§1. Political Economy, in England at least, is now almost universally understood to be a study or inquiry concerned with the Production, Distribution, and Exchange of Wealth. I shall afterwards propose, in certain parts of the enquiry, to substitute for `wealth' a term which will include the transient utilities resulting from labour---which we call `services'---as well as the utilities ``embodied in material objects'' to which the term `wealth' is commonly restricted. But since the relations of men to Wealth, strictly taken, will in any case constitute the chief object of our study, we may acquiesce provisionally in the definition above given: understanding that by `Production of wealth' is meant the production of new value or utility in preexisting materials; and that, under the head of `Distribution and Exchange' we examine, not the material processes by which goods are conveyed from place to place, or the legal processes by which they are transferred from owner to owner, but the different proportions in which the produce of industry is shared among the different economic classes that have cooperated in producing it, the ratios in which different kinds of wealth are exchanged for each other, and the causes determining these proportions and ratios.
A more fundamental divergence of opinion relates to the point of view from which Political Economy contemplates these relations. Is its primary aim to establish certain general propositions, either positively or hypothetically true, respecting the coexistence and sequence of facts, or to give practical rules for the attainment of certain ends? Is it, in short---to use an old distinction recently revived in this connexion---a Science or an Art? The former view is that which has been adopted, I believe, by all writers on economic theory in England for the last thirty years. No doubt an important part of the subject as treated by Mill and other systematic writers belongs admittedly to Art rather than to Science; viz. the discussion of the principles on which Taxation should be managed and of the general nature and limits of Governmental interference, so far as it affects the amount or the distribution of the national wealth. But these matters are generally handled by the writers in question under the head not of Political Economy strictly speaking, but of its application to Politics or the Art of Government. They hold that the precepts or rules of this department of practice are properly based, in a great measure, on the generalisations or deductions of Economic Science; but they do not mean these rules of Art when they speak of the `laws of Political Economy'; and they have frequently censured as a vulgar error the habit of thinking and speaking of economic `laws' as liable to `violation', and as needing to be realised by voluntary conformity or even enforced by public opinion. Still this habit has found very difficult to eradicate; and indeed, the sharp distinction which English economists are at present disposed to between Economic Theory and its application to practice is almost confined to themselves and their more docile disciples: it has not worked itself into the common thought of even cultivated persons here, and it has not been generally accepted by Continental writers. When, in discussing the same matters, one set of disputants blend the consideration of `what exists' or `tends to exist' with the consideration `what ought to be done', while another set emphatically distinguish the two questions, the gravest misunderstanding is likely to result: hence it seems very important to examine carefully the causes and the justification, if there be any, of this widespread confusion---or at least fusion---of distinct inquiries.
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