The Place of Science in Modern Civilisation and Other Essays

inly and more effectually in the general trend and

nal motive."[2] Both in the Theory of the Moral Sentiments and in the Wealth of Nations there are many passages that testify to his abiding conviction that there is a wholesome trend in the natural course of things,

ms and motives, to this work that they are to accomplish. The guidance of the invisible hand takes place not by way of interposition, but through a comprehensive scheme of contrivances established from the beginning. For the purpose of economic theory, man is conceived to be consistently self-seeking; but this economic man is a part of the mechanism of nature, and his self-seeking traffic is but a means whereby, in the natural course of things, the general welfare is worked out.

's use, meant necessary, in the sense of causally determined, no divergence of events from the natural or legitimate course of things would be possible. If the mechanism of nature, including man, were a mechanically competent contrivance for achieving the great artificer's design, there could be no such episodes of blundering and perverse departure from the direct path as Adam Smith finds in nearly all existing arrangements. Institutional facts would then be "natural."[4] (2) When things have gone wrong, they will right themselves if interference with the natural course ceases; whereas, in the case of a causal sequence simply, the mere cessation of interference will not leave the outcome the same as if no interference had taken place. This recuperative power of nature is of an

also in some details of his economic theory, as first set forth in the Lectures, and afterwards more fully developed in the Wealth of Nations. So, for instance, in the earlier presentation of the matter, "the division of labor is the immediate cause of opulence"; and this division of labor, which is the chief condition of economic well-being, "flows from a direct propensity in human nature for one man to barter with another."[8] The "propensity" in question is here app

ist. They are the expression of his general philosophical and theological views, and are significant for the present purpose chiefly as evidences of an animistic and optimistic bent. They go to show what is Adam Smit

igure in the process of production. With the Physiocrats, production is the work of nature: with Adam Smith, it is the work of man and nature, with man in the foreground. In Adam Smith, therefore, labor is the final term in valuation. This "real" value of commodities is the value imputed to them by the economist under the stress of his teleological preconception. It has little, if any, place in the course of economic events, and no bearing on human affairs, apart from the sentimental influence which such a preconception in favor of a "real value" in things may exert upon men's notions of what is the good and equitable course to pursue in their transactions. It is impossible to gauge this real value of goods; it cannot be measured or expressed in concrete terms. Still, if labor exchanges for a varying quantity of goods, "it is their value which varies, not that of the labor which purchases them."[11] The values which practically attach to goods in men's handling of them are conceived to be determined without regard to the real value which Adam Smith imputes

s between the ordinary or average rates, and the natural rates, is a matter of coincidence, not of identity. Not only are there temporary deviations, but there may be a per

ors of production, and it is itself an outcome of production. Nature, including the human factor, works to turn out the goods; and the natural value of the goods is their appraisement from the standpoint of this productive process of nature. Natural value is a category of production: whereas, notoriously exchange v

. That is to say, Adam Smith's preconception of a productive natural process as the basis of his economic theory dominates his aims and procedure, when he comes to deal with phenomena that cannot be stated in terms of production. The causal sequence in the process of distribution is, by Adam Smith's own showing, unrelated to the causal sequence in the process of production; but, since the latter is the substantial fact, as viewed from the standpoint of a teleological natural order, the former must be stated in terms of th

al end of economic life and development. The result of this normalisation of data is, on the one hand, the use of what James Steuart calls "conjectural history" in dealing with past phases of economic life, and, on the other hand, a statement of present-day phenomena in terms of what legi

resentation of what should have been the course of past development, in order to lead up to that ideal economic situation which would satisfy Adam Smith's preconception.[16] As the narrative comes nearer the region of known latter-day facts, the normalisation of the data becomes more difficult and receives more detailed attention; but the change in method is a change of degree rather than of kind. In the "early and rude state" the coincidence of the "natural" and the actual course of events is immedi

oney should legitimately serve in such a community as Adam Smith considered right and good, not in terms of the motives and exigencies which have resulted in the use of money and in the gradual rise of the existing method of payment and accounts. Money is "the great

the Samoyed, for instance, the reindeer which serves him as unit of value is wealth in the most concrete and tangible form. Much the same is true of coin, or even of bank-notes, in the apprehension of unsophisticated peop

as an efficient agent in the events discussed, or to be in any way consciously present in the process. It can scarcely be taken as an animistic agency engaged in the process. It sanctions the course of things, and gives legitimacy and substance to the sequence of events, so far as this sequence may be made to square with the requirements of the imputed end. It has therefore a ceremonial or symbolical force only, and lends the discussion a ceremonial competen

t of view from which the facts are handled; but it comes in great part to a substitution of a new body of preconceptions for the old, or a new adaptation of the old ground of finality, rather than an elimination of all metaphysical or animistic norms of valuation. With Adam Smith, as with the Physiocrats, the fundamental question, the answer to which affords the point of departure and the norm of procedure, is a question of substantiality or economic "reality." With both, the answer to this question is given na?vely, as a deliverance of common sense. Neither is disturbed by doubts as to this deliverance of common sense or by any need of scrutinising it. To the Physiocrats this substantial ground of

iately, or proximately, productive.[18] Adam Smith still has too lively a sense of the nutritive purpose of the order of nature freely to extend the concept of productiveness to any activity that does not yield a material increase of the creature comforts. His instinctive appreciation of the substantial virtue of whatever effectually furthers nutrition, even leads him into the concession

idual; although productive efficiency is the legitimate, normal end of the community's economic life. To such an extent does this concept of man's seeking his ends through "truck, barter, and exchange" pervade Adam Smith's treatment of economic processes that he even states production in its terms, and says that "labor was the first price, the original purchase-money, that was paid for all things."[19] The human nature engaged in this pecuniary traffic is conceived in

the struggle for wealth, as Adam Smith points out; but this consumption comprises the legitimate range of incentives, and a theory which concerns itself with the natural course of things need take but incidental account of what does not come legitimately in the natural course. In point of fact, there are appreciable "actual," though scarcely "real," departures from this rule. They are spurious and insubstantial departures, and do not properly come within the purview of the stricter theory. And, since human nature is strikingly uniform, in Ad

mal scheme of the economic process. Through his normalising the chief causal factor engaged in the process, it affects also his arguments from cause to effect.[21] What makes this latter feature worth

t part, in the utilitarian philosophy that entered in force and in consummate form at about the turning of the century. Some credit in the work of normalisation is d

from the point of view of a divinely instituted order; nor do they discuss human interests with that gently optimistic spirit of submission that belongs to the economist who goes to his work with the fear of God before his eyes. Even with Malthus the recourse to the divinely sanctioned

ndeed, that he is not infrequently spoken of as a utilitarian. This view, convincingly set forth by Mr. Bonar,[22] is no doubt well borne out by a detailed scrutiny of Malthus's economic doctrines. His humanitarian bias is evident throughout, and his weakness for considerations of expediency is the great blemish of his scientific work. But, for all t

e working out of this natural order, not the substantial and self-legitimating ground. Shifty as Malthus's metaphysics are, much the same is to be said for him.[24] Of the utilitarians proper the converse is true, alt

h a distinction that marks no tangible difference. But a reading of the classical doctrines, with something of this metaphysics of political economy in mind, will show how, and in great part why, the later

s of very great importance also in Adam Smith; but Adam Smith's economics is a theory of the production and apportionment of the material means of life.[25] With Adam Smith, value is discussed from the point of view of

rship;[27] but the classical writers are followers of Adam Smith, and improve upon and correct the results arrived at by him, and the difference of point o

of the educated community, is the substitution of hedonism (utility) in place of achievement of purpose, as a ground of legitimacy and a guide in the normalisation of knowledge. Its effect is most patent in speculations on morals, where it inculcates determinism. Its close connection with determinism in ethics points the way to what may be expected of its working in economics. In both cases the result is that human action is construed in terms of the causal forces of the environment, the human agent being,

s of the material forces affecting the human sensory and of their equivalents in the resulting activity. In the language of economics, the theory of value may be stated in terms of the consumable goods that afford the incentive to effort and the expenditure undergone in order to procure them. Between these two there subsists a necessary equality; but the magnitudes between which the equality subsists are hedonistic magnitudes, not magnitudes of kinetic energy nor of vital force, for the terms handled are sensuous terms. It is true, since human nature is substantially uniform, passive, and

the equivalent of the sensuous gain secured. An alternative statement might perhaps be made, to the effect that the measure of the value of goods is not the sacrifice or discomfort undergone, but the sensuous gain that accrues from the acquisition of t

in either case. The post-Bentham economics contemplates value as a measure of, or as measured by, the irksomeness of the effort involved in procuring the valuable goods. As Mr. E. C. K. Gonner has admirably pointed out,[28] Ricardo-and the like holds true of classical economics generally-makes cost the foundation of value, not its cause. This resting of value on cost takes place through a valuation. Any one who will read Adam Smith's theoretical exposition to as good purpose as Mr. Gonner has read Ri

value, the conduciveness to welfare is not the objective point of the argument. This objective point is rather the bearing of productive enterprise upon the individual fortunes of the agents engaged, or upon the fortunes of the several distinguishable classes of beneficiaries comprised in the industrial community; for the great immediate bearing of exchange values upon the life of the collectivity is their bearing upon the distribution of wealth. Value is a category of distribution. The result is that, as is well shown by Mr. Cannan's discussion,[29] the theories of production offered by the classical economists have been sensibly scant, and have been carried out with a constant view to the doctrines on distribution. An incidental b

1] In this way the doctrines on production come to take a pecuniary coloring; as is seen in a less degree also in Adam Smith, and even in the Physiocrats, although these earlier economists very rarely, if ever, lose touch with the concept of generic serviceability as the characteristic feature of production. The tradition derived from Adam Smith, which made productivity and serviceability the substantial features of economic life, was not abruptly

e is an invidious gain for the individual (in contrast with or at the cost of his neighbors), or an enhancement of the facility of human life on the whole, is altogether a by-question in any discussion of the range of incentives by which men are prompted to their work or the direction which their efforts take. The ser

terests of the individuals. It follows by easy consequence, whether strictly true or not, that the sum of individual gains is the gain of the society, and that, in serving his own interest in the way of acquisition, the individual serves the collective interest of the community. Productivity or serviceability is, therefo

es ampler and more painstaking attention as the classical body of doctrines reaches a fuller development. The "wages of superintendence" are the gains due to pecuniary management. They are the gains that come to the director of the "business,"-not tho

ed aggregate output of consumable goods, that is a fortuitous circumstance incident to that heightened vendibility on which the investor's gain depends. Yet the classical doctrine says frankly that the wages of super

omic situation was also the chief ground for the vogue of hedonism in economics; so that hedonistic economics may be taken as an interpretation of human nature in terms of the market-place. The market and the "business world," to which the business man in his pursuit of gain was required to adapt his motives, had by this time grown so large that the course of business events was beyond the control of any one person; and at the same time those far-reaching organisations of invested wealth which have latterly come to prevail and to coerce the market were not then in the foreground. Th

wealth) is productive; and the rate of its average remuneration marks the degree of its productiveness.[34] The most obvious fact limiting the pecuniary gain secured by means of invested wealth is the sum invested. Therefore, capital limits the productiveness of industry; and the chief and indispensable condition to an advance in material well-being is the accumulation of invest

te situation the pecuniary motive has its perfect work, and guides all the acts of economic man in a guileless, colorless, unswerving quest of the greatest gain at the least sacrifice. Of course, this perfect competitive system, with its untainted "economic man," is a feat of the scientific imagination, and is not intended as a competent expression of fact. It is an expedient of abstract reasoning; and its avowed competency extends only to the abstract principles, the fundamenta

economic conduct, so far as it touches the production and distribution of wealth, are but the simple and constant sequence of hedonistic cause and effect, the element of human nature may fairly be eliminated from the problem, with great gain in simplicity and expedition. Human nature being eliminated, as being a constant intermediate term, and all institutional features of the situation being also eliminated (as being similar constants under that natural or consummate pecuniary régime with which the pure theory is concerned), the laws of the phenomena of wealth may be formulated in terms of the remai

n its reaction to pecuniary stimulus, and since no other feature of human nature is legitimately present in economic phenomena than this reaction to pecuniary stimulus, the valuer concerned in the matter is to be overlooked or eliminated; and t

he commonplace-stronger at this time than at any earlier period. The reason for this growing penchant for the commonplace, for the explanation of things in causal terms, lies partly in the growing resort to mechanical processes and mechanical prime movers in industry, partly in the (consequent) continued decline of the aristocracy and the

irtschaft to which men "are impelled by the provisions of nature."[37] By virtue of their hedonistic preconceptions, their habituation to the ways of a pecuniary culture, and their unavowed animistic faith that nature is in the right, the classical economists knew that the consummation to which, in the nature of things, all things tend, is the frictionless and beneficent competitive system. This competitive ideal, therefore, affords the normal, and conformity to its requirements affords the test of absolute economic truth. The standpoint so gained selectively guides the attention of the classical writers in

cy lies beyond the causal sequence in which the observed phenomena are conceived to be interlinked. It is related to the concrete facts neither as cause nor as effect in any such way that the causal relation may be traced in a concrete instance. It has little causally to do either with the "mental

ead of being, as under the earlier normalisation of Adam Smith, primarily a great wheel of circulation for the diffusion of consumable goods. The terms in which the laws of money, as of the other phenomena of pecuniary life, are formulated, are terms which connote its norm

TNO

om The Quarterly Journal of Ec

hy and Political Ec

leads him to prefer that employment which is most advantageous to the society.... 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

hysical ground of all that inculcation of morality and enlightened policy that makes up so large a part of Adam Smith's w

ying many of the bad effects of the folly and injustice of man; in the same manner as it has done in the

alue of all commodities." Wealth of Nations, Book

rofits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may be called its natura

am Smith (Ed. Cann

adual consequence of a certain propensity in human nature which has in view no such extensive utility,-the propensity to truck, barter, and exchange one thing for another. Whether this propensity be one of those original principles in human n

Nations, Book I

f Nations, Bo

of the determination of Wages, Profit

orhood an ordinary or average rate of rent, which is regulated, too.... These ordinary or average rates may be called the natural rates of wages, profit, and rent, at the time and place in which they commonly prevail. When the price of any commodity is neither more nor less than what is su

high price; and that part of it which resolves itself into the rent of land is, in t

ons, Book I, chap,

lopment appear, when not seen in the light of Adam Smith's precon

ok I, c

ook II, chap. v, "Of the Diff

he annual revenue of every society is always precisely equal to the exchangeable value of the whole

ferent men is in reality much less than we are

sen Teile darauf, dass Smith die Principien in so innige Verbindung mit dem Thats?chlichen gebracht. Hie und da werden dann auch die Principien, was durch diese Verbindung veranlasst wird, an ihren Spitzen et

the chapter on Malthus in Philosophy and Political Economy, Book

Bentham. His hedonism is but the uncritically accepted metaphysics comprised in the common sense of his time, and

Malthus and his

into "the Nature and Cause

ces of life which it annually consumes, and which consist always either in the immediate produce of that labor or in w

machinery, and capital-is divided among three classes of the community.... To determine the laws which

s edition of Ricardo's Political Eco

roduction and Dist

aft (second edition). Cf. especi

the classes of the community, ... that enough still remains to constitute a separate science, the mere enumeration of the chief terms of economics-wealt

geable value; ... (but), possessing utility, commodities derive their exchangea

under profits; and the work of superintendence is thereupon conceived as being, immediately or remotely, an exercise of "abstinence" and a productive work. The illustration o

duction and chaps. iv and v of Book I. B?hm-Bawerk's discussion bears less immedi

ical Econo

71. Cairnes may not be altogether representative of the high tide of class

Political E

CEPTIONS O

ENC