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

§3. This last possibility brings us in view of another fundamental assumption of the system of natural liberty, the limited applicability of which it is both theoretically and practically important to notice. In the general argument above given it was implicitly assumed that the individual can always obtain through free exchange adequate remuneration for the services which he is capable of rendering to society. But there is no general reason for supposing that this will always be possible; and in fact there is a large and varied class of cases in which the supposition would be manifestly erroneous. In the first place there are some utilities which, from their nature are practically. incapable of being appropriated by those who produce them or who would otherwise be willing to purchase them. For instance, it may easily happen that the benefits of a well-placed lighthouse must be largely enjoyed by ships on which no toll could be conveniently imposed. So again if it is economically advantageous to a nation to keep up forests, on account of their beneficial effects in moderating and equalizing rainfall, the advantage is one which private enterprise has no tendency to provide; since no one could appropriate and sell improvements in climate. For a somewhat different reason scientific discoveries, again, however ultimately profitable to industry, have not generally speaking a market value: the inventions in which the discovery is applied can be protected by patents; but the extent to which any given discovery will aid invention is mostly so uncertain, that even if the secret of a law of nature could be conveniently kept, it would not be worth an inventor's while to buy it, in the hope of being able to make something of it.

Here I may notice a specially important way in which the inequalities in Distribution---which natural liberty has no manifest tendency to diminish---may react unfavourably on Production. So far as the most economic production involves present outlay for remote results, it may be prevented by the fact that the persons concerned do not possess and cannot procure the requisite capital; while for others who do possess it, such outlay would not be remunerative, owing to the difficulty of appropriating an adequate share of the resulting increment of utility. In the preceding book we have been led to observe how the services of the higher grades of skilled labour, including the labour of large employers, tend to be paid more highly than would be the case if wealth were more equally distributed. But this result is also prima facie evidence that such services are rendered less abundantly than would be the case if the labour and capital of the community were most productively employed: since it may be inferred that society would purchase an additional increment of such services at a price more than sufficient to repay the outlay necessary to provide them,---while at the same time it would not be profitable for any capitalist to provide the money, with the view of being repaid out of the salary of the labourer educated; owing to the trouble and risk involved in the deferred payments. In this way it may be profitable for the community to provide technical and professional education at a cheap rate, even when it could not be remuneratively undertaken by private enterprise. And thus, too, the low wages of a depressed class of labourers may cause a loss of wealth to the community, from the low standard of efficiency which they tend to perpetuate in the class, even when it would not be the interest of any private employer of the labourers in question to pay higher wages.

[Back to:] [Forward to:] [Up to:]