material products only. They also clearly set forth that the Production, Distribution and Consumption of Wealth meant Commerce, or Exchange.

Hence the Science of the Production, Distribution and Consumption of Wealth meant the Science of the Exchanges of material products.

Accordingly, in 1776, Condillac declared Economic Science to be the Science of Exchanges.

The Physiocrates maintained the extraordinary doctrine that Labour (excepting only the labour of obtaining the rude produce of the earth) and Commerce do not enrich a nation.

Such an extraordinary paradox as this, contrary to the plainest evidence of facts, could not fail to provoke a reaction. And in 1776, Adam Smith and Condillac published works simultaneously, but independently, to prove that Labour and Commerce are productive of Wealth.

Condillac defined Economic Science to be the Science of Exchanges. Smith speaks of the Production and Distribution of Wealth, but he explains that the purport of that part of his work is to "investigate the principles which regulate the exchangeable value of commodities." Therefore the constructive part of his work is really on Exchanges.

He repeatedly speaks of Wealth as being " the annual produce of land and labour," but afterwards, he says, that unless it is exchangeable it is not wealth. So that, after all, Smith comes to Exchangeability as the principle of Wealth.

We shall now see the mischief caused in a Science, by not properly thinking out its fundamental conceptions.

Smith begins by filling his readers' minds with the notion that Wealth is the "annual produce of land and labour;" but he afterwards expressly includes the "natural and acquired abilities of the inhabitants" as Wealth; which, of course, is the second species of Economic Quantities shewn by the author of the Eryxias. Besides this, he also expressly enumerates Paper Credit under the title of Capital; and this is the third species of

Economic Quantities declared to be Wealth in the Pandects of Justinian. Thus we see that the three species of Economic Quantities reappear in Smith; and it is manifestly absurd to say that "abilities" and "paper credit" are the "annual produce of land and labour."

Then came J. B. Say, who first defined Political Economy to be the science of the Production, Distribution, and Consumption of Wealth; and he, too, repeatedly declares the principle of Wealth to reside in Exchangeability; and he also enumerates the three species of Economic Quantities.

The manifest error of the doctrine that Labour (other than agricultural) is not productive of Wealth, naturally provoked a reaction; and, as is very often the case in scientific reactions, the pendulum swung from one extreme to the other. From its being held that Labour is not productive of Wealth, the equally absurd and fantastic doctrine was maintained that Labour is the cause of all Wealth and all Value. The doctrine that the Value of a thing is simply the "quantity of labour" embodied in it, was carried to the most grotesque extreme by Ricardo, McCulloch, Carey, and De Quincey. Ricardo actually says that the Labour of a million of men in manufactures always produces the same value-no matter whether the product sells for £10 or £10,000 --and that the agency of Nature-a fertile soil, genial showers, and a bright sun add nothing to the exchangeable value of the products of the earth!

Common sense revolts against such doctrines. A man has only to look round him in any direction, or to the ground upon which he stands, to see the folly of the doctrine that Labour is the cause of all Value. Look at the great oaks of the forest,-is their Value due to Labour? Look at the great cattle that graze in the fields, is their Value due to Labour? Look at the ground upon which a city stands,-is its Value due to Labour? Look at the hundreds of millions of Paper Credit, by which the commerce of this country is carried on,-is its Value due to Labour?

Then came Mr. J. S. Mill, who commences his work by saying that Wealth is "everything which has purchasing power." Here at last we have come back to the generality of Aristotle and the ancients; and we hoped that we had got rid for ever of the notion that Wealth is the "annual produce of land and labour." But, unfortunately, this bright prospect is soon afterwards clouded over, and he defines the " production of Wealth" to be the "extraction of the instruments of human subsistence and enjoyment from the materials of the globe." And he afterwards says that he means only material wealth.

But such is the strange inconsistency of Mr. Mill that he also, expressly classes the "acquired capacities" of men as wealth; and still further on he classes Bank Notes as productive capital; and he says that bank notes, bills of exchange, and cheques, perform all the functions of money, and therefore are Capital in the same way that money is. Here we see that Mr. Mill, notwithstanding his efforts to restrict the term Wealth to material products, is perforce driven to admit the existence of the three classes of Economic Quantities as Wealth. And again we ask are the "acquired capacities" of men, and "Paper Credit" extracted out of the materials of the globe?

The fatal consequences of the method followed by these literary Economists are soon apparent. From considering some classes only of material products, and not even all classes of material objects, they lay down dogmas-pure Atalanta's apples -which they proclaim as General principles of the science. But Nature and reality break the bonds of the theories of Smith, Ricardo and Mill, just as the planet Mars burst away from the first crude equations of Kepler. But, unfortunately, they do not imitate Kepler, who mercilessly throw aside all his own theories which were seen to be false, and honestly persevered until at last his labours were rewarded with the discovery of the true theory.

When we see so much inconsistency with respect to the very fundamental conceptions of the science, it is only natural to ex

pect that we should find a similarly unscientific treatment of the science as a whole.

It has been said frequently that Economics is a physical science, and Mr. Mill has in some passages said that we can only expect success in the Social Science by generalizing and extending the principles of reasoning already followed in physical science. Now Ricardo and Mr. Mill break up Economic phenomena into a number of different classes, and they maintain that there is a distinct Law of Value for each class; and Mr. Mill seems to make the whole science consist of "exceptional cases," of "peculiar cases," and of "anomalous cases." Now if each class of Economic Quantities has a different cause of Value, how is it possible to have any Fundamental General Conceptions? and if each class of cases has a distinct Law of Value, how is it possible to have any General Theory of Value? The method followed, therefore, by Ricardo and Mr. Mill utterly destoys the power of GENERALIZING in Economics, and such a mode of treating a science would drive any Physical Philosopher frantic.

To such a method of treating a science I entirely refuse to agree. I have shewn the complete fallacy of the doctrine that Labour is the cause of, or even necessary to, Value. Along with the whole of the ancient writers, with HUME, with the Physiocrates, with the Italian Economists, VERRI, GENOVESI, BECCARIA, with CONDILLAC, WHATELY, and BASTIAT, I have shewn that DEMAND is the sole GENERAL Cause of the Value of all Quantities, whatever their nature be; and that it is not Labour which is the cause of Value, as Ricardo, McCulloch, Carey, and De Quincey say; but as Hume, Condillac and Whately say, it is Value, or Demand, which is the cause of, or inducement to, Labour. By this simple change we are enabled to obtain General Conceptions in the science, without which there can be no General Propositions.

I have shewn that all Phenomena of Value, and all changes of Value, are governed exclusively by changes in the Intensity of

Demand or in the Limitation of Supply, and by the Principle of the Continuity of the Sciences, and the Law of Continuity, I have swept away and annihilated all the distinctions of the Law of Value in different classes of cases; and thus reduced the Science to one General Theory.

As the ancients held that the principle of Wealth lies exclusively in Exchangeability, and that whatever is Exchangeable is Wealth, whatever its nature is, it follows that if they had treated of a Science of Wealth, it could only have been the Science of Exchanges. This conception, which was allowed by the first Economists to be equivalent to their definition of the subject, was adopted by Condillac, by Whately, and by Bastiat, and it at once clears up all the doubts and difficulties which have obscured the science; and presents us with a distinct body of phenomena relating to a species of Variable Quantities whose laws we are to investigate according to the recognized principles of Physical Science.

This conception manifestly includes all the three species of Exchangeable Quantities, and brings under the general laws of the Science the Commerce in Debts, or the System of Credit. Such was the Conception of the Science adopted in the first edition of this work, in which I shewed that Demand is the sole origin of Value, and formally included Incorporeal Property as a class of Economic Quantities. The whole system of Credit was developed to a much greater extent in my Dictionary of Political Economy, and the second edition of my Theory and Practice of Banking, merely from my own practical observation of commerce; but in preparing my papers for the Law Digest Commission, I was led to examine the Roman Law on the subject, and I was somewhat surprised to find that the system I set forth is absolutely identical, word for word, with that contained in the Pandects of Justinian.

No one is more sensible than I am of the immortal services rendered to mankind by Smith and his friends by the establishment of Free Trade. That no doubt was the great practical