The Principles of Political Economy

Henry Sidgwick


Chapter 2

The Scope of Political Economy

§2. The causes are partly historical or linguistic; partly, again, they lie deep in the nature of the subject and the normal conditions of the application of the human intellect to practice. To begin with the former, we may observe that the generic term Economy has always denoted an Art or method of attaining a practical end rather than a Science, and that it has naturally been found difficult to alter its meaning altogether in prefixing to it the epithet Political; especially since, the compound `politico-economical' having been found unendurable, the simple 'economical' has been used to do adjectival duty both for 'economy' and `political economy'. Recent writers, it is true, have generally used `economic' as the adjective corresponding to 'political economy': but though they have thereby obviated an ambiguity of language, they have not done away with the general impression that Political Economy is one branch of a larger subject which includes, e.g., Domestic Economy as another branch. This, of course, was the relation of the two studies as originally conceived: otherwise the term Political Economy would never have come into use. It was because a monarch or statesman was conceived to have the function of arranging the industry of the country somewhat as the father of a family arranges the industry of his household, that the Art which offered him guidance in the performance of this function was called Political Economy. If we turn, for example, to Sir James Steuart, the first of our systematic writers, we find that his Inquiry into the Principles of Political Economy (published 1767) commences with the following account of the subject:

``Economy in general is the art of providing for all the wants of a family with prudence and frugality … The whole economy must be directed by the head, who is both lord and steward; … as lord he establishes the laws of his economy, as steward he puts them into execution …

``What economy is in a family, Political Economy is in a state, … but the statesman is not master to establish what form of economy he pleases; … the great art therefore of Political Economy is first to adapt the different operations of it to the spirit, manners, habits and customs of the people, and afterwards to model these circumstances so as to be able to introduce a set of new and more useful institutions.

``The principal object of this science is to secure a certain fund of subsistence for all the inhabitants, to obviate every circumstance which may render it precarious; to provide everything necessary for supplying the wants of the society, and to employ the inhabitants (supposing them to be freemen) in such a manner as naturally to create reciprocal relations and dependencies between them, so as to make their several interests lead them to supply one another with their reciprocal wants … Political Economy in each country must necessarily be different; … it is the business of a statesman to judge of the expediency of different schemes of economy, and by degrees to model the minds of his subjects so as to induce them, from the allurement of private interest, to concur in the execution of his plan.''

Nine years after Steuart's book was published appeared the epoch-making Wealth of Nations, enforcing an essentially different view of a statesman's duties. But notwithstanding the gulf that separates Adam Smith's economic doctrine from Steuart's, he is equally decided in regarding Political Economy as a study with an immediate practical end. ``Political Economy'', he says, in the introduction to the fourth book,

``proposes two distinct objects: first, to provide a plentiful revenue or subsistence for the people, or, more properly, to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or common weal with a revenue sufficient for the public service. It proposes to enrich both the people and the sovereign.''
Accordingly by the ``systems of Political Economy'' of which he treats in this book he seems at the outset to mean not systems in the scientific sense, i.e. connected sets of general statements of fact; but modes of organized governmental interference with a view to ``enriching the people and the sovereign''. But each of those systems was of course based upon certain quasi-scientific principles, a certain view of economic facts; for instance, the ``mercantile'' system of restraints on importation, encouragements of exportation, &c., rested on the supposition that the balance of gold and silver procured by any branch of national industry and commerce was a trustworthy criterion of its advantage to the country. Hence in his discussion of the mercantile system Adam Smith naturally expounds and refutes this quasi-scientific doctrine (and the confusions and errors on which it was founded) along with the practical deductions drawn from it; though he is chiefly occupied in describing these latter and tracing their consequences. So far there is no particular disadvantage in the ambiguity of the term `system'; as it might legitimately denote either a body of scientific doctrines or a set of practical precepts, there is no serious confusion caused by using it for a combination of the two.

But when Adam Smith passes in Ch. ix. to treat of the ``Agricultural Systems'', the ambiguous term becomes a manifestly awkward instrument for the conveyance of his meaning, and is certainly liable to cause a confusion in the reader's mind. For we naturally expect to find in an agricultural `system' the same kind of organized governmental interference in the interest of agricultural producers that we found in the mercantile system in the interest of manufacturers and merchants; and in fact Adam Smith's own language expressly suggests this antithesis. He introduces his account of the views of Quesnay and the other French Physiocrats, which occupies two-thirds of this chapter, by a reference to Colbert's protective policy; remarking that ``as in the plan of Mr Colbert the industry of the towns was certainly overvalued in comparison with that of the country, so in their system it seems to be as certainly undervalued''. He passes on from his discussion of the Physiocrats to speak of the policy of China, Indostan and ancient Egypt, which, as he says, ``favours agriculture more than all other employments''; he also refers to the ancient republics of Greece and of Rome, whose policy ``honoured agriculture more than manufactures (though it seems rather to have discouraged the latter employments than to have given any direct or intentional encouragement to the former)''. And he concludes by arguing that ``those agricultural systems … which preferring agriculture to all other employments, in order to promote it, impose restraints upon manufactures and foreign trade … really and in the end discourage their own favourite species of industry … and are therefore more inconsistent than the mercantile system''; and that, therefore, ``all systems of preference and restraint should be completely taken away''. Hence the careless reader might excusably carry away the impression that Quesnay's doctrine, which was certainly a ``system of preference'' for agriculture, was like the ``plan of Mr Colbert'', a system of legal regulation and restraint: and even the careful reader, if not previously informed on the subject, must be startled when be suddenly learns that in Quesnay's view ``perfect liberty'' was ``the only effectual expedient'' for encouraging agriculture; and that the only positive governmental interference proposed by the Physiocrats, as a deduction from their speculative preference for agriculturists, was the raising of all revenue by an ``impôt unique'' on rent.

The truth is that Adam Smith has really not seen the extent to which, in the hands of the Physiocrats as well as his own, the method of Political Economy has changed its fundamental character and become the method of a science rather than an art: since the change is due not to any difference in the question primarily asked by the economic inquirer, but to the entirely different answer now given to it. The question is still the same, ``How to make the nation as rich as possible'': but as the answer now is ``By letting each member of it make himself as rich as he can in his own way'', that portion of the old art of Political Economy which professed to teach a statesman how to ``provide a plentiful revenue or subsistence for the people'' becomes almost evanescent: since the only service of this kind which the sovereign can render besides protecting his subjects from the violence of foreigners and from mutual oppression and injustice---is to ``erect and maintain certain public works and certain public institutions, which it can never be for the interest of any individual, or any small number of individuals, to erect and maintain''. What remains for Political Economy to teach the statesman is merely how to provide himself with a ``revenue sufficient for the public services'' in the best possible way: and accordingly such teaching, since Adam Smith's time, has constituted the sole or chief part of Political Economy considered as an art. As regards the ``plentiful revenue or subsistence of the people'', Adam Smith, instead of showing the statesman bow to provide it, has to show him how Nature herself would make ample provision if only the statesman would abstain from interfering with her processes: instead of recommending laws (in the jurist's sense) by which the national production and distribution of wealth ought to be governed, he has to trace the laws (in the naturalist's sense) by which these processes actually are governed. In short, the substance of his economic doctrine naturally leads him to expound it in the form of the science to which later writers have applied the name of Political Economy; before entering (in Book v.) on the discussion of the principles of the Art of Political Economy, of which the legitimate sphere is, in his view, reduced to the principles of governmental expenditure and taxation.

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