Political Economy

Political Economy in the United States

Political Economy in 1899 (United States)

The following information about Political Economy is from the Cyclopaedia of Political Science, Political Economy, and the Political History of the United States by the Best American and European Writers.

POLITICAL ECONOMY, History of. The history of the science of economics falls naturally into two periods: that before, and that after, Adam Smith. The year 1776 may fairly enough be called the birth-year of economics, for in that year appeared Adam Smith’s immortal work entitled, An Inquiry into the Nature and Causes of the Wealth of Nations.

The science had passed through two stages of its development before that time: the embryonic and the formative periods. Men had thought upon economical subjects for ages in a desultory, blind sort of a way, but had produced nothing which even remotely resembled the science now called economics until within two centuries of Adam Smith. The embryo began to assume shape in the writings of those men who immediately preceded the so-called mercantilists; it appeared in a more developed shape in the formulations of the mercantile writers during the seventeenth century, and assumed a still more definite and orderly form in the theories of the economists or physiocrats of the eighteenth century. It was reserved for Adam Smith, however, to actually bring it into life and start it forth in its career of development. Adam Smith occupies a very similar position in the history of economics to that occupied by Kant in the history of philosophy. All theories and development of the preceding ages culminate in him, all lines of development in the succeeding ages start from him. His work has been before the public over one hundred years, and yet no second book has been produced that deserves to be compared with it in originality or importance. The subsequent history of the science is mainly the history of attempts to broaden and deepen the foundation laid by Adam Smith, to build the superstructure higher and render it more solid.

-Those who have attempted to find the origin of economics in antiquity have met with poor success. Even Roscher, with all his love for the historical method and his wonderful acquaintance with economical writings, has not been able to prove anything more than that ancient writers discussed some phases of various economic subjects-as how could they help doing so, if they touched upon social or political matters at all? One might as well claim that the New Testament contains a systematic treatise on political economy, because it discusses the proper method of treating the poor, and the relations between masters and servants, as to maintain that Plato and Aristotle, in their discussions of the state and its functions, elaborated an economic science, or even laid the foundations for such a science. Greek and Roman writers, it is true, discussed economic questions. So they discussed chemical, physical and geological questions, but it would hardly be claimed, even by their most enthusiastic followers, that they laid the foundations, in any real sense, of the modern sciences of chemistry, physics and geology. They considered nearly all questions which present themselves to the inquiring human mind. But many of them they did not approach from [238] the right direction, and consequently their thought did not result in anything valuable. They reflected upon economic questions, and discussed them to some extent, but not from an economic standpoint. Economic issues were decided, not from economic considerations, but on social, political, religious or even esthetic grounds. Three things prevented the Greeks from elaborating a science of economics: 1, the abstract nature of their science; 2, their economical institutions; 3, their political and social theories. (Eisenhardt.) Greek science was abstractly philosophical. It was pre-eminently a priori. It was in such haste to reach ultimate generalizations that it was not content to make even elementary observations of actual facts. As a consequence it became mere form without content. Its theories were often directly opposed to patent facts. Such a method could not develop a science of economics, whose starting point is certainly the concrete facts of the material and moral world, whatever its subsequent logical method may be. Nor was the social and economic organization of the Grecian states any more favorable to the development of economics than their scientific method. Greece never got beyond the natural economy-that form of social organization in which the community is made up of a mere aggregate of households, each of which is largely independent of the others, since it satisfies its own want of material commodities by producing them itself, instead of depending on acquiring them by exchange. The typical Greek state was based on a landed aristocracy, whose members dwelt each in the midst of an estate, on which he employed enough slaves to work the lands and manufacture the commodities which necessity and comfort required. The economical phenomena of such a social organization could not be so striking as to attract the thoughtful attention of the thinkers and philosophers long enough to result in any valuable system of science. And finally, the Greek idea of labor barred in a most effectual way all attempts to investigate its real nature as an economic factor. Physical labor was held to be degrading. It unfitted a man for the higher and nobler duties of life, those relating to the state. It was necessary, therefore, for human society to be divided into two classes, the slaves and the masters. All physical labor must be performed by the former, so as to leave the latter leisure to live for the higher purposes of life. Plato carefully excluded artisans from his ideal state, and after calling a state organized in their interest a state of swine, he says that it is not worth the trouble to spend any time in discussing them. Aristotle recognized only one kind of physical labor as worthy occupation for free citizens, and that was agriculture. In this respect the Romans resembled Aristotle. Senators were disgraced who took part in undertakings which were not aristocratic, and agriculture was the only kind of physical labor which was allowed to be aristocratic. Of course, with such ideas of labor, there was no possibility of a science of economics, in the modern sense of the term. This bar to the rise of political economy was taken away by the triumph of Christianity, which made the servant equal to the master in the sight of God, and all kinds of labor equally honorable. But early Christian science was as antagonistic to any thoroughgoing investigation of economic problems as had been its predecessors. For, in the first place, it was as abstract and as a priori as Greek philosophy. In fact, it was a mere outgrowth of the latter, and for ages it did not get beyond it. In the second place, the ascetic influence was decidedly prominent. The doctrine of renunciation was preached. The way to get rich is to become so deeply interested in the life beyond the grave that the wealth of this world shall become of no importance. Such an idea was as inimical to the rise of political economy as the ancient idea of labor. Mediæval society also resembled that of antiquity, in that it was essentially a mere aggregate of private households, each largely independent of all the others. The system of barter still prevailed. Society was divided into two classes, lords and serfs. The latter lived for the former, and these, theoretically, for the state and the church, practically, for themselves. But toward the beginning of that period which we call modern times, things began to change, and the conditions began to be realized, one by one, w
hich were necessary to the rise of economics. The first great step was the rise of the cities. The artisan and commercial classes began to work themselves up out of the subordinate positions they had always occupied, to an equality with the clergy and nobility. By coming together in cities they managed to develop a political strength which secured their rights and privileges. By the cheapness of their products they began to build up a trade with the country. The first germs of that vast organism which we may call the industrial economy of the world began to vegetate. Exchange by money began to take the place of exchange by barter. The trades unions insisted on the dignity of labor, and the representatives of the cities claimed equal rank with those of the courts. The growth was rapid. Kings and princes saw in the cities a means of humbling the power of the barons and of increasing the revenue at their disposal. The need of money to sustain their armies led the kings to consider the best way of getting money. The thought and attention of their ministers were directed more and more powerfully to this subject, though of course all the time more toward the practical question of how to get a large revenue, than to the theoretical one of how to establish and maintain national wealth. Works upon money are consequently the earliest writings we have on economical subjects. It might have been a long time, however, before any system of economical theories would have been elaborated, had it not been for the discovery of America. To the gold and silver mines of Mexico and Peru we are probably indebted for the mercantile theory. The [239] revolution in prices in western Europe caused by the influx of gold and silver from America, was both intensive and extensive, and its effects are traceable even to this day. Many modern economists are never tired of belittling the theories of the mercantile school, and of expressing their surprise that men ever held such views. A glance at the conditions under which it rose will do much to explain its raison d’étre. Most modern writers on economics unito in attributing but little importance to the increase in the amount of money in a country. Mill says that if the quantity of money in the possession of every individual in a nation were suddenly doubled, the only economical effect would be a rise in prices equal to the increase in the amount of money in circulation. Now, although this might be true of the case which he supposes (which he does not by any means prove), yet it is plain that, if the same amount of money were put at the disposal of a few men, its passage into circulation might have a most powerful effect on the whole national economy. It might work out a total redistribution of wealth before it had all passed into circulation and produced its legitimate effect of raising prices. Such was the condition of things in the world market from 1500 to 1600. A large addition was made to the money of the world. This addition was in the possession of a single nation. The economical superiority of this nation in western Europe was undisputed. Its political superiority followed as a matter of course. Spain, by virtue of its immense acquisitions of gold and silver, became mistress of the wealth and lands of Europe. Prices rose rapidly, but Spain was in a condition to profit at the expense of the rest of the world. The quantity of money in the European world in 1600 was estimated to be about four times what it was in 1492. Bodin, in his discours sur l’excessive cherté, published in 1574, says that prices had risen ten to twelve fold within seventy years. Bishop Latimer, in his sermons (1575), says that he had to pay sixteen pounds rent for the estate which his father had had for three-fourths of a pound. The European world contemplated this unheard-of and universal rise in prices with dazed fear. If this thing continues, says Latimer, we shall have to pay a pound for a hog after awhile. It was, of course, natural that men should see in such a revolution a real increase in the cost of commodities. It was widely attributed to the usurious manipulations of the large banking houses. It was therefore a long step forward toward the rise of economics when Bodin declared that this whole phenomenon was a mere sinking in the value of gold and silver, and not an increase in the value of other commodities. Just as much corn, cloth, etc., is produced now as before, and at the same expense of labor and capital; the only difference is, that money has become much more plenty, and consequently has sunk in price. But while this expressed a great economic truth, it did not change the fact that while this process was going on it had produced a very different distribution of wealth among the European nations to the advantage of Spain, nor could it obscure the fact that money had been the great instrument in effecting this distribution. The phenomena attendant upon this enormous redistribution of wealth attracted the attention of eminent thinkers of all nations. They naturally attempted to account for them. The theory which they elaborated has become known as the commercial or mercantile system, and was the first attempt to systematize and arrange in scientific order the complicated phenomena of the industrial world, and, as such, deserves a somewhat careful examination. This theory arose from discussions of the money question, and was primarily a mere theory of money and of the laws controlling its creation and distribution. It included, however, the discussion of many other points, and it will be presented here as it appeared in its later form.

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-The most striking peculiarity of the mercantile school, as Roscher has happily remarked, consists in a five-fold over-estimation. The mercantile writers, as a rule, over-estimated the importance of a dense population, the value of a large stock of money, the advantages of foreign trade, the importance of manufacturing industry, and the efficiency of governmental control and supervision. We have already explained how naturally they were led by the circumstances of the time to over-value the precious metals, which formed the money stock of the world. The underlying principle of the whole mercantile school was that a nation’s wealth is to be measured by the amount of the precious metals which is circulating within its limits as money, and that the national economy is consequently to be organized so as to attract as much money as possible into the country, and to retain it when once obtained. They held that wherever money performs its service as a universal medium of exchange, the individual is rich in proportion as he can control money, and that what is true of the individual must be true of the nation, which is only an aggregate of individuals. Further, that although the wealth of a nation does not consist altogether of gold and silver coins, but of money and what is worth money, yet money is the most important element of wealth, because it is not consumed and destroyed like provisions, and because it forms an essential condition of a lively domestic commerce, and of a great production and consumption, and must also be regarded as an unusually important, nay, indispensable, resource, and as a powerful promoter of international commerce. Again, that the vigor, authority, efficiency and power of the government at home and abroad depend mainly on the amount of money at its disposal, and that great and successful wars can never be waged without abundance of money. Finally, that the importance of money can be seen from the fact that all those states which, by means of manufacturing industry, foreign trade or other expedients, have succeeded in obtaining the largest amount of the precious metals, and in whose territories there is the liveliest [240] circulation of money, have distinguished themselves from other states by a great population, prosperity and power. Starting from these considerations, the value of any branch of national industry, th
e propriety of any course of national policy, must be tried by its probable effect on the quantity of money at the nation’s disposal. Agriculture, although necessary to the existence of a people, can not increase the national wealth very much, because its products, as a rule, are rapidly consumed, and, even if shipped to foreign lands, can not bring back much money, since they are generally exchanged for manufactures. If the products of agriculture were worked over at home and sent abroad in a perfected form they would serve to support a flourishing manufacturing and commercial population, and money would flow into the country in abundance. In the opinion of the mercantilists, then, agriculture is to be fostered as the nourisher of the nation, and as the source of various kinds of raw material which manufacturing industry needs; but as compared with other branches of industry which contribute to increase the quantity of money, the nerve and sinew of national power and prosperity, it is only of secondary importance, and can by no means lay claim to special care and favor. In reference to mining, which is intimately connected with the production of raw materials, the mercantile school held, that the mining of the precious metals is an extremely important source of national wealth, for it contributes immediately to swell the quantity of gold and silver. The opening of mines, then, at home or in the colonies, must be a special care of every government which understands its true interest. Gold and silver mines should be kept open, even if they yield no profit, or indeed if they can be worked only at a loss; for the money with which the costs of mining are defrayed remains in the country, while the precious metals so obtained are a permanent gain to the national wealth.

-In opposition to agriculture the mercantile system recognizes manufacturing industry as especially important to a nation; for it alone furnishes those products and commodities which can be exchanged with foreign countries for cash, while it also prevents money from going to foreign countries in return for manufactures. It is to be regarded, therefore, as a powerful lever in acquiring money. The mercantilists hold that everything which can be produced at home should be produced there, even if the costs of production and prices should be higher than abroad; for the higher prices paid to the producers remain at home. Those branches of industry are of most importance which furnish artistic products for the foreign market, for these not only prevent money from leaving the country to purchase such things elsewhere, but they are the very things that bring in most money. In consequence of the significance, importance and necessity of such industry, it becomes one of the chief functions of the state to further everything which can promote it in any way, and especially to aim at securing low wages of labor, cheap provisions, low rates of interest, cheap raw materials, skilled laborers, large markets, cheap transportation, etc., since these are prime conditions of the expansion and progress of the technical industries. This can only be attained when the government keeps the wages at a proper minimum by police regulations, fixes the prices of the necessaries of life, hinders the export of corn, fixes the rate of interest, and renders difficult the exportation of raw materials, while offering a premium on their importation. It must at the same time attempt to persuade skilled laborers to immigrate from foreign countries, reward and promote skill and inventiveness by patents and pensions, by monopolies and privileges, improve the means of communication and transportation, and regulate domestic and exclude foreign competition. What the landowner, farmer, laborer and capitalist, and the whole class of consumers, lose by this policy, is made up to the state as a whole, for in this way the efflux of money to foreign countries is prevented, and the consequent increase in rapidity of circulation accrues to the advantage of all. In regard to domestic commerce, the mercantile school held that inasmuch as it is exclusively occupied with domestic wares and products, it is of importance, from an economical point of view, only in so far as it assists manufacturing industry by furnishing it good and cheap raw material. Very different is it with foreign commerce, which occupies a most important place in the industrial and mercantile life of nations, and must, therefore, be an object of special care to the state. First of all, care must be taken that no money leaves the land through foreign commerce, or at least that no more flows out than comes back. The balance of trade is taken as an indication of the movement of the money. In order to secure a favorable balance of trade, that is, in order that more money shall be imported than is exported, the importation of foreign manufactures is to be prevented or rendered difficult by customs duties, while the importation of raw material is to be allowed, because it promotes manufacturing industry at home. The exportation of domestic manufactures, on the contrary, is to be promoted by every possible means, since they bring in money the most surely and in the largest quantities. In order that the manufactures may obtain a large market in foreign lands, especial care must be devoted to the cheapness and excellence of the wares and products so as to compete easily with foreign products. The cheapness of the goods is to be secured by the methods mentioned above, by low taxes, etc., while the quality is to be assured by a very detailed system of inspection and control on the part of the government. The latter must examine all commodities destined for foreign markets, insist upon honest and fair workmanship, and confiscate all goods of a poor quality or such as would be likely to injure the prospects of trade. It should further assist and encourage the producers by rebates and premiums on exportation, [241] and should insure them against unavoidable accidents and misfortunes. The mercantilists claimed that premiums on exports do not injure anybody, because they are paid to inhabitants of the country, and consequently remain at home. Foreign commerce is to be encouraged by the establishment of great trading companies, by the planting of colonies, by treaties of commerce with other nations, by great fairs, etc.

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-The mercantile school insisted, further, that the mere accumulation of money by mining, manufacturing and trade did no good of itself, but that if the money was to accomplish its true mission, and be of any great advantage, it must circulate rapidly from hand to hand. A large body of consumers, therefore, is necessary to any great advance in national wealth. The state should not be niggardly in its expenditure, for, since the money all remains in the land, a liberal consumption of products and wares promotes production in every line. Their theory of taxation was, that so far as the expenses of government can not be defrayed by domains, monopolies, fees, etc., they should be met by taxing the profits of the citizens. Great care must be exercised, however, not to tax infant industries too heavily, and in many cases they should be exempted from taxation. Since the power and basis of national wealth are to be found in a large and dense population, the state should devote especial attention to promoting, by every means in its power, the growth of population. Their views on population are easily accounted for. Society was in that transition state when every increase in numbers, so far from resulting in greater poverty and distress, acted merely as a stimulant to new undertakings and richer achievements.

-The above set of views, to which the name of the mercantile or commercial theory has been given, ruled the political world during the whole period of modern times down to the close of the French revolution, and still maintains a hold in some places. It is difficult, or rather impossible, to say who was the founder of the mercantile school, or in what land it had its origin. It was such a nat
ural outgrowth of the conditions of society that it made its appearance about the same time in Italy, France and England. And although a good case may be made out for Italian and French thinkers as the earliest theorizers on this subject, yet an exact form was given to these views first by Thomas Mun in a posthumous work published in 1664, and entitled England’s Treasure by Foreign Trade; or, the Balance of our Foreign Trade is the rule of our Treasure.

-One of the practical results of such views, when adopted by statesmen, was a thoroughgoing paternal system of government. The state undertook to regulate every department of life. Free trade was as unknown as free speech or free thought. The economy of the world was forced, as it were, into a strait-jacket. Everything moved along artificial channels. Nothing was natural and free. There came a time, of course, in the progress of civilization when such a state of things was no longer tenable. Men began to grow restive under this continual restraint. They longed for a greater liberty of thought, speech and action. The period of agitation in the intellectual and religious world began in earnest with Voltaire. It was one of his contemporaries and countrymen who voiced the general dissatisfaction of the time in economical matters. Side by side with the champions of political and religious freedom, François Quesnay represented the economical phase of this great struggle. The system which he founded has been called the agricultural or physiocratic. It is a vigorous protest against the theory and practice of the mercantilistic school. Although it never acquired the importance, either theoretically or practically, of the latter, yet it marks an important stage in the development of the science of political economy, and is, therefore, worthy of our special attention.

-If the mercantile theory over-estimated the importance of the technical industries and of the towns, the physiocratic went as far the other way in its valuation of agriculture and of the country. The fundamental principles of the physiocrats were few and simple. The very name itself which was given to the school signifies its most important characteristic. Its first principle was, that all national wealth is derived from the soil; agriculture is the only productive occupation; the production of raw material is the only calling in which the value of the product exceeds the cost of production. The labor of the farmer yields not only enough to support him while engaged in the labor, but a surplus over and above this, which may be called the net product. This net product generally falls to the landlord under the form of rent, and is the fund from which all expenditures of a public nature must be defrayed. The landlords, since they live without labor, are called the classe disponible, and they may devote themselves to the service of the public. Manufacturers and artisans are unproductive. They add value, it is true, to the raw material which they work over, but only as much as is equivalent to the cost of their support while engaged in their work. If they are able to save anything from their income, they do it either by limiting their consumption within too narrow bounds, or by some favoritism of government or of chance, which secures them against competition. Although unproductive, these classes are by no means useless, since by their labor they give permanence to the utilities embodied in raw material, and by their improvements they lessen the cost at which the agricultural classes can supply themselves with the needed manufactures; and so, by diminishing the cost of living of the farmers, they render possible the increase of the ground rent, that is, of the net national revenue. Their views on money were essentially different from those of the mercantile school. While they acknowledged a nation to be rich which possessed much money, yet since money can be obtained from foreign countries [242] only by exchanging agricultural productions, no advantage is gained by such an exchange. They looked upon commerce in the same light as manufacturing industry. It added no value to the commodities beyond the wages of the laborers engaged in transportation. Since the only surplus product of labor is this ground rent, physiocrats maintain that all taxation should fall upon this alone. Any tax upon industry, wages or commerce, tends simply to increase the price of manufactured commodities, and the cost of living of the agricultural classes, and so diminish the ground rent and the net revenue of the nation. The practical consequences of these few principles were sweeping and widespread. They demanded unlimited freedom of competition in every department of economic life, abolition of all import and export duties, the encouragement of agriculture by every possible means, simplification of taxation, and the protecting of industry and trade by leaving it the fullest liberty.

-The rapid spread of the doctrines of the physiocrats is easily accounted for when we take into consideration the economic and political conditions of the time. Not only France, but all Europe, was just emerging from the feverish and excited period of over-speculation which ended with the collapse of John Law’s Mississippi bubble. Men had seen every form of property take wings and fly away; all classes in the community had speculated and lost; but the farming class had been relatively safe. Landed property in France had indeed increased somewhat in value: no wonder that men turned their attention thither in the hope of recuperating their lost and ruined fortunes. This seemed like a solid rock in the wild and fluctuating sea of speculative vocations. Quesnay’s glorification of agriculture, therefore, fell into good ground and was enthusiastically received.

-The economic views of the physiocrats are intimately connected with their ethico-political ideas. They base their social laws upon natural laws, and seek to establish a harmony between the useful and the just. They were not content with studying merely one phase of national life, the economic side, but endeavored to trace this back to a greater whole, to connect it with the political and moral elements of social life. According to Quesnay’s idea, the world and humanity are controlled by certain permanent physical and moral laws, which man is to seek out and use for his own ends. One of the main purposes of human and social life consists in the appropriation and control of matter for human ends, and so in improving and increasing man’s prosperity. In following out this aim man must obey the demands of justice in its connection with the idea of the useful. This idea of justice manifests itself in freedom and in property, that is, in the right of every one to do what does not injure the whole, and to acquire, possess and use all commodities so far as this does not come in conflict with the laws of nature and of social organization, with the behests of morality and of political wisdom. Freedom and property, therefore, are fundamental elements of human nature and of political organization, rights of such high importance and sacredness that in every human society they are to be highly valued, and to be protected, secured and promoted, since they form the essential support and condition of the state in general; and without freedom and property, without law and justice, no economical nor intellectual nor political nor moral progress of nations is conceivable. In a word, the physiocrats demanded freedom and justice in all social relations, freedom of conscience and freedom of the press, freedom of trade and commerce, equality before the law for every man, etc., and the example of nature was to be the criterion and model of all social and political institutions.

-The theory of the physiocrats had an ardent admirer and defender in the practical statesman, Turgot who attempted the task of saving and regenerating France by reorganizing the finance and economy of the nation in accordance with physiocratic principles. With his brief and troubled career as prime minister of France, di
sappeared all hope of putting into practice the doctrines of the physiocrats. The school lost i

Political Economy. in 1899 (United States)

The following information about Political Economy. is from the Cyclopaedia of Political Science, Political Economy, and the Political History of the United States by the Best American and European Writers.

POLITICAL ECONOMY. I. Preliminary Considerations. In a Cyclopædia like the present it would seem that the article Political Economy should form one of the central points of the whole work. It would perhaps be such, if we desired to embrace under this term the various considerations which commend the study of economic science to those whom it interests, and to set forth the many advantages which may be derived from it. It would be so likewise, if in the article Political Economy we attempted to touch upon all the subjects which the science embraces, either for the purpose of showing their importance or their connection. We can not enter into such detail here. We wish simply to define political economy, to give it a point of departure, a formula; to determine its character and object, and to indicate, as far as possible, its extent and limits.

-It would be mistaking the nature of such a task to suppose that it can be performed in a few lines. It is not as easy as one might think at first to give an exact definition of political economy, or at least a satisfactory one, one around which all adepts in the science might rally. Many authors, beginning with Adam Smith, have attempted it, but no one seems to have succeeded. Whatever may be the real merit of certain definitions hitherto given, it is certain that, up to the present time, not a single one has been accepted without dispute. It has even frequently happened (and this is a more serious matter) that the very ones who furnished them, subsequently contradicted or modified them in the course of their works. It would perhaps be more correct to say that there is not one of these definitions to which its author himself remained faithful in the manner in which be conceived and treated his subject. This has caused some of the later teachers of the science to say, that political economy has yet to be defined.

Even if we must blush for the science, says Rossi, the economist must confess that the first question still to be examined is this: ‘What is political economy? what is its object, its extent, its limits?’ There is no reason to blush, we think, for being still obliged to put such a question, when we consider the natural difficulties it presents; but we must agree, with Rossi, that it is still awaiting a solution. A Belgian writer, Arrivabene, has called attention to this truth in his introduction to a translation of Senior’s Lectures on Political Economy, in terms more emphatic than those used by Rossi, bitterly deploring the vagueness, the obscurity, the incoherence, and especially the insufficiency, of all the definitions hazarded by the masters of the science, and calling loudly for a more satisfactory and precise formula. To make this clear, we here reproduce some of the definitions furnished by economists generally considered to be of the highest authority.

-Adam Smith was usually very sparing of definitions. He, however, gave a few here and there, and they characterized or defined, in the course of his work, the science which he treated.

Political economy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects: first, to supply a plentiful revenue or subsistence for the people, or, more properly, to enable them to provide [217] such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services. It proposes to enrich both the people and the sovereign.

(Wealth of Nations, book iv., introduction.) Without discussing the relative merit of this definition, we shall simply remark that it has in view much less a science than an art, although the idea of a science is put forward in it, and although the word science is to be found in it. The author, in fact, appears to enunciate a series of precepts which would indeed constitute an art; but not an exposition or an explanation of certain natural phenomena, which alone can constitute a science. In substance, if not in form, Adam Smith’s definition is nearly like that given by J. J. Rousseau under the term économie politique, in the Encyclopédie. We know, however, how widely Adam Smith differed from Rousseau, not only in his conclusions, but especially in his manner of treating his subject. On the other hand, his definition differs greatly, as we shall see, from that of J. B. Say, who followed in his footsteps, and looked on the science as Smith himself had done.

-J. B. Say, in the beginning of his treatise, and even as title to this treatise, gave his principal definition of political economy, the one which has since been most frequently reproduced:

A Treatise on Political Economy, or a simple exposition of the manner in which wealth is produced, distributed and consumed.

Whatever may be thought of this formula, it is at least very much superior to that of Adam Smith, in this especially, that it suggests the idea of a real science, and not merely of an art, since it describes an exposition or explanation of certain phenomena presented to our observation. But is this formula really satisfactory? and will it be final? Assuredly not. Men may still disagree as to the nature of the phenomena which it presents for the study of economists, as well as to the extent of the field which it opens to their exploration. And this all the more, since on this last point especially J. B. Say has not always been consistent with himself. In the formula which we have just quoted, he seems to confine the economist to a study of the material facts relating to the production and distribution of wealth; but elsewhere, notably in his Cours, he brings into its domain all facts relating to social life.

The object of political economy, he says, seems till now to have been restricted to a knowledge of the laws which govern the production, distribution and consumption of wealth. This is how I considered it myself in my Traité d’Economie Politique.

Still, he adds, it may be seen, even in that work, that the science touches everything in human society, and embraces the whole social system.

(Cours d’économie politique, p. 4.) We might add, that in other parts of his works J. B. Say again defines political economy in a way altogether different from that in which he defined it in his Traité and his Cours. The following, for instance, taken from manuscript notes found after his death, has sometimes been quoted:

Political economy is the science of the interests of society, and like every real science is founded on experience, the results of which, grouped and arranged methodically, are principles and general truths.

But it is evident that this is less a definition than a qualification, such as every author has the right to introduce in the course of his works, in order to bring out the dignity and importance of the subject he is treating.

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-According to Sismondi, the physical well-being of man, so far as it can be the work of his government, is the object of political economy.

This is very different from J. B. Say’s first definition. In the first place, it takes us out of the realm of science into the realm of art; for, according to this formula, political economy must be merely a series of rules intended
to instruct governments how to insure the physical well-being of man; it is therefore an art, a branch of the art of government. Very much limited, from a certain point of view, since governments alone can practice it, this art is, in other respects, without assignable limits; for what are the acts of a government that have not to do, more or less, with the physical well-being of man?

-According to Storch, Political economy is the science of the natural laws which determine the prosperity of nations, that is to say, their wealth and their civilization.

Preferable to Sismondi’s, because it suggests at least the idea of a science, this definition is still very imperfect.

The natural laws which determine the prosperity of nations, present, to our thinking, too complex an idea, and, in any case, a very vague one; and as to civilization, it certainly includes, in its general expression, things with which an economist, as such, has nothing to do.

-There is nothing in Malthus or Ricardo which can be taken as a precise definition of political economy. In the case of Ricardo the reason may be, that in his Principles of Political Economy and Taxation, being confined, as he says himself in his preface, to defining the laws regulating the distribution of revenue among the various classes of society, he did not consider the science as a whole. It may, however, be inferred from these words, that, if he had had to define science in a general manner, he would have defined it very nearly as J. B. Say had done in his Traité.

-As to Rossi, after he had discussed and rejected, one after another, all the definitions given before his time, he, absolutely speaking, gave nothing in their stead. He contents himself with saying that there are phenomena of a certain order relating to wealth which are not confounded with those of any other order, and that these are just what economic science should study. Political economy is, therefore, in his eyes, as he says elsewhere, purely and simply the science of wealth.

Hence, he thinks, that, setting aside the strangeness of the words, one might call economists chrysologists, chrematisticians or divitiaries, without giving them cause of complaint.

-We may here close our review of the definitions of [218] political economy. What we have stated suffices to show how far the definition of economic science, or the general formula which covers it, is from being finally fixed.

-Now, should we be ashamed of this uncertainty, as Rossi seemed to think? Must we lament it, with Arrivabene and some other writers? We do not think so. A science does not depend on the definition given of it; it is not regulated by an arbitrary formula which may be more or less happy, more or less exact; on the contrary, it is the definition which should come after, mould itself, so to speak, to the science as it exists. So much the worse for writers who cultivate a certain branch of human knowledge, if they are unable to grasp its general data and clothe these data with a fitting expression; but this does not in any way impair the stock of truth which they have to bring to light.-A science, says J. B. Say, makes real progress only when its masters have succeeded in determining the territory over which they may extend their researches, and what should be the object of their research.

(Traité, Discours Préliminaire.) There is doubtless some truth in this statement. It is well, perhaps even necessary, that the object of a science and the field it covers should be properly determined; but it is not absolutely necessary that this determination should result from definitions hazarded by authors: it is enough if it results from the very nature of their labors. Now, it may well happen that the nature of these labors may be essentially the same for all, while the definitions are different; each author having been led by a kind of instinct to confine himself to a certain order of phenomena, without afterward being able to render an account to himself of the precise object of his researches, or to measure exactly the field he has gone over. And this is really what takes place. We have just seen how much the authors cited differ in regard to the definition of the science, and still the sum and substance of their works are always the same. Who does not know that this is the case with Adam Smith and J. B. Say? It is the case, too, with all the others, in spite of a few slight differences as to the greater or less extent of the ground they embrace.

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-It is one thing to feel or express, and another to conceive or define. It is sometimes very difficult to clothe a single thought in a just expression or a fitting formula; the difficulty is much greater when there is question of including a great number of ideas and facts in a single formula. It is not to be wondered at that many writers have failed in this task, in this sense, that the definitions which they give are nothing but more or less unfaithful translations of their own conceptions. J. B. Say acknowledges that this is true in his own case, since he recognizes that his Traité went everywhere beyond the limits, if the expression be allowed, marked out by his definition. And still he is, perhaps, of all economists, the one who has remained the most faithful to the formula which he had adopted. There is much more to be reprehended in Adam Smith and Sismondi in this regard. If we look, for example, at the manner in which the latter defines the science, we might think he was going to confine himself, as J. J. Rousseau had done, to laying down the rules which governments should observe in regard to the material interests of the people; and still, like all other economists since Quesnay, Turgot and Adam Smith, he has discussed the questions of exchange, division of labor, accumulation, savings, the production and distribution of wealth, the laws regulating the value of things, those determining the rate of wages, profits, etc., etc.: things in which governments have almost nothing to do. So true is it that his definition is simply an error, and an error of no consequence, an ill-chosen but empty formula, which in no way influences the real character of his labors.

-It would be very desirable, however, to find for political economy a more satisfactory definition than those hitherto given, a formula at once more comprehensive and more precise, in which the whole science might, so to speak, be reflected in a few words. Will this formula be found? Perhaps. Without flattering ourselves with having found it, we shall try to point out the road to its formulation by determining, as far as possible, the real object which the science proposes to itself, and the extent of its domain.

-The first question to be solved is, whether political economy belongs to the category of science, or merely to the category of art. We have already seen, from what precedes, that the question is not an idle one, especially not idle since the distinction to be made between science and art does not appear to be generally understood.

-II. To what order does Political Economy belong? Is it a Science or an Art? An art, says Destutt de Tracy, is a collection of maxims or practical precepts, the observance of which leads to success in doing a thing, no matter what it may be; a science consists in the truths resulting from the examination of any subject whatever. Art consists, therefore, in a series of precepts or rules to be followed; science, in the knowledge of certain phenomena or certain observed and revealed relations.

We are not concerned here with examining which of the two is superior to the other, art or science; both may have equal merits, each in its place; it is solely a question of showing in what they differ as to their object and methods of procedure. Art counsels, prescribes, directs; science observes, exposes, explains. When an astronomer observes and describes the course of the stars, he cultivates science; but when, his observations ma
de, he deduces from them rules to be applied in navigation, he is engaged in art. He may be equally right in the two cases; but his object is different, as well as his method of working. Hence, observing and describing real phenomena is science; dictating precepts, laying down rules, is art.

-Art and science often have close connections, in this sense especially, that the precepts of art must be derived as far as possible from the observations of science, but they are none the less different from it on [219] that account. Notwithstanding this, they are confounded every day. A man striving to build up an art gives it emphatically the name of science, believing that by doing so he gives a high idea of the correctness of its precepts. It is notoriously the weak side of physicians to call medicine a science. They are mistaken in the use of the word. If medicine were as certain in its prescriptions as it is uncertain, it would still be no more than an art,38 the art of healing, since it consists in a collection of rules applicable to the cure of human diseases. But anatomy is a science; physiology is a science; because anatomy and physiology both have as their object a knowledge of the human body, which they study, the one in its structure, the other in the play of its organs.

-Rossi grasped this distinction between science and art well, though he abused it by improperly confounding it with the distinction which is made frequently enough between theory and practice.39 Properly speaking, he says, science has no object. The moment we try to discover what use can be made of it, what profit may be drawn from it, we leave science and come to art. Science is in all cases nothing more or less than the possession of truth, the well-considered knowledge of relations inherent in the nature of things.

Here we have, under another form, the same thought so accurately expressed by Destutt de Tracy.

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-This distinction being well drawn between science and art, we may now ask, to which of the two orders of ideas does political economy belong? Is it a collection of precepts, a theory of action, or only an assemblage of truths borrowed from the observation of actual phenomena? Does it show us how to do something? or does it explain what takes place? In other words, is it a science, or an art? We need not hesitate to answer that, in its present condition, political economy is both the one and the other; that is to say, in the direction of economic labors and studies a common name is still given to things which might and should be kept distinct. It is evident, in fact, that in the general treatises on political economy, composed since Adam Smith’s time, a great number of really scientific observations are met with, that is to say, observations whose sole object is to tell us what takes place, or what exists. One might even say that observations of this kind predominate. But the directions, precepts, rules to be followed, are also met with in such treatises very frequently. Art is therefore constantly mixed up with science. But it is very different with a multitude of special treatises, or those particular dissertations whose object is to solve certain questions relating to industry, commerce or the economic administration of states: questions of taxation, credit, finance, foreign commerce, etc. Here it is always art that predominates. Counsels, precepts, rules to be followed, all things that pertain by their nature to the domain of art, follow each other in quick succession, while really scientific observations scarcely appear at long intervals. And still all this, without distinction, bears the name of political economy. So true is it that the name still belongs to two orders of labor, and of very different kinds.

-We are far from complaining or finding it strange that from scientific truth once clearly established men should endeavor to draw rules applicable to the conduct of human affairs. It is not well that scientific truths should remain fruitless, and the only way of utilizing them is to base art upon them. There are close ties of relationship, as we have already said, between science and art. Science lends its lights to art, corrects its processes, enlightens and directs its course. Without the aid of science, art would have to feel its way, stumbling at every step. On the other hand, art gives a value to the truths which science has discovered, and science without art would be barren. Art is almost always the principal motor in the labors of science. Man rarely studies for the sole pleasure of knowledge; in general, his research and labor have generally a useful end in view, and it is through art alone that he finds that end.

-In view of all this, who can fail to see how different art is from science? The distance is great between a truth discovered by observation, and a rule deduced from that truth with the intent of giving it an application; the one belongs to nature, to God; man only discovers and states it; the other is the act of man, and it always retains something of him. Everything is absolute in scientific data; they are either false or true, there is no half way; this simply means that the student of science has observed either well or ill, has seen correctly or incorrectly what he communicates. There are, it is true, incomplete data, exact on one side, inexact on the other; but, even then, the true side is true, the false side is false. On the contrary, everything is relative in the rules and the methods of art. As something human is always involved in them, they can not pretend to infallibility, they are always susceptible of more or less variation between the two extreme limits [220] of radical vice and absolute perfection. Finally, scientific truths are immutable as the laws of nature whose revelation they are; while rules of art are changeable, either by reason of the wants they have in view or by reason of the changing views of the men who apply them.

-There is so much the more reason to insist on the distinction which we have just established, viz., that if science and art have frequently many points of contact, their radii and their circumferences are far from being identical. The data furnished by a science may sometimes be utilized in many different arts. Thus, geometry, or the science of the relations of extension, enlightens and directs the work of the surveyor, the engineer, the artillery officer, the navigator, the shipbuilder, the architect, etc., etc. Chemistry comes to the aid of the druggist as well as the dyer, and to a great number of the industrial professions. Who can tell how many different arts make use of the general data of physics? And, so, an art may gain information from the data furnished by many sciences; and it is in this way, to cite but one example, that medicine, or the art of healing, simultaneously consults anatomy, physiology, chemistry, physics, botany, etc.

-It is necessary, therefore, in every respect to distinguish art from science, and to indicate clearly the line separating them. This has been carefully done in certain branches of human knowledge. Mathematicians, for example, distinguish carefully pure mathematics, or science properly speaking, from its various applications. So do physicists and chemists. And the distinction exists not in books alone, it is transferred even to instruction, where the study of science and that of the arts depending on it have different chairs. It is thus that a polytechnic school is, if we be permitted to say so, the sanctuary of pure science. It is only after graduating from it that the students, each in his specialty, study the art to which they are to apply the scientific knowledge acquired.

-We could wish that what has been so well done in so many other divisions of study might also be done in the order of economic studies and labors. But, it must be confessed, it has not been done up to the present. The labors of art and the studies of science continue to be, if not altogether mingled, at least embraced, u
nder a common denomination. Sometimes it has been attempted to separate them by giving certain labors, which belong especially to art, the name of public economy, to distinguish them from others. But these attempts, ill directed, and made, in the majority of cases, without a clear view of the results to be obtained, have not succeeded thus far, so that at present, in the order of economic studies, art and science are still mingled and confounded. Whence comes this confusion? It comes, first of all, from the immaturity of the science, which has not yet had time to disengage itself from the art or arts connected with it. It results also, in a certain measure, from the pressing and ever present interest of the subjects than economic science embraces, an interest which has not allowed those who study it to devote themselves entirely to the contemplation of scientific truths, neglecting, for the moment, the artistical deductions, that is to say, the practical maxims, which they might draw from it.

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-Political economy was an art before it became a science, and even the etymology of its name shows this; furthermore, before it was an art, that is to say, before it was formulated in general maxims and precepts, it was blind practice in the hands of governments. Such is, however, the course of human things. In the logical order, science precedes art, which should be only a deduction from science; and art precedes practice, which should be only a more or less exact application of the general rules of art. This is the ordinary course followed in our schools, in which the logical order is followed. But in their historic sequence, things take another course: they are generally found there in an inverse order. There practice precedes art, and art science. This is true of almost all the branches of knowledge, and particularly of that which interests us most. Hurried to act, because he must act, man goes straight to action, to practice, without studying deeply that which he undertakes, and with no other guide than his instinct. It is only later, that, by rectifying and correcting the errors of this practice, with the aid of a little acquired experience, he forms rules or general maxims which he erects into an art; and it is later still that the idea comes to him of correcting the errors of this art itself, by the aid of a scientific study of the subject which he has in view. There were physicians before there was an art of healing; men acted at hazard, inspired most frequently by blind superstition, and the art of healing, based at first on a certain acquired experience, existed much earlier than anatomy, physiology, therapeutics, that is to say, earlier than a scientific knowledge of the subject on which it was desired to operate, and of the remedies employed for his cure. Huts were built before the art of building was reduced to rules, and the art of building was subjected to rules, if not written, at least transmitted from mouth to mouth, before it received the mathematical and physical sciences as a foundation. Political economy advanced in the same way. The most ancient governments, as Blanqui very justly says in his history, treated political economy after their own fashion, long before they knew what they did, or were able to give an account of the result of their measures. Later, it was attempted to give an account of these results by the aid of acquired experience, and with the data of these experiences, well or ill understood, an art was created. Sully and Colbert had reached this stage. It was only in the last resort that men undertook to study scientifically this subject, that is to say, general industry, on which they were to operate.

-Now, this liberation of economic science is quite recent; it scarcely dates from the middle of the last century. It was the school of Quesnay which first endeavored to construct in [221] this order of ideas a real science; up to his time there were merely scattered observations, and even final success in building up the science belongs only to Adam Smith. It is not very surprising, therefore, that the science of political economy has not yet been able to free itself entirely from the restrictions of the art from which it sprung.

-It was our wish and duty to state, as we have done, that under the general name of political economy two things are at present understood, things very different in their nature, though tending in many respects to the same end. It has seemed to us all the more important to note this confusion of ideas, since, to our thinking, it is the real cause of the incoherence in the definitions of the science, of the deviations to which it is subject in its course, and the species of discord which reigns almost always in its beginnings. Shall we attempt, on that account, henceforth to make a clearer division between the science and the art, by giving them different names? We confine ourselves to drawing the distinction clearly, time and a better knowledge of the subject will do the rest.

-III. First Idea or General Conception of Economic Science. Do the Facts of Human Industry afford Material for the formation of a real Science? It will doubtless be asked, with some astonishment, how economic science was born so late, how political economy in action could exist so long without a systematic, scientific study of the subject itself on which men had to operate. This astonishment will cease, perhaps, if we consider for a moment the internal nature of a science, and the point of view at which men place themselves on all subjects before the light of science appears.

-A science does not consist merely in a knowledge of certain external facts isolated from each other, for it is an abuse of words to give the name science to a simple collection of facts. Science consists rather in the knowledge of the relations which connect these facts with one another, and of the laws which govern them. A tie, a connection, is necessary, a linking of the phenomena which it takes up and observes, and it is the knowledge of this connection which is its principal study. An incoherent collection of facts without connection may constitute the baggage of a man of erudition, but can never constitute a science. Astronomy would not merit the name if it merely limited itself to noting and naming, one by one, the stars which wander in the deserts of space; it is worthy of the name only because it renders an account of the movements of the stars and the constancy of their evolution. Similarly, in all the other branches of human knowledge, a collection of facts does not constitute a science; we must, further, be able to tell the constant relations which connect, and the general laws which govern, them.

-But the first condition of the study of the laws governing certain phenomena is to suspect their existence; to believe that these phenomena are not governed by chance, and that certain constant relations exist between them. Now, on all subjects, the first impression of men who have not yet submitted facts to continuous observation or patient analysis, is to see in them merely the play of blind chance. It is only much later that they come to suspect that these facts may be subject to a certain order; and it is then only that the idea is gained of studying the laws that govern them. Let us take the ignorant and rude man of primitive ages. All the phenomena of nature are to him disordered and capricious. Wherever he looks, he sees merely accidents without cause, facts without connection or relation. If he looks at the heavens, he sees the stars scattered at hazard, as he thinks, like thistles in a field. In all things that strike him he sees nothing but the play of blind chance, unless, indeed, he supposes the mysterious influence of some occult power. Later, as he gains in knowledge, natural phenomena, at least those of a certain order, range themselves before his eyes; he sees that they are subject to certain rules, he observes the constancy of their relations; here he recognizes law. But always, even in the course of time, and a
ges of enlightenment, the first impression of men is the same in relation to facts which they have not yet observed. If they come, therefore, so late to study the natural laws which govern phenomena, it is because they had not previously even suspected that there were natural laws to be studied.


-A remarkable example of this is to be found in the case of geological facts. Why did geology, a science so inte

Author of this text: Ch. Coquelin.

Political Economy in the International Business Landscape

Definition of Political Economy in the context of U.S. international business and public trade policy: The study of how political factors influence the functioning of an economic system.

Political Economy in the International Business Landscape

Definition of Political Economy in the context of U.S. international business and public trade policy: The study of the interaction of political, economic, and other factors in society.

Concept of Political Economy

In the U.S., in the context of Political Economy and Public Policy, Political Economy has the following meaning: An approach in the social sciences that emphasizes the study of the interrelationships between political and economic institutions and processes. Political economists highlight the integration of politics and economics to explain decisions about the distribution and redistribution of resources. (Source of this definition of Political Economy : University of Texas)

Political Economy


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  • Political Economy
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