The Principles of Political Economy

Henry Sidgwick

Book 3

The Art of Political Economy

Chapter 2

The System of Natural Liberty Considered in Relation to Production

§2. I propose, therefore, in the present chapter, to concentrate attention on these qualifications and exceptions. And, in so doing, I think it will be most instructive to adhere, in the main, to the abstract deductive method of treatment which has been chiefly employed in the preceding book; since many persons who are willing to admit that the principle of laisser faire ought not to be applied unreservedly in the actual condition of human societies, yet seem to suppose it to be demonstrably right in the hypothetical community contemplated in the general reasonings of Political Economy. This supposition appears to me seriously erroneous; hence in the present chapter I am specially concerned to show that even in a society composed---solely or mainly---of ``economic men'', the system of natural liberty would have, in certain respects and under certain conditions, no tendency to realise the beneficent results claimed for it.

I may begin by pointing out that the argument for laisser faire does not tend to show that the spontaneous combination of individuals pursuing their private interests will lead to the production of a maximum of material wealth, except so far as the individuals in question prefer material wealth to utilities not embodied in matter. So far as their choice falls on the latter so far (e.g.) as the wealthier among them prefer the opera and the drama to the arts of painting and sculpture, and a greater abundance of servants, to a greater elaborateness in food, clothing, and ornaments---the result of their free action will be to render the production of material wealth less than it would otherwise be. And even taking `produce', as I propose to do, in the wider sense in which it has been taken in the preceding books, to include immaterial utilities as well as material, we have still to observe that men may prefer repose, leisure, reputation, &c., to any utilities whatever that they could obtain by labouring. Thus the freeing of a servile population may cause a large diminution of production (in the widest sense of the term); because the freedmen are content with what they can get by a much smaller amount of labour than their masters forced them to perform. In short `natural liberty' can only tend to the production of maximum wealth, so far as this gives more satisfaction on the whole than any other employment of time.

The importance of both these qualifications becomes more clear when they are viewed in connexion with a third. In the abstract argument, by which the system of natural liberty is shown to lead to the most economic production, it has to be implicitly assumed that all the different parts of produce are to be measured, at any one time and place, by their exchange value. That is, we have to assume, that utilities valued highly by the rich are useful to the community in proportion either to their market price, or to the pecuniary gain foregone in order to obtain them. And among these utilities, as we have just seen, we must include the gratification of the love of power, the love of ease, and all the whims and fancies that are wont to take possession of the minds of persons whose income is far more than sufficient to satisfy ordinary human desires. It is only by this strained extension of the idea of social utility that the production of such utility under the system of natural liberty can be said to have even a general tendency to reach the maximum production possible. Thus, for instance, there is no reason why, even in a community of most perfectly economic men, a few wealthy landowners, fond of solitude, scenery or sport, should not find their interest in keeping from cultivation large tracts of land naturally fit for the plough or for pasture; or why large capitalists generally should not prefer to live on the interest of their capital, without producing personally any utilities whatsoever.

The waste of social resources that might result in this way is likely to be greater the nearer a man approaches the close of life, so far as we suppose self-interest to be his governing principle of action. Unless he is sympathetic enough to find his greatest happiness in beneficence, it may clearly be his interest, as his end draws near, to spend larger and larger sums on smaller and smaller enjoyments. Or if we may legitimately assume, as political economists generally do, that a man will generally wish at least to keep his capital intact for the sake of his descendants, we still have no ground for making any similar general assumption in the case of persons unmarried or childless. Such persons, again, even if they do not spend their accumulations on themselves, may (and not unfrequently do) make an almost equally uneconomical disposal of them by whimsical or ill-judged bequests. And this leads me to another difficulty that stands in the way of the consistent realization of the system of natural liberty, if extended to include freedom of bequest. Granting that men in general will extract most satisfaction out of their wealth for themselves, if they are allowed to choose freely the manner of spending it; it does not in any way follow that they will render it most productive of utility for those who are to come after them if they are allowed to bequeath it under any conditions that they choose. On the contrary, it rather follows that any such posthumous restraint on the use of bequeathed wealth will tend to make it less useful to the living, as it will interfere with their freedom in dealing with it. How far it would therefore be generally useful to impose restrictions on bequest is a question which can only be decided by a balance of conflicting considerations; we have to weigh the gain of utility that may be expected from the greater freedom of the heirs against the loss of utility that may be feared, not so much through the diminution in the satisfactions of the testator---which perhaps need not be highly estimated---but from his diminished inducement to produce and preserve wealth. But however this question may be decided, the theoretical dilemma in which the system of natural liberty is placed is none the less clear. The free play of self-interest can only be supposed to lead to a socially advantageous employment of wealth in old age, if we assume that the old are keenly interested in the utilities that their wealth may furnish to those who succeed them: but if they have this keen interest, they will probably wish to regulate the employment of their wealth; while again in proportion as they attempt this regulation by will, they will diminish the freedom of their successors in dealing with the wealth that they bequeath; and therefore, according to the fundamental assumption of the system of natural liberty, will diminish the utility of this wealth to those successors. Of this difficulty there is, I think, no theoretical solution; it can only be settled by a rough practical compromise.

A somewhat similar difficulty arises in respect of the enforcement of contracts. If all contracts freely made are to be enforced, it is conceivable that a man may freely contract himself into slavery; it is even conceivable that a large mass of the population of a country might do this, in the poverty and distress caused by some wide-spreading calamity. In such a case Freedom of Contract would have produced a social state in which Freedom of Contract would be no longer allowed to large numbers, and therefore its effect in keeping production economic would be correspondingly restricted. It may be said that such contracts would not really be in the interest of the enslavers; and it is no doubt true, that according to the fundamental hypothesis that we are now considering, it cannot be A's interest to make a contract with B which will tend to diminish B's prospective utility to A, taking everything into account. It is, however, possible that the most valued utility which B can provide for A is the gratification of the love of power or superiority which A will obtain by a more complete control over B so that it will be A's interest to obtain this control at the cost of rendering B's labour less productive---in any ordinary sense of the term. And, again, it may be possible for A to make a contract, which though it will tend to diminish B's productive efficiency on the whole, will tend in a greater degree to increase A's prospect of securing to himself the results of this efficiency: and, if so, A's self-interest will clearly prompt to such a contract.

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