Adam Smith and the Invisible Hand by Edmund A. Opitz

Adam Smith and the Invisible Hand

The Reverend Mr. Opitz is a member of the staff of the Foundation for Economic Education, a seminar lecturer, and author of the book, Religion and Capitalism: Allies Not Enemies.

This article is from a lecture of February ¹7, ¹976, at the Taft School, Watertown, Connecticut.

We celebrate in 1976 the bicentennial of two significant events, the signing of the American Declaration of Independence, and the publication of The Wealth of Nations by Adam Smith.

Smith had made a name for himself with an earlier volume entitled Theory of the Moral Sentiments, published in 1759, but he is now remembered mainly for his Wealth of Nations, on which he labored for ten years. The Wealth of Nations sold briskly in the American colonies, some 2,500 copies within five years of publication, even though our people were at war. This is a remarkable fact, for there were only three million people living on these shores two centuries ago, and about one-third of these were Loyalists. In England, as in the colonies, there were two opposed political factions—Whigs and Tories. The Tories favored the King and the old regime; the Whigs worked to increase freedom in society. Adam Smith was a Whig; the men we call Founding Fathers were Whigs. There was a Whig faction in the British Parliament and many Englishmen were bound to the American cause by strong intellectual and emotional ties.

Adam Smith’s book was warmly received here, not only because it was a great work of literature, but also because it provided a philosophical justification for individual freedom in the areas of manufacture and trade. The colonies, of course, were largely agricultural; but of necessity there were also artisans of all sorts. There had to be carpenters and cabinet makers, bricklayers and blacksmiths, weavers and tailors, gunsmiths and bootmakers. These colonial manufacturers and farmers had been practicing economic freedom all along; simply because the Crown was too busy with other matters to interfere seriously. There were numerous laws designed to regulate trade, but the laws were difficult to enforce, and so they were ignored.

Mercantilism

The nations of Europe at this time embraced a theory of economic organization called "Mercantilism." Mercantilism was based upon the idea of national rivalry, and each nation sought to get the better of other nations by exporting merchandise in exchange for gold and silver. The goal of Mercantilism was the enhancement of national prestige by accumulating the precious metals, but the goal was not nearly so significant as the means employed to reach it. 

Mercantilism was the planned economy par excellence; the nation was trussed up in a strait jacket ofregulations just about as severe as the controls imposed today upon the people of Russia or China. The modern authoritarian state, of course, has more efficient methods of surveillance and control than did the governments of the seventeenth and eighteenth centuries, but the basic idea is similar.

Take the theory of Mercantilism and boil it down. What do you get? You get political control over what you eat. Now, if someone holds the power of decision over you as to whether you eat or starve, he’s acquired considerable leverage over every aspect of your life; you do not bite the hand that feeds you! If someone controls your livelihood, you do his bidding, or people start talking about you in the past tense!

Mercantilism, in short, is the prototype of today’s totalitarian state, where government — by controlling the economy — exerts a commanding influence over people in every sector of their lives.

The major theme of The Wealth of Nations has to do with the interaction between government and the economic order. The theory of Mercantilism held that government must control and manage the economy, else production would be chaotic and the right people would not be properly rewarded. Present-day collectivists concur; they want a national plan which taxes away about 40 per cent of the peoples’ earnings in order to redistribute these billions of tax dollars to politically selected individuals and groups.

Questions of Political Power

The actions of the redistributive state — call it the welfare state if you prefer — are political actions. From ancient times to the present, every political theorist — except the Classical Liberals — tried to frame answers for three questions.

The first question was: Who shall wield power? Whether the structure took the form of a monarchy backed by divine right or a democracy based on the so-called will of the majority, it was essential that power be wielded by the small group thought most fit to exercise rule. The ruler’s job is to program our lives toward the achievement of national goals. But it was never power simply for power’s sake; it was political power for the sake of the economic advantage power bestows.

So the second question is: For whose benefit shall this power be wielded? The court at Versailles is a good example of what I mean. The French nobles favored by royalty lived rather well, although they’d rather be caught dead than working. In virtue of their privileged position in the political structure, they got something for nothing. I daresay that each of you can think of parallel instances operating today, even in our own country. Now, when someone in a society gets something for nothing through political channels, there are others in that society who are forced to accept nothing for something! And the third question, of course, is: At whose expense shall this power be wielded? Somebody must be sacrificed.

Let me repeat these three questions, for they provide an apt key to many political puzzles: Who shall wield power? For whose benefit? At whose expense? One might put this in a formula: Votes and taxes for all; subsidies and privileges for us, our friends, and whoever else happens at the moment to pack a lot of political clout. The American system was to be based upon a different idea. It took seriously the ideas of God, the moral order, and the rights of persons. It discarded the notion of using government to arbitrarily disadvantage a selected segment of society, and instead embraced the ideal of equality before the law. Government, in this scheme, functioned somewhat like an umpire on the baseball field. The umpire does not write the rules for baseball; these have emerged and been inscribed in rule books over the years and they lay down the norms as to how the game shall be played.

 

If any person is on the field it is to be presumed that he has freely chosen to be there, and in his thoughtful moments he knows that the game cannot go on unless there is an impartial arbiter on the field to interpret and enforce last-resort decisions — such as ball or strike, safe or out at first. Government, similarily, enforces the previously agreed upon rules.

This is the political theory of Classical Liberalism, and it marks a radical departure from all other political theories. It declared that the end of government is justice between persons, and maximum liberty for everyone in society. "Justice is the end of government," wrote Madison in the 51st Federalist Paper; "it is the end of civil society." 

Government Is Force

The point to be stressed is that the essential nature of government — its license to resort to force at some point — is not changed by merely altering the warrant under which government acts. Divine right or popular sovereignty — it makes no difference to this point: Government is as government does.

Governmental action is what it is, no matter what sanction might be offered to justify what it does. The nature of goverment remains the same even though its sponsorship be changed from monarchial power to majority rule. Government always acts with power; in the last resort government uses force to back up its decrees. The government of a society is its police power, and the nature of government remains the same, even when office holders are elected by a vote of the people. And when the police power — government — is limited to keeping the peace of the community by curbing those who disturb the peace — criminals —then there is maximum liberty for peaceful citizens.

"The history of liberty," wrote Woodrow Wilson in 1912, "is the history of the limitations placed upon governmental power." The 18th century Whigs achieved a limited monarchy in England, and a constitutional republic for the thirteen colonies. This was a victory for freedom over tyranny. Such battles, however, do not stay won, and in our time many people have lost their freedom.

Twentieth century political despotism is much more extensive and severe than the monarchial rule of Smith’s day, which is why The Wealth of Nations is still a relevant book. Smith demonstrated that a country does not need an overall national plan enforced upon people in order to achieve social harmony. This is not to say that a peaceful, orderly society comes about by accident, or as the result of doing nothing. Certain requirements must be met if people are to live at peace with their neighbors. It is required, first of all, that there be widespread obedience to the moral commandments which forbid murder, theft, misrepresentation, and covetousness. The second requirement is for a legal system which secures equal justice before the law for every person. When these moral and legal requirements are met, then the people will be led into a system of social cooperation under the division of labor "as if by an invisible hand."

Adam Smith liked this metaphor of "an invisible hand" and used it in Theory of the Moral Sentiments as well as in The Wealth of Nations. Every person, Smith writes, employs his time, his talents, his capital, so as to direct "industry that its produce may be of the greatest value…. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it…. He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intentions." Smith concludes this passage by adding, sardonically, "I have never known much good done by those who affected to trade for the public good."

What is Adam Smith telling us? He is saying that if we operate within the proper moral and legal framework, employing our God-given talents to the limit of our powers, then we will find individual fulfillment directly and get the good society as an unexpected bonus.

Equality, Liberty, Justice

The Wealth of Nations is generally regarded as a work on economics, but Smith did not think of himself as an economist. Smith was a professor of Moral Philosophy at the University of Glasgow, where he lectured on ethics, rhetoric, jurisprudence, and political economy. Ask Adam Smith for a thumbnail description of the system of political economy he believed in, and he’d reply that he advocated "the liberal plan of equality, liberty and justice."

These three virtues together characterize the free society, and in fact they are but three facets of a single truth. Equality, as the term is used in the Declaration of Independence, and here by Adam Smith, means the abolition of privilege — one law for all men alike because all men are one in their essential humanity. Because all people are created equal, it is wrong for government to play favorites and bestow advantages on some at the expense of others. The goal is "equal and exact justice for all men, of whatever state or persuasion" — to quote from Jefferson’s First Inaugural. Justice is equality before the law, and this describes a society where each person may freely pursue his own goals, provided he does not infringe the equal right of all the others to pursue theirs.

You’re all familiar with the division of society into a public sector and a private sector; call the former the governmental, coercive sector, if you prefer, and the latter the voluntary sector. When the governmental sector expands, the voluntary sector contracts, and vice versa. The efforts of the old-fashioned Whigs and the Classical Liberals were directed toward the goal of a government limited to maintaining the peace of the community and assuring justice and fair play among people — the umpire role in society. This expanded the voluntary sector and gave us the ideals of freedom of speech, freedom of the press, and religious liberty. And in 1776, Adam Smith provided a rationale for freedom of economic action.

One of the large questions which every society has to face and resolve is: How shall the economic rewards be allocated? Food, clothing, shelter — as well as things like automobiles, television sets, refrigerators, concerts, and trips to Europe — are in limited supply. How shall we "divvy up" the available quantity of these goods? Who gets what?

We know how it was under the old regime: those who wielded political power used it for the economic advantage of themselves and their friends, at the expense of those who lacked political power. There were Haves and Have-nots, and the Haves obtained their wealth by seizing it.

But when men are free, economic rewards are parceled out in a different manner. The free society allocates rewards in the market place; the Haves get that way by pleasing the customers, at which game some are more successful than others.

Consumer Choice

Every one of us in a free society is rewarded in the marketplace by his peers, according to the value willing buyers attach to the goods and services he offers for exchange. This marketplace assessment is made by consumers who are ignorant, venal, biased, stupid; in short, by people very much like us! This does seem to be a clumsy way of deciding how much or how little of this world’s goods shall be put at this or that man’s disposal, and so people of every age look for an alternative.

There is an alternative, and it runs something like this: People are too dumb to know what is good for them, and they fall easy victims of Madison Avenue. Therefore, let’s invite the wise and good to come down from Olympus to sit as a council among men, and we’ll appear before them one by one, to be judged on personal merit and rewarded accordingly. Then we’ll be assured that those who make a million really deserve it, and those who are paupers belong at that level; and we’ll all be contented and happy. What lunacy! The genuinely wise and good would not accept such a role, and I quote the words of the highest authority declining it: "Who made me a judge over you?"

The Alternative Is Worse

The market-place decision that this man shall earn twenty-five thousand, this one ten, and so on, is not, of course, marked by supernal wisdom; no one claims this. But it is infinitely better than the alternative, which is to recast consumers into voters, who will elect a body of politicians, who will appoint bureaucrats, who will "divvy up" the wealth by governmental legerdemain. This mad scheme backs away from the imperfect and crashes into the impossible!

There are no perfect arrangements in human affairs, but the fairest distribution of material rewards attainable by imperfect men is to let a man’s customers decide how much he should earn; this method will distribute economic goods unequally, but nevertheless equitably. Parenthetically, it should be understood that the market does not measure the true worth of a man or a woman. If it did, we would have to rate all who make a lot of money as superior beings — rock music stars, producers of porno films, publishers of dirty books, television commentators, authors of best sellers — and they’re not superior. To the contrary! But such people constitute only a tiny sector of the free economy, and they are a very small price to pay for the blessings of liberty we enjoy.

In a free society, those who earn more than the national average are entitled to enjoy their possessions, for they’ve gained them in a system of voluntary exchange; the well-being the Haves enjoy is matched by the well-being they have bestowed upon other people —as these other people measure it. There is genuine reciprocity in the free society. But opponents of the market are blind to its built-in mutuality. The Left, therefore, will make a determined effort to instill a guilty conscience in everyone who lives above the poverty level. They use Karl Marx’s exploitation theory which alleges that the man who works for wages produces, over and above his wage, a "surplus value" which is garnisheed by his employer. To be employed — they tell us — is to be exploited, and the whole capitalist class should feel guilty for denying the working class its due!

"Surplus Value" Exposed

This naive and vicious notion was demolished even while Marx still lived, by the economist, Böhm-Bawerk — founder of the Austrian School. Bohm-Bawerk did it again in a second book, in 1896, with the result that the exploitation theory is not now promoted even by Communist theoreticians. But the "surplus value" idea does intensify feelings of envy and guilt, so it is still useful as propaganda.

The free economy sounds pretty good in theory, you might say, but what does it do for the poor? Well, it takes most of them out of that category! A free people becomes a properous people. To the extent that the free economy has been allowed to operate in a nation, in like measure has the free economy elevated more people further out of poverty, faster, than any other system.

It is easy to see why this is so. Poverty is a lack of certain things.

A man is poor whose supply of food, clothing, and shelter are meager; he has only one shabby suit, his diet is macaroni and cheese, and he lives in a sparsely furnished room. A man moves out of poverty only as he acquires better clothes, a more varied diet, and then expands into an apartment or a house. People are well off or less well off according as they command more or less of the things which are manufactured or grown. This is axiomatic, and it follows that poverty is overcome by increased productivity and in no other way. America is the world’s most properous nation because America has been the most productive nation; we have more wealth because we produce more wealth.

Who has the biggest stake in the free economy? Who has most to lose if the free economy lapses into the planned state? Not the rich; the poor! The corporate executive type; the shrewd, energetic, hard-driving, far-seeing, imaginative, nimble, smart, tough executive will make a bundle under any system. In Russia he’d be a commissar. It’s the not so smart, not so energetic, not so imaginative, plodder type who has the biggest stake in the free society. This description fits most of us, and there is a place for us in the free society, where we are rewarded quite handsomely. We’d be serfs, or worse, in most other societies — if we survived liquidation!

When people are free, there is no guarantee that they’ll use their freedom wisely. Freedom of speech does not assure witty conversation, eloquent preaching, or lofty utterance. Most talk, as a matter of fact, is banal and shallow and gossipy; but no one on this account suggests we put a political ban on free speech. We have freedom of the press, with the result that we are knee deep in triviality and garbage. But we support freedom of the press anyway, knowing that a governmentally controlled press would be far worse. Freedom of religion opens the door to all kinds of weird cults, as well as to exotic brands of superstition and magic; but no one advocates that we repeal the First Amendment and set up an American National Church!

That is what freedom is all about — putting up with things we don’t like, and living with a lot of people we can barely stand! We must support the processes of freedom even when we cannot endorse every one of the products of freedom. And that goes for freedom of economic enterprise as well —as Adam Smith advised 200 years ago.

Now, neither the free economy nor its business sector can guarantee to every person full realization of his potential talents; this is a matter for individual decision. All the free society can promise is maximum and equal opportunity —and this is all the guarantee we need. 

Edmund A. Opitz

The Rev. Edmund A. Opitz (1914-2006) was a Congregationalist minister, a FEE staff member, who for decades championed the cause of a free society and the need to anchor that society in a transcendent morality. A man of wide reading and high culture, Opitz was for many years on the staff of the Foundation for Economic Education in Irvington-on-Hudson, New York. He was one of the few voices in the 1950s through the 1990s calling for an integrated understanding between economic liberty and religious sensibility. He was the founder and coordinator of the Remnant, a fellowship of conservative and libertarian ministers.

This article was originally published on FEE.org. Read the original article.

Early American Communism, 1910 Article

Article in the Encyclopedia Brittanica 11th Edition 1910

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COMMUNISM, the name loosely given to schemes of social organizations depending on the abolition of private property and its absorption into the property of a community as such. It is a form of what is now generally called socialism, the terminology of which has varied a good deal according to time and place; but the expression “communism” may be conveniently used, as opposed to “socialism” in its wider political sense, or to the political and municipal varieties known as “collectivism,” “state socialism,” &c., in order to indicate more particularly the historical schemes propounded or put into practice for establishing certain ideally arranged communities composed of individuals living and working on the basis of holding their property in common. It has nothing, of course, to do with the Paris Commune, overthrown in May 1871, which was a political and not an economic movement. Communistic schemes have been advocated in almost every age and country, and have to be distinguished from mere anarchism or from the selfish desire to transfer other people’s property into one’s own pockets. The opinion that a communist is merely a man who has no property to lose, and therefore advocates a redistribution of wealth, is contrary to the established facts as to those who have historically supported the theory of communism. The Corn-law Rhymer’s lines on this subject are amusing, but only apply to the baser sort:—

“What is a Communist! One that hath yearnings
For equal division of unequal earnings.
Idler or bungler, or both, he is willing
To fork out his penny and pocket your shilling.”


This is the communist of hostile criticism—a criticism, no doubt, ultimately based on certain fundamental facts in human nature, which have usually wrecked communistic schemes of a purely altruistic type in conception. But the great communists, like Plato, More, Saint-Simon, Robert Owen, were the very reverse of selfish or idle in their aims; and communism as a force in the historical evolution of economic and social opinion must be regarded on its ideal side, and not merely in its lapses, however natural the latter may be in operation, owing to the defects of human character. As a theory it has inspired not only some of the finest characters in history, but also much of the gradual evolution of economic organization—especially in the case of co-operation; and its opportunities have naturally varied according to the state of social organization in particular countries. The communism of the early Christians, for instance, was rather a voluntary sharing of private property than any abnegation of property as such. The Essenes and the Therapeutae, however, in Palestine, had a stricter form of communism, and the former required the surrender of individual property; and in the middle ages various religious sects, followed by the monastic orders, were based on the communistic principle.

Communistic schemes have found advocates in almost every age and in many different countries. The one thing that is shared by all communists, whether speculative or practical, is deep dissatisfaction with the economic conditions by which they are surrounded. In Plato’s Republic the dissatisfaction is not limited to merely economic conditions. In his examination of the body politic there is hardly any part which he can pronounce to be healthy. He would alter the life of the citizens of his state from the very moment of birth. Children are to be taken away from their parents and nurtured under the supervision of the state. The old nursery tales, “the blasphemous nonsense with which mothers fool the manhood out of their children,” are to be suppressed. Dramatic and imitative poetry are not to be allowed. Education, marriage, the number of births, the occupations of the citizens are to be controlled by the guardians or heads of the state. The most perfect equality of conditions and careers is to be preserved; the women are to have similar training with the men, no careers and no ambition are to be forbidden to them; the inequalities and rivalries between rich and poor are to cease, because all will be provided for by the state. Other cities are divided against themselves. “Any ordinary city, however small, is in fact two cities, one the city of the poor, the other of the rich, at war with one another” (Republic, bk. iv. p. 249, Jowett’s translation). But this ideal state is to be a perfect unit; although the citizens are divided into classes according to their capacity and ability, there is none of the exclusiveness of birth, and no inequality is to break the accord which binds all the citizens, both male and female, together into one harmonious whole. The marvellous comprehensiveness of the scheme for the government of this ideal state makes it belong as much to the modern as to the ancient world. Many of the social problems to which Plato draws attention are yet unsolved, and some are in process of solution in the direction indicated by him. He is not appalled by the immensity of the task which he has sketched out for himself and his followers. He admits that there are difficulties to be overcome, but he says in a sort of parenthesis, “Nothing great is easy.” He refuses to be satisfied with half measures and patchwork reforms. “Enough, my friend! but what is enough while anything remains wanting?” These sentences indicate the spirit in which philosophical as distinguished from practical communists from the time of Plato till to-day have undertaken to reconstruct human society.

Sir Thomas More’s Utopia has very many of the characteristics of The Republic. There is in it the same wonderful power of shaking off the prejudices of the place and time in which it was written. The government of Utopia is described as founded on popular election; community of goods prevailed, the magistrates distributed the instruments of production among the inhabitants, and the wealth resulting from their industry was shared by all. The use of money and all outward ostentation of wealth were forbidden. All meals were taken in common, and they were rendered attractive by the accompaniment of sweet strains of music, while the air was filled by the scent of the most delicate perfumes. More’s ideal state differs in one important respect from Plato’s. There was no community of wives in Utopia. The sacredness of the family relation and fidelity to the marriage contract were recognized by More as indispensable to the well-being of modern society. Plato, notwithstanding all the extraordinary originality with which he advocated the emancipation of women, was not able to free himself from the theory and practice of regarding the wife as part and parcel of the property of her husband. The fact, therefore, that he advocated community of property led him also to advocate community of wives. He speaks of “the possession and use of women and children,” and proceeds to show how this possession and use must be regulated in his ideal state. Monogamy was to him mere exclusive possession on the part of one man of a piece of property which ought to be for the benefit of the public. The circumstance that he could not think of wives otherwise than as the property of their husbands only makes it the more remarkable that he claimed for women absolute equality of training and careers. The circumstance that communists have so frequently wrecked their projects by attacking marriage and advocating promiscuous intercourse between the sexes may probably be traced to the notion which regards a wife as being a mere item among the goods and chattels of her husband. It is not difficult to find evidence of the survival of this ancient habit of mind. “I will be master of what is mine own,” says Petruchio. “She is my goods, my chattels.”

The Perfectionists of Oneida, on the other hand, held that there was “no intrinsic difference between property in persons and property in things; and that the same spirit which abolished exclusiveness in regard to money would abolish, if circumstances allowed full scope to it, exclusiveness in regard to women and children” (Nordhoff’s Communistic Societies of the United States). It is this notion of a wife as property that is responsible for the wild opinions communists have often held in favour of a community of wives and the break-up of family relations. If they could shake off this notion and take hold of the conception of marriage as a contract, there is no reason why their views on the community of property should lead them to think that this contract should not include mutual fidelity and remain in force during the life of the contracting parties. It was probably not this conception of the marriage relation so much as the influence of Christianity which led More to discountenance community of wives in Utopia. It is strange that the same influence did not make him include the absence of slavery as one of the characteristics of his ideal state. On the contrary, however, we find in Utopia the anomaly of slavery existing side by side with institutions which otherwise embody the most absolute personal, political and religious freedom. The presence of slaves in Utopia is made use of to get rid of one of the practical difficulties of communism, viz. the performance of disagreeable work. In a society where one man is as good as another, and the means of subsistence are guaranteed to all alike, it is easy to imagine that it would be difficult to ensure the performance of the more laborious, dangerous and offensive kinds of labour. In Utopia, therefore, we are expressly told that “all the uneasy and sordid services” are performed by slaves. The institution of slavery was also made supplementary to the criminal system of Utopia, as the slaves were for the most part men who had been convicted of crime; slavery for life was made a substitute for capital punishment.

In many respects, however, More’s views on the labour question were vastly in advance of his own time. He repeats the indignant protest of the Republic that existing society is a warfare between rich and poor. “The rich,” he says, “desire every means by which they may in the first place secure to themselves what they have amassed by wrong, and then take to their own use and profit, at the lowest possible price, the work and labour of the poor. And so soon as the rich decide on adopting these devices in the name of the public, then they become law.” One might imagine these words had been quoted from the programme of The International, so completely is their tone in sympathy with the hardships of the poor in all ages. More shared to the full the keen sympathy with the hopeless misery of the poor which has been the strong motive power of nearly all speculative communism. The life of the poor as he saw it was so wretched that he said, “Even a beast’s life seems enviable!” Besides community of goods and equality of conditions, More advocated other means of ameliorating the condition of the people. Although the hours of labour were limited to six a day there was no scarcity, for in Utopia every one worked; there was no idle class, no idle individual even. The importance of this from an economic point of view is insisted on by More in a passage remarkable for the importance which he attaches to the industrial condition of women. “And this you will easily apprehend,” he says, “if you consider how great a part of all other nations is quite idle. First, women generally do little, who are the half of mankind.” Translated into modern language his proposals comprise universal compulsory education, a reduction of the hours of labour to six a day, the most modern principles of sanitary reform, a complete revision of criminal legislation, and the most absolute religious toleration. The romantic form which Sir Thomas More gave to his dream of a new social order found many imitators. The Utopia may be regarded as the prototype of Campanella’s City of the Sun, Harrington’s Oceana, Bacon’s Nova Atlantis, Defoe’s Essay on Projects, Fénelon’s Voyage dans l’Île des Plaisirs, and other works of minor importance.

All communists have made a great point of the importance of universal education. All ideal communes have been provided by their authors with a perfect machinery for securing the education of every child. One of the first things done in every attempt to carry communistic theories into practice has been to establish a good school and guarantee education to every child. The first impulse to national education in the 19th century probably sprang from the very marked success of Robert Owen’s schools in connexion with the cotton mills at New Lanark. Compulsory education, free trade, and law reform, the various movements connected with the improvement of the condition of women, have found their earliest advocates among theoretical and practical communists. The communists denounce the evils of the present state of society; the hopeless poverty of the poor, side by side with the self-regarding luxury of the rich, seems to them to cry aloud to Heaven for the creation of a new social organization. They proclaim the necessity of sweeping away the institution of private property, and insist that this great revolution, accompanied by universal education, free trade, a perfect administration of justice, and a due limitation of the numbers of the community, would put an end to half the self-made distress of humanity.

The various communistic experiments in America are the most interesting in modern times, opportunities being naturally greater there for such deviations from the normal forms of regulations as compared with the closely organized states of Europe, and particularly in the means of obtaining land cheaply for social settlements with peculiar views. They have been classified by Morris Hillquit (History of Socialism in the United States, 1903) as (1) sectarian, (2) Owenite, (3) Fourieristic, (4) Icarian.

1. The oldest of the sectarian group was the society of the Shakers, whose first settlement at Watervliet was founded in 1776. The Harmony Society or Rappist Community was introduced into Pennsylvania by George Rapp (1770-1847) from Württemberg in 1804, and in 1815 they moved to a settlement (New Harmony) in Indiana, returning to Pennsylvania again in 1824, and founding the village of Economy, from which they were 793 also known as Economites. Emigrants from Württemberg also founded the community of Zoar in Ohio in 1817, being incorporated in 1832 as the Society of Separatists of Zoar; it was dissolved in 1898. The Amana community, the strongest of all American communistic societies, originated in Germany in the early part of the 18th century as “the True Inspiration Society,” and some 600 members removed to America in 1842-1844. The Bethel (Missouri) and Aurora (Oregon) sister communities were founded by Dr Keil (1812-1877) in 1844 and 1856 respectively, and were dissolved in 1880 and 1881. The Oneida Community, created by John Humphrey Noyes (1811-1886), the author of a famous History of American Socialisms (1870), was established in 1848 as a settlement for the Society of Perfectionists. All these bodies had a religious basis, and were formed with the object of enjoying the free exercise of their beliefs, and though communistic in character they had no political or strictly economic doctrine to propagate.

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2. The Owenite communities rose under the influence of Robert Owen’s work at New Lanark, and his propaganda in America from 1824 onwards, the principal being New Harmony (acquired from the Rappists in 1825); Yellow Springs, near Cincinnati, 1824; Nashoba, Tennessee, 1825; Haverstraw, New York, 1826; its short-lived successors, Coxsackie, New York, and the Kendal Community, Canton, Ohio, 1826. All these had more or less short existences, and were founded on Owen’s theories of labour and economics.

3. The Fourierist communities similarly were due to the Utopian teachings of the Frenchman Charles Fourier, introduced into America by his disciple Albert Brisbane (1809-1890), author of The Social Destiny of Man (1840), who was efficiently helped by Horace Greeley, George Ripley and others. The North American Phalanx, in New Jersey, was started in 1843 and lasted till 1855. Brook Farm was started as a Fourierist Phalanx in 1844, after three years’ independent career, and became the centre of Fourierist propaganda, lasting till 1847. The Wisconsin Phalanx, or Ceresco, was organized in 1844, and lasted till 1850. In Pennsylvania seven communities were established between 1843 and 1845, the chief of which were the Sylvania Association, the Peace Union Settlement, the Social Reform Unity, and the Leraysville Phalanx. In New York state the chief were the Clarkson Phalanx, the Sodus Bay Phalanx, the Bloomfield Association, and the Ontario Union. In Ohio the principal were the Trumbull Phalanx, the Ohio Phalanx, the Clermont Phalanx, the Integral Phalanx, and the Columbian Phalanx; and of the remainder the Alphadelphia Phalanx, in Michigan, was the best-known. It is pointed out by Morris Hillquit that while only two Fourierist Phalanxes were established in France, over forty were started in the United States.

4. The Icarian communities were due to the communistic teachings of another Frenchman, Étienne Cabet (1788-1856), the name being derived from his social romance, Voyage en Icarie (1840), sketching the advantages of an imaginary country called Icaria, with a co-operative system, and criticizing the existing social organization. It was his idea, in fact, of a Utopia. Robert Owen advised him to establish his followers, already numerous, in Texas, and thither about 1500 went in 1848. But disappointment resulted, and their numbers dwindled to less than 500 in 1849; some 280 went to Nauvoo, Illinois; after a schism in 1856 some formed a new colony (1858) at Cheltenham, near St Louis; others went to Iowa, others to California. The last branch was dissolved in 1895.

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The Economics of John Stuart Mill by JE Cairnes 1873

HIS WORK IN POLITICAL ECONOMY BY PROF. J. E. CAIRNES

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The task of fairly estimating the value of Mr. Mill's achievements in political economy—and indeed the same remark applies to what he has done in every department of philosophy—is rendered particularly difficult by a circumstance which constitutes their principal merit. The character of his intellectual, no less than of his moral nature, led him to strive to connect his thoughts, whatever was the branch of knowledge at which he labored, with the previously existing body of speculation, to fit them into the same framework, and exhibit them as parts of the same scheme; so that it might be truly said of him that he was at more pains to conceal the originality and independent value of his contributions to the stock of knowledge than most writers are to set forth those qualities in their compositions. As a consequence of this, hasty readers of his works, while recognizing the comprehensiveness of his mind, have sometimes denied its originality; and in political economy in particular he has been frequently represented as little more than an expositor and popularizer of Ricardo. It cannot be denied that there is a show of truth in this representation; about as much as there would be in asserting that Laplace and Herschel were the expositors and popularizers of Newton, or that Faraday performed a like office for Sir Humphrey Davy. In truth, this is an incident of all progressive science. The cultivators in each age may, in a sense, be said to be the interpreters and popularizers of those who have preceded them; and it is in this sense, and in this sense only, that this part can be attributed to Mill. In this respect he is to be strongly contrasted with the great majority of writers on political economy, who, on the strength, perhaps, of a verbal correction, or an unimportant qualification, of a received doctrine, if not on the score of a pure fallacy, would fain persuade us that they have achieved a revolution in economic doctrine, and that the entire science must be rebuilt from its foundation in conformity with their scheme. This sort of thing has done infinite mischief to the progress of economic science; and one of Mill's great merits is that both by example and by precept he steadily discountenanced it. His anxiety to affiliate his own speculations to those of his predecessors is a marked feature in all his philosophical works, and illustrates at once the modesty and comprehensiveness of his mind.

On some points, however, and these points of supreme importance, the contributions of Mill to economic science are very much more than developments—even though we understand that term in its largest sense—of any previous writer. No one can have studied political economy in the works of its earlier cultivators without being struck with the dreariness of the outlook which, in the main, it discloses for the human race. It seems to have been Ricardo's deliberate opinion that a substantial improvement in the condition of the mass of mankind was impossible. He considered it as the normal state of things that wages should be at the minimum requisite to support the laborer in physical health and strength, and to enable him to bring up a family large enough to supply the wants of the labor-market. A temporary improvement, indeed, as the consequence of expanding commerce and growing capital, he saw that there might be; but he held that the force of the principle of population was always powerful enough so to augment the supply of labor as to bring wages ever again down to the minimum point. So completely had this belief become a fixed idea in Ricardo's mind, that he confidently drew from it the consequence that in no case could taxation fall on the laborer, since—living, as a normal state of things, on the lowest possible stipend adequate to maintain him and his family—he would inevitably, he argued, transfer the burden to his employer, and a tax, nominally on wages, would, in the result, become invariably a tax upon profits. On this point Mill's doctrine leads to conclusions directly opposed to Ricardo's, and to those of most preceding economists. And it will illustrate his position, as a thinker, in relation to them, if we note how this result was obtained. Mill neither denied the premises nor disputed the logic of Ricardo's argument: he accepted both; and in particular he recognized fully the force of the principle of population; but he took account of a further premiss which Ricardo had overlooked, and which, duly weighed, led to a reversal of Ricardo's conclusion. The minimum of wages, even such as it exists in the case of the worst-paid laborer, is not the very least sum that human nature can subsist upon; it is something more than this: in the case of all above the worst-paid class it is decidedly more. The minimum is, in truth, not a physical, but a moral minimum, and, as such, is capable of being altered with the changes in the moral character of those whom it affects. In a word, each class has a certain standard of comfort below which it will not consent to live, or, at least to multiply—a standard, however, not fixed, but liable to modification with the changing circumstances of society, and which in the case of a progressive community is, in point of fact, constantly rising, as moral and intellectual influences are brought more and more effectually to bear on the masses of the people. This was the new premiss brought by Mill to the elucidation of the wages question, and it sufficed to change the entire aspect of human life regarded from the point of view of Political Economy. The practical deductions made from it were set forth in the celebrated chapter on "The Future of the Industrial Classes"—a chapter which, it is no exaggeration to say, places a gulf between Mill and all who preceded him, and opens an entirely new vista to economic speculation.

The doctrine of the science with which Mill's name has been most prominently associated, within the last few years, is that which relates to the economic nature of land, and the consequences to which this should lead in practical legislation. It is very commonly believed that on this point Mill has started aside from the beaten highway of economic thought, and propounded views wholly at variance with those generally entertained by orthodox economists. No economist need be told that this is an entire mistake. In truth there is no portion of the economic field in which Mill's originality is less conspicuous than in that which deals with the land. His assertion of the peculiar nature of landed property, and again his doctrine as to the "unearned increment" of value arising from land with the growth of society, are simply direct deductions from Ricardo's theory of rent, and cannot be consistently denied by any one who accepts that theory. All that Mill has done here has been to point the application of principles, all but universally accepted, to the practical affairs of life. This is not the place to consider how far the plan proposed by him for this purpose is susceptible of practical realization; but it may at least be confidently stated that the scientific basis on which his proposal rests is no strange novelty invented by him, but simply a principle as fundamental and widely recognized as any within the range of the science of which it forms a part.

There is one more point which ought not to be omitted from even the most meagre summary. Mill was not the first to treat political economy as a science, but he was the first, if not to perceive, at least to enforce the lesson, that, just because it is a science, its conclusions carried with them no obligatory force with reference to human conduct. As a science it tells us that certain modes of action lead to certain results; but it remains for each man to judge of the value of the results thus brought about, and to decide whether or not it is worth while to adopt the means necessary for their attainment. In the writings of the economists who preceded Mill it is very generally assumed that to prove that a certain course of conduct tends to the most rapid increase of wealth suffices to entail upon all who accept the argument the obligation of adopting the course which leads to this result. Mill absolutely repudiated this inference, and, while accepting the theoretic conclusion, held himself perfectly free to adopt in practice whatever course he preferred. It was not for political economy or for any science to say what are the ends most worthy of being pursued by human beings: the task of science is complete when it shows us the means by which the ends may be attained; but it is for each individual man to decide how far the end is desirable at the cost which its attainment involves. In a word, the sciences should be our servants, and not our masters. This was a lesson which Mill was the first to enforce, and by enforcing which he may be said to have emancipated economists from the thraldom of their own teaching. It is in no slight degree, through the constant recognition of its truth, that he has been enabled to divest of repulsiveness even the most abstract speculations, and to impart a glow of human interest to all that he has touched.

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Cantillon, Father of Modern Economics by Henry Higgs 1892

Richard Cantillon, Father of Modern Economics by Henry Higgs 1892

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Stimulated in part by the conscious recognition of the principle of evolution, the rapidly extending interest in the earlier economic writers is certain to be further developed by reprints like those of the hitherto hardly accessible Essai of Cantillon. An appetite for such literature rarely fails to grow by what it feeds on. The moment, moreover, is propitious for the revival of these old works. On the one hand, M'Culloch's reprints are themselves become "scarce and valuable" in the book market, as they were probably intended to be. And, on the other, the student of economics is no longer content to begin his history of theory with Adam Smith, but is fain to hope for a more intelligent appreciation of the Wealth of Nations, when he is aware of the relation which much of it bears to what had already been written by others.

Among these others, a place of high honor is due to Cantillon. He shares, with Adam Smith, Steuart, Mirabeau, Quesnay, Petty, Montchretien, Serra, Sully, the dignity of a reputed paternity of economics; and good reasons might be given for regarding him as "the father of Political Economy," without putting any very strained interpretation upon the phrase. But it is quite hazardous enough to make even the limited assertion that a writer is the first to offer a certain characteristic or to formulate a certain theory,— statements based rather upon what we do not know than upon what we do. Looking rather at economics as a stream issuing into light from sources veiled by the mists of antiquity, we may regard Cantillon as an early and important tributary, and consider (I.) the influences which affected him, (II.) the nature of his own contribution to the main stream, and (III.) the turn which he gave to other and later currents of economic doctrine.

I.
As regards Cantillon's originality, it is impossible that he can have owed anything to works written later than 1734; for in that year he died. And a reference to the year 1730 at page 364 of the Essai justifies us in assuming, when allowance has been made for the time spent in translation, that the book was not finished long before his death. What, then, were the influences which bore upon him? The authors whom he names are Cicero, Livy, the two Plinys, Petty, D'Avenant, Locke, Halley, King, Newton, Vauban, and Boizard. He refers also to the author of an Etat de la France, probably Boulainvilliers, to the book of Genesis, and to the casuist writers on Usury.

One extrinsic piece of evidence enables us not only to name two other works with which he was acquainted, but comes nearer than any statement yet published to confirm the ascription of the Essai to Richard Cantillon. The necessity of explaining in a law-suit the distinction between usury and a profit made by foreign exchanges at current market rates induced Cantillon, as he tells a friend in a letter, to draw up a memoir on the subject for his advocate. Such a memoir is embodied in the "case"

preserved in the Bibliotheque Nationale in Paris, in the suit of Carol versus Richard Cantillon (Fm 2740). It is evidently from the hand of the author of the Essai, exhibits lucidly the nature of the exchanges in almost the same words, and appeals for confirmation to Dupuy's Traite de l'art des Lettres de Change, Savary's Parfait Negociant, "and all the authors who have treated of this subject." This mode of lumping writers together, with the easy confidence of a man who has read them all, is, it may be remarked, quite characteristic of Cantillon. Compare, for instance, his mention of Petty, Locke, and D'Avenant, "and all the other English authors who have written anything on this subject." On the other hand, it is inexplicable that a man much interested in the literature of his subject should go back to "a little manuscript of the year 1685" for a statement of Petty's which was printed in his Political Anatomy of Ireland in 1691, at p. 63. This, too, is the more remarkable because Petty was the one writer more than any other whose influence is conspicuous in the Essai. A certain familiarity with the Latin writers, suggested in various parts of the book, is borne out by Mirabeau's graphic description of Cantillon in his dressing-gown, discoursing upon the Livy which lay upon his desk.

It is possible, as Jevons suggests, that he had some acquaintance with Aristotle; but of this there is no proof. Such Aristotelian distinctions as "natural" and "artificial" wealth (a distinction, by the way, which Cantillon does not employ) were constantly used by seventeenth century writers like Mun, Lewes Roberts, Fortrey, Barbon, and D'Avenant, without being consciously borrowed from the Greek. And the opposition of le fonds et la forme, an old colloquialism still constantly heard in France, came, there is reason to think, from the formal language of the old French law, and not from Aristotle direct. Allowing, indeed, for literary influences in the air,— the spirit of the age,— we may account as well for an Aristotelian as, in a few scattered phrases here and there, for a certain Machiavellian ring.

But, if we do not find in Cantillon that fulness of reading which is shown by Adam Smith even oftener than his acknowledgments allow, we know that he was prepared for his task by two excellent teachers, Travel and Trade. Of these formative influences, the first operated, with few exceptions, upon all the ablest of the old English economists,— upon Mun, Petty, Locke, North, Barbon, Law, and the rest,— enlarging their horizon much as in modern times travel through time by the aid of history has widened the view of economists in Germany and elsewhere. Thus, too, in his recent inspection of a portion of the library of Adam Smith, who, we know, spent three years abroad, Professor Nicholson was much struck by the large number of books of travel. Cantillon, according to Mirabeau, "had houses in seven of the principal towns of Europe, and the slightest point of information to acquire or calculation to verify made him cross Europe from one end to the other." Such cosmopolitan experience must have greatly assisted an economist in the infancy of the science to winnow the local, accidental, and particular from the general and "natural" causes of wealth, even if it did not afford the advantage of access to the literature of trade in other tongues than his own. And Cantillon was an observant traveller. "In these travels," says Mirabeau, "he reduced everything to precision, got down from his carriage to go and question a laborer in his field, weighed the quality of the soil, tried the taste of it, made his notes, and a clerk, whom he always took with him, drew up the whole account at home in the evening." The countries to which Cantillon refers are England, France, Germany, Belgium, Holland, Sweden, Spain, Portugal, Italy, Hungary, Turkey, Greece, Poland, Russia, Cyprus, Arabia, China, Japan, India, Brazil, and America; and his references are often intimate as they are always apt.

A close connection with trade was equally fortunate in the case of a man with Cantillon's faculty for abstract reasoning. A banker, conversant by practice with the movements of commerce and the exchanges, he was admirably situated for a study of the great economic forces which swayed society in its diverse and seemingly eccentric movements. It was by the aid of qualities which enabled him to see the principles and workings of these elemental powers that, like Ricardo in later years, he succeeded in the money market. He had probably, too, some experience in the silk trade, possibly even in the wine trade. From these three forms of business activity his examples are chiefly drawn; though this may be little to the purpose in conjecturing his biography, for we know that Ricardo, let us say, was not a hatter, fond as he was of quoting hats as an example. Cantillon shows no such poverty of illustration. He is always ready to support an argument by a cogent fact, in this respect resembling Adam Smith as closely as in his laconic style he differs from him widely.

Whether or not Cantillon was a great reader, Mirabeau tells us that he wrote a great quantity of valuable works which perished with him. The standard of Mirabeau was

high in this respect, his own scribbling activity almost justifying his boast, "Had my hand been of bronze, it were long since worn out!" But there is little in Cantillon which the present writer can identify as derived from his predecessors, to none of whom, indeed, does he exhibit a very reverential attitude. The remarks upon the advantages of money hic et nunc over other commodities (pp. 252, 310) at once call up to the mind the words of Petty upon the same subject (e.g., Political Arithmetick, ed. 1691, pp. 18, 19, 36); though comparison shows the great advance which Cantillon made upon Petty's argument, and the subtlety of his additions to it (pp. 249-252). So, too, the alleged excessive number of priests and of holidays in Catholic countries (p. 125) is reminiscent of Petty's Political Anatomy of Ireland, 1691, where he recommends at p. 130 "that the exorbitant Number of Popish-priests and Fryars may be reduced to a bare competency," and says (p. 118), "The Irish Papists (besides Sundays and the 29 Holidays appointed by the Law) do . . . observe about 24 days more in the Year ... so as they have but about 266 working days; whereas Protestants have in effect 300 working days,— that is 34 days more than the Papists, or 1/10 part of the whole year." But Law's writings are not even mentioned by Cantillon, although his "System" is referred to in the Essai; and, although the distinction between "value in use" and "value in exchange," with the examples of water and diamonds, which opens the treatise on Money and Trade, was considered important enough by Adam Smith to be transferred to the pages of The Wealth of Nations (Book I. Chap. IV.). The title Essai sur la Nature du Commerce en General may be compared with the first page of Defoe's Plan of the English Commerce, 1728 (2d edition, 1730): "Of Trade in General, Chap. I When 'tis particular to a Place, 'tis Trade; when general, 'tis Commerce; when we speak of it as the Effect of Nature, 'tis Product or Produce; when as the Effect of Labour, 'tis Manufacture." The word "Nature" in the title is used with intention. "Natural" and "naturally" occur thirty times or more in the course of the short Essai; and we have only to think of the titles and the language of Graunt's Natural and Political Observations, or Adam Smith's Inquiry into the Nature and Causes of the Wealth of Nations, to recognize that in this respect Cantillon was not singular. But his use of "natural" is eminently scientific, and does not cover a confusion of thought or serve as a mere rhetorical trick, as often in the hands of other writers. It stands in the Essai for the inevitable sequence of effect upon cause, none the less existent because it may in practice be overborne by other forces. A clear conception of his title is necessary because he frequently cuts short a seductive line of inquiry by the remark, "But this is no part of my subject."

II.
We thus come to consider the character and qualities of the Essai itself. To the present writer it appears very effectually to "isolate the conception of material wealth," which is often regarded as the distinctive originality of Adam Smith, and to differ from any preceding work of the kind in thoroughness and system, and especially in the unity which it derives from its backbone of a theory of value. Its piercing analysis is of such scientific generality that, had it been written in Latin by an author unknown, doubt might still prevail as to his nationality. This is true to some extent of two other able books, the Discourses upon Trade of Sir Dudley North, 1691, and Barbon's Discourse of Trade, 1690; but the latter is not without a vein of discursive philosophy, and, shorn of digressions, is not much more considerable in development than the outline which makes up the former, while neither Barbon nor North affects to treat of wages. North has, indeed, been the subject of unbounded eulogy by those who regard free trade as coincident with economic science, and has been called by M'Culloch "an Achilles without a heel"; but, in truth, his order of intellect, as manifested in this tract, bears about the same relation to that of Cantillon as the writings of Bastiat bear to those of Cournot. And, if we wish to find the first advocate of free trade, we must go much further back than two centuries ago.

The proposition with which Cantillon opens his Essai, that man and matter or land and labor are the agents of production, is a commonplace of old economics, such as Graunt had represented by the jingle "hands and lands." But it is necessary to emphasize the fact that Cantillon holds tightly to this principle throughout, because the authority of Daire has been lent to the opinion that the phrase in the Maximes Generales of Quesnay, "La terre est l'unique source des richesses," is due to the influence of Cantillon. It is not surprising that, after accepting this view, Jevons should write: "Quesnay . . . attributed undue weight to some . . . remarks of Cantillon, and produced an entirely one-sided system of economics, depending on land alone. Smith struck off rather on the other track, and took 'the annual labor of every nation' as the fund which supplies it with all the necessaries and conveniences of life." But we have no direct evidence that in either of these cases Cantillon is responsible for the faults of others; and, apart from the antecedent improbability of a borrowing which is really a rejection of his view, it is easier to match both these dicta more closely by references to other writers. Thus Colmeiro, Biblioteca de los Economistas Espanolas, quotes Centani (c. 1650) as saying, "La tierra es la unica y fisica hacienda"(wealth). And Locke and Galiani anticipated Adam Smith in the point under consideration.

When Cantillon passes from the causes to the measure of wealth, he acknowledges the influence of Petty, and again has recourse to land and labor, which he attempts to reduce to a par or equation, in order that wealth may be evaluated in terms of one of these two components. Petty's large experience as a land surveyor must, however, have convinced him of the great practical difficulty of taking any of the various and variable kinds of land as a general measure of value. He shows, therefore, a preference for "drudging labor," or rather its remuneration, for this purpose: "The day's food of an adult man at a medium, and not the day's labor, is the common measure of Value, and seems to be as regular and constant as the value of fine Silver" (Political Anatomy of Ireland, 1691, p. 65). "We understand the easiest gotten food of the respective Countries of the World, . . . what all Sorts and Sizes will eat, so as to Live, Labour, and Generate" (p. 64). Petty further mentions certain articles of food as equivalent,— e.g., a pint of oatmeal, a half-pint of rice, a quart of milk, a pound of bread, a pound and a quarter of "flesch,"— and goes on to give a very interesting account of the food, clothing, and housing of the poorer families in Ireland, and the average cost of the separate articles consumed (pp. 75-77, 81, 82). Now, Cantillon, as we know, bettered this instruction. It appears, from pages 48-51 of the Essai, that the missing Supplement contained statistics of the annual cost of living (food, clothing, etc.), of the peasant in the different countries of "our Europe," and exhibited great variations of diet, fashion, and expense. Even the subsistence of the Iroquois hunter and of the Southern Chinaman was compared with that of peasants in the county of Middlesex and in the south of France. Such a collocation evidently convinced Cantillon that the real wages of Labor do not constitute a good measure of value. He accordingly falls back upon land, his other alternative, but significantly concludes, in italics, "Money which, in exchange, finds the proportions of values, is the most certain measure for judging of the Par between Land and Labour, and the relation of one to the other in the different countries where this Par varies with the amount of Produce of Land attributed to those who work" (p. 54). But the curious italicizing on page 44 of a passage which seems to be an interpolation raises a question whether this, the only other italicized sentence in the book, is not inserted by some other hand. At any rate, his subsequent practice is not consistent. He sometimes estimates value in ounces of silver, sometimes in the product of so many acres of land "of average European goodness."

One conspicuous service of Cantillon to science is indicated by the necessity under which he lay to invent a phrase for what has since been called Normal Value. This real or intrinsic value, as he styled it is opposed to market value, precisely as natural and market value are contrasted by Adam Smith and Ricardo, or normal and market value by Cairnes and Marshall. The first Cantillon rested upon cost of production, or "quantity of land and labor which enters into its production, regard being had to the goodness or product of the land, and to the quality of the labor" (p. 36). The second depends upon supply and demand, "is sometimes above, sometimes below, Intrinsic Value, and varies with abundance or scarcity according to the consumption" (p. 128).

Such a conception of intrinsic value, imperfect as we may think it, was a striking feat of the imagination early in the eighteenth century, when the free play of "natural liberty" had not yet facilitated economic speculation by the simplification of hypothesis. The forces modifying at every step the production, distribution, and consumption of wealth, were so numerous, complicated, and capricious that an analysis of "tendencies" must have appeared to many minds neither practicable nor useful. But, in discussing the relative value of coin and bullion, Cantillon appeals to "the long run" with a quite Ricardian confidence; and he will admit of no exceptions to his theory of value, though it is noteworthy that he always applies it with careful regard to the effects of other factors of which he was a keen observer. Such factors, e.g., are space, time, and custom.

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The English economist, living in a country whose physical features are on so small a scale and whose soil is so thickly populated, has been peculiarly liable to omit from view the economic results of distance from work or distance from a market, and this in spite of the exceptional importance attached to the subject by Adam Smith. But any one who has climbed the arduous approaches to the mountain villages among the olive groves of Northern Italy can hardly refuse his sympathy to Cantillon's a priori account of the "natural" formation of villages, due to the necessity of proximity to work. Readers of the Essai will not need to be reminded of the observations upon the marketing of perishable commodities, like fruit, vegetables, and fresh eggs, or heavy commodities, like timber, or wines coming to Paris from the south of France by way of Gibraltar, or bullion from Japan. Compare, too, his extension of Locke's Theory of Value so as to include under the term "market" other and distant places, so far as supply and demand there affect the particular place in question.

The reprint happily makes it unnecessary to quote the Essai at length. It is sufficient to instance the examples of the villagers who lose their time in going to and returning from another place, for want of a local tradesman; of the artisan whose wages are higher by reason of the time spent in apprenticeship; of the rapidity of circulation of the currency, and the proportion of bank reserves as related to the monetary habits of different classes of the community; and of custom in regard to consumption, of. fashion among the rich (e.g., pp. 82-84, 314), and the standard of comfort among the poor (p. 45).

It might, no doubt, be urged on behalf of economists who have accepted too literally the sublime exhortation of Carlyle to "sweep away the illusion of Time!" (and the rest), that by eliminating disturbing elements they have purified theory. Nor will it be denied that the competitive theory is a valuable tool, whose use is the distinctive feature of the trained economist. But the practice of suppressing reference to the disturbing elements is giving place to their careful enumeration and estimation, although the progress of society has in some respects considerably diminished the obstacles to unrestricted competition since Cantillon's time. So far, his book is much more likely to be appreciated now than it would have been some years ago. And, if the times were not yet ripe for a hypothesis of pure competition, he attained scientific exactitude by the ingenious device since used by Cournot of starting from monopoly (pp. 76, 131) and working down to something like the conditions of real life. Of a piece with this procedure is his method of approaching the wages question in Part I. Chap. XI. Beginning with slave labor, he shows that an adult unskilled slave must have allotted to him enough produce for his own maintenance and for that of a family sufficiently large to replace him as a laborer, regard being had to the rate of mortality. The skilled slave will receive more, because it pays to take more care of him as a more valuable chattel. The overseers will be distinguished "by advantages proportioned to the confidence and authority which they possess." Now, "if the proprietor employ vassals or free peasants to do his work, he will probably keep them a little better than he would keep slaves, to an extent determined by the custom of the country." Here Cantillon anticipates the necessary wages of the "iron law," and includes the important corrective or explanation of the effect of the standard of comfort.

Many points of great interest might further be mentioned with regard to his theory of value. But it is needless to extend these random references to the contents of the Essai. In originating even so much, Cantillon derived, as he complains, little help from his English predecessors, whom he accuses of attending, "not to causes and principles, but only to effects." It is idle to speculate whether this taunt can have fired Adam Smith to undertake his inquiry into the nature and causes of wealth; but it shows us Cantillon's own intentions, and to these he confined himself strictly. His arguments might often with advantage be expanded and his suggestions worked out, but there is no irrelevance, no prolixity. "He knows so well," says Mirabeau, "whence he starts and whither he goes!" And so, as Roscher has stated, he exhibits in great fulness many of the leading features and merits of later writers. His was, in truth, a master mind. He dared to argue with Newton, and did not get the worst of the argument. And he mentions Locke's views, generally to improve upon them and accept them "with a difference." He did not, of course, shake himself entirely free from contemporary prejudices. His suspicious anxiety for what may be called a balance of nutrition in foreign trade smacks of mercantilism in its latest phases, and is of a piece with earlier doctrine. "People and Plenty," wrote Fortrey in England's Interest and Improvement, 1663, "are commonly the begetters the one of the other, if rightly ordered,"—a phrase curiously re-echoed in the still unpublished article, Hommes, of Quesnay. And the author of Britannia Languens, 1680, devotes a section of his work to show that "People and Treasure are the Pillars of a Nation." The wonderfully good chapter on Population redeems Cantillon, however, from any charge of believing that wealth necessarily followed upon population. Moreover, if his environment betrayed him into weakness, it also saved him from some of the pitfalls of later writers,— as, for example, from airy assumptions about the equality of profits through the "migration of capital." After conducting us, with many concrete explanations, through the decline and fall of a tradesman's business, he brings us up with his usual formula, that "he will cease to carry it on or become bankrupt,"— an alternative not much contemplated by the Ricardian school.

As regards the second and third parts of the Essai, it would be interesting to show the advance made by Cantillon upon Briscoe and Asgill, Locke and Law. There is some beautiful work in these parts, notably the study of the circumstances which stimulate or impede the circulation of money; but it needs not to be extracted. A quotation from Jevons is sufficient: "The second part ... is a complete little treatise on currency, probably more profound than anything of the same size since published on the subject. . . . Judged by the knowledge and experience of the time, the third part especially is almost beyond praise." This is the verdict of a master, and is thoroughly justified by the weight of evidence.

Before laying down the Essai, we must lament the disappearance of the statistical Supplement. But for the unhappy accident by which this part of Cantillon's work is lost to us, the development of economics might have been considerably modified. The author's recognition of the importance of demand and consumption is very striking, and must have been much re-enforced by the Supplement, judging from the glimpses which we get of it in the text. Adam Smith, who was one of Cantillon's readers, identified the production of wealth with the "annual produce of the land and labor of the country," and not with the yield of taxes to the national exchequer. But he did not carry forward the same view into the Consumption of Wealth, and concluded his book by considering merely "the expenses of the Sovereign or Commonwealth" and the means by which they are defrayed; while the expenses of social classes, at which Petty and Cantillon had worked, were left in the background. From this misfortune, the study of consumption is only just beginning to recover.

Lastly, in addition to his services in threshing out and applying a theory of cost value, and in discussing in so masterly a fashion the principles of currency, banking, credit, and foreign commerce, Cantillon deserves recognition for having, as an economist, so sharply dissociated himself from political issues. Not even the influence of Petty persuaded him to enter upon the subject of Taxation (see p. 210), though the effects of taxation upon commerce are by no means remote; and the veriest purist among economists does not hesitate to-day, with due circumspection, to include Taxation in his province. Nevertheless, the distinction of economics from politics is a great gain for both; and Cantillon acted as a useful pioneer when he drew his firm line between them.

III.
In considering Cantillon's originality, it was necessary to compare his work with writings which had appeared

before his death in 1734. In examining his influence, however, we are confined to writers of a date not earlier than 1755, when the Essai was first published. The manuscript of the Essai certainly affected the Marquis of Mirabeau much earlier. But he retained the manuscript jealously in his possession for sixteen out of the twenty-one years following its author's death. He is, therefore, probably the only important exception to the statement that the influence of Cantillon was not felt until 1755. It is a remarkable testimony, not only to the scientific value of the Essai, but to the stagnation of economics during the period 1734-55, that no part of the work was invalidated by this lapse of time, except, perhaps, so far as the development of banking had shown some of Cantillon's fears of state chicanery to be groundless. Melon's Essai Politique sur le Commerce, 1734, Vanderlint's Money answers All Things, 1734, and Berkeley's Querist, 1735, are gauges of the then state of economics as represented by its ablest votaries. Yet in 1756 the exordium of Another Dissertation on the Mutual Support of Trade and Civil Liberty runs as follows: "The author of the Reflections upon Learning, complaining of the late wonderful enlargements of its Boundaries, with a kind of prophetic contempt, supposes it not impossible, but that in a short time the World may admit even Trade Papers within the circle of Science. The event is at length come to pass,"—the University of Cambridge, "the renowned Mother of Arts and Sciences," having proposed in 1755, under the patronage of Lord Townshend, a reward of twenty guineas for a Dissertation on the Mutual Support and Assistance of Trade and Civil Liberty.

The year 1755 was remarkable in social science for much more than Lord Townshend's patronage. The middle of the century witnessed an awakening of interest in economics. Reprints and translations were multiplied. The writings of Ustariz and Ulloa were translated from Spanish into French, and those of Ustariz into English also. Dangeul and Forbonnais began to write. In France the economists were stirring, and the Encyclopedie was preparing. Gournay and his disciples were translating Culpepper, Child, and Tucker into French. Indeed, the identity of the fictitious title-page of Cantillon's Essai (A Londres, chez Fletcher Gyles, dam Holborn., 1755), with that of Turgot's translation of Tucker's Questions Importantes sur le Commerce the same year, at first sight suggests the possibility that Cantillon was published by the Gournay school. But the slovenly inaccuracies of its grammar (e.g., le prix et valeur intrinseque) and the numerous misprints (e.g., un a un for un a mil at page 35) at once make this very doubtful. At Berlin [Paris] appeared an edition of Herbert's Essai sur la Police des Grains. In Scotland the Foulis press was reprinting old works like Mun's England's Treasure by Forraigne Trade and Gee's Trade and Navigation of Great Britain considered. In England the Statutes at Large concerning the Provision for the Poor were collected together and published. Tucker printed his incomplete Elements of Commerce and Theory of Taxes, and published his Reflections on the Expediency of opening the Trade to Turkey. Petty's Political Arithmetic and Douglass's Summary of the British Plantations in North America were reprinted in London. Hewitt's Treatise upon Money and Magens's Essay on Insurances and the English translation of his Universal Merchant bear nearly the same date. And the same year which saw the death of Montesquieu and the publication of Cantillon's Essai was marked by Adam Smith's accession to the chair of Moral Philosophy in the University of Glasgow. The era of economic activity then commencing was not allowed to die. A succession of numerous and able writers extends thence-forward to the appearance of The Wealth of Nations, which opens a new chapter in the history of economic science.

There can be little doubt that the elder Mirabeau at one time intended to touch up Cantillon's manuscript, which he possessed, and publish it as his own. But he abandoned this project for that of avowedly editing the Essai, with a copious commentary. The publication of the text in 1755 by another person brought about a new change of plan; and ultimately his commentary, completed and enlarged, was published in 1756, under the title of L'Ami des Hommes. This work, with its ingenious turns of expression, familiar style, and vein of science, had a great literary success, at the same time that it attracted the serious attention of so solid a critic as Quesnay. It was not only in a sense the offspring of Cantillon's Essai, but called attention to the Essai in terms of high praise, and so must have widely extended Cantillon's repute. It further laid the foundation of the friendship between Mirabeau and Quesnay which resulted in the school or "sect" of the Economistes. If Mirabeaus account of his first conversation with Quesnay be accurate, he represented himself to Quesnay as a disciple of Cantillon, and was told for his pains that his tutor was a fool if he had taught him such views as he held. This indicates that Quesnay was, as yet, only acquainted with the Essai at second hand. He quoted it, however, in 1757 in support of his "fundamental" principles in his article Grains in the Encyclopedie. Gournay, in particular, esteemed it highly. Turgot, Morellet, Condillac, Mably, Graslin, Savary, Graumann, and Adam Smith, among contemporary writers, mention it; Harris and Postlethwayt plagiarized it; and Sir James Steuart quotes from a mutilated English translation, The Analysis of Trade, by Philip Cantillon, 1759. These are distinguished pupils, and the obligations under which some of them lay to the Essai would have entitled it to the epigraph,—

"Hither, as to their fountain, other stars
 Repair, and in their golden urns draw light."

The debt of Quesnay to Cantillon is not a borrowing of detail, but an influence of spirit. It was not upon questions of grande or petite culture, of oxen or horses, of productive or unproductive labor, that he found help in Cantillon, but in the scientific attitude which he adopted when he approached the Distribution of Wealth. This organization of principle, and analytical habit of mind characteristic of the Economistes, constituted their very real service to Adam Smith. It is probable that Quesnay deduced his produit net and formed the idea of his Tableau Oeconomique from Part I. Chap. XII. of Cantillon's book, in which case Cantillon is certainly the Father of Physiocracy. The famous L'Ami des Hommes, written under the circumstances already mentioned, of course shows the influence of Cantillon throughout; but in later years Mirabeau persuaded himself that Cantillon was an advocate of large populations as a source of wealth, and refers to him in his Philosophie Rurale with amusing pity, as a great genius who had not a good grasp of scientific principle. The attribute of Turgot is breadth, as that of Quesnay is depth. He had taken all learning to be his province, and read much, but quoted little. We know, however, from one of his letters that he accounted for the eclipse of Melon's reputation by the succession of such luminaries as Montesquieu, Hume, Cantillon, Quesnay, Gournay, thus placing Cantillon in the first rank. Condillac paid the Essai the flattering attention of modelling upon it his work Le Commerce et le Gouvernement, 1776, in which he gave the Essai great praise. Nor were the Economistes alone in this chorus of favor. Mably, the brother of Condillac, who proposed his "doubts" to the Economistes upon their Ordre Naturel, was equally eulogistic. Graslin, reputed (probably without foundation) to have attended Adam Smith's lectures at Glasgow, followed suit in his Essai analytique sur la Richesse, 1767 (p. 365). And Adam Smith himself, by his reference to Cantillon, has insured him, as Jevons says, "a kind of immortality," though an examination of page 49 of the Essai discredits the criticism which the reference contains. The philosopher, who had in his Moral Sentiments based virtue upon sympathy, showed little of that quality himself in stating the views of others.

To the passages collected by Jevons as examples of Cantillon's influence upon Adam Smith it would be easy to add others. But it must suffice to mention one; and this will serve to show the lengths to which a fanciful study of "influences" may carry us. The fifteenth chapter of Part I. will convince any one who reads it that the eleventh was not the only chapter studied by Adam Smith. Accordingly, we have in Book I. Chap. XI. Part I. of The Wealth of Nations the following words, evidently inspired by Cantillon's fuller statement on the subject: "Men, like all other animals, naturally multiply in proportion to the means of their subsistence." Now, this passage is said to have suggested to Malthus the idea of his Essay on Population; and Darwin was led by the study of the Essay on Population "to explain the origin of species by a generalization which Malthus had known and named, though he did not pursue it beyond man." We have thus a complete chain from Cantillon, through Adam Smith, Malthus, and Darwin, to the present day. Malthus was one of the few English economists who refused to accept Adam Smith's account of the French school, and studied their views for himself. Daire, indeed, thinks that Malthus approved what was fundamental in them. But there is nothing to show that he was acquainted with those parts of their writings in which Cantillon's principles of population were stated or referred to; and he probably never saw Cantillon's Essai itself.

Lastly, to turn from this superficial indication of the influence of the Essai, what are the reasons which account for its falling almost into oblivion for a century, to be now revived with fairer prospects of recognition? Its scarcity, its difficulty (due to a rare combination of brevity with nicety of argument), and its lack of polished style or literary graces must have gone far to prevent it from becoming popular. There is, however, another reason which, to the conscientious student of to-day, gives it a perennial charm. As already mentioned, it was equally welcomed by the Economistes and by their opponents; and, if its general acceptance is not encouraged, neither is it discouraged by any recommendation of "isms." But the economists who have made a sound in the world outside the narrow circle of scientific discrimination have been, not the giants of pure theory, but the advocates of some "system," actual or prospective,— the mercantile or the agricultural, the cosmopolitan or the national system, free trade or protection, individualism or socialism, State regulation or laissez-faire, bimetallism or monometallism, and the like. The neglect of Cournot, even among professed economists of to-day, is a case in point.

It is not to be expected that the general reader will ever interest himself in Cantillon. It is enough that the Essai is now put within the reach of those who have a care for the history of economic science, or who find originality stimulated by quitting now and then the groove of contemporary thought to converse with an able writer of an older age. The reprint of 1892, at any rate, realizes the author's possible hope that, in the modest phrase of Milton, he "might perhaps leave something so written to aftertimes as they should not willingly let it die."
Henkt Higgs.

See also http://tomwoods.com/podcast/ep-704-adam-smith-not-the-founder-of-economic-science/

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