by resorting to the\nalleged facts of primitive industry, when there was no capital, for the\nelements out of which to construct a capital concept, instead of going\nto the current business situation. In a hedonistic-utilitarian scheme of\neconomic doctrine, such as Mr. Clark's, only physically productive\nagencies can be admitted as efficient factors in production or as\nlegitimate claimants to a share in distribution. Hence capital, one of\nthe prime factors in production and the central claimant in the current\nscheme of distribution, must be defined in physical terms and delimited\nby mechanical distinctions. This is necessary for reasons which appear\nin the succeeding chapter, on The Measure of Consumers' Wealth.\n\nOn the same page (38), and elsewhere, it is remarked that \"business\ndisasters\" destroy capital in part. The destruction in question is a\nmatter of values; that is to say, a lowering of valuation, not in any\nappreciable degree a destruction of material goods. Taken as a physical\naggregate, capital does not appreciably decrease through business\ndisasters, but, taken as a fact of ownership and counted in standard\nunits of value, it decreases; there is a destruction of values and a\nshifting of ownership, a loss of ownership perhaps; but these are\npecuniary phenomena, of an immaterial character, and so do not directly\naffect the material aggregate of the industrial equipment. Similarly,\nthe discussion (pp. 301-314) of how changes of method, as, _e.g._,\nlabor-saving devices, \"liberate capital,\" and at times \"destroy\"\ncapital, is intelligible only on the admission that \"capital\" here is a\nmatter of values owned by investors and is not employed as a synonym for\nindustrial appliances. The appliances in question are neither liberated\nnor destroyed in the changes contemplated. And it will not do to say\nthat the aggregate of \"productive goods\" suffers a diminution by a\nsubstitution of devices which increases its aggregate productiveness, as\nis implied, _e.g._, by the passage on page 307,[10] if Mr. Clark's\ndefinition of capital is strictly adhered to. This very singular\npassage (pp. 306-311, under the captions, Hardships entailed on\nCapitalists by Progress, and the Offset for Capital destroyed by Changes\nof Method) implies that the aggregate of appliances of production is\ndecreased by a change which increases the aggregate of these articles in\nthat respect (productivity) by virtue of which they are counted in the\naggregate. The argument will hold good if \"productive goods\" are rated\nby bulk, weight, number, or some such irrelevant test, instead of by\ntheir productivity or by their consequent capitalised value. On such a\nshowing it should be proper to say that the polishing of plowshares\nbefore they are sent out from the factory diminishes the amount of\ncapital embodied in plowshares by as much as the weight or bulk of the\nwaste material removed from the shares in polishing them.\n\nSeveral things may be said of the facts discussed in this passage. There\nis, presumably, a decrease, in bulk, weight, or number, of the\nappliances that make up the industrial equipment at the time when such a\ntechnological change as is contemplated takes place. This change,\npresumably, increases the productive efficiency of the equipment as a\nwhole, and so may be said without hesitation to increase the equipment\nas a factor of production, while it may decrease it, considered as a\nmechanical magnitude. The owners of the obsolete or obsolescent\nappliances presumably suffer a diminution of their capital, whether they\ndiscard the obsolete appliances or not. The owners of the new\nappliances, or rather those who own and are able to capitalise the new\ntechnological expedients, presumably gain a corresponding advantage,\nwhich may take the form of an increase of the effective capitalisation\nof their outfit, as would then be shown by an increased market value of\ntheir plant. The largest theoretical outcome of the supposed changes,\nfor an economist not bound by Mr. Clark's conception of capital, should\nbe the generalisation that industrial capital--capital considered as a\nproductive agent--is substantially a capitalisation of technological\nexpedients, and that a given capital invested in industrial equipment is\nmeasured by the portion of technological expedients whose usufruct the\ninvestment appropriates. It would accordingly appear that the\nsubstantial core of all capital is immaterial wealth, and that the\nmaterial objects which are formally the subject of the capitalist's\nownership are, by comparison, a transient and adventitious matter. But\nif such a view were accepted, even with extreme reservations, Mr.\nClark's scheme of the \"natural\" distribution of incomes between capital\nand labor would \"go up in the air,\" as the colloquial phrase has it. It\nwould be extremely difficult to determine what share of the value of the\njoint product of capital and labor should, under a rule of \"natural\"\nequity, go to the capitalist as an equitable return for his\nmonopolisation of a given portion of the intangible assets of the\ncommunity at large.[11] The returns actually accruing to him under\ncompetitive conditions would be a measure of the differential advantage\nheld by him by virtue of his having become legally seized of the\nmaterial contrivances by which the technological achievements of the\ncommunity are put into effect.\n\nYet, if in this way capital were apprehended as \"an historical\ncategory,\" as Rodbertus would say, there is at least the comfort in it\nall that it should leave a free field for Mr. Clark's measures of\nrepression as applied to the discretionary management of capital by the\nmakers of trusts. And yet, again, this comforting reflection is coupled\nwith the ugly accompaniment that by the same move the field would be\nleft equally free of moral obstructions to the extreme proposals of the\nsocialists. A safe and sane course for the quietist in these premises\nshould apparently be to discard the equivocal doctrines of the passage\n(pp. 306-311) from which this train of questions arises, and hold fast\nto the received dogma, however unworkable, that \"capital\" is a congeries\nof physical objects with no ramifications or complications of an\nimmaterial kind, and to avoid all recourse to the concept of value, or\nprice, in discussing matters of modern business.\n\n       *       *       *       *       *\n\nThe center of interest and of theoretical force and validity in Mr.\nClark's work is his law of \"natural\" distribution. Upon this law hangs\nvery much of the rest, if not substantially the whole structure of\ntheory. To this law of distribution the earlier portions of the\ntheoretical development look forward, and this the succeeding portions\nof the treatise take as their point of departure. The law of \"natural\"\ndistribution says that any productive agent \"naturally\" gets what\nit produces. Under ideally free competitive conditions--such as\nprevail in the \"static\" state, and to which the current situation\napproximates--each unit of each productive factor unavoidably gets\nthe amount of wealth which it creates,--its \"virtual product,\"\nas it is sometimes expressed. This law rests, for its theoretical\nvalidity, on the doctrine of \"final productivity,\" set forth in\nfull in the _Distribution of Wealth_, and more concisely in the\n_Essentials_[12]--\"one of those universal principles which govern\neconomic life in all its stages of evolution.\"[13]\n\nIn combination with a given amount of capital, it is held, each\nsucceeding unit of added labor adds a less than proportionate increment\nto the product. The total product created by the labor so engaged is at\nthe same time the distributive share received by such labor as wages;\nand it equals the increment of product added by the \"final\" unit of\nlabor, multiplied by the number of such units engaged. The law of\n\"natural\" interest is the same as this law of wages, with a change of\nterms. The product of each unit of labor or capital being measured by\nthe product of the \"final\" unit, each gets the amount of its own\nproduct.\n\nIn all of this the argument runs in terms of value; but it is Mr.\nClark's view, backed by an elaborate exposition of the grounds of his\ncontention,[14] that the use of these terms of value is merely a matter\nof convenience for the argument, and that the conclusions so\nreached--the equality so established between productivity and\nremuneration--may be converted to terms of goods, or \"effective\nutility,\" without abating their validity.\n\nWithout recourse to some such common denominator as value the outcome of\nthe argument would, as Mr. Clark indicates, be something resembling the\nRicardian law of differential rent instead of a law drawn in homogeneous\nterms of \"final productivity\"; and the law of \"natural\" distribution\nwould then, at the best, fall short of a general formula. But the\nrecourse to terms of value does not, as Mr. Clark recognises, dispose of\nthe question without more ado. It smooths the way for the argument, but,\nunaided, it leaves it nugatory. According to Hudibras, \"The value of a\nthing Is just as much as it will bring,\" and the later refinements on\nthe theory of value have not set aside this dictum of the ancient\nauthority. It answers no pertinent question of equity to say that the\nwages paid for labor are as much as it will bring. And Mr. Clark's\nchapter (xxiv.) on \"The Unit for Measuring Industrial Agents and their\nProducts\" is designed to show how this tautological statement in terms\nof market value converts itself, under competitive conditions, into a\ncompetent formula of distributive justice. It does not conduce to\nintelligibility to say that the wages of labor are just and fair because\nthey are all that is paid to labor as wages. What further value Mr.\nClark's extended discussion of this matter may have will lie in his\nexposition of how competition converts the proposition that \"the value\nof a thing is just as much as it will bring\" into the proposition that\n\"the market rate of wages (or interest) gives to labor (or capital) the\nfull product of labor (or capital).\"\n\nIn following up the theory at this critical point, it is necessary to\nresort to the fuller statement of the _Distribution of Wealth_,[15] the\npoint being not so adequately covered in the _Essentials_. Consistently\nhedonistic, Mr. Clark recognises that his law of natural justice must be\nreduced to elementary hedonistic terms, if it is to make good its claim\nto stand as a fundamental principle of theory. In hedonistic theory,\nproduction of course means the production of utilities, and utility is\nof course utility to the consumer.[16] A product is such by virtue of\nand to the amount of the utility which it has for a consumer. This\nutility of the goods is measured, as value, by the sacrifice\n(disutility) which the consumer is willing to undergo in order to get\nthe utility which the consumption of the goods yields him. The unit and\nmeasure of productive labor is in the last analysis also a unit of\ndisutility; but it is disutility to the productive laborer, not to the\nconsumer. The balance which establishes itself under competitive\nconditions is a compound balance, being a balance between the utility of\nthe goods to the consumer and the disutility (cost) which he is willing\nto undergo for it, on the one hand, and, on the other hand, a balance\nbetween the disutility of the unit of labor and the utility for which\nthe laborer is willing to undergo this disutility. It is evident, and\nadmitted, that there can be no balance, and no commensurability, between\nthe laborer's disutility (pain) in producing the goods and the\nconsumer's utility (pleasure) in consuming them, inasmuch as these two\nhedonistic phenomena lie each within the consciousness of a distinct\nperson. There is, in fact, no continuity of nervous tissue over the\ninterval between consumer and producer, and a direct comparison,\nequilibrium, equality, or discrepancy in respect of pleasure and pain\ncan, of course, not be sought except within each self-balanced\nindividual complex of nervous tissue.[17] The wages of labor (_i.e._,\nthe utility of the goods received by the laborer) is not equal to the\ndisutility undergone by him, except in the sense that he is\ncompetitively willing to accept it; nor are these wages equal to the\nutility got by the consumer of the goods, except in the sense that he\nis competitively willing to pay them. This point is covered by the\ncurrent diagrammatic arguments of marginal-utility theory as to the\ndetermination of competitive prices.\n\nBut, while the wages are not equal to or directly comparable with the\ndisutility of the productive labor engaged, they are, in Mr. Clark's\nview, equal to the \"productive efficiency\" of that labor.[18]\n\"Efficiency in a worker is, in reality, power to draw out labor on the\npart of society. It is capacity to offer that for which society will\nwork in return.\" By the mediation of market price, under competitive\nconditions, it is held, the laborer gets, in his wages, a valid claim on\nthe labor of other men (society) as large as they are competitively\nwilling to allow him for the services for which he is paid his wages.\nThe equitable balance between work and pay contemplated by the \"natural\"\nlaw is a balance between wages and \"efficiency,\" as above defined; that\nis to say, between the wages of labor and the capacity of labor to get\nwages. So far, the whole matter might evidently have been left as\nBastiat left it. It amounts to saying that the laborer gets what he is\nwilling to accept and the consumers give what they are willing to pay.\nAnd this is true, of course, whether competition prevails or not.\n\nWhat makes this arrangement just and right under competitive conditions,\nin Mr. Clark's view, lies in his further doctrine that under such\nconditions of unobstructed competition the prices of goods, and\ntherefore the wages of labor, are determined, within the scope of the\ngiven market, by a quasi-consensus of all the parties in interest. There\nis of course no formal consensus, but what there is of the kind is\nimplied in the fact that bargains are made, and this is taken as an\nappraisement by \"society\" at large. The (quasi-) consensus of buyers is\nheld to embody the righteous (quasi-) appraisement of society in the\npremises, and the resulting rate of wages is therefore a (quasi-) just\nreturn to the laborer.[19] \"Each man accordingly is paid an amount that\nequals the total product that he personally creates.\"[20] If competitive\nconditions are in any degree disturbed, the equitable balance of prices\nand wages is disturbed by that much. All this holds true for the\ninterest of capital, with a change of terms.\n\nThe equity and binding force of this finding is evidently bound up with\nthat common-sense presumption on which it rests; namely, that it is\nright and good that all men should get what they can without force or\nfraud and without disturbing existing property relations. It springs\nfrom this presumption, and, whether in point of equity or of expediency,\nit rises no higher than its source. It does not touch questions of\nequity beyond this, nor does it touch questions of the expediency or\nprobable advent of any contemplated change in the existing conventions\nas to rights of ownership and initiative. It affords a basis for those\nwho believe in the old order--without which belief this whole structure\nof opinions collapses--to argue questions of wages and profits in a\nmanner convincing to themselves, and to confirm in the faith those who\nalready believe in the old order. But it is not easy to see that some\nhundreds of pages of apparatus should be required to find one's way back\nto these time-worn commonplaces of Manchester.\n\nIn effect, this law of \"natural\" distribution says that whatever men\nacquire without force or fraud under competitive conditions is their\nequitable due, no more and no less, assuming that the competitive\nsystem, with its underlying institution of ownership, is equitable and\n\"natural.\" In point of economic theory the law appears on examination to\nbe of slight consequence, but it merits further attention for the\ngravity of its purport. It is offered as a definitive law of equitable\ndistribution comprised in a system of hedonistic economics which is in\nthe main a theory of distributive acquisition only. It is worth while to\ncompare the law with its setting, with a view to seeing how its broad\ndeclarations of economic justice shows up in contrast with the elements\nout of which it is constructed and among which it lies.\n\nAmong the notable chapters of the _Essentials_ is one (vi.) on Value and\nits Relation to Different Incomes, which is not only a very substantial\nsection of Mr. Clark's economic theory, but at the same time a type of\nthe achievements of the latter-day hedonistic school. Certain features\nof this chapter alone can be taken up here. The rest may be equally\nworthy the student's attention, but it is the intention here not to go\ninto the general substance of the theory of marginal utility and value,\nto which the chapter is devoted, but to confine attention to such\nelements of it as bear somewhat directly on the question of equitable\ndistribution already spoken of. Among these latter is the doctrine of\nthe \"consumer's surplus,\"--virtually the same as what is spoken of by\nother writers as \"consumer's rent.\"[21] \"Consumer's surplus\" is the\nsurplus of utility (pleasure) derived by the consumer of goods above the\n(pain) cost of the goods to him. This is held to be a very generally\nprevalent phenomenon. Indeed, it is held to be all but universally\npresent in the field of consumption. It might, in fact, be effectively\nargued that even Mr. Clark's admitted exception[22] is very doubtfully\nto be allowed, on his own showing. Correlated with this element of\nutility on the consumer's side is a similar volume of disutility on the\nproducer's side, which may be called \"producer's abatement,\" or\n\"producer's rent\": it is the amount of disutility by which the\ndisutility-cost of a given article to any given producer (laborer) falls\nshort of (or conceivably exceeds) the disutility incurred by the\nmarginal producer. Marginal buyers or consumers and marginal sellers or\nproducers are relatively few: the great body on both sides come in for\nsomething in the way of a \"surplus\" of utility or disutility.\n\nAll this bears on the law of \"natural\" wages and interest as follows,\ntaking that law of just remuneration at Mr. Clark's rating of it. The\nlaw works out through the mediation of price. Price is determined,\ncompetitively, by marginal producers or sellers and marginal consumers\nor purchasers: the latter alone on the one side get the precise\nprice-equivalent of the disutility incurred by them, and the latter\nalone on the other side pay the full price-equivalent of the utilities\nderived by them from the goods purchased.[23] Hence the competitive\nprice--covering competitive wages and interest--does not reflect the\nconsensus of all parties concerned as to the \"effective utility\" of the\ngoods, on the one hand, or as to their effective (disutility) cost, on\nthe other hand. It reflects instead, if anything of this kind, the\nvaluations which the marginal unfortunates on each side concede under\nstress of competition; and it leaves on each side of the bargain\nrelation an uncovered \"surplus,\" which marks the (variable) interval by\nwhich price fails to cover \"effective utility.\" The excess utility--and\nthe conceivable excess cost--does not appear in the market transactions\nthat mediate between consumer and producer.[24] In the balance,\ntherefore, which establishes itself in terms of value between the social\nutility of the product and the remuneration of the producer's\n\"efficiency,\" the margin of utility represented by the aggregate\n\"consumer's surplus\" and like elements is not accounted for. It follows,\nwhen the argument is in this way reduced to its hedonistic elements,\nthat no man \"is paid an amount that equals the amount of the total\nproduct that he personally creates.\"\n\nSupposing the marginal-utility (final-utility) theories of objective\nvalue to be true, there is no consensus, actual or constructive, as to\nthe \"effective utility\" of the goods produced: there is no \"social\"\ndecision in the case beyond what may be implied in the readiness of\nbuyers to profit as much as may be by the necessities of the marginal\nbuyer and seller. It appears that there is warrant, within these\npremises, for the formula: Remuneration <> than Product. Only by\nan infinitesimal chance would it hold true in any given case that,\nhedonistically, Remuneration = Product; and, if it should ever happen to\nbe true, there would be no finding it out.\n\nThe (hedonistic) discrepancy which so appears between remuneration and\nproduct affects both wages and interest in the same manner, but there is\nsome (hedonistic) ground in Mr. Clark's doctrines for holding that the\ndiscrepancy does not strike both in the same degree. There is indeed no\nwarrant for holding that there is anything like an equable distribution\nof this discrepancy among the several industries or the several\nindustrial concerns; but there appears to be some warrant, on Mr.\nClark's argument, for thinking that the discrepancy is perhaps slighter\nin those branches of industry which produce the prime necessaries of\nlife.[25] This point of doctrine throws also a faint (metaphysical)\nlight on a, possibly generic, discrepancy between the remuneration of\ncapitalists and that of laborers: the latter are, relatively, more\naddicted to consuming the necessaries of life, and it may be that they\nthereby gain less in the way of a consumer's surplus.\n\nAll the analysis and reasoning here set forth has an air of undue\ntenuity; but in extenuation of this fault it should be noted that this\nreasoning is made up of such matter as goes to make up the theory under\nreview, and the fault, therefore, is not to be charged to the critic.\nThe manner of argument required to meet this theory of the \"natural law\nof final productivity\" on its own ground is itself a sufficiently\ntedious proof of the futility of the whole matter in dispute. Yet it\nseems necessary to beg further indulgence for more of the same kind. As\na needed excuse, it may be added that what immediately follows bears on\nMr. Clark's application of the law of \"natural distribution\" to modern\nproblems of industry and public policy, in the matter of curbing\nmonopolies.\n\n       *       *       *       *       *\n\nAccepting, again, Mr. Clark's general postulates--the postulates of\ncurrent hedonistic economics--and applying the fundamental concepts,\ninstead of their corollaries, to his scheme of final productivity, it\ncan be shown to fail on grounds even more tenuous and hedonistically\nmore fundamental than those already passed in review. In all\nfinal-utility (marginal-utility) theory it is of the essence of the\nscheme of things that successive increments of a \"good\" have\nprogressively less than proportionate utility. In fact, the coefficient\nof decrease of utility is greater than the coefficient of increase of\nthe stock of goods. The solitary \"first loaf\" is exorbitantly useful. As\nmore loaves are successively added to the stock, the utility of each\ngrows small by degrees and incontinently less, until, in the end, the\nstate of the \"marginal\" or \"final\" loaf is, in respect of utility,\nshameful to relate. So, with a change of phrase, it fares with\nsuccessive increments of a given productive factor--labor or capital--in\nMr. Clark's scheme of final productivity. And so, of course, it also\nfares with the utility of successive increments of product created by\nsuccessively adding unit after unit to the complement of a given\nproductive factor engaged in the case. If we attend to this matter of\nfinal productivity in consistently hedonistic terms, a curious result\nappears.\n\nA larger complement of the productive agent, counted by weight and tale,\nwill, it is commonly held, create a larger output of goods, counted by\nweight and tale;[26] but these are not hedonistic terms and should not\nbe allowed to cloud the argument. In the hedonistic scheme the magnitude\nof goods, in all the dimensions to be taken account of, is measured in\nterms of utility, which is a different matter from weight and tale. It\nis by virtue of their utility that they are \"goods,\" not by virtue of\ntheir physical dimensions, number and the like; and utility is a matter\nof the production of pleasure and the prevention of pain. Hedonistically\nspeaking, the amount of the goods, the magnitude of the output, is the\nquantity of utility derivable from their consumption; and the utility\nper unit decreases faster than the number of units increases.[27] It\nfollows that in the typical or undifferentiated case an increase of the\nnumber of units beyond a certain critical point entails a decrease of\nthe \"total effective utility\" of the supply.[28] This critical point\nseems ordinarily to be very near the point of departure of the curve of\ndeclining utility, perhaps it frequently coincides with the latter. On\nthe curve of declining final utility, at any point whose tangent cuts\nthe axis of ordinates at an angle of less than 45 degrees, an increase\nof the number of units entails a decrease of the \"total effective\nutility of the supply,\"[29] so that a gain in physical productivity is\na loss as counted in \"total effective utility.\" Hedonistically,\ntherefore, the productivity in such a case diminishes, not only\nrelatively to the (physical) magnitude of the productive agents, but\nabsolutely. This critical point, of maximum \"total effective utility,\"\nis, if the practice of shrewd business men is at all significant,\ncommonly somewhat short of the point of maximum physical productivity,\nat least in modern industry and in a modern community.\n\nThe \"total effective utility\" may commonly be increased by decreasing\nthe output of goods. The \"total effective utility\" of wages may often be\nincreased by decreasing the amount (value) of the wages per man,\nparticularly if such a decrease is accompanied by a rise in the price of\narticles to be bought with the wages. Hedonistically speaking, it is\nevident that the point of maximum net productivity is the point at which\na perfectly shrewd business management of a perfect monopoly would limit\nthe supply; and the point of maximum (hedonistic) remuneration (wages\nand interest) is the point which such a management would fix on in\ndealing with a wholly free, perfectly competitive supply of labor and\ncapital.\n\nSuch a monopolistic state of things, it is true, would not answer to Mr.\nClark's ideal. Each man would not be \"paid an amount that equals the\namount of the total product that he personally creates,\" but he would\ncommonly be paid an amount that (hedonistically, in point of \"effective\nutility\") exceeds what he personally creates, because of the high final\nutility of what he receives. This is easily proven. Under the\nmonopolistic conditions supposed, the laborers would, it is safe to\nassume, not be fully employed all the time; that is to say, they would\nbe willing to work some more in order to get some more articles of\nconsumption; that is to say, the articles of consumption which their\nwages offer them have so high a utility as to afford them a consumer's\nsurplus,--the articles are worth more than they cost:[30] Q. E. D.\n\nThe initiated may fairly doubt the soundness of the chain of argument by\nwhich these heterodox theoretical results are derived from Mr. Clark's\nhedonistic postulates, more particularly since the adepts of the school,\nincluding Mr. Clark, are not accustomed to draw conclusions to this\neffect from these premises. Yet the argument proceeds according to the\nrules of marginal-utility permutations. In view of this scarcely\navoidable doubt, it may be permitted, even at the risk of some tedium,\nto show how the facts of every-day life bear out this unexpected turn of\nthe law of natural distribution, as briefly traced above. The principle\ninvolved is well and widely accepted. The familiar practical maxim of\n\"charging what the traffic will bear\" rests on a principle of this kind,\nand affords one of the readiest practical illustrations of the working\nof the hedonistic calculus. The principle involved is that a larger\naggregate return (value) may be had by raising the return per unit to\nsuch a point as to somewhat curtail the demand. In practice it is\nrecognised, in other words, that there is a critical point at which the\nvalue obtainable per unit, multiplied by the number of units that will\nbe taken off at that price, will give the largest net aggregate result\n(in value to the seller) obtainable under the given conditions. A\ncalculus involving the same principle is, of course, the guiding\nconsideration in all monopolistic buying and selling; but a moment's\nreflection will show that it is, in fact, the ruling principle in all\ncommercial transactions and, indeed, in all business. The maxim of\n\"charging what the traffic will bear\" is only a special formulation of\nthe generic principle of business enterprise. Business initiative, the\nfunction of the entrepreneur (business man) is comprehended under this\nprinciple taken in its most general sense.[31] In business the buyer, it\nis held by the theorists, bids up to the point of greatest obtainable\nadvantage to himself under the conditions prevailing, and the seller\nsimilarly bids down to the point of greatest obtainable net aggregate\ngain. For the trader (business man, entrepreneur) doing business in the\nopen (competitive) market or for the business concern with a partial or\nlimited monopoly, the critical point above referred to is, of course,\nreached at a lower point on the curve of price than would be the case\nunder a perfect and unlimited monopoly, such as was supposed above; but\nthe principle of charging what the traffic will bear remains intact,\nalthough the traffic will not bear the same in the one case as in the\nother.\n\nNow, in the theories based on marginal (or \"final\") utility, value is an\nexpression or measure of \"effective utility\"--or whatever equivalent\nterm may be preferred. In operating on values, therefore, under the rule\nof charging what the traffic will bear, the sellers of a monopolised\nsupply, _e.g._, must operate through the valuations of the buyers; that\nis to say, they must influence the final utility of the goods or\nservices to such effect that the \"total effective utility\" of the\nlimited supply to the consumers will be greater than would be the \"total\neffective utility\" of a larger supply, which is the point in question.\nThe emphasis falls still more strongly on this illustration of the\nhedonistic calculus, if it is called to mind that in the common run of\nsuch limitations of supply by a monopolistic business management the\nmanagement would be able to increase the supply at a progressively\ndeclining cost beyond the critical point by virtue of the well-known\nprinciple of increasing returns from industry. It is also to be added\nthat, since the monopolistic business gets its enhanced return from the\nmargin by which the \"total effective utility\" of the limited supply\nexceeds that of a supply not so limited, and since there is to be\ndeducted from this margin the costs of monopolistic management in\naddition to other costs, therefore the enhancement of the \"total\neffective utility\" of the goods to the consumer in the case must be\nappreciably larger than the resulting net gains to the monopoly.\n\nBy a bold metaphor--a metaphor sufficiently bold to take it out of the\nregion of legitimate figures of speech--the gains that come to\nenterprising business concerns by such monopolistic enhancement of the\n\"total effective utility\" of their products are spoken of as \"robbery,\"\n\"extortion,\" \"plunder\"; but the theoretical complexion of the case\nshould not be overlooked by the hedonistic theorist in the heat of\noutraged sentiment. The monopolist is only pushing the principle of all\nbusiness enterprise (free competition) to its logical conclusion; and,\nin point of hedonistic theory, such monopolistic gains are to be\naccounted the \"natural\" remuneration of the monopolist for his\n\"productive\" service to the community in enhancing their enjoyment per\nunit of consumable goods to such point as to swell their net aggregate\nenjoyment to a maximum.\n\nThis intricate web of hedonistic calculations might be pursued further,\nwith the result of showing that, while the consumers of the monopolised\nsupply of goods are gainers by virtue of the enhanced \"total effective\nutility\" of the goods, the monopolists who bring about this result do so\nin great part at their own cost, counting cost in terms of a reduction\nof \"total effective utility.\" By injudiciously increasing their own\nshare of goods, they lower the marginal and effective utility of their\nwealth to such a point as, probably, to entail a considerable\n(hedonistic) privation in the shrinkage of their enjoyment per unit. But\nit is not the custom of economists, nor does Mr. Clark depart from this\ncustom, to dwell on the hardships of the monopolists. This much may be\nadded, however, that this hedonistically consistent exposition of the\n\"natural law of final productivity\" shows it to be \"one of those\nuniversal principles which govern economic life in all its stages of\nevolution,\" even when that evolution enters the phase of monopolistic\nbusiness enterprise,--granting always the sufficiency of the hedonistic\npostulates from which the law is derived. Further, the considerations\nreviewed above go to show that, on two counts, Mr. Clark's crusade\nagainst monopoly in the later portion of his treatise is out of touch\nwith the larger theoretical speculations of the earlier portions: (_a_)\nit runs counter to the hedonistic law of \"natural\" distribution; and\n(_b_) the monopolistic business against which Mr. Clark speaks is but\nthe higher and more perfect development of that competitive business\nenterprise which he wishes to reinstate,--competitive business, so\ncalled, being incipiently monopolistic enterprise.\n\nApart from this theoretical bearing, the measures which Mr. Clark\nadvocates for the repression of monopoly, under the head of applications\n\"to modern problems of industry and public policy,\" may be good economic\npolicy or they may not,--they are the expression of a sound common\nsense, an unvitiated solicitude for the welfare of mankind, and a wide\ninformation as to the facts of the situation. The merits of this policy\nof repression, as such, cannot be discussed here. On the other hand, the\nrelation of this policy to the theoretical groundwork of the treatise\nneeds also not be discussed here, inasmuch as it has substantially no\nrelation to the theory. In this later portion of the volume Mr. Clark\ndoes not lean on doctrines of \"final utility,\" \"final productivity,\" or,\nindeed, on hedonistic economics at large. He speaks eloquently for the\nmaterial and cultural interests of the community, and the references to\nhis law of \"natural distribution\" might be cut bodily out of the\ndiscussion without lessening the cogency of his appeal or exposing any\nweakness in his position. Indeed, it is by no means certain that such an\nexcision would not strengthen his appeal to men's sense of justice by\neliminating irrelevant matter.\n\nCertain points in this later portion of the volume, however, where the\nargument is at variance with specific articles of theory professed by\nMr. Clark, may be taken up, mainly to elucidate the weakness of his\ntheoretical position at the points in question. He recognises with more\nthan the current degree of freedom that the growth and practicability of\nmonopolies under modern conditions is chiefly due to the negotiability\nof securities representing capital, coupled with the joint-stock\ncharacter of modern business concerns.[32] These features of the modern\n(capitalistic) business situation enable a sufficiently few men to\ncontrol a section of the community sufficiently large to make an\neffective monopoly. The most effective known form of organisation for\npurposes of monopoly, according to Mr. Clark, is that of the holding\ncompany, and the ordinary corporation follows it closely in\neffectiveness in this respect. The monopolistic control is effected by\nmeans of the vendible securities covering the capital engaged. To meet\nthe specifications of Mr. Clark's theory of capital, these vendible\nsecurities--as _e.g._, the securities (common stock) of a holding\ncompany--should be simply the formal evidence of the ownership of\ncertain productive goods and the like. Yet, by his own showing, the\nownership of a share of productive goods proportionate to the face\nvalue, or the market value, of the securities is by no means the chief\nconsequence of such an issue of securities.[33] One of the consequences,\nand for the purposes of Mr. Clark's argument the gravest consequence, of\nthe employment of such securities, is the dissociation of ownership from\nthe control of the industrial equipment, whereby the owners of certain\nsecurities, which stand in certain immaterial, technical relations to\ncertain other securities, are enabled arbitrarily to control the use of\nthe industrial equipment covered by the latter. These are facts of the\nmodern organisation of capital, affecting the productivity of the\nindustrial equipment and its serviceability both to its owners and to\nthe community. They are facts, though not physically tangible objects;\nand they have an effect on the serviceability of industry no less\ndecisive than the effect which any group of physically tangible objects\nof equal market value have. They are, moreover, facts which are bought\nand sold in the purchase and sale of these securities, as, _e.g._, the\ncommon stock of a holding company. They have a value, and therefore they\nhave a \"total effective utility.\"\n\nIn short, these facts are intangible assets, which are the most\nconsequential element in modern capital, but which have no existence in\nthe theory of capital by which Mr. Clark aims to deal with \"modern\nproblems of industry.\" Yet, when he comes to deal with these problems,\nit is, of necessity, these intangible assets that immediately engage his\nattention. These intangible assets are an outgrowth of the freedom of\ncontract under the conditions imposed by the machine industry; yet Mr.\nClark proposes to suppress this category of intangible assets without\nprejudice to freedom of contract or to the machine industry, apparently\nwithout having taken thought of the lesson which he rehearses (pp.\n390-391) from the introduction of the holding company, with its\n\"sinister perfection,\" to take the place of the (less efficient) \"trust\"\nwhen the latter was dealt with somewhat as it is now proposed to deal\nwith the holding company. One is tempted to remark that a more naive\napprehension of the facts of modern capital would have afforded a more\ncompetent realisation of the problems of monopoly.\n\n       *       *       *       *       *\n\nIt appears from what has just been said of Mr. Clark's \"natural\"\ndistribution and of his dealing with the problems of modern industry\nthat the logic of hedonism is of no avail for the theory of business\naffairs. Yet it is held, perhaps justly, that the hedonistic\ninterpretation may be of great avail in analysing the industrial\nfunctions of the community, in their broad, generic character, even if\nit should not serve so well for the intricate details of the modern\nbusiness situation. It may be at least a serviceable hypothesis for the\noutlines of economic theory, for the first approximations to the\n\"economic laws\" sought by taxonomists. To be serviceable for this\npurpose, the hypothesis need perhaps not be true to fact, at least not\nin the final details of the community's life or without material\nqualification;[34] but it must at least have that ghost of actuality\nthat is implied in consistency with its own corollaries and\nramifications.\n\nAs has been suggested in an earlier paragraph, it is characteristic of\nhedonistic economics that the large and central element in its\ntheoretical structure is the doctrine of distribution. Consumption being\ntaken for granted as a quantitive matter simply,--essentially a matter\nof an insatiable appetite,--economics becomes a theory of acquisition;\nproduction is, theoretically, a process of acquisition, and distribution\na process of distributive acquisition. The theory of production is drawn\nin terms of the gains to be acquired by production; and under\ncompetitive conditions this means necessarily the acquisition of a\ndistributive share of what is available. The rest of what the facts of\nproductive industry include, as, _e.g._, the facts of workmanship or the\n\" state of the industrial arts,\" gets but a scant and perfunctory\nattention. Those matters are not of the theoretical essence of the\nscheme. Mr. Clark's general theory of production does not differ\nsubstantially from that commonly professed by the marginal-utility\nschool. It is a theory of competitive acquisition. An inquiry into the\nprinciples of his doctrine, therefore, as they appear, _e.g._, in the\nearly chapters of the _Essentials_, is, in effect, an inquiry into the\ncompetence of the main theorems of modern hedonistic economics.\n\n\"All men seek to get as much net service from material wealth as they\ncan.\" \"Some of the benefit received is neutralised by the sacrifice\nincurred; but there is a net surplus of gains not thus canceled by\nsacrifices, and the generic motive which may properly be called\neconomic is the desire to make this surplus large.\"[35] It is of the\nessence of the scheme that the acquisitive activities of mankind afford\na net balance of pleasure. It is out of this net balance, presumably,\nthat \"the consumer's surpluses\" arise, or it is in this that they merge.\nThis optimistic conviction is a matter of presumption, of course; but it\nis universally held to be true by hedonistic economists, particularly by\nthose who cultivate the doctrines of marginal utility. It is not\nquestioned and not proven. It seems to be a surviving remnant of the\neighteenth-century faith in a benevolent Order of Nature; that is to\nsay, it is a rationalistic metaphysical postulate. It may be true or\nnot, as matter of fact; but it is a postulate of the school, and its\noptimistic bias runs like a red thread through all the web of argument\nthat envelops the \"normal\" competitive system. A surplus of gain is\nnormal to the theoretical scheme.\n\nThe next great theorem of this theory of acquisition is at\ncross-purposes with this one. Men get useful goods only at the cost of\nproducing them, and production is irksome, painful, as has been\nrecounted above. They go on producing utilities until, at the margin,\nthe last increment of utility in the product is balanced by the\nconcomitant increment of disutility in the way of irksome productive\neffort,--labor or abstinence. At the margin, pleasure-gain is balanced\nby pain-cost. But the \"effective utility\" of the total product is\nmeasured by that of the final unit; the effective utility of the whole\nis given by the number of units of product multiplied by the effective\nutility of the final unit; while the effective disutility (pain-cost) of\nthe whole is similarly measured by the pain-cost of the final unit. The\n\"total effective utility\" of the producer's product equals the \"total\neffective disutility\" of his pains of acquisition. Hence there is no net\nsurplus of utility in the outcome.\n\nThe corrective objection is ready to hand,[36] that, while the balance\nof utility and disutility holds at the margin, it does not hold for the\nearlier units of the product, these earlier units having a larger\nutility and a lower cost, and so leaving a large net surplus of utility,\nwhich gradually declines as the margin is approached. But this attempted\ncorrection evades the hedonistic test. It shifts the ground from the\ncalculus to the objects which provoke the calculation. Utility is a\npsychological matter, a matter of pleasurable appreciation, just as\ndisutility, conversely, is a matter of painful appreciation. The\nindividual who is held to count the costs and the gain in this\nhedonistic calculus is, by supposition, a highly reasonable person. He\ncounts the cost to him as an individual against the gain to him as an\nindividual. He looks before and after, and sizes the whole thing up in a\nreasonable course of conduct. The \"absolute utility\" would exceed the\n\"effective utility\" only on the supposition that the \"producer\" is an\nunreflecting sensory apparatus, such as the beasts of the field are\nsupposed to be, devoid of that gift of appraisement and calculation\nwhich is the hypothetical hedonist's only human trait. There might on\nsuch a supposition--if the producer were an intelligent sensitive\norganism simply--emerge an excess of total pleasure over total pain, but\nthere could then be no talk of utility or of disutility, since these\nterms imply intelligent reflection, and they are employed because they\ndo so. The hedonistic producer looks to his own cost and gain, as an\nintelligent pleasure-seeker whose consciousness compasses the contrasted\nelements as wholes. He does not contrast the balance of pain and\npleasure in the morning with the balance of pain and pleasure in the\nafternoon, and say that there is so much to the good because he was not\nso tired in the morning. Indeed, by hypothesis, the pleasure to be\nderived from the consumption of the product is a future, or expected,\npleasure, and can be said to be present, at the point of time at which a\ngiven unit of pain-cost is incurred, only in anticipation; and it cannot\nbe said that the anticipated pleasure attaching to a unit of product\nwhich emerges from the effort of the producer during the relatively\npainless first hour's work exceeds the anticipated pleasure attaching to\na similar unit emerging from the second hour's work. Mr. Clark has, in\neffect, explained this matter in substantially the same way in another\nconnection (_e.g._, p. 42), where he shows that the magnitude on which\nthe question of utility and cost hinges is the \"total effective\nutility,\" and that the \"total absolute utility\" is a matter not of what\nhedonistically is, in respect of utility as an outcome of production,\nbut of what might have been under different circumstances.\n\nAn equally unprofitable result may be reached from the same point of\ndeparture along a different line of argument. Granting that increments\nof product should be measured, in respect of utility, by comparison with\nthe disutility of the concomitant increment of cost, then the\ndiagrammatic arguments commonly employed are inadequate, in that the\ndiagrams are necessarily drawn in two dimensions only,--length and\nbreadth: whereas they should be drawn in three dimensions, so as to take\naccount of the intensity of application as well as of its duration.[37]\nApparently, the exigencies of graphic representation, fortified by the\npresumption that there always emerges a surplus of utility, have led\nmarginal-utility theorists, in effect, to overlook this matter of\nintensity of application.\n\nWhen this element is brought in with the same freedom as the other two\ndimensions engaged, the argument will, in hedonistic consistency, run\nsomewhat as follows,--the run of the facts being what it may. The\nproducer, setting out on this irksome business, and beginning with the\nproduction of the exorbitantly useful initial unit of product, will, by\nhedonistic necessity, apply himself to the task with a correspondingly\nextravagant intensity, the irksomeness (disutility) of which necessarily\nrises to such a pitch as to leave no excess of utility in this initial\nunit of product above the concomitant disutility of the initial unit of\nproductive effort.[38] As the utility of subsequent units of product\nprogressively declines, so will the producer's intensity of irksome\napplication concomitantly decline, maintaining a nice balance between\nutility and disutility throughout. There is, therefore, no excess of\n\"absolute utility\" above \"effective utility\" at any point on the curve,\nand no excess of \"total absolute utility\" above \"total effective\nutility\" of the product as a whole, nor above the \"total absolute\ndisutility\" or the \"total effective disutility\" of the pain-cost.\n\nA transient evasion of this outcome may perhaps be sought by saying that\nthe producer will act wisely, as a good hedonist should, and save his\nenergies during the earlier moments of the productive period in order to\nget the best aggregate result from his day's labor, instead of spending\nhimself in ill-advised excesses at the outset. Such seems to be the fact\nof the matter, so far as the facts wear a hedonistic complexion; but\nthis correction simply throws the argument back on the previous position\nand concedes the force of what was there claimed. It amounts to saying\nthat, instead of appreciating each successive unit of product in\nisolated contrast with its concomitant unit of irksome productive\neffort, the producer, being human, wisely looks forward to his total\nproduct and rates it by contrast with his total pain-cost. Whereupon, as\nbefore, no net surplus of utility emerges, under the rule which says\nthat irksome production of utilities goes on until utility and\ndisutility balance.\n\nBut this revision of \"final productivity\" has further consequences for\nthe optimistic doctrines of hedonism. Evidently, by a somewhat similar\nline of argument the \"consumer's surplus\" will be made to disappear,\neven as this that may be called the \"producer's surplus\" has\ndisappeared. Production being acquisition, and the consumer's cost being\ncost of acquisition, the argument above should apply to the consumer's\ncase without abatement. On considering this matter in terms of the\nhedonistically responsive individual concerned, with a view to\ndetermining whether there is, in his calculus of utilities and costs,\nany margin of uncovered utilities left over after he has incurred all\nthe disutilities that are worth while to him,--instead of proceeding on\na comparison between the pleasure-giving capacity of a given article and\nthe market price of the article, all such alleged differential\nadvantages within the scope of a single sensory are seen to be nothing\nbetter than an illusory diffractive effect due to a faulty instrument.\n\nBut the trouble does not end here. The equality: pain-cost =\npleasure-gain, is not a competent formula. It should be: pain-cost\nincurred = pleasure-gain anticipated. And between these two formulas\nlies the old adage, \"there's many a slip 'twixt the cup and the lip.\" In\nan appreciable proportion of ventures, endeavors, and enterprises, men's\nexpectations of pleasure-gain are in some degree disappointed,--through\nmiscalculation, through disserviceable secondary effects of their\nproductive efforts, by \"the act of God,\" by \"fire, flood, and\npestilence.\" In the nature of things these discrepancies fall out on the\nside of loss more frequently than on that of gain. After all allowance\nhas been made for what may be called serviceable errors, there remains a\nmargin of disserviceable error, so that pain-cost > eventual\npleasure-gain = anticipated pleasure-gain--_n._ Hence, in general,\npain-cost > pleasure-gain. Hence it appears that, in the nature of\nthings, men's pains of production are underpaid by that much; although\nit may, of course, be held that the nature of things at this point is\nnot \"natural\" or \"normal.\"\n\nTo this it may be objected that the risk is discounted. Insurance is a\npractical discounting of risk; but insurance is resorted to only to\ncover risk that is appreciated by the person exposed to it, and it is\nsuch risks as are not appreciated by those who incur them that are\nchiefly in question here. And it may be added that insurance has\nhitherto not availed to equalise and distribute the chances of success\nand failure. Business gains--entrepreneur's gains, the rewards of\ninitiative and enterprise--come out of this uncovered margin of\nadventure, and the losses of initiative and enterprise are to be set\ndown to the same account. In some measure this element of initiative and\nenterprise enters into all economic endeavor. And it is not unusual for\neconomists to remark that the volume of unsuccessful or only partly\nsuccessful enterprise is very large. There are some lines of enterprise\nthat are, as one might say, extra hazardous, in which the average falls\nout habitually on the wrong side of the account. Typical of this class\nis the production of the precious metals, particularly as conducted\nunder that regime of free competition for which Mr. Clark speaks. It has\nbeen the opinion, quite advisedly, of such economists of the classic age\nof competition as J. S. Mill and Cairnes, _e.g._, that the world's\nsupply of the precious metals has been got at an average or total cost\nexceeding their value by several fold. The producers, under free\ncompetition at least, are over-sanguine of results.\n\nBut, in strict consistency, the hedonistic theory of human conduct does\nnot allow men to be guided in their calculation of cost and gain, when\nthey have to do with the precious metals, by different norms from those\nwhich rule their conduct in the general quest of gain. The visible\ndifference in this respect between the production of the precious metals\nand production generally should be due to the larger proportions and\ngreater notoriety of the risks in this field rather than to a difference\nin the manner of response to the stimulus of expected gain. The canons\nof hedonistic calculus permit none but a quantitative difference in the\nresponse. What happens in the production of the precious metals is\ntypical of what happens in a measure and more obscurely throughout the\nfield of productive effort.\n\nInstead of a surplus of utility of product above the disutility of\nacquisition, therefore, there emerges an average or aggregate net\nhedonistic deficit. On a consistent marginal-utility theory, all\nproduction is a losing game. The fact that Nature keeps the bank, it\nappears, does not take the hedonistic game of production out of the\ngeneral category known of old to that class of sanguine hedonistic\ncalculators whose day-dreams are filled with safe and sane schemes for\nbreaking the bank. \"Hope springs eternal in the human breast.\" Men are\ncongenitally over-sanguine, it appears; and the production of utilities\nis, mathematically speaking, a function of the pig-headed optimism of\nmankind. It turns out that the laws of (human) nature malevolently grind\nout vexation for men instead of benevolently furthering the greatest\nhappiness of the greatest number. The sooner the whole traffic ceases,\nthe better,--the smaller will be the net balance of pain. The great\nhedonistic Law of Nature turns out to be simply the curse of Adam,\nbacked by the even more sinister curse of Eve.\n\n       *       *       *       *       *\n\nThe remark was made in an earlier paragraph that Mr. Clark's theories\nhave substantially no relation to his practical proposals. This broad\ndeclaration requires an equally broad qualification. While the positions\nreached in his theoretical development count for nothing in making or\nfortifying the positions taken on \"problems of modern industry and\npublic policy,\" the two phases of the discussion--the theoretical and\nthe pragmatic--are the outgrowth of the same range of preconceptions and\nrun back to the same metaphysical ground. The present canvass of items\nin the doctrinal system has already far overpassed reasonable limits,\nand it is out of the question here to pursue the exfoliation of ideas\nthrough Mr. Clark's discussion of public questions, even in the\nfragmentary fashion in which scattered items of the theoretical portion\nof his treatise have been passed in review. But a broad and rudely drawn\ncharacterisation may yet be permissible. This latter portion of the\nvolume has the general complexion of a Bill of Rights. This is said, of\ncourse, with no intention of imputing a fault. It implies that the scope\nand method of the discussion is governed by the preconception that there\nis one right and beautiful definitive scheme of economic life, \"to which\nthe whole creation tends.\" Whenever and in so far as current phenomena\ndepart or diverge from this definitive \"natural\" scheme or from the\nstraight and narrow path that leads to its consummation, there is a\ngrievance to be remedied by putting the wheels back into the rut. The\nfuture, such as it ought to be,--the only normally possible, natural\nfuture scheme of life,--is known by the light of this preconception; and\nmen have an indefeasible right to the installation and maintenance of\nthose specific economic relations, expedients, institutions, which this\n\"natural\" scheme comprises, and to no others. The consummation is\npresumed to dominate the course of things which is presumed to lead up\nto the consummation. The measures of redress whereby the economic Order\nof Nature is to renew its youth are simple, direct, and short-sighted,\nas becomes the proposals of pre-Darwinian hedonism, which is not\ntroubled about the exuberant uncertainties of cumulative change. No\ndoubt presents itself but that the community's code of right and equity\nin economic matters will remain unchanged under changing conditions of\neconomic life.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _The Quarterly Journal of Economics_,\nVol. XXII, Feb., 1908.\n\n[2] _The Essentials of Economic Theory, as Applied to Modern Problems of\nIndustry and Public Policy._ By John Bates Clark. New York: The\nMacmillan Company. 1907.\n\n[3] _Cf._, _e.g. The Distribution of Wealth_, p. 376, note.\n\n[4] See, _e.g._, J. S. Mill, _Political Economy_, Book I; Marshall,\n_Principles of Economics_, Vol. I, Books II-V.\n\n[5] _Cf._, _e.g._, such an account as Barrows, _Ethno-botany of the\nCoahuilla Indians_.\n\n[6] What would be the scientific rating of the work of a botanist who\nshould spend his energy in devising ways and means to neutralize the\necological variability of plants, or of a physiologist who conceived it\nthe end of his scientific endeavors to rehabilitate the vermiform\nappendix or the pineal eye, or to denounce and penalize the imitative\ncoloring of the Viceroy butterfly? What scientific interest would attach\nto the matter if Mr. Loeb, _e.g._, should devote a few score pages to\ncanvassing the moral responsibilities incurred by him in his parental\nrelation to his parthenogenetically developed sea-urchin eggs?\n\nThose phenomena which Mr. Clark characterizes as \"positive perversions\"\nmay be distasteful and troublesome, perhaps, but \"the economic necessity\nof doing what is legally difficult\" is not of the \"essentials of\ntheory.\"\n\n[7] It is a notable fact that even the genius of Herbert Spencer could\nextract nothing but taxonomy from his hedonistic postulates; _e.g._,\n_his Social Statics_. Spencer is both evolutionist and hedonist, but it\nis only by recourse to other factors, alien to the rational hedonistic\nscheme, such as habit, delusions, use and disuse, sporadic variation,\nenvironmental forces, that he is able to achieve anything in the way of\ngenetic science, since it is only by this recourse that he is enabled to\nenter the field of cumulative change within which the modern\npost-Darwinian sciences live and move and have their being.\n\n[8] \"The capital-goods have to be taken unit by unit if their value for\nproductive purposes is to be rightly gauged. A part of a supply of\npotatoes is traceable to the hoes that dig them.... We endeavor simply\nto ascertain how badly the loss of one hoe would affect us or how much\ngood the restoration of it would do us. This truth, like the foregoing\nones, has a universal application in economics; for primitive men as\nwell as civilized ones must estimate the specific productivity of the\ntools that they use,\" etc. Page 43.\n\n[9] _Cf._ a criticism of Mr. Fisher's conception in the _Political\nScience Quarterly_ for February, 1908.\n\n[10] \"The machine itself is often a hopeless specialist. It can do one\nminute thing and that only, and when a new and better device appears for\ndoing that one thing, the machine has to go, and not to some new\nemployment, but to the junk heap. There is thus taking place a\nconsiderable waste of capital in consequence of mechanical and other\nprogress.\" \"Indeed, a quick throwing away of instruments which have\nbarely begun to do their work is often the secret of the success of an\nenterprising manager, but it entails a destruction of capital.\"\n\n[11] The position of the laborer and his wages, in this light, would not\nbe substantially different from that of the capitalist and his interest.\nLabor is no more possible, as a fact of industry, without the\ncommunity's accumulated technological knowledge than is the use of\n\"productive goods.\"\n\n[12] _Cf. Distribution of Wealth_, chaps, xii, xiii, vii, viii;\n_Essentials_, chaps, v-x.\n\n[13] _Essentials_, p. 158.\n\n[14] _Distribution_, chap. xxiv.\n\n[15] Chap. xxiv.\n\n[16] _Essentials_, p. 40.\n\n[17] Among modern economic hedonists, including Mr. Clark, there stands\nover from the better days of the order of nature a presumption,\ndisavowed, but often decisive, that the sensational response to the like\nmechanical impact of the stimulating body is the same in different\nindividuals. But, while this presumption stands ever in the background,\nand helps to many important conclusions, as in the case under\ndiscussion, few modern hedonists would question the statement in the\ntext.\n\n[18] _Distribution_, p. 394.\n\n[19] In Mr. Clark's discussion, elsewhere, the \"quasi\"-character of the\nproductive share of the laborer is indicated by saying that it is the\nproduct \"imputed\" or \"imputable\" to him.\n\n[20] _Essentials_, p. 92. Et si sensus deficit, ad firmandum cor\nsincerum sola fides sufficit.\n\n[21] See pp. 102-113; also p. 172, note.\n\n[22] \"The cheapest and poorest grades of articles.\" Page 113.\n\n[23] See p. 113.\n\n[24] The disappearance, and the method of disappearance, of such\nelements of differential utility and disutility occupies a very\nimportant place in all marginal-utility (\"final-utility\") theories of\nmarket value, or \"objective value.\"\n\n[25] \"Only the simplest and cheapest things that are sold in the market\nat all bring just what they are worth to the buyers.\" Page 113.\n\n[26] It is, _e.g._, open to serious question whether Mr. Clark's curves\nof final productivity (pp. 139, 148), showing a declining output per\nunit in response to an increase of one of the complementary agents of\nproduction, will fit the common run of industry in case the output be\ncounted by weight and tale. In many cases they will, no doubt; in many\nother cases they will not. But this is no criticism of the curves in\nquestion, since they do not, or at least should not, purport to\nrepresent the product in such terms, but in terms of utility.\n\n[27] To resort to an approximation after the manner of Malthus, if the\nsupply of goods be supposed to increase by arithmetical progression,\ntheir final utility may be said concomitantly to decrease by geometrical\nprogression.\n\n[28] _Cf. Essentials_, chap. iii, especially pp. 40-41.\n\n[29] The current marginal-utility diagrams are not of much use in this\nconnection, because the angle of the tangent with the axis of ordinates,\nat any point, is largely a matter of the draftsman's taste. The abscissa\nand the ordinate do not measure commensurable units. The units on the\nabscissa are units of frequency, while those on the ordinate are units\nof amplitude; and the greater or less segment of line allowed per unit\non either axis is a matter of independently arbitrary choice. Yet the\nproposition in the text remains true,--as true as hedonistic\npropositions commonly are. The magnitude of the angle of the tangent\nwith the axis of ordinates decides whether the total (hedonistic)\nproductivity at a given point in the curve increases or decreases with a\n(mechanical) increase of the productive agent,--no student at all\nfamiliar with marginal-utility arguments will question that patent fact.\nBut the angle of the tangent depends on the fancy of the draftsman,--no\none possessed of the elemental mathematical notions will question that\nequally patent fact.\n\n[30] A similar line of argument has been followed up by Mr. Clark for\ncapital and interest, in a different connection. See _Essentials_, pp.\n340-345, 356.\n\n[31] _Cf. Essentials_, pp. 83-90, 118-120.\n\n[32] _Cf._ chap. xxii, especially pp. 378-392.\n\n[33] _Cf._ p. 391.\n\n[34] _Cf. Essentials_, p. 39.\n\n[35] _Essentials_, p. 39.\n\n[36] _Cf. Essentials_, chap. iii, especially pp. 51-56.\n\n[37] This difficulty is recognized by the current marginal-utility\narguments, and an allowance for intensity is made or presumed. But the\nallowance admitted is invariably insufficient. It might be said to be\ninsufficient by hypothesis, since it is by hypothesis too small to\noffset the factor which it is admitted to modify.\n\n[38] The limit to which the intensity rises is a margin of the same kind\nas that which limits the duration. This supposition, that the intensity\nof application necessarily rises to such a pitch that its disutility\novertakes and offsets the utility of the product, may be objected to as\na bit of puerile absurdity; but it is a long time since puerility or\nabsurdity has been a bar to any supposition in arguments on marginal\nutility.\n\n\n\n\nTHE LIMITATIONS OF MARGINAL UTILITY[1]\n\n\nThe limitations of the marginal-utility economics are sharp and\ncharacteristic. It is from first to last a doctrine of value, and in\npoint of form and method it is a theory of valuation. The whole system,\ntherefore, lies within the theoretical field of distribution, and it has\nbut a secondary bearing on any other economic phenomena than those of\ndistribution--the term being taken in its accepted sense of pecuniary\ndistribution, or distribution in point of ownership. Now and again an\nattempt is made to extend the use of the principle of marginal utility\nbeyond this range, so as to apply it to questions of production, but\nhitherto without sensible effect, and necessarily so. The most ingenious\nand the most promising of such attempts have been those of Mr. Clark,\nwhose work marks the extreme range of endeavor and the extreme degree of\nsuccess in so seeking to turn a postulate of distribution to account for\na theory of production. But the outcome has been a doctrine of the\nproduction of values, and value, in Mr. Clark's as in other utility\nsystems, is a matter of valuation; which throws the whole excursion back\ninto the field of distribution. Similarly, as regards attempts to make\nuse of this principle in an analysis of the phenomena of consumption,\nthe best results arrived at are some formulation of the pecuniary\ndistribution of consumption goods.\n\nWithin this limited range marginal-utility theory is of a wholly\nstatical character. It offers no theory of a movement of any kind, being\noccupied with the adjustment of values to a given situation. Of this,\nagain, no more convincing illustration need be had than is afforded by\nthe work of Mr. Clark, which is not excelled in point of earnestness,\nperseverance, or insight. For all their use of the term \"dynamic,\"\nneither Mr. Clark nor any of his associates in this line of research\nhave yet contributed anything at all appreciable to a theory of genesis,\ngrowth, sequence, change, process, or the like, in economic life. They\nhave had something to say as to the bearing which given economic\nchanges, accepted as premises, may have on valuation, and so on\ndistribution; but as to the causes of change or the unfolding sequence\nof the phenomena of economic life they have had nothing to say hitherto;\nnor can they, since their theory is not drawn in causal terms but in\nterms of teleology.\n\nIn all this the marginal-utility school is substantially at one with the\nclassical economics of the nineteenth century, the difference between\nthe two being that the former is confined within narrower limits and\nsticks more consistently to its teleological premises. Both are\nteleological, and neither can consistently admit arguments from cause to\neffect in the formulation of their main articles of theory. Neither can\ndeal theoretically with phenomena of change, but at the most only with\nrational adjustment to change which may be supposed to have supervened.\n\nTo the modern scientist the phenomena of growth and change are the most\nobtrusive and most consequential facts observable in economic life. For\nan understanding of modern economic life the technological advance of\nthe past two centuries--_e.g._, the growth of the industrial arts--is of\nthe first importance; but marginal-utility theory does not bear on this\nmatter, nor does this matter bear on marginal-utility theory. As a means\nof theoretically accounting for this technological movement in the past\nor in the present, or even as a means of formally, technically stating\nit as an element in the current economic situation, that doctrine and\nall its works are altogether idle. The like is true for the sequence of\nchange that is going forward in the pecuniary relations of modern life;\nthe hedonistic postulate and its propositions of differential utility\nneither have served nor can serve an inquiry into these phenomena of\ngrowth, although the whole body of marginal-utility economics lies\nwithin the range of these pecuniary phenomena. It has nothing to say to\nthe growth of business usages and expedients or to the concomitant\nchanges in the principles of conduct which govern the pecuniary\nrelations of men, which condition and are conditioned by these altered\nrelations of business life or which bring them to pass.\n\nIt is characteristic of the school that wherever an element of the\ncultural fabric, an institution or any institutional phenomenon, is\ninvolved in the facts with which the theory is occupied, such\ninstitutional facts are taken for granted, denied, or explained away. If\nit is a question of price, there is offered an explanation of how\nexchanges may take place with such effect as to leave money and price\nout of the account. If it is a question of credit, the effect of credit\nextension on business traffic is left on one side and there is an\nexplanation of how the borrower and lender cooeperate to smooth out their\nrespective income streams of consumable goods or sensations of\nconsumption. The failure of the school in this respect is consistent and\ncomprehensive. And yet these economists are lacking neither in\nintelligence nor in information. They are, indeed, to be credited,\ncommonly, with a wide range of information and an exact control of\nmaterials, as well as with a very alert interest in what is going on;\nand apart from their theoretical pronouncements the members of the\nschool habitually profess the sanest and most intelligent views of\ncurrent practical questions, even when these questions touch matters of\ninstitutional growth and decay.\n\nThe infirmity of this theoretical scheme lies in its postulates, which\nconfine the inquiry to generalisations of the teleological or\n\"deductive\" order. These postulates, together with the point of view and\nlogical method that follow from them, the marginal-utility school shares\nwith other economists of the classical line--for this school is but a\nbranch or derivative of the English classical economists of the\nnineteenth century. The substantial difference between this school and\nthe generality of classical economists lies mainly in the fact that in\nthe marginal-utility economics the common postulates are more\nconsistently adhered to at the same time that they are more neatly\ndefined and their limitations are more adequately realized. Both the\nclassical school in general and its specialized variant, the\nmarginal-utility school, in particular, take as their common point of\ndeparture the traditional psychology of the early nineteenth-century\nhedonists, which is accepted as a matter of course or of common\nnotoriety and is held quite uncritically. The central and well-defined\ntenet so held is that of the hedonistic calculus. Under the guidance of\nthis tenet and of the other psychological conceptions associated and\nconsonant with it, human conduct is conceived of and interpreted as a\nrational response to the exigencies of the situation in which mankind is\nplaced; as regards economic conduct it is such a rational and\nunprejudiced response to the stimulus of anticipated pleasure and\npain--being, typically and in the main, a response to the promptings of\nanticipated pleasure, for the hedonists of the nineteenth century and of\nthe marginal-utility school are in the main of an optimistic temper.[2]\nMankind is, on the whole and normally, (conceived to be) clearsighted\nand farsighted in its appreciation of future sensuous gains and losses,\nalthough there may be some (inconsiderable) difference between men in\nthis respect. Men's activities differ, therefore, (inconsiderably) in\nrespect of the alertness of the response and the nicety of adjustment of\nirksome pain-cost to apprehended future sensuous gain; but, on the\nwhole, no other ground or line or guidance of conduct than this\nrationalistic calculus falls properly within the cognizance of the\neconomic hedonists. Such a theory can take account of conduct only in so\nfar as it is rational conduct, guided by deliberate and exhaustively\nintelligent choice--wise adaptation to the demands of the main chance.\n\nThe external circumstances which condition conduct are variable, of\ncourse, and so they will have a varying effect upon conduct; but their\nvariation is, in effect, construed to be of such a character only as to\nvary the degree of strain to which the human agent is subject by contact\nwith these external circumstances. The cultural elements involved in the\ntheoretical scheme, elements that are of the nature of institutions,\nhuman relations governed by use and wont in whatever kind and\nconnection, are not subject to inquiry but are taken for granted as\npre-existing in a finished, typical form and as making up a normal and\ndefinitive economic situation, under which and in terms of which human\nintercourse is necessarily carried on. This cultural situation comprises\na few large and simple articles of institutional furniture, together\nwith their logical implications or corollaries; but it includes nothing\nof the consequences or effects caused by these institutional elements.\nThe cultural elements so tacitly postulated as immutable conditions\nprecedent to economic life are ownership and free contract, together\nwith such other features of the scheme of natural rights as are implied\nin the exercise of these. These cultural products are, for the purpose\nof the theory, conceived to be given a priori in unmitigated force. They\nare part of the nature of things; so that there is no need of accounting\nfor them or inquiring into them, as to how they have come to be such as\nthey are, or how and why they have changed and are changing, or what\neffect all this may have on the relations of men who live by or under\nthis cultural situation.\n\nEvidently the acceptance of these immutable premises, tacitly, because\nuncritically and as a matter of course, by hedonistic economics gives\nthe science a distinctive character and places it in contrast with other\nsciences whose premises are of a different order. As has already been\nindicated, the premises in question, so far as they are peculiar to the\nhedonistic economics, are (_a_) a certain institutional situation, the\nsubstantial feature of which is the natural right of ownership, and\n(_b_) the hedonistic calculus. The distinctive character given to this\nsystem of theory by these postulates and by the point of view resulting\nfrom their acceptance may be summed up broadly and concisely in saying\nthat the theory is confined to the ground of sufficient reason instead\nof proceeding on the ground of efficient cause. The contrary is true of\nmodern science, generally (except mathematics), particularly of such\nsciences as have to do with the phenomena of life and growth. The\ndifference may seem trivial. It is serious only in its consequences. The\ntwo methods of inference--from sufficient reason and from efficient\ncause--are out of touch with one another and there is no transition from\none to the other: no method of converting the procedure or the results\nof the one into those of the other. The immediate consequence\nis that the resulting economic theory is of a teleological\ncharacter--\"deductive\" or \"a priori\" as it is often called--instead of\nbeing drawn in terms of cause and effect. The relation sought by this\ntheory among the facts with which it is occupied is the control\nexercised by future (apprehended) events over present conduct. Current\nphenomena are dealt with as conditioned by their future consequences;\nand in strict marginal-utility theory they can be dealt with only in\nrespect of their control of the present by consideration of the future.\nSuch a (logical) relation of control or guidance between the future and\nthe present of course involves an exercise of intelligence, a taking\nthought, and hence an intelligent agent through whose discriminating\nforethought the apprehended future may affect the current course of\nevents; unless, indeed, one were to admit something in the way of a\nprovidential order of nature or some occult line of stress of the nature\nof sympathetic magic. Barring magical and providential elements, the\nrelation of sufficient reason runs by way of the interested\ndiscrimination, the forethought, of an agent who takes thought of the\nfuture and guides his present activity by regard for this future. The\nrelation of sufficient reason runs only from the (apprehended) future\ninto the present, and it is solely of an intellectual, subjective,\npersonal, teleological character and force; while the relation of cause\nand effect runs only in the contrary direction, and it is solely of an\nobjective, impersonal, materialistic character and force. The modern\nscheme of knowledge, on the whole, rests, for its definitive ground, on\nthe relation of cause and effect; the relation of sufficient reason\nbeing admitted only provisionally and as a proximate factor in the\nanalysis, always with the unambiguous reservation that the analysis must\nultimately come to rest in terms of cause and effect. The merits of this\nscientific animus, of course, do not concern the present argument.\n\nNow, it happens that the relation of sufficient reason enters very\nsubstantially into human conduct. It is this element of discriminating\nforethought that distinguishes human conduct from brute behavior. And\nsince the economist's subject of inquiry is this human conduct, that\nrelation necessarily comes in for a large share of his attention in any\ntheoretical formulation of economic phenomena, whether hedonistic or\notherwise. But while modern science at large has made the causal\nrelation the sole ultimate ground of theoretical formulation; and while\nthe other sciences that deal with human life admit the relation of\nsufficient reason as a proximate, supplementary, or intermediate ground,\nsubsidiary, and subservient to the argument from cause to effect;\neconomics has had the misfortune--as seen from the scientific point of\nview--to let the former supplant the latter. It is, of course, true that\nhuman conduct is distinguished from other natural phenomena by the human\nfaculty for taking thought, and any science that has to do with human\nconduct must face the patent fact that the details of such conduct\nconsequently fall into the teleological form; but it is the peculiarity\nof the hedonistic economics that by force of its postulates its\nattention is confined to this teleological bearing of conduct alone. It\ndeals with this conduct only in so far as it may be construed in\nrationalistic, teleological terms of calculation and choice. But it is\nat the same time no less true that human conduct, economic or otherwise,\nis subject to the sequence of cause and effect, by force of such\nelements as habituation and conventional requirements. But facts of this\norder, which are to modern science of graver interest than the\nteleological details of conduct, necessarily fall outside the attention\nof the hedonistic economist, because they cannot be construed in terms\nof sufficient reason, such as his postulates demand, or be fitted into a\nscheme of teleological doctrines.\n\nThere is, therefore, no call to impugn these premises of the\nmarginal-utility economics within their field. They commend themselves\nto all serious and uncritical persons at the first glance. They are\nprinciples of action which underlie the current, business-like scheme of\neconomic life, and as such, as practical grounds of conduct, they are\nnot to be called in question without questioning the existing law and\norder. As a matter of course, men order their lives by these principles\nand, practically, entertain no question of their stability and finality.\nThat is what is meant by calling them institutions; they are settled\nhabits of thought common to the generality of men. But it would be mere\nabsentmindedness in any student of civilization therefore to admit that\nthese or any other human institutions have this stability which is\ncurrently imputed to them or that they are in this way intrinsic to the\nnature of things. The acceptance by the economists of these or other\ninstitutional elements as given and immutable limits their inquiry in a\nparticular and decisive way. It shuts off the inquiry at the point where\nthe modern scientific interest sets in. The institutions in question are\nno doubt good for their purpose as institutions, but they are not good\nas premises for a scientific inquiry into the nature, origin, growth,\nand effects of these institutions and of the mutations which they\nundergo and which they bring to pass in the community's scheme of life.\n\nTo any modern scientist interested in economic phenomena, the chain of\ncause and effect in which any given phase of human culture is involved,\nas well as the cumulative changes wrought in the fabric of human conduct\nitself by the habitual activity of mankind, are matters of more\nengrossing and more abiding interest than the method of inference by\nwhich an individual is presumed invariably to balance pleasure and pain\nunder given conditions that are presumed to be normal and invariable.\nThe former are questions of the life-history of the race or the\ncommunity, questions of cultural growth and of the fortunes of\ngenerations; while the latter is a question of individual casuistry in\nthe face of a given situation that may arise in the course of this\ncultural growth. The former bear on the continuity and mutations of that\nscheme of conduct whereby mankind deals with its material means of life;\nthe latter, if it is conceived in hedonistic terms, concerns a\ndisconnected episode in the sensuous experience of an individual member\nof such a community.\n\nIn so far as modern science inquires into the phenomena of life, whether\ninanimate, brute, or human, it is occupied about questions of genesis\nand cumulative change, and it converges upon a theoretical formulation\nin the shape of a life-history drawn in causal terms. In so far as it\nis a science in the current sense of the term, any science, such as\neconomics, which has to do with human conduct, becomes a genetic inquiry\ninto the human scheme of life; and where, as in economics, the subject\nof inquiry is the conduct of man in his dealings with the material means\nof life, the science is necessarily an inquiry into the life-history of\nmaterial civilization, on a more or less extended or restricted plan.\nNot that the economist's inquiry isolates material civilization from all\nother phases and bearings of human culture, and so studies the motions\nof an abstractly conceived \"economic man.\" On the contrary, no\ntheoretical inquiry into this material civilization that shall be at all\nadequate to any scientific purpose can be carried out without taking\nthis material civilization in its causal, that is to say, its genetic,\nrelations to other phases and bearings of the cultural complex; without\nstudying it as it is wrought upon by other lines of cultural growth and\nas working its effects in these other lines. But in so far as the\ninquiry is economic science, specifically, the attention will converge\nupon the scheme of material life and will take in other phases of\ncivilization only in their correlation with the scheme of material\ncivilization.\n\nLike all human culture this material civilization is a scheme of\ninstitutions--institutional fabric and institutional growth. But\ninstitutions are an outgrowth of habit. The growth of culture is a\ncumulative sequence of habituation, and the ways and means of it are the\nhabitual response of human nature to exigencies that vary incontinently,\ncumulatively, but with something of a consistent sequence in the\ncumulative variations that so go forward,--incontinently, because each\nnew move creates a new situation which induces a further new variation\nin the habitual manner of response; cumulatively, because each new\nsituation is a variation of what has gone before it and embodies as\ncausal factors all that has been effected by what went before;\nconsistently, because the underlying traits of human nature\n(propensities, aptitudes, and what not) by force of which the response\ntakes place, and on the ground of which the habituation takes effect,\nremain substantially unchanged.\n\nEvidently an economic inquiry which occupies itself exclusively with the\nmovements of this consistent, elemental human nature under given, stable\ninstitutional conditions--such as is the case with the current\nhedonistic economics--can reach statical results alone; since it makes\nabstraction from those elements that make for anything but a statical\nresult. On the other hand an adequate theory of economic conduct, even\nfor statical purposes, cannot be drawn in terms of the individual\nsimply--as is the case in the marginal-utility economics--because it\ncannot be drawn in terms of the underlying traits of human nature\nsimply; since the response that goes to make up human conduct takes\nplace under institutional norms and only under stimuli that have an\ninstitutional bearing; for the situation that provokes and inhibits\naction in any given case is itself in great part of institutional,\ncultural derivation. Then, too, the phenomena of human life occur only\nas phenomena of the life of a group or community: only under stimuli due\nto contact with the group and only under the (habitual) control\nexercised by canons of conduct imposed by the group's scheme of life.\nNot only is the individual's conduct hedged about and directed by his\nhabitual relations to his fellows in the group, but these relations,\nbeing of an institutional character, vary as the institutional scheme\nvaries. The wants and desires, the end and aim, the ways and means, the\namplitude and drift of the individual's conduct are functions of an\ninstitutional variable that is of a highly complex and wholly unstable\ncharacter.\n\nThe growth and mutations of the institutional fabric are an outcome of\nthe conduct of the individual members of the group, since it is out of\nthe experience of the individuals, through the habituation of\nindividuals, that institutions arise; and it is in this same experience\nthat these institutions act to direct and define the aims and end of\nconduct. It is, of course, on individuals that the system of\ninstitutions imposes those conventional standards, ideals, and canons of\nconduct that make up the community's scheme of life. Scientific inquiry\nin this field, therefore, must deal with individual conduct and must\nformulate its theoretical results in terms of individual conduct. But\nsuch an inquiry can serve the purposes of a genetic theory only if and\nin so far as this individual conduct is attended to in those respects in\nwhich it counts toward habituation, and so toward change (or stability)\nof the institutional fabric, on the one hand, and in those respects in\nwhich it is prompted and guided by the received institutional\nconceptions and ideals on the other hand. The postulates of marginal\nutility, and the hedonistic preconceptions generally, fail at this point\nin that they confine the attention to such bearings of economic conduct\nas are conceived not to be conditioned by habitual standards and ideals\nand to have no effect in the way of habituation. They disregard or\nabstract from the causal sequence of propensity and habituation in\neconomic life and exclude from theoretical inquiry all such interest in\nthe facts of cultural growth, in order to attend to those features of\nthe case that are conceived to be idle in this respect. All such facts\nof institutional force and growth are put on one side as not being\ngermane to pure theory; they are to be taken account of, if at all, by\nafterthought, by a more or less vague and general allowance for\ninconsequential disturbances due to occasional human infirmity. Certain\ninstitutional phenomena, it is true, are comprised among the premises of\nthe hedonists, as has been noted above; but they are included as\npostulates a priori. So the institution of ownership is taken into the\ninquiry not as a factor of growth or an element subject to change, but\nas one of the primordial and immutable facts of the order of nature,\nunderlying the hedonistic calculus. Property, ownership, is presumed as\nthe basis of hedonistic discrimination and it is conceived to be given\nin its finished (nineteenth-century) scope and force. There is no\nthought either of a conceivable growth of this definitive\nnineteenth-century institution out of a cruder past or of any\nconceivable cumulative change in the scope and force of ownership in the\npresent or future. Nor is it conceived that the presence of this\ninstitutional element in men's economic relations in any degree affects\nor disguises the hedonistic calculus, or that its pecuniary conceptions\nand standards in any degree standardize, color, mitigate, or divert the\nhedonistic calculator from the direct and unhampered quest of the net\nsensuous gain. While the institution of property is included in this way\namong the postulates of the theory, and is even presumed to be\never-present in the economic situation, it is allowed to have no force\nin shaping economic conduct, which is conceived to run its course to its\nhedonistic outcome as if no such institutional factor intervened between\nthe impulse and its realization. The institution of property, together\nwith all the range of pecuniary conceptions that belong under it and\nthat cluster about it, are presumed to give rise to no habitual or\nconventional canons of conduct or standards of valuation, no proximate\nends, ideals, or aspirations. All pecuniary notions arising from\nownership are treated simply as expedients of computation which mediate\nbetween the pain-cost and the pleasure-gain of hedonistic choice,\nwithout lag, leak, or friction; they are conceived simply as the\nimmutably correct, God-given notation of the hedonistic calculus.\n\nThe modern economic situation is a business situation, in that economic\nactivity of all kinds is commonly controlled by business considerations.\nThe exigencies of modern life are commonly pecuniary exigencies. That is\nto say they are exigencies of the ownership of property. Productive\nefficiency and distributive gain are both rated in terms of price.\nBusiness considerations are considerations of price, and pecuniary\nexigencies of whatever kind in the modern communities are exigencies of\nprice. The current economic situation is a price system. Economic\ninstitutions in the modern civilized scheme of life are (prevailingly)\ninstitutions of the price system. The accountancy to which all phenomena\nof modern economic life are amenable is an accountancy in terms of\nprice; and by the current convention there is no other recognized scheme\nof accountancy, no other rating, either in law or in fact, to which the\nfacts of modern life are held amenable. Indeed, so great and pervading a\nforce has this habit (institution) of pecuniary accountancy become that\nit extends, often as a matter of course, to many facts which properly\nhave no pecuniary bearing and no pecuniary magnitude, as, _e.g._, works\nof art, science, scholarship, and religion. More or less freely and\nfully, the price system dominates the current commonsense in its\nappreciation and rating of these non-pecuniary ramifications of modern\nculture; and this in spite of the fact that, on reflection, all men of\nnormal intelligence will freely admit that these matters lie outside the\nscope of pecuniary valuation.\n\nCurrent popular taste and the popular sense of merit and demerit are\nnotoriously affected in some degree by pecuniary considerations. It is a\nmatter of common notoriety, not to be denied or explained away, that\npecuniary (\"commercial \") tests and standards are habitually made use of\noutside of commercial interests proper. Precious stones, it is admitted,\neven by hedonistic economists, are more esteemed than they would be if\nthey were more plentiful and cheaper. A wealthy person meets with more\nconsideration and enjoys a larger measure of good repute than would fall\nto the share of the same person with the same habit of mind and body and\nthe same record of good and evil deeds if he were poorer. It may well be\nthat this current \"commercialisation\" of taste and appreciation has been\noverstated by superficial and hasty critics of contemporary life, but it\nwill not be denied that there is a modicum of truth in the allegation.\nWhatever substance it has, much or little, is due to carrying over into\nother fields of interest the habitual conceptions induced by dealing\nwith and thinking of pecuniary matters. These \"commercial\" conceptions\nof merit and demerit are derived from business experience. The pecuniary\ntests and standards so applied outside of business transactions and\nrelations are not reducible to sensuous terms of pleasure and pain.\nIndeed, it may, _e.g._, be true, as is commonly believed, that the\ncontemplation of a wealthy neighbor's pecuniary superiority yields\npainful rather than pleasurable sensations as an immediate result; but\nit is equally true that such a wealthy neighbor is, on the whole, more\nhighly regarded and more considerately treated than another neighbor who\ndiffers from the former only in being less enviable in respect of\nwealth.\n\nIt is the institution of property that gives rise to these habitual\ngrounds of discrimination, and in modern times, when wealth is counted\nin terms of money, it is in terms of money value that these tests and\nstandards of pecuniary excellence are applied. This much will be\nadmitted. Pecuniary institutions induce pecuniary habits of thought\nwhich affect men's discrimination outside of pecuniary matters; but the\nhedonistic interpretation alleges that such pecuniary habits of thought\ndo not affect men's discrimination in pecuniary matters. Although the\ninstitutional scheme of the price system visibly dominates the modern\ncommunity's thinking in matters that lie outside the economic interest,\nthe hedonistic economists insist, in effect, that this institutional\nscheme must be accounted of no effect within that range of activity to\nwhich it owes its genesis, growth, and persistence. The phenomena of\nbusiness, which are peculiarly and uniformly phenomena of price, are in\nthe scheme of the hedonistic theory reduced to non-pecuniary hedonistic\nterms and the theoretical formulation is carried out as if pecuniary\nconceptions had no force within the traffic in which such conceptions\noriginate. It is admitted that preoccupation with commercial\ninterests has \"commercialised\" the rest of modern life, but the\n\"commercialisation\" of commerce is not admitted. Business transactions\nand computations in pecuniary terms, such as loans, discounts, and\ncapitalisation, are without hesitation or abatement converted into terms\nof hedonistic utility, and conversely.\n\nIt may be needless to take exception to such conversion from pecuniary\ninto sensuous terms, for the theoretical purpose for which it is\nhabitually made; although, if need were, it might not be excessively\ndifficult to show that the whole hedonistic basis of such a conversion\nis a psychological misconception. But it is to the remoter theoretical\nconsequences of such a conversion that exception is to be taken. In\nmaking the conversion abstraction is made from whatever elements do not\nlend themselves to its terms; which amounts to abstracting from\nprecisely those elements of business that have an institutional force\nand that therefore would lend themselves to scientific inquiry of the\nmodern kind--those (institutional) elements whose analysis might\ncontribute to an understanding of modern business and of the life of the\nmodern business community as contrasted with the assumed primordial\nhedonistic calculus.\n\nThe point may perhaps be made clearer. Money and the habitual resort to\nits use are conceived to be simply the ways and means by which\nconsumable goods are acquired, and therefore simply a convenient method\nby which to procure the pleasurable sensations of consumption; these\nlatter being in hedonistic theory the sole and overt end of all economic\nendeavor. Money values have therefore no other significance than that of\npurchasing power over consumable goods, and money is simply an expedient\nof computation. Investment, credit extensions, loans of all kinds and\ndegrees, with payment of interest and the rest, are likewise taken\nsimply as intermediate steps between the pleasurable sensations of\nconsumption and the efforts induced by the anticipation of these\nsensations, other bearings of the case being disregarded. The balance\nbeing kept in terms of the hedonistic consumption, no disturbance arises\nin this pecuniary traffic so long as the extreme terms of this extended\nhedonistic equation--pain-cost and pleasure-gain--are not altered, what\nlies between these extreme terms being merely algebraic notation\nemployed for convenience of accountancy. But such is not the run of the\nfacts in modern business. Variations of capitalization, _e.g._, occur\nwithout its being practicable to refer them to visibly equivalent\nvariations either in the state of the industrial arts or in the\nsensations of consumption. Credit extensions tend to inflation of\ncredit, rising prices, overstocking of markets, etc., likewise without a\nvisible or securely traceable correlation in the state of the industrial\narts or in the pleasures of consumption; that is to say, without a\nvisible basis in those material elements to which the hedonistic theory\nreduces all economic phenomena. Hence the run of the facts, in so far,\nmust be thrown out of the theoretical formulation. The hedonistically\npresumed final purchase of consumable goods is habitually not\ncontemplated in the pursuit of business enterprise. Business men\nhabitually aspire to accumulate wealth in excess of the limits of\npracticable consumption, and the wealth so accumulated is not intended\nto be converted by a final transaction of purchase into consumable goods\nor sensations of consumption. Such commonplace facts as these, together\nwith the endless web of business detail of a like pecuniary character,\ndo not in hedonistic theory raise a question as to how these\nconventional aims, ideals, aspirations, and standards have come into\nforce or how they affect the scheme of life in business or outside of\nit; they do not raise those questions because such questions cannot be\nanswered in the terms which the hedonistic economists are content to\nuse, or, indeed, which their premises permit them to use. The question\nwhich arises is how to explain the facts away: how theoretically to\nneutralize them so that they will not have to appear in the theory,\nwhich can then be drawn in direct and unambiguous terms of rational\nhedonistic calculation. They are explained away as being aberrations due\nto oversight or lapse of memory on the part of business men, or to some\nfailure of logic or insight. Or they are construed and interpreted into\nthe rationalistic terms of the hedonistic calculus by resort to an\nambiguous use of the hedonistic concepts. So that the whole \"money\neconomy,\" with all the machinery of credit and the rest, disappears in a\ntissue of metaphors to reappear theoretically expurgated, sterilized,\nand simplified into a \"refined system of barter,\" culminating in a net\naggregate maximum of pleasurable sensations of consumption.\n\nBut since it is in just this unhedonistic, unrationalistic pecuniary\ntraffic that the tissue of business life consists; since it is this\npeculiar conventionalism of aims and standards that differentiates the\nlife of the modern business community from any conceivable earlier or\ncruder phase of economic life; since it is in this tissue of pecuniary\nintercourse and pecuniary concepts, ideals, expedients, and aspirations\nthat the conjunctures of business life arise and run their course of\nfelicity and devastation; since it is here that those institutional\nchanges take place which distinguish one phase or era of the business\ncommunity's life from any other; since the growth and change of these\nhabitual, conventional elements make the growth and character of any\nbusiness era or business community; any theory of business which sets\nthese elements aside or explains them away misses the main facts which\nit has gone out to seek. Life and its conjunctures and institutions\nbeing of this complexion, however much that state of the case may be\ndeprecated, a theoretical account of the phenomena of this life must be\ndrawn in these terms in which the phenomena occur. It is not simply that\nthe hedonistic interpretation of modern economic phenomena is inadequate\nor misleading; if the phenomena are subjected to the hedonistic\ninterpretation in the theoretical analysis they disappear from the\ntheory; and if they would bear the interpretation in fact they would\ndisappear in fact. If, in fact, all the conventional relations and\nprinciples of pecuniary intercourse were subject to such a perpetual\nrationalized, calculating revision, so that each article of usage,\nappreciation, or procedure must approve itself _de novo_ on hedonistic\ngrounds of sensuous expediency to all concerned at every move, it is not\nconceivable that the institutional fabric would last over night.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from the _Journal of Political Economy_,\nVol. XVII, No. 9 November 1909.\n\n[2] The conduct of mankind differs from that of the brutes in being\ndetermined by anticipated sensations of pleasure and pain, instead of\nactual sensations. Hereby, in so far, human conduct is taken out of the\nsequence of cause and effect and falls instead under the rule of\nsufficient reason. By virtue of this rational faculty in man the\nconnection between stimulus and response is teleological instead of\ncausal.\n\nThe reason for assigning the first and decisive place to pleasure,\nrather than to pain, in the determination of human conduct, appears to\nbe the (tacit) acceptance of that optimistic doctrine of a beneficent\norder of nature which the nineteenth century inherited from the\neighteenth.\n\n\n\n\nGUSTAV SCHMOLLER'S ECONOMICS[1]\n\n\nProfessor Schmoller's _Grundriss_[2] is an event of the first importance\nin economic literature. It appears from later advices that the second\nand concluding volume of the work is hardly to be looked for at as early\na date as the author's expressions in his preface had led us to\nanticipate. What lies before Professor Schmoller's readers, therefore,\nin this first volume of the _Outlines_ is but one-half of the\ncompendious statement which he here purposes making of his theoretical\nposition and of his views and exemplification of the scope and method of\neconomic science. It may accordingly seem adventurous to attempt a\ncharacterisation of his economic system on the basis of this avowedly\nincomplete statement. And yet such an endeavor is not altogether\ngratuitous, nor need it in any great measure proceed on hypothetical\ngrounds. The introduction comprised in the present volume sketches the\nauthor's aim in an outline sufficiently full to afford a convincing view\nof the \"system\" of science for which he speaks; and the two books by\nwhich the introduction is followed show Professor Schmoller's method of\ninquiry consistently carried out, as well as the reach and nature of the\ntheoretical conclusions which he considers to lie within the competency\nof economic science. And with regard to an economist who is so much of\nan innovator,--not to say so much of an iconoclast,--and whose work\ntouches the foundations of the science so intimately and profoundly, the\ninterest of his critics and associates must, at least for the present,\ncenter chiefly about these questions as to the scope and nature assigned\nto the theory by his discussion, as to the range and character of the\nmaterial of which he makes use, and as to the methods of inquiry which\nhis sagacity and experience commend. So, therefore, while the _Outlines_\nis yet incomplete, considered as a compendium of details of doctrine,\nthe work in its unfinished state need not thereby be an inadequate\nexpression of Professor Schmoller's relation to economic science.\n\nHerewith for the first time economic readers are put in possession of a\nfully advised deliverance on economic science at large as seen and\ncultivated by that modernised historical school of which Professor\nSchmoller is the authoritative exponent. Valuable and characteristic as\nhis earlier discussions on the scope and method of the science are, they\nare but preliminary studies and tentative formulations as compared with\nthis maturer work, which not only avows itself a definitive formulation,\nbut has about it an air of finality perceptible at every turn. But this\ncomes near saying that it embodies the sole comprehensive working-out of\nthe scientific aims of the historical school. Discussions partially\ncovering the field, monographs and sketches there are in great number,\nshowing the manner of economic theory that was to be looked for as an\noutcome of the \"historical diversion.\" Some of these, especially some of\nthe later ones, are extremely valuable in the results they offer, as\nwell as significant of the trend which the science is taking under the\nhands of the German students.[3] But a comprehensive work, aiming to\nformulate a body of economic theory on the basis afforded by the\n\"historical method,\" has not hitherto been seriously attempted.\n\nTo the broad statement just made exception might perhaps be taken in\nfavor of Schaeffle's half-forgotten work of the seventies, together\npossibly with several other less notable and less consistent endeavors\nof a similar kind, dating back to the early decades of the school.\nProbably none of the younger generation of economists would be tempted\nto cite Roscher's work as invalidating such a statement as the one made\nabove. Although time has been allowed for the acceptance and\nauthentication of these endeavors of the earlier historical economists\nin the direction of a system of economic theory,--that is to say, of an\neconomic science,--they have failed of authentication at the hands of\nthe students of the science; and there seems no reason to regard this\nfailure as less than definitive.\n\nDuring the last two decades the historical school has branched into two\nmain directions of growth, somewhat divergent, so that broad general\nstatements regarding the historical economists can be less confidently\nmade to-day than perhaps at any earlier time. Now, as regards the more\nconservative branch, the historical economists of the stricter\nobservance,--these modern continuers of what may be called the elder\nline of the historical school can scarcely be said to cultivate a\nscience at all, their aim being not theoretical work. Assuredly, the\nwork of this elder line, of which Professor Wagner is the unquestioned\nhead, is by no means idle. It is work of a sufficiently important and\nvaluable order, perhaps it is indispensable to the task which the\nscience has in hand, but, broadly speaking, it need not be counted with\nin so far as it touches directly upon economic theory. This elder line\nof German economics, in its numerous modern representatives, shows both\ninsight and impartiality; but as regards economic theory their work\nbears the character of eclecticism rather than that of a constructive\nadvance. Frequent and peremptory as their utterances commonly are on\npoints of doctrine, it is only very rarely that these utterances embody\ntheoretical views arrived at or verified by the economists who make them\nor by such methods of inquiry as are characteristic of these economists.\nWhere these expressions of doctrine are not of the nature of maxims of\nexpediency, they are, as is well known, commonly borrowed somewhat\nuncritically from classical sources. Of constructive scientific\nwork--that is to say, of theory--this elder line of German economics is\ninnocent; nor does there seem to be any prospect of an eventual output\nof theory on the part of that branch of the historical school, unless\nthey should unexpectedly take advice, and make the scope, and therefore\nthe method, of their inquiry something more than historical in the sense\nin which that term is currently accepted. The historical economics of\nthe conservative kind seems to be a barren field in the theoretical\nrespect.\n\nSo that whatever characteristic articles of general theory the\nhistorical school may enrich the science with are to be looked for at\nthe hands of those men who, like Professor Schmoller, have departed from\nthe strict observance of the historical method. A peculiar interest,\ntherefore, attaches to his work as the best accepted and most\nauthoritative spokesman of that branch of historical economics which\nprofesses to cultivate theoretical inquiry. It serves to show in what\nmanner and degree this more scientific wing of the historical school\nhave outgrown the original \"historical\" standpoint and range of\nconceptions, and how they have passed from a distrust of all economic\ntheory to an eager quest of theoretical formulations that shall cover\nall phenomena of economic life to better purpose than the body of\ndoctrine received from the classical writers and more in consonance with\nthe canons of contemporary science at large. That this should have been\nthe outcome of the half-century of development through which the school\nhas now passed might well seem unexpected, if not incredible, to any who\nsaw the beginning of that divergence within the school, a generation\nago, out of which this modernised, theoretical historical economics has\narisen.\n\nProfessor Schmoller entered the field early, in the sixties, as a\nprotestant against the aims and ideals then in vogue in economics. His\nprotest ran not only against the methods and results of the classical\nwriters, but also against the views professed by the leaders of the\nhistorical school, both as regards the scope of the science and as\nregards the character of the laws or generalisations sought by the\nscience. His early work, in so far as he was at variance with his\ncolleagues, was chiefly critical; and there is no good evidence that he\nthen had a clear conception of the character of that constructive work\nto which it has been his persistent aim to turn the science. Hence he\ncame to figure in common repute as an iconoclast and an extreme exponent\nof the historical school, in that he was held practically to deny the\nfeasibility of a scientific treatment of economic matters and to aim at\nconfining economics to narrative, statistics, and description. This\niconoclastic or critical phase of his economic discussion is now past,\nand with it the uncertainty as to the trend and outcome of his\nscientific activity.\n\nTo understand the significance of the diversion created by Professor\nSchmoller as regards the scope and method of economics, it is necessary,\nvery briefly, to indicate the position occupied by that early generation\nof historical economists from which his teaching diverged, and more\nparticularly those points of the older canon at which he has come to\ndiffer characteristically from the views previously in vogue.\n\nAs regards the situation in which the historical school, as exemplified\nby its leaders, was then placed, it is, of course, something of a\ncommonplace that by the end of its first twenty years of endeavor in the\nreform of economic science the school had, in point of systematic\nresults, scarcely got beyond preliminaries. And even these preliminaries\nwere not in all respects obviously to the purpose. A new and wider scope\nhad been indicated for economic inquiry, as well as a new aim and method\nfor theoretical discussion. But the new ideals of theoretical advance,\nas well as the ways and means indicated for their attainment, still had\nmainly a speculative interest. Nothing substantial had been done towards\nthe realisation of the former or the _mise en oeuvre_ of the latter.\nThe historical economists can scarcely be said at that time to have put\ntheir hand to the new engines which they professed to house in their\nworkshop. Apart from polemics and speculation concerning ideals, the\nserious interest and endeavors of the school had up to that time been in\nthe field of history rather than in that of economics, except so far as\nthe adepts of the new school continued in a fragmentary way to inculcate\nand, in some slight and uncertain degree, to elaborate the dogmas of the\nclassical writers whom they sought to discredit.\n\nThe character of historical economics at the time when Professor\nSchmoller entered on his work of criticism and revision is fairly shown\nby Roscher's writings. Whatever may be thought to-day of Roscher's rank\nas an economist, in contrast with Knies and Hildebrand, it will scarcely\nbe questioned that at the close of the first quarter-century of the life\nhistory of the historical school it was Roscher's conception of the\nscope and method of economics that found the widest acceptance and that\nbest expressed the animus of that body of students who professed to\ncultivate economics by the historical method. For the purpose in hand\nRoscher's views may, therefore, be taken as typical, all the more\nreadily since for the very general purpose here intended there are no\nserious discrepancies between Roscher and his two illustrious\ncontemporaries. The chief difference is that Roscher is more naive and\nmore specific. He has also left a more considerable volume of results\nachieved by the professed use of his method.\n\nRoscher's professed method was what he calls the\n\"historico-physiological\" method. This he contrasts with the\n\"philosophical\" or \"idealistic\" method. But his air of depreciation as\nregards \"philosophical\" methods in economics must not be taken to mean\nthat Roscher's own economic speculations were devoid of all\nphilosophical or metaphysical basis. It only means that his\nphilosophical postulates were different from those of the economists\nwhom he discredits, and that they were regarded by him as self-evident.\n\nAs must necessarily be the case with a writer who had neither a special\naptitude for nor special training in philosophical inquiries, Roscher's\nmetaphysical postulates are, of course, chiefly tacit. They are the\ncommon-sense, commonplace metaphysics afloat in educated German circles\nin the time of Roscher's youth,--during the period when his growth and\neducation gave him his outlook on life and knowledge and laid the basis\nof his intellectual habits; which means that these postulates belong to\nwhat Hoeffding has called the \"Romantic\" school of thought, and are of a\nHegelian complexion. Roscher being not a professed philosophical\nstudent, it is neither easy nor safe to particularise closely as regards\nhis fundamental metaphysical tenets; but, as near as so specific an\nidentification of his philosophical outlook is practicable, he must be\nclassed with the Hegelian \"Right.\" But since the Hegelian metaphysics\nhad in Roscher's youth an unbroken vogue in reputable German circles,\nespecially in those ultra-reputable circles within which lay the\ngentlemanly life and human contact of Roscher, the postulates afforded\nby the Hegelian metaphysics were accepted simply as a matter of course,\nand were not recognised as metaphysical at all. And in this his\nmetaphysical affiliation Roscher is fairly typical of the early\nhistorical school of economics.\n\nThe Hegelian metaphysics, in so far as bears upon the matter in hand, is\na metaphysics of a self-realising life process. This life process, which\nis the central and substantial fact of the universe, is of a spiritual\nnature,--\"spiritual,\" of course, being here not contrasted with\n\"material.\" The life process is essentially active, self-determining,\nand unfolds by inner necessity,--by necessity of its own substantially\nactive nature. The course of culture, in this view, is an unfolding\n(exfoliation) of the human spirit; and the task which economic science\nhas in hand is to determine the laws of this cultural exfoliation in its\neconomic aspect. But the laws of the cultural development with which the\nsocial sciences, in the Hegelian view, have to do are at one with the\nlaws of the processes of the universe at large; and, more immediately,\nthey are at one with the laws of the life process at large. For the\nuniverse at large is itself a self-unfolding life process, substantially\nof a spiritual character, of which the economic life process which\noccupies the interest of the economist is but a phase and an aspect.\nNow, the course of the processes of unfolding life in organic nature has\nbeen fairly well ascertained by the students of natural history and the\nlike; and this, in the nature of the case, must afford a clew to the\nlaws of cultural development, in its economic as well as in any other of\nits aspects or bearings,--the laws of life in the universe being all\nsubstantially spiritual and substantially at one. So we arrive at a\nphysiological conception of culture after the analogy of the ascertained\nphysiological processes seen in the biological domain. It is conceived\nto be physiological after the Hegelian manner of conceiving a\nphysiological process, which is, however, not the same as the modern\nscientific conception of a physiological process.[4]\n\nSince this quasi-physiological process of cultural development is\nconceived to be an unfolding of the self-realising human spirit, whose\nlife history it is, it is of the nature of the case that the cultural\nprocess should run through a certain sequence of phases--a certain life\nhistory prescribed by the nature of the active, unfolding spiritual\nsubstance. The sequence is determined on the whole, as regards the\ngeneral features of the development, by the nature of life on the human\nplane. The history of cultural growth and decline necessarily repeats\nitself, since it is substantially the same human spirit that seeks to\nrealise itself in every comprehensive sequence of cultural development,\nand since this human spirit is the only factor in the case that has\nsubstantial force. In its generic features the history of past cultural\ncycles is, therefore, the history of the future. Hence the importance,\nnot to say the sole efficacy for economic science, of an historical\nscrutiny of culture. A well-authenticated sequence of cultural phenomena\nin the history of the past is conceived to have much the same binding\nforce for the sequence of cultural phenomena in the future as a \"natural\nlaw,\" as the term has been understood in physics or physiology, is\nconceived to have as regards the course of phenomena in the life history\nof the human body; for the onward cultural course of the human spirit,\nactively unfolding by inner necessity, is an organic process, following\nlogically from the nature of this self-realising spirit. If the process\nis conceived to meet with obstacles or varying conditions, it adapts\nitself to the circumstances in any given case, and it then goes on along\nthe line of its own logical bent until it eventuates in the consummation\ngiven by its own nature. The environment, in this view, if it is not to\nbe conceived simply as a function of the spiritual force at work, is, at\nthe most, of subsidiary and transient consequence only. Environmental\nconditions can at best give rise to minor perturbations; they do not\ninitiate a cumulative sequence which can profoundly affect the outcome\nor the ulterior course of the cultural process. Hence the sole, or\nalmost sole, importance of historical inquiry in determining the laws of\ncultural development, economic or other.\n\nThe working conception which this romantic-historical school had of\neconomic life, therefore, is, in its way, a conception of development,\nor evolution; but it is not to be confused with Darwinism or\nSpencerianism. Inquiry into the cultural development under the guidance\nof such preconceptions as these has led to generalisations, more or less\narbitrary, regarding uniformities of sequence in phenomena, while the\ncauses which determine the course of events, and which make the\nuniformity or variation of the sequence, have received but scant\nattention. The \"natural laws\" found by this means are necessarily of the\nnature of empiricism, colored by the bias or ideals of the investigator.\nThe outcome is a body of aphoristic wisdom, perhaps beautiful and\nvaluable after its kind, but quite fatuous when measured by the\nstandards and aims of modern science. As is well known, no substantial\ntheoretical gain was made along this romantic-historical line of inquiry\nand speculation, for the reason, apparently, that there are no cultural\nlaws of the kind aimed at, beyond the unprecise generalities that are\nsufficiently familiar beforehand to all passably intelligent adults.\n\n       *       *       *       *       *\n\nIt has seemed necessary to offer this much in characterisation of that\n\"historical\" aim and method which afforded a point of departure for\nProfessor Schmoller's work of revision. When he first raised his protest\nagainst the prevailing ideals and methods, as being ill-advised and not\nthorough-going, he does not seem himself to have been entirely free from\nthis Romantic, or Hegelian, bias. There is evidence to the contrary in\nhis early writings.[5] It cannot even be said that his later theoretical\nwork does not show something of the same animus, as, _e.g._, when he\nassumes that there is a meliorative trend in the course of cultural\nevents.[6] What has differentiated his work from that of the group of\nwriters which has above been called the elder line of historical\neconomics is the weakness or relative absence of this bias in his\ntheoretical work. Particularly, he has refused to bring his researches\nin the field of theory definitely to rest on ground given by the\nHegelian, or Romantic, school of thought. He was from the first\nunwilling to accept classificatory statements of uniformity or of\nnormality as an adequate answer to questions of scientific theory. He\ndoes not commonly deny the truth or the importance of the empirical\ngeneralisations aimed at by the early historical economists. Indeed, he\nmakes much of them and has been notoriously urgent for a full survey of\nhistorical data and a painstaking digestion of materials with a view to\na comprehensive work of empirical generalisation. As is well known, in\nhis earlier work of criticism and methodological controversy he was led\nto contend that for at least one generation economists must be content\nto spend their energies on descriptive work of this kind; and he thereby\nearned the reputation of aiming to reduce economics to a descriptive\nknowledge of details and to confine its method to the Baconian ground of\ngeneralisation by simple enumeration. But this exhaustive historical\nscrutiny and description of detail has always, in Professor Schmoller's\nview, been preliminary to an eventual theory of economic life. The\nsurvey of details and the empirical generalisations reached by its help\nare useful for the scientific purpose only as they serve the end of an\neventual formulation of the laws of causation that work out in the\nprocess of economic life. The ulterior question, to which all else is\nsubsidiary, is a question of the causes at work rather than a question\nof the historical uniformities observable in the sequence of phenomena.\nThe scrutiny of historical details serves this end by defining the scope\nand character of the several factors causally at work in the growth of\nculture, and, what is of more immediate consequence, as they are at work\nin the shaping of the economic activities and the economic aims of men\nengaged in this unfolding cultural process as it lies before the\ninvestigator in the existing situation.\n\nIn the preliminary work, then, of defining and characterising the causes\nor factors of economic life, historical investigation plays a large, if\nnot the largest, part; but it is by no means the sole line of inquiry to\nwhich recourse is had for this purpose. Nor, it may be added, is this\nthe sole use of historical inquiry. To the like end a comparative study\nof the climatic, geographical, and geological features of the\ncommunity's environment is drawn into the inquiry; and more particularly\nthere is a careful study of ethnographic parallels and a scrutiny of the\npsychological foundations of culture and the psychological factors\ninvolved in cultural change.\n\nHence it appears that Professor Schmoller's work differs from that of\nthe elder line of historical economics in respect of the scope and\ncharacter of the preliminaries of economic theory no less than in the\nulterior aim which he assigns the science. It is only by giving a very\nbroad meaning to the term that this latest development of the science\ncan be called an \"historical\" economics. It is Darwinian rather than\nHegelian, although with the earmarks of Hegelian affiliation visible now\nand again; and it is \"historical\" only in a sense similar to that in\nwhich a Darwinian account of the evolution of economic institutions\nmight be called historical. For the distinguishing characteristic of\nProfessor Schmoller's work, that wherein it differs from the earlier\nwork of the economists of his general class, is that it aims at a\nDarwinistic account of the origin, growth, persistence, and variation of\ninstitutions, in so far as these institutions have to do with the\neconomic aspect of life either as cause or as effect. In much of what he\nhas to say, he is at one with his contemporaries and predecessors within\nthe historical school; and he shows at many points both the excellences\nand weaknesses due to his \"historical\" antecedents. But his striking and\ncharacteristic merits lie in the direction of a post-Darwinian, causal\ntheory of the origin and growth of species in institutions. In this line\nof theoretical inquiry Professor Schmoller is not alone, nor does he,\nperhaps, go so far or with such singleness of purpose in this direction\nas some others do at given points; but the seniority belongs to him, and\nhe is also in the lead as regards the comprehensiveness of his work.\n\n       *       *       *       *       *\n\nBut to return to the _Grundriss_, to which recourse must be had to\nsubstantiate the characterisation here offered. The entire work as\nprojected comprises an Introduction and four Books, of which the\nintroduction and the first two books are contained in the volume already\npublished. The two books yet to be published, in a second volume,\npromise to be of a length corresponding to the first two. The present\nvolume should accordingly contain approximately three-fifths of the\nwhole, counted by bulk. The scheme of the work is as follows: An\nIntroduction (pp. 1-124) treats of (1) the Concept of Economics, (2) the\nPsychical, Ethical (or Conventional, _sittliche_), and Legal Foundations\nof Economic Life and of Culture, and (3) the Literature and Method of\nthe Science. This is followed by Book I. (pp. 125-228) on Land,\nPopulation, and the Industrial Arts, considered as collective phenomena\nand factors in economic life, and Book II. (pp. 229-457), on the\nConstitution of Economic Society, its chief organs and the causal\nfactors to which they are due. Books III. and IV. are to deal with the\nCirculation of Goods and the Distribution of Income, and to give a\ngenetic account of the Development of Economic Society.\n\nThe course outlined differs noticeably from what has been customary in\ntreatises on economics. The point of departure is a comprehensive\ngeneral survey of the factors which enter into the growth of culture,\nwith special reference to their economic bearing. This survey runs\nchiefly on psychological and ethnographic ground, historical inquiry in\nthe stricter sense being relatively scant and obviously of secondary\nconsequence. It is followed up with a more detailed and searching\ndiscussion of the factors engaged in the economic process in any given\nsituation. The factors, or \"collective phenomena,\" in question are not\nthe time-honored Land, Labor, and Capital, but rather population,\nmaterial environment, and technological conditions. Here, too, the\ndiscussion has to do with ethnographic rather than with properly\nhistorical material. The question of population concerns not the\nnumerical force of laborers, but rather the diversity of race\ncharacteristics and the bearing of race endowment upon the growth of\neconomic institutions. The discussion of the material environment,\nagain, has relatively little to say of the fertility of the soil, and\ngives much attention to diversities of climate, geographical situation,\nand geological and biological conditions. And this first book closes\nwith a survey of the growth of technological knowledge and the\nindustrial arts.\n\nIn all this the significant innovation lies not so much in the character\nof the details. They are for the most part commonplace enough as details\nof the sciences from which they are borrowed. They are shrewdly chosen\nand handled in such a way as to bring out their bearing upon the\nulterior questions about which the economist's interest centers; but\nthere is, as might be expected, little attempt to go back of the returns\ngiven by specialists in the several lines of research that are laid\nunder contribution. But the significance of it all lies rather in the\nfact that material of this kind should have been drawn upon for a\nfoundation for economic theory, and that it should have seemed necessary\nto Professor Schmoller to make this introductory survey so comprehensive\nand so painstaking as it is. Its meaning is that these features of human\nnature and these forces of nature and circumstances of environment are\nthe agencies out of whose interaction the economic situation has arisen\nby a cumulative process of change, and that it is this cumulative\nprocess of development, and its complex and unstable outcome, that are\nto be the economist's subject-matter. The theoretical outcome for which\nsuch a foundation is prepared is necessarily of a genetic kind. It\nnecessarily seeks to know and explain the structure and functions of\neconomic society in terms of how and why they have come to be what they\nare, not, as so many economic writers have explained them, in terms of\nwhat they are good for and what they ought to be. It means, in other\nwords, a deliberate attempt to substitute an inquiry into the efficient\ncauses of economic life in the place of empirical generalisations, on\nthe one hand, and speculations as to the eternal fitness of things, on\nthe other hand.\n\nIt follows from the nature of the case that an economics of this genetic\ncharacter, working on grounds of the kind indicated, comprises nothing\nin the way of advice or admonition, no maxims of expediency, and no\neconomic, political, or cultural creed. How nearly Professor Schmoller\nconforms to this canon of continence is another question. The above\nindicates the scope of such doctrines as are consistently derivable from\nthe premises with which the work under review starts out, not the scope\nof its writer's speculations on economic matters.\n\nThe second book, by the help of prehistoric and ethnographic material as\nwell as history, deals with the evolution of the methods of social\norganisation,--the growth of institutions in so far as this growth\nshapes or is shaped by the exigencies of economic life. The \"organs,\" or\nsocial-economic institutions, whose life history is passed in review\nare: the family; the methods of settlement and domicile, in town and\ncountry; the political units of control and administration;\ndifferentiation of functions between industrial and other classes and\ngroups; ownership, its growth and distribution; social classes and\nassociations; business enterprise, industrial organisations and\ncorporations.\n\nAs regards the singleness of purpose with which Professor Schmoller has\ncarried out the scheme of economic theory for which he has sketched the\noutlines and pointed the way, it is not possible to speak with the same\nconfidence as of his preliminary work. It goes without saying that this\nfurther work of elaboration is excellent after its kind; and this\nexcellence, which was to be looked for at Professor Schmoller's hands,\nmay easily divert the reader's attention from the shortcomings of the\nwork in respect of kind rather than of quality. Now, while a broad\ngeneralisation on this head may be hazardous and is to be taken with a\nlarge margin, still, with due allowance, the following generalisation\nwill probably stand, so far as regards this first volume. So long as the\nauthor is occupied with the life-history of institutions down to\ncontemporary developments, so long his discussion proceeds by the dry\nlight of the scientific interest, simply, as the term \"scientific\" is\nunderstood among the modern adepts of the natural sciences; but so soon\nas he comes to close quarters with the situation of to-day, and reaches\nthe point where a dispassionate analysis and exposition of the causal\ncomplex at work in contemporary institutional changes should begin, so\nsoon the scientific light breaks up into all the colors of the rainbow,\nand the author becomes an eager and eloquent counselor, and argues the\nquestion of what ought to be and what modern society must do to be\nsaved. The argument at this point loses the character of a genetic\nexplanation of phenomena, and takes on the character of appeal and\nadmonition, urged on grounds of expediency, of morality, of good taste,\nof hygiene, of political ends, and even of religion. All this, of\ncourse, is what we are used to in the common run of writers of the\nhistorical school; but those students whose interest centers in the\nscience rather than in the ways and means of maintaining the received\ncultural forms of German society have long fancied they had ground to\nhope for something more to the purpose when Professor Schmoller came to\nput forth his great systematic work. Brilliant and no doubt valuable in\nits way and for its end, this digression into homiletics and reformatory\nadvice means that the argument is running into the sands just at the\nstage where the science can least afford it. It is precisely at this\npoint, where men of less years and breadth and weight would find it\ndifficult to hold tenaciously to the course of cause and effect through\nthe maze of jarring interests and sentiments that make up the\ncontemporary situation,--it is precisely at this point that a genetic\ntheory of economic life most needs the guidance of the firm, trained,\ndispassionate hand of the master. And at this point his guidance all but\nfails us.\n\nWhat has just been said applies generally to Professor Schmoller's\ntreatment of contemporary economic development, and it should be added\nthat it applies at nearly all points with more or less of qualification.\nBut the qualifications required are not large enough to belie the\ngeneral characterisation just offered. It would be asking too large an\nindulgence to follow the point up in this place through all the\ndiscussions of the volume that fairly come under this criticism. The\nmost that may be done is to point for illustration to the handling which\ntwo or three of the social-economic \"organs\" receive. So, for instance,\nBook II. opens with an account of the family and its place and function\nin the structure of economic society. The discussion proceeds along the\nbeaten paths of ethnographic research, with repeated and well-directed\nrecourse to the psychological knowledge that Professor Schmoller always\nhas well in hand. Coming down into recent times, the discussion still\nproceeds to show how the large economic changes of late mediaeval and\nearly modern times acted to break down the patriarchal regime of the\nearlier culture; but at the same time there comes into sight (pp.\n245-249) a bias in favor of the recent as against the earlier form of\nthe household. The author is no longer content to show the exigencies\nwhich set the earlier patriarchal household aside in favor of the\nmodified patriarchal household of more recent times. He also offers\nreasons why the later, modified form is intrinsically the more\ndesirable; reasons, it should perhaps be said, which may be well taken,\nbut which are beside the point so far as regards a scientific\nexplanation of the changes under discussion.\n\nThe closing paragraphs of the section (91) dwell with a kindly\ninsistence on the many elements of strength and beauty possessed by the\nform of household organisation handed down from the past generation to\nthe present. The facts herewith recited by the author are, no doubt, of\nweight, and must be duly taken account of by any economist who ventures\non a genetic discussion of the present situation and the changing\nfortunes of the received household. But Professor Schmoller has failed\neven to point out in what manner these elements of strength and beauty\nhave in the recent past or may in the present and immediate future\ncausally affect the fortunes of the institution. The failure to turn the\nmaterial in question to scientific account becomes almost culpable in\nProfessor Schmoller, since there are few, if any, who are in so\nfavorable a position to outline the argument which a theoretical account\nof the situation at this point must take. Plainly, as shown by Professor\nSchmoller's argument, economic exigencies are working an incessant\ncumulative change in the form of organisation of the modern household;\nbut he has done little towards pointing out in what manner and with what\neffect these exigencies come into play. Neither has he gone at all into\nthe converse question, equally grave as a question of economic theory,\nof how the persistence, even though qualified, of the patriarchal family\nhas modified and is modifying economic structure and function at other\npoints and qualifying or accentuating the very exigencies themselves to\nwhich the changes wrought in the institution are to be traced. Plainly,\ntoo, the strength and beauty of the traditionally received form of the\nhousehold--that is to say, the habits of life and of complacency which\nare bound up with this household--are elements of importance in the\nmodern situation as affects the degree of persistence and the direction\nof change which this institution shows under modern circumstances. They\nare psychological facts, facts of habit and propensity and spiritual\nfitness, the efficiency of which as live forces making for survival or\nvariation is in this connection probably second to that of no other\nfactors that could be named. We had, therefore, almost a right to expect\nthat Professor Schmoller's profound and comprehensive erudition in the\nfields of psychology and cultural growth should turn these facts to\nbetter ends than a preachment concerning an intrinsically desirable\nconsummation.\n\nRegarding the present visible disintegration of the family, and the\nclosely related \"woman question,\" Professor Schmoller's observations are\nof much the same texture. He notes the growing disinclination to the\nold-fashioned family life on the part of the working population, and\nshows that there are certain economic causes for this growth or\ndeterioration of sentiment. What he has to offer is made up of the\ncommonplaces of latter-day social-economic discussion, and is charged\nwith a strong undertone of deprecation. What the trend of the causes at\nwork to alter or fortify this body of sentiment may be, counts for very\nlittle in what he says on the present movement or on the immediate\nfuture of the institution. The best he has to offer on the \"woman\nquestion\" is an off-hand reference of the ground of sentiment on which\nit rests to a recrudescence of the eighteenth century spirit of\n_egalite_. This notion of the equality of the sexes he refutes in\ngraceful and affecting terms, and he pleads for the unbroken\npreservation of woman's sphere and man's primacy; as if the matter of\nsuperiority or inferiority between the sexes could conceivably be\nanything more than a conventional outcome of the habits of life imposed\nupon the community by the circumstances under which they live. How it\nhas come to pass that under the economic exigencies of the past the\nphysical and temperamental diversity between the sexes has been\nconventionally construed into a superiority of the man and an\ninferiority of the woman,--on this head he has no more to say or to\nsuggest than on the correlate question of why this conventional\ninterpretation of the facts has latterly not been holding its ancient\nground. The discussion of the family and of the relation of the sexes,\nin modern culture, is marked throughout by unwillingness or inability to\npenetrate behind the barrier of conventional finality.\n\nThe discussion of the family just cited occupies the opening chapter of\nBook II. For a further instance of Professor Schmoller's handling of a\nmodern economic problem, reference may be had to the closing chapter of\nBook I., on the \"Development of Technological Expedients and its\nEconomic Significance,\" but more particularly the sections (84-86) on\nthe modern machine industry (pp. 211-228). In this discussion, also, the\npoint of interest is the attention given to the latter-day phenomena of\nmachine industry, and the author's method and animus in dealing with\nthem. There is (pp. 211-218) a condensed and competent presentation of\nthe main characteristics of the modern \"machine age,\" followed (pp.\n218-228) by a critical discussion of its cultural value. The customary\neulogy, but with more than the customary discrimination, is given to the\nadvantages of the regime of the machine in point of economy, creature\ncomforts, and intellectual sweep; and it is pointed out how the regime\nof the machine has brought about a redistribution of wealth and of\npopulation and a reorganisation and redistribution of social and\neconomic structures and functions. It is pointed out (p. 223) that the\ngravest social effect of the machine industry has been the creation of a\nlarge class of wage laborers. The material circumstances into which this\nclass has been thrown, particularly in point of physical comfort, are\ndealt with in a sober and discriminating way; and it is shown (p. 224)\nthat in the days of its fuller development the machine's regime has\nevolved a class of trained laborers who not only live in comfort, but\nare sound and strong in mind and body. But with the citation of these\nfacts the pursuit of the chain of cause and effect in this modern\nmachine situation comes to an end. The remainder of the space given to\nthe subject is occupied with extremely sane and well-advised criticism,\nmoral and aesthetic, and indications of what the proper ideals and ends\nof endeavor should be.\n\nProfessor Schmoller misses the opportunity he here has of dealing with\nthis material in a scientific spirit and with some valuable results for\neconomic theory. He could, it is not too bold to assume, have sketched\nfor us an effective method and line of research to be pursued, for\ninstance, in following up the scientific question of what may be the\ncultural, spiritual effects of the machine's regime upon this large body\nof trained workmen, and what this body of trained workmen in its turn\ncounts for as a factor in shaping the institutional growth of the\npresent and the economic and cultural situation of to-morrow. Work of\nthis kind, there is reason to believe, Professor Schmoller could have\ndone with better effect than any of his colleagues in the science; for\nhe is, as already noticed above, possessed of the necessary\nqualifications in the way of psychological training, broad knowledge of\nthe play of cause and effect in cultural growth, and an ability to take\na scientific point of view. Instead of this he harks back again to the\ndreary homiletical waste of the traditional _Historismus_. It seems as\nif a topic which he deals with as an objective matter so long as it lies\noutside the sphere of every-day humanitarian and social solicitude,\nbecomes a matter to be passed upon by conventional standards of taste,\ndignity, morality, and the like, so soon as it comes within the sweep of\nlatter-day German sentiment.\n\nThis habit of treating a given problem from these various and shifting\npoints of view at times gives a kaleidoscopic effect that is not without\ninterest. So in the matter of the technically trained working population\nin the machine industry, to which reference has already been made,\nsomething of an odd confusion appears when expressions taken from\ndiverse phases of the discussion are brought side by side. He speaks of\nthis class at one point (p. 224) as \"sound, strong, spiritually and\nmorally advancing,\" superior in all these virtues to the working classes\nof other times and places. At another point (pp. 250-253) he speaks of\nthe same popular element, under the designation of \"socialists,\" as\nperverse, degenerate, and reactionary. This latter characterisation may\nbe substantially correct, but it proceeds on grounds of taste and\npredilection, not on grounds of scientifically determinable cause and\neffect. And the two characterisations apply to the same elements of\npopulation; for the substantial core and tone-giving factor of the\nradical socialistic element in the German community is, notoriously,\njust this technically trained population of the industrial towns where\nthe discipline of the machine industry has been at work with least\nmitigation. The only other fairly isolable element of a radical\nsocialistic complexion is found among the students of modern science.\nNow, further, in his speculations on the relation of technological\nknowledge to the advance of culture, Professor Schmoller points out\n(_e.g._, p. 226) that a high degree of culture connotes, on the whole, a\nhigh degree of technological efficiency, and conversely. In this\nconnection he makes use of the terms _Halbkulturvoelker_ and\n_Ganskulturvoelker_ to designate different degrees of cultural maturity.\nIt is curious to reflect, in the light of what he has to say on these\nseveral heads, that if the socialistically affected, technically\ntrained population of the industrial towns, together with the\nradical-socialistic men of science, were abstracted from the German\npopulation, leaving substantially the peasantry, the slums, and the\naristocracy great and small, the resulting German community would\nunquestionably have to be classed as a _Halbkulturvoelk_ in Professor\nSchmoller's scheme. Whereas the elements abstracted, if taken by\nthemselves, would as unquestionably be classed among the\n_Ganskulturvoelker_.\n\nIn conclusion, one may turn to the concluding chapter (Book II., Chapter\nvii.) of the present volume for a final illustration of Professor\nSchmoller's method and animus in handling a modern economic problem. All\nthe more so as this chapter on business enterprise better sustains that\nscientific attitude which the introductory outline leads the reader to\nlook for throughout. It shows how modern business enterprise is in the\nmain an outgrowth of commercial activity, as also that it has retained\nthe commercial spirit down to the present. The motive force of business\nenterprise is the self-seeking quest of dividends; but Professor\nSchmoller shows, with more dispassionate insight than many economists,\nthat this self-seeking motive is hemmed in and guided at all points in\nthe course of its development by considerations and conventions that are\nnot of a primarily self-seeking kind. He is not content to point to the\nbeneficent working of a harmony of interests, but sketches the play of\nforces whereby a self-seeking business traffic has come to serve the\ninterests of the community. Business enterprise has gradually emerged\nand come into its present central and dominant position in the\ncommunity's industry as a concomitant of the growth of individual\nownership and pecuniary discretion in modern life. It is therefore a\nphase of the modern cultural situation; and its survival and the\ndirection of its further growth are therefore conditioned by the\nexigencies of the modern cultural situation. What this modern cultural\nsituation is and what are the forces, essentially psychological, which\nshape the further growth of the situation, no one is better fitted to\ndiscuss than Professor Schmoller; and he has also given valuable\nindications (pp. 428-457) of what these factors are and how the inquiry\ninto their working must be conducted. But even here, where a\ndispassionate tracing-out of the sequence of cause and effect should be\neasier to undertake, because less readily blurred with sentiment, than\nin the case, _e.g._, of the family, the work of tracing the\ndevelopmental sequence tapers off into advice and admonition proceeding\non the assumption that the stage now reached is, or at least should be,\nfinal. The attention in the later pages diverges from the process of\ngrowth and its conditioning circumstances, to the desirability of\nmaintaining the good results attained and to the ways and means of\nholding fast that which is good in the outcome already achieved. The\nquestion to which an answer is sought in discussing the present phase of\nthe development is not a question as to what is taking place as respects\nthe institution of business enterprise, but rather a question as to what\nform should be given to an optimistic policy of fostering business\nenterprise and turning it to account for the common good. At this\npoint, as elsewhere, though perhaps in a less degree than elsewhere, the\nexisting form of the institution is accepted as a finality. All this is\ndisappointing in view of the fact that at no other point do modern\neconomic institutions bear less of an air of finality than in the forms\nand conventions of business organisations and relations. As Professor\nSchmoller remarks (p. 455), the scope and character of business\nundertakings necessarily conform to the circumstances of the time, not\nto any logical scheme of development from small to great or from simple\nto complex. So also, one might be tempted to say, the expediency and the\nchance of ultimate survival of business enterprise is itself an open\nquestion, to be answered by a scrutiny of the forces that make for its\nsurvival or alteration, not by advice as to the best method of\nsustaining and controlling it.\n\n       *       *       *       *       *\n\nWhat has here been said in criticism of Professor Schmoller's work,\nparticularly as regards his departure from the path of scientific\nresearch in dealing with present-day phenomena, may, of course, have to\nbe qualified, if not entirely set aside, when his work is completed with\nthe promised genetic survey of modern institutions to be set forth in\nthe concluding fourth book. Perhaps it may even be said that there is\nfair hope, on general grounds, of such a consummation; but the present\nvolume does not afford ground for a confident expectation of this kind.\nIt is perhaps needless, perhaps gratuitous, to add that the strictures\noffered indicate, after all, but relatively slight shortcomings in a\nwork of the first magnitude.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _The Quarterly Journal of Economics_,\nVol. XVI, Nov., 1901.\n\n[2] _Grundriss der allgemeinen Volkswirtschaftslehre_. Erster Teil.\nLeipzig, 1900.\n\n[3] _E.g._, K. Buecher's _Entstehung der Volkswirtschaft_, and _Arbeit\nund Rythmus_; R. Hildebrand's _Recht und Sitte_; Knapp's\n_Grundherrschaft und Rittergut_; Ehrenberg's _Zeitalter der Fugger_; R.\nMucke's various works.\n\n[4] A physiological conception of society, or of the community, had been\nemployed before,--_e.g._, by the Physiocrats,--and such a concept was\nreached also by English speculators--_e.g._, Herbert Spencer--during\nRoscher's lifetime; but these physiological conceptions of society are\nreached by a different line of approach from that which led up to the\nlate-Hegelian physiological or biological conception of human culture as\na spiritual structure and process. The outcome is also a different one,\nboth as regards the use made of the analogy and as regards the\ntheoretical results reached by its aid.\n\nIt may be remarked, by the way, that neo-Hegelianism, of the \"Left,\"\nlikewise gave rise to a theory of a self-determining cultural\nexfoliation; namely, the so-called \"Materialistic Conception of History\"\nof the Marxian socialists. This Marxian conception, too, had much of a\nphysiological air; but Marx and his coadjutors had an advantage over\nRoscher and his following, in that they were to a greater extent\nschooled in the Hegelian philosophy, instead of being uncritical\nreceptacles of the Romantic commonplaces left by Hegelianism as a\nresidue in popular thought. They were therefore more fully conscious of\nthe bearing of their postulates and less naive in their assumptions of\nself-sufficiency.\n\n[5] _E.g._, in his controversy with Treitschke. See _Grundfragen der\nSocialpolitik und der Volkswirtschaftslehre_, particularly pp. 24, 25.\n\n[6] _E.g._, _Grundriss_, pp. 225, 409, 411.\n\n\n\n\nINDUSTRIAL AND PECUNIARY EMPLOYMENTS[1]\n\n\nFor purposes of economic theory, the various activities of men and\nthings about which economists busy themselves were classified by the\nearly writers according to a scheme which has remained substantially\nunchanged, if not unquestioned, since their time. This scheme is the\nclassical three-fold division of the factors of production under Land,\nLabor, and Capital. The theoretical aim of the economists in discussing\nthese factors and the activities for which they stand has not remained\nthe same throughout the course of economic discussion, and the\nthree-fold division has not always lent itself with facility to new\npoints of view and new purposes of theory, but the writers who have\nshaped later theory have, on the whole, not laid violent hands on the\nsacred formula. These facts must inspire the utmost reserve and\ncircumspection in any one who is moved to propose even a subsidiary\ndistinction of another kind between economic activities or agents. The\nterminology and the conceptual furniture of economics are complex and\nparti-colored enough without gratuitous innovation.\n\nIt is accordingly not the aim of this paper to set aside the\ntime-honored classification of factors, or even to formulate an\niconoclastic amendment, but rather to indicate how and why this\nclassification has proved inadequate for certain purposes of theory\nwhich were not contemplated by the men who elaborated it. To this end a\nbit of preface may be in place as regards the aims which led to its\nformulation and the uses which the three-fold classification originally\nserved.\n\n       *       *       *       *       *\n\nThe economists of the late eighteenth and early nineteenth centuries\nwere believers in a Providential order, or an order of Nature. How they\ncame by this belief need not occupy us here; neither need we raise a\nquestion as to whether their conviction of its truth was well or ill\ngrounded. The Providential order or order of Nature is conceived to work\nin an effective and just way toward the end to which it tends; and in\nthe economic field this objective end is the material welfare of\nmankind. The science of that time set itself the task of interpreting\nthe facts with which it dealt, in terms of this natural order. The\nmaterial circumstances which condition men's life fall within the scope\nof this natural order of the universe, and as members of the universal\nscheme of things men fall under the constraining guidance of the laws of\nNature, who does all things well. As regards their purely theoretical\nwork, the early economists are occupied with bringing the facts of\neconomic life under natural laws conceived somewhat after the manner\nindicated; and when the facts handled have been fully interpreted in the\nlight of this fundamental postulate the theoretical work of the\nscientist is felt to have been successfully done.\n\nThe economic laws aimed at and formulated under the guidance of this\npreconception are laws of what takes place \"naturally\" or \"normally,\"\nand it is of the essence of things so conceived that in the natural or\nnormal course there is no wasted or misdirected effort. The standpoint\nis given by the material interest of mankind, or, more concretely, of\nthe community or \"society\" in which the economist is placed; the\nresulting economic theory is formulated as an analysis of the \"natural\"\ncourse of the life of the community, the ultimate theoretical postulate\nof which might, not unfairly, be stated as in some sort a law of the\nconservation of economic energy. When the course of things runs off\nnaturally or normally, in accord with the exigencies of human welfare\nand the constraining laws of nature, economic income and outgo balance\none another. The natural forces at play in the economic field may\nincrease indefinitely through accretions brought in under man's dominion\nand through the natural increase of mankind, and, indeed, it is of the\nnature of things that an orderly progress of this kind should take\nplace; but within the economic organism, as within the larger organism\nof the universe, there prevails an equivalence of expenditure and\nreturns, an equilibrium of flux and reflux, which is not broken over in\nthe normal course of things. So it is, by implication, assumed that the\nproduct which results from any given industrial process or operation is,\nin some sense or in some unspecified respect, the equivalent of the\nexpenditure of forces, or of the effort, or what not, that has gone into\nthe process out of which the product emerges.\n\nThis theorem of equivalence is the postulate which lies at the root of\nthe classical theory of distribution, but it manifestly does not admit\nof proof--or of disproof either, for that matter; since neither the\neconomic forces which go into the process nor the product which emerges\nare, in the economic respect, of such a tangible character as to admit\nof quantitative determination. They are in fact incommensurable\nmagnitudes. To this last remark the answer may conceivably present\nitself that the equivalence in question is an equivalence in utility or\nin exchange value, and that the quantitative determination of the\nvarious items in terms of exchange value or of utility is,\ntheoretically, not impossible; but when it is called to mind that the\nforces or factors which go to the production of a given product take\ntheir utility or exchange value from that of the product, it will easily\nbe seen that the expedient will not serve. The equivalence between the\naggregate factors of production in any given case and their product\nremains a dogmatic postulate whose validity cannot be demonstrated in\nany terms that will not reduce the whole proposition to an aimless\nfatuity, or to metaphysical grounds which have now been given up.\n\nThe point of view from which the early, and even the later classical,\neconomists discussed economic life was that of \"the society\" taken as a\ncollective whole and conceived as an organic unit. Economic theory\nsought out and formulated the laws of the normal life of the social\norganism, as it is conceived to work out in that natural course whereby\nthe material welfare of society is attained. The details of economic\nlife are construed, for purposes of general theory, in terms of their\nsubservience to the aims imputed to the collective life process. Those\nfeatures of detail which will bear construction as links in the process\nwhereby the collective welfare is furthered, are magnified and brought\ninto the foreground, while such features as will not bear this\nconstruction are treated as minor disturbances. Such a procedure is\nmanifestly legitimate and expedient in a theoretical inquiry whose aim\nis to determine the laws of health of the social organism and the normal\nfunctions of this organism in a state of health. The social organism is,\nin this theory, handled as an individual endowed with a consistent life\npurpose and something of an intelligent apprehension of what means will\nserve the ends which it seeks. With these collective ends the interests\nof the individual members are conceived to be fundamentally at one; and,\nwhile men may not see that their own individual interests coincide with\nthose of the social organism, yet, since men are members of the\ncomprehensive organism of nature and consequently subject to beneficent\nnatural law, the ulterior trend of unrestrained individual action is, on\nthe whole, in the right direction.\n\nThe details of individual economic conduct and its consequences are of\ninterest to such a general theory chiefly as they further or disturb the\nbeneficent \"natural\" course. But if the aims and methods of individual\nconduct were of minor importance in such an economic theory, that is not\nthe case as regards individual rights. The early political economy was\nnot simply a formulation of the natural course of economic phenomena,\nbut it embodied an insistence on what is called \"natural liberty.\"\nWhether this insistence on natural liberty is to be traced to\nutilitarianism or to a less specific faith in natural rights, the\noutcome for the purpose in hand is substantially the same. To avoid\ngoing too far afield, it may serve the turn to say that the law of\neconomic equivalence, or conservation of economic energy, was, in early\neconomics, backed by this second corollary of the order of nature, the\nclosely related postulate of natural rights. The classical doctrine of\ndistribution rests on both of these, and it is consequently not only a\ndoctrine of what must normally take place as regards the course of life\nof society at large, but it also formulates what ought of right to take\nplace as regards the remuneration for work and the distribution of\nwealth among men.\n\nUnder the resulting natural-economic law of equivalence and equity, it\nis held that the several participants or factors in the economic process\nseverally get the equivalent of the productive force which they expend.\nThey severally get as much as they produce; and conversely, in the\nnormal case they severally produce as much as they get. In the earlier\nformulations, as, for example, in the authoritative formulation of Adam\nSmith, there is no clear or consistent pronouncement as regards the\nterms in which this equivalence between production and remuneration\nruns. With the later, classical economists, who had the benefit of a\ndeveloped utilitarian philosophy, it seems to be somewhat consistently\nconceived in terms of an ill-defined serviceability. With some later\nwriters it is an equivalence of exchange values; but as this latter\nreduces itself to tautology, it need scarcely be taken seriously. When\nwe are told in the later political economy that the several agents or\nfactors in production normally earn what they get, it is perhaps fairly\nto be construed as a claim that the economic service rendered the\ncommunity by any one of the agents in production equals the service\nreceived by the agent in return. In terms of serviceability, then, if\nnot in terms of productive force,[2] the individual agent, or at least\nthe class or group of agents to which the individual belongs, normally\ngets as much as he contributes and contributes as much as he gets. This\napplies to all those employments or occupations which are ordinarily\ncarried on in any community, throughout the aggregate of men's dealings\nwith the material means of life. All activity which touches industry\ncomes in under this law of equivalence and equity.\n\nNow, to a theorist whose aim is to find the laws governing the economic\nlife of a social organism, and who for this purpose conceives the\neconomic community as a unit, the features of economic life which are of\nparticular consequence are those which show the correlation of efforts\nand the solidarity of interests. For this purpose, such activities and\nsuch interests as do not fit into the scheme of solidarity contemplated\nare of minor importance, and are rather to be explained away or\nconstrued into subservience to the scheme of solidarity than to be\nincorporated at their face value into the theoretical structure. Of this\nnature are what are here to be spoken of under the term \"pecuniary\nemployments,\" and the fortune which these pecuniary employments have met\nat the hands of classical economic theory is such as is outlined in the\nlast sentence.\n\nIn a theory proceeding on the premise of economic solidarity, the\nimportant bearing of any activity that is taken up and accounted for, is\nits bearing upon the furtherance of the collective life process. Viewed\nfrom the standpoint of the collective interest, the economic process is\nrated primarily as a process for the provision of the aggregate material\nmeans of life. As a late representative of the classical school\nexpresses it: \"Production, in fact, embraces every economic operation\nexcept consumption.\"[3] It is this aggregate productivity, and the\nbearing of all details upon the aggregate productivity, that constantly\noccupies the attention of the classical economists. What partially\ndiverts their attention from this central and ubiquitous interest, is\ntheir persistent lapse into natural-rights morality.\n\nThe result is that acquisition is treated as a sub-head under\nproduction, and effort directed to acquisition is construed in terms of\nproduction. The pecuniary activities of men, efforts directed to\nacquisition and operations incident to the acquisition or tenure of\nwealth, are treated as incidental to the distribution to each of his\nparticular proportion in the production of goods. Pecuniary activities,\nin short, are handled as incidental features of the process of social\nproduction and consumption, as details incident to the method whereby\nthe social interests are served, instead of being dealt with as the\ncontrolling factor about which the modern economic process turns.\n\nApart from the metaphysical tenets indicated above as influencing them,\nthere are, of course, reasons of economic history for the procedure of\nthe early economists in so relegating the pecuniary activities to the\nbackground of economic theory. In the days of Adam Smith, for instance,\neconomic life still bore much of the character of what Professor\nSchmoller calls _Stadtwirtschaft_. This was the case to some extent in\npractice, but still more decidedly in tradition. To a greater extent\nthan has since been the case, households produced goods for their own\nconsumption, without the intervention of sale; and handicraftsmen still\nproduced for consumption by their customers, without the intervention of\na market. In a considerable measure, the conditions which the Austrian\nmarginal-utility theory supposes, of a producing seller and a consuming\nbuyer, actually prevailed. It may not be true that in Adam Smith's time\nthe business operations, the bargain and sale of goods, were, in\ngeneral, obviously subservient to their production and consumption, but\nit comes nearer being true at that time than at any time since then. And\nthe tradition having once been put into form and authenticated by Adam\nSmith, that such was the place of pecuniary transactions in economic\ntheory, this tradition has lasted on in the face of later and further\nchanges. Under the shadow of this tradition the pecuniary employments\nare still dealt with as auxiliary to the process of production, and the\ngains from such employments are still explained as being due to a\nproductive effect imputed to them.\n\nAccording to ancient prescription, then, all normal, legitimate economic\nactivities carried on in a well regulated community serve a materially\nuseful end, and so far as they are lucrative they are so by virtue of\nand in proportion to a productive effect imputed to them. But in the\nsituation as it exists at any time there are activities and classes of\npersons which are indispensable to the community, or which are at least\nunavoidably present in modern economic life, and which draw some income\nfrom the aggregate product, at the same time that these activities are\nnot patently productive of goods and can not well be classed as\nindustrial, in any but a highly sophisticated sense. Some of these\nactivities, which are concerned with economic matters but are not\npatently of an industrial character, are integral features of modern\neconomic life, and must therefore be classed as normal; for the existing\nsituation, apart from a few minor discrepancies, is particularly normal\nin the apprehension of present-day economists. Now, the law of economic\nequivalence and equity says that those who normally receive in income\nmust perforce serve some productive end; and, since the existing\norganization of society is conceived to be eminently normal, it becomes\nimperative to find some ground on which to impute industrial\nproductivity to those classes and employments which do not at first view\nappear to be industrial at all. Hence there is commonly visible in the\nclassical political economy, ancient and modern, a strong inclination to\nmake the schedule of industrially productive employments very\ncomprehensive; so that a good deal of ingenuity has been spent in\neconomically justifying their presence by specifying the productive\neffect of such non-industrial factors as the courts, the army, the\npolice, the clergy, the schoolmaster, the physician, the opera singer.\n\nBut these non-economic employments are not so much to the point in the\npresent inquiry; the point being employments which are unmistakably\neconomic, but not industrial in the naive sense of the word industry,\nand which yield an income.\n\nAdam Smith analysed the process of industry in which he found the\ncommunity of his time engaged, and found the three classes of agents or\nfactors: Land, Labor, and Capital (stock). The productive factors\nengaged being thus determined, the norm of natural-economic equivalence\nand equity already referred to above, indicated what would be the\nnatural sharers in the product. Later economists have shown great\nreserve about departing from this three-fold division of factors, with\nits correlated three-fold division of sharers of remuneration;\napparently because they have retained an instinctive, indefeasible trust\nin the law of economic equivalence which underlies it. But circumstances\nhave compelled the tentative intrusion of a fourth class of agent and\nincome. The undertaker and his income presently came to be so large and\nubiquitous figures in economic life that their presence could not be\noverlooked by the most normalising economist. The undertaker's activity\nhas been interpolated in the scheme of productive factors, as a peculiar\nand fundamentally distinctive kind of labor, with the function of\ncooerdinating and directing industrial processes. Similarly, his income\nhas been interpolated in the scheme of distribution, as a peculiar kind\nof wages, proportioned to the heightened productivity given the\nindustrial process by his work.[4] His work is discussed in expositions\nof the theory of production. In discussions of his functions and his\nincome the point of the argument is, how and in what degree does his\nactivity increase the output of goods, or how and in what degree does it\nsave wealth to the community. Beyond his effect in enhancing the\neffective volume of the aggregate wealth the undertaker receives but\nscant attention, apparently for the reason that so soon as that point\nhas been disposed of the presence of the undertaker and his income has\nbeen reconciled with the tacitly accepted natural law of equivalence\nbetween productive service and remuneration. The normal balance has been\nestablished, and the undertaker's function has been justified and\nsubsumed under the ancient law that Nature does all things well and\nequitably.\n\nThis holds true of the political economy of our grandfathers. But this\naim and method of handling the phenomena of life for theoretical ends,\nof course, did not go out of vogue abruptly in the days of our\ngrandfathers.[5] There is a large sufficiency of the like aim and animus\nin the theoretical discussions of a later time; but specifically to cite\nand analyse the evidence of its presence would be laborious, nor would\nit conduce to the general peace of mind.\n\nSome motion towards a further revision of the scheme is to be seen in\nthe attention which has latterly been given to the function and the\nprofits of that peculiar class of undertakers whom we call speculators.\nBut even on this head the argument is apt to turn on the question of how\nthe services which the speculator is conceived to render the community\nare to be construed into an equivalent of his gains.[6] The difficulty\nof interpretation encountered at this point is considerable, partly\nbecause it is not quite plain whether the speculators as a class come\nout of their transactions with a net gain or with a net loss. A\nsystematic net loss, or a no-profits balance, would, on the theory of\nequivalence, mean that the class which gets this loss or doubtful gain\nis of no service to the community; yet we are, out of the past,\ncommitted to the view that the speculator is useful--indeed economically\nindispensable--and shall therefore have his reward. In the discussions\ngiven to the speculator and his function some thought is commonly given\nto the question of the \"legitimacy\" of the speculator's traffic. The\nlegitimate speculator is held to earn his gain by services of an\neconomic kind rendered the community. The recourse to this epithet,\n\"legitimate,\" is chiefly of interest as showing that the tacit postulate\nof a natural order is still in force. Legitimate are such speculative\ndealings as are, by the theorist, conceived to serve the ends of the\ncommunity, while illegitimate speculation is that which is conceived to\nbe disserviceable to the community.\n\nThe theoretical difficulty about the speculator and his gains (or\nlosses) is that the speculator _ex professo_ is quite without interest\nin or connection with any given industrial enterprise or any industrial\nplant. He is, industrially speaking, without visible means of support.\nHe may stake his risks on the gain or on the loss of the community with\nequal chances of success, and he may shift from one side to the other\nwithout winking.\n\nThe speculator may be treated as an extreme case of undertaker, who\ndeals exclusively with the business side of economic life rather than\nwith the industrial side. But he differs in this respect from the common\nrun of business men in degree rather than in kind. His traffic is a\npecuniary traffic, and it touches industry only remotely and\nuncertainly; while the business man as commonly conceived is more or\nless immediately interested in the successful operation of some concrete\nindustrial plant. But since the undertaker first broke into economic\ntheory, some change has also taken place as regards the immediacy of the\nrelations of the common run of undertakers to the mechanical facts of\nthe industries in which they are interested. Half a century ago it was\nstill possible to construe the average business manager in industry as\nan agent occupied with the superintendence of the mechanical processes\ninvolved in the production of goods or services. But in the later\ndevelopment the connection between the business manager and the\nmechanical processes has, on an average, grown more remote; so much so,\nthat his superintendence of the plant or of the processes is frequently\nvisible only to the scientific imagination. That activity by virtue of\nwhich the undertaker is classed as such makes him a businessman, not a\nmechanic or foreman of the shop. His superintendence is a\nsuperintendence of the pecuniary affairs of the concern, rather than of\nthe industrial plant; especially is this true in the higher development\nof the modern captain of industry. As regards the nature of the\nemployment which characterises the undertaker, it is possible to\ndistinguish him from the men who are mechanically engaged in the\nproduction of goods, and to say that his employment is of a business or\npecuniary kind, while theirs is of an industrial or mechanical kind. It\nis not possible to draw a similar distinction between the undertaker who\nis in charge of a given industrial concern, and the business man who is\nin business but is not interested in the production of goods or\nservices. As regards the character of employment, then, the line falls\nnot between legitimate and illegitimate pecuniary transactions, but\nbetween business and industry.\n\nThe distinction between business and industry has, of course, been\npossible from the beginning of economic theory, and, indeed, the\ndistinction has from time to time temporarily been made in the contrast\nfrequently pointed out between the proximate interest of the business\nman and the ulterior interest of society at large. What appears to have\nhindered the reception of the distinction into economic doctrine, is the\nconstraining presence of a belief in an order of Nature and the habit of\nconceiving the economic community as an organism. The point of view\ngiven by these postulates has made such a distinction between\nemployments not only useless, but even disserviceable for the ends to\nwhich theory has been directed. But the fact has come to be gradually\nmore and more patent that there are constantly, normally present in\nmodern economic life an important range of activities and classes of\npersons who work for an income but of whom it cannot be said that they,\neither proximately or remotely, apply themselves to the production of\ngoods. Their services, proximate or remote, to society are often of\nquite a problematical character. They are ubiquitous, and it will\nscarcely do to say that they are anomalous, for they are of ancient\nprescription, they are within the law and within the pale of popular\nmorals.\n\nOf these strictly economic activities that are lucrative without\nnecessarily being serviceable to the community, the greater part are to\nbe classed as \"business.\" Perhaps the largest and most obvious\nillustration of these legitimate business employments is afforded by the\nspeculators in securities. By way of further illustration may be\nmentioned the extensive and varied business of real-estate men\n(land-agents) engaged in the purchase and sale of property for\nspeculative gain or for a commission; so, also, the closely related\nbusiness of promoters and boomers of other than real-estate ventures; as\nalso attorneys, brokers, bankers, and the like, although the work\nperformed by these latter will more obviously bear interpretation in\nterms of social serviceability. The traffic of these business men shades\noff insensibly from that of the _bona fide_ speculator who has no\nulterior end of industrial efficiency to serve, to that of the captain\nof industry or entrepreneur as conventionally set forth in the economic\nmanuals.\n\nThe characteristic in which these business employments resemble one\nanother, and in which they differ from the mechanical occupations as\nwell as from other non-economic employments, is that they are concerned\nprimarily with the phenomena of value--with exchange or market values\nand with purchase and sale--and only indirectly and secondarily, if at\nall, with mechanical processes. What holds the interest and guides and\nshifts the attention of men within these employments is the main\nchance. These activities begin and end within what may broadly be called\n\"the higgling of the market.\" Of the industrial employments, in the\nstricter sense, it may be said, on the other hand, that they begin and\nend outside the higgling of the market. Their proximate aim and effect\nis the shaping and guiding of material things and processes. Broadly,\nthey may be said to be primarily occupied with the phenomena of material\nserviceability, rather than with those of exchange value. They are taken\nup with phenomena which make the subject matter of Physics and the other\nmaterial sciences.\n\nThe business man enters the economic life process from the pecuniary\nside, and so far as he works an effect in industry he works it through\nthe pecuniary dispositions which he makes. He takes thought most\nimmediately of men's convictions regarding market values; and his\nefforts as a business man are directed to the apprehension, and commonly\nalso to the influencing of men's beliefs regarding market values. The\nobjective point of business is the diversion of purchase and sale into\nsome particular channel, commonly involving a diversion from other\nchannels. The laborer and the man engaged in directing industrial\nprocesses, on the other hand, enter the economic process from the\nmaterial side; in their characteristic work they take thought most\nimmediately of mechanical effects, and their attention is directed to\nturning men and things to account for the compassing of some material\nend. The ulterior aim, and the ulterior effect, of these industrial\nemployments may be some pecuniary result; work of this class commonly\nresults in an enhancement, or at least an alteration, of market values.\nConversely, business activity may, and in a majority of cases it\nperhaps does, effect an enhancement of the aggregate material wealth of\nthe community, or the aggregate serviceability of the means at hand; but\nsuch an industrial outcome is by no means bound to follow from the\nnature of the business man's work.\n\nFrom what has just been said it appears that, if we retain the classical\ndivision of economic theory into Production, Distribution, and\nConsumption, the pecuniary employments do not properly fall under the\nfirst of these divisions, Production, if that term is to retain the\nmeaning commonly assigned to it. In an earlier and less specialised\norganisation of economic life, particularly, the undertaker frequently\nperforms the work of a foreman or a technological expert, as well as the\nwork of business management. Hence in most discussions of his work and\nhis theoretical relations his occupation is treated as a composite one.\nThe technological side of his composite occupation has even given a name\nto his gains (wages of superintendence), as if the undertaker were\nprimarily a master-workman. The distinction at this point has been drawn\nbetween classes of persons instead of between classes of employments;\nwith the result that the evident necessity of discussing his\ntechnological employment under production has given countenance to the\nendeavor to dispose of the undertaker's business activity under the same\nhead. This endeavor has, of course, not wholly succeeded.\n\nIn the later development, the specialisation of work in the economic\nfield has at this point progressed so far, and the undertaker now in\nmany cases comes so near being occupied with business affairs alone, to\nthe exclusion of technological direction and supervision, that, with\nthis object lesson before us, we no longer have the same difficulty in\ndrawing a distinction between business and industrial employments. And\neven in the earlier days of the doctrines, when the aim was to dispose\nof the undertaker's work under the theoretical head of Production, the\nbusiness side of his work persistently obtruded itself for discussion in\nthe books and chapters given to Distribution and Exchange. The course\ntaken by the later theoretical discussion of the entrepreneur, leaves no\nquestion but that the characteristic fact about his work is that he is a\nbusiness man, occupied with pecuniary affairs.\n\nSuch pecuniary employments, of which the purely fiscal or financiering\nforms of business are typical, are nearly all and nearly throughout,\nconditioned by the institution of property or ownership--an institution\nwhich, as John Stuart Mill remarks, belongs entirely within the\ntheoretical realm of Distribution. Ownership, no doubt, has its effect\nupon productive industry, and, indeed, its effect upon industry is very\nlarge, both in scope and range, even if we should not be prepared to go\nthe length of saying that it fundamentally conditions all industry; but\nownership is not itself primarily or immediately a contrivance for\nproduction. Ownership directly touches the results of industry, and only\nindirectly the methods and processes of industry. If the institution of\nproperty be compared with such another feature of our culture, for\ninstance, as the domestication of plants or the smelting of iron, the\nmeaning of what has just been said may seem clearer.\n\nSo much then of the business man's activity as is conditioned by the\ninstitution of property, is not to be classed, in economic theory, as\nproductive or industrial activity at all. Its objective point is an\nalteration of the distribution of wealth. His business is, essentially,\nto sell and buy--sell in order to buy cheaper, buy in order to sell\ndearer.[7] It may or may not, indirectly, and in a sense incidentally,\nresult in enhanced production. The business man may be equally\nsuccessful in his enterprise, and he may be equally well remunerated,\nwhether his activity does or does not enrich the community. Immediately\nand directly, so long as it is confined to the pecuniary or business\nsphere, his activity is incapable of enriching or impoverishing the\ncommunity as a whole except, after the fashion conceived by the\nmercantilists, through his dealings with men of other communities. The\ncirculation and distribution of goods incidental to the business man's\ntraffic is commonly, though not always or in the nature of the case,\nserviceable to the community; but the distribution of goods is a\nmechanical, not a pecuniary transaction, and it is not the objective\npoint of business nor its invariable outcome. From the point of view of\nbusiness, the distribution or circulation of goods is a means of gain,\nnot an end sought.\n\nIt is true, industry is closely conditioned by business. In a modern\ncommunity, the business man finally decides what may be done in\nindustry, or at least in the greater number and the more conspicuous\nbranches of industry. This is particularly true of those branches that\nare currently thought of as peculiarly modern. Under existing\ncircumstances of ownership, the discretion in economic matters,\nindustrial or otherwise, ultimately rests in the hands of the business\nmen. It is their business to have to do with property, and property\nmeans the discretionary control of wealth. In point of character, scope\nand growth, industrial processes and plants adapt themselves to the\nexigencies of the market, wherever there is a developed market, and the\nexigencies of the market are pecuniary exigencies. The business man,\nthrough his pecuniary dispositions, enforces his choice of what\nindustrial processes shall be in use. He can, of course, not create or\ninitiate methods or aims for industry; if he does so he steps out of the\nbusiness sphere into the material domain of industry. But he can decide\nwhether and which of the known processes and industrial arts shall be\npracticed, and to what extent. Industry must be conducted to suit the\nbusiness man in his quest for gain; which is not the same as saying that\nit must be conducted to suit the needs or the convenience of the\ncommunity at large. Ever since the institution of property was\ndefinitely installed, and in proportion as purchase and sale has been\npracticed, some approach has been made to a comprehensive system of\ncontrol of industry by pecuniary transactions and for pecuniary ends,\nand the industrial organisation is nearer such a consummation now than\nit ever has been. For the great body of modern industry the final term\nof the sequence is not the production of the goods but their sale; the\nendeavor is not so much to fit the goods for use as for sale. It is well\nknown that there are many lines of industry in which the cost of\nmarketing the goods equals the cost of making and transporting them.\n\nAny industrial venture which falls short in meeting the pecuniary\nexigencies of the market declines and yields ground to others that meet\nthem with better effect. Hence shrewd business management is a requisite\nto success in any industry that is carried on within the scope of the\nmarket. Pecuniary failure carries with it industrial failure, whatever\nmay be the cause to which the pecuniary failure is due--whether it be\ninferiority of the goods produced, lack of salesmanlike tact, popular\nprejudice, scanty or ill-devised advertising, excessive truthfulness, or\nwhat not. In this way industrial results are closely dependent upon the\npresence of business ability; but the cause of this dependence of\nindustry upon business in a given case is to be sought in the fact that\nother rival ventures have the backing of shrewd business management,\nrather than in any help which business management in the aggregate\naffords to the aggregate industry of the community. Shrewd and\nfarsighted business management is a requisite of survival in the\ncompetitive pecuniary struggle in which the several industrial concerns\nare engaged, because shrewd and farsighted business management abounds\nand is employed by all the competitors. The ground of survival in the\nselective process is fitness for pecuniary gain, not fitness for\nserviceability at large. Pecuniary management is of an emulative\ncharacter and gives, primarily, relative success only. If the change\nwere equitably distributed, an increase or decrease of the aggregate or\naverage business ability in the community need not immediately affect\nthe industrial efficiency or the material welfare of the community. The\nlike can not be said with respect to the aggregate or average industrial\ncapacity of the men at work. The latter are, on the whole, occupied with\nproduction of goods; the business men, on the other hand, are occupied\nwith the acquisition of them.\n\nTheoreticians who are given to looking beneath the facts and to\ncontemplating the profounder philosophical meaning of life speak of the\nfunction of the undertaker as being the guidance and cooerdination of\nindustrial processes with a view to economies of production. No doubt,\nthe remoter effect of business transactions often is such cooerdination\nand economy, and, no doubt also, the undertaker has such economy in view\nand is stimulated to his maneuvers of combination by the knowledge that\ncertain economies of this kind are feasible and will inure to his gain\nif the proper business arrangements can be effected. But it is\npracticable to class even this indirect furthering of industry by the\nundertaker as a permissive guidance only. The men in industry must first\ncreate the mechanical possibility of such new and more economical\nmethods and arrangements, before the undertaker sees the chance, makes\nthe necessary business arrangements, and gives directions that the more\neffective working arrangements be adopted.\n\nIt is notorious, and it is a matter upon which men dilate, that the wide\nand comprehensive consolidations and cooerdinations of industry, which\noften add so greatly to its effectiveness, take place at the initiative\nof the business men who are in control. It should be added that the fact\nof their being in control precludes such cooerdination from being\neffected except by their advice and consent. And it should also be\nadded, in order to a passably complete account of the undertaker's\nfunction, that he not only can and does effect economising cooerdinations\nof a large scope, but he also can and does at times inhibit the process\nof consolidation and cooerdination. It happens so frequently that it\nmight fairly be said to be the common run that business interests and\nundertaker's maneuvers delay consolidation, combination, cooerdination,\nfor some appreciable time after they have become patently advisable on\nindustrial grounds. The industrial advisability or practicability is not\nthe decisive point. Industrial advisability must wait on the eventual\nconvergence of jarring pecuniary interests and on the strategical moves\nof business men playing for position.\n\nWhich of these two offices of the business man in modern industry, the\nfurthering or the inhibitory, has the more serious or more far-reaching\nconsequences is, on the whole, somewhat problematical. The furtherance\nof cooerdination by the modern captain of industry bulks large in our\nvision, in great part because the process of widening cooerdination is of\na cumulative character. After a given step in cooerdination and\ncombination has been taken, the next step takes place on the basis of\nthe resulting situation. Industry, that is to say the working force\nengaged in industry, has a chance to develop new and larger\npossibilities to be taken further advantage of. In this way each\nsuccessive move in the enhancement of the efficiency of industrial\nprocesses, or in the widening of cooerdination in industrial processes,\npushes the captain of industry to a further concession, making possible\na still farther industrial growth. But as regards the undertaker's\ninhibitory dealings with industrial cooerdination the visible outcome is\nnot so striking. The visible outcome is simply that nothing of the kind\nthen takes place in the premises. The potential cumulative sequence is\ncut off at the start, and so it does not figure in our appraisement of\nthe disadvantage incurred. The loss does not commonly take the more\nobtrusive form of an absolute retreat, but only that of a failure to\nadvance where the industrial situation admits of an advance.\n\nIt is, of course, impracticable to foot up and compare gain and loss in\nsuch a case, where the losses, being of the nature of inhibited growth,\ncannot be ascertained. But since the industrial serviceability of the\ncaptain of industry is, on the whole, of a problematical complexion, it\nshould be advisable for a cautious economic theory not to rest its\ndiscussion of him on his serviceability.[8]\n\nIt appears, then, as all economists are no doubt aware, that there is in\nmodern society a considerable range of activities, which are not only\nnormally present, but which constitute the vital core of our economic\nsystem; which are not directly concerned with production, but which are\nnevertheless lucrative. Indeed, the group comprises most of the highly\nremunerative employments in modern economic life. The gains from these\nemployments must plainly be accounted for on other grounds than their\nproductivity, since they need have no productivity.\n\nBut it is not only as regards the pecuniary employments that\nproductivity and remuneration are constitutionally out of touch. It\nseems plain, from what has already been said, that the like is true for\nthe remuneration gained in the industrial employments. Most wages,\nparticularly those paid in the industrial employments proper, as\ncontrasted with those paid for domestic or personal service, are paid on\naccount of pecuniary serviceability to the employer, not on grounds of\nmaterial serviceability to mankind at large. The product is valued,\nsought and paid for on account of and in some proportion to its\nvendibility, not for more recondite reasons of ulterior human welfare\nat large. It results that there is no warrant, in general theory, for\nclaiming that the work of highly paid persons (more particularly that of\nhighly paid business men) is of greater substantial use to the community\nthan that of the less highly paid. At the same time, the reverse could,\nof course, also not be claimed. Wages, resting on a pecuniary basis,\nafford no consistent indication of the relative productivity of the\nrecipients, except in comparisons between persons or classes whose\nproducts are identical except in amount,--that is to say, where a\nresort to wages as an index of productivity would be of no use\nanyway.[9]\n\n       *       *       *       *       *\n\nA result of the acceptance of the theoretical distinction here attempted\nbetween industrial and pecuniary employments and an effective\nrecognition of the pecuniary basis of the modern economic organisation\nwould be to dissociate the two ideas of productivity and remuneration.\nIn mathematical language, remuneration could no longer be conceived and\nhandled as a \"function\" of productivity,--unless productivity be taken\nto mean pecuniary serviceability to the person who pays the\nremuneration. In modern life remuneration is, in the last analysis,\nuniformly obtained by virtue of an agreement between individuals who\ncommonly proceed on their own interest in point of pecuniary gain. The\nremuneration may, therefore, be said to be a \"function\" of the pecuniary\nservice rendered the person who grants the remuneration; but what is\npecuniarily serviceable to the individual who exercises the discretion\nin the matter need not be productive of material gain to the community\nas a whole. Nor does the algebraic sum of individual pecuniary gains\nmeasure the aggregate serviceability of the activities for which the\ngains are got.\n\nIn a community organized, as modern communities are, on a pecuniary\nbasis, the discretion in economic matters rests with the individuals, in\nseveralty; and the aggregate of discrete individual interests nowise\nexpresses the collective interest. Expressions constantly recur in\neconomic discussions which imply that the transactions discussed are\ncarried out for the sake of the collective good or at the initiative of\nthe social organism, or that \"society\" rewards so and so for their\nservices. Such expressions are commonly of the nature of figures of\nspeech and are serviceable for homiletical rather than for scientific\nuse. They serve to express their user's faith in a beneficent order of\nnature, rather than to convey or to formulate information in regard to\nfacts.\n\nOf course, it is still possible consistently to hold that there is a\nnatural equivalence between work and its reward, that remuneration is\nnaturally, or normally, or in the long run, proportioned to the material\nservice rendered the community by the recipient; but that proposition\nwill hold true only if \"natural\" or \"normal\" be taken in such a sense as\nto admit of our saying that the natural does not coincide with the\nactual; and it must be recognised that such a doctrine of the \"natural\"\napportionment of wealth or of income disregards the efficient facts of\nthe case. Apart from effects of this kind in the way of equitable\narrangements traceable to grounds of sentiment, the only recourse which\nmodern science would afford the champion of a doctrine of natural\ndistribution, in the sense indicated, would be a doctrine of natural\nselection; according to which all disserviceable or unproductive,\nwasteful employments would, perforce, be weeded out as being\nincompatible with the continued life of any community that tolerated\nthem. But such a selective elimination of unserviceable or wasteful\nemployments would presume the following two conditions, neither of which\nneed prevail: (1) It must be assumed that the disposable margin between\nthe aggregate productivity of industry and the aggregate necessary\nconsumption is so narrow as to admit of no appreciable waste of energy\nor of goods; (2) it must be assumed that no deterioration of the\ncondition of society in the economic respect does or can \"naturally\"\ntake place. As to the former of these two assumptions, it is to be said\nthat in a very poor community, and under exceptionally hard economic\ncircumstances, the margin of production may be as narrow as the theory\nwould require. Something approaching this state of things may be found,\nfor instance, among some Eskimo tribes. But in a modern industrial\ncommunity--where the margin of admissible waste probably always exceeds\nfifty per cent, of the output of goods--the facts make no approach to\nthe hypothesis. The second assumed condition is, of course, the\nold-fashioned assumption of a beneficent, providential order or\nmeliorative trend in human affairs. As such, it needs no argument at\nthis day. Instances are not far to seek of communities in which economic\ndeterioration has taken place while the system of distribution, both of\nincome and of accumulated wealth, has remained on a pecuniary basis.\n\n       *       *       *       *       *\n\nTo return to the main drift of the argument. The pecuniary employments\nhave to do with wealth in point of ownership, with market values, with\ntransactions of exchange, purchase and sale, bargaining for the purpose\nof pecuniary gain. These employments make up the characteristic\noccupations of business men, and the gains of business are derived from\nsuccessful endeavors of the pecuniary kind. These business employments\nare the characteristic activity (constitute the \"function\") of what are\nin theory called undertakers. The dispositions which undertakers, _qua_\nbusiness men, make are pecuniary dispositions--whatever industrial\nsequel they may or may not have--and are carried out with a view to\npecuniary gain. The wealth of which they have the discretionary disposal\nmay or may not be in the form of \"production goods\"; but in whatever\nform the wealth in question is conceived to exist, it is handled by the\nundertakers in terms of values and is disposed of by them in the\npecuniary respect. When, as may happen, the undertaker steps down from\nthe pecuniary plane and directs the mechanical handling and functioning\nof \"production goods,\" he becomes for the time a foreman. The\nundertaker, if his business venture is of the industrial kind, of course\ntakes cognizance of the aptness of a given industrial method or process\nfor his purpose, and he has to choose between different industrial\nprocesses in which to invest his values; but his work as undertaker,\nsimply, is the investment and shifting of the values under his hand from\nthe less to the more gainful point of investment. When the investment\ntakes the form of material means of industry, or industrial plant, the\nsequel of a given business transaction is commonly some particular use\nof such means; and when such industrial use follows, it commonly takes\nplace at the hands of other men than the undertaker, although it takes\nplace within limits imposed by the pecuniary exigencies of which the\nundertaker takes cognizance. Wealth turned to account in the way of\ninvestment or business management may or may not, in consequence, be\nturned to account, materially, for industrial effect. Wealth, values, so\nemployed for pecuniary ends is capital in the business sense of the\nword.[10] Wealth, material means of industry, physically employed for\nindustrial ends is capital in the industrial sense. Theory, therefore,\nwould require that care be taken to distinguish between capital as a\npecuniary category, and capital as an industrial category, if the term\ncapital is retained to cover the two concepts.[11] The distinction here\nmade substantially coincides with a distinction which many late writers\nhave arrived at from a different point of approach and have, with\nvarying success, made use of under different terms.[12]\n\nA further corollary touching capital may be pointed out. The gains\nderived from the handling of capital in the pecuniary respect have no\nimmediate relation, stand in no necessary relation of proportion, to the\nproductive effect compassed by the industrial use of the material means\nover which the undertaker may dispose; although the gains have a\nrelation of dependence to the effects achieved in point of vendibility.\nBut vendibility need not, even approximately, coincide with\nserviceability, except serviceability be construed in terms of marginal\nutility or some related conception, in which case the outcome is a\ntautology. Where, as in the case commonly assumed by economists as\ntypical, the investing undertaker seeks his gain through the production\nand sale of some useful article, it is commonly also assumed that his\neffort is directed to the most economical production of as large and\nserviceable a product as may be, or at least it is assumed that such\nproduction is the outcome of his endeavors in the natural course of\nthings. This account of the aim and outcome of business enterprise may\nbe natural, but it does not describe the facts. The facts being, of\ncourse, that the undertaker in such a case seeks to produce economically\nas vendible a product as may be. In the common run vendibility depends\nin great part on the serviceability of the goods, but it depends also on\nseveral other circumstances; and to that highly variable, but nearly\nalways considerable extent to which vendibility depends on other\ncircumstances than the material serviceability of the goods, the\npecuniary management of capital must be held not to serve the ends of\nproduction. Neither immediately, in his purely pecuniary traffic, nor\nindirectly, in the business guidance of industry through his pecuniary\ntraffic, therefore, can the undertaker's dealings with his pecuniary\ncapital be accounted a productive occupation, nor can the gains of\ncapital be taken to mark or to measure the productivity due to the\ninvestment. The \"cost of production\" of goods in the case contemplated\nis to an appreciable, but indeterminable, extent a cost of production\nof vendibility--an outcome which is often of doubtful service to the\nbody of consumers, and which often counts in the aggregate as waste. The\nmaterial serviceability of the means employed in industry, that is to\nsay the functioning of industrial capital in the service of the\ncommunity at large, stands in no necessary or consistent relation to the\ngainfulness of capital in the pecuniary respect. Productivity can\naccordingly not be predicated of pecuniary capital. It follows that\nproductivity theories of interest should be as difficult to maintain as\nproductivity theories of the gains of the pecuniary employments, the two\nresting on the same grounds.\n\nIt is, further, to be remarked that pecuniary capital and industrial\ncapital do not coincide in respect of the concrete things comprised\nunder each. From this and from the considerations already indicated\nabove, it follows that the magnitude of pecuniary capital may vary\nindependently of variations in the magnitude of industrial capital--not\nindefinitely, perhaps, but within a range which, in its nature, is\nindeterminate. Pecuniary capital is a matter of market values, while\nindustrial capital is, in the last analysis, a matter of mechanical\nefficiency, or rather of mechanical effects not reducible to a common\nmeasure or a collective magnitude. So far as the latter may be spoken of\nas a homogenous aggregate--itself a doubtful point at best--the two\ncategories of capital are disparate magnitudes, which can be mediated\nonly through a process of valuation conditioned by other circumstances\nbesides the mechanical efficiency of the material means valued. Market\nvalues being a psychological outcome, it follows that pecuniary capital,\nan aggregate of market values, may vary in magnitude with a freedom\nwhich gives the whole an air of caprice,--such as psychological\nphenomena, particularly the psychological phenomena of crowds,\nfrequently present, and such as becomes strikingly noticeable in times\nof panic or of speculative inflation. On the other hand, industrial\ncapital, being a matter of mechanical contrivances and adaptation,\ncannot similarly vary through a revision of valuations. If it is taken\nas an aggregate, it is a physical magnitude, and as such it does not\nalter its complexion or its mechanical efficiency in response to the\ngreater or less degree of appreciation with which it is viewed. Capital\npecuniarily considered rests on a basis of subjective value; capital\nindustrially considered rests on material circumstances reducible to\nobjective terms of mechanical, chemical and physiological effect.\n\nThe point has frequently been noted that it is impossible to get at the\naggregate social (industrial) capital by adding up the several items of\nindividual (pecuniary) capital. A reason for this, apart from variations\nin the market values of given material means of production, is that\npecuniary capital comprises not only material things but also\nconventional facts, psychological phenomena not related in any rigid way\nto material means of production,--as _e.g._, good will, fashions,\ncustoms, prestige, effrontery, personal credit. Whatever ownership\ntouches, and whatever affords ground for pecuniary discretion, may be\nturned to account for pecuniary gain and may therefore be comprised in\nthe aggregate of pecuniary capital. Ownership, the basis of pecuniary\ncapital, being itself a conventional fact, that is to say a matter of\nhabits of thought, it is intelligible that phenomena of convention and\nopinion should figure in an inventory of pecuniary capital; whereas,\nindustrial capital being of a mechanical character, conventional\ncircumstances do not affect it--except as the future production of\nmaterial means to replace the existing outfit may be guided by\nconvention--and items having but a conventional existence are,\ntherefore, not comprised in its aggregate. The disparity between\npecuniary and industrial capital, therefore, is something more than a\nmatter of an arbitrarily chosen point of view, as some recent\ndiscussions of the capital concept would have us believe; just as the\ndifference between the pecuniary and the industrial employments, which\nare occupied with the one or the other category of capital, means\nsomething more than the same thing under different aspects.\n\n       *       *       *       *       *\n\nBut the distinction here attempted has a farther bearing, beyond the\npossible correction of a given point in the theory of distribution.\nModern economic science is to an increasing extent concerning itself\nwith the question of what men do and how and why they do it, as\ncontrasted with the older question of how Nature, working through human\nnature, maintains a favorable balance in the output of goods. Neither\nthe practical questions of our generation, nor the pressing theoretical\nquestions of the science, run on the adequacy or equity of the share\nthat goes to any class in the normal case. The questions are rather such\nrealistic ones as these: Why do we, now and again, have hard times and\nunemployment in the midst of excellent resources, high efficiency and\nplenty of unmet wants? Why is one-half our consumable product contrived\nfor consumption that yields no material benefit? Why are large\ncooerdinations of industry, which greatly reduce cost of production, a\ncause of perplexity and alarm? Why is the family disintegrating among\nthe industrial classes, at the same time that the wherewithal to\nmaintain it is easier to compass? Why are large and increasing portions\nof the community penniless in spite of a scale of remuneration which is\nvery appreciably above the subsistence minimum? Why is there a\nwidespread disaffection among the intelligent workmen who ought to know\nbetter? These and the like questions, being questions of fact, are not\nto be answered on the grounds of normal equivalence. Perhaps it might\nbetter be said that they have so often been answered on those grounds,\nwithout any approach to disposing of them, that the outlook for help in\nthat direction has ceased to have a serious meaning. These are, to\nborrow Professor Clark's phrase, questions to be answered on dynamic,\nnot on static grounds. They are questions of conduct and sentiment, and\nso far as their solution is looked for at the hands of economists it\nmust be looked for along the line of the bearing which economic life has\nupon the growth of sentiment and canons of conduct. That is to say, they\nare questions of the bearing of economic life upon the cultural changes\nthat are going forward.\n\nFor the present it is the vogue to hold that economic life, broadly,\nconditions the rest of social organization or the constitution of\nsociety. This vogue of the proposition will serve as excuse from going\ninto an examination of the grounds on which it may be justified, as it\nis scarcely necessary to persuade any economist that it has substantial\nmerits even if he may not accept it in an unqualified form. What the\nMarxists have named the \"Materialistic Conception of History\" is\nassented to with less and less qualification by those who make the\ngrowth of culture their subject of inquiry. This materialistic\nconception says that institutions are shaped by economic conditions;\nbut, as it left the hands of the Marxists, and as it still functions in\nthe hands of many who knew not Marx, it has very little to say regarding\nthe efficient force, the channels, or the methods by which the economic\nsituation is conceived to have its effect upon institutions. What answer\nthe early Marxists gave to this question, of how the economic situation\nshapes institutions, was to the effect that the causal connection lies\nthrough a selfish, calculating class interest. But, while class interest\nmay count for much in the outcome, this answer is plainly not a\ncompetent one, since, for one thing, institutions by no means change\nwith the alacrity which the sole efficiency of a reasoned class interest\nwould require.\n\nWithout discrediting the claim that class interest counts for something\nin the shaping of institutions, and to avoid getting entangled in\npreliminaries, it may be said that institutions are of the nature of\nprevalent habits of thought, and that therefore the force which shapes\ninstitutions is the force or forces which shape the habits of thought\nprevalent in the community. But habits of thought are the outcome of\nhabits of life. Whether it is intentionally directed to the education of\nthe individual or not, the discipline of daily life acts to alter or\nreenforce the received habits of thought, and so acts to alter or\nfortify the received institutions under which men live. And the\ndirection in which, on the whole, the alteration proceeds is conditioned\nby the trend of the discipline of daily life. The point here immediately\nat issue is the divergent trend of this discipline in those occupations\nwhich are prevailingly of an industrial character, as contrasted with\nthose which are prevailingly of a pecuniary character. So far as regards\nthe different cultural outcome to be looked for on the basis of the\npresent economic situation as contrasted with the past, therefore, the\nquestion immediately in hand is as to the greater or less degree in\nwhich occupations are differentiated into industrial and pecuniary in\nthe present as compared with the past.\n\nThe characteristic feature which is currently held to differentiate the\nexisting economic situation from that out of which the present has\ndeveloped, or out of which it is emerging, is the prevalence of the\nmachine industry with the consequent larger and more highly specialised\norganisation of the market and of the industrial force and plant. As has\nbeen pointed out above, and as is well enough known from the current\ndiscussions of the economists, industrial life is organised on a\npecuniary basis and managed from the pecuniary side. This, of course, is\ntrue in a degree both of the present and of the nearer past, back at\nleast as far as the Middle Ages. But the larger scope of organisations\nin modern industry means that the pecuniary management has been\ngradually passing into the hands of a relatively decreasing class, whose\ncontact with the industrial classes proper grows continually less\nimmediate. The distinction between employments above spoken of is in an\nincreasing degree coming to coincide with a differentiation of\noccupations and of economic classes. Some degree of such specialisation\nand differentiation there has, of course, been, one might almost say,\nalways. But in our time, in many branches of industry, the\nspecialisation has been carried so far that large bodies of the working\npopulation have but an incidental contact with the business side of the\nenterprise, while a minority have little if any other concern with the\nenterprise than its pecuniary management. This was not true, _e.g._, at\nthe time when the undertaker was still salesman, purchasing agent,\nbusiness manager, foreman of the shop, and master workman. Still less\nwas it true in the days of the self-sufficing manor or household, or in\nthe days of the closed town industry. Neither is it true in our time of\nwhat we call the backward or old-fashioned industries. These latter have\nnot been and are not organised on a large scale, with a consistent\ndivision of labor between the owners and business managers on the one\nside and the operative employees on the other. Our standing\nillustrations of this less highly organised class of industries are the\nsurviving handicrafts and the common run of farming as carried on by\nrelatively small proprietors. In that earlier phase of economic life,\nout of which the modern situation has gradually grown, all the men\nengaged had to be constantly on their guard, in a pecuniary sense, and\nwere constantly disciplined in the husbanding of their means and in the\ndriving of bargains,--as is still true, _e.g._, of the American farmer.\nThe like was formerly true also of the consumer, in his purchases, to a\ngreater extent than at present. A good share of the daily attention of\nthose who were engaged in the handicrafts was still perforce given to\nthe pecuniary or business side of their trade. But for that great body\nof industry which is conventionally recognised as eminently modern,\nspecialisation of function has gone so far as, in great measure, to\nexempt the operative employees from taking thought of pecuniary matters.\n\nNow, as to the bearing of all this upon cultural changes that are in\nprogress or in the outlook. Leaving the \"backward,\" relatively\nunspecialised, industries on one side, as being of an equivocal\ncharacter for the point in hand and as not differing characteristically\nfrom the corresponding industries in the past so far as regards their\ndisciplinary value; modern occupations may, for the sake of the\nargument, be broadly distinguished, as economic employments have been\ndistinguished above, into business and industrial. The modern industrial\nand the modern business occupations are fairly comparable as regards the\ndegree of intelligence required in both, if it be borne in mind that the\nformer occupations comprise the highly trained technological experts and\nengineers as well as the highly skilled mechanics. The two classes of\noccupations differ in that the men in the pecuniary occupations work\nwithin the lines and under the guidance of the great institution of\nownership, with its ramifications of custom, prerogative, and legal\nright; whereas those in the industrial occupations are, in their work,\nrelatively free from the constraint of this conventional norm of truth\nand validity. It is, of course, not true that the work of the latter\nclass lies outside the reach of the institution of ownership; but it is\ntrue that, in the heat and strain of the work, when the agent's powers\nand attention are fully taken up with the work which he has in hand,\nthat of which he has perforce to take cognisance is not conventional\nlaw, but the conditions impersonally imposed by the nature of material\nthings. This is the meaning of the current commonplace that the required\nclose and continuous application of the operative in mechanical industry\nbars him out of all chance for an all-around development of the cultural\ngraces and amenities. It is the periods of close attention and hard work\nthat seem to count for most in the formation of habits of thought.\n\nAn _a priori_ argument as to what cultural effects should naturally\nfollow from such a difference in discipline between occupations, past\nand present, would probably not be convincing, as _a priori_ arguments\nfrom half-authenticated premises commonly are not. And the experiments\nalong this line which later economic developments have so far exhibited\nhave been neither neat enough, comprehensive enough, nor long continued\nenough to give definite results. Still, there is something to be said\nunder this latter head, even if this something may turn out to be\nsomewhat familiar.\n\nIt is, _e.g._ a commonplace of current vulgar discussions of existing\neconomic questions, that the classes engaged in the modern mechanical or\nfactory industries are improvident and apparently incompetent to take\ncare of the pecuniary details of their own life. In this indictment may\nwell be included not only factory hands, but the general class of highly\nskilled mechanics, inventors, technological experts. The rule does not\nhold in any hard and fast way, but there seems to be a substantial\nground of truth in the indictment in this general form. This will be\nevident on comparison of the present factory population with the class\nof handicraftsmen of the older culture whom they have displaced, as also\non comparison with the farming population of the present time,\nespecially the small proprietors of this and other countries. The\ninferiority which is currently conceded to the modern industrial classes\nin this respect is not due to scantier opportunities for saving, whether\nthey are compared with the earlier handicraftsmen or with the modern\nfarmer or peasant. This phenomenon is commonly discussed in terms which\nimpute to the improvident industrial classes something in the way of\ntotal depravity, and there is much preaching of thrift and steady\nhabits. But the preaching of thrift and self-help, unremitting as it is,\nis not producing an appreciable effect. The trouble seems to run deeper\nthan exhortation can reach. It seems to be of the nature of habit rather\nthan of reasoned conviction. Other causes may be present and may be\ncompetent partially to explain the improvidence of these classes; but\nthe inquiry is at least a pertinent one; how far the absence of\nproperty and thrift among them may be traceable to the relative absence\nof pecuniary training in the discipline of their daily life. If, as the\ngeneral lie of the subject would indicate, this peculiar pecuniary\nsituation of the industrial classes is in any degree due to\ncomprehensive disciplinary causes, there is material in it for an\ninteresting economic inquiry.\n\nThe surmise that the trouble with the industrial class is something of\nthis character is strengthened by another feature of modern vulgar life,\nto which attention is directed as a further, and, for the present, a\nconcluding illustration of the character of the questions that are\ntouched by the distinction here spoken for. The most insidious and most\nalarming malady, as well as the most perplexing and unprecedented, that\nthreatens the modern social and political structure is what is vaguely\ncalled socialism. The point of danger to the social structure, and at\nthe same time the substantial core of the socialistic disaffection, is a\ngrowing disloyalty to the institution of property, aided and abetted as\nit is by a similarly growing lack of deference and affection for other\nconventional features of social structure. The classes affected by\nsocialistic vagaries are not consistently averse to a competent\norganisation and control of society, particularly not in the economic\nrespect, but they are averse to organisation and control on conventional\nlines. The sense of solidarity does not seem to be either defective or\nin abeyance, but the ground of solidarity is new and unexpected. What\ntheir constructive ideals may be need not concern nor detain us; they\nare vague and inconsistent and for the most part negative. Their\ndisaffection has been set down to discontent with their lot by\ncomparison with others, and to a mistaken view of their own interests;\nand much and futile effort has been spent in showing them the error of\ntheir ways of thinking. But what the experience of the past suggests\nthat we should expect under the guidance of such motives and reasoning\nas these would be a demand for a redistribution of property, a\nreconstitution of the conventions of ownership on such new lines as the\napprehended interests of these classes would seem to dictate. But such\nis not the trend of socialistic thinking, which contemplates rather the\nelimination of the institution of property. To the socialists property\nor ownership does not seem inevitable or inherent in the nature of\nthings; to those who criticise and admonish them it commonly does.\n\nCompare them in this respect with other classes who have been moved by\nhardship or discontent, whether well or ill advised, to put forth\ndenunciations and demands for radical economic changes; as _e.g._, the\nAmerican farmers in their several movements, of grangerism, populism,\nand the like. These have been loud enough in their denunciations and\ncomplaints, and they have been accused of being socialistic in their\ndemand for a virtual redistribution of property. They have not felt the\njustice of the accusation, however, and it is to be noted that their\ndemands have consistently run on a rehabilitation of property on some\nnew basis of distribution, and have been uniformly put forth with the\navowed purpose of bettering the claimants in point of ownership.\nOwnership, property \"honestly\" acquired, has been sacred to the rural\nmalcontents, here and elsewhere; what they have aspired to do has been\nto remedy what they have conceived to be certain abuses under the\ninstitution, without questioning the institution itself.\n\nNot so with the socialists, either in this country or elsewhere. Now,\nthe spread of socialistic sentiment shows a curious tendency to affect\nthose classes particularly who are habitually employed in the\nspecialised industrial occupations, and are thereby in great part exempt\nfrom the intellectual discipline of pecuniary management. Among these\nmen, who by the circumstances of their daily life are brought to do\ntheir serious and habitual thinking in other than pecuniary terms, it\nlooks as if the ownership preconception were becoming obsolescent\nthrough disuse. It is the industrial population, in the modern sense,\nand particularly the more intelligent and skilled men employed in the\nmechanical industries, that are most seriously and widely affected. With\nexceptions both ways, but with a generality that is not to be denied,\nthe socialistic disaffection spreads through the industrial towns,\nchiefly and most potently among the better classes of operatives in the\nmechanical employments; whereas the relatively indigent and\nunintelligent regions and classes, which the differentiation between\npecuniary and industrial occupations has not reached, are relatively\nfree from it. In like manner the upper and middle classes, whose\nemployments are of a pecuniary character, if any, are also not seriously\naffected; and when avowed socialistic sentiment is met with among these\nupper and middle classes it commonly turns out to be merely a\nhumanitarian aspiration for a more \"equitable\" redistribution of\nwealth--a readjustment of ownership under some new and improved method\nof control--not a contemplation of the traceless disappearance of\nownership.\n\nSocialism, in the sense in which the word connotes a subversion of the\neconomic foundations of modern culture, appears to be found only\nsporadically and uncertainly outside the limits, in time and space, of\nthe discipline exercised by the modern mechanical, non-pecuniary\noccupations. This state of the case need of course not be due solely to\nthe disciplinary effects of the industrial employments, nor even solely\nto effects traceable to those employments whether in the way of\ndisciplinary results, selective development, or what not. Other factors,\nparticularly factors of an ethnic character, seem to cooeperate to the\nresult indicated; but, so far as evidence bearing on the point is yet in\nhand and has been analysed, it indicates that this differentiation of\noccupations is a necessary requisite to the growth of a consistent body\nof socialistic sentiment; and the indication is also that wherever this\ndifferentiation prevails in such a degree of accentuation and affects\nsuch considerable and compact bodies of people as to afford ground for a\nconsistent growth of common sentiment, a result is some form of\niconoclastic socialism. The differentiation may of course have a\nselective as well as a disciplinary effect upon the population affected,\nand an off-hand separation of these two modes of influence can of course\nnot be made. In any case, the two modes of influence seem to converge to\nthe outcome indicated; and, for the present purpose of illustration\nsimply, the tracing out of the two strands of sequence in the case\nneither can nor need be undertaken. By force of this differentiation, in\none way and another, the industrial classes are learning to think in\nterms of material cause and effect, to the neglect of prescription and\nconventional grounds of validity; just as, in a faintly incipient way,\nthe economists are also learning to do in their discussion of the life\nof these classes. The resulting decay of the popular sense of\nconventional validity of course extends to other matters than the\npecuniary conventions alone, with the outcome that the socialistically\naffected industrial classes are pretty uniformly affected with an\neffortless iconoclasm in other directions as well. For the discipline to\nwhich their work and habits of life subject them gives not so much a\ntraining away from the pecuniary conventions, specifically, as a\npositive and somewhat unmitigated training in methods of observation and\ninference proceeding on grounds alien to all conventional validity. But\nthe practical experiment going on in the specialisation of discipline,\nin the respect contemplated, appears still to be near its beginning, and\nthe growth of aberrant views and habits of thought due to the peculiar\ndisciplinary trend of this late and unprecedented specialisation of\noccupations has not yet had time to work itself clear.\n\nThe effects of the like one-sided discipline are similarly visible in\nthe highly irregular, conventionally indefensible attitude of the\nindustrial classes in the current labor and wage disputes, not of an\navowedly socialistic aim. So also as regards the departure from the\nancient norm in such non-economic, or secondarily economic matters as\nthe family relation and responsibility, where the disintegration of\nconventionalities in the industrial towns is said to threaten the\nfoundations of domestic life and morality; and again as regards the\ngrowing inability of men trained to materialistic, industrial habits of\nthought to appreciate, or even to apprehend, the meaning of religious\nappeals and consolations that proceed on the old-fashioned conventional\nor metaphysical grounds of validity. But these and other like directions\nin which the cultural effects of the modern specialisation of\noccupations, whether in industry or in business, may be traceable can\nnot be followed up here.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _Publications of the American Economic\nAssociation_, series 3, Vol. II.\n\n[2] Some late writers, as, _e.g._, J. B. Clark, apparently must be held\nto conceive the equivalence in terms of productive force rather than of\nserviceability; or, perhaps, in terms of serviceability on one side of\nthe equation and productive force on the other.\n\n[3] J. B. Clark, _The Distribution of Wealth_, p. 20.\n\n[4] The undertaker gets an income; therefore he must produce goods. But\nhuman activity directed to the production of goods is labor; therefore\nthe undertaker is a particular kind of laborer. There is, of course,\nsome dissent from this position.\n\n[5] The change which has supervened as regards the habitual resort to a\nnatural law of equivalence is in large part a change with respect to the\ndegree of immediacy and \"reality\" imputed to this law, and to a still\ngreater extent a change in the degree of overtness with which it is\navowed.\n\n[6] See, _e.g._, a paper by H. C. Emery in the _Papers and Proceedings\nof the Twelfth Annual Meeting_ of the American Economic Association, on\n\"The Place of the Speculator in the Theory of Distribution,\" and more\nparticularly the discussion following the paper.\n\n[7] _Cf. e.g._, Marx, _Capital_, especially bk. I, ch. IV.\n\n[8] It is not hereby intended to depreciate the services rendered the\ncommunity by the captain of industry in his management of business. Such\nservices are no doubt rendered and are also no doubt of substantial\nvalue. Still less is it the intention to decry the pecuniary incentive\nas a motive to thrift and diligence. It may well be that the pecuniary\ntraffic which we call business is the most effective method of\nconducting the industrial policy of the community; not only the most\neffective that has been contrived, but perhaps the best that can be\ncontrived. But that is a matter of surmise and opinion. In a matter of\nopinion on a point that can not be verified, a reasonable course is to\nsay that the majority are presumably in the right. But all that is\nbeside the point. However probable or reasonable such a view may be, it\ncan find no lodgment in modern scientific theory, except as a corollary\nof secondary importance. Nor can scientific theory build upon the ground\nit may be conceived to afford. Policy may so build, but science can not.\nScientific theory is a formulation of the laws of phenomena in terms of\nthe efficient forces at work in the sequence of phenomena. So long as\n(under the old dispensation of the order of nature) the animistically\nconceived natural laws, with their God-given objective end, were\nconsidered to exercise a constraining guidance over the course of events\nwhereof they were claimed to be laws, so long it was legitimate\nscientific procedure for economists to formulate their theory in terms\nof these laws of the natural course; because so long they were speaking\nin terms of what was, to them, the efficient forces at work. But so soon\nas these natural laws were reduced to the plane of colorless empirical\ngeneralization as to what commonly happens, while the efficient forces\nat work are conceived to be of quite another cast, so soon must theory\nabandon the ground of the natural course, sterile for modern scientific\npurposes, and shift to the ground of the causal sequence, where alone it\nwill have to do with the forces at work as they are conceived in our\ntime. The generalisations regarding the normal course, as \"normal\" has\nbeen defined in economics since J. S. Mill, are not of the nature of\ntheory, but only rule-of-thumb. And the talk about the \"function\" of\nthis and that factor of production, etc., in terms of the collective\nlife purpose, goes to the same limbo; since the collective life purpose\nis no longer avowedly conceived to cut any figure in the every-day\nguidance of economic activities or the shaping of economic results.\n\nThe doctrine of the social-economic function of the undertaker may for\nthe present purpose be illustrated by a supposititious parallel from\nPhysics. It is an easy generalisation, which will scarcely be\nquestioned, that, in practice, pendulums commonly vibrate in a plane\napproximately parallel with the nearest wall of the clock-case in which\nthey are placed. The normality of this parallelism is fortified by the\nfurther observation that the vibrations are also commonly in a plane\nparallel with the nearest wall of the room; and when it is further\ncalled to mind that the balance which serves the purpose of a pendulum\nin watches similarly vibrates in a plane parallel with the walls of its\ncase, the absolute normality of the whole arrangement is placed beyond\nquestion. It is true, the parallelism is not claimed to be related to\nthe working of the pendulum, except as a matter of fortuitous\nconvenience; but it should be manifest from the generality of the\noccurrence that in the normal case, in the absence of disturbing causes,\nand in the long run, all pendulums will \"naturally\" tend to swing in a\nplane faultlessly parallel with the nearest wall. The use which has been\nmade of the \"organic concept,\" in economics and in social science at\nlarge, is fairly comparable with this supposititious argument concerning\nthe pendulum.\n\n[9] Since the ground of payment of wages is the vendibility of the\nproduct, and since the ground of a difference in wages is the different\nvendibility of the product acquired through the purchase of the labor\nfor which the wages are paid, it follows that wherever the difference in\nvendibility rests on a difference in the magnitude of the product alone,\nthere wages should be somewhat in proportion to the magnitude of the\nproduct.\n\n[10] All wealth so used is capital, but it does not follow that all\npecuniary capital is social wealth.\n\n[11] In current theory the term capital is used in these two senses;\nwhile in business usage it is employed pretty consistently in the former\nsense alone. The current ambiguity in the term capital has often been\nadverted to by economists, and there may be need of a revision of the\nterminology at this point; but this paper is not concerned with that\nquestion.\n\n[12] Professor Fetter, in a recent paper (_Quarterly Journal of\nEconomics_, November, 1900) is, perhaps, the writer who has gone the\nfarthest in this direction in the definition of the capital concept.\nProfessor Fetter wishes to confine the term capital to pecuniary\ncapital, or rather to such pecuniary capital as is based on the\nownership of material goods. The wisdom of such a terminological\nexpedient is, of course, not in question here.\n\n\n\n\nON THE NATURE OF CAPITAL[1]\n\n\nI. THE PRODUCTIVITY OF CAPITAL GOODS\n\nIt has been usual in expositions of economic theory to speak of capital\nas an array of \"productive goods.\" What is immediately had in mind in\nthis expression, as well as in the equivalent \"capital goods,\" is the\nindustrial equipment, primarily the mechanical appliances employed in\nthe processes of industry. When the productive efficiency of these and\nof other subsidiary classes of capital goods is subjected to further\nanalysis, it is not unusual to trace it back to the productive labor of\nthe workmen, the labor of the individual workman being the ultimate\nproductive factor in the commonly accepted systems of theory. The\ncurrent theories of production, as also those of distribution, are drawn\nin individualistic terms, particularly when these theories are based on\nhedonistic premises, as they commonly are.\n\nNow, whatever may or may not be true for human conduct in some other\nbearing, in the economic respect man has never lived an isolated,\nself-sufficient life as an individual, either actually or potentially.\nHumanly speaking, such a thing is impossible. Neither an individual\nperson nor a single household, nor a single line of descent, can\nmaintain its life in isolation. Economically speaking, this is the\ncharacteristic trait of humanity that separates mankind from the other\nanimals. The life-history of the race has been a life-history of human\ncommunities, of more or less considerable size, with more or less of\ngroup solidarity, and with more or less of cultural continuity over\nsuccessive generations. The phenomena of human life occur only in this\nform.\n\nThis continuity, congruity, or coherence of the group, is of an\nimmaterial character. It is a matter of knowledge, usage, habits of life\nand habits of thought, not a matter of mechanical continuity or contact,\nor even of consanguinity. Wherever a human community is met with, as,\n_e.g._, among any of the peoples of the lower cultures, it is found in\npossession of something in the way of a body of technological\nknowledge,--knowledge serviceable and requisite to the quest of a\nlivelihood, comprising at least such elementary acquirements as\nlanguage, the use of fire, of a cutting edge, of a pointed stick, of\nsome tool for piercing, of some form of cord, thong, or fiber, together\nwith some skill in the making of knots and lashings. Cooerdinate with\nthis knowledge of ways and means, there is also uniformly present some\nmatter-of-fact knowledge of the physical behavior of the materials with\nwhich men have to deal in the quest of a livelihood, beyond what any one\nindividual has learned or can learn by his own experience alone. This\ninformation and proficiency in the ways and means of life vests in the\ngroup at large; and, apart from accretions borrowed from other groups,\nit is the product of the given group, though not produced by any single\ngeneration. It may be called the immaterial equipment, or, by a license\nof speech, the intangible assets[2] of the community; and, in the early\ndays at least, this is far and away the most important and\nconsequential category of the community's assets or equipment. Without\naccess to such a common stock of immaterial equipment no individual and\nno fraction of the community can make a living, much less make an\nadvance. Such a stock of knowledge and practice is perhaps held loosely\nand informally; but it is held as a common stock, pervasively, by the\ngroup as a body, in its corporate capacity, as one might say; and it is\ntransmitted and augmented in and by the group, however loose and\nhaphazard the transmission may be conceived to be, not by individuals\nand in single lines of inheritance.\n\nThe requisite knowledge and proficiency of ways and means is a product,\nperhaps a by-product, of the life of the community at large; and it can\nalso be maintained and retained only by the community at large. Whatever\nmay be true for the unsearchable prehistoric phases of the life-history\nof the race, it appears to be true for the most primitive human groups\nand phases of which there is available information that the mass of\ntechnological knowledge possessed by any community, and necessary to its\nmaintenance and to the maintenance of each of its members or subgroups,\nis too large a burden for any one individual or any single line of\ndescent to carry. This holds true, of course, all the more rigorously\nand consistently, the more advanced the \"state of the industrial arts\"\nmay be. But it seems to hold true with a generality that is fairly\nstartling, that whenever a given cultural community is broken up or\nsuffers a serious diminution of numbers, its technological heritage\ndeteriorates and dwindles, even though it may have been apparently\nmeager enough before. On the other hand, it seems to hold true with a\nsimilar uniformity that, when an individual member or a fraction of a\ncommunity on what we call a lower stage of economic development is drawn\naway and trained and instructed in the ways of a larger and more\nefficient technology, and is then thrown back into his home community,\nsuch an individual or fraction proves unable to make head against the\ntechnological bent of the community at large or even to create a serious\ndiversion. Slight, perhaps transient, and gradually effective\ntechnological consequences may result from such an experiment; but they\nbecome effective by diffusion and assimilation through the body of the\ncommunity, not in any marked degree in the way of an exceptional\nefficiency on the part of the individual or fraction which has been\nsubjected to exceptional training. And inheritance in technological\nmatters runs not in the channels of consanguinity, but in those of\ntradition and habituation, which are necessarily as wide as the scheme\nof life of the community. Even in a relatively small and primitive\ncommunity the mass of detail comprised in its knowledge and practice of\nways and means is large,--too large for any one individual or household\nto become competently expert in it all; and its ramifications are\nextensive and diverse, at the same time that all these ramifications\nbear, directly or indirectly, on the life and work of each member of the\ncommunity. Neither the standard and routine of living nor the daily work\nof any individual in the community would remain the same after the\nintroduction of an appreciable change, for good or ill, in any branch of\nthe community's equipment of technological expedients. If the community\ngrows larger, to the dimensions of a modern civilised people, and this\nimmaterial equipment grows proportionately great and various, then it\nwill become increasingly difficult to trace the connection between any\ngiven change in technological detail and the fortunes of any given\nobscure member of the community. But it is at least safe to say that an\nincrease in the volume and complexity of the body of technological\nknowledge and practice does not progressively emancipate the life and\nwork of the individual from its dominion.\n\nThe complement of technological knowledge so held, used, and transmitted\nin the life of the community is, of course, made up out of the\nexperience of individuals. Experience, experimentation, habit,\nknowledge, initiative, are phenomena of individual life, and it is\nnecessarily from this source that the community's common stock is all\nderived. The possibility of its growth lies in the feasibility of\naccumulating knowledge gained by individual experience and initiative,\nand therefore it lies in the feasibility of one individual's learning\nfrom the experience of another. But the initiative and technological\nenterprise of individuals, such, _e.g._, as shows itself in inventions\nand discoveries of more and better ways and means, proceeds on and\nenlarges the accumulated wisdom of the past. Individual initiative has\nno chance except on the ground afforded by the common stock, and the\nachievements of such initiative are of no effect except as accretions to\nthe common stock. And the invention or discovery so achieved always\nembodies so much of what is already given that the creative contribution\nof the inventor or discoverer is trivial by comparison.\n\nIn any known phase of culture this common stock of intangible,\ntechnological equipment is relatively large and complex,--_i.e._,\nrelatively to the capacity of any individual member to create or to use\nit; and the history of its growth and use is the history of the\ndevelopment of material civilisation. It is a knowledge of ways and\nmeans, and is embodied in the material contrivances and processes by\nmeans of which the members of the community make their living. Only by\nsuch means does technological efficiency go into effect. These \"material\ncontrivances\" (\"capital goods,\" material equipment) are such things as\ntools, vessels, vehicles, raw materials, buildings, ditches, and the\nlike, including the land in use; but they include also, and through the\ngreater part of the early development chiefly, the useful minerals,\nplants, and animals. To say that these minerals, plants, and animals are\nuseful--in other words, that they are economic goods--means that they\nhave been brought within the sweep of the community's knowledge of ways\nand means.\n\nIn the relatively early stages of primitive culture the useful plants\nand minerals are, no doubt, made use of in a wild state, as, _e.g._,\nfish and timber have continued to be used. Yet in so far as they are\nuseful they are unmistakably to be counted in among the material\nequipment (\"tangible assets\") of the community. The case is well\nillustrated by the relation of the Plains Indians to the buffalo, and by\nthe northwest coast Indians to the salmon, on the one hand, and by the\nuse of a wild flora by such communities as the Coahuilla Indians,[3] the\nAustralian blacks, or the Andamanese, on the other hand.\n\nBut with the current of time, experience, and initiative, domesticated\n(that is to say improved) plants and animals come to take the first\nplace. We have then such \"technological expedients\" in the first rank as\nthe many species and varieties of domestic animals, and more\nparticularly still the various grains, fruits, root-crops, and the like,\nvirtually all of which were created by man for human use; or perhaps a\nmore scrupulously veracious account would say that they were in the main\ncreated by the women, through long ages of workmanlike selection and\ncultivation. These things, of course, are useful because men have\nlearned their use, and their use, so far as it has been learned, has\nbeen learned by protracted and voluminous experience and\nexperimentation, proceeding at each step on the accumulated achievements\nof the past. Other things, which may in time come to exceed these in\nusefulness are still useless, economically non-existent, on the early\nlevels of culture, because of what men in that time have not yet\nlearned.\n\n       *       *       *       *       *\n\nWhile this immaterial equipment of industry, the intangible assets of\nthe community, have apparently always been relatively very considerable\nand are always mainly in the keeping of the community at large, the\nmaterial equipment, the tangible assets, on the other hand, have, in the\nearly stages (say the earlier 90 per cent.) of the life-history of human\nculture, been relatively slight, and have apparently been held somewhat\nloosely by individuals or household groups. This material equipment is\nrelatively very slight in the earlier phases of technological\ndevelopment, and the tenure by which it is held is apparently vague and\nuncertain. At a relatively primitive phase of the development, and under\nordinary conditions of climate and surroundings, the possession of the\nconcrete articles (\"capital goods\") needed to turn the commonplace\nknowledge of ways and means to account is a matter of slight\nconsequence,--contrary to the view commonly spoken for by the economists\nof the classical line. Given the commonplace technological knowledge and\nthe commonplace training,--and these are given by common notoriety and\nthe habituation of daily life,--the acquisition, construction, or\nusufruct of the slender material equipment needed arranges itself almost\nas a matter of course, more particularly where this material equipment\ndoes not include a stock of domestic animals or a plantation of\ndomesticated trees and vegetables. Under given circumstances a\nrelatively primitive technological scheme may involve some large items\nof material equipment, as the buffalo pens (_piskun_) of the Blackfoot\nIndians or the salmon weirs of the river Indians of the northwest coast.\nSuch items of material equipment are then likely to be held and worked\ncollectively, either by the community at large or by subgroups of a\nconsiderable size. Under ordinary, more generally prevalent conditions,\nit appears that even after a relatively great advance has been made in\nthe cultivation of crops the requisite industrial equipment is not a\nmatter of serious concern, particularly so aside from the tilled ground\nand the cultivated trees, as is indicated by the singularly loose and\ninconsequential notions of ownership prevalent among peoples occupying\nsuch a stage of culture. A primitive stage of communism is not known.\n\nBut as the common stock of technological knowledge increases in volume,\nrange, and efficiency, the material equipment whereby this knowledge of\nways and means is put into effect grows greater, more considerable\nrelatively to the capacity of the individual. And so soon, or in so far,\nas the technological development falls into such shape as to require a\nrelatively large unit of material equipment for the effective pursuit of\nindustry, or such as otherwise to make the possession of the requisite\nmaterial equipment a matter of consequence, so as seriously to handicap\nthe individuals who are without these material means, and to place the\ncurrent possessors of such equipment at a marked advantage, then the\nstrong arm intervenes, property rights apparently begin to fall into\ndefinite shape, the principles of ownership gather force and\nconsistency, and men begin to accumulate capital goods and take measures\nto make them secure.\n\nAn appreciable advance in the industrial arts is commonly followed or\naccompanied by an increase of population. The difficulty of procuring a\nlivelihood may be no greater after such an increase; it may even be\nless; but there results a relative curtailment of the available area and\nraw materials, and commonly also an increased accessibility of the\nseveral portions of the community. A wide-reaching control becomes\neasier. At the same time a larger unit of material equipment is needed\nfor the effective pursuit of industry. As this situation develops, it\nbecomes worth while--this is to say, it becomes feasible--for the\nindividual with the strong arm to engross, or \"corner,\" the usufruct of\nthe commonplace knowledge of ways and means by taking over such of the\nrequisite material as may be relatively scarce and relatively\nindispensable for procuring a livelihood under the current state of the\nindustrial arts.[4] Circumstances of space and numbers prevent escape\nfrom the new technological situation. The commonplace knowledge of ways\nand means cannot be turned to account, under the new conditions, without\na material equipment adapted to the then current state of the industrial\narts; and such a suitable material equipment is no longer a slight\nmatter, to be compassed by workmanlike initiative and application.\n_Beati possidentes._\n\nThe emphasis of the technological situation, as one might say, may fall\nnow on one line of material items, now on another, according as the\nexigencies of climate, topography, flora and fauna, density of\npopulation, and the like, may decide. So also, under the rule of the\nsame exigencies, the early growth of property rights and of the\nprinciples (habits of thought) of ownership may settle on one or another\nline of material items, according as one or another affords the\nstrategic advantage for engrossing the current technological efficiency\nof the community.\n\nShould the technological situation, the state of the industrial arts, be\nsuch as to throw the strategic emphasis on manual labor, on workmanlike\nskill and application, and if at the same time the growth of population\nhas made land relatively scarce, or hostile contact with other\ncommunities has made it impracticable for members of the community to\nrange freely over outlying tracts, then it would be expected that the\ngrowth of ownership should take the direction primarily of slavery, or\nof some equivalent form of servitude, so effecting a naive and direct\nmonopolistic control of the current knowledge of ways and means.[5]\nWhereas if the development has taken such a turn, and the community is\nso placed as to make the quest of a livelihood a matter of the natural\nincrease of flocks and herds, then it should reasonably be expected that\nthese items of equipment will be the chief and primary subject of\nproperty rights. In point of fact, it appears that a pastoral culture\ncommonly involves also some degree of servitude, along with the\nownership of flocks and herds.\n\nUnder different circumstances the mechanical appliances of industry, or\nthe tillable land, might come into the position of strategic advantage,\nand might come in for the foremost place in men's consideration as\nobjects of ownership. The evidence afforded by the known (relatively)\nprimitive cultures and communities seems to indicate that slaves and\ncattle have in this way come into the primacy as objects of ownership at\nan earlier period in the growth of material civilisation than land or\nthe mechanical appliances. And it seems similarly evident--more so,\nindeed--that land has on the whole preceded the mechanical equipment as\nthe stronghold of ownership and the means of engrossing the community's\nindustrial efficiency.\n\nIt is not until a late period in the life-history of material\ncivilisation that ownership of the industrial equipment, in the narrower\nsense in which that phrase is commonly employed, comes to be the\ndominant and typical method of engrossing the immaterial equipment.\nIndeed, it is a consummation which has been reached only a very few\ntimes even partially, and only once with such a degree of finality as to\nleave the fact indisputable. If it may be said, loosely, that mastery\nthrough the ownership of slaves, cattle, or land comes on in force only\nafter the economic development has run through some nine-tenths of its\ncourse hitherto, then it may be said likewise that some ninety-nine\none-hundredths of this course of development had been completed before\nthe ownership of the mechanical equipment came into undisputed primacy\nas the basis of pecuniary dominion. So late an innovation, indeed, is\nthis modern institution of \"capitalism,\"--the predominant ownership of\nindustrial capital as we know it,--and yet so intimate a fact is it in\nour familiar scheme of life, that we have some difficulty in seeing it\nin perspective at all, and we find ourselves hesitating between denying\nits existence, on the one hand, and affirming it to be a fact of nature\nantecedent to all human institutions, on the other hand.\n\nIn so speaking of the ownership of industrial equipment as being an\ninstitution for cornering the community's intangible assets, there is\nconveyed an unavoidably implied, though unintended, note of\ncondemnation. Such an implication of merit or demerit is an untoward\ncircumstance in any theoretical inquiry. Any sentimental bias, whether\nof approval or disapproval, aroused by such an implied censure, must\nunavoidably hamper the dispassionate pursuit of the argument. To\nmitigate the effect of this jarring note as far as may be, therefore, it\nwill be expedient to turn back for a moment to other, more primitive and\nremoter forms of the institution,--as slavery and landed wealth,--and so\nreach the modern facts of industrial capital by a roundabout and gradual\napproach.\n\nThese ancient institutions of ownership, slavery and landed wealth, are\nmatters of history. Considered as dominant factors in the community's\nscheme of life, their record is completed; and it needs no argument to\nenforce the proposition that it is a record of economic dominion by the\nowners of the slaves or the land, as the case may be. The effect of\nslavery in its best day, and of landed wealth in mediaeval and early\nmodern times, was to make the community's industrial efficiency serve\nthe needs of the slave-owners in the one case and of the land-owners in\nthe other. The effect of these institutions in this respect is not\nquestioned now, except in such sporadic and apologetical fashion as need\nnot detain the argument.\n\nBut the fact that such was the direct and immediate effect of these\ninstitutions of ownership in their time by no means involves the instant\ncondemnation of the institutions in question. It is quite possible to\nargue that slavery and landed wealth, each in its due time and due\ncultural setting, have served the amelioration of the lot of man and the\nadvance of human culture. What these arguments may be that aim to show\nthe merits of slavery and landed wealth as a means of cultural advance\ndoes not concern the present inquiry, neither do the merits of the case\nin which the arguments are offered. The matter is referred to here to\ncall to mind that any similar theoretical outcome of an analysis of the\nproductivity of \"capital goods\" need not be admitted to touch the merits\nof the case in controversy between the socialistic critics of capitalism\nand the spokesmen of law and order.\n\nThe nature of landed wealth, in point of economic theory, especially as\nregards its productivity, has been sifted with the most jealous\nprecautions and the most tenacious logic during the past century; and\nany economic student can easily review the course of the argument\nwhereby that line of economic theory has been run to earth. It is only\nnecessary here to shift the point of view slightly to bring the whole\nargument concerning the rent of land to bear on the present question.\nRent is of the nature of a differential gain, resting on a differential\nadvantage in point of productivity of the industry employed upon or\nabout it. This differential advantage attaching to a given parcel of\nland may be a differential as against another parcel or as against\nindustry applied apart from land. The differential advantage attaching\nto agricultural land--_e.g._, as against industry at large--rests on\ncertain broad peculiarities of the technological situation. Among them\nare such peculiarities as these: the human species, or the fraction of\nit concerned in the case, is numerous, relatively to the extent of its\nhabitat; the methods of getting a living, as hitherto elaborated, the\nways and means of life, make use of certain crop-plants and certain\ndomestic animals. Apart from such conditions, taken for granted in\narguments concerning agricultural rent, there could manifestly be no\ndifferential advantage attaching to land, and no production of rent.\nWith increased command of methods of transportation, the agricultural\nlands of England, _e.g._, and of Europe at large, declined in value, not\nbecause these lands became less fertile, but because an equivalent\nresult could more advantageously be got by a new method. So, again, the\nflint- and amber-bearing regions that are now Danish and Swedish\nterritory about the waters at the entrance to the Baltic were in the\nneolithic culture of northern Europe the most favored and valuable lands\nwithin that cultural region. But, with the coming of the metals and the\nrelative decline of the amber trade, they began to fall behind in the\nscale of productivity and preference. So also in later time, with the\nrise of \"industry\" and the growth of the technology of communication,\nurban property has gained, as contrasted with rural property, and land\nplaced in an advantageous position relatively to shipping and railroads\nhas acquired a value and a \"productiveness\" which could not be claimed\nfor it apart from these modern technological expedients.\n\nThe argument of the single-tax advocates and other economists as to the\n\"unearned increment\" is sufficiently familiar, but its ulterior\nimplications have not commonly been recognised. The unearned increment,\nit is held, is produced by the growth of the community in numbers and in\nthe industrial arts. The contention seems to be sound, and is commonly\naccepted; but it has commonly been overlooked that the argument involves\nthe ulterior conclusion that all land values and land productivity,\nincluding the \"original and indestructible powers of the soil,\" are a\nfunction of the \"state of the industrial art.\" It is only within the\ngiven technological situation, the current scheme of ways and means,\nthat any parcel of land has such productive powers as it has. It is, in\nother words, useful only because, and in so far, and in such manner, as\nmen have learned to make use of it. This is what brings it into the\ncategory of \"land,\" economically speaking. And the preferential position\nof the landlord as a claimant of the \"net product\" consists in his legal\nright to decide whether, how far, and on what terms men shall put this\ntechnological scheme into effect in those features of it which involve\nthe use of his parcel of land.\n\n       *       *       *       *       *\n\nAll this argument concerning the unearned increment may be carried over,\nwith scarcely a change of phrase, to the case of \"capital goods.\" The\nDanish flint supply was of first-rate economic consequence, for a\nthousand years or so, during the stone age; and the polished-flint\nutensils of that time were then \"capital goods\" of inestimable\nimportance to civilisation, and were possessed of a \"productivity\" so\nserious that the life of mankind in that world may be said to have been\nbalanced on the fine-ground edge of those magnificent polished-flint\naxes. All that lasted through its technological era. The flint supply\nand the mechanical expedients and \"capital goods,\" whereby it was turned\nto account, were valuable and productive then, but neither before nor\nafter that time. Under a changed technological situation the capital\ngoods of that time have become museum exhibits, and their place in human\neconomy has been taken by technological expedients which embody another\n\"state of the industrial arts,\" the outcome of later and different\nphases of human experience. Like the polished-flint ax, the metal\nutensils which gradually displaced it and its like in the economy of the\nOccidental culture were the product of long experience and the gradual\nlearning of ways and means. The steel ax, as well as the flint ax,\nembodies the same ancient technological expedient of a cutting edge, as\nwell as the use of a helve and the efficiency due to the weight of the\ntool. And in the case of the one or the other, when seen in historical\nperspective and looked at from the point of view of the community at\nlarge, the knowledge of ways and means embodied in the utensils was the\nserious and consequential matter. The construction or acquisition of the\nconcrete \"capital goods\" was simply an easy consequence. It \"cost\nnothing but labor,\" as Thomas Mun would say.\n\nYet it might be argued that each concrete article of \"capital goods\" was\nthe product of some one man's labor, and, as such, its productivity,\nwhen put to use, was but the indirect, ulterior, deferred productiveness\nof the maker's labor. But the maker's productivity in the case was but a\nfunction of the immaterial technological equipment at his command, and\nthat in its turn was the slow spiritual distillate of the community's\ntime-long experience and initiative. To the individual producer or\nowner, to whom the community's accumulated stock of immaterial equipment\nwas open by common notoriety, the cost of the concrete material goods\nwould be the effort involved in making or getting them and in making\ngood his claim to them. To his neighbor who had made or acquired no such\nparcel of \"productive goods,\" but to whom the resources of the\ncommunity, material and immaterial, were open on the same easy terms,\nthe matter would look very much the same. He would have no grievance,\nnor would he have occasion to seek one. Yet, as a resource in the\nmaintenance of the community's life and a factor in the advance of\nmaterial civilisation, the whole matter would have a different meaning.\n\nSo long, or rather in so far, as the \"capital goods\" required to meet\nthe technological demands of the time were slight enough to be compassed\nby the common man with reasonable diligence and proficiency, so long\nthe draft upon the common stock of immaterial assets by any one would be\nno hindrance to any other, and no differential advantage or disadvantage\nwould emerge. The economic situation would answer passably to the\nclassical theory of a free competitive system,--\"the obvious and simple\nsystem of natural liberty,\" which rests on the presumption of equal\nopportunity. In a roughly approximate way, such a situation supervened\nin the industrial life of western Europe on the transition from mediaeval\nto modern times, when handicraft and \"industrial\" enterprise superseded\nlanded wealth as the chief economic factor. Within the \"industrial\nsystem,\" as distinct from the privileged non-industrial classes, a man\nwith a modicum of diligence, initiative, and thrift might make his way\nin a tolerable fashion without special advantages in the way of\nprescriptive right or accumulated means. The principle of equal\nopportunity was, no doubt, met only in a very rough and dubious fashion;\nbut so favorable became the conditions in this respect that men came to\npersuade themselves in the course of the eighteenth century that a\nsubstantially equitable allotment of opportunities would result from the\nabrogation of all prerogatives other than the ownership of goods. But so\nprecarious and transient was this approximation to a technologically\nfeasible system of equal opportunity that, while the liberal movement\nwhich converged upon this great economic reform was still gathering\nhead, the technological situation was already outgrowing the possibility\nof such a scheme of reform. After the Industrial Revolution came on, it\nwas no longer true, even in the roughly approximate way in which it\nmight have been true some time earlier, that equality before the law,\nbarring property rights, would mean equal opportunity. In the leading,\naggressive industries which were beginning to set the pace for all that\neconomic system that centered about the market, the unit of industrial\nequipment, as required by the new technological era, was larger than one\nman could compass by his own efforts with the free use of the\ncommonplace knowledge of ways and means. And the growth of business\nenterprise progressively made the position of the small, old-fashioned\nproducer more precarious. But the speculative theoreticians of that time\nstill saw the phenomena of current economic life in the light of the\nhandicraft traditions and of the preconceptions of natural rights\nassociated with that system, and still looked to the ideal of \"natural\nliberty\" as the goal of economic development and the end of economic\nreform. They were ruled by the principles (habits of thought) which had\narisen out of an earlier situation, so effectually as not to see that\nthe rule of equal opportunity which they aimed to establish was already\ntechnologically obsolete.[6]\n\nDuring the hundred years and more of this ascendancy of the\nnatural-rights theories in economic science, the growth of technological\nknowledge has unremittingly gone forward, and concomitantly the\nlarge-scale industry has grown great and progressively dominated the\nfield. This large-scale industrial regime is what the socialists, and\nsome others, call \"capitalism.\" \"Capitalism,\" as so used, is not a neat\nand rigid technical term, but it is definite enough to be useful for\nmany purposes. On its technological side the characteristic trait of\nthis capitalism is that the current pursuit of industry requires a\nlarger unit of material equipment than one individual can compass by\nhis own labor, and larger than one person can make use of alone.\n\nSo soon as the capitalist regime, in this sense, comes in, it ceases to\nbe true that the owner of the industrial equipment (or the controller of\nit) in any given case is or may be the producer of it, in any naive\nsense of \"production.\" He is under the necessity of acquiring its\nownership or control by some other expedient than that of industrially\nproductive work. The pursuit of industry requires an accumulation of\nwealth, and, barring force, fraud, and inheritance, the method of\nacquiring such an accumulation of wealth is necessarily some form of\nbargaining; that is to say, some form of business enterprise. Wealth is\naccumulated, within the industrial field, from the gains of business;\nthat is to say, from the gains of advantageous bargaining.[7] Taking the\nsituation by and large, looking to the body of business enterprise as a\nwhole, the advantageous bargaining from which gains accrue and from\nwhich, therefore, accumulations of capital are derived, is necessarily,\nin the last analysis, a bargaining between those who own (or control)\nindustrial wealth and those whose work turns this wealth to account in\nproductive industry. This bargaining for hire--commonly a wage\nagreement--is conducted under the rule of free contract, and is\nconcluded according to the play of demand and supply, as has been well\nset forth by many writers.\n\nOn this technological view of capital, as here spoken for,\nthe relations between the two parties to the bargain, the\ncapitalist-employer and the working class, stand as follows. More or\nless rigorously, the technological situation enforces a certain scale\nand method in the various lines of industry.[8] The industry can, in\neffect, be carried on only by recourse to the technologically requisite\nscale and method, and this requires a material equipment of a certain\n(large) magnitude; while material equipment of this required magnitude\nis held exclusively by the capitalist-employer, and is _de facto_ beyond\nthe reach of the common man.\n\nA corresponding body of immaterial equipment--knowledge and practice of\nways and means--is likewise requisite, under the rule of the same\ntechnological exigencies. This immaterial equipment is in part\ndrawn on in the making of the material equipment held by the\ncapitalist-employers, in part in the use to be made of this material\nequipment in the further processes of industry. This body of immaterial\nequipment so drawn on in any line of industry is, relatively, still\nlarger, being, on any exhaustive analysis, virtually the whole body of\nindustrial experience accumulated by the community up to date. A free\ndraft on this common stock of technological wisdom must be had both in\nthe construction and in the subsequent use of the material equipment;\nalthough no one person can master, or himself employ, more than an\ninconsiderable fraction of the immaterial equipment so drawn on for the\ninstallation or operation of any given block of the material equipment.\n\nThe owner of the material equipment, the capitalist-employer, is, in the\ntypical case, not possessed of any appreciable fraction of the\nimmaterial equipment necessarily drawn on in the construction and\nsubsequent use of the material equipment owned (controlled) by him. His\nknowledge and training, so far as it enters into the question, is a\nknowledge of business, not of industry.[9] The slight technological\nproficiency which he has or needs for his business ends is of a general\ncharacter, wholly superficial and impracticable in point of workmanlike\nefficiency; nor is it turned to account in actual workmanship. He\ntherefore \"needs in his business\" the service of persons who have a\ncompetent working mastery of this immaterial technological equipment,\nand it is with such persons that his bargains for hire are made. By and\nlarge, the measure of their serviceability for his ends is the measure\nof their technological competency. No workman not possessed of some\nfractional mastery of the technological requirements is\nemployed,--imbeciles are useless in proportion to their imbecility; and\neven unskilled and \"unintelligent\" workmen, so called, are of relatively\nlittle use, although they may be possessed of a proficiency in the\ncommonplace industrial details such as would bulk large in absolute\nmagnitude. The \"common laborer\" is, in fact, a highly trained and widely\nproficient workman when contrasted with the conceivable human blank\nsupposed to have drawn on the community for nothing but his physique.\n\nIn the hands of these workmen--the industrial community, the bearers of\nthe immaterial, technological equipment--the capital goods owned by the\ncapitalist become a \"means of production.\" Without them, or in the\nhands of men who do not know their use, the goods in question would be\nsimply raw materials, somewhat deranged and impaired through having been\ngiven the form which now makes them \"capital goods.\" The more proficient\nthe workmen in their mastery of the technological expedients involved,\nand the greater the facility with which they are able to put these\nexpedients into effect, the more productive will be the processes in\nwhich the workmen turn the employer's capital goods to account. So,\nalso, the more competent the work of \"superintendence,\" the foreman-like\noversight and correlation of the work in respect of kind, speed, volume,\nthe more will it count in the aggregate of productive efficiency. But\nthis work of correlation is a function of the foreman's mastery of the\ntechnological situation at large and his facility in proportioning one\nprocess of industry to the requirements and effects of another. Without\nthis due and sagacious correlation of the processes of industry, and\ntheir current adaptation to the demands of the industrial situation at\nlarge, the material equipment engaged would have but slight efficiency\nand would count for but little in the way of capital goods. The\nefficiency of the control exercised by the master-workman, engineer,\nsuperintendent, or whatever term may be used to designate the\ntechnological expert who controls and correlates the productive\nprocesses,--this workmanlike efficiency determines how far the given\nmaterial equipment is effectually to be rated as \"capital goods.\"\n\nThrough all this functioning of the workman and the foreman the\ncapitalist's business ends are ever in the background, and the degree of\nsuccess that attends his business endeavors depends, other things equal,\non the efficiency with which these technologists carry on the processes\nof industry in which he has invested. His working arrangements with\nthese workmen, the bearers of the immaterial equipment engaged, enables\nthe capitalist to turn the processes for which his capital goods are\nadapted to account for his own profit, but at the cost of such a\ndeduction from the aggregate product of these processes as the workmen\nmay be able to demand in return for their work. The amount of this\ndeduction is determined by the competitive bidding of other capitalists\nwho may have use for the same lines of technological efficiency, in the\nmanner set forth by writers on wages.\n\nWith the conceivable consolidation of all material assets under one\nbusiness management, so as to eliminate competitive bidding between\nemployers, it is plain that the resulting business concern would command\nthe undivided forces of the technological situation, with such deduction\nas is involved in the livelihood of the working population. This\nlivelihood would in such a case be reduced to the most economical\nfooting, as seen from the standpoint of the employer. And the employer\n(capitalist) would be the _de facto_ owner of the community's aggregate\nknowledge of ways and means, except so far as this body of immaterial\nequipment serves also the housekeeping routine of the working\npopulation. How nearly the current economic situation may approach to\nthis finished state is a matter of opinion. There is also place for a\nbroad question whether the conditions are more or less favorable to the\nworking population under the existing business regime, involving\ncompetitive bidding between the several business concerns, than they\nwould be in case a comprehensive business consolidation had eliminated\ncompetition and placed the ownership of the material assets on a footing\nof unqualified monopoly. Nothing but vague surmises can apparently be\noffered in answer to these questions.\n\nBut as bearing on the question of monopoly and the use of the\ncommunity's immaterial equipment it is to be kept in mind that the\ntechnological situation as it stands to-day does not admit of a complete\nmonopolisation of the community's technological expedients, even if a\ncomplete monopolisation of the existing aggregate of material property\nwere effected. There is still current a large body of industrial\nprocesses to which the large-scale methods do not apply and which do not\npresume such a large unit of material equipment or involve such rigorous\ncorrelation with the large-scale industry as to take them out of the\nrange of discretionary use by persons not possessed of appreciable\nmaterial wealth. Typical of such lines of work, hitherto not amenable to\nmonopolisation, are the details of housekeeping routine alluded to\nabove. It is, in fact, still possible for an appreciable fraction of the\npopulation to \"pick up a living,\" more or less precarious, without\nrecourse to the large-scale processes that are controlled by the owners\nof the material assets. This somewhat precarious margin of free recourse\nto the commonplace knowledge of ways and means appears to be what stands\nin the way of a neater adjustment of wages to the \"minimum of\nsubsistence\" and the virtual ownership of the immaterial equipment by\nthe owners of the material equipment.\n\nIt follows from what has been said that all tangible[10] assets owe\ntheir productivity and their value to the immaterial industrial\nexpedients which they embody or which their ownership enables their\nowner to engross. These immaterial industrial expedients are necessarily\na product of the community, the immaterial residue of the community's\nexperience, past and present; which has no existence apart from the\ncommunity's life, and can be transmitted only in the keeping of the\ncommunity at large. It may be objected by those who make much of the\nproductivity of capital that tangible capital goods on hand are\nthemselves of value and have a specific productive efficiency, if not\napart from the industrial processes in which they serve, then at least\nas a prerequisite to these processes, and therefore a material\ncondition-precedent standing in a causal relation to the industrial\nproduct. But these material goods are themselves a product of the past\nexercise of technological knowledge, and so back to the beginning. What\nthere is involved in the material equipment, which is not of this\nimmaterial, spiritual nature, and so what is not an immaterial residue\nof the community's experience, is the raw material out of which the\nindustrial appliances are constructed, with the stress falling wholly on\nthe \"raw.\"\n\nThe point is illustrated by what happens to a mechanical contrivance\nwhich goes out of date because of a technological advance and is\ndisplaced by a new contrivance embodying a new process. Such a\ncontrivance \"goes to the junk-heap,\" as the phrase has it. The specific\ntechnological expedient which it embodies ceases to be effective in\nindustry, in competition with \"improved methods.\" It ceases to be an\nimmaterial asset. When it is in this way eliminated, the material\nrepository of it ceases to have value as capital. It ceases to be a\nmaterial asset. \"The original and indestructible powers\" of the material\nconstituents of capital goods, to adapt Ricardo's phrase, do not make\nthese constituents capital goods; nor, indeed, do these original and\nindestructible powers of themselves bring the objects in question into\nthe category of economic goods at all. The raw materials--land,\nminerals, and the like--may, of course, be valuable property, and may be\ncounted among the assets of a business. But the value which they so have\nis a function of the anticipated use to which they may be put, and that\nis a function of the technological situation under which it is\nanticipated that they will be useful.\n\n       *       *       *       *       *\n\nAll this may seem to undervalue or perhaps to overlook the physical\nfacts of industry and the physical nature of commodities. There is, of\ncourse, no call to understate the importance of material goods or of\nmanual labor. The goods about which this inquiry turns are the products\nof trained labor working on the available materials; but the labor has\nto be trained, in the large sense, in order to be labor, and the\nmaterials have to be available in order to be materials of industry. And\nboth the trained efficiency of the labor and the availability of the\nmaterial objects engaged are a function of the \"state of the industrial\narts.\"\n\nYet the state of the industrial arts is dependent on the traits of human\nnature, physical, intellectual, and spiritual, and on the character of\nthe material environment. It is out of these elements that the human\ntechnology is made up; and this technology is efficient only as it meets\nwith the suitable material conditions and is worked out, practically, in\nthe material forces required. The brute forces of the human animal are\nan indispensable factor in industry, as are likewise the physical\ncharacteristics of the material objects with which industry deals. And\nit seems bootless to ask how much of the products of industry or of its\nproductivity is to be imputed to these brute forces, human and\nnon-human, as contrasted with the specifically human factors that make\ntechnological efficiency. Nor is it necessary to go into questions of\nthat import here, since the inquiry here turns on the productive\nrelation of capital to industry; that is to say, the relation of the\nmaterial equipment and its ownership to men's dealings with the physical\nenvironment in which the race is placed. The question of capital goods\n(including that of their ownership and therefore including the question\nof investment) is a question of how mankind as a species of intelligent\nanimals deals with the brute forces at its disposal. It is a question of\nhow the human agent deals with his means of life, not of how the forces\nof the environment deal with man. Questions of the latter class belong\nunder the head of Ecology, a branch of the biological sciences dealing\nwith the adaptive variability of plants and animals. Economic inquiry\nwould belong under that category if the human response to the forces of\nthe environment were instinctive and variational only, including nothing\nin the way of a technology. But in that case there would be no question\nof capital goods, or of capital, or of labor. Such questions do not\narise in relation to the non-human animals.\n\nIn an inquiry into the productivity of labor some perplexity might be\nmet with as to the share or the place of the brute forces of the human\norganism in the theory of production; but in relation to capital that\nquestion does not arise, except so far as these forces are involved in\nthe production of the capital goods. As a parenthesis, more or less\ngermane to the present inquiry into capital, it may be remarked that an\nanalysis of the productive powers of labor would apparently take account\nof the brute energies of mankind (nervous and muscular energies) as\nmaterial forces placed at the disposal of man by circumstances largely\nbeyond human control, and in great part not theoretically dissimilar to\nthe like nervous and muscular forces afforded by the domestic animals.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _The Quarterly Journal of Economics_,\nVol. XXII, Aug., 1908.\n\n[2] \"Assets\" is, of course, not to be taken literally in this\nconnection. The term properly covers a pecuniary concept, not an\nindustrial (technological) one, and it connotes ownership as well as\nvalue; and it will be used in this literal sense when, in a later\narticle, ownership and investment come into the discussion. In the\npresent connection it is used figuratively, for want of a better term,\nto convey the connotation of value and serviceability without thereby\nimplying ownership.\n\n[3] Barrows.\n\n[4] Motives of exploit and emulation, no doubt, play a serious part in\nbringing on the practice of ownership and in establishing the principles\non which it rests; but this play of motives and the concomitant growth\nof institutions cannot be taken up here. _Cf._ _The Theory of the\nLeisure Class_, chaps. i, ii, iii.\n\n[5] _Cf._ H. Nieboer, _Slavery as an Industrial System_, chap. iv, sect.\n12.\n\n[6] For a more extended discussion of this point see the _Quarterly\nJournal of Economics_, July, 1899, \"The Preconceptions of Economic\nScience\"; also _The Theory of Business Enterprise_, chap. iv, especially\npp. 70-82.\n\n[7] Marx holds that the \"primitive accumulation\" from which capitalism\ntakes its rise is a matter of force and fraud (_Capital_, Book I, chap.\nxxiv.). Sombart holds the source to have been landed wealth (_Moderne\nKapitalismus_, Book II, Part II, especially chap. xii). Ehrenberg and\nother critics of Sombart incline to the view that the most important\nsource was usury and the petty trade (_Zeitalter der Fugger_, chaps. i,\nii).\n\n[8] The phrase \"more or less\" covers a certain margin of tolerance in\nrespect of scale and method, which may be very appreciably wider in some\nlines of industry than in others, and which cannot be more adequately\ndefined or described here within such space as could reasonably be\nallowed. The requirement of scale and method is enforced by competition.\nThe force and reach of this competitive adjustment can also not be dealt\nwith here, but the familiar current acceptance of the fact will dispense\nwith details.\n\n[9] _Cf._ _Theory of Business Enterprise_, chap. iii.\n\n[10] \"Tangible assets\" is here taken to signify serviceable capital\ngoods considered as valuable possessions yielding income to their owner.\n\n\n\n\nON THE NATURE OF CAPITAL[1]\n\n\nII. INVESTMENT, INTANGIBLE ASSETS, AND THE PECUNIARY MAGNATE\n\nWhat has been said in the earlier section of this paper[2] applies to\n\"capital goods,\" so called, and it is intended to apply to these in\ntheir character of \"productive goods\" rather than in their character of\n\"capital\"; that is to say, what is had in mind is the industrial, or\ntechnological, efficiency and subservience of the material means of\nproduction, rather than the pecuniary use and effect of invested wealth.\nThe inquiry has dealt with the industrial equipment as \"plant\" rather\nthan as \"assets.\" In the course of this inquiry it has appeared that out\nof the profitable engrossing of the community's industrial efficiency\nthrough control of the material equipment there arises the practice of\ninvestment, which has further consequences that merit more detailed\nattention.\n\nInvestment is a pecuniary transaction, and its aim is pecuniary\ngain,--gain in terms of value and ownership. Invested wealth is capital,\na pecuniary magnitude, measured in terms of value and determined in\nrespect of its magnitude by a valuation which proceeds on an\nappraisement of the gain expected from the ownership of this invested\nwealth. In modern business practice, capital is distinguished into two\ncooerdinate categories of assets, tangible and intangible. \"Tangible\nassets\" is here taken to designate pecuniarily serviceable capital\ngoods, considered as a valuable possession yielding an income to their\nowner. Such goods, material items of wealth, are \"assets\" to the amount\nof their capitalisable value, which may be more or less closely related\nto their industrial serviceability as productive goods. \"Intangible\nassets\" are immaterial items of wealth, immaterial facts owned, valued,\nand capitalised on an appraisement of the gain to be derived from their\npossession. These are also assets to the amount of their capitalisable\nvalue, which has commonly little, if any, relation to the industrial\nserviceability of these items of wealth considered as factors of\nproduction.\n\n       *       *       *       *       *\n\nBefore going into the matter of intangible assets, it is necessary to\nspeak further of the consequences which investment--and hence\ncapitalisation--has for the use and serviceability of (material) capital\ngoods. It has commonly been assumed by economists, without much\nscrutiny, that the gains which accrue from invested wealth are derived\nfrom and (roughly) measured by the productivity of the industrial\nprocess in which the items of wealth so invested are employed,\nproductivity being counted in some terms of material serviceability to\nthe community, conduciveness to the livelihood, comfort, or consumptive\nneeds of the community. In the course of the present inquiry it has\nappeared that the gainfulness of such invested wealth (tangible assets)\nis due to a more or less extensive engrossing of the community's\nindustrial efficiency. The aggregate gains of the aggregate material\ncapital accrue from the community's industrial activity, and bear some\nrelation to the productive capacity of the industrial traffic so\nengrossed. But it will be noted that there is no warrant in the\nanalysis of these phenomena as here set forth for alleging that the\ngains of investment bear a relation of equality or proportion to the\nmaterial serviceability of the capital goods, as rated in terms of\neffectual usefulness to the community. Given capital goods, tangible\nassets, may owe their pecuniary serviceability to their owner, and so\ntheir value, to other things than their serviceability to the community;\nalthough the gains of investment in the aggregate are drawn from the\naggregate material productivity of the community's industry.\n\nThe ownership of the material equipment gives the owner not only the\nright of use over the community's immaterial equipment, but also the\nright of abuse and of neglect or inhibition. This power of inhibition\nmay be made to afford an income, as well as the power to serve; and\nwhatever will yield an income may be capitalised and become an item of\nwealth to its possessor. Under modern conditions of investment it\nhappens not infrequently that it becomes pecuniarily expedient for the\nowner of the material equipment to curtail or retard the processes of\nindustry,--\"restraint of trade.\" The motive in all such cases of\nretardation is the pecuniary expediency of the measure for the owner\n(controller) of capital,--expediency in terms of income from investment,\nnot expediency in terms of serviceability to the community at large or\nto any fraction of the community except the owner (manager). Except for\nthe exigencies of investment, _i.e._, exigencies of pecuniary gain to\nthe investor, phenomena of this character would have no place in the\nindustrial system. They invariably come of the endeavors of business men\nto secure a pecuniary gain or to avoid a pecuniary loss. More\nfrequently, perhaps, manoeuvers of inhibition--advised idleness of\nplant--in industry aim to effect a saving or avoid a waste than to\nprocure an increase of gain; but the saving to be effected and the waste\nto be avoided are always pecuniary saving to the owner and pecuniary\nwaste in the matter of ownership, not a saving of goods to the community\nor a prevention of wasteful consumption or wasteful expenditure of\neffort and resources on the part of the community. Pecuniary--that is to\nsay, differential--advantage to the capitalist-manager has, under the\nregime of investment, taken precedence of economic advantage to the\ncommunity; or rather, the differential advantage of ownership is alone\nregarded in the conduct of industry under this system.\n\nBusiness practices which inhibit industrial efficiency and curtail the\nindustrial output are too well known to need particular enumeration. Nor\nis it necessary to cite evidence to show that such inhibition and\ncurtailment are resorted to from motives of pecuniary expediency. But an\nillustrative example or two will make the theoretical point clearer, and\nperhaps more plainly bring out the wholly pecuniary grounds of such\nbusiness procedure. The most comprehensive principle involved in this\nclass of business management is that of raising prices, and so\nincreasing the net gains of business, by limiting the supply, or\n\"charging what the traffic will bear.\" Of a similar effect, for the\npoint here in question, are the obstructive tactics designed to hinder\nthe full efficiency of a business rival. These phenomena lie along the\nline of division between tangible and intangible assets. Successful\nstrategy of this kind may, by force of custom, legislation, or the\n\"freezing-out\" of rival concerns, pass into settled conditions of\ndifferential advantage for the given business concern, which so may be\ncapitalised as an item of intangible assets and take their place in the\nbusiness community as articles of invested wealth.\n\nBut, aside from such capitalisation of inefficiency, it is at least an\nequally consequential fact that the processes of productive industry are\ngoverned in detail by the exigencies of investment, and therefore by the\nquest of gain as counted in terms of price, which leads to the\ndependence of production on the course of prices. So that, under the\nregime of capital, the community is unable to turn its knowledge of ways\nand means to account for a livelihood except at such seasons and in so\nfar as the course of prices affords a differential advantage to the\nowners of the material equipment. The question of advantageous--which\ncommonly means rising--prices for the owners (managers) of the capital\ngoods is made to decide the question of livelihood for the rest of the\ncommunity. The recurrence of hard times, unemployment, and the rest of\nthat familiar range of phenomena, goes to show how effectual is the\ninhibition of industry exercised by the ownership of capital under the\nprice system.[3]\n\nSo also as regards the discretionary abuse of the community's industrial\nefficiency vested in the owner of the material equipment.\nDisserviceability may be capitalised as readily as serviceability, and\nthe ownership of the capital goods affords a discretionary power of\nmisdirecting the industrial processes and perverting[4] industrial\nefficiency, as well as of inhibiting or curtailing industrial processes\nand their output, while the outcome may still be profitable to the owner\nof the capital goods. There is a large volume of capital goods whose\nvalue lies in their turning the technological inheritance to the injury\nof mankind. Such are, _e.g._, naval and military establishments,\ntogether with the docks, arsenals, schools, and manufactories of arms,\nammunition, and naval and military stores, that supplement and supply\nsuch establishments. These armaments and the like are, of course, public\nand quasi-public enterprises, under the current regime, with somewhat\ndisputable relations to the system of current business enterprise. But\nit is no far-fetched interpretation to say that they are, in great part,\na material equipment for the maintenance of law and order, and so enable\nthe owners of capital goods with immunity to inhibit or pervert the\nindustrial processes when the exigencies of business profits make it\nexpedient; that they are, further, a means--more or less ineffectual, it\nis true--for extending and protecting trade, and so serve the\ndifferential advantage of business men at the cost of the community; and\nthat they are also in large part a material equipment set apart for the\ndiversion of a livelihood from the community at large to the military,\nnaval, diplomatic, and other official classes. These establishments may\nin any case be taken as illustrating how items of material equipment may\nbe devoted to and may be valued for the use of the technological\nexpedients for the damage and discomfort of mankind, without sensible\noffset or abatement.\n\nTypical of a class of investments which derive profits from capital\ngoods devoted to uses that are altogether dubious, with a large\npresumption of net detriment, are such establishments as race-tracks,\nsaloons, gambling-houses, and houses of prostitution.[5] Some spokesmen\nof the \"non-Christian tribes\" might wish to include churches under the\nsame category, but the consensus of opinion in modern communities\ninclines to look on churches as serviceable, on the whole; and it may be\nas well not to attempt to assign them a specific place in the scheme of\nserviceable and disserviceable use of invested wealth.\n\nThere is, further, a large field of business, employing much capital\ngoods and many technological processes, whose profits come from products\nin which serviceability and disserviceability are mingled with waste in\nthe most varying proportions. Such are the production of goods of\nfashion, disingenuous proprietary articles, sophisticated household\nsupplies, newspapers and advertising enterprise. In the degree in which\nbusiness of this class draws its profits from wasteful practices,\nspurious goods, illusions and delusions, skilled mendacity, and the\nlike, the capital goods engaged must be said to owe their capitalisable\nvalue to a perverse use of the technological expedients employed.\n\nThese wasteful or disserviceable uses of capital goods have been cited,\nnot as implying that the technological proficiency embodied in these\ngoods or brought into effect in their use, intrinsically has a\ndisserviceable bearing, nor that investment in these things, and\nbusiness enterprise in the management of them, need aim at\ndisserviceability, but only to bring out certain minor points of theory,\nobvious but commonly overlooked: (_a_) technological proficiency is not\nof itself and intrinsically serviceable or disserviceable to\nmankind,--it is only a means of efficiency for good or ill; (_b_) the\nenterprising use of capital goods by their businesslike owner aims not\nat serviceability to the community, but only at serviceability to the\nowner; (_c_) under the price system--under the rule of pecuniary\nstandards and management--circumstances make it advisable for the\nbusiness man at times to mismanage the processes of industry, in the\nsense that it is expedient for his pecuniary gain to inhibit, curtail,\nor misdirect industry, and so turn the community's technological\nproficiency to the community's detriment. These somewhat commonplace\npoints of theory are of no great weight in themselves, but they are of\nconsequence for any theory of business or of life under the rules of the\nprice system, and they have an immediate bearing here on the question of\nintangible assets.\n\n       *       *       *       *       *\n\nAt the risk of some tedium it is necessary to the theory of intangible\nassets to pursue this analysis and piecing together of commonplaces\nsomewhat farther. As has already been remarked, \"assets\" is a pecuniary\nconcept, not a technological one; a concept of business, not of\nindustry. Assets are capital, and tangible assets are items of material\nequipment and the like, considered as available for capitalisation. The\ntangibility of tangible assets is a matter of the materiality of the\nitems of wealth of which they are made up, while they are assets to the\namount of their value. Capital goods, which typically make up the\ncategory of tangible assets, are capital goods by virtue of their\ntechnological serviceability, but they are capital in the measure, not\nof their technological serviceability, but in the measure of the income\nwhich they may yield to their owner. The like is, of course, true of\nintangible assets, which are likewise capital, or assets, in the measure\nof their income-yielding capacity. Their intangibility is a matter of\nthe immateriality of the items of wealth--objects of ownership--of which\nthey are made up, but their character and magnitude as assets is a\nmatter of the gainfulness to their owner of the processes which their\nownership enables him to engross. The facts so engrossed, in the case of\nintangible assets, are not of a technological or industrial character;\nand herein lies the substantial disparity between tangible and\nintangible assets.\n\nMankind has other dealings with the material means of life, besides\nthose covered by the community's technological proficiency. These other\ndealings have to do with the use, distribution, and consumption of the\ngoods procured by the employment of the community's technological\nproficiency, and are carried out under working arrangements of an\ninstitutional character,--use and wont, law and custom. The principles\nand practice of the distribution of wealth vary with the changes in\ntechnology and with the other cultural changes that are going forward;\nbut it is probably safe to assume that the principles of\napportionment,--that is to say, the consensus of habitual opinion as to\nwhat is right and good in the distribution of the product,--these\nprinciples and the concomitant methods of carrying them out in practice\nhave always been such as to give one person or group or class something\nof a settled preference above another. Something of this kind, something\nin the way of a conventionally arranged differential advantage in the\napportionment of the common livelihood, is to be found in all cultures\nand communities that have been observed at all carefully; and it is\nperhaps needless to remark that in the higher cultures such economic\npreferences, privileges, prerogatives, differential advantages and\ndisadvantages, are numerous and varied, and that they make up an\nintricate fabric of economic institutions. Indeed, peculiarities of\nclass difference in some such respect are among the most striking and\ndecisive features that distinguish one cultural era from another. In all\nphases of material civilisation these preferential advantages are sought\nand valued. Classes or groups which are in a position to make good a\nclaim to such differential advantages commonly come, in due course, to\nput forward such claims; as, _e.g._, the priesthood, the princely and\nruling class, the men as contrasted with the women, the adults as\nagainst minors, the able-bodied as against the infirm. Principles\n(habits of thought) countenancing some form of class or personal\npreference in the distribution of income are to be found incorporated in\nthe moral code of all known civilisations and embodied in some form of\ninstitution. Such items of immaterial wealth are of a differential\ncharacter, in that the advantage of those who secure the preference is\nthe disadvantage of those who do not; and it may be mentioned in\npassing, that such a differential advantage inuring to any one class or\nperson commonly carries a more than equal disadvantage to some other\nclass or person or to the community at large.[6]\n\nWhen property rights fall into definite shape and the price system comes\nin, and more particularly when the practice of investment arises and\nbusiness enterprise comes into vogue, such differential advantages take\non something of the character of intangible assets. They come to have a\npecuniary value and rating, whether they are transferable or not; and if\nthey are transferable, if they can be sold and delivered, they become\nassets in a fairly clear and full sense of that term. Such immaterial\nwealth, preferential benefits of the nature of intangible assets, may be\na matter of usage simply, as the vogue of a given public house, or of a\ngiven tradesman, or of a given brand of consumable goods; or may be a\nmatter of arrogation, as the King's Customs in early times, or the once\nnotorious Sound Dues, or the closing of public highways by large\nland-owners; or of contractual concession, as the freedom of a city or a\nguild, or a franchise in the Hanseatic League or in the Associated\nPress; or of government concession, whether on the basis of a bargain or\notherwise, as the many trade monopolies of early modern times, or a\ncorporation charter, or a railway franchise, or letters of marque, or\nletters patent; or of statutory creation, as trade protection by import,\nexport, or excise duties or navigation laws; or of conventionalised\nsuperstitious punctilio, as the creation of a demand for wax by the\ndevoutly obligatory consumption of consecrated tapers, or the similar\ndevout consumption of and demand for fish during Lent.\n\nUnder the regime of investment and business enterprise these and the\nlike differential benefits may turn to the business advantage of a given\nclass, group, or concern, and in such an event the resulting\ndifferential business advantage in the pursuit of gain becomes an asset,\ncapitalised on the basis of its income-yielding capacity, and possibly\nvendible under the cover of a corporation security (as, _e.g._, common\nstock), or even under the usual form of private sale (as, _e.g._, the\nappraised good-will of a business concern).\n\nBut the regime of business enterprise has not only taken over various\nforms of institutional privileges and prerogatives out of the past: it\nalso gives rise to new kinds of differential advantage and capitalises\nthem into intangible assets. These are all (or virtually all) of one\nkind, in that their common aim and common basis of value and\ncapitalisation is a preferentially advantageous sale. Naturally so,\nsince the end of all business endeavor, in the last analysis, is an\nadvantageous sale. The commonest and typical kind of such intangible\nassets is \"good-will,\" so called,--a term which has come to cover a\ngreat variety of differential business advantages, but which in the\noriginal business usage of it meant the customary resort of a clientele\nto the concern so possessed of the good-will. It seems originally to\nhave implied a kindly sentiment of trust and esteem on the part of a\ncustomer, but as the term is now used it has lost this sentimental\ncontent. In the broad and loose sense in which it is now currently\nemployed it is extended to cover such special advantages as inure to a\nmonopoly or a combination of business concerns through its power to\nlimit or engross the supply of a given line of goods or services. So\nlong as such a special advantage is not specifically protected by\nspecial legislation or by a due legal instrument,--as in the case of a\nfranchise or a patent right,--it is likely to be spoken of loosely as\n\"good-will.\"\n\nThe results of the analysis may be summed up to show the degree of\ncoincidence and the distinctions between the two categories of assets:\n(_a_) the value (that is to say, the amount) of given assets, whether\ntangible or intangible, is the capitalised (or capitalisable) value of\nthe given articles of wealth, rated on the basis of their\nincome-yielding capacity to their owner; (_b_) in the case of tangible\nassets there is a presumption that the objects of wealth involved have\nsome (at least potential) serviceability at large, since they serve a\nmaterially productive work, and there is therefore a presumption, more\nor less well founded, that their value represents, though it by no means\nmeasures, an item of serviceability at large; (_c_) in the case of\nintangible assets there is no presumption that the objects of wealth\ninvolved have any serviceability at large, since they serve no\nmaterially productive work, but only a differential advantage to the\nowner in the distribution of the industrial product;[7] (_d_) given\ntangible assets may be disserviceable to the community,--a given\nmaterial equipment may owe its value as capital to a disserviceable use,\nthough in the aggregate or on an average the body of tangible assets are\n(presumptively) serviceable; (_e_) given intangible assets may be\nindifferent in respect of serviceability at large, though in the\naggregate, or on an average, intangible assets are (presumably)\ndisserviceable to the community.\n\nOn this showing it would appear that the substantial difference between\ntangible and intangible assets lies in the different character of the\nimmaterial facts which are turned to pecuniary account in the one case\nand in the other. The former, in effect, capitalise such fraction\nof the technological proficiency of the community as the ownership\nof the capital goods involved enables the owner to engross. The\nlatter capitalise such habits of life, of a non-technological\ncharacter,--settled by usage, convention, arrogation, legislative\naction, or what not,--as will effect a differential advantage to the\nconcern to which the assets in question appertain. The former owe their\nexistence and magnitude to the usufruct of technological expedients\ninvolved in the industrial process proper; while the latter are in like\nmanner due to the usufruct of what may be called the interstitial\ncorrelations and adjustments both within the industrial system and\nbetween industry proper and the market, in so far as these relations are\nof a pecuniary rather than a technological character. Much the same\ndistinction may be put in other words, so as to bring the expression\nnearer the current popular apprehension of the matter, by saying that\ntangible assets, commonly so called, capitalise the processes of\nproduction, while intangible assets, so called, capitalise certain\nexpedients and processes of acquisition, not productive of wealth, but\naffecting only its distribution. Formulated in either way, the\ndistinction seems not to be an altogether hard-and-fast one, as will\nimmediately appear if it is called to mind that intangible assets may be\nconverted into tangible assets, and conversely, as the exigencies of\nbusiness may decide. Yet, while the two categories of assets stand in\nsuch close relation to one another as this state of things presumes, it\nis still evident from the same state of things that they are not to be\nconfounded with one another.\n\nTaking \"good-will\" as typical of the category of \"intangible assets,\" as\nbeing the most widely prevalent and at the same time the farthest\nremoved in its characteristics from the range of \"tangible assets,\" some\nslight further discussion of it may serve to bring out the difference\nbetween the two categories of assets and at the same time to enforce\ntheir essential congruity as assets as well as the substantial\nconnection between them. In the earlier days of the concept, in the\nperiod of growth to which it owes its name, when good-will was coming\ninto recognition as a factor affecting assets, it was apparently looked\non habitually as an adventitious differential advantage accruing\nspontaneously to the business concern to which it appertained; an\nimmaterial by-product of the concern's conduct of business,--commonly\npresumed to be an adventitious blessing incident to an upright and\nhumane course of business life. Poor Richard would express this sense of\nthe matter in the saying that \"honesty is the best policy.\" But\npresently, no doubt, some thought would be taken of the acquirement of\ngood-will, and some effort would be expended by the wise business man in\nthat behalf. Goods would be given a more elegant finish for the sake of\na readier sale, beyond what would conduce to their brute serviceability\nsimply; smooth-spoken and obsequious salesmen and solicitors, gifted\nwith a tactful effrontery, have come to be preferred to others, who,\nwithout these merits, may be possessed of all the diligence, dexterity,\nand muscular force required in their trade; something is expended on\nconvincing, not to say vain-glorious, show-windows that shall promise\nsomething more than one would like to commit one's self to in words;\nitinerant agents, and the like, are employed at some expense to secure a\nclientele; much thought and substance is spent on advertising of many\nkinds.\n\nThis last-named item may be taken as typical of the present stage of\ngrowth in the production or generation of good-will, and therefore in\nthe creation of intangible assets. Advertising has come to be an\nimportant branch of business enterprise by itself, and it employs a\nlarge and varied array of material appliances and processes (tangible\nassets). Investment is made in certain material items (productive\ngoods), such as printed matter, billboards, and the like, with a view to\ncreating a certain body of good-will. The precise magnitude of the\nproduct may not be foreseen, but, if sagaciously made, such investment\nrarely fails of the effect aimed at--unless a business rival with even\ngreater sagacity should out-manoeuver and offset these endeavors with\na superior array of appliances (productive goods) and workmen for the\ngeneration of good-will. The product aimed at, commonly with effect, is\ngood-will,--an intangible asset,--which may be considered to have been\ngenerated by converting certain tangible assets into this intangible; or\nit may be considered as an industrial product, the output of certain\nindustrial processes in which the given items of material equipment are\nemployed and give effect to the requisite technological proficiency.\nWhichever view be taken of the causal relation between the material\nequipment and processes employed, on the one hand, and the output of\ngood-will, on the other hand, the result is substantially the same for\nthe purpose in hand.\n\nThe ulterior end of the advertising is, it may be said, the sale of an\nincreased quantity of the advertised articles, at an increased net gain;\nwhich would mean an increased value of the material items offered for\nsale; which, in turn, is the same as saying an increase of tangible\nassets. It may be assumed without debate that the end of business\nendeavor is a gain in final terms of tangible values. But this ulterior\nend is, in the case of advertising enterprise, to be gained only by the\nintermediate step of a production of an immaterial item of good-will, an\nintangible asset.\n\nSo the case in illustration shows not only the conversion of tangible\nassets (material capital goods, such as printed matter) into intangible\nwealth, or, if that formula be preferred, the production of immaterial\nwealth by the productive use of material wealth, but also, conversely,\nin the second step of the process, it shows the conversion of intangible\nassets into tangible wealth (enhanced value of vendible goods), or, if\nthe expression seems preferable, the production of tangible assets by\nthe use of intangible wealth.\n\nThis creation of tangible wealth out of intangible assets is seen\nperhaps at its neatest in the enhancement of land values by the\nendeavors of interested parties. Real estate is, of course, a tangible\nasset of the most authentic tangibility, and it is an asset to the\namount of its value, which is determined, say, by the figures at which\nthe real estate in question is currently bought and sold. This is the\ncurrent value of the real estate, and therefore its current actual\nmagnitude as a tangible asset. The value of the real estate might also\nbe computed by capitalising its rental value; but, where the current\nmarket value does not coincide with the capitalised rental value, the\nformer must, according to business conceptions, be accepted as the\nactual value. In many parts of this country, perhaps in most, but\nparticularly in the Western States and in the neighborhood of\nflourishing towns, these two methods of rating the pecuniary magnitude\nof real estate will habitually not coincide. Due allowance, often very\nconsiderable, being made, the capitalised rental value of the land may\nbe taken as measuring its current serviceability as an item of material\nequipment; while the amount by which the market value of the land\nexceeds its capitalised rental value may be taken as the product, the\ntangible residue, of an intangible asset of the nature of good-will,\nturned to account, or \"productively employed,\" in behalf of this parcel\nof land.[8]\n\nSome of the lands of California may be taken as a very good, though\nperhaps not an extreme, example of such a creation of real estate by\nspiritual instrumentalities. It is probably well within the mark to say\nthat some of these lands owe not more than one-half their current market\nvalue to their current serviceability as an instrument of production or\nuse. The excess may be attributable to illusions touching the chances of\nfuture sale, to anticipation of a prospective enhanced usefulness, and\nthe like; but all these are immaterial factors, of the nature of\ngood-will. Like other assets, these lands are capitalised on the basis\nof the anticipated income from them, part of which income is anticipated\nfrom profitable sales to persons who, it is hoped, will be persuaded to\ntake a very sanguine view of the land situation, while part of it may be\ndue to over-sanguine anticipations of usefulness generated by the\nadvertising matter and the efforts of the land agents directed to what\nis called \"developing the country.\"\n\nTo any one preoccupied with the conceit that \"capital\" means \"capital\ngoods\" such a conversion of intangible into tangible goods, or such a\ngeneration of intangible assets by the productive use of tangible\nassets, might be something of a puzzle. If \"assets\" were a physical\nconcept, covering a range of physical things, instead of a pecuniary\nconcept, such conversion of tangible into intangible assets, and\nconversely, would be a case of transubstantiation. But there is nothing\nmiraculous in the matter. \"Assets\" are a pecuniary magnitude, and belong\namong the facts of investment. Except in relation to investment the\nitems of wealth involved are not assets. In other words, assets are a\nmatter of capitalisation, which is a special case of valuation; and the\nquestion of tangibility or intangibility as regards a given parcel of\nassets is a question of what article or class of articles the valuation\nshall attach to or be imputed to. If, _e.g._, the fact to which value is\nimputed in the valuation is the habitual demand for a given article of\nmerchandise, or the habitual resort of a given group of customers to a\nparticular shop or merchant, or a monopolistic control or limitation of\nprice and supply, then the resulting item of assets will be\n\"intangible,\" since the object to which the capitalised value in\nquestion is imputed is an immaterial object. If the fact which is by\nimputation made the bearer of the capitalised value is a material\nobject, as, _e.g._, the merchantable goods of which the supply is\narbitrarily limited or the price arbitrarily fixed, or if it is the\nmaterial means of supplying such goods, then the capitalised value in\nquestion is a case of tangible assets. The value involved is, like all\nvalue, a matter of imputation, and as assets it is a matter of\ncapitalisation; but capitalisation is an appraisement of a pecuniary\n\"income-stream\" in terms of the vendible objects to the ownership of\nwhich the income is assumed to inure. To what object the capitalised\nvalue of the \"income-stream\" shall be imputed is a question of what\nobject of ownership secures to the owner an effectual claim on this\n\"income-stream \"; that is to say, it is a question of what object of\nownership the strategic advantages is assumed to attach to, which is a\nquestion of the play of business exigencies in the given case.\n\nThe \"income-stream\" in question is a pecuniary income-stream, and is in\nthe last resort traceable to transactions of sale. Within the confines\nof business--and therefore within the scope of capital, investments,\nassets, and the like business concepts--transactions of purchase and\nsale are the final terms of any analysis. But beyond these confines,\ncomprehending and conditioning the business system, lie the material\nfacts of the community's work and livelihood. In the final transaction\nof sale the merchantable goods are valued by the consumer, not as\nassets, but as livelihood;[9] and in the last analysis and long run it\nis to some such transaction that all business imputations of value and\ncapitalistic appraisement of assets must have regard and by which they\nmust finally be checked. Dissociated from the facts of work and\nlivelihood, therefore, assets cease to be assets; but this does not\npreclude their relation to these facts of work and livelihood being at\ntimes somewhat remote and loose.\n\nWithout recourse, immediately or remotely, to certain material facts of\nindustrial process and equipment, assets would not yield earnings; that\nis to say, wholly disjoined from these material facts, they would in\neffect not be assets. This is true for both tangible and intangible\nassets, although the relation of the assets to the material facts of\nindustry is not the same in the two cases. The case of tangible assets\nneeds no argument. Intangible assets, such as patent right or\nmonopolistic control, are likewise of no effect except in effectual\ncontact with industrial facts. The patent right becomes effective for\nthe purpose only in the material working of the innovation covered by\nit; and monopolistic control is a source of gain only in so far as it\neffectually modifies or divides the supply of goods.\n\nIn the light of these considerations it seems feasible to indicate both\nthe congruence and the distinction between the two categories of assets\na little more narrowly than was done above. Both are assets,--that is to\nsay, both are values determined by a capitalisation of anticipated\nincome-yielding capacity; both depend for their income-yielding capacity\non the preferential use of certain immaterial factors; both depend for\ntheir efficiency on the use of certain material objects; both may\nincrease or decrease, as assets, apart from any increase or decrease of\nthe material objects involved. The tangible assets capitalise the\npreferential use of technological, industrial expedients,--expedients of\nproduction, dealing with the facts of brute nature under the laws of\nphysical cause and effect,--this preferential use being secured by the\nownership of material articles employed in the processes in which these\nexpedients are put into effect. The intangible assets capitalise the\npreferential use of certain facts of human nature--habits, propensities,\nbeliefs, aspirations, necessities--to be dealt with under the\npsychological laws of human motivation; this preferential use being\nsecured by custom, as in the case of old-fashioned good-will, by legal\nassignment, as in patent or copyright, by ownership of the instruments\nof production, as in the case of industrial monopolies.[10]\n\n       *       *       *       *       *\n\nIntangible assets are capital as well as tangible assets; that is to\nsay, they are items of capitalised wealth. Both categories of assets,\ntherefore, represent expected \"income-streams\" which are of such\ndefinite character as to admit of their being rated in set terms per\ncent. per time unit; although the expected income need not therefore be\nanticipated to come in an even flow or to be distributed in any equable\nmanner over a period of time. The income-streams to be so rated and\ncapitalised are associated in such a manner with some external fact\n(impersonal to their claimant), whether material or immaterial, as to\npermit their being traced or attributed to an income-yielding capacity\non the part of this external fact, to which their valuation as a whole\nmay be imputed and which may then be capitalised as an item of wealth\nyielding this income-stream. Income-streams which do not meet these\nrequirements do not give rise to assets in the accepted sense of the\nterm, and so do not swell the volume of capitalised wealth.\n\nThere are income-streams which do not meet the necessary specifications\nof capitalisable wealth; and in modern business traffic, particularly,\nthere are large and secure sources of income that are in this way not\ncapitalisable and yet yield a legitimate business income. Such are,\nindeed, to be rated among the most consequential factors in the current\nbusiness situation. Under the guidance of traditions carried over from a\nmore primitive business situation, it has been usual to speak of\nincome-streams derived in such a manner as \"wages of superintendence,\"\nor \"undertaker's wages,\" or \"entrepreneur's profits,\" or, latterly, as\n\"profits\" simply and specifically. Such phenomena of this class as are\nof consequence in business are commonly accounted for, theoretically,\nunder this head; and the effort so to account for them is to be taken\nas, at least, a laudable endeavor to avoid an undue multiplication of\ntechnical terms and categories.[11] Yet the most striking phenomena of\nthis class, and the most consequential for modern business and industry,\nboth in respect of their magnitude and in respect of the pecuniary\ndominion and discretion which they represent, cannot well be accounted\nundertaker's gains, in the ordinary sense of that term. The great gains\nof the great industrial financiers or of the great \"interests,\" _e.g._,\ndo not answer the description of undertaker's gains, in that they do not\naccrue to the captain of industry on the basis of his \"managerial\nability\" alone, apart from his wealth or out of relation to his wealth;\nand yet it is not safe to say that such gains (which are over and above\nordinary returns on his investments) accrue on the ground of the\nrequisite amount of wealth alone, apart from the exercise of a large\nbusiness direction on the part of the owner of such wealth, or on the\npart of his agent to whom discretion has been delegated. Administrative,\nor strategic, discretion and activity must necessarily be present in the\ncase: otherwise, the income in question would rightly be rated as income\nfrom capital simply.\n\nThe captain of industry, the pecuniary magnate, is normally in receipt\nof income in excess of the ordinary rate per cent. on investment; but\napart from his large holdings he is not in a position to get these large\ngains. Dissociated from his large holdings, he is not a large captain of\nindustry; but it is not the size of his holdings alone that determines\nwhat the gains of the pecuniary magnate in modern industry shall be.\nGains of the kind and magnitude that currently come to this class of\nbusiness men come only on condition that the owner (or his agent) shall\nexercise a similarly large discretion and control in the affairs of the\nbusiness community; but the magnitude of the gains, as well as of the\ndiscretion and control exercised, is somewhat definitely conditioned by\nthe magnitude of the wealth which gives effect to this discretion.\n\nThe disposition of pecuniary forces in such matters may be well seen in\nthe work and remuneration of any coalition of \"interests,\" such as the\nmodern business community has become familiar with. The \"interests\" in\nsuch a case are of a personal character,--they are \"interested\nparties,\"--and the sagacity, experience, and animus of these various\ninterested parties counts in the outcome, both as regards the aggregate\ngains of the coalition and as regards the distribution of these gains\namong the several parties in interest; but the weight of any given\n\"interest\" in a coalition or \"system\" is more nearly proportioned to the\nwealth controlled by the given \"interest,\" and to the strategic position\nof such wealth, than to any personal talents or proficiency of the\n\"interested party.\" The talents and proficiency involved are not the\nmain facts. Indeed, the movements of such a \"system,\" and of the several\ncomponent \"interests,\" are largely a matter of artless routine, in which\nthe greatest ingenuity and initiative engaged in the premises are\ncommonly exercised by the legal counsel working for a fee.\n\nA dispassionate student of the current business traffic, who is not\noverawed by round numbers, will be more impressed by the ease and\nsimplicity of the manoeuvers that lead to large pecuniary results in the\nhigher business finance than by any evidence of preeminent sagacity and\ninitiative among the pecuniary magnates. One need only call to mind the\nsimple and obvious way in which the promoters of the Steel Corporation\nwere magnificently checkmated by the financiers of the Carnegie\n\"interest,\" when that great and reluctant corporation was floated, or\nthe pettyfogging tactics of Standard Oil in its later career. In\nextenuation of their visible lack of initiative and insight it may not\nbe ungraceful to call to mind that many of the discretionary heads of\nthe great \"interests\" are men of advanced years, and that in the nature\nof the case the pecuniary magnates of the present generation must\ncommonly be men of a somewhat advanced age; and it is only during the\npresent generation that the existing situation has arisen, with its\ncharacteristic opportunities and demands. To take their present foremost\nrank in the new business finance which is here under inquiry, they have\nhad to accumulate the great wealth on which alone their discretionary\ncontrol of business affairs rests, and their best vigor has been spent\nin this work of preparation; so that they have commonly attained the\nrequisite strategic position only after they had outlived their \"years\nof discretion.\"\n\nBut there is no intention here to depreciate the work of the pecuniary\nmagnates or the spokesmen of the great \"interests.\" The matter has been\nreferred to only as it bears on this category of capitalistic income\nwhich accrues on other grounds than the \"earning-capacity\" of the assets\ninvolved, and which still cannot be imputed to the \"earning-capacity\" of\nthese business men apart from these assets. The case is evidently not\none of \"wages of superintendence\" or \"undertaker's profits\"; but it is\nas evidently not a case of the earning-capacity of the assets. The proof\nof the latter point is quite as easy as of the former. If the gains of\nthe \"system\" or of its constituent \"interests\" and magnates were\nimputable to the earning-capacity of the assets involved,--in any\naccepted sense of \"earnings,\"--then it would immediately follow that\nthese assets would be recapitalised on the basis of these extraordinary\nearnings, and that the income derived in this class of traffic should\nreappear as interest or dividends on the capital so increased to\ncorrespond with the increased earnings. But such recapitalisation takes\nplace only to a relatively very limited extent, and the question then\nbears on the income which is not so accounted for in the\nrecapitalisation.\n\nThe gains of this class of traffic are, of course, themselves\ncapitalised,--for the most part they accrue in the capitalised form, as\nissues of securities and the like; but the sources of this income are\nnot capitalised as such. The (large) accumulated wealth, or assets,\nwhich gives weight to the movements of the \"interests\" and magnates in\nquestion, and which affords the ground for the discretionary control of\nbusiness affairs exercised by them, are, for the most part at least,\ninvested in ordinary business ventures, in the form of corporation\nsecurities and the like, and are there earning dividends or interest at\ncurrent rates; and these assets are valued in the market (and thereby\ncapitalised) on the basis of their current earnings in the various\nenterprises in which they are so invested. But their being so invested\nin profitable business enterprises does not in the least hinder their\nusefulness in the hands of the magnates as a basis or means of carrying\non the large and highly profitable transactions of the higher industrial\nfinance. To impute these gains to these assets as \"earnings,\" therefore,\nwould be to count the assets twice as capital, or rather to count them\nover and over.\n\nAn additional perplexity in endeavoring to handle gains of this class\ntheoretically as earnings, in the ordinary sense, arises from the fact\nthat they stand in no definable time relation to their underlying\nassets. They have no definable \"time-shape,\" as Mr. Fisher might put\nit.[12] Such gains are timeless, in the sense that the time relation\ndoes not count in any substantial manner or in any sensible degree in\ntheir determination.[13]\n\n       *       *       *       *       *\n\nIn a more painstaking statement of this point of theory it would be\nnecessary to note that these gains are \"timeless,\" in the sense\nindicated, in so far as the enterprise from which they accrue is\ndissociated from the technological circumstances and processes of\nindustry, and only in so far. Technological (industrial) procedure,\nbeing of the nature of physical causation, is subject to the time\nrelation under which causal sequence runs. This is the basis of such\ndiscussions of capital and interest as those of Boehm-Bawerk, and of\nFisher. But business traffic, as distinguished from the processes of\nindustry, being not immediately concerned with the technological\nprocess, is also not immediately or uniformly subject to the time\nrelation involved in the causal sequence of the technological process.\nBusiness traffic is subject to the time relation because and in so far\nas it depends upon and follows up the processes of production. The\ncommonplace or old-fashioned business enterprise, the competitive system\nof investment in industrial business simply, commonly rests pretty\ndirectly on the due sequence of the industrial processes in which the\ninvestments of such enterprise are placed. Such enterprise, as conceived\nby the current theories of capital, does business at first hand in the\nindustrial efficiency of the community, which is conditioned by the time\nrelation of the causal sequence, and which is, indeed, in great measure\na function of the time consumed in the technological processes.\nTherefore, the gains, as well as the transactions, of such enterprise\nare also commonly somewhat closely conditioned by the like time\nrelation, and they typically emerge under the form of a per-cent. per\ntime unit; that is to say, as a function of the lapse of time. Yet the\nbusiness transactions themselves are not a matter of the lapse of time.\nTime is not of the essence of the case. The magnitude of a pecuniary\ntransaction is not a function of the time consumed in concluding it, nor\nare the gains which accrue from the transaction. In business enterprise\non the higher plane, which is here under inquiry, the relation of the\ntransactions, and of their gains, to the consecution of the\ntechnological processes remotely underlying them is distant, loose, and\nuncertain, so that the time element here does not obtrude itself:\nrather, it somewhat obviously falls into abeyance, marking the degree of\nits remoteness. Yet this phase of business enterprise, like any other,\nof course takes place in time; and, it is also to be remarked, the\nvolume of the traffic and the gains derived from it are, no doubt,\nsomewhat closely conditioned in the long run by the time relation which\ndominates that technological (industrial) efficiency on which this\nenterprise, too, ultimately and indirectly rests and from which in the\nlast resort its gains are finally drawn, however remotely and\nindirectly.\n\nAn analysis of these phenomena on lines similar to those which have been\nfollowed in the discussion of assets above is not without difficulty,\nnor can it fairly be expected to yield any but tentative and provisional\nresults. The matter has received so little attention from economic\ntheoreticians that even significant mistakes in this connection are of\nvery rare occurrence.[14] The cause of this scant attention to these\nmatters lies, no doubt, in the relative novelty of the facts in\nquestion. The facts may be roughly drawn together under the caption\n\"Traffic in Vendible Capital\"; although that term serves rather as a\ncomprehensive designation of the class of business enterprise from which\nthese gains accrue than as an adequate characterisation of the play of\nforces involved.[15] Traffic in vendible capital has not been unknown\nin the past, but it is only recently that it has come into the\nforeground as the most important line of business enterprise. Such it\nnow is, in that it is in this traffic that the ultimate initiative and\ndiscretion in business are now to be found. It is at the same time the\nmost gainful of business enterprise, not only in absolute terms, but\nrelatively to the magnitude of the assets involved as well. One reason\nfor this superior gainfulness is the fact that the assets involved in\nthis traffic are at the same time engaged as assets to their full extent\nin ordinary business, so that the peculiar gains of this traffic are of\nthe nature of a bonus above the earnings of the invested wealth. \"It is\nlike finding money.\"\n\nAs was said above, the method, or the ways and means, characteristic of\nthis superior business enterprise is a traffic in vendible capital. The\nwealth gained in this field is commonly in the capitalised form, and\nconstitutes in each transaction, or \"deal,\" a deduction or abstraction\nfrom the capitalised wealth of the business community in favor of the\nmagnates or \"interests\" to whom the gains accrue. Its proximate aim is a\ntransfer of capitalised wealth from other capitalists to those who so\ngain. This transfer or abstraction of capitalised wealth from the former\nowners is commonly effected by an augmentation of the nominal capital,\nbased on a (transient) advantage inuring to the particular concerns\nwhose capitalisation is so augmented.[16] Any such increase of the\ncommunity's aggregate capitalisation, without a corresponding increase\nof the material wealth on which the capitalisation is based, involves,\nof course, in effect a redistribution of the aggregate capitalised\nwealth; and in this redistribution the great financiers are in a\nposition to gain. The gains in question, it will be seen, come out of\nthe business community, out of invested wealth, and only remotely and\nindirectly out of the community at large from which the business\ncommunity draws its income. These gains, therefore, are a tax on\ncommonplace business enterprise, in much the same manner and with much\nthe like effects as the gains of commonplace business (ordinary profits\nand interest) are a tax on industry.[17]\n\nIn a manner analogous to the old-fashioned capitalist-employer's\nengrossing of the industrial community's technological efficiency does\nthe modern pecuniary magnate engross the business community's\ncapitalistic efficiency. This capitalistic efficiency lies in the\ncapitalist-employer's ability--by force of the ownership of the material\nequipment--to induce the industrial community, through suitable\nbargaining, to turn over to the owner of the material equipment the\nexcess of the product above the industrial community's livelihood. The\nfortunes of the capitalist-employer are closely dependent on the run of\nthe market,--the conjunctures of advantageous purchase and sale; and it\nis his constant endeavor to create or gain for himself some peculiar\ndegree of advantage in the market, in the way of monopoly, good-will,\nlegalised privilege, and the like,--something in the way of intangible\nassets. But the pecuniary magnate, in the measure in which he truly\nanswers to the concept, is superior to the market on which the\ncapitalist-employer depends, and can make or mar its conjunctures of\nadvantageous purchase and sale of goods; that is to say, he is in a\nposition to make or mar any peculiar advantage possessed by the given\ncapitalist-employer who comes in his way. He does this by force of his\nlarge holdings of capital at large, the weight of which he can shift\nfrom one point of investment to another as the relative\nefficiency--earning-capacity--of one and another line of investment may\nmake it expedient; and at each move of this kind, in so far as it is\neffective for his ends, he cuts into and assimilates a fraction of the\ninvested wealth involved, in that he cuts into and sequesters a fraction\nof the capital's earning-capacity in the given line. That is to say, in\nthe measure in which he is a pecuniary magnate, and not simply a\ncapitalist-employer, he engrosses the capitalistic efficiency of\ninvested wealth; he turns to his own account the capitalist-employer's\neffectual engrossing of the community's industrial efficiency. He\nengrosses the community's pecuniary initiative and proficiency. In the\nmeasure, therefore, in which this relatively new-found serviceability of\nextraordinarily large wealth is effective for its peculiar business\nfunction, the old-fashioned capitalist-employer loses his discretionary\ninitiative and becomes a mediator, an instrumentality of extraction and\ntransmission, a collector and conveyer of revenue from the community at\nlarge to the pecuniary magnate, who, in the ideal case, should leave him\nonly such an allowance out of the gross earnings collected and\ntransmitted as will induce him to continue in business.\n\nTo the community at large, whose industrial efficiency is already\nvirtually engrossed by the capitalist-employer's ownership and control\nof the material equipment, this later step in the evolution of the\neconomic situation should apparently not be a matter of substantial\nconsequence or a matter for sentimental disturbance. On the face of it,\nit should appear to have little more than a speculative interest for\nthose classes of the community who do not derive an income from\ninvestments; particularly not for the working classes, who own nothing\nto speak of and whose only dependence is their technological efficiency,\nwhich has virtually ceased to be their own. But such is not the current\nstate of sentiment. This inchoate new phase of capitalism, this business\nenterprise on the higher plane, is in fact viewed with the most lively\napprehension. In a maze of consternation and solicitude the boldest,\nwisest, most public-spirited, most illustrious gentlemen of our time are\nspending their manhood in an endeavor to make the hen continue sitting\non the nest after the chickens are out of the shell. The modern\ncommunity is imbued with business principles--of the old dispensation.\nBy precept and example, men have learned that the business interests\n(of the authentic superannuated scale and kind) are the palladium\nof our civilisation, as Mr. Dooley would say; and it is felt\nthat any disturbance of the existing pecuniary dominion of the\ncapitalist-employer--as contrasted with the pecuniary magnate--would\ninvolve the well-being of the community in one common agony of\ndesolation.\n\nThe merits of this perturbation, or of the remedies proposed for saving\nthe pecuniary life of the old-fashioned capitalist-employer, of course\ndo not concern the present inquiry; but the matter has been referred to\nhere as evidence that the pecuniary magnate's work, and the dominion\nwhich his extraordinarily large wealth gives him, are, in effect,\nsubstantially a new phase of the economic development, and that these\nphenomena are distastefully unfamiliar and are felt to be consequential\nenough to threaten the received institutional structure. That is to\nsay, it is felt to be a new phase of business enterprise,--distasteful\nto those who stand to lose by it.\n\nThe basis of this business enterprise on the higher plane is\ncapital-at-large, as distinguished from capital invested in a given line\nof industrial enterprise, and it becomes effective when wealth has\naccumulated in holdings sufficiently large to give the holder (or\ncombination of holders, the \"system\") a controlling weight in any group\nor ramification of business interests into which he may throw his weight\nby judicious investment (or by underwriting and the like). The pecuniary\nmagnate must be able effectually to engross the pecuniary initiative and\nthe business opportunities on which such a section or ramification of\nthe business community depends for its ordinary gains. How large a\nproportion of the business community's capital is needed for such an\neffectual engrossing of its capitalistic efficiency, in any given\nbearing, is a question that cannot be answered in anything like absolute\nterms, or even in relative terms of a satisfactorily definite kind. It\nis, of course, evident that a relatively large disposable body of\ncapital is needed for such a purpose; and it is also evident, from the\ncurrent facts of business, that the body of capital so disposed of need\nnot amount to a majority, or anything near a majority, of the\ninvestments involved,--at least not at the present relatively inchoate\nphase of this larger business enterprise. The larger the holdings of the\nmagnate, the more effectual and expeditious will be his work of\nabsorbing the holdings of the smaller capitalist-employer, and the more\nprecipitately will the latter yield his assets to the new claimant.\n\nEvidently, this work of the pecuniary magnate bears a great resemblance\nto the creation of intangible assets under the ordinary competitive\nsystem. This is, no doubt, the point of its nearest relation to the\ncurrent capitalistic enterprise. But, as has already been indicated\nabove, it cannot be said that the magnate's peculiar work is the\ncreation of intangible, or other assets, although there is commonly some\nrecapitalisation involved in his manoeuvers, and although his gains\ncommonly come as assets, _i.e._, in the capitalised form. Nor can it, as\nhas also been indicated above, be said that the wealth which serves him\nas the means of his peculiar enterprise stands in the relation of assets\nto this enterprise or to the gains in question, since this wealth\nalready stands in an exhaustive relation as assets to some corporate\nenterprise in ordinary business and to the corresponding items of\ninterest and dividends. It may, of course, be contended that the present\nstate of things on this higher plane of enterprise is transient and\ntransitional only, and that in the settled condition which may\nconceivably supervene, the magnate's relation to business at large will\nbe capitalised in some form of intangible assets, after the manner in\nwhich the monopoly advantage of an ordinary \"trust\" is now capitalised.\nBut this is at the best only a surmise, guided by inapplicable\ngeneralisations drawn from a past situation in which this higher\nenterprise has not engrossed the pecuniary initiative and played the\nruling part.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _The Quarterly Journal of Economics_,\nVol. XXIII, Nov., 1908.\n\n[2] See this Journal for August, 1908.\n\n[3] For the connection between prices and prosperity, hard times,\nunemployment, etc., see _The Theory of Business Enterprise_, chap. vii\n(pp. 185-252, especially 196-212).\n\n[4] By \"perversion\" is here meant such disposition of the industrial\nforces as entails a net waste or detriment to the community's\nlivelihood.\n\n[5] Should the connection at this point with the main argument of the\npaper as set forth in the earlier section seem doubtful or obscure, it\nmay be called to mind that these dubious enterprises in dissipation are\ncases of investment for a profit, and that the \"capital goods\" engaged\nare invested wealth yielding an income, but that they yield an income\nonly on the fulfillment of two conditions: (_a_) the possession and\nemployment of these capital goods enables their holder to turn to\naccount the common stock of technological proficiency, in those bearings\nin which it may be of use in his enterprise; and (_b_) the limited\namount of wealth available for the purpose enables their holder to\n\"engross\" the usufruct of such a fraction of the common stock of\ntechnological proficiency, in the degree determined by this limitation\nof the amount available. In so far, these enterprises are like any other\nindustrial enterprise; but beyond this they have the peculiarity that\nthey do not, or need not, even ostensibly, turn the current knowledge\nand use of ways and means to \"productive\" account for the community at\nlarge, but simply take their stand on the (institutionally sacred)\n\"accomplished fact\" of invested wealth. They have less of the fog of\napology about them than the common run of business enterprise.\n\n[6] This statement may not seem clear without indicating in a more\nconcrete manner some terms in which to measure the relative differential\nadvantage and disadvantage which so emerge in such a case of prerogative\nor privilege. Where, as in the earlier, non-pecuniary phases of culture,\nno price test is applicable, the statement in the text may be taken to\nmean that the differential disadvantage at the cost of which the\ndifferential benefit in question is gained is greater than the\nbeneficiary would be willing to undergo in order to procure this\nbenefit.\n\n[7] A doubt has been offered as to the applicability of this\ncharacterization to such intangible assets as a patent right and other\nitems of the same class. The doubt seems to arise from a misapprehension\nof the analysis and of its intention. It should be remarked that there\nis no intention to condemn or disapprove any of the items here spoken of\nas intangible assets. The patent right may be justifiable or it may not:\nthere is no call to discuss that question here. Other intangible assets\nare in the same case in this respect.\n\nFurther, as to the character of a patent right considered as an asset.\nThe invention or innovation covered by the patent right is a\ncontribution to the common stock of technological proficiency. It may be\n(immediately) serviceable to the community at large, or it may\nnot;--_e.g._, a cash register, a bank-check punch, a streetcar fare\nregister; a burglar-proof safe, and the like are of no immediate service\nto the community at large, but serve only a pecuniary use to their\nusers. But, whether the innovation is useful or not, the patent right,\nas an asset, has no (immediate) usefulness at large, since its essence\nis the restriction of the usufruct of the innovation to the patentee.\nImmediately and directly the patent right must be considered a detriment\nto the community at large, since its purport is to prevent the community\nfrom making use of the patented innovation, whatever may be its ulterior\nbeneficial effects or its ethical justification.\n\n[8] Neither as a physical magnitude (\"land\") nor as a pecuniary\nmagnitude (\"real estate\") is the capitalised land in question an item of\n\"good-will\"; but its value as real estate--_i.e._, its magnitude as an\nasset--is in part a product of the \"good-will\" (illusions and the like)\nworked up in its behalf and turned to account, by the land agent. The\nreal estate is a tangible asset, an item of material wealth, while the\n\"good-will\" to which in part it owes its magnitude as an item of wealth\nis an intangible asset, an item of immaterial wealth.\n\n[9] \"Livelihood\" is, of course, here taken in a loose sense, not as\ndenoting the means of subsistence simply or even the means of physical\ncomfort, but as signifying that the purchases in question are made with\na view to the consumptive use of the goods rather than with a view to\ntheir use for a profit.\n\n[10] The instruments of production so monopolised are, of course,\ntangible assets, but the ownership of such means of production in amount\nsufficient to enable the owner to monopolise or control the market,\nwhether for purchase (as of materials or labor) or for sale (as of\nmarketable goods or services), gives rise to a differential business\nadvantage which is to be classed as intangible assets.\n\n[11] One writer even goes so far in the endeavor to bring the facts\nwithin the scope of the staple concepts of theory at this point as to\nrate the persons concerned in such a case as \"capital,\" after having\nsatisfied himself that such income-streams are traceable to a personal\nsource.--See Fisher, _Nature of Capital and Income_, chap. v.\n\n[12] _Cf._ Fisher, _Rate of Interest_, chap. vi.\n\n[13] This conclusion is reached, _e.g._, by Mr. G. P. Watkins (_The\nGrowth of Large Fortunes_, chap. iii, sec. 10), although through a\ncurious etymological misapprehension he rejects the term \"timeless\" as\nnot available.\n\n[14] Even Mr. Watkins (as cited above), _e.g._, is led by a superficial\ngeneralisation to class these gains as \"speculative,\" and so to excuse\nhimself from a closer acquaintance with their character and with the\nbearings of the class of business enterprise out of which they arise.\n\n[15] _Cf._ _Theory of Business Enterprise_, chap, v, pp. 119-130; chap.\nvi, pp. 162-174.\n\n[16] _Cf._ _Theory of Business Enterprise_, footnote on pp. 169-170.\n\n[17] As should be evident from the run of the argument in the earlier\nportions of this paper, the use of the words \"tax,\" \"deduction,\"\n\"abstraction,\" in this connection, is not to be taken as implying\napproval or disapproval of the phenomena so characterised. The words are\nused for want of better terms to indicate the source of business gains,\nand objectively to characterise the relation of give-and-take between\nindustry and ordinary capitalistic business, on the one hand, and\nbetween ordinary business and this business enterprise on the higher\nplane, on the other hand.\n\n\n\n\nSOME NEGLECTED POINTS IN THE THEORY OF SOCIALISM[1]\n\n\nThe immediate occasion for the writing of this paper was given by the\npublication of Mr. Spencer's essay, \"From Freedom to Bondage\";[2]\nalthough it is not altogether a criticism of that essay. It is not my\npurpose to controvert the position taken by Mr. Spencer as regards the\npresent feasibility of any socialist scheme. The paper is mainly a\nsuggestion, offered in the spirit of the disciple, with respect to a\npoint not adequately covered by Mr. Spencer's discussion, and which has\nreceived but very scanty attention at the hands of any other writer on\neither side of the socialist controversy. This main point is as to an\neconomic ground, as a matter of fact, for the existing unrest that finds\nexpression in the demands of socialist agitators.\n\nI quote from Mr. Spencer's essay a sentence which does fair justice, so\nfar as it goes, to the position taken by agitators: \"In presence of\nobvious improvements, joined with that increase of longevity, which even\nalone yields conclusive proof of general amelioration, it is proclaimed,\nwith increasing vehemence, that things are so bad that society must be\npulled to pieces and reorganised on another plan.\" The most obtrusive\nfeature of the change demanded by the advocates of socialism is\ngovernmental control of the industrial activities of society--the\nnationalisation of industry. There is also, just at present, a distinct\nmovement in practice, towards a more extended control of industry by the\ngovernment, as Mr. Spencer has pointed out. This movement strengthens\nthe position of the advocates of a complete nationalisation of industry,\nby making it appear that the logic of events is on their side.\n\nIn America at least, this movement in the direction of a broader\nassertion of the paramount claims of the community, and an extension of\ncorporate action on part of the community in industrial matters, has not\ngenerally been connected with or based on an adherence to socialistic\ndogmas. This is perhaps truer of the recent past than of the immediate\npresent. The motive of the movement has been, in large part, the\nexpediency of each particular step taken. Municipal supervision, and,\npossibly, complete municipal control, has come to be a necessity in the\ncase of such industries--mostly of recent growth--as elementary\neducation, street-lighting, water-supply, etc. Opinions differ widely as\nto how far the community should take into its own hands such industries\nas concern the common welfare, but the growth of sentiment may fairly be\nsaid to favor a wider scope of governmental control.\n\nBut the necessity of some supervision in the interest of the public\nextends to industries which are not simply of municipal importance. The\nmodern development of industry and of the industrial organisation of\nsociety makes it increasingly necessary that certain industries--often\nspoken of as \"natural monopolies\"--should be treated as being of a\nsemi-public character. And through the action of the same forces a\nconstantly increasing number of occupations are developing into the form\nof \"natural monopolies.\"\n\nThe motive of the movement towards corporate action on the part of the\ncommunity--State control of industry--has been largely that of\nindustrial expediency. But another motive has gone with this one, and\nhas grown more prominent as the popular demands in this direction have\ngathered wider support and taken more definite form. The injustice, the\ninequality, of the existing system, so far as concerns these natural\nmonopolies especially, are made much of. There is a distinct unrest\nabroad, a discontent with things as they are, and the cry of injustice\nis the expression of this more or less widely prevalent discontent. This\ndiscontent is the truly socialistic element in the situation.\n\nIt is easy to make too much of this popular unrest. The clamor of the\nagitators might be taken to indicate a wider prevalence and a greater\nacuteness of popular discontent than actually exists; but after all due\nallowance is made for exaggeration on the part of those interested in\nthe agitation, there can still be no doubt of the presence of a chronic\nfeeling of dissatisfaction with the working of the existing industrial\nsystem, and a growth of popular sentiment in favor of a leveling policy.\nThe economic ground of this popular feeling must be found, if we wish to\nunderstand the significance, for our industrial system, of the movement\nto which it supplies the motive. If its causes shall appear to be of a\ntransient character, there is little reason to apprehend a permanent or\nradical change of our industrial system as the outcome of the agitation;\nwhile if this popular sentiment is found to be the outgrowth of any of\nthe essential features of the existing social system, the chances of its\nultimately working a radical change in the system will be much greater.\n\nThe explanation offered by Mr. Spencer, that the popular unrest is due\nessentially to a feeling of _ennui_--to a desire for a change of posture\non part of the social body, is assuredly not to be summarily rejected;\nbut the analogy will hardly serve to explain the sentiment away. This\nmay be a cause, but it can hardly be accepted as a sufficient cause.\n\nSocialist agitators urge that the existing system is necessarily\nwasteful and industrially inefficient. That may be granted, but it does\nnot serve to explain the popular discontent, because the popular\nopinion, in which the discontent resides, does notoriously not favor\nthat view. They further urge that the existing system is unjust, in that\nit gives an advantage to one man over another. That contention may also\nbe true, but it is in itself no explanation, for it is true only if it\nbe granted that the institutions which make this advantage of one man\nover another possible are unjust, and that is begging the question. This\nlast contention is, however, not so far out of line with popular\nsentiment. The advantage complained of lies, under modern conditions, in\nthe possession of property, and there is a feeling abroad that the\nexisting order of things affords an undue advantage to property,\nespecially to owners of property whose possessions rise much above a\ncertain rather indefinite average. This feeling of injured justice is\nnot always distinguishable from envy; but it is, at any rate, a factor\nthat works towards a leveling policy. With it goes a feeling of slighted\nmanhood, which works in the same direction. Both these elements are to a\ngreat extent of a subjective origin. They express themselves in the\ngeneral, objective form, but it is safe to say that on the average they\nspring from a consciousness of disadvantage and slight suffered by the\nperson expressing them, and by persons whom he classes with himself. No\nflippancy is intended in saying that the rich are not so generally\nalive to the necessity of any leveling policy as are people of slender\nmeans. Any question as to the legitimacy of the dissatisfaction, on\nmoral grounds, or even on grounds of expediency, is not very much to the\npoint; the question is as to its scope and its chances of persistence.\n\nThe modern industrial system is based on the institution of private\nproperty under free competition, and it cannot be claimed that these\ninstitutions have heretofore worked to the detriment of the material\ninterests of the average member of society. The ground of discontent\ncannot lie in a disadvantageous comparison of the present with the past,\nso far as material interests are concerned. It is notorious, and,\npractically, none of the agitators deny, that the system of industrial\ncompetition, based on private property, has brought about, or has at\nleast co-existed with, the most rapid advance in average wealth and\nindustrial efficiency that the world has seen. Especially can it fairly\nbe claimed that the result of the last few decades of our industrial\ndevelopment has been to increase greatly the creature comforts within\nthe reach of the average human being. And, decidedly, the result has\nbeen an amelioration of the lot of the less favored in a relatively\ngreater degree than that of those economically more fortunate. The claim\nthat the system of competition has proved itself an engine for making\nthe rich richer and the poor poorer has the fascination of epigram; but\nif its meaning is that the lot of the average, of the masses of humanity\nin civilised life, is worse to-day, as measured in the means of\nlivelihood, than it was twenty, or fifty, or a hundred years ago, then\nit is farcical. The cause of discontent must be sought elsewhere than in\nany increased difficulty in obtaining the means of subsistence or of\ncomfort. But there is a sense in which the aphorism is true, and in it\nlies at least a partial explanation of the unrest which our conservative\npeople so greatly deprecate. The existing system has not made, and does\nnot tend to make, the industrious poor poorer as measured absolutely in\nmeans of livelihood; but it does tend to make them relatively poorer, in\ntheir own eyes, as measured in terms of comparative economic importance,\nand, curious as it may seem at first sight, that is what seems to count.\nIt is not the abjectly poor that are oftenest heard protesting; and when\na protest is heard in their behalf it is through spokesmen who are from\noutside their own class, and who are not delegated to speak for them.\nThey are not a negligible element in the situation, but the unrest which\nis ground for solicitude does not owe its importance to them. The\nprotest comes from those who do not habitually, or of necessity, suffer\nphysical privation. The qualification \"of necessity,\" is to be noticed.\nThere is a not inconsiderable amount of physical privation suffered by\nmany people in this country, which is not physically necessary. The\ncause is very often that what might be the means of comfort is diverted\nto the purpose of maintaining a decent appearance, or even a show of\nluxury.\n\nMan as we find him to-day has much regard to his good fame--to his\nstanding in the esteem of his fellowmen. This characteristic he always\nhas had, and no doubt always will have. This regard for reputation may\ntake the noble form of a striving after a good name; but the existing\norganisation of society does not in any way preeminently foster that\nline of development. Regard for one's reputation means, in the average\nof cases, emulation. It is a striving to be, and more immediately to be\nthought to be, better than one's neighbor. Now, modern society, the\nsociety in which competition without prescription is predominant, is\npreeminently an industrial, economic society, and it is\nindustrial--economic--excellence that most readily attracts the\napproving regard of that society. Integrity and personal worth will, of\ncourse, count for something, now as always; but in the case of a person\nof moderate pretentions and opportunities, such as the average of us\nare, one's reputation for excellence in this direction does not\npenetrate far enough into the very wide environment to which a person is\nexposed in modern society to satisfy even a very modest craving for\nrespectability. To sustain one's dignity--and to sustain one's\nself-respect--under the eyes of people who are not socially one's\nimmediate neighbors, it is necessary to display the token of economic\nworth, which practically coincides pretty closely with economic success.\nA person may be well-born and virtuous, but those attributes will not\nbring respect to the bearer from people who are not aware of his\npossessing them, and these are ninety-nine out of every one hundred that\none meets. Conversely, by the way, knavery and vulgarity in any person\nare not reprobated by people who know nothing of the person's\nshortcomings in those respects.\n\nIn our fundamentally industrial society a person should be economically\nsuccessful, if he would enjoy the esteem of his fellowmen. When we say\nthat a man is \"worth\" so many dollars, the expression does not convey\nthe idea that moral or other personal excellence is to be measured in\nterms of money, but it does very distinctly convey the idea that the\nfact of his possessing many dollars is very much to his credit. And,\nexcept in cases of extraordinary excellence, efficiency in any direction\nwhich is not immediately of industrial importance, and does not redound\nto a person's economic benefit, is not of great value as a means of\nrespectability. Economic success is in our day the most widely accepted\nas well as the most readily ascertainable measure of esteem. All this\nwill hold with still greater force of a generation which is born into a\nworld already encrusted with this habit of a mind.\n\nBut there is a further, secondary stage in the development of this\neconomic emulation. It is not enough to possess the talisman of\nindustrial success. In order that it may mend one's good fame\nefficiently, it is necessary to display it. One does not \"make much of a\nshowing\" in the eyes of the large majority of the people whom one meets\nwith, except by unremitting demonstration of ability to pay. That is\npractically the only means which the average of us have of impressing\nour respectability on the many to whom we are personally unknown, but\nwhose transient good opinion we would so gladly enjoy. So it comes about\nthat the appearance of success is very much to be desired, and is even\nin many cases preferred to the substance. We all know how nearly\nindispensable it is to afford whatever expenditure other people with\nwhom we class ourselves can afford, and also that it is desirable to\nafford a little something more than others.\n\nThis element of human nature has much to do with the \"standard of\nliving.\" And it is of a very elastic nature, capable of an indefinite\nextension. After making proper allowance for individual exceptions and\nfor the action of prudential restraints, it may be said, in a general\nway, that this emulation in expenditure stands ever ready to absorb any\nmargin of income that remains after ordinary physical wants and comforts\nhave been provided for, and, further, that it presently becomes as hard\nto give up that part of one's habitual \"standard of living\" which is due\nto the struggle for respectability, as it is to give up many physical\ncomforts. In a general way, the need of expenditure in this direction\ngrows as fast as the means of satisfying it, and, in the long run, a\nlarge expenditure comes no nearer satisfying the desire than a smaller\none.\n\nIt comes about through the working of this principle that even the\ncreature comforts, which are in themselves desirable, and, it may even\nbe, requisite to a life on a passably satisfactory plane, acquire a\nvalue as a means of respectability quite independent of, and out of\nproportion to, their simple utility as a means of livelihood. As we are\nall aware, the chief element of value in many articles of apparel is not\ntheir efficiency for protecting the body, but for protecting the\nwearer's respectability; and that not only in the eyes of one's\nneighbors but even in one's own eyes. Indeed, it happens not very rarely\nthat a person chooses to go ill-clad in order to be well dressed. Much\nmore than half the value of what is worn by the American people may\nconfidently be put down to the element of \"dress,\" rather than to that\nof \"clothing.\" And the chief motive of dress is emulation--\"economic\nemulation.\" The like is true, though perhaps in a less degree, of what\ngoes to food and shelter.\n\nThis misdirection of effort through the cravings of human vanity is of\ncourse not anything new, nor is \"economic emulation\" a modern fact. The\nmodern system of industry has not invented emulation, nor has even this\nparticular form of emulation originated under that system. But the\nsystem of free competition has accentuated this form of emulation, both\nby exalting the industrial activity of man above the rank which it held\nunder more primitive forms of social organisation, and by in great\nmeasure cutting off other forms of emulation from the chance of\nefficiently ministering to the craving for a good fame. Speaking\ngenerally and from the standpoint of the average man, the modern\nindustrial organization of society has practically narrowed the scope of\nemulation to this one line; and at the same time it has made the means\nof sustenance and comfort so much easier to obtain as very materially to\nwiden the margin of human exertion that can be devoted to purposes of\nemulation. Further, by increasing the freedom of movement of the\nindividual and widening the environment to which the individual is\nexposed--increasing the number of persons before whose eyes each one\ncarries on his life, and, _pari passu_, decreasing the chances which\nsuch persons have of awarding their esteem on any other basis than that\nof immediate appearances, it has increased the relative efficiency of\nthe economic means of winning respect through a show of expenditure for\npersonal comforts.\n\nIt is not probable that further advance in the same direction will lead\nto a different result in the immediate future; and it is the _immediate_\nfuture we have to deal with. A further advance in the efficiency of our\nindustry, and a further widening of the human environment to which the\nindividual is exposed, should logically render emulation in this\ndirection more intense. There are, indeed, certain considerations to be\nset off against this tendency, but they are mostly factors of slow\naction, and are hardly of sufficient consequence to reverse the general\nrule. On the whole, other things remaining the same, it must be admitted\nthat, within wide limits, the easier the conditions of physical life for\nmodern civilised man become, and the wider the horizon of each and the\nextent of the personal contact of each with his fellowmen, and the\ngreater the opportunity of each to compare notes with his fellows, the\ngreater will be the preponderance of economic success as a means of\nemulation, and the greater the straining after economic respectability.\nInasmuch as the aim of emulation is not any absolute degree of comfort\nor of excellence, no advance in the average well-being of the community\ncan end the struggle or lessen the strain. A general amelioration cannot\nquiet the unrest whose source is the craving of everybody to compare\nfavorably with his neighbor.\n\nHuman nature being what it is, the struggle of each to possess more than\nhis neighbor is inseparable from the institution of private property.\nAnd also, human nature being what it is, one who possesses less will, on\nthe average, be jealous of the one who possesses more; and \"more\" means\nnot more than the average share, but more than the share of the person\nwho makes the comparison. The criterion of complacency is, largely, the\n_de facto_ possession or enjoyment; and the present growth of sentiment\namong the body of the people--who possess less--favors, in a vague way,\na readjustment adverse to the interests of those who possess more, and\nadverse to the possibility of legitimately possessing or enjoying\n\"more\"; that is to say, the growth of sentiment favors a socialistic\nmovement. The outcome of modern industrial development has been, so far\nas concerns the present purpose, to intensify emulation and the jealousy\nthat goes with emulation, and to focus the emulation and the jealousy on\nthe possession and enjoyment of material goods. The ground of the unrest\nwith which we are concerned is, very largely, jealousy,--envy, if you\nchoose; and the ground of this particular form of jealousy, that makes\nfor socialism, is to be found in the institution of private property.\nWith private property, under modern conditions, this jealousy and unrest\nare unavoidable.\n\nThe corner-stone of the modern industrial system is the institution of\nprivate property. That institution is also the objective point of all\nattacks upon the existing system of competitive industry, whether open\nor covert, whether directed against the system as a whole or against\nany special feature of it. It is, moreover, the ultimate ground--and,\nunder modern conditions, necessarily so--of the unrest and discontent\nwhose proximate cause is the struggle for economic respectability. The\ninference seems to be that, human nature being what it is, there can be\nno peace from this--it must be admitted--ignoble form of emulation, or\nfrom the discontent that goes with it, this side of the abolition of\nprivate property. Whether a larger measure of peace is in store for us\nafter that event shall have come to pass, is of course not a matter to\nbe counted on, nor is the question immediately to the point.\n\nThis economic emulation is of course not the sole motive, nor the most\nimportant feature, of modern industrial life; although it is in the\nforeground, and it pervades the structure of modern society more\nthoroughly perhaps than any other equally powerful moral factor. It\nwould be rash to predict that socialism will be the inevitable outcome\nof a continued development of this emulation and the discontent which it\nfosters, and it is by no means the purpose of this paper to insist on\nsuch an inference. The most that can be claimed is that this emulation\nis one of the causes, if not the chief cause, of the existing unrest and\ndissatisfaction with things as they are; that this unrest is inseparable\nfrom the existing system of industrial organisation; and that the growth\nof popular sentiment under the influence of these conditions is\nnecessarily adverse to the institution of private property, and\ntherefore adverse to the existing industrial system of free competition.\n\n       *       *       *       *       *\n\nThe emulation to which attention has been called in the preceding\nsection of this paper is not only a fact of importance to an\nunderstanding of the unrest that is urging us towards an untried path in\nsocial development, but it has also a bearing on the question of the\npracticability of any scheme for the complete nationalisation of\nindustry. Modern industry has developed to such a degree of efficiency\nas to make the struggle of subsistence alone, under average conditions,\nrelatively easy, as compared with the state of the case a few\ngenerations ago. As I have labored to show, the modern competitive\nsystem has at the same time given the spirit of emulation such a\ndirection that the attainment of subsistence and comfort no longer\nfixes, even approximately, the limit of the required aggregate labor on\nthe part of the community. Under modern conditions the struggle for\nexistence has, in a very appreciable degree, been transformed into a\nstruggle to keep up appearances. The ultimate ground of this struggle to\nkeep up appearance by otherwise unnecessary expenditure, is the\ninstitution of private property. Under a regime which should allow no\ninequality of acquisition or of income, this form of emulation, which is\ndue to the possibility of such inequality, would also tend to become\nobsolete. With the abolition of private property, the characteristic of\nhuman nature which now finds its exercise in this form of emulation,\nshould logically find exercise in other, perhaps nobler and socially\nmore serviceable, activities; it is at any rate not easy to imagine it\nrunning into any line of action more futile or less worthy of human\neffort.\n\nSupposing the standard of comfort of the community to remain\napproximately at its present average, the abolition of the struggle to\nkeep up economic appearances would very considerably lessen the\naggregate amount of labor required for the support of the community. How\ngreat a saving of labor might be effected is not easy to say. I believe\nit is within the mark to suppose that the struggle to keep up\nappearances is chargeable, directly and indirectly, with one-half the\naggregate labor, and abstinence from labor--for the standard of\nrespectability requires us to shun labor as well as to enjoy the fruits\nof it--on part of the American people. This does not mean that the same\ncommunity, under a system not allowing private property, could make its\nway with half the labor we now put forth; but it means something more or\nless nearly approaching that. Any one who has not seen our modern social\nlife from this point of view will find the claim absurdly extravagant,\nbut the startling character of the proposition will wear off with longer\nand closer attention to this aspect of the facts of everyday life. But\nthe question of the exact amount of waste due to this factor is\nimmaterial. It will not be denied that is is a fact of considerable\nmagnitude, and that is all that the argument requires.\n\nIt is accordingly competent for the advocates of the nationalisation of\nindustry and property to claim that even if their scheme of organisation\nshould prove less effective for production of goods than the present, as\nmeasured absolutely in terms of the aggregate output of our industry,\nyet the community might readily be maintained at the present average\nstandard of comfort. The required aggregate output of the nation's\nindustry would be considerably less than at present, and there would\ntherefore be less necessity for that close and strenuous industrial\norganisation and discipline of the members of society under the new\nregime, whose evils unfriendly critics are apt to magnify. The chances\nof practicability for the scheme should logically be considerably\nincreased by this lessening of the necessity for severe application. The\nless irksome and exacting the new regime, the less chance of a reversion\nto the earlier system.\n\nUnder such a social order, where common labor would no longer be a mark\nof peculiar economic necessity and consequent low economic rank on part\nof the laborer, it is even conceivable that labor might practically come\nto assume that character of nobility in the eyes of society at large,\nwhich it now sometimes assumes in the speculations of the well-to-do, in\ntheir complacent moods. Much has sometimes been made of this possibility\nby socialist speculators, but the inference has something of a utopian\nlook, and no one, certainly, is entitled to build institutions for the\ncoming social order on this dubious ground.\n\nWhat there seems to be ground for claiming is that a society which has\nreached our present degree of industrial efficiency would not go into\nthe Socialist or Nationalist state with as many chances of failure as a\ncommunity whose industrial development is still at the stage at which\nstrenuous labor on the part of nearly all members is barely sufficient\nto make both ends meet.\n\nIn Mr. Spencer's essay, in conformity with the line of argument of his\n\"Principles of Sociology,\" it is pointed out that, as the result of\nconstantly operative social forces, all social systems, as regards the\nform of organisation, fall into the one or the other of Sir Henry\nMaine's two classes--the system of status or the system of contract. In\naccordance with this generalisation it is concluded that whenever the\nmodern system of contract or free competition shall be displaced, it\nwill necessarily be replaced by the only other known system--that of\nstatus; the type of which is the military organisation, or, also, a\nhierarchy, or a bureaucracy. It is something after the fashion of the\nindustrial organisation of ancient Peru that Mr. Spencer pictures as the\ninevitable sequel of the demise of the existing competitive system.\nVoluntary cooeperation can be replaced only by compulsory cooeperation,\nwhich is identified with the system of status and defined as the\nsubjection of man to his fellow-man.\n\nNow, at least as a matter of speculation, this is not the only\nalternative. These two systems, of status, or prescription, and of\ncontract, or competition, have divided the field of social organisation\nbetween them in some proportion or other in the past. Mr. Spencer has\nshown that, very generally, where human progress in its advanced stages\nhas worked towards the amelioration of the lot of the average member of\nsociety, the movement has been away from the system of status and\ntowards the system of contract. But there is at least one, if not more\nthan one exception to the rule, as concerns the recent past. The latest\ndevelopment of the industrial organisation among civilised\nnations--perhaps in an especial degree in the case of the American\npeople--has not been entirely a continuation of the approach to a regime\nof free contract. It is also, to say the least, very doubtful if the\nmovement has been towards a regime of status, in the sense in which Sir\nHenry Maine uses the term. This is especially evident in the case of the\ngreat industries which we call \"natural monopolies\"; and it is to be\nadded that the present tendency is for a continually increasing\nproportion of the industrial activities of the community to fall into\nthe category of \"natural monopolies.\" No revolution has been achieved;\nthe system of competition has not been discarded, but the course of\nindustrial development is not in the direction of an extension of that\nsystem at all points; nor does the principle of status always replace\nthat of competition wherever the latter fails.\n\nThe classification of methods of social organisation under the two heads\nof status or of contract, is not logically exhaustive. There is nothing\nin the meaning of the terms employed which will compel us to say that\nwhenever man escapes from the control of his fellow man, under a system\nof status, he thereby falls into a system of free contract. There is a\nconceivable escape from the dilemma, and it is this conceivable, though\nperhaps impracticable, escape from both these systems that the socialist\nagitator wishes to effect. An acquaintance with the aims and position of\nthe more advanced and consistent advocates of a new departure leaves no\ndoubt but that the principles of contract and of status, both, are in\nsubstance familiar to their thoughts--though often in a vague and\ninadequate form--and that they distinctly repudiate both. This is\nperhaps less true of those who take the socialist position mainly on\nethical grounds.\n\nAs bearing on this point it may be remarked that while the industrial\nsystem, in the case of all communities with whose history we are\nacquainted, has always in the past been organised according to a scheme\nof status or of contract, or of the two combined in some proportion, yet\nthe social organisation has not in all cases developed along the same\nlines, so far as concerns such social functions as are not primarily\nindustrial. Especially is this true of the later stages in the\ndevelopment of those communities whose institutions we are accustomed to\ncontemplate with the most complacency, _e.g._, the case of the\nEnglish-speaking peoples. The whole system of modern constitutional\ngovernment in its latest developed forms, in theory at least, and, in a\nmeasure, in practice, does not fall under the head of either contract or\nstatus. It is the analogy of modern constitutional government through an\nimpersonal law and impersonal institutions, that comes nearest doing\njustice to the vague notions of our socialist propagandists. It is true,\nsome of the most noted among them are fond of the analogy of the\nmilitary organisation, as a striking illustration of one feature of the\nsystem they advocate, but that must after all be taken as an _obiter\ndictum_.\n\nFurther, as to the manner of the evolution of existing institutions and\ntheir relation to the two systems spoken of. So far as concerns the\ncommunities which have figured largely in the civilised world, the\npolitical organisation has had its origin in a military system of\ngovernment. So, also, has the industrial organisation. But while the\ndevelopment of industry, during its gradual escape from the military\nsystem of status, has been, at least until lately, in the direction of a\nsystem of free contract, the development of the political organisation,\nso far as it has escaped from the regime of status, has not been in that\ndirection. The system of status is a system of subjection to personal\nauthority,--of prescription and class distinctions, and privileges and\nimmunities; the system of constitutional government, especially as seen\nat its best among a people of democratic traditions and habits of mind,\nis a system of subjection to the will of the social organism, as\nexpressed in an impersonal law. This difference between the system of\nstatus and the \"constitutional system\" expresses a large part of the\nmeaning of the boasted free institutions of the English-speaking people.\nHere, subjection is not to the person of the public functionary, but to\nthe powers vested in him. This has, of course, something of the ring of\nlatter-day popular rhetoric, but it is after all felt to be true, not\nonly speculatively, but in some measure also in practice.\n\nThe right of eminent domain and the power to tax, as interpreted under\nmodern constitutional forms, indicate something of the direction of\ndevelopment of the political functions of society at a point where they\ntouch the province of the industrial system. It is along the line\nindicated by these and kindred facts that the socialists are advancing;\nand it is along this line that the later developments made necessary by\nthe exigencies of industry under modern conditions are also moving. The\naim of the propagandists is to sink the industrial community in the\npolitical community; or perhaps better, to identify the two\norganisations; but always with insistence on the necessity of making the\npolitical organisation, in some further developed form, the ruling and\nonly one in the outcome. Distinctly, the system of contract is to be\ndone away with; and equally distinctly, no system of status is to take\nits place.\n\nAll this is pretty vague, and of a negative character, but it would\nquickly pass the limits of legitimate inference from the accepted\ndoctrines of the socialists if it should attempt to be anything more. It\ndoes not have much to say as to the practicability of any socialist\nscheme. As a matter of speculation, there seems to be an escape from the\ndilemma insisted on by Mr. Spencer. We may conceivably have nationalism\nwithout status and without contract. In theory, both principles are\nentirely obnoxious to that system. The practical question, as to whether\nmodern society affords the materials out of which an industrial\nstructure can be erected on a system different from either of these, is\na problem of constructive social engineering which calls for a\nconsideration of details far too comprehensive to be entered on here.\nStill, in view of the past course of development of character and\ninstitutions on the part of the people to which we belong, it is perhaps\nnot extravagant to claim that no form of organisation which should\nnecessarily eventuate in a thorough-going system of status could endure\namong us. The inference from this proposition may be, either that a near\napproach to nationalisation of industry would involve a regime of\nstatus, a bureaucracy, which would be unendurable, and which would\ntherefore drive us back to the present system before it had been\nentirely abandoned; or that the nationalisation would be achieved with\nsuch a measure of success, in conformity with the requirements of our\ntype of character, as would make it preferable to what we had left\nbehind. In either case the ground for alarm does not seem so serious as\nis sometimes imagined.\n\nA reversion to the system of free competition, after it had been in\nlarge part discarded, would no doubt be a matter of great practical\ndifficulty, and the experiment which should demonstrate the necessity of\nsuch a step might involve great waste and suffering, and might seriously\nretard the advance of the race toward something better than our present\ncondition; but neither a permanent deterioration of human society, nor a\nhuge catastrophe, is to be confidently counted on as the outcome of the\nmovement toward nationalisation, even if it should prove necessary for\nsociety to retrace its steps.\n\nIt is conceivable that the application of what may be called the\n\"constitutional method\" to the organisation of industry--for that is\nessentially what the advocates of Nationalisation demand--would result\nin a course of development analogous to what has taken place in the case\nof the political organisation under modern constitutional forms. Modern\nconstitutional government--the system of modern free institutions--is by\nno means an unqualified success, in the sense of securing to each the\nrights and immunities which in theory are guaranteed to him.\n\nOur modern republics have hardly given us a foretaste of that political\nmillennium whereof they proclaim the fruition. The average human nature\nis as yet by no means entirely fit for self-government according to the\n\"constitutional method.\" Shortcomings are visible at every turn. These\nshortcomings are grave enough to furnish serious arguments against the\npracticability of our free institutions. On the continent of Europe the\nbelief seems to be at present in the ascendant that man must yet, for a\nlong time, remain under the tutelage of absolutism before he shall be\nfit to organise himself into an autonomous political body. The belief is\nnot altogether irrational. Just how great must be the advance of society\nand just what must be the character of the advance, preliminary to its\nadvantageously assuming the autonomous--republican--form of political\norganisation, must be admitted to be an open question. Whether we, or\nany people, have yet reached the required stage of the advance is also\nquestioned by many. But the partial success which has attended the\nmovement in this direction, among the English-speaking people for\nexample, goes very far towards proving that the point in the development\nof human character at which the constitutional method may be\nadvantageously adopted in the political field, lies far this side the\npoint at which human nature shall have become completely adapted for\nthat method. That is to say, it does not seem necessary, as regards the\nfunctions of society which we are accustomed to call political, to be\nentirely ready for nationalisation before entering upon it. How far the\nanalogy of this will hold when applied to the industrial organisation of\nsociety is difficult to say, but some significance the analogy must be\nadmitted to possess.\n\nCertainly, the fact that constitutional government--the nationalisation\nof political functions--seems to have been a move in the right direction\nis not to be taken as proof of the advisability of forthwith\nnationalising the industrial functions. At the same time this fact does\nafford ground for the claim that a movement in this direction may prove\nitself in some degree advantageous, even if it takes place at a stage\nin the development of human nature at which mankind is still far from\nbeing entirely fit for the duties which the new system shall impose. The\nquestion, therefore, is not whether we have reached the perfection of\ncharacter which would be necessary in order to a perfect working of the\nscheme of nationalisation of industry, but whether we have reached such\na degree of development as would make an imperfect working of the scheme\npossible.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from the _Annals of American Academy of\nPolitical and Social Science_, Vol. II, 1892.\n\n[2] Introductory paper of _A Plea for Liberty_; edited by Thomas Mackay.\n\n\n\n\nTHE SOCIALIST ECONOMICS OF KARL MARX AND HIS FOLLOWERS[1]\n\n\nI. THE THEORIES OF KARL MARX\n\nThe system of doctrines worked out by Marx is characterised by a certain\nboldness of conception and a great logical consistency. Taken in detail,\nthe constituent elements of the system are neither novel nor\niconoclastic, nor does Marx at any point claim to have discovered\npreviously hidden facts or to have invented recondite formulations of\nfacts already known; but the system as a whole has an air of originality\nand initiative such as is rarely met with among the sciences that deal\nwith any phase of human culture. How much of this distinctive character\nthe Marxian system owes to the personal traits of its creator is not\neasy to say, but what marks it off from all other systems of economic\ntheory is not a matter of personal idiosyncrasy. It differs\ncharacteristically from all systems of theory that had preceded it, both\nin its premises and in its aims. The (hostile) critics of Marx have not\nsufficiently appreciated the radical character of his departure in both\nof these respects, and have, therefore, commonly lost themselves in a\ntangled scrutiny of supposedly abstruse details; whereas those writers\nwho have been in sympathy with his teachings have too commonly been\ndisciples bent on exegesis and on confirming their fellow-disciples in\nthe faith.\n\nExcept as a whole and except in the light of its postulates and aims,\nthe Marxian system is not only not tenable, but it is not even\nintelligible. A discussion of a given isolated feature of the system\n(such as the theory of value) from the point of view of classical\neconomics (such as that offered by Boehm-Bawerk) is as futile as a\ndiscussion of solids in terms of two dimensions.\n\nNeither as regards his postulates and preconceptions nor as regards the\naim of his inquiry is Marx's position an altogether single-minded one.\nIn neither respect does his position come of a single line of\nantecedents. He is of no single school of philosophy, nor are his ideals\nthose of any single group of speculators living before his time. For\nthis reason he takes his place as an originator of a school of thought\nas well as the leader of a movement looking to a practical end.\n\nAs to the motives which drive him and the aspirations which guide him,\nin destructive criticism and in creative speculation alike, he is\nprimarily a theoretician busied with the analysis of economic phenomena\nand their organisation into a consistent and faithful system of\nscientific knowledge; but he is, at the same time, consistently and\ntenaciously alert to the bearing which each step in the progress of his\ntheoretical work has upon the propaganda. His work has, therefore, an\nair of bias, such as belongs to an advocate's argument; but it is not,\ntherefore, to be assumed, nor indeed to be credited, that his\npropagandist aims have in any substantial way deflected his inquiry or\nhis speculations from the faithful pursuit of scientific truth. His\nsocialistic bias may color his polemics, but his logical grasp is too\nneat and firm to admit of any bias, other than that of his metaphysical\npreconceptions, affecting his theoretical work.\n\nThere is no system of economic theory more logical than that of Marx.\nNo member of the system, no single article of doctrine, is fairly to be\nunderstood, criticised, or defended except as an articulate member of\nthe whole and in the light of the preconceptions and postulates which\nafford the point of departure and the controlling norm of the whole. As\nregards these preconceptions and postulates, Marx draws on two distinct\nlines of antecedents,--the Materialistic Hegelianism and the English\nsystem of Natural Rights. By his earlier training he is an adept in the\nHegelian method of speculation and inoculated with the metaphysics of\ndevelopment underlying the Hegelian system. By his later training he is\nan expert in the system of Natural Rights and Natural Liberty, ingrained\nin his ideals of life and held inviolate throughout. He does not take a\ncritical attitude toward the underlying principles of Natural Rights.\nEven his Hegelian preconceptions of development never carry him the\nlength of questioning the fundamental principles of that system. He is\nonly more ruthlessly consistent in working out their content than his\nnatural-rights antagonists in the liberal-classical school. His polemics\nrun against the specific tenets of the liberal school, but they run\nwholly on the ground afforded by the premises of that school. The ideals\nof his propaganda are natural-rights ideals, but his theory of the\nworking out of these ideals in the course of history rests on the\nHegelian metaphysics of development, and his method of speculation and\nconstruction of theory is given by the Hegelian dialectic.\n\n       *       *       *       *       *\n\nWhat first and most vividly centered interest on Marx and his\nspeculations was his relation to the revolutionary socialistic movement;\nand it is those features of his doctrines which bear immediately on the\npropaganda that still continue to hold the attention of the greater\nnumber of his critics. Chief among these doctrines, in the apprehension\nof his critics, is the theory of value, with its corollaries: (_a_) the\ndoctrines of the exploitation of labor by capital; and (_b_) the\nlaborer's claim to the whole product of his labor. Avowedly, Marx traces\nhis doctrine of labor-value to Ricardo, and through him to the classical\neconomists.[2] The laborer's claim to the whole product of labor, which\nis pretty constantly implied, though not frequently avowed by Marx, he\nhas in all probability taken from English writers of the early\nnineteenth century,[3] more particularly from William Thompson. These\ndoctrines are, on their face, nothing but a development of the\nconceptions of natural rights which then pervaded English speculation\nand afforded the metaphysical ground of the liberal movement. The more\nformidable critics of the Marxian socialism have made much of these\ndoctrinal elements that further the propaganda, and have, by laying the\nstress on these, diverted attention from other elements that are of more\nvital consequence to the system as a body of theory. Their exclusive\ninterest in this side of \"scientific socialism\" has even led them to\ndeny the Marxian system all substantial originality, and make it a\n(doubtfully legitimate) offshoot of English Liberalism and natural\nrights.[4] But this is one-sided criticism. It may hold as against\ncertain tenets of the so-called \"scientific socialism,\" but it is not\naltogether to the point as regards the Marxian system of theory. Even\nthe Marxian theory of value, surplus value, and exploitation, is not\nsimply the doctrine of William Thompson, transcribed and sophisticated\nin a forbidding terminology, however great the superficial resemblance\nand however large Marx's unacknowledged debt to Thompson may be on these\nheads. For many details and for much of his animus Marx may be indebted\nto the Utilitarians; but, after all, his system of theory, taken as a\nwhole, lies within the frontiers of neo-Hegelianism, and even the\ndetails are worked out in accord with the preconceptions of that school\nof thought and have taken on the complexion that would properly belong\nto them on that ground. It is, therefore, not by an itemised scrutiny of\nthe details of doctrine and by tracing their pedigree in detail that a\nfair conception of Marx and his contribution to economics may be\nreached, but rather by following him from his own point of departure out\ninto the ramifications of his theory, and so overlooking the whole in\nthe prospective which the lapse of time now affords us, but which he\ncould not himself attain, since he was too near to his own work to see\nwhy he went about it as he did.\n\n       *       *       *       *       *\n\nThe comprehensive system of Marxism is comprised within the scheme of\nthe Materialistic Conception of History.[5] This materialistic\nconception is essentially Hegelian,[6] although it belongs with the\nHegelian Left, and its immediate affiliation is with Feuerbach, not with\nthe direct line of Hegelian orthodoxy. The chief point of interest here,\nin identifying the materialistic conception with Hegelianism, is that\nthis identification throws it immediately and uncompromisingly into\ncontrast with Darwinism and the post-Darwinian conceptions of evolution.\nEven if a plausible English pedigree should be worked out for this\nMaterialistic Conception, or \"Scientific Socialism,\" as has been\nattempted, it remains none the less true that the conception with which\nMarx went to his work was a transmuted framework of Hegelian\ndialectic.[7]\n\nRoughly, Hegelian materialism differs from Hegelian orthodoxy by\ninverting the main logical sequence, not by discarding the logic or\nresorting to new tests of truth or finality. One might say, though\nperhaps with excessive crudity, that, where Hegel pronounces his dictum,\n_Das Denken ist das Sein_, the materialists, particularly Marx and\nEngels, would say _Das Sein macht das Denken_. But in both cases some\nsort of a creative primacy is assigned to one or the other member of the\ncomplex, and in neither case is the relation between the two members a\ncausal relation. In the materialistic conception man's spiritual\nlife--what man thinks--is a reflex of what he is in the material\nrespect, very much in the same fashion as the orthodox Hegelian would\nmake the material world a reflex of the spirit. In both, the dominant\nnorm of speculation and formulation of theory is the conception of\nmovement, development, evolution, progress; and in both the movement is\nconceived necessarily to take place by the method of conflict or\nstruggle. The movement is of the nature of progress,--gradual advance\ntoward a goal, toward the realisation in explicit form of all that is\nimplicit in the substantial activity involved in the movement. The\nmovement is, further, self-conditioned and self-acting: it is an\nunfolding by inner necessity. The struggle which constitutes the method\nof movement or evolution is, in the Hegelian system proper, the struggle\nof the spirit for self-realisation by the process of the well-known\nthree-phase dialectic. In the materialistic conception of history this\ndialectical movement becomes the class struggle of the Marxian system.\n\nThe class struggle is conceived to be \"material,\" but the term\n\"material\" is in this connection used in a metaphorical sense. It does\nnot mean mechanical or physical, or even physiological, but economic. It\nis material in the sense that it is a struggle between classes for the\nmaterial means of life. \"The materialistic conception of history\nproceeds on the principle that production and, next to production, the\nexchange of its products is the groundwork of every social order.\"[8]\nThe social order takes its form through the class struggle, and the\ncharacter of the class struggle at any given phase of the unfolding\ndevelopment of society is determined by \"the prevailing mode of economic\nproduction and exchange.\" The dialectic of the movement of social\nprogress, therefore, moves on the spiritual plane of human desire and\npassion, not on the (literally) material plane of mechanical and\nphysiological stress, on which the developmental process of brute\ncreation unfolds itself. It is a sublimated materialism, sublimated by\nthe dominating presence of the conscious human spirit; but it is\nconditioned by the material facts of the production of the means of\nlife.[9] The ultimately active forces involved in the process of\nunfolding social life are (apparently) the material agencies engaged in\nthe mechanics of production; but the dialectic of the process--the\nclass struggle--runs its course only among and in terms of the secondary\n(epigenetic) forces of human consciousness engaged in the valuation of\nthe material products of industry. A consistently materialistic\nconception, consistently adhering to a materialistic interpretation of\nthe process of development as well as of the facts involved in the\nprocess, could scarcely avoid making its putative dialectic struggle a\nmere unconscious and irrelevant conflict of the brute material forces.\nThis would have amounted to an interpretation in terms of opaque cause\nand effect, without recourse to the concept of a conscious class\nstruggle, and it might have led to a concept of evolution similar to the\nunteleological Darwinian concept of natural selection. It could scarcely\nhave led to the Marxian notion of a conscious class struggle as the one\nnecessary method of social progress, though it might conceivably, by the\naid of empirical generalisation, have led to a scheme of social process\nin which a class struggle would be included as an incidental though\nperhaps highly efficient factor.[10] It would have led, as Darwinism\nhas, to a concept of a process of cumulative change in social structure\nand function; but this process, being essentially a cumulative sequence\nof causation, opaque and unteleological, could not, without an infusion\nof pious fancy by the speculator, be asserted to involve progress as\ndistinct from retrogression or to tend to a \"realisation\" or\n\"self-realisation\" of the human spirit or of anything else. Neither\ncould it conceivably be asserted to lead up to a final term, a goal to\nwhich all lines of the process should converge and beyond which the\nprocess would not go, such as the assumed goal of the Marxian process of\nclass struggle, which is conceived to cease in the classless economic\nstructure of the socialistic final term. In Darwinism there is no such\nfinal or perfect term, and no definitive equilibrium.\n\nThe disparity between Marxism and Darwinism, as well as the disparity\nwithin the Marxian system between the range of material facts that are\nconceived to be the fundamental forces of the process, on the one hand,\nand the range of spiritual facts within which the dialectic movement\nproceeds,--this disparity is shown in the character assigned the class\nstruggle by Marx and Engels. The struggle is asserted to be a conscious\none, and proceeds on a recognition by the competing classes of their\nmutually incompatible interests with regard to the material means of\nlife. The class struggle proceeds on motives of interest, and a\nrecognition of class interest can, of course, be reached only by\nreflection on the facts of the case. There is, therefore, not even a\ndirect causal connection between the material forces in the case and the\nchoice of a given interested line of conduct. The attitude of the\ninterested party does not result from the material forces so immediately\nas to place it within the relation of direct cause and effect, nor even\nwith such a degree of intimacy as to admit of its being classed as a\ntropismatic, or even instinctive, response to the impact of the material\nforce in question. The sequence of reflection, and the consequent choice\nof sides to a quarrel, run entirely alongside of a range of material\nfacts concerned.\n\nA further characteristic of the doctrine of class struggle requires\nmention. While the concept is not Darwinian, it is also not legitimately\nHegelian, whether of the Right or the Left. It is of a utilitarian\norigin and of English pedigree, and it belongs to Marx by virtue of his\nhaving borrowed its elements from the system of self-interest. It is in\nfact a piece of hedonism, and is related to Bentham rather than to\nHegel. It proceeds on the grounds of the hedonistic calculus, which is\nequally foreign to the Hegelian notion of an unfolding process and to\nthe post-Darwinian notions of cumulative causation. As regards the\ntenability of the doctrine, apart from the question of its derivation\nand its compatibility with the neo-Hegelian postulates, it is to be\nadded that it is quite out of harmony with the later results of\npsychological inquiry,--just as is true of the use made of the\nhedonistic calculus by the classical (Austrian) economics.\n\n       *       *       *       *       *\n\nWithin the domain covered by the materialistic conception, that is to\nsay within the domain of unfolding human culture, which is the field of\nMarxian speculation at large, Marx has more particularly devoted his\nefforts to an analysis and theoretical formulation of the present\nsituation,--the current phase of the process, the capitalistic system.\nAnd, since the prevailing mode of the production of goods determines the\ninstitutional, intellectual, and spiritual life of the epoch, by\ndetermining the form and method of the current class struggle, the\ndiscussion necessarily begins with the theory of \"capitalistic\nproduction,\" or production as carried on under the capitalistic\nsystem.[11]\n\nUnder the capitalistic system, that is to say under the system of modern\nbusiness traffic, production is a production of commodities,\nmerchantable goods, with a view to the price to be obtained for them in\nthe market. The great fact on which all industry under this system\nhinges is the price of marketable goods. Therefore it is at this point\nthat Marx strikes into the system of capitalistic production, and\ntherefore the theory of value becomes the dominant feature of his\neconomics and the point of departure for the whole analysis, in all its\nvoluminous ramifications.[12]\n\nIt is scarcely worth while to question what serves as the beginning of\nwisdom in the current criticisms of Marx; namely, that he offers no\nadequate proof of his labor-value theory.[13] It is even safe to go\nfarther, and say that he offers no proof of it. The feint which occupies\nthe opening paragraphs of the _Kapital_ and the corresponding passages\nof _Zur Kritik_, etc., is not to be taken seriously as an attempt to\nprove his position on this head by the ordinary recourse to argument. It\nis rather a self-satisfied superior's playful mystification of those\nreaders (critics) whose limited powers do not enable them to see that\nhis proposition is self-evident. Taken on the Hegelian (neo-Hegelian)\nground, and seen in the light of the general materialistic conception,\nthe proposition that value = labor-cost is self-evident, not to say\ntautological. Seen in any other light, it has no particular force.\n\nIn the Hegelian scheme of things the only substantial reality is the\nunfolding life of the spirit. In the neo-Hegelian scheme, as embodied in\nthe materialistic conception, this reality is translated into terms of\nthe unfolding (material) life of man in society.[14] In so far as the\ngoods are products of industry, they are the output of this unfolding\nlife of man, a material residue embodying a given fraction of this\nforceful life-process. In this life-process lies all substantial\nreality, and all finally valid relations of quantivalence between the\nproducts of this life-process must run in its terms. The life-process,\nwhich, when it takes the specific form of an expenditure of labor power,\ngoes to produce goods, is a process of material forces, the spiritual or\nmental features of the life-process and of labor being only its\ninsubstantial reflex. It is consequently only in the material changes\nwrought by this expenditure of labor power that the metaphysical\nsubstance of life--labor power--can be embodied; but in these changes of\nmaterial fact it cannot but be embodied, since these are the end to\nwhich it is directed.\n\nThis balance between goods in respect of their magnitude as output of\nhuman labor holds good indefeasibly, in point of the metaphysical\nreality of the life-process, whatever superficial (phenomenal)\nvariations from this norm may occur in men's dealings with the goods\nunder the stress of the strategy of self-interest. Such is the value of\nthe goods in reality; they are equivalents of one another in the\nproportion in which they partake of this substantial quality, although\ntheir true ratio of equivalence may never come to an adequate expression\nin the transactions involved in the distribution of the goods. This real\nor true value of the goods is a fact of production, and holds true under\nall systems and methods of production, whereas the exchange value (the\n\"phenomenal form\" of the real value) is a fact of distribution, and\nexpresses the real value more or less adequately according as the scheme\nof distribution in force at the given time conforms more or less closely\nto the equities given by production. If the output of industry were\ndistributed to the productive agents strictly in proportion to their\nshares in production, the exchange value of the goods would be presumed\nto conform to their real value. But, under the current, capitalistic\nsystem, distribution is not in any sensible degree based on the equities\nof production, and the exchange value of goods under this system can\ntherefore express their real value only with a very rough, and in the\nmain fortuitous, approximation. Under a socialistic regime, where the\nlaborer would get the full product of his labor, or where the whole\nsystem of ownership, and consequently the system of distribution, would\nlapse, values would reach a true expression, if any.\n\nUnder the capitalistic system the determination of exchange value is a\nmatter of competitive profit-making, and exchange values therefore\ndepart erratically and incontinently from the proportions that would\nlegitimately be given them by the real values whose only expression\nthey are. Marx's critics commonly identify the concept of \"value\" with\nthat of \"exchange value,\"[15] and show that the theory of \"value\" does\nnot square with the run of the facts of price under the existing system\nof distribution, piously hoping thereby to have refuted the Marxian\ndoctrine; whereas, of course, they have for the most part not touched\nit. The misapprehension of the critics may be due to a (possibly\nintentional) oracular obscurity on the part of Marx. Whether by his\nfault or their own, their refutations have hitherto been quite\ninconclusive. Marx's severest stricture on the iniquities of the\ncapitalistic system is that contained by implication in his development\nof the manner in which actual exchange value of goods systematically\ndiverges from their real (labor-cost) value. Herein, indeed, lies not\nonly the inherent iniquity of the existing system, but also its fateful\ninfirmity, according to Marx.\n\nThe theory of value, then, is _contained in_ the main postulates of the\nMarxian system rather than derived from them. Marx identifies this\ndoctrine, in its elements, with the labor-value theory of Ricardo,[16]\nbut the relationship between the two is that of a superficial\ncoincidence in their main propositions rather than a substantial\nidentity of theoretic contents. In Ricardo's theory the source and\nmeasure of value is sought in the effort and sacrifice undergone by the\nproducer, consistently, on the whole, with the Benthamite-utilitarian\nposition to which Ricardo somewhat loosely and uncritically adhered. The\ndecisive fact about labor, that quality by virtue of which it is assumed\nto be the final term in the theory of production, is its irksomeness.\nSuch is of course not the case in the labor-value theory of Marx, to\nwhom the question of the irksomeness of labor is quite irrelevant, so\nfar as regards the relation between labor and production. The\nsubstantial diversity or incompatibility of the two theories shows\nitself directly when each is employed by its creator in the further\nanalysis of economic phenomena. Since with Ricardo the crucial point is\nthe degree of irksomeness of labor, which serves as a measure both of\nthe labor expended and the value produced, and since in Ricardo's\nutilitarian philosophy there is no more vital fact underlying this\nirksomeness, therefore no surplus-value theory follows from the main\nposition. The productiveness of labor is not cumulative, in its own\nworking; and the Ricardian economics goes on to seek the cumulative\nproductiveness of industry in the functioning of the products of labor\nwhen employed in further production and in the irksomeness of the\ncapitalist's abstinence. From which duly follows the general position of\nclassical economics on the theory of production.\n\nWith Marx, on the other hand, the labor power expended in production\nbeing itself a product and having a substantial value corresponding to\nits own labor-cost, the value of the labor power expended and the value\nof the product created by its expenditure need not be the same. They are\nnot the same, by supposition, as they would be in any hedonistic\ninterpretation of the facts. Hence a discrepancy arises between the\nvalue of the labor power expended in production and the value of the\nproduct created, and this discrepancy is covered by the concept of\nsurplus value. Under the capitalistic system, wages being the value\n(price) of the labor power consumed in industry, it follows that the\nsurplus product of their labor cannot go to the laborers, but becomes\nthe profits of capital and the source of its accumulation and increase.\nFrom the fact that wages are measured by the value of labor power rather\nthan by the (greater) value of the product of labor, it follows also\nthat the laborers are unable to buy the whole product of their labor,\nand so that the capitalists are unable to sell the whole product of\nindustry continuously at its full value, whence arise difficulties of\nthe gravest nature in the capitalistic system, in the way of\noverproduction and the like.\n\nBut the gravest outcome of this systematic discrepancy between the value\nof labor power and the value of its product is the accumulation of\ncapital out of unpaid labor, and the effect of this accumulation on the\nlaboring population. The law of accumulation, with its corollary, the\ndoctrine of the industrial reserve army, is the final term and the\nobjective point of Marx's theory of capitalist production, just as the\ntheory of labor value is his point of departure.[17] While the theory of\nvalue and surplus value are Marx's explanation of the possibility of\nexistence of the capitalistic system, the law of the accumulation of\ncapital is his exposition of the causes which must lead to the collapse\nof that system and of the manner in which the collapse will come. And\nsince Marx is, always and everywhere, a socialist agitator as well as a\ntheoretical economist, it may be said without hesitation that the law of\naccumulation is the climax of his great work, from whatever point of\nview it is looked at, whether as an economic theorem or as a tenet of\nsocialistic doctrine.\n\nThe law of capitalistic accumulation may be paraphrased as follows:[18]\nWages being the (approximately exact) value of the labor power bought in\nthe wage contract; the price of the product being the (similarly\napproximate) value of the goods produced; and since the value of the\nproduct exceeds that of the labor power by a given amount (surplus\nvalue), which by force of the wage contract passes into the possession\nof the capitalist and is by him in part laid by as savings and added to\nthe capital already in hand, it follows (_a_) that, other things equal,\nthe larger the surplus value, the more rapid the increase of capital;\nand, also (_b_), that the greater the increase of capital relatively to\nthe labor force employed, the more productive the labor employed and the\nlarger the surplus product available for accumulation. The process of\naccumulation, therefore, is evidently a cumulative one; and, also\nevidently, the increase added to capital is an unearned increment drawn\nfrom the unpaid surplus product of labor.\n\nBut with an appreciable increase of the aggregate capital a change takes\nplace in its technological composition, whereby the \"constant\" capital\n(equipment and raw materials) increases disproportionately as compared\nwith the \"variable\" capital (wages fund). \"Labor-saving devices\" are\nused to a greater extent than before, and labor is saved. A larger\nproportion of the expenses of production goes for the purchase of\nequipment and raw materials, and a smaller proportion--though perhaps\nan absolutely increased amount--goes for the purchase of labor power.\nLess labor is needed relatively to the aggregate capital employed as\nwell as relatively to the quantity of goods produced. Hence some portion\nof the increasing labor supply will not be wanted, and an \"industrial\nreserve army,\" a \"surplus labor population,\" an army of unemployed,\ncomes into existence. This reserve grows relatively larger as the\naccumulation of capital proceeds and as technological improvements\nconsequently gain ground; so that there result two divergent cumulative\nchanges in the situation,--antagonistic, but due to the same set of\nforces and, therefore, inseparable: capital increases, and the number of\nunemployed laborers (relatively) increases also.\n\nThis divergence between the amount of capital and output, on the one\nhand, and the amount received by laborers as wages, on the other hand,\nhas an incidental consequence of some importance. The purchasing power\nof the laborers, represented by their wages, being the largest part of\nthe demand for consumable goods, and being at the same time, in the\nnature of the case, progressively less adequate for the purchase of the\nproduct, represented by the price of the goods produced, it follows that\nthe market is progressively more subject to glut from overproduction,\nand hence to commercial crises and depression. It has been argued, as if\nit were a direct inference from Marx's position, that this maladjustment\nbetween production and markets, due to the laborer not getting the full\nproduct of his labor, leads directly to the breakdown of the\ncapitalistic system, and so by its own force will bring on the\nsocialistic consummation. Such is not Marx's position, however, although\ncrises and depression play an important part in the course of\ndevelopment that is to lead up to socialism. In Marx's theory,\nsocialism is to come by way of a conscious class movement on the part of\nthe propertyless laborers, who will act advisedly on their own interest\nand force the revolutionary movement for their own gain. But crises and\ndepression will have a large share in bringing the laborers to a frame\nof mind suitable for such a move.\n\nGiven a growing aggregate capital, as indicated above, and a concomitant\nreserve of unemployed laborers growing at a still higher rate, as is\ninvolved in Marx's position, this body of unemployed labor can be, and\nwill be, used by the capitalists to depress wages, in order to increase\nprofits. Logically, it follows that, the farther and faster capital\naccumulates, the larger will be the reserve of unemployed, both\nabsolutely and relatively to the work to be done, and the more severe\nwill be the pressure acting to reduce wages and lower the standard of\nliving, and the deeper will be the degradation and misery of the working\nclass and the more precipitately will their condition decline to a still\nlower depth. Every period of depression, with its increased body of\nunemployed labor seeking work, will act to hasten and accentuate the\ndepression of wages, until there is no warrant even for holding that\nwages will, on an average, be kept up to the subsistence minimum.[19]\nMarx, indeed, is explicit to the effect that such will be the\ncase,--that wages will decline below the subsistence minimum; and he\ncites English conditions of child labor, misery, and degeneration to\nsubstantiate his views.[20] When this has gone far enough, when\ncapitalist production comes near enough to occupying the whole field of\nindustry and has depressed the condition of its laborers sufficiently to\nmake them an effective majority of the community with nothing to lose,\nthen, having taken advice together, they will move, by legal or\nextra-legal means, by absorbing the state or by subverting it, to\nestablish the social revolution.\n\nSocialism is to come through class antagonism due to the absence of all\nproperty interests from the laboring class, coupled with a generally\nprevalent misery so profound as to involve some degree of physical\ndegeneration. This misery is to be brought about by the heightened\nproductivity of labor due to an increased accumulation of capital and\nlarge improvements in the industrial arts; which in turn is caused by\nthe fact that under a system of private enterprise with hired labor the\nlaborer does not get the whole product of his labor; which, again, is\nonly saying in other words that private ownership of capital goods\nenables the capitalist to appropriate and accumulate the surplus product\nof labor. As to what the regime is to be which the social revolution\nwill bring in, Marx has nothing particular to say, beyond the general\nthesis that there will be no private ownership, at least not of the\nmeans of production.\n\n       *       *       *       *       *\n\nSuch are the outlines of the Marxian system of socialism. In all that\nhas been said so far no recourse is had to the second and third volumes\nof _Kapital_. Nor is it necessary to resort to these two volumes for the\ngeneral theory of socialism. They add nothing essential, although many\nof the details of the processes concerned in the working out of the\ncapitalist scheme are treated with greater fullness, and the analysis is\ncarried out with great consistency and with admirable results. For\neconomic theory at large these further two volumes are important\nenough, but an inquiry into their contents in that connection is not\ncalled for here.\n\nNothing much need be said as to the tenability of this theory. In its\nessentials, or at least in its characteristic elements, it has for the\nmost part been given up by latter-day socialist writers. The number of\nthose who hold to it without essential deviation is growing gradually\nsmaller. Such is necessarily the case, and for more than one reason. The\nfacts are not bearing it out on certain critical points, such as the\ndoctrine of increasing misery; and the Hegelian philosophical\npostulates, without which the Marxism of Marx is groundless, are for the\nmost part forgotten by the dogmatists of to-day. Darwinism has largely\nsupplanted Hegelianism in their habits of thought.\n\nThe particular point at which the theory is most fragile, considered\nsimply as a theory of social growth, is its implied doctrine of\npopulation,--implied in the doctrine of a growing reserve of unemployed\nworkmen. The doctrine of the reserve of unemployed labor involves as a\npostulate that population will increase anyway, without reference to\ncurrent or prospective means of life. The empirical facts give at least\na very persuasive apparent support to the view expressed by Marx, that\nmisery is, or has hitherto been, no hindrance to the propagation of the\nrace; but they afford no conclusive evidence in support of a thesis to\nthe effect that the number of laborers must increase independently of an\nincrease of the means of life. No one since Darwin would have the\nhardihood to say that the increase of the human species is not\nconditioned by the means of living.\n\nBut all that does not really touch Marx's position. To Marx, the\nneo-Hegelian, history, including the economic development, is the\nlife-history of the human species; and the main fact in this\nlife-history, particularly in the economic aspect of it, is the growing\nvolume of human life. This, in a manner of speaking, is the base-line of\nthe whole analysis of the process of economic life, including the phase\nof capitalist production with the rest. The growth of population is the\nfirst principle, the most substantial, most material factor in this\nprocess of economic life, so long as it is a process of growth, of\nunfolding, of exfoliation, and not a phase of decrepitude and decay. Had\nMarx found that his analysis led him to a view adverse to this position,\nhe would logically have held that the capitalist system is the mortal\nagony of the race and the manner of its taking off. Such a conclusion is\nprecluded by his Hegelian point of departure, according to which the\ngoal of the life-history of the race in a large way controls the course\nof that life-history in all its phases, including the phase of\ncapitalism. This goal or end, which controls the process of human\ndevelopment, is the complete realisation of life in all its fullness,\nand the realisation is to be reached by a process analogous to the\nthree-phase dialectic, of thesis, antithesis, and synthesis, into which\nscheme the capitalist system, with its overflowing measure of misery and\ndegradation, fits as the last and most dreadful phase of antithesis.\nMarx, as a Hegelian,--that is to say, a romantic philosopher,--is\nnecessarily an optimist, and the evil (antithetical element) in life is\nto him a logically necessary evil, as the antithesis is a necessary\nphase of the dialectic; and it is a means to the consummation, as the\nantithesis is a means to the synthesis.\n\nFOOTNOTES:\n\n[1] The substance of lectures before students in Harvard University in\nApril, 1906. Reprinted by permission from _The Quarterly Journal of\nEconomics_, Vol. XX, Aug., 1906\n\n[2] _Cf._ _Critique of Political Economy_, chap. i, \"Notes on the\nHistory of the Theory of Commodities,\" pp. 56-73 (English translation,\nNew York, 1904).\n\n[3] See Menger, _Right to the Whole Produce of Labor_, sections iii-v\nand viii-ix, and Foxwell's admirable Introduction to Menger.\n\n[4] See Menger and Foxwell, as above, and Schaeffle, _Quintessence of\nSocialism_, and _The Impossibility of Social Democracy_.\n\n[5] See Engels, _The Development of Socialism from Utopia to Science_,\nespecially section ii and the opening paragraphs of section iii; also\nthe preface of _Zur Kritik der politischen Oekonomie_.\n\n[6] See Engels, as above, and also his _Feuerbach: The Roots of\nSocialist Philosophy_ (translation, Chicago, Kerr & Co., 1903).\n\n[7] See _e.g._, Seligman, _The Economic Interpretation of History_, Part\nI.\n\n[8] Engels, _Development of Socialism_, beginning of section iii.\n\n[9] _Cf._, on this point, Max Adler, \"Kausalitaet und Teleologie im\nStreite um die Wissenschaft\" (included in _Marx-Studien_, edited by\nAdler and Hilfendirg, vol. i), particularly section xi; _cf._ also\nLudwig Stein, _Die soziale Frage im Lichte der Philosophie_, whom Adler\ncriticises and claims to have refuted.\n\n[10] _Cf._ Adler, as above.\n\n[11] It may be noted, by way of caution to readers familiar with the\nterms only as employed by the classical (English and Austrian)\neconomists, that in Marxian usage \"capitalistic production\" means\nproduction of goods for the market by hired labor under the direction of\nemployers who own (or control) the means of production and are engaged\nin industry for the sake of a profit. \"Capital\" is wealth (primarily\nfunds) so employed. In these and other related points of terminological\nusage Marx is, of course, much more closely in touch with colloquial\nusage than those economists of the classical line who make capital\nsignify \"the products of past industry used as aids to further\nproduction.\" With Marx \"Capitalism\" implies certain relations of\nownership, no less than the \"productive use\" which is alone insisted on\nby so many later economists in defining the term.\n\n[12] In the sense that the theory of value affords the point of\ndeparture and the fundamental concepts out of which the further theory\nof the workings of capitalism is constructed,--in this sense, and in\nthis sense only, is the theory of value the central doctrine and the\ncritical tenet of Marxism. It does not follow that the Marxist doctrine\nof an irresistible drift towards a socialistic consummation hangs on the\ndefensibility of the labor-value theory, nor even that the general\nstructure of the Marxist economics would collapse if translated into\nother terms than those of this doctrine of labor-value. _Cf_.\nBoehm-Bawerk, _Karl Marx and the Close of his System_; and, on the\nother hand, Franz Oppenheimer, _Das Grundgesetz der Marx'schen\nGesellschaftslehre_; and Rudolf Goldscheid, _Verelendungs- oder\nMeliorationstheorie_.\n\n[13] _Cf._, _e.g._, Boehm-Bawerk, as above; Georg Adler, _Grundlagen der\nKarl Marx'schen Kritik_.\n\n[14] In much the same way, and with an analogous effect on their\ntheoretical work, in the preconceptions of the classical (including the\nAustrian) economists, the balance of pleasure and pain is taken to be\nthe ultimate reality in terms of which all economic theory must be\nstated and to terms of which all phenomena should finally be reduced in\nany definitive analysis of economic life. It is not the present purpose\nto inquire whether the one of these uncritical assumptions is in any\ndegree more meritorious or more serviceable than the other.\n\n[15] Boehm-Bawerk, _Capital and Interest_, Book VI, chap, iii; also _Karl\nMarx and the Close of his System_, particularly chap. iv; Adler,\n_Grundlagen_, chaps. ii. and iii.\n\n[16] _Cf._ _Kapital_, vol. i, chap. xv, p. 486 (4th ed.). See also notes\n9 and 16 to chap. i of the same volume, where Marx discusses the\nlabor-value doctrines of Adam Smith and an earlier (anonymous) English\nwriter, and compares them with his own. Similar comparisons with the\nearly--classical--value theories recur from time to time in the later\nportions of _Kapital_.\n\n[17] Oppenheimer (_Das Grundgesetz der Marx'schen Gesellschaftslehre_)\nis right in making the theory of accumulation the central element in the\ndoctrines of Marxist socialism, but it does not follow, as Oppenheimer\ncontends, that this doctrine is the keystone of Marx's economic\ntheories. It follows logically from the theory of surplus value, as\nindicated above, and rests on that theory in such a way that it would\nfail (in the form in which it is held by Marx) with the failure of the\ndoctrine of surplus value.\n\n[18] See _Kapital_, vol. i, chap. xxiii.\n\n[19] The \"subsistence minimum\" is here taken in the sense used by Marx\nand the classical economists, as meaning what is necessary to keep up\nthe supply of labor at its current rate of efficiency.\n\n[20] See _Kapital_, vol. i, chap, xxiii, sections 4 and 5.\n\n\n\n\nTHE SOCIALIST ECONOMICS OF KARL MARX AND HIS FOLLOWERS[1]\n\n\nII. THE LATER MARXISM\n\nMarx worked out his system of theory in the main during the third\nquarter of the nineteenth century. He came to the work from the\nstandpoint given him by his early training in German thought, such as\nthe most advanced and aggressive German thinking was through the middle\nperiod of the century, and he added to this German standpoint the\nfurther premises given him by an exceptionally close contact with and\nalert observation of the English situation. The result is that he brings\nto his theoretical work a twofold line of premises, or rather of\npreconceptions. By early training he is a neo-Hegelian, and from this\nGerman source he derives his peculiar formulation of the Materialistic\nTheory of History. By later experience he acquired the point of view of\nthat Liberal-Utilitarian school which dominated English thought through\nthe greater part of his active life. To this experience he owes\n(probably) the somewhat pronounced individualistic preconceptions on\nwhich the doctrines of the Full Product of Labor and the Exploitation of\nLabor are based. These two not altogether compatible lines of doctrine\nfound their way together into the tenets of scientific[2] socialism, and\ngives its characteristic Marxian features to the body of socialist\neconomics.\n\nThe socialism that inspires hopes and fears to-day is of the school of\nMarx. No one is seriously apprehensive of any other so-called\nsocialistic movement, and no one is seriously concerned to criticise or\nrefute the doctrines set forth by any other school of \"socialists.\" It\nmay be that the socialists of the Marxist observance are not always or\nat all points in consonance with the best accepted body of Marxist\ndoctrine. Those who make up the body of the movement may not always be\nfamiliar with the details--perhaps not even with the general\nfeatures--of the Marxian scheme of economics; but with such consistency\nas may fairly be looked for in any popular movement, the socialists of\nall countries gravitate toward the theoretical position of the avowed\nMarxism. In proportion as the movement in any given community grows in\nmass, maturity, and conscious purpose, it unavoidably takes on a more\nconsistently Marxian complexion. It is not the Marxism of Marx, but the\nmaterialism of Darwin, which the socialists of to-day have adopted. The\nMarxist socialists of Germany have the lead, and the socialists of other\ncountries largely take their cue from the German leaders.\n\nThe authentic spokesmen of the current international socialism are\navowed Marxists. Exceptions to that rule are very few. On the whole, the\nsubstantial truth of the Marxist doctrines is not seriously questioned\nwithin the lines of the socialists, though there may be some appreciable\ndivergence as to what the true Marxist position is on one point and\nanother. Much and eager controversy circles about questions of that\nclass.\n\nThe keepers of the socialist doctrines are passably agreed as to the\nmain position and the general principles. Indeed, so secure is this\ncurrent agreement on the general principles that a very lively\ncontroversy on matters of detail may go on without risk of disturbing\nthe general position. This general position is avowedly Marxism. But it\nis not precisely the position held by Karl Marx. It has been modernised,\nadapted, filled out, in response to exigencies of a later date than\nthose which conditioned the original formulation of the theories. It is,\nof course, not admitted by the followers of Marx that any substantial\nchange or departure from the original position has taken place. They are\nsomewhat jealously orthodox, and are impatient of any suggested\n\"improvements\" on the Marxist position, as witness the heat engendered\nin the \"revisionist\" controversy of a few years back. But the jealous\nprotests of the followers of Marx do not alter the fact that Marxism has\nundergone some substantial change since it left the hands of its\ncreator. Now and then a more or less consistent disciple of Marx will\navow a need of adapting the received doctrines to circumstances that\nhave arisen later than the formulation of the doctrines; and amendments,\nqualifications, and extensions, with this need in view, have been\noffered from time to time. But more pervasive though unavowed changes\nhave come in the teachings of Marxism by way of interpretation and an\nunintended shifting of the point of view. Virtually, the whole of the\nyounger generation of socialist writers shows such a growth. A citation\nof personal instances would be quite futile.\n\n       *       *       *       *       *\n\nIt is the testimony of his friends as well as of his writings that the\ntheoretical position of Marx, both as regards his standpoint and as\nregards his main tenets, fell into a definitive shape relatively early,\nand that his later work was substantially a working out of what was\ncontained in the position taken at the outset of his career.[3] By the\nlatter half of the forties, if not by the middle of the forties, Marx\nand Engels had found the outlook on human life which came to serve as\nthe point of departure and the guide for their subsequent development of\ntheory. Such is the view of the matter expressed by Engels during the\nlater years of his life.[4] The position taken by the two great leaders,\nand held by them substantially intact, was a variant of neo-Hegelianism,\nas has been indicated in an earlier section of this paper.[5] But\nneo-Hegelianism was short-lived, particularly considered as a standpoint\nfor scientific theory. The whole romantic school of thought, comprising\nneo-Hegelianism with the rest, began to go to pieces very soon after it\nhad reached an approach to maturity, and its disintegration proceeded\nwith exceptional speed, so that the close of the third quarter of the\ncentury saw the virtual end of it as a vital factor in the development\nof human knowledge. In the realm of theory, primarily of course in the\nmaterial sciences, the new era belongs not to romantic philosophy, but\nto the evolutionists of the school of Darwin. Some few great figures, of\ncourse, stood over from the earlier days, but it turns out in the sequel\nthat they have served mainly to mark the rate and degree in which the\nmethod of scientific knowledge has left them behind. Such were Virchow\nand Max Mueller, and such, in economic science, were the great figures of\nthe Historical School, and such, in a degree, were also Marx and Engels.\nThe later generation of socialists, the spokesmen and adherents of\nMarxism during the closing quarter of the century, belong to the new\ngeneration, and see the phenomena of human life under the new light. The\nmaterialistic conception in their handling of it takes on the color of\nthe time in which they lived, even while they retain the phraseology of\nthe generation that went before them.[6]\n\nThe difference between the romantic school of thought, to which Marx\nbelonged, and the school of the evolutionists into whose hands the\nsystem has fallen,--or perhaps, better, is falling,--is great and\npervading, though it may not show a staring superficial difference at\nany one point,--at least not yet. The discrepancy between the two is\nlikely to appear more palpable and more sweeping when the new method of\nknowledge has been applied with fuller realisation of its reach and its\nrequirement in that domain of knowledge that once belonged to the\nneo-Hegelian Marxism. The supplanting of the one by the other has been\ntaking place slowly, gently, in large measure unavowedly, by a sort of\nprecession of the point of view from which men size up the facts and\nreduce them to intelligible order.\n\nThe neo-Hegelian, romantic, Marxian standpoint was wholly personal,\nwhereas the evolutionistic--it may be called Darwinian--standpoint is\nwholly impersonal. The continuity sought in the facts of observation and\nimputed to them by the earlier school of theory was a continuity of a\npersonal kind,--a continuity of reason and consequently of logic. The\nfacts were construed to take such a course as could be established by an\nappeal to reason between intelligent and fair-minded men. They were\nsupposed to fall into a sequence of logical consistency. The romantic\n(Marxian) sequence of theory is essentially an intellectual sequence,\nand it is therefore of a teleological character. The logical trend of it\ncan be argued out. That is to say, it tends to a goal. On the other\nhand, in the Darwinian scheme of thought, the continuity sought in and\nimputed to the facts is a continuity of cause and effect. It is a scheme\nof blindly cumulative causation, in which there is no trend, no final\nterm, no consummation. The sequence is controlled by nothing but the\n_vis a tergo_ of brute causation, and is essentially mechanical. The\nneo-Hegelian (Marxian) scheme of development is drawn in the image of\nthe struggling ambitious human spirit: that of Darwinian evolution is of\nthe nature of a mechanical process.[7]\n\nWhat difference, now, does it make if the materialistic conception is\ntranslated from the romantic concepts of Marx into the mechanical\nconcepts of Darwinism? It distorts every feature of the system in some\ndegree, and throws a shadow of doubt on every conclusion that once\nseemed secure.[8] The first principle of the Marxian scheme is the\nconcept covered by the term \"Materialistic,\" to the effect that the\nexigencies of the material means of life control the conduct of men in\nsociety throughout, and thereby indefeasibly guide the growth of\ninstitutions and shape every shifting trait of human culture. This\ncontrol of the life of society by the material exigencies takes effect\nthrough men's taking thought of material (economic) advantages and\ndisadvantages, and choosing that which will yield the fuller material\nmeasure of life. When the materialistic conception passes under the\nDarwinian norm, of cumulative causation, it happens, first, that this\ninitial principle itself is reduced to the rank of a habit of thought\ninduced in the speculator who depends on its light, by the circumstances\nof his life, in the way of hereditary bent, occupation, tradition,\neducation, climate, food supply, and the like. But under the Darwinian\nnorm the question of whether and how far material exigencies control\nhuman conduct and cultural growth becomes a question of the share which\nthese material exigencies have in shaping men's habits of thought,\n_i.e._, their ideals and aspirations, their sense of the true, the\nbeautiful, and the good. Whether and how far these traits of human\nculture and the institutional structure built out of them are the\noutgrowth of material (economic) exigencies becomes a question of what\nkind and degree of efficiency belongs to the economic exigencies among\nthe complex of circumstances that conduce to the formation of habits. It\nis no longer a question of whether material exigencies rationally should\nguide men's conduct, but whether, as a matter of brute causation, they\ndo induce such habits of thought in men as the economic interpretation\npresumes, and whether in the last analysis economic exigencies alone\nare, directly or indirectly, effective in shaping human habits of\nthought.\n\nTentatively and by way of approximation some such formulation as that\noutlined in the last paragraph is apparently what Bernstein and others\nof the \"revisionists\" have been seeking in certain of their\nspeculations,[9] and, sitting austere and sufficient on a dry shoal up\nstream, Kautsky has uncomprehendingly been addressing them advice and\nadmonition which they do not understand.[10] The more intelligent and\nenterprising among the idealist wing--where intellectual enterprise is\nnot a particularly obvious trait--have been struggling to speak for the\nview that the forces of the environment may effectually reach men's\nspiritual life through other avenues than the calculus of the main\nchance, and so may give rise to habitual ideals and aspirations\nindependent of, and possibly alien to, that calculus.[11]\n\nSo, again, as to the doctrine of the class struggle. In the Marxian\nscheme of dialectical evolution the development which is in this way\nheld to be controlled by the material exigencies must, it is held,\nproceed by the method of the class struggle. This class struggle is held\nto be inevitable, and is held inevitably to lead at each revolutionary\nepoch to a more efficient adjustment of human industry to human uses,\nbecause, when a large proportion of the community find themselves ill\nserved by the current economic arrangements, they take thought, band\ntogether, and enforce a readjustment more equitable and more\nadvantageous to them. So long as differences of economic advantage\nprevail, there will be a divergence of interests between those more\nadvantageously placed and those less advantageously placed. The members\nof society will take sides as this line of cleavage indicated by their\nseveral economic interests may decide. Class solidarity will arise on\nthe basis of this class interest, and a struggle between the two classes\nso marked off against each other will set in,--a struggle which, in the\nlogic of the situation, can end only when the previously less fortunate\nclass gains the ascendancy,--and so must the class struggle proceed\nuntil it shall have put an end to that diversity of economic interest on\nwhich the class struggle rests. All this is logically consistent and\nconvincing, but it proceeds on the ground of reasoned conduct, calculus\nof advantage, not on the ground of cause and effect. The class struggle\nso conceived should always and everywhere tend unremittingly toward the\nsocialistic consummation, and should reach that consummation in the end,\nwhatever obstructions or diversions might retard the sequence of\ndevelopment along the way. Such is the notion of it embodied in the\nsystem of Marx. Such, however, is not the showing of history. Not all\nnations or civilisations have advanced unremittingly toward a\nsocialistic consummation, in which all divergence of economic interest\nhas lapsed or would lapse. Those nations and civilisations which have\ndecayed and failed, as nearly all known nations and civilisations have\ndone, illustrate the point that, however reasonable and logical the\nadvance by means of the class struggle may be, it is by no means\ninevitable. Under the Darwinian norm it must be held that men's\nreasoning is largely controlled by other than logical, intellectual\nforces; that the conclusion reached by public or class opinion is as\nmuch, or more, a matter of sentiment than of logical inference; and that\nthe sentiment which animates men, singly or collectively, is as much, or\nmore, an outcome of habit and native propensity as of calculated\nmaterial interest. There is, for instance, no warrant in the Darwinian\nscheme of things for asserting _a priori_ that the class interest of the\nworking class will bring them to take a stand against the propertied\nclass. It may as well be that their training in subservience to their\nemployers will bring them again to realise the equity and excellence of\nthe established system of subjection and unequal distribution of\nwealth. Again, no one, for instance, can tell to-day what will be the\noutcome of the present situation in Europe and America. It may be that\nthe working classes will go forward along the line of the socialistic\nideals and enforce a new deal, in which there shall be no economic class\ndiscrepancies, no international animosity, no dynastic politics. But\nthen it may also, so far as can be foreseen, equally well happen that\nthe working class, with the rest of the community in Germany, England,\nor America, will be led by the habit of loyalty and by their\nsportsmanlike propensities to lend themselves enthusiastically to the\ngame of dynastic politics, which alone their sportsmanlike rulers\nconsider worth while. It is quite impossible on Darwinian ground to\nforetell whether the \"proletariat\" will go on to establish the\nsocialistic revolution or turn aside again, and sink their force in the\nbroad sands of patriotism. It is a question of habit and native\npropensity and of the range of stimuli to which the proletariat are\nexposed and are to be exposed, and what may be the outcome is not a\nmatter of logical consistency, but of response to stimulus.\n\nSo, then, since Darwinian concepts have begun to dominate the thinking\nof the Marxists, doubts have now and again come to assert themselves\nboth as to the inevitableness of the irrepressible class struggle and to\nits sole efficacy. Anything like a violent class struggle, a seizure of\npower by force, is more and more consistently deprecated. For resort to\nforce, it is felt, brings in its train coercive control with all its\napparatus of prerogative, mastery, and subservience.[12]\n\nSo, again, the Marxian doctrine of progressive proletarian distress, the\nso-called _Verelendungstheorie_, which stands pat on the romantic ground\nof the original Marxism, has fallen into abeyance, if not into\ndisrepute, since the Darwinian conceptions have come to prevail. As a\nmatter of reasoned procedure, on the ground of enlightened material\ninterest alone, it should be a tenable position that increasing misery,\nincreasing in degree and in volume, should be the outcome of the present\nsystem of ownership, and should at the same time result in a\nwell-advised and well-consolidated working-class movement that would\nreplace the present system by a scheme more advantageous to the\nmajority. But so soon as the question is approached on the Darwinian\nground of cause and effect, and is analysed in terms of habit and of\nresponse to stimulus, the doctrine that progressive misery must effect a\nsocialistic revolution becomes dubious, and very shortly untenable.\nExperience, the experience of history, teaches that abject misery\ncarries with it deterioration and abject subjection. The theory of\nprogressive distress fits convincingly into the scheme of the Hegelian\nthree-phase dialectic. It stands for the antithesis that is to be merged\nin the ulterior synthesis; but it has no particular force on the ground\nof an argument from cause to effect.[13]\n\nIt fares not much better with the Marxian theory of value and its\ncorollaries and dependent doctrines when Darwinian concepts are brought\nin to replace the romantic elements out of which it is built up. Its\nfoundation is the metaphysical equality between the volume of human life\nforce productively spent in the making of goods and the magnitude of\nthese goods considered as human products. The question of such an\nequality has no meaning in terms of cause and effect, nor does it bear\nin any intelligible way upon the Darwinian question of the fitness of\nany given system of production or distribution. In any evolutionary\nsystem of economics the central question touching the efficiency and\nfitness of any given system of production is necessarily the question as\nto the excess of serviceability in the product over the cost of\nproduction.[14] It is in such an excess of serviceability over cost that\nthe chance of survival lies for any system of production, in so far as\nthe question of survival is a question of production, and this matter\ncomes into the speculation of Marx only indirectly or incidentally, and\nleads to nothing in his argument.\n\nAnd, as bearing on the Marxian doctrines of exploitation, there is on\nDarwinian ground no place for a natural right to the full product of\nlabor. What can be argued in that connection on the ground of cause and\neffect simply is the question as to what scheme of distribution will\nhelp or hinder the survival of a given people or a given\ncivilisation.[15]\n\nBut these questions of abstruse theory need not be pursued, since they\ncount, after all, but relatively little among the working tenets of the\nmovement. Little need be done by the Marxists to work out or to adapt\nthe Marxian system of value theory, since it has but slight bearing on\nthe main question,--the question of the trend towards socialism and of\nits chances of success. It is conceivable that a competent theory of\nvalue dealing with the excess of serviceability over cost, on the one\nhand, and with the discrepancy between price and serviceability, on the\nother hand, would have a substantial bearing upon the advisability of\nthe present as against the socialistic regime, and would go far to clear\nup the notions of both socialists and conservatives as to the nature of\nthe points in dispute between them. But the socialists have not moved in\nthe direction of this problem, and they have the excuse that their\ncritics have suggested neither a question nor a solution to a question\nalong any such line. None of the value theorists have so far offered\nanything that could be called good, bad, or indifferent in this\nconnection, and the socialists are as innocent as the rest. Economics,\nindeed, has not at this point yet begun to take on a modern tone, unless\nthe current neglect of value theory by the socialists be taken as a\nnegative symptom of advance, indicating that they at least recognise the\nfutility of the received problems and solutions, even if they are not\nready to make a positive move.\n\n       *       *       *       *       *\n\nThe shifting of the current point of view, from romantic philosophy to\nmatter-of-fact, has affected the attitude of the Marxists towards the\nseveral articles of theory more than it has induced an avowed alteration\nor a substitution of new elements of theory for the old. It is always\npossible to make one's peace with a new standpoint by new\ninterpretations and a shrewd use of figures of speech, so far as the\ntheoretical formulation is concerned, and something of this kind has\ntaken place in the case of Marxism; but when, as in the case of Marxism,\nthe formulations of theory are drafted into practical use, substantial\nchanges of appreciable magnitude are apt to show themselves in a changed\nattitude towards practical questions. The Marxists have had to face\ncertain practical problems, especially problems of party tactics, and\nthe substantial changes wrought in their theoretical outlook have come\ninto evidence here. The real gravity of the changes that have overtaken\nMarxism would scarcely be seen by a scrutiny of the formal professions\nof the Marxists alone. But the exigencies of a changing situation have\nprovoked readjustments of the received doctrinal position, and the\nshifting of the philosophical standpoint and postulates has come into\nevidence as marking the limits of change in their professions which the\nsocialistic doctrinaires could allow themselves.\n\nThe changes comprised in the cultural movement that lies between the\nmiddle and the close of the nineteenth century are great and grave, at\nleast as seen from so near a standpoint as the present day, and it is\nsafe to say that, in whatever historical perspective they may be seen,\nthey must, in some respects, always assert themselves as unprecedented.\nSo far as concerns the present topic, there are three main lines of\nchange that have converged upon the Marxist system of doctrines, and\nhave led to its latter-day modification and growth. One of these--the\nchange in the postulates of knowledge, in the metaphysical foundations\nof theory--has been spoken of already, and its bearing on the growth of\nsocialist theory has been indicated in certain of its general features.\nBut, among the circumstances that have conditioned the growth of the\nsystem, the most obvious is the fact that since Marx's time his\ndoctrines have come to serve as the platform of a political movement,\nand so have been exposed to the stress of practical party politics\ndealing with a new and changing situation. At the same time the\nindustrial (economic) situation to which the doctrines are held to\napply--of which they are the theoretical formulation--has also in\nimportant respects changed its character from what it was when Marx\nfirst formulated his views. These several lines of cultural change\naffecting the growth of Marxism cannot be held apart in so distinct a\nmanner as to appraise the work of each separately. They belong\ninextricably together, as do the effects wrought by them in the system.\n\nIn practical politics the Social Democrats have had to make up their\naccount with the labor movement, the agricultural population, and the\nimperialistic policy. On each of these heads the preconceived programme\nof Marxism has come in conflict with the run of events, and on each head\nit has been necessary to deal shrewdly and adapt the principles to the\nfacts of the time. The adaptation to circumstances has not been\naltogether of the nature of compromise, although here and there the\nspirit of compromise and conciliation is visible enough. A conciliatory\nparty policy may, of course, impose an adaptation of form and color\nupon the party principles, without thereby seriously affecting the\nsubstance of the principles themselves; but the need of a conciliatory\npolicy may, even more, provoke a substantial change of attitude toward\npractical questions in a case where a shifting of the theoretical point\nof view makes room for a substantial change.\n\nApart from all merely tactical expedients, the experience of the past\nthirty years has led the German Marxists to see the facts of the labor\nsituation in a new light, and has induced them to attach an altered\nmeaning to the accepted formulations of doctrine. The facts have not\nfreely lent themselves to the scheme of the Marxist system, but the\nscheme has taken on such a new meaning as would be consistent with the\nfacts. The untroubled Marxian economics, such as it finds expression in\nthe _Kapital_ and earlier documents of the theory, has no place and no\nuse for a trade-union movement, or, indeed, for any similar\nnon-political organisation among the working class, and the attitude of\nthe Social-Democratic leaders of opinion in the early days of the\nparty's history was accordingly hostile to any such movement,[16]--as\nmuch so, indeed, as the loyal adherents of the classical political\neconomy. That was before the modern industrial era had got under way in\nGermany, and therefore before the German socialistic doctrinaires had\nlearned by experience what the development of industry was to bring with\nit. It was also before the modern scientific postulates had begun to\ndisintegrate the neo-Hegelian preconceptions as to the logical sequence\nin the development of institutions.\n\nIn Germany, as elsewhere, the growth of the capitalistic system\npresently brought on trade-unionism; that is to say, it brought on an\norganised attempt on the part of the workmen to deal with the questions\nof capitalistic production and distribution by business methods, to\nsettle the problems of working-class employment and livelihood by a\nsystem of non-political, businesslike bargains. But the great point of\nall socialist aspiration and endeavor is the abolition of all business\nand all bargaining, and, accordingly, the Social Democrats were heartily\nout of sympathy with the unions and their endeavors to make business\nterms with the capitalist system, and make life tolerable for the\nworkmen under that system. But the union movement grew to be so serious\na feature of the situation that the socialists found themselves obliged\nto deal with unions, since they could not deal with the workmen over the\nheads of the unions. The Social Democrats, and therefore the Marxian\ntheorists, had to deal with a situation which included the union\nmovement, and this movement was bent on improving the workman's\nconditions of life from day to day. Therefore it was necessary to figure\nout how the union movement could and must further the socialistic\nadvance; to work into the body of doctrines a theory of how the unions\nbelong in the course of economic development that leads up to socialism,\nand to reconcile the unionist efforts at improvement with the ends of\nSocial Democracy. Not only were the unions seeking improvement by\nunsocialistic methods, but the level of comfort among the working\nclasses was in some respects advancing, apparently as a result of these\nunion efforts. Both the huckstering animus of the workmen in their\nunionist policy and the possible amelioration of working-class\nconditions had to be incorporated into the socialistic platform and into\nthe Marxist theory of economic development. The Marxist theory of\nprogressive misery and degradation has, accordingly, fallen into the\nbackground, and a large proportion of the Marxists have already come to\nsee the whole question of working-class deterioration in some such\napologetic light as is shed upon it by Goldscheid in his\n_Verelendungs-oder Meliorationstheorie_. It is now not an unusual thing\nfor orthodox Marxists to hold that the improvement of the conditions of\nthe working classes is a necessary condition to the advance of the\nsocialistic cause, and that the unionist efforts at amelioration must be\nfurthered as a means toward the socialistic consummation. It is\nrecognised that the socialistic revolution must be carried through not\nby an anaemic working class under the pressure of abject privation, but\nby a body of full-blooded workingmen gradually gaining strength from\nimproved conditions of life. Instead of the revolution being worked out\nby the leverage of desperate misery, every improvement in working-class\nconditions is to be counted as a gain for the revolutionary forces. This\nis a good Darwinism, but it does not belong in the neo-Hegelian Marxism.\n\nPerhaps the sorest experience of the Marxist doctrinaires has been with\nthe agricultural population. Notoriously, the people of the open country\nhave not taken kindly to socialism. No propaganda and no changes in the\neconomic situation have won the sympathy of the peasant farmers for the\nsocialistic revolution. Notoriously, too, the large-scale industry has\nnot invaded the agricultural field, or expropriated the small\nproprietors, in anything like the degree expected by the Marxist\ndoctrinaires of a generation ago. It is contained in the theoretical\nsystem of Marx that, as modern industrial and business methods gain\nground, the small proprietor farmers will be reduced to the ranks of the\nwage-proletariat, and that, as this process of conversion goes on, in\nthe course of time the class interest of the agricultural population\nwill throw them into the movement side by side with the other\nwage-workmen.[17] But at this point the facts have hitherto not come out\nin consonance with the Marxist theory. And the efforts of the Social\nDemocrats to convert the peasant population to socialism have been\npractically unrewarded. So it has come about that the political leaders\nand the keepers of the doctrines have, tardily and reluctantly, come to\nsee the facts of the agrarian situation in a new light, and to give a\nnew phrasing to the articles of Marxian theory that touch on the\nfortunes of the peasant farmer. It is no longer held that either the\nsmall properties of the peasant farmer must be absorbed into larger\nproperties, and then taken over by the State, or that they must be taken\nover by the State directly, when the socialistic revolution is\nestablished. On the contrary, it is now coming to be held that the\npeasant proprietors will not be disturbed in their holdings by the great\nchange. The great change is to deal with capitalistic enterprise, and\nthe peasant farming is not properly \"capitalistic.\" It is a system of\nproduction in which the producer normally gets only the product of his\nown labor. Indeed, under the current regime of markets and credit\nrelations, the small agricultural producer, it is held, gets less than\nthe product of his own labor, since the capitalistic business\nenterprises with which he has to deal are always able to take advantage\nof him. So it has become part of the overt doctrine of socialists that\nas regards the peasant farmer it will be the consistent aim of the\nmovement to secure him in the untroubled enjoyment of his holding, and\nfree him from the vexatious exactions of his creditors and the ruinous\nbusiness traffic in which he is now perforce involved. According to the\nrevised code, made possible by recourse to Darwinian concepts of\nevolution instead of the Hegelian three-phase dialectic, therefore, and\ncontrary to the earlier prognostications of Marx, it is no longer held\nthat agricultural industry must go through the capitalistic mill; and it\nis hoped that under the revised code it may be possible to enlist the\ninterest and sympathy of this obstinately conservative element for the\nrevolutionary cause. The change in the official socialist position on\nthe agricultural question has come about only lately, and is scarcely\nyet complete, and there is no knowing what degree of success it may meet\nwith either as a matter of party tactics or as a feature of the\nsocialistic theory of economic development. All discussions of party\npolicy, and of theory so far as bears on policy, take up the question;\nand nearly all authoritative spokesmen of socialism have modified their\nviews in the course of time on this point.\n\nThe socialism of Karl Marx is characteristically inclined to peaceable\nmeasures and disinclined to a coercive government and belligerent\npolitics. It is, or at least it was, strongly averse to international\njealousy and patriotic animosity, and has taken a stand against\narmaments, wars, and dynastic aggrandisement. At the time of the\nFrench-Prussian war the official organisation of Marxism, the\nInternational, went so far in its advocacy of peace as to urge the\nsoldiery on both sides to refuse to fight. After the campaign had warmed\nthe blood of the two nations, this advocacy of peace made the\nInternational odious in the eyes of both French and Germans. War begets\npatriotism, and the socialists fell under the reproach of not being\nsufficiently patriotic. After the conclusion of the war the Socialistic\nWorkingmen's Party of Germany sinned against the German patriotic\nsentiment in a similar way and with similarly grave results. Since the\nfoundation of the empire and of the Social-Democratic party, the\nsocialists and their doctrines have passed through a further experience\nof a similar kind, but on a larger scale and more protracted. The\ngovernment has gradually strengthened its autocratic position at home,\nincreased its warlike equipment, and enlarged its pretensions in\ninternational politics, until what would have seemed absurdly impossible\na generation ago is now submitted to by the German people, not only with\na good grace, but with enthusiasm. During all this time that part of the\npopulation that has adhered to the socialist ideals has also grown\ngradually more patriotic and more loyal, and the leaders and keepers of\nsocialist opinion have shared in the growth of chauvinism with the rest\nof the German people. But at no time have the socialists been able to\nkeep abreast of the general upward movement in this respect. They have\nnot attained the pitch of reckless loyalty that animates the\nconservative German patriots, although it is probably safe to say that\nthe Social Democrats of to-day are as good and headlong patriots as the\nconservative Germans were a generation ago. During all this period of\nthe new era of German political life the socialists have been freely\naccused of disloyalty to the national ambition, of placing their\ninternational aspirations above the ambition of imperial aggrandisement.\n\nThe socialist spokesmen have been continually on the defensive. They\nset out with a round opposition to any considerable military\nestablishment, and have more and more apologetically continued to oppose\nany \"undue\" extension of the warlike establishments and the warlike\npolicy. But with the passage of time and the habituation to warlike\npolitics and military discipline, the infection of jingoism has\ngradually permeated the body of Social Democrats, until they have now\nreached such a pitch of enthusiastic loyalty as they would not patiently\nhear a truthful characterisation of. The spokesmen now are concerned to\nshow that, while they still stand for international socialism, consonant\nwith their ancient position, they stand for national aggrandisement\nfirst and for international comity second. The relative importance of\nthe national and the international ideals in German socialist\nprofessions has been reversed since the seventies.[18] The leaders are\nbusy with interpretation of their earlier formulations. They have come\nto excite themselves over nebulous distinctions between patriotism and\njingoism. The Social Democrats have come to be German patriots first and\nsocialists second, which comes to saying that they are a political party\nworking for the maintenance of the existing order, with modifications.\nThey are no longer a party of revolution, but of reform, though the\nmeasure of reform which they demand greatly exceeds the Hohenzollern\nlimit of tolerance. They are now as much, if not more, in touch with the\nideas of English liberalism than with those of revolutionary Marxism.\n\nThe material and tactical exigencies that have grown out of changes in\nthe industrial system and in the political situation, then, have brought\non far-reaching changes of adaptation in the position of the\nsocialists. The change may not be extremely large at any one point, so\nfar as regards the specific articles of the programme, but, taken as a\nwhole, the resulting modification of the socialistic position is a very\nsubstantial one. The process of change is, of course, not yet\ncompleted,--whether or not it ever will be,--but it is already evident\nthat what is taking place is not so much a change in amount or degree of\nconviction on certain given points as a change in kind,--a change in the\ncurrent socialistic habit of mind.\n\nThe factional discrepancies of theory that have occupied the socialists\nof Germany for some years past are evidence that the conclusion, even a\nprovisional conclusion, of the shifting of their standpoint has not been\nreached. It is even hazardous to guess which way the drift is setting.\nIt is only evident that the past standpoint, the standpoint of\nneo-Hegelian Marxism, cannot be regained,--it is a forgotten standpoint.\nFor the immediate present the drift of sentiment, at least among the\neducated, seems to set toward a position resembling that of the National\nSocials and the Rev. Mr. Naumann; that is to say, imperialistic\nliberalism. Should the conditions, political, social, and economic,\nwhich to-day are chiefly effective in shaping the habits of thought\namong the German people, continue substantially unchanged and continue\nto be the chief determining causes, it need surprise no one to find\nGerman socialism gradually changing into a somewhat characterless\nimperialistic democracy. The imperial policy seems in a fair way to get\nthe better of revolutionary socialism, not by repressing it, but by\nforce of the discipline in imperialistic ways of thinking to which it\nsubjects all classes of the population. How far a similar process of\nsterilisation is under way, or is likely to overtake the socialist\nmovement in other countries, is an obscure question to which the German\nobject-lesson affords no certain answer.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _The Quarterly Journal of Economics_,\nVol. XXI, Feb., 1907.\n\n[2] \"Scientific\" is here used in the half-technical sense which by usage\nit often has in this connection, designating the theories of Marx and\nhis followers.\n\n[3] There is, indeed, a remarkable consistency, amounting substantially\nto an invariability of position, in Marx's writing, from the _Communist\nManifesto_ to the last volume of the _Capital_. The only portion of the\ngreat _Manifesto_ which became antiquated, in the apprehension of its\ncreators, is the polemics addressed to the \"Philosophical\" socialists of\nthe forties and the illustrative material taken from contemporary\npolitics. The main position and the more important articles of\ntheory--the materialistic conception, the doctrine of class struggle,\nthe theory of value and surplus value, of increasing distress, of the\nreserve army, of the capitalistic collapse--are to be found in the\n_Critique of Political Economy_ (1859), and much of them in the _Misery\nof Philosophy_ (1847), together with the masterful method of analysis\nand construction which he employed throughout his theoretical work.\n\n[4] _Cf._ Engels, _Feuerbach_ (English translation, Chicago, 1903),\nespecially Part IV, and various papers published in the _Neue Zeit_;\nalso the preface to the _Communist Manifesto_ written in 1888; also the\npreface to volume ii. of _Capital_, where Engels argues the question of\nMarx's priority in connection with the leading theoretical principles of\nhis system.\n\n[5] _Cf._ _Feuerbach_, as above; _The Development of Socialism from\nUtopia to Science_, especially sections ii and iii.\n\n[6] Such a socialist as Anton Menger, _e.g._, comes into the neo-Marxian\nschool from without, from the field of modern scientific inquiry, and\nshows, at least virtually, no Hegelian color, whether in the scope of\nhis inquiry, in his method, or in the theoretical work which he puts\nforth. It should be added that his _Neue Staatslehre_, and _Neue\nSittenlehre_ are the first socialistic constructive work of substantial\nvalue as a contribution to knowledge, outside of economic theory proper,\nthat has appeared since Lassalle. The efforts of Engels (_Ursprung der\nFamilie_) and Bebel (_Die Frau_) would scarcely be taken seriously as\nscientific monographs even by hot-headed socialists if it were not for\nthe lack of anything better. Menger's work is not Marxism, whereas\nEngels's and Bebel's work of this class is practically without value or\noriginality. The unfitness of the Marxian postulates and methods for the\npurposes of modern science shows itself in the sweeping barrenness of\nsocialistic literature all along that line of inquiry into the evolution\nof institutions for the promotion of which the materialistic dialectic\nwas invented.\n\n[7] This contrast holds between the original Marxism of Marx and the\nscope and method of modern science; but it does not, therefore, hold\nbetween the latter-day Marxists--who are largely imbued with\npost-Darwinian concepts--and the non-Marxian scientists. Even Engels, in\nhis latter-day formulation of Marxism, is strongly affected with the\nnotions of post-Darwinian science, and reads Darwinism into Hegel and\nMarx with a good deal of _naivete_. (See his _Feuerbach_, especially pp.\n93-98 of the English translation.) So, also, the serious but scarcely\nquite consistent qualifications of the materialistic conception offered\nby Engels in the letters printed in the _Sozialistische Akademiker_,\n1895.\n\n[8] The fact that the theoretical structures of Marx collapse when their\nelements are converted into the terms of modern science should of itself\nbe sufficient proof that those structures were not built by their maker\nout of such elements as modern science habitually makes use of. Marx was\nneither ignorant, imbecile, nor disingenuous, and his work must be\nconstrued from such a point of view and in terms of such elements as\nwill enable his results to stand substantially sound and convincing.\n\n[9] Cf. _Voraussetzungen des Sozialismus_, especially the first two\n(critical) chapters. Bernstein's reverent attitude toward Marx and\nEngels, as well as his somewhat old-fashioned conception of the scope\nand method of science, gives his discussion an air of much greater\nconsonance with the orthodox Marxism than it really has. In his later\nexpressions this consonance and conciliatory animus show up more\nstrongly rather than otherwise. (See _Socialism and Science_, including\nthe special preface written for the French edition.) That which was to\nMarx and Engels the point of departure and the guiding norm--the\nHegelian dialectic--is to Bernstein a mistake from which scientific\nsocialism must free itself. He says, _e.g._ (_Voraussetzungen_, end of\nch. iv.), \"The great things achieved by Marx and Engels they have\nachieved not by the help of the Hegelian dialectic, but in spite of it.\"\n\nThe number of the \"revisionists\" is very considerable, and they are\nplainly gaining ground as against the Marxists of the older line of\northodoxy. They are by no means agreed among themselves as to details,\nbut they belong together by virtue of their endeavor to so construe (and\namend) the Marxian system as to bring it into consonance with the\ncurrent scientific point of view. One should rather say points of view,\nsince the revisionists' endeavors are not all directed to bringing the\nreceived views in under a single point of view. There are two main\ndirections of movement among the revisionists: (_a_) those who, like\nBernstein, Conrad Schmidt, Tugan-Baranowski, Labriola, Ferri, aim to\nbring Marxism abreast of the standpoint of modern science, essentially\nDarwinists; and (_b_) those who aim to return to some footing on the\nlevel of the romantic philosophy. The best type and the strongest of the\nlatter class are the neo-Kantians, embodying that spirit of revulsion to\nromantic norms of theory that makes up the philosophical side of the\nreactionary movement fostered by the discipline of German imperialism.\n(See K. Vorlaender, _Die neukantische Bewegung im Sozialismus_.)\n\nExcept that he is not officially inscribed in the socialist calendar,\nSombart might be cited as a particularly effective revisionist, so far\nas concerns the point of modernising Marxism and putting the modernised\nmaterialistic conception to work.\n\n[10] _Cf._ the files of the _Neue Zeit_, particularly during the\ncontroversy with Bernstein, and _Bernstein und das Sozialdemokratische\nProgramm_.\n\n[11] The \"idealist\" socialists are even more in evidence outside of\nGermany. They may fairly be said to be in the ascendant in France, and\nthey are a very strong and free-spoken contingent of the socialist\nmovement in America. They do not commonly speak the language either of\nscience or of philosophy, but, so far as their contentions may be\nconstrued from the standpoint of modern science, their drift seems to be\nsomething of the kind indicated above. At the same time the spokesmen of\nthis scattering and shifting group stand for a variety of opinions and\naspirations that cannot be classified under Marxism, Darwinism, or any\nother system of theory. At the margin they shade off into theology and\nthe creeds.\n\n[12] Throughout the revisionist literature in Germany there is a visible\nsoftening of the traits of the doctrine of the class struggle, and the\nlike shows itself in the programmes of the party. Outside of Germany the\ndoctrinaire insistence on this tenet is weakening even more decidedly.\nThe opportunist politicians, with strong aspirations, but with\nrelatively few and ill-defined theoretical preconceptions, are gaining\nground.\n\n[13] _Cf._ Bernstein, _Die heutige Sozialdemokratie in Theorie\nund Praxis_, an answer to Brunhuber, _Die heutige Sozialdemokratie_,\nwhich should be consulted in the same connection: Goldscheid,\n_Verelendungs- oder Meliorationstheorie_; also Sombart, _Sozialismus\nund soziale Bewegung_, 5th edition, pp. 86-89.\n\n[14] Accordingly, in later Marxian handling of the questions of\nexploitation and accumulation, the attention is centered on the \"surplus\nproduct\" rather than on the \"surplus value.\" It is also currently held\nthat the doctrines and practical consequences which Marx derived from\nthe theory of surplus value would remain substantially well founded,\neven if the theory of surplus value was given up. These secondary\ndoctrines could be saved--at the cost of orthodoxy--by putting a theory\nof surplus product in the place of the theory of surplus value, as in\neffect is done by Bernstein (_Socialdemokratie in Theorie und Praxis_,\nsec. 5. Also various of the essays included in _Zur Geschichte und\nTheorie des Sozialismus_).\n\n[15] The \"right to the full product of labor\" and the Marxian theory of\nexploitation associated with that principle has fallen into the\nbackground, except as a campaign cry designed to stir the emotions of\nthe working class. Even as a campaign cry it has not the prominence, nor\napparently the efficacy, which it once had. The tenet is better\npreserved, in fact, among the \"idealists\", who draw for their\nantecedents on the French Revolution and the English philosophy of\nnatural rights, than among the latter-day Marxists.\n\n[16] It is, of course, well known that even in the transactions and\npronounciamentos of the International a good word is repeatedly said for\nthe trade-unions, and both the Gotha and the Erfurt programmes speak in\nfavor of labor organisations, and put forth demands designed to further\nthe trade-union endeavors. But it is equally well known that these\nexpressions were in good part perfunctory, and that the substantial\nmotive behind them was the politic wish of the socialists to conciliate\nthe unionists, and make use of the unions for the propaganda. The early\nexpressions of sympathy with the unionist cause were made for an\nulterior purpose. Later on, in the nineties, there comes a change in the\nattitude of the socialist leaders toward the unions.\n\n[17] _Cf._ _Kapital_, vol. i, ch. xiii, sect 10.\n\n[18] _Cf._ Kautsky, _Erfurter Programm_, ch. v, sect. 13; Bernstein,\n_Voraussetzungen_, ch. iv, sect. e.\n\n\n\n\nTHE MUTATION THEORY AND THE BLOND RACE[1]\n\n\nThe theories of racial development by mutation, associated with the name\nof Mendel, when they come to be freely applied to man, must greatly\nchange the complexion of many currently debated questions of race--as to\norigins, migrations, dispersion, chronology, cultural derivation and\nsequence. In some respects the new theories should simplify current\nproblems of ethnology, and they may even dispense with many analyses and\nspeculations that have seemed of great moment in the past.\n\nThe main postulate of the Mendelian theories--the stability of type--has\nalready done much service in anthropological science, being commonly\nassumed as a matter of course in arguments dealing with the derivation\nand dispersion of races and peoples. It is only by force of this\nassumption that ethnologists are able to identify any given racial stock\nover intervals of space or time, and so to trace the racial affinities\nof any given people. Question has been entertained from time to time as\nto the racial fixity of given physical traits--as, _e.g._, stature, the\ncephalic indices, or hair and eye color--but on the whole these and\nother standard marks of race are still accepted as secure grounds of\nidentification.[2] Indeed, without some such assumption any ethnological\ninquiry must degenerate into mere wool-gathering.\n\nBut along with this, essentially Mendelian, postulate of the stability\nof types, ethnologists have at the same time habitually accepted the\nincompatible Darwinian doctrine that racial types vary incontinently\nafter a progressive fashion, arising through insensible cumulative\nvariations and passing into new specific forms by the same method, under\nthe Darwinian rule of the selective survival of slight and unstable\n(non-typical) variations. The effect of these two incongruous premises\nhas been to leave discussions of race derivation somewhat at loose ends\nwherever the two postulates cross one another.\n\nIf it be assumed, or granted, that racial types are stable, it follows\nas a matter of course that these types or races have not arisen by the\ncumulative acquirement of unstable non-specific traits, but must have\noriginated by mutation or by some analogous method, and this view must\nthen find its way into anthropology as into the other biological\nsciences. When such a step is taken an extensive revision of questions\nof race will be unavoidable, and an appreciable divergence may then be\nlooked for among speculations on the mutational affinities of the\nseveral races and cultures.\n\nAmong matters so awaiting revision are certain broad questions of\nderivation and ethnography touching the blond race or races of Europe.\nMuch attention, and indeed much sentiment, has been spent on this\ngeneral topic. The questions involved are many and diverse, and many of\nthem have been subject of animated controversy, without definitive\nconclusions.\n\nThe mutation theories, of course, have immediately to do with the facts\nof biological derivation alone, but when the facts are reviewed in the\nlight of these theories it will be found that questions of cultural\norigins and relationship are necessarily drawn into the inquiry. In\nparticular, an inquiry into the derivation and distribution of the\nblond stock will so intimately involve questions of the Aryan speech and\ninstitutions as to be left incomplete without a somewhat detailed\nattention to this latter range of questions. So much so that an inquiry\ninto the advent and early fortunes of the blond stock in Europe will\nfall, by convenience, under two distinct but closely related captions:\nThe Origin of the Blond Type, and The Derivation of the Aryan Culture.\n\n       *       *       *       *       *\n\n(a) It is held, on the one hand, that there is but a single blond race,\ntype or stock (Keane, Lapouge, Sergi), and on the other hand that there\nare several such races or types, more or less distinct but presumably\nrelated (Deniker, Beddoe, and other, especially British, ethnologists).\n(b) There is no good body of evidence going to establish a great\nantiquity for the blond stock, and there are indications, though perhaps\ninconclusive, that the blond strain, including all the blond types, is\nof relatively late date--unless a Berber (Kabyle) blond race is to be\naccepted in a more unequivocal manner than hitherto. (c) Neither is\nthere anything like convincing evidence that this blond strain has come\nfrom outside of Europe--except, again, for the equivocal Kabyle--or that\nany blond race has ever been widely or permanently distributed outside\nof its present European habitat, (d) The blond race is not found\nunmixed. In point of pedigree all individuals showing the blond traits\nare hybrids, and the greater number of them show their mixed blood in\ntheir physical traits. (e) There is no community, large or small, made\nup exclusively of blonds, or nearly so, and there is no good evidence\navailable that such an all-blond or virtually all-blond community ever\nhas existed, either in historic or prehistoric times. The race appears\nnever to have lived in isolation. (f) It occurs in several (perhaps\nhybrid) variants--unless these variants are to be taken (with Deniker)\nas several distinct races, (g) Counting the dolicho-blond as the\noriginal type of the race, its nearest apparent relative among the races\nof mankind is the Mediterranean (of Sergi), at least in point of\nphysical traits. At the same time the blond race, or at least the\ndolicho-blond type, has never since neolithic times, so far as known,\nextensively and permanently lived in contact with the Mediterranean. (h)\nThe various (national) ramifications of the blond stock--or rather the\nvarious racial mixtures into which an appreciable blond element\nenters--are all, and to all appearance have always been, of Aryan\n(\"Indo-European,\" \"Indo-Germanic\") speech--with the equivocal exception\nof the Kabyle. (i) Yet far the greater number and variety (national and\nlinguistic) of men who use the Aryan speech are not prevailingly blond,\nor even appreciably mixed with blond. (j) The blond race, or the peoples\nwith an appreciable blond admixture, and particularly the communities in\nwhich the dolicho-blond element prevails, show little or none of the\npeculiarly Aryan institutions--understanding by that phrase not the\nknown institutions of the ancient Germanic peoples, but that range of\ninstitutions said by competent philologists to be reflected in the\nprimitive Aryan speech. (k) These considerations raise the presumption\nthat the blond race was not originally of Aryan speech or of Aryan\nculture, and they also suggest (l) that the Mediterranean, the nearest\napparent relative of the dolicho-blond, was likewise not originally\nAryan.\n\n       *       *       *       *       *\n\nAccepting the mutation theory, then, for the purpose in hand, and\nleaving any questions of Aryanism on one side for the present, a\ncanvass of the situation so outlined may be offered in such bold, crude\nand summary terms as should be admissible in an analysis which aims to\nbe tentative and provisional only. It may be conceived that the\ndolichocephalic blond originated as a mutant of the Mediterranean type\n(which it greatly resembles in its scheme of biometric measurements[3])\nprobably some time after that race had effected a permanent lodgment on\nthe continent of Europe. The Mediterranean stock may be held (Sergi and\nKeane) to have come into Europe from Africa,[4] whatever its remoter\nderivation may have been. It is, of course, not impossible that the\nmutation which gave rise to the dolicho-blond may have occurred before\nthe parent stock left Africa, or rather before it was shut out of Africa\nby the submergence of the land connection across Sicily, but the\nprobabilities seem to be against such a view. The conditions would\nappear to have been less favorable to a mutation of this kind in the\nAfrican habitat of the parent stock than in Europe, and less favorable\nin Europe during earlier quaternary time than toward the close of the\nglacial period.\n\nThe causes which give rise to a variation of type have always been\nsufficiently obscure, whether the origin of species be conceived after\nthe Darwinian or the Mendelian fashion, and the mutation theories have\nhitherto afforded little light on that question. Yet the Mendelian\npostulate that the type is stable except for such a mutation as shall\nestablish a new type raises at least the presumption that such a\nmutation will take place only under exceptional circumstances, that is\nto say, under circumstances so substantially different from what the\ntype is best adapted to as to subject it to some degree of physiological\nstrain. It is to be presumed that no mutation will supervene so long as\nthe conditions of life do not vary materially from what they have been\nduring the previous uneventful life-history of the type. Such is the\npresumption apparently involved in the theory and such is also the\nsuggestion afforded by the few experimental cases of observed mutation,\nas, _e.g._, those studied by De Vries.\n\nA considerable climatic change, such as would seriously alter the\nconditions of life either directly or through its effect on the food\nsupply, might be conceived to bring on a mutating state in the race; or\nthe like effect might be induced by a profound cultural change,\nparticularly any such change in the industrial arts as would radically\naffect the material conditions of life. These considerations, mainly\nspeculative it is true, suggest that the dolicho-blond mutant could\npresumably have emerged only at a time when the parent stock was exposed\nto notably novel conditions of life, such as would be presumed (with De\nVries) to tend to throw the stock into a specifically unstable\n(mutating) state; at the same time these novel conditions of life must\nalso have been specifically of such a nature as to favor the survival\nand multiplication of this particular human type. The climatic tolerance\nof the dolicho-blond, _e.g._, is known to be exceptionally narrow. Now,\nit is not known, indeed there is no reason to presume, that the\nMediterranean race was exposed to such variations of climate or of\nculture before it entered Europe as might be expected to induce a\nmutating state in the stock, and at the same time a mutant gifted with\nthe peculiar climatic intolerance of the dolicho-blond would scarcely\nhave survived under the conditions offered by northern Africa in late\nquaternary time. But the required conditions are had later on in Europe,\nafter the Mediterranean was securely at home in that continent.\n\nThe whole episode may be conceived to have run off somewhat in the\nfollowing manner. The Mediterranean race is held to have entered Europe\nin force during quaternary time, presumably after the quaternary period\nwas well advanced, most likely during the last genial, interglacial\nperiod. This race then brought the neolithic culture, but without the\ndomestic animals (or plants?) that are a characteristic feature of the\nlater neolithic age, and it encountered at least the remnants of an\nolder, palaeolithic population. This older European population was made\nup of several racial stocks, some of which still persist as obscure and\nminor elements in the later peoples of Europe. The (geologic) date to be\nassigned this intrusion of the Mediterranean race into Europe is of\ncourse not, and can perhaps never be, determined with any degree of\nnicety or confidence. But there is a probability that it coincides with\nthe recession of the ice-sheet, following one or another of the severer\nperiods of glaciations, that occurred before the submergence of the land\nconnection between Europe and Africa, over Gibraltar, Sicily, and\nperhaps Crete. How late in quaternary time the final submergence of the\nMediterranean basin occurred is still a matter of surmise; the intrusion\nof the Mediterranean race into Europe appears, on archaeological\nevidence, to have occurred in late quaternary time, and in the end this\narchaeological evidence may help to decide the geologic date of the\nseverance of Europe from Africa.\n\nThe Mediterranean race seems to have spread easily over the habitable\nsurface of Europe and shortly to have grown numerous and taken rank as\nthe chief racial element in the neolithic population; which argues that\nno very considerable older population occupied the European continent at\nthe time of the Mediterranean invasion; which in turn implies that the\nfairly large (Magdalenian) population of the close of the palaeolithic\nage was in great part destroyed or expelled by the climatic changes that\ncoincided with or immediately preceded the advent of the Mediterranean\nrace. The known characteristics of the Magdalenian culture indicate a\ntechnology, a situation and perhaps a race, somewhat closely paralleled\nby the Eskimo;[5] which argues that the climatic situation before which\nthis Magdalenian race and culture gave way would have been that of a\ngenial interglacial period rather than a period of glaciation.\n\nDuring this genial (perhaps sub-tropical) inter-glacial period\nimmediately preceding the last great glaciation the Magdalenian stock\nwould presumably find Europe climatically untenable, judging by analogy\nwith the Eskimo; whereas the Mediterranean stock should have found it an\neminently favorable habitat, for this race has always succeeded best in\na warm-temperate climate. Both the extensive northward range of the\nearly neolithic (Mediterranean) settlements and the total disappearance\nof the Magdalenian culture from the European continent point to a\nclimatic situation in Europe more favorable to the former race and more\nunwholesome for the latter than the conditions known to have prevailed\nat any time since the last interglacial period, especially in the higher\nlatitudes. The indications would seem to be that the whole of Europe,\neven the Baltic and Arctic seaboards, became climatically so fully\nimpossible for the Magdalenian race during this interglacial period as\nto result in its extinction or definitive expulsion; for when, in recent\ntimes, climatically suitable conditions return, on the Arctic seaboard,\nthe culture which takes the place that should have been occupied by the\nMagdalenian is the Finnic (Lapp)--a culture unrelated to the\nMagdalenian either in race or technology, although of much the same\ncultural level and dealing with a material environment of much the same\ncharacter. And this genial interval that was fatal to the Magdalenian\nwas, by just so much, favorable to the Mediterranean race.\n\nBut glacial conditions presently returned, though with less severity\nthan the next preceding glacial period; and roughly coincident with the\nclose of the genial interval in Europe the land connection with Africa\nwas cut off by submergence, shutting off retreat to the south. How far\ncommunication with Asia may have been interrupted during the subsequent\ncold period, by the local glaciation of the Caucasus, Elburz and\nArmenian highlands, is for the present apparently not to be determined,\nalthough it is to be presumed that the outlet to the east would at least\nbe seriously obstructed during the glaciation. There would then be left\navailable for occupation, mainly by the Mediterranean race, central and\nsouthern Europe together with the islands, notably Sicily and Crete,\nleft over as remnants of the earlier continuous land between Europe and\nAfrica. The southern extensions of the mainland, and more particularly\nthe islands, would still afford a favorable place for the Mediterranean\nrace and its cultural growth. So that the early phases of the great\nCretan (Aegean) civilisation are presumably to be assigned to this\nperiod that is covered by the last advance of the ice in northern\nEurope. But the greater portion of the land area so left accessible to\nthe Mediterranean race, in central or even in southern Europe, would\nhave been under glacial or sub-glacial climatic conditions. For this\nrace, essentially native to a warm climate, this situation on the\nEuropean mainland would be sufficiently novel and trying, particularly\nthroughout that ice-fringed range of country where they would be\nexposed to such cold and damp as this race has never easily tolerated.\n\nThe situation so outlined would afford such a condition of physiological\nstrain as might be conceived to throw the stock into a specifically\nunstable state and so bring on a phase of mutation. At the same time\nthis situation, climatic and technological, would be notably favorable\nto the survival and propagation of a type gifted with all the peculiar\ncapacities and limitations of the dolicho-blond; so that any mutant\nshowing the traits characteristic of that type would then have had an\neminently favorable chance of survival. Indeed, it is doubtful, in the\npresent state of the available evidence, whether such a type of man\ncould have survived in Europe from or over any period of quaternary time\nprior to the last period of glaciation. The last preceding interglacial\nperiod appears to have been of a sufficiently genial (perhaps\nsub-tropical) character throughout Europe to have definitively\neliminated the Magdalenian race and culture, and a variation of climate\nin the genial sense sufficiently pronounced to make Europe absolutely\nuntenable for the Magdalenian--presumed to be something of a counterpart\nto the Eskimo both in race and culture--should probably have reached the\nlimit of tolerance for the dolicho-blond as well. The latter is\ndoubtless not as intolerant of a genial--warm-temperate--climate as the\nformer, but the dolicho-blond after all stands much nearer to the Eskimo\nin this matter of climatic tolerance than to either of the two chief\nEuropean stocks with which it is associated. Apparently no racial stock\nwith a climatic tolerance approximately like that of the Eskimo, the\nMagdalenian, or the current races of the Arctic seaboard, survived over\nthe last inter-glacial period; and if the dolicho-blond is conceived to\nhave lived through that period it would appear to have been by a\nprecariously narrow margin. So that, on one ground and another, the\nmutation out of which the dolicho-blond has arisen is presumably to be\nassigned to the latest period of glaciation in Europe, and with some\nprobability to the time when the latest glaciation was at its maximum,\nand to the region where glacial and seaboard influences combined to give\nthat racial type a differential advantage over all others.\n\nThis dolicho-blond mutation may, of course, have occurred only once, in\na single individual, but it should seem more probable, in the light of\nDe Vries' experiments, that the mutation will have been repeated in the\nsame specific form in several individuals in the same general locality\nand in the same general period of time. Indeed, it would seem highly\nprobable that several typically distinct mutations will have occurred,\nrepeatedly, at roughly the same period and in the same region, giving\nrise to several new types, some of which, including the dolicho-blond,\nwill have survived. Many, presumably the greater number, of these mutant\ntypes will have disappeared, selectively, being unfit to survive under\nthose sub-glacial seaboard conditions that were eminently favorable to\nthe dolicho-blond; while other mutants arising out of the same mutating\nperiod and adapted to climatic conditions of a more continental\ncharacter, suitable to more of a continental habitat, less humid, at a\nhigher altitude and with a wider seasonal variation of temperature, may\nhave survived in the regions farther inland, particularly eastward of\nthe selectively defined habitat of the dolicho-blond. These latter may\nhave given rise to several blond races, such as are spoken for by\nDeniker[6] and certain British ethnologists.\n\nThe same period of mutation may well have given rise also to one or more\nbrunet types, some of which may have survived. But if any new brunet\ntype has come up within a period so recent as this implies, the fact has\nnot been noted or surmised hitherto--unless the brunet races spoken for\nby Deniker are to be accepted as typically distinct and referred to such\nan origin. The evidence for the brunet stocks has not been canvassed\nwith a question of this kind in view. These stocks have not been subject\nof such eager controversy as the dolicho-blond, and the attention given\nthem has been correspondingly less. The case of the blond is unique in\nrespect of the attention spent on questions of its derivation and\nprehistory, and it is also singular in respect of the facility with\nwhich it can be isolated for the purposes of such an inquiry. This large\nand persistent attention, from all sorts of ethnologists, has brought\nthe evidence bearing on the dolicho-blond into such shape as to permit\nmore confident generalisations regarding that race than any other.\n\nIn any case the number of mutant individuals, whether of one or of\nseveral specific types, will have been very few as compared with the\nnumbers of the parent stock from which they diverged, even if they may\nhave been somewhat numerous as counted absolutely, and the survivors\nwhose offspring produced a permanent effect on the European peoples will\nhave been fewer still. It results that these surviving mutants will not\nhave been isolated from the parent stock, and so could not breed in\nisolation, but must forthwith be crossed on the parent stock and could\ntherefore yield none but hybrid offspring. From the outset, therefore,\nthe community or communities in which the blond mutants were propagated\nwould be made up of a mixture of blond and brunet, with the brunet\ngreatly preponderating. It may be added that in all probability there\nwere also present in this community from the start one or more minor\nbrunet elements besides the predominant Mediterranean, and that at least\nshortly after the close of the glacial period the new brachycephalic\nbrunet (Alpine) race comes into the case; so that the chances favor an\nearly and persistent crossing of the dolicho-blond with more than one\nbrunet type, and hence they favor complications and confusion of types\nfrom the start. It follows that, in point of pedigree, according to this\nview there neither is nor ever has been a pure-bred dolicho-blond\nindividual since the putative original mutant with which the type came\nin. But under the Mendelian rule of hybrids it is none the less to be\nexpected that, in the course of time and of climatically selective\nbreeding, individuals (perhaps in appreciable numbers) will have come up\nfrom time to time showing the type characters unmixed and unweakened,\nand effectively pure-bred in point of heredity. Indeed, such\nindividuals, effectively pure-bred or tending to the establishment of a\npure line, will probably have emerged somewhat frequently under\nconditions favorable to the pure type. The selective action of the\nconditions of life in the habitat most favorable to the propagation of\nthe dolicho-blond has worked in a rough and uncertain way toward the\nestablishment, in parts of the Baltic and North Sea region, of\ncommunities made up prevailingly of blonds. Yet none of these\ncommunities most favorably placed for a selective breeding in the\ndirection of a pure dolicho-blond population have gone far enough in\nthat direction to allow it safely to be said that the composite\npopulation of any such given locality is more than half blond.\n\nPlaced as it is in a community of nations made up of a hybrid mixture of\nseveral racial stocks there is probably no way at present of reaching a\nconvincing demonstration of the typical originality of this\ndolicho-blond mutant, as contrasted with the other blond types with\nwhich it is associated in the European population; but certain general\nconsiderations go decidedly, perhaps decisively, to enforce such a view:\n(a) This type shows such a pervasive resemblance to a single one of the\nknown older and more widely distributed types of man (the Mediterranean)\nas to suggest descent by mutation from this one rather than derivation\nby crossing of any two or more known types. The like can not be said of\nthe other blond types, all and several of which may plausibly be\nexplained as hybrids of known types. They have the appearance of blends,\nor rather of biometrical compromises, between two or more existing\nvarieties of man. Whereas it does not seem feasible to explain the\ndolicho-blond as such a blend or compromise between any known racial\ntypes. (b) The dolicho-blond occurs, in a way, centrally to the other\nblond types, giving them a suggestive look of being ramifications of the\nblond stock, by hybridisation, into regions not wholly suited to the\ntypical blond. The like can scarcely be said for any of the other\nEuropean types or races. The most plausible exception would be Deniker's\nEast-European or Oriental race, Beddoe's Saxon, which stands in a\nsomewhat analogous spacial relation to the other blond types. But this\nbrachycephalic blond is not subject to the same sharp climatic\nlimitations that hedge about the dolicho-blond; it occurs apparently\nwith equally secure viability within the littoral home area of the\ndolicho-blond and in continental situations where conditions of altitude\nand genial climate would bar the latter from permanent settlement. The\nancient and conventionally accepted center of diffusion of blondness in\nEurope lies within the seaboard region bordering on the south Baltic,\nthe North Sea and the narrow waters of the Scandinavian peninsulas.\nProbably, if this broad central area of diffusion were to be narrowed\ndown to a particular spot, the consensus of opinion as to where the\nnarrower area of characteristic blondness is to be looked for, would\nconverge on the lands immediately about the narrow Scandinavian waters.\nThis would seem to hold true for historic and for prehistoric times\nalike. This region is at the same time, by common consent, the peculiar\nhome of the dolicho-blond, rather than of any other blond type. (c) The\nwell known but little discussed climatic limitation of the blond race\napplies particularly to the dolicho-blond, and only in a pronouncedly\nslighter degree to the other blond types. The dolicho-blond is subject\nto a strict regional limitation, the other blond types to a much less\ndefinite and wider limitation of the same kind. Hence these others are\ndistributed somewhat widely, over regions often remote and climatically\ndifferent from the home area of the dolicho-blond, giving them the\nappearance of being dispersed outward from this home area as hybrid\nextensions of the central and typical blond stock. A further and equally\ncharacteristic feature of this selective localisation of the\ndolicho-blond race is the fact that while this race does not succeed\npermanently outside the seaboard region of the south Baltic and North\nSea, there is no similar selective bar against other races intruding\ninto this region. Although the dolicho-blond perhaps succeeds better\nwithin its home area than any other competing stock or type, yet several\nother types of man succeed so well within the same region as to hold it,\nand apparently always to have held it, in joint tenancy with the\ndolicho-blond.\n\nA close relationship, amounting to varietal identity, of the Kabyle with\nthe dolicho-blond has been spoken for by Keane and by other\nethnologists. But the very different climatic tolerance of the two\nraces should put such an identity out of the question. The Kabyle lives\nand thrives best, where his permanent home area has always been, in a\nhigh and dry country, sufficiently remote from the sea to make it a\ncontinental rather than a littoral habitat. The dolicho-blond, according\nto all available evidence, can live in the long run only in a seaboard\nhabitat, damp and cool, at a high latitude and low altitude. There is no\nknown instance of this race having gone out from its home area on the\nnorthern seaboard into such a region as that inhabited by the Kabyle and\nhaving survived for an appreciable number of generations. That this type\nof man should have come from Mauritania, where it could apparently not\nlive under the conditions known to have prevailed there in the recent or\nthe remoter past, would seem to be a biologic impossibility. Hitherto,\nwhen the dolicho-blond has migrated into such or a similar habitat it\nhas not adapted itself to the new climatic requirements but has\npresently disappeared off the face of the land. Indeed, the experiment\nhas been tried in Mauritanian territory. If the Kabyle blond is to be\ncorrelated with those of Europe, it will in all probability have to be\nassigned an independent origin, to be derived from an earlier mutation\nof the same Mediterranean stock to which the dolicho-blond is to be\ntraced.\n\nQuestions of race in Europe are greatly obscured by the prevalence of\nhybrid types having more or less fixity and being more or less\ndistinctly localised. The existing European peoples are hybrid mixtures\nof two or more racial stocks. The further fact is sufficiently obvious,\nthough it has received less critical attention than might be, that\nthese several hybrid populations have in the course of time given\nrise to a number of distinct national and local types, differing\ncharacteristically from one another and having acquired a degree of\npermanence, such as to simulate racial characters and show well marked\nnational and local traits in point of physiognomy and temperament.\nPresumably, these national and local types of physique and temperament\nare hybrid types that have been selectively bred into these\ncharacteristic forms in adaptation to the peculiar circumstances of\nenvironment and culture under which each particular local population is\nrequired to live, and that have been so fixed (provisionally) by\nselective breeding of the hybrid material subject to such locally\nuniform conditions--except so far as the local characters in question\nare of the nature of habits and are themselves therefore to be classed\nas an institutional element rather than as characteristics of race.\n\nIt is evident that under the Mendelian law of hybridisation the range of\nfavorable, or viable, variations in any hybrid population must be very\nlarge--much larger than the range of fluctuating (non-typical)\nvariations obtainable under any circumstances in a pure-bred race. It\nalso follows from these same laws of hybridisation that by virtue of the\nmutual exclusiveness of allelomorphic characters or groups of characters\nit is possible selectively to obtain an effectually \"pure line\" of\nhybrids combining characters drawn from each of the two or more parent\nstocks engaged, and that such a composite pure line may selectively be\nbrought to a provisional fixity[7] in any such hybrid population. And\nunder conditions favorable to a type endowed with any given hybrid\ncombination of characters so worked out the given hybrid type (composite\npure line) may function in the racial mixture in which it is so placed\nvery much as an actual racial type would behave under analogous\ncircumstances; so that, _e.g._, under continued intercrossing such a\nhybrid population would tend cumulatively to breed true to this\nprovisionally stable hybrid type, rather than to the actual racial type\nrepresented by any one of the parent stocks of which the hybrid\npopulation is ultimately made up, unless the local conditions should\nselectively favor one or another of these ultimate racial types.\nEvidently, too, the number of such provisionally stable composite pure\nlines that may be drawn from any hybrid mixture of two or more parent\nstocks must be very considerable--indeed virtually unlimited; so that on\nthis ground there should be room for any conceivable number of\nprovisionally stable national or local types of physique and\ntemperament, limited only by the number of characteristically\ndistinguishable local environments or situations that might each\nselectively act to characterise and establish a locally characteristic\ncomposite pure line; each answering to the selective exigencies of the\nhabitat and cultural environment in which it is placed, and each\nresponding to these exigencies in much the same fashion as would an\nactual racial type--provided only that this provisionally stable\ncomposite pure line is not crossed on pure-bred individuals of either of\nthe parent stocks from which it is drawn, pure-bred in respect of the\nallelomorphic characters which give the hybrid type its typical traits.\n\nWhen the hybrid type is so crossed back on one or other of its parent\nstocks it should be expected to break down; but in so slow-breeding a\nspecies as man, with so large a complement of unit characters (some 4000\nit has been estimated), it will be difficult to decide empirically which\nof the two lines--the hybrid or the parent stock--proves itself in the\noffspring effectively to be a racial type; that is to say, which of the\ntwo (or more) proves to be an ultimately stable type arisen by a\nMendelian mutation, and which is a provisionally stable composite pure\nline selectively derived from a cross. The inquiry at this point,\ntherefore, will apparently have to content itself with arguments of\nprobability drawn from the varying behavior of the existing hybrid types\nunder diverse conditions of life.\n\nSuch general consideration of the behavior of the blond types of Europe,\nother than the dolicho-blond, and more particularly consideration of\ntheir viability under divergent climatic conditions, should apparently\nincline to the view that they are hybrid types, of the nature of\nprovisionally stable composite pure lines.\n\nSo far, therefore, as the evidence has yet been canvassed, it seems\nprobable on the whole that the dolicho-blond is the only survivor from\namong the several mutants that may have arisen out of this presumed\nmutating period; that the other existing blond types, as well as certain\nbrunets, are derivatives of the hybrid offspring of the dolicho-blond\ncrossed on the parent Mediterranean stock or on other brunet stocks with\nwhich the race has been in contact early or late; and that several of\nthese hybrid lines have in the course of time selectively been\nestablished as provisionally stable types (composite pure lines),\nbreakable only by a fresh cross with one or other of the parent types\nfrom which the hybrid line sprang, according to the Mendelian rule.[8]\n\nAll these considerations may not be convincing, but they are at least\nsuggestive to the effect that if originality is to be claimed for any\none of the blond types or stocks it can best be claimed for the\ndolicho-blond, while the other blond types may better be accounted for\nas the outcome of the crossing of this stock on one or another of the\nbrunet stocks of Europe.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _The Journal of Race Development_, Vol.\nIII, No. 4.\n\n[2] _Cf._, however, W. Ridgeway, \"The Application of Zoological Laws to\nMan,\" _Report, British Association for Advancement of Science_ (Dublin),\n1908.\n\n[3] _Cf._ Sergi, _The Mediterranean Race_, ch. xi, xiii.\n\n[4] Sergi, _Arii e Italici_; Keane, _Man Past and Present_, ch. xii.\n\n[5] _Cf._ W. J. Sollas, \"Palaeolithic Races and their Modern\nRepresentatives,\" _Science Progress_, vol. iv, 1909-1910.\n\n[6] _The Races of Mankind_; and \"Les six races composant la population\nde l'Europe,\" _Journal Anth. Inst._, 1906.\n\n[7] Illustrated by the various pure breeds or \"races\" of domestic\nanimals.\n\n[8] Mr. R. B. Bean's discussion of Deniker's \"Six Races,\" _e.g._, goes\nfar to show that such is probably the standing of the blond types, other\nthan the dolicho-blond, among these six races of Europe; although such\nis not the conclusion to which Mr. Bean comes. _Philippine Journal of\nScience_, September, 1909.\n\n\n\n\nTHE BLOND RACE AND THE ARYAN CULTURE[1]\n\n\nIt has been argued in an earlier paper[2] that the blond type or types\nof man (presumably the dolichocephalic blond) arose by mutation from the\nMediterranean stock during the last period of severe glaciation in\nEurope. This would place the emergence of this racial type roughly\ncoincident with the beginning of the European neolithic; the evidence\ngoing presumptively to show that the neolithic technology came into\nEurope with the Mediterranean race, at or about the same time with that\nrace, and that the mutation which gave rise to the dolicho-blond took\nplace after the Mediterranean race was securely settled in Europe. Since\nthis blond mutant made good its survival under the circumstances into\nwhich it so was thrown it should presumably be suited by native\nendowment to the industrial and climatic conditions that prevailed\nthrough the early phases of the neolithic age in Europe; that is to say,\nit would be a type of man selectively adapted to the technological\nsituation characteristic of the early neolithic but lacking as yet the\ndomestic animals (and crop-plants?) that presently give much of its\ncharacter to that culture.\n\nBeginning, then, with the period of the last severe glaciation, and\nstarting with this technological equipment, those portions of the\nEuropean population that contained an appreciable and increasing\nadmixture of the blond may be conceived to have ranged across the\nbreadth of Europe, particularly in the lowlands, in the belt of damp and\ncool country that fringed the ice, and to have followed the receding\nice-sheet northward when the general climate of Europe began to take on\nits present character with the returning warmth and dryness. By force of\nthe strict climatic limitation to which this type is subject, the blond\nelement, and more particularly the dolicho-blond, will presently have\ndisappeared by selective elimination from the population of those\nregions from which the ice-sheet and its fringe of cool and humid\nclimate had receded. The cool and humid belt suited to the propagation\nof the blond mutant (and its blond hybrids) would shift northward and\nshorten down to the seaboard as the glacial conditions in which it had\noriginated presently ceased. So that presently, when Europe finally lost\nits ice-sheet, the blond race and its characteristic hybrids would be\nfound confined nearly within the bounds which have marked its permanent\nextension in historic times. These limits have, no doubt, fluctuated\nsomewhat in response to secular variations of climate; but on the whole\nthey appear to have been singularly permanent and singularly rigid.\n\nApparently after the dolicho-blond had come to occupy the restricted\nhabitat which the stock has since continued to hold on the northern\nseaboard of Europe, toward the close of what is known in Danish\nchronology as the \"older stone age,\" the early stock of domestic animals\nappear to have been introduced into Europe from Asia; the like statement\nwill hold more doubtfully for the older staple crop plants, with the\nreservation that their introduction appears to antedate that of the\ndomestic animals. At least some such date seems indicated by their first\nappearance in Denmark late in the period of the \"kitchen middens.\"\nVirtually all of these essential elements of their material civilisation\nappear to have come to the blond-hybrid communities settled on the\nnarrow Scandinavian waters, as to the rest of Europe, from Turkestan.\nThis holds true at least for the domestic animals as a whole, the\npossible exceptions among the early introductions being not of great\nimportance. Some of the early crop plants may well have come from what\nis now Mesopotamian or Persian territory, and may conceivably have\nreached western Europe appreciably earlier, without affecting the\npresent argument. If the European horse had been domesticated in\npalaeolithic times, as appears at least extremely probable, that\ntechnological gain appears to have been lost before the close of the\npalaeolithic age; perhaps along with the extinction of the European\nhorse.\n\nThese new elements of technological equipment, the crop plants and\nanimals, greatly affected the character of the neolithic culture in\nEurope; visibly so as regards the region presumably occupied by the\ndolicho-blond,--or the blond-hybrid peoples. On the material side of the\ncommunity's life they would bring change direct and immediate, altering\nthe whole scheme of ways and means and shifting the pursuit of a\nlivelihood to new lines; and on the immaterial side their effect would\nbe scarcely less important, in that the new ways and means and the new\nmanner of life requisite and induced by their use would bring on certain\nnew institutional features suitable to a system of mixed farming.\nWhatever may have been the manner of their introduction, whether they\nwere transmitted peaceably by insensible diffusion from group to group\nor were carried in with a high hand by a new intrusive population that\noverran the country and imposed its own cultural scheme upon the\nEuropeans along with the new ways and means of life,--in any case these\nnew cultural elements will have spread over the face of Europe somewhat\ngradually and will have reached the blond-hybrid communities in their\nremote corner of the continent only after an appreciable lapse of time.\nYet, it is to be noted, it is after all relatively early in neolithic\ntimes that certain of the domestic plants and animals first come into\nevidence in the Scandinavian region.\n\nThe crop plants appear to have come in earlier than the domestic\nanimals, being perhaps brought in by the peoples of the Mediterranean\nrace at their first occupation of Europe in late quaternary time. With\ntillage necessarily goes a sedentary manner of life. So that at their\nfirst introduction the domestic animals were intruded into a system of\nhusbandry carried on by a population living in settled communities, and\ndrawing their livelihood in great part from the tilled ground but also\nin part from the sea and from the game-bearing forests that covered much\nof the country at that time. It was into such a situation that the\ndomestic animals were intruded on their first coming into\nEurope,--particularly into the seaboard region of north Europe.\n\nOn the open ranges of western and central Asia, from which these\ndomestic animals came, and even in the hill country of that general\nregion, the peoples that draw their livelihood from cattle and sheep are\ncommonly of a nomadic habit of life, in the sense that the requirements\nof forage for their herds and flocks hold them to an unremitting round\nof seasonal migration. It results that, except in the broken hill\ncountry, these peoples habitually make use of movable habitations, live\nin camps rather than in settled, sedentary communities. Certain peculiar\ninstitutional arrangements also result from this nomadic manner of life\nassociated with the care of flocks and herds on a large scale. But on\ntheir introduction into Europe the domestic animals appear on the whole\nnot to have supplanted tillage and given rise to such a nomadic-pastoral\nscheme of life, exclusively given to cattle raising, but rather to have\nfallen into a system of mixed farming which combined tillage with a\nsedentary or quasi-sedentary grazing industry. Such particularly appears\nto have been the case in the seaboard region of the north, where there\nis no evidence of tillage having been displaced by a nomadic grazing\nindustry. Indeed, the small-scale and broken topography of this European\nregion has never admitted a large-scale cattle industry, such as has\nprevailed on the wide Asiatic ranges. An exception, at least partial and\ncircumscribed, may perhaps be found in the large plains of the extreme\nSoutheast and in the Danube valley; and it appears also that grazing,\nafter the sedentary fashion, took precedence of tillage in prehistoric\nIreland as well as here and there in the hilly countries of southern and\ncentral Europe.\n\nSuch an introduction of tillage and grazing would mean a revolutionary\nchange in the technology of the European stone age, and a technological\nrevolution of this kind will unavoidably bring on something of a radical\nchange in the scheme of institutions under which the community lives;\nprimarily in the institutions governing the details of its economic\nlife, but secondarily also in its domestic and civil relations. When\nsuch a change comes about through the intrusion of new material factors\nthe presumption should be that the range of institutions already\nassociated with these material factors in their earlier home will\ngreatly influence the resulting new growth of institutions in the new\nsituation, even if circumstances may not permit these alien institutions\nto be brought in and put into effect with the scope and force which they\nmay have had in the culture out of which they have come. Some\nassimilation is to be looked for even if circumstances will not permit\nthe adoption of the full scheme of institutions, and the institutions\noriginally associated with the intrusive technology will be found\nsurviving with least loss or qualification in those portions of the\ninvaded territory where the invaders have settled in force, and\nparticularly where conditions have permitted them to retain something of\ntheir earlier manner of life.\n\nThe bringers of these new elements of culture, material and immaterial,\nhad acquired what they brought with them on the open sheep and cattle\nranges of the central-Asiatic plains and uplands,--as is held to be the\nunequivocal testimony of the Aryan speech, and as is borne out by the\nlatest explorations in that region. These later explorations indicate\nwest-central Turkestan as the probable center of the domestication and\ndiffusion of the animals, if not also of the crop plants, that have\nstocked Europe. Of what race these bearers of the new technology and\nculture may have been, and just what they brought into Europe, is all\na matter of inference and surmise. It was once usual to infer, as a\nready matter of course, that these immigrant pastoral nomads from the\nAsiatic uplands were \"Aryans,\" \"Indo-Europeans,\" \"Indo-Germans,\" of a\npredominantly blond physique. But what has been said above as well as in\nthe earlier paper referred to comes near excluding the possibility of\nthese invaders being blonds, or more specifically the dolicho-blond. It\nis, of course, conceivable, with Keane (if his speculations on this head\nare to be taken seriously), that a fragment of the alleged blond race\nfrom Mauretania may have wandered off into Turkestan by way of the\nLevant, and so may there have acquired the habits of a pastoral life,\ntogether with the Aryan speech and institutions, and may then presently\nhave carried these cultural factors into Europe and imposed them on the\nEuropean population, blond and brunet. But such speculations, which once\nwere allowable though idle, have latterly been put out of all question,\nat least for the present, by the recent Pumpelly explorations in\nTurkestan. It is, for climatic reasons, extremely improbable that any\nblond stock should have inhabited any region of the central-Asiatic\nplains or uplands long enough to acquire the pastoral habits of life and\nthe concomitant Aryan speech and institutions, and it is fairly certain\nthat the dolicho-blond could not have survived for that length of time\nunder the requisite conditions of climate and topography.\n\nIt is similarly quite out of the question that the dolicho-blond,\narising as a mutant type late in quaternary time, should have created\nthe Aryan speech and culture in Europe, since neither the archaeological\nevidence nor the known facts of climate and topography permit the\nhypothesis that a pastoral-nomadic culture of home growth has ever\nprevailed in Europe on a scale approaching that required for such a\nresult. And there is but little more possibility that the bringers of\nthe new (Aryan) culture should have been of the Mediterranean race;\nalthough the explorations referred to make it nearly certain that the\ncommunities which domesticated the pastoral animals (and perhaps the\ncrop-plants) in Turkestan were of that race. The Mediterranean race\noriginally is Hamitic, not Aryan, it is held by men competent to speak\non that matter, and the known (presumably) Mediterranean prehistoric\nsettlements in Turkestan, at Anau, are moreover obviously the\nsettlements of a notably sedentary people following a characteristically\npeaceable mode of life. The population of these settlements might of\ncourse conceivably have presently acquired the nomadic and predatory\nhabits reflected by the Aryan speech and institutions, but there is no\nevidence of such an episode at Anau, where the finds show an\nuninterrupted peaceable and sedentary occupation of the sites throughout\nthe period that could come in question. The population of the\nsettlements at Anau could scarcely have made such a cultural innovation,\ninvolving the adoption of an alien language, except under the pressure\nof conquest by an invading people; which would involve the subjection of\nthe peaceable communities of Anau and the incorporation of their\ninhabitants as slaves or as a servile class in the predatory\norganisation of their masters. The Mediterranean people of Anau could\naccordingly have had a hand in carrying this pastoral-predatory (Aryan)\nculture into the West only as a subsidiary racial element in a migratory\ncommunity made up primarily of another racial stock.\n\nThis leaves the probability that an Asiatic stock, without previous\nsettled sedentary habits of life, acquired the domesticated animals from\nthe sedentary and peaceable communities of Anau, or from some similar\nvillage (pueblo) or villages of western Turkestan, and then through a\n(moderately) long experience of nomadic pastoral life acquired also the\npredatory habits and institutions that commonly go with a pastoral life\non a large scale. These cultural traits they acquired in such a degree\nof elaboration and maturity as is implied by the primitive Aryan (or,\nbetter, proto-Aryan) speech, including a more or less well developed\npatriarchal system; so that they would presently become a militant and\nmigratory community somewhat after the later-known Tatar fashion, and so\nmade their way westward as a self-sufficient migratory host and carried\nthe new material culture into Europe together with the alien Aryan\nspeech. It is at the same time almost unavoidable that in such an event\nthis migratory host would have carried with them into the West an\nappreciable servile contingent made up primarily of enslaved captives\nfrom the peaceable agricultural settlements of the Mediterranean race,\nwhich had originally supplied them with their stock of domestic animals.\n\nAlong with these new technological elements and the changes of law and\ncustom which their adoption would bring on, there will also have come in\nthe new language that was designed to describe these new ways and means\nof life and was adapted to express the habits of thought which the new\nways and means bred in the peoples that adopted them. The immigrant\npastoral (proto-Aryan) language and the pastoral (patriarchal and\npredatory) law and custom will in some degree have been bound up with\nthe technological ways and means out of which they arose, and they would\nbe expected to have reached and affected the various communities of\nEurope in somewhat the same time and the same measure in which these\nmaterial facts of the pastoral life made their way among these peoples.\nIn the course of the diffusion of these cultural elements, material and\nimmaterial, among the European communities the language and in a less\ndegree the domestic and civil usages and ideals bred by the habits of\nthe pastoral life might of course come to be dissociated from their\nmaterial or technological basis and might so be adopted by remoter\npeoples who never acquired any large measure of the material culture of\nthose pastoral nomads whose manner of life had once given rise to these\nimmaterial features of Aryan civilisation.\n\n       *       *       *       *       *\n\nCertain considerations going to support this far-flung line of\nconjectural history may be set out more in detail: (a) The Aryan\ncivilisation is of the pastoral type, with such institutions, usages\nand preconceptions as a large-scale pastoral organisation commonly\ninvolves. Such is said by competent philologists to be the evidence of\nthe primitive Aryan speech. It is substantially a servile organisation\nunder patriarchal rule, or, if the expression be preferred, a militant\nor predatory organisation; these alternative phrases describe the same\nfacts from different points of view. It is characterised by a\nwell-defined system of property rights, a somewhat pronounced subjection\nof women and children, and a masterful religious system tending strongly\nto monotheism. A pastoral culture on the broad plains and uplands of a\ncontinental region, such as west-central Asia, will necessarily fall\ninto some such shape, because of the necessity of an alert and mobile\nreadiness for offense and defense and the consequent need of soldierly\ndiscipline. Insubordination, which is the substance of free\ninstitutions, is incompatible with a prosperous pastoral-nomadic mode of\nlife. When worked out with any degree of maturity and consistency the\npastoral-nomadic culture that has to do with sheep and cattle appears\nalways to have been a predatory, and therefore a servile culture,\nparticularly when drawn on the large scale imposed by the topography of\nthe central-Asiatic plains, and reenforced with the use of the horse.\n(The reindeer nomads of the arctic seaboard may appear to be an\nexception, at least in a degree, but they are a special case, admitting\na particular explanation, and their case does not affect the argument\nfor the Aryan civilisation.) The characteristic and pervasive human\nrelation in such a culture is that of master and servant, and the social\n(domestic and civil) structure is an organisation of graded servitude,\nin which no one is his own master but the overlord, even nominally. The\nfamily is patriarchal, women and children are in strict tutelage, and\ndiscretion vests in the male head alone. If the group grows large its\ncivil institutions are of a like coercive character, it commonly shows a\nrigorous tribal organisation, and in the end, with the help of warlike\nexperience, it almost unavoidably becomes a despotic monarchy.\n\nIt has not been unusual to speak of the popular institutions of Germanic\npaganism--typified, _e.g._, by the Scandinavian usages of local\nself-government in pagan times--as being typically Aryan institutions,\nbut that is a misnomer due to uncritical generalisation guided by a\nchauvinistic bias. These ancient north-European usages are plainly alien\nto the culture reflected by the primitive Aryan Speech, if we are to\naccept the consensus of the philological ethnologists to the effect that\nthe people who used the primitive Aryan speech must have been a\ncommunity of pastoral nomads inhabiting the plains and uplands of a\ncontinental region. That many of these philological ethnologists also\nhold to the view that these Aryans were north-European pagan blonds may\nraise a personal question of consistency but does not otherwise touch\nthe present argument.\n\n(b) A racial stock that has ever been of first-rate consequence in the\nethnology of Europe (the Alpine, brachycephalic brunet, the _homo\nalpinus_ of the Linnean scheme) comes into Europe at this general\nperiod, from Asia; and this race is held to have presently made itself\nat home, if not dominant, throughout middle Europe, where it has in\nhistoric times unquestionably been the dominant racial element.\n\n(c) The pastoral-nomadic institutions spoken of above appear to have\nbest made their way in those regions of Europe where this brachycephalic\nbrunet stock has been present in some force if not as a dominant racial\nfactor. The evidence is perhaps not conclusive, but there is at least a\nstrong line of suggestion afforded by the distribution of the\npatriarchal type of institutions within Europe, including the tribal and\ngentile organisation. There is a rough concomitance between the\ndistribution of these cultural elements presumably derived from an Aryan\nsource on the one hand, and the distribution past or present of the\nbrachycephalic brunet type on the other hand. The regions where this\nline of institutions are known to have prevailed in early times are, in\nthe main, regions in which the Alpine racial type is also known to have\nbeen present in force, as, _e.g._, in the classic Greek and Roman\nrepublics.\n\nAt the same time a gentile organisation seems also to have been\nassociated from the outset with the Mediterranean racial stock and may\nwell have been comprised in the institutional furniture of that race as\nit stood before the advent of the Alpine stock; but the drift of later\ninquiry and speculation on this head appears to support the view that\nthis Mediterranean gentile system was of a matrilinear character, such\nas is found in many extant agricultural communities of the lower\nbarbarian culture, rather than of a patriarchal kind, such as\ncharacterises the pastoral nomads. The northern blond communities alone\nappear, on the available evidence, to have had no gentile or tribal\ninstitutions, whether matrilinear or patriarchal. The classic Greek and\nRoman communities appear originally to have been of the Mediterranean\nrace and to have always retained a broad substratum of the Mediterranean\nstock as the largest racial element in their population, but the Alpine\nstock was also largely represented in these communities at the period\nwhen their tribal and gentile institutions are known to have counted for\nmuch, as, indeed, it has continued ever since.\n\nApart from these communities of the Mediterranean seaboard, the peoples\nof the Keltic culture appear to have had the tribal and gentile system,\ntogether with the patriarchal family, in more fully developed form than\nit is to be found in Europe at large. The peoples of Keltic speech are\ncurrently believed by ethnologists to have originally been of a blond\ntype, although opinions are not altogether at one on that head,--the\ntall, perhaps red-haired, brachycephalic blond, the \"Saxon\" of Beddoe,\nthe \"Oriental\" of Deniker. But this blond type is perhaps best accounted\nfor as a hybrid of the dolicho-blond crossed on the Alpine\nbrachycephalic brunet. Some such view of its derivation is fortified by\nwhat is known of the prehistory and the peculiar features of the early\nKeltic culture. This culture differs in some respects radically from\nthat of the dolicho-blond communities, and it bears more of a\nresemblance to the culture of such a brunet group of peoples as the\nearly historic communities of upper and middle Italy. If the view is to\nbe accepted which is coming into currency latterly, that the Keltic is\nto be affiliated with the culture of Hallstatt and La Tene, such\naffiliation will greatly increase the probability that it is to be\ncounted as a culture strongly influenced if not dominated by the Alpine\nstock. The Hallstatt culture, lying in the valley of the Danube and its\nupper affluents, lay in the presumed westward path of immigration of the\nAlpine stock; its human remains are of a mixed character, showing a\nstrong admixture of the brachycephalic brunet type; and it gives\nevidence of cultural gains due to outside influence in advance of the\nadjacent regions of Europe. This Keltic culture, then, as known to\nhistory and prehistory, runs broadly across middle Europe along the belt\nwhere blond and brunet elements meet and blend; and it has some of the\nfeatures of that predatory-pastoral culture reflected by the primitive\nAryan speech, in freer development, or in better preservation, than the\nadjacent cultural regions to the north; at the same time the peoples of\nthis Keltic culture show more of affiliation to or admixture with the\nbrachycephalic brunet than the other blond-hybrid peoples do.\n\nOn the other hand the communities of dolicho-blond hybrids on the shores\nof the narrow Scandinavian waters, remote from the centers of the Alpine\nculture, show little of the institutions peculiar to a pastoral people.\nThese dolicho-blond hybrids of the North come into history at a later\ndate, but with a better preserved and more adequately recorded\npaganism than the other barbarians of Europe. The late-pagan\nGermanic-Scandinavian culture affords the best available instance of\narchaic dolicho-blond institutions, if not the sole instance; and it is\nto be noted that among these peoples the patriarchal system is weak and\nvague,--women are not in perpetual tutelage, the discretion of the male\nhead of the household is not despotic nor even unquestioned, children\nare not held under paternal discretion beyond adult age, the patrimony\nis held to no clan liabilities and is readily divisible on inheritance,\nand so forth. Neither is there any serious evidence of a tribal or\ngentile system among these peoples, early or late, nor are any of them,\nexcepting the late and special instance of the Icelandic colony, known\never to have been wholly or mainly of pastoral habits; indeed, they are\nknown to have been without the pastoral animals until some time in the\nneolithic period. The only dissenting evidence on these heads is that of\nthe Latin writers, substantially Caesar and Tacitus, whose testimony is\ndoubtless to be thrown out as incompetent in view of the fact that it is\nsupported neither by circumstantial evidence nor by later and more\nauthentic records. In speaking of \"tribes\" among the Germanic hordes\nthese Latin writers are plainly construing Germanic facts in Roman\nterms, very much as the Spanish writers of a later day construed\nMexican and Peruvian facts in mediaeval-feudalistic terms,--to the\nlasting confusion of the historians; whereas in enlarging on the\npastoral habits of the Germanic communities they go entirely on data\ntaken from bodies of people on the move and organised for raiding, or\nrecently and provisionally settled upon a subject population presumably\nof Keltic derivation or of other alien origin and inhabiting the broad\nlands of middle Europe remote from the permanent habitat of the\ndolicho-blond. Great freedom of assumption has been used and much\ningenuity has been spent in imputing a tribal system to the early\nGermanic peoples, but apart from the sophisticated testimony of these\nclassical writers there is no evidence for it. The nearest approach to a\ntribal or a gentile organisation within this culture is the \"kin\" which\ncounts for something in early Germanic law and custom; but the kin is\nfar from being a gens or clan, and it will be found to have more of the\nforce of a clan organisation the farther it has strayed from the\nScandinavian center of diffusion of the dolicho-blond and the more\nprotracted the warlike discipline to which the wandering host has been\nexposed. All these properly Aryan institutions are weakest or most\nnotably wanting where the blond is most indubitably in evidence.\n\nTaking early Europe as a whole, it will appear that among the European\npeoples at large institutions of the character reflected in the\nprimitive Aryan speech and implied in the pastoral-nomadic life\nevidenced by the same speech are relatively weak, ill-defined or\nwanting, arguing that Europe was never fully Aryanised. And the peculiar\ngeographical and ethnic distribution of this Aryanism of institutions\nargues further that the dolicho-blond culture of the Scandinavian region\nwas less profoundly affected by the Aryan invasion than any other\nequally well known section of Europe. What is known of this primitive\nAryan culture, material, domestic, civil and religious, through the\nSanskrit and other early Asiatic sources, may convincingly be contrasted\nwith what is found in early Europe. These Asiatic records, which are our\nsole dependence for a competent characterisation of the Aryan culture,\nshows it to have resembled the culture of the early Hebrews or that of\nthe pastoral Turanians more closely than it resembles the early European\nculture at large, and greatly more than it resembles the known culture\nof the early communities of dolicho-blond hybrids.\n\n(d) Scarcely more conclusive, but equally suggestive, is the evidence\nfrom the religious institutions of the Aryanised Europeans. As would be\nexpected in any predatory civilisation, such as the pastoral-nomadic\ncultures typically are, the Aryan religious system is said to have\nleaned strongly toward a despotic monarchical form, a hierarchically\ngraded polytheism, culminating in a despotic monotheism. There is little\nof all this to be found in early pagan Europe. The nearest well-known\napproach to anything of the kind is the late-Greek scheme of Olympian\ndivinities with Zeus as a doubtful suzerain,--known through latter-day\ninvestigations to have been superimposed on an earlier cult of a very\ndifferent character. The Keltic (Druidical) system is little known, but\nit is perhaps not beyond legitimate conjecture, on the scant evidence\navailable, that this system had rather more of the predatory,\nmonarchical-despotic cast than the better known pagan cults of Europe.\nThe Germanic paganism, as indicated by the late Scandinavian--which\nalone is known in any appreciable degree--was a lax polytheism which\nimputed little if any coercive power to the highest god, and which was\nnot taken so very seriously anyway by the \"worshipers,\"--if Snorri's\nvirtually exclusive account is to be accepted without sophistication.\nThe evidence accorded by the religious cults of Europe yields little\nthat is conclusive, beyond throwing the whole loose-jointed, proliferous\nEuropean paganism out of touch with anything that can reasonably be\ncalled Aryan. And this in spite of the fact that all the available\nevidence is derived from the European cults as they stood after having\nbeen exposed to long centuries of Aryanisation. So that it may well be\nheld that such systematisation of myths and observances as these\nEuropean cults give evidence of, and going in the direction of a\ndespotic monotheism, is to be traced to the influence of the intrusive\nculture of the Aryan or Aryanised invaders,--as is fairly plain in the\ninstance of the Olympians.\n\n(e) That the languages of early Europe, so far as known, belong almost\nuniversally to the Aryan family may seem an insurmountable obstacle to\nthe view here spoken for. But the difficulties of the case are not\nappreciably lessened by so varying the hypothesis as to impute the Aryan\nspeech to the dolicho-blond, or to any blond stock, as its original\nbearer. Indeed, the difficulties are increased by such an hypothesis,\nsince the Aryan-speaking peoples of early times, as of later times, have\nin the main been communities made up of brunets without evidence of a\nblond admixture, not to speak of an exclusively blond people. (There is\nno evidence of the existence of an all-blond people anywhere, early or\nlate.)\n\nThe early European situation, so far as known, offers no exceptional\nobstacles to the diffusion of an intrusive language. Certain mass\nmovements of population, or rather mass movements of communities\nshifting their ground by secular progression, are known to have taken\nplace, as, _e.g._, in the case of the Hallstatt-La Tene-Keltic culture\nmoving westward on the whole as it gained ground and spread by shifting\nand ramification outward from its first-known seat in the upper Danube\nvalley. All the while, as this secular movement of growth, ramification\nand advance was going on, the Hallstatt-La Tene-Keltic peoples continued\nto maintain extensive trade relations with the Mediterranean seaboard\nand the AEgean on the one side and reaching the North-Sea littoral on the\nother side. In all probability it is by trade relations of this\nkind--chiefly, no doubt, through trade carried on by itinerant\nmerchants--that the new speech made its way among the barbarians of\nEurope; and it is no far-fetched inference that it made its way, in the\nNorth at least, as a trade jargon. All this accords with what is going\non at present under analogous circumstances. The superior merit by force\nof which such a new speech would make its way need be nothing more\nsubstantial than a relatively crude syntax and phonetics--such as\nfurthers the dissemination of English to-day in the form of Chinook\njargon, Pidgin English, and Beach la Mar. Such traits, which might in\nsome other light seem blemishes, facilitate the mutilation of such a\nlanguage into a graceless but practicable trade jargon. With jargons as\nwith coins the poorer (simpler) drives out the better (subtler and more\ncomplex). A second, and perhaps the chief, point of superiority by\nvirtue of which a given language makes its way as the dominant factor in\nsuch a trade jargon, is the fact that it is the native language of the\npeople who carry on the trade for whose behoof the jargon is contrived.\nThe traders, coming in contact with many men, of varied speech, and\ncarrying their varied stock of trade goods, will impose their own names\nfor the articles bartered and so contribute that much to the jargon\nvocabulary,--and a jargon is at its inception little more than a\nvocabulary. The traders at the same time are likely to belong to the\npeople possessed of the more efficient technology, since it is the\nsuperior technology that commonly affords them their opportunity for\nadvantageous trade; hence the new or intrusive words, being the names of\nnew or intrusive facts, will in so far find their way unhindered into\ncurrent speech and further the displacement of the indigenous language\nby the jargon.\n\nSuch a jargon at the outset is little else than a vocabulary comprising\nnames for the most common objects and the most tangible relations. On\nthis simple but practicable framework new varieties of speech will\ndevelop, diversified locally according to the kind and quantity of\nmaterials and linguistic tradition contributed by the various languages\nwhich it supplants or absorbs.\n\nIn so putting forward the conjecture that the several forms of Aryan\nspeech have arisen out of trade jargons that have run back to a common\nsource in the language of an intrusive proto-Aryan people, and\ndeveloping into widely diversified local and ethnic variants according\nas the mutilated proto-Aryan speech (vocabulary) fell into the hands of\none or another of the indigenous barbarian peoples,--in this suggestion\nthere is after all nothing substantially novel beyond giving a\ncollective name to facts already well accepted by the philologists.\nWorking backward analytically step by step from the mature results given\nin the known Aryan languages they have discovered and divulged--with\nwhat prolixity need not be alluded to here--that in their beginnings\nthese several idioms were little else than crude vocabularies covering\nthe commonest objects and most tangible relations, and that by time-long\nuse and wont the uncouth strings of vocables whereby the beginners of\nthese languages sought to express themselves have been worked down\nthrough a stupendously elaborate fabric of prefixes, infixes and\nsuffixes, etc., etc., to the tactically and phonetically unexceptionable\ninflected languages of the Aryan family as they stood at their classical\nbest. And what is true of the European languages should apparently hold\nwith but slight modification for the Asiatic members of the family.\nThese European idioms are commonly said to be, on the whole, less true\nto the pattern of the inferentially known primitive Aryan than are its\nbest Asiatic representatives; as would be expected in case the latter\nwere an outgrowth of jargons lying nearer the center of diffusion of the\nproto-Aryan speech and technology.\n\nAs regards the special case of the early north-European communities of\ndolicho-blond hybrids, the trade between the Baltic and Danish waters on\nthe one hand and the Danube valley, Adriatic and AEgean on the other hand\nis known to have been continued and voluminous during the neolithic and\nbronze ages,--as counted by the Scandinavian chronology. In the course\nof this traffic, extending over many centuries and complicated as it\nseems to have been with a large infiltration of the brachycephalic\nbrunet type, much might come to pass in the way of linguistic\nsubstitution and growth.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _The University of Missouri Bulletin_,\nScience Series, vol. ii, No. 3.\n\n[2] \"The Mutation Theory and the Blond Race,\" in _The Journal of Race\nDevelopment_, April, 1913.\n\n\n\n\nAN EARLY EXPERIMENT IN TRUSTS[1]\n\n\nAccording to Much,[2] following in the main the views of Penka, Wilser,\nDe Lapouge, Sophus Mueller, Andreas Hansen, and other spokesmen of the\nlater theories touching Aryan origins, the area of characterisation of\nthe West-European culture, as well as of that dolicho-blond racial stock\nthat bears this culture, is the region bordering on the North Sea and\nthe Baltic, and its center of diffusion is to be sought on the southern\nshores of the Baltic. This region is in a manner, then, the primary\nfocus of that culture of enterprise that has reshaped the scheme of life\nfor mankind during the Christian era. Its spirit of enterprise and\nadventure has carried this race to a degree of material success that is\nwithout example in history, whether in point of the extent or of the\nscope of its achievements. Up to the present the culminating achievement\nof this enterprise is dominion in business, and its most finished\ninstrument is the quasi-voluntary coalition of forces known as a Trust.\n\nIn its method and outward form this enterprise of the Indo-germanic\nracial stock has varied with the passage of time and the change of\ncircumstances; but in its spirit and objective end it has maintained a\nsingularly consistent character through all the mutations of name and\nexternal circumstance that have passed over it in the course of history.\n\nIn its earlier, more elemental expression this enterprise takes the\nform of raiding, by land and sea. A shrewd interpretation might, without\nparticular violence to the facts, find a coalition of forces of the kind\nwhich is later known as a Trust in the Barbarian raids spoken of as the\n_Voelkerwanderung_. Such an interpretation would seem remote, however,\nand not particularly apt. The beginnings of a _bona fide_ trust\nenterprise are of a more businesslike character and have left a record\nmore amenable to the tests of accountancy. A trust, as that term is\ncolloquially understood, is a business organisation.\n\nNow, the line of enterprise, of indigenous growth in the north-European\ncultural region, which first falls into settled shape as an orderly,\norganised business is the traffic of those seafaring men of the North\nknown to fame as the Vikings. And it is in this traffic, so far as the\nrecords show, that a trust, with all essential features, is first\norganised. The term \"viking\" covers, somewhat euphemistically, two main\nfacts: piracy and slave-trade. Without both of these lines of business\nthe traffic could not be maintained in the long run; and both, but more\nparticularly the latter, presume, as an indispensable condition to their\nsuccessful prosecution, a regular market and an assured demand for the\noutput. It is a traffic in which, in order to get the best results, a\nrelatively large initial investment must be sunk, and the period of\nturnover--the \"period of production\"--is necessarily of some duration;\nthe risk is also considerable. Further, certain technological\nprerequisites must be met, in the way particularly of shipbuilding,\nnavigation, and the manufacture of weapons; an adequate accumulation of\ncapital goods must be had, coupled with a sagacious spirit of adventure;\nthere must also be an available supply of labor. There appears to have\nbeen a concurrence of all these circumstances, together with favorable\nmarket conditions, in the south-Baltic region from about the sixth\ncentury onward; the circumstances apparently growing gradually more\nfavorable through the succeeding four centuries.\n\nThe viking trade appears to have grown up gradually on the Baltic\nseaboard, as well as in the Sound country and throughout the fjord\nregion of Norway, as a by-occupation of the farming population. Its\nbeginnings are earlier than any records, so that the earliest traditions\nspeak of it as an institution well understood and fully legitimate. The\nwell-to-do freehold farmers, including some who laid claim to the rank\nof _jarl_, seem to have found it an agreeable and honorable diversion,\nas well as a lucrative employment for their surplus wealth and labor\nsupply. From such sporadic and occasional beginnings it passed presently\ninto an independently organised and self-sustaining line of business\nenterprise, and in the course of time it attained a settled business\nroutine and a defined code of professional ethics. Syndication, of a\nloose form, had begun as early as the oldest accounts extant, but it is\nevident from the way in which the matter is spoken of that combination\nhad not at that date--say, about the beginning of the ninth\ncentury--long been the common practice. It was not then a matter of\ncourse. The early combinations were relatively small and transient. They\ntook the form of \"gentlemen's agreements,\" pools, working arrangements,\ndivision of territory, etc., rather than hard and fast syndicates. In\nthose early days a combine would be formed for a season between two or\nmore capitalist-undertakers, for the most part employing their own\ncapital only, without recourse to credit; although credit arrangements\noccur quite early, but are not very common in the earlier recorded\nphases of the trade. Such a loose combine, say about the middle of the\nninth century, might comprise from two to a dozen boats. What may be\ncalled the normal unit in the trade at that time was a boat of perhaps\nthirty tons' burden, with an effective crew of some eighty men. Boats\nand crews gradually increase both in size and efficiency for a century\nand a half after that time.\n\nSyndication, of an increasingly close texture and increasingly permanent\neffect, appears to have rapidly grown in favor through the ninth and\ntenth centuries. The reasons for this movement of coalition are plain.\nThe volume of the trade, as well as its territorial extension, increased\nuninterruptedly. The technique of the trade was gradually improved, and\nthe equipment and management were improved and reduced to standard\nforms. The tonnage employed at any given time can, of course, not be\nascertained with anything like a confident approximation; but its steady\nincrease is unmistakable. Year by year the boats and crews increase in\naverage size as well as in number, until by the middle of the tenth\ncentury the number of men and ships engaged, as well as the volume of\ncapital invested in the trade, are probably larger than the\ncorresponding figures for any other form of lucrative enterprise at that\ntime. It is, at that time, altogether the best-organised line of\nenterprise in the West-European region in respect of its business\nmanagement, and the most efficient and progressive in respect of its\nequipment and technology. At a conservative guess, the aggregate number\nof ships engaged about the middle of the tenth century must have\nappreciably exceeded six hundred, and may have reached one thousand;\nwith crews which had also grown gradually larger until they may by this\ntime have averaged 150 or 200 men. There was consequently what would in\nmodern phrase be called an \"overproduction\" of piratical\ncraft--overinvestment in the viking trade and consequent cut-throat\ncompetition. The various coalitions came into violent conflict, and many\nof them went under, with great resultant loss of capital, impoverishment\nof well-to-do families, hardship and demoralisation of the entire trade.\n\nAdded to these untoward conditions within the trade was the open\ndisfavor of the crown, in each of the three Scandinavian kingdoms. The\ntraffic had long passed out of the stage at which it had offered a\nlucrative opening for farmers' sons who were tired of the farm and eager\nto find excitement, reputation, and creature comforts in that wider\nhuman contact and busier life for which the tedium of the farm had\nsharpened their appetites. The larger capitalists alone could succeed as\norganisers or directors of a viking concern under the changed\nconditions. The common run of well-to-do farmers had neither the\ntangible assets nor the \"good-will\" requisite to the successful\npromotion of a new company of freebooters. At the best, their sons could\nenter the business only as employees and with but a very uncertain\noutlook to speedy promotion to an executive position. On the other hand,\nas the trade became better organised in stronger hands, with a larger\nequipment, and as the competition within the trade grew more severe, the\nblackmail from which much of the profits of the trade was drawn grew\nmore excessive and more uncertain, both as to its amount and as to the\nmanner and incidents with which it was levied. As competition grew\nsevere and the small vikings practically disappeared, and as the\ndemoralisation that goes with cut-throat competition set in, the\nlivelihood of the common people, at whose expense the vikings lived,\ngrew progressively more precarious, and even their domestic peace and\nhousehold industry grew insecure. Popular sentiment was running strongly\nagainst the whole traffic. So much so, indeed, as to threaten the tenure\nof courts and sovereigns if the popular hardship incident to the\ncontinuance of the trade were not abated.\n\nThe politicians, therefore, made a strenuous show of effort to regulate,\nor even to repress, the viking organisations. Outright and\nindiscriminate repression was scarcely a feasible remedy, certainly not\nan agreeable one. The viking companies were a source of strength to the\ncountry, both in that they might be drawn on for support in case of war\nand in that they brought funds into the country. The remedy to which the\npoliticians turned, by preference, therefore, was a regulation of the\ncompanies in such a manner as to let \"the foreigners pay the tax,\" to\nadapt a modern phrase. If the freebooters of a given state could be\ninduced, by stringent regulations, to prey upon the people of the\nneighboring states, and particularly if they worked at cross-purposes\nwith similar companies of freebooters domiciled in such neighboring\nstates, it was then plain to the sagacious politicians of those days\nthat the companies might be more of a blessing than a curse. On trial it\nwas found that this policy of control gave at the best but very dubious\nresults, and consequently the repressive hand of the authorities\nperforce fell with increasingly rigorous pressure on the viking\norganisations, particularly on the smaller ones which were scarcely of\nnational importance. The competition in the trade was too severe to\nadmit of a consistent avoidance of excesses and irregularities on the\npart of the vikings, and these irregularities obliged the authorities to\ninterfere.\n\nUnder these circumstances it is plain that no viking combine could hope\nto prosper in the long run unless it were strong enough to take an\ninternational position and to maintain a practical monopoly of the\ntrade. \"International\" in these premises means within the Scandinavian\ncountries. In the days of its finest development the viking trade was\ndomiciled in the Scandinavian countries, almost exclusively. This means\nthe two Scandinavian peninsulas, with Iceland, the Faroes, Orkneys,\nHebrides, and the Scandinavian portions of Scotland. To this, for\ncompleteness of statement, is to be added a stretch of Wendish seaboard\non the south of the Baltic and a negligible patch of German territory.\nThe trade, so far as regards its home offices, to use a modern phrase,\ngathered in the main about two chief centers: the Orkneys and the south\nend of the Baltic. Outlying regions, such as the Norwegian fjord country\nand the Hebrides, are by no means negligible, but the two regions named\nabove are after all the chief seats of the traffic; and of these two\ncenters the Baltic--chiefly Danish--region is in many respects the more\nnotable. Its viking traffic is better, more regularly organised, is\ncarried on with a more evident sense of a solidarity of interests and a\nmore consistent view to a long-term prosperity. As one might say,\nlooking at the matter from the modern standpoint, it has more of a look\nof stability and conservative management, such as belongs to an\ninvestment business, and has less of a speculative air, than the trade\nthat centers in the western isles.\n\nPerhaps it is just on this account, because of its greater stability of\ninterests and more conservative animus, that the traffic of this region\nresponds with greater alacrity to the pressure of excessive competition\nand political interference, and so enters on a policy of larger and\ncloser coalition. It may be added that many of the great captains of\nadventure in this region are men of good family and substantial standing\nin the community. As may often happen in a like conjuncture, when the\nirksomeness of this competitive situation in the Baltic was fast\nbecoming intolerable, there arose a man of far-seeing sagacity and\nsettled principles, of executive ability and businesslike integrity, who\nsaw the needs of the hour and the available remedy, and who saw at the\nsame glance his own opportunity of gain. This man was Palnatoki, the\ndescendant of an honorable line of country gentlemen in the island of\nFunen, whose family had from time immemorial borne an active and prudent\npart in the trade, and had been well seen at court and in society. He\nwas a man of mature experience, with a large investment in the traffic,\nand with a body of \"good-will\" that gave him perhaps his most decisive\nadvantage.\n\nDuring the reign of Harald Gormsson, about the middle of the tenth\ncentury, Palnatoki seems to have cast about for a basis on which to\npromote an international coalition of vikings, such as would put an end\nto headlong competition in the trade and would at the same time be\nplaced above the accidents of national politics. To this end it was\nnecessary to find a neutral ground on which to establish the home office\nof the concern. Such a mediaeval-Scandinavian New Jersey was the Wendish\nkingdom at the south of the Baltic.\n\nJomsborg (on the island of Wollin, at the mouth of the Oder) seems to\nhave been a resort of vikings before Palnatoki organised his company\nthere and strengthened the harbor, which may have been fortified by\nthose who held it before him. Here the new company was incorporated\nunder a special franchise from the Wendish crown, with the stipulation\nthat it was to do business only outside the Wendish territories. The\ntangible assets of the corporation were the harbor and fortified town\nof Jomsborg, together with the ships and other equipment of such vikings\nas were admitted to fellowship; its intangible assets were its franchise\nand the good-will of the promoter and the underlying companies. Its\nby-laws were very strict, both as to the discipline of the personnel and\nas to the distribution of earnings. The promoter, who was the first\npresident of the corporation, was given extreme powers for the\nenforcement of the by-laws, and throughout his long incumbency of office\nhe exercised his powers with the greatest discretion and with a most\nsalutary effect.\n\nThis neutral, international corporation of piracy rapidly won a great\nprestige. In modern phrase, its intangible assets grew rapidly larger.\nBacked by the competitive pressure which the new corporation was able to\nbring upon the smaller companies and syndicates, this prestige of the\nJomsvikings brought a steady run of applications for admission into the\ntrust. The trust's policy was substantially the same as has since become\nfamiliar in other lines of enterprise, with the difference that in those\nearly days the competitive struggle took a less sophisticated form.\nOutstanding syndicates and private firms were given the alternative of\nsubmission to the trust's terms or retirement from the traffic. There\nwas great hardship among the outstanding concerns, especially among that\nlarge proportion of them that were unable to meet the scale of\nrequirements imposed on applicants for admission into the trust. The\nqualifications both as to equipment and personnel were extremely strict,\nso that a large percentage of the applicants were excluded; and the\nunfortunates who failed of admission found themselves in a doubtful\nposition that grew more precarious with every year that passed.\nPractically, such concerns were either frozen out of the business or\nforced into a liquidation which permanently wound up their affairs and\nterminated their corporate existence.\n\nThe accounts extant are of course not reliable in minute details, being\nnot strictly contemporary, nor are they cast in such modern terms as\nwould give an easy comparison with present-day facts. The chief\ndocuments in the case are _Jomsvikingasaga_, _Saxo Grammaticus_,\n_Heimskringla_, and _Olafssaga Tryggvasonar_; but nearly the whole of\nthe saga literature bears on the development of the viking trade, and\ncharacteristic references to the Jomsviking trust occur throughout. The\nevidence afforded by these accounts converges to the conclusion that\ntoward the close of the tenth century the trust stood in a high state of\nprosperity and was in a position virtually to dictate the course of the\ntraffic for all that portion of the viking trade that centered in the\nBaltic. Its prestige and influence were strong wherever the traffic\nextended, even in the region of the western isles and in the fjord\ncountry of Norway. It had even come to be a factor of first-rate\nconsequence in international politics, and its power was feared and\ncourted by those two sovereigns who established the Danish rule in\nEngland, as well as by their Swedish, Norwegian, and Russian\ncontemporaries. It is probably not an overstatement to say that the\nDanish conquest of England would not have been practicable except for\nthe alliance of the trust with Svend, which enabled him to turn his\nattention from the complications of Scandinavian politics to his English\ninterests.\n\nThe extent of the trust's material equipment at the height of its\nprosperity is a matter of surmise rather than of statistical\ninformation. Some notion of its strength may be gathered from the\nstatement that the fortified harbor of Jomsborg included within its\ncastellated sea-wall an inclosed basin capable of floating three\nhundred ships at anchor. In the great raid against the kingdom of\nNorway, whose failure inaugurated the disintegration of the trust, the\nnumber of ships sent out is variously given by different authorities.\nThe _Jomsvikingasaga_ says that they numbered one long hundred. This\nfleet, however, was made up of craft selected from among the ships that\nwere under the immediate command of four of the great captains of\nadventure. The fleet, as it lay in the Sound before the final selection,\nis said to have numbered 185, but the context shows that this fleet was\nbut a fraction of the aggregate Jomsviking tonnage. Of this disastrous\nexpedition but a fraction returned; yet various later expeditions of the\nJomsvikings are mentioned in which some scores of their ships took part.\n\nThe trust having become an international power, it undertook to shape\nthe destiny of nations and dynasties, and it broke under the strain. It,\nor its directors, took a contract to bring Norway into subjection to the\nDanish crown. Partly through untoward accidents, partly through\nmiscalculation and hurried preparations, it failed in this undertaking,\nwhich brought the affairs of the trust to a spectacular crisis. From\nthis disaster it never recovered. With the opening of the eleventh\ncentury the viking trust fell into abeyance, and in a few years it\ndisappeared from the field. There are several good reasons for its\nfailure. On the death of its founder the management had passed into the\nhands of Sigvaldi, a man of less sagacity and less integrity as well as\nof more unprincipled personal ambition, and somewhat given to flighty\nventures in the field of politics. It was Sigvaldi's overweening\npersonal ambition that committed the corporation to the ill-advised\nexpedition against Norway. The trust, moreover, being supreme within its\nfield, the discipline grew lax and its exactions grew arbitrary,\nsometimes going to unprovoked excesses. As one might say, too little\nthought was given to \"economies of production,\" and the charges were\npushed beyond \"what the traffic would bear.\" But for all that, in spite\nof its meddling in politics, and in spite of jobbery and corruption in\nits management, the trust still had a fair outlook for continued\nsuccess, except that the bottom dropped out of the trade. For better or\nworse, the slave-trade in the north of Europe collapsed on the\nintroduction of Christianity, at least so far as regards the trade in\nChristians; and without a slave market the viking enterprise had no\nchance of reasonable earnings. At the same time, the risk and hardships\nof the traffic--the \"cost of production\"--grew heavier as the countries\nto the south became better able to defend their shores. The passenger\ntraffic failed almost entirely, and the goods traffic was in a\ndisorganised and unprofitable state. The costs were fast becoming\nprohibitive, even to men so enterprising and necessitous as the\nNorwegian freebooters. The situation changed in such a way as to leave\nthe trust out.\n\nSome show of corporate existence was still maintained for a short period\nafter the trust's great crisis, but there was an end of discipline and\nauthoritative control. The minor concerns and private establishments\nthat had once formed part of the trust continued in the trade on an\nindependent footing, but with decreasing regularity and with diminishing\nstrength. As the equipment wore out it was not replaced, and the trade\nlapsed. The great captains of the industry, like Sigvaldi, Thorkel\nHaraldson, Sigurd Kapa, and Vagn Akason, turned their holdings to the\nservice of the dynastic politics which were then engaging the attention\nof the northern countries. Much of this body of enterprise and wealth\nwas exhausted in working out the imperialistic schemes of expansion of\nSvend and Knut the Great; and what was left over shared the fortunes\nof the other available forces of the Scandinavian countries, being\ndissipated in political dissensions, extortionate government\norganisations, and the establishment of a church and a nobility.\n\nFOOTNOTES:\n\n[1] Reprinted by permission from _The Journal of Political Economy_,\nVol. XII, March, 1904.\n\n[2] MATTHAEUS MUCH, _Die Heimat der Indogermanen_.\n\n\n  THE END","title":"The Place of Science in Modern Civilisation, and Other Essays","tradition":"philosophy-ethics","translated_text":null,"word_count":154041}