Reichsbank, so far as guarantees against the re-issue of the old notes have been given."

The advantages of this plan do not seem to be very clear. (a) If the consortium buys up mark-notes at a fixed price, retires Treasury Bills and burns the notes, the subsequent effect will be appreciation of currency, a higher exchange rate and a deflation crisis. (b) Or the exchange rate is not to be allowed to rise, in which case there will have to be a new issue of notes, backed, it is true, no longer by Treasury Bills, but by gold, foreign bills, or internal bills. In this case the mark will be permanently devaluated at the stabilisation rates. (c) The Government will no longer owe money to the Reichsbank, but will owe dollars to the Syndicate. Apart from the improbability that such a Syndicate would be prepared to put up the money, the cost to the Government would probably be greater than if it took over the existing Treasury Bills, giving dollar bonds in return, meeting interest and sinking fund charges on them, and allowing the Reichsbank to sell these bonds as it liked at the new stabilisation price to investors either for foreign currency or for stabilised marks. It may be rough justice to devaluate, but there seems no real alternative left.

A word must be said in praise of the admirably objective tone in which Prof. Lotz has written, which makes his book a model for those who are concerned in highly controversial issues of this kind.

Prof. Wolf is troubled by no doubts as to the responsibility of the Allies: the Allies have done their best to ruin the mark, and with it their chance of Reparations. It does not follow that because this is so, therefore the ruin of the mark is to be ascribed to Allied action. It is altogether extravagant to assert, as Prof. Wolf does, that the productive capacity of Germany is indicated by the mark exchange (p. 7), though a ruined currency does certainly impair productivity. Nor is it quite as obvious as Prof. Wolf would seem to think "that even a country with orderly state finances can only pay tribute with an 'active' balance of trade." This is true if it is taken in the sense that A equals A. When a country pays tribute it has an "active" balance of trade, but this is by no means the same thing as saying that an active balance of trade cannot be obtained.

This brings up the whole question of the export surplus which forms the scientific core of Mr. Angas's book.

It is to be regretted that Mr. Angas should not have confined his work to the really important economic questions which he

has raised. As it is, a fair proportion of his pages are occupied with political aspects which do not lend themselves easily to objectivity, and it is not easy to excuse in a serious work phrases such as that “we really should give our German, or rather our Jewish, cousins a little more credit for cunning."

However, Mr. Angas has a good deal to say on the scientific aspects of the question which is worth consideration, though not necessarily winning assent. His main attack is on the "Fallacy of the Pre-war Export Quantum" (pp. 38 et seq.), i. e. the view that Germany cannot increase her exports beyond what they were before the war. Mr. Angas rightly argues that there is no absolute export surplus which exists once and for all, though it is doubtful whether the grounds which he assigns for this view are quite secure. On p. 39 we read that "all that is necessary for Germany to secure a larger volume of exports is for the German Government to take the trouble regularly to earn, or to raise by taxation, or to borrow, a sufficient volume of domestic money and to spend it on foreign exchange." This I believe to be a perfectly correct view of the situation, but on p. 17 Mr. Angas has expressed a view which is inconsistent, as I think, with the view just quoted, in saying at that place that "the theory of the matter is that, in order to go on paying for invisible imports such as 'reparations' (or, if you like, the cancellation of Reparation debts) the currency of the paying country must remain almost continually undervalued externally." This, again, is rather inconsistent with what is said on p. 16, where it is argued that, unless there is speculation in a currency, "the after-effects of these momentarily engendered exports on the exchanges would . . . tend very soon to improve the German exchanges and to check German exportation. When eventually the new mass of artificially engendered German exports came to be paid for by the foreign buyers over the foreign exchanges, marks would be heavily wanted by foreigners and the German exchange would improve. Such improvement would tend to check German exports and reduce the export surplus. A disconcerting point! Assuming a general stabilisation of the mark, it is very doubtful whether a permanent undervaluation of German currency is possible : nor is it really necessary for the end in view. The real problem is not one of exports by Germany, but of production and taxation in Germany on the one hand and of willingness to receive German goods on the other. The absurd fuss which is just now being made over the disposal of the sequestrated Ruhr goods by the French well illustrates the fatuity of inter-allied policy

whenever a demand to make Germany pay is really made. Mr. Angas thinks that the German export surplus already exists and blames the price policy of the Syndicates and the official licensing authorities for keeping German export prices up; German exports would be much greater if freedom of sale were permitted. This is no doubt true, but the inference that, therefore, the actual amounts of foreign currency which Germany could pay are reduced, is, as Mr. Angas says, a moot point (p. 23). Of course, if creditors can pay their debtors in depreciating currency, they will order more goods, but the amount of foreign money which could in this case be bought by the German Government through the taxation of exporters would still fall with every fall of the mark, and that fall could hardly be checked permanently by importers in foreign countries having to buy mark balances to pay for their German goods, though the descent to worthlessness might be somewhat smoothed out.

Mr. Angas also criticises the Keynes-Cassel-Brand scheme, though he agrees with the underlying principle. He argues that stabilisation of the exchange should follow and not precede internal stabilisation, because he thinks that an attempt to stop inflation in Germany would at once produce a devaluation crisis, and the fall in prices would necessarily lead to a purchasing power parity rate inconsistent with the stabilisation rate previously adopted. This objection, I think, depends partly on the stabilisation rate chosen, for if the stabilisation rate is based on internal prices at the moment of stabilisation, the margin between the prices at the moment of stabilisation and those which would follow on a devaluation crisis would be narrowed. And though it is true that the stabilisation rate itself might have to be altered somewhat, yet I think that the knowledge that a disparity of any magnitude between internal and external prices would be followed by offers of foreign currency and an increase in domestic currency would prevent the fall, as a consequence of a devaluation crisis, being very considerable. T. E. GREGORY

Essays in Applied Economics. By A. C. PIGOU, Professor of Economics in the University of Cambridge. (London : P. S. King & Son. 1923. Pp. 198, 8vo.)

THE title of Professor Pigou's latest book will be unpleasing to those who, like Huxley, wish that the phrase "applied science" had never been invented. "It suggests," wrote Huxley, "that there is a sort of scientific knowledge of direct practical use which can be studied apart from another sort of scientific knowledge,

which is of no practical utility and which is pure science.

But

there is no more complete fallacy than this. What people call applied science is nothing but the application of pure science to particular classes of problems. It consists of deductions from these general principles, established by reasoning and observation, which constitute pure science. No one can safely make these deductions until he has a firm grasp of the principles; and he can obtain that grasp only by personal experience of the operations of observation and of reasoning on which they are founded."

Whatever may be said in favour of such distinctions as pure and applied mathematics, there seem to be substantial objections to the phrases" applied economics" and "applied statistics." Not only do they remind one of the signboard of the "practical tailor," which sets one wondering what an unpractical tailor may be, but they convey a suggestion that the results of applied economics are scientifically established and cannot be gainsaid. Mathematics applied to astronomy enables us to predict an eclipse with unerring certainty. Attempts to apply economics sometimes begin with abstractions and symbols in the approved " pure theory" style, introduce some concrete facts by way of " allowing for friction," and ultimately present us with conclusions which will not hold water because important factors have been left out or not given their proper weight. This is perhaps the main cause of the little respect which men of business sometimes express for economics. If solutions of particular problems are put forward which they see to be imperfect solutions, they inveigh against the science itself instead of understanding that the investigator is correct as far as he goes, but has not gone far enough in his search for the factors which come into play. Happily, to quarrel with Professor Pigou's title is not to quarrel with his book. His "firm grasp of the principles " and his wide philosophic outlook make one pity the rash critic who should attempt to pick holes in his deductive reasoning. Opinions may differ upon such a dictum as we find on his first page, that "probably in our secret thought we should recognise that our own interests have no right to rank, as guides to action, above the equivalent and equally certain interests of others"; and when we are told that our giving should be constructive, should be so devised as to evoke in the recipient a spirit of co-operation rather than one of mere passive receptivity, and should be given as from friend to friend, we may fairly ask whether all this is applied economics or simple ethics.

Of the sixteen essays here collected three have appeared in the ECONOMIC JOURNAL, three have not been previously published,

66

and the remainder have seen the light in various magazines. They cover a variety of topics, and it is needless to say that they illuminate them all and frequently offer considerations of importance which might not occur to less subtle thinkers. Most of them are addressed to persons who, without necessarily possessing a specialist training in economics, are interested in the application of economic principles to current social problems. Unlike the "Ode to Posterity," they will undoubtedly arrive at their address, and will furnish much valuable assistance to those who wish to enlighten themselves upon the subjects with which they deal. The three Essays which are new are on Employers and Economic Chivalry," "Small Holdings," and "Small Holdings," and "The Concentration of Population." The second of these exhibits Professor Pigou at his best. Its conclusion is that "these considerations, so far as they go, suggest that the State would do well to encourage small tenants rather than small owners, even though there were no difference between the expense involved in the two policies." The words which I have italicised show that Professor Pigou is of course fully alive to the possible fallibility of applied economics. Economics, like tools, are made to be used or applied, and if they are employed upon imperfect materials may give faulty results. It would be foolish to impeach the utility of the tool on this ground. Its indispensable value is abundantly manifested in these Essays.

HENRY HIGGS

Social and Economic Conditions in the Dominion of Canada. Ed. by W. P. M. KENNEDY. (The Annals of the American Academy of Political and Social Science, Philadelphia, 1923.) PROFESSOR KENNEDY of Toronto University is heartily to be congratulated on the contents of the volume that he has got together for the American Academy. In spite of its mass of information the volume, as a whole, strikes a very human note; and tables of statistics, whilst serving to illustrate, never dominate the accompanying text. The secret of this success lies partly in the fact that each contributor has had full freedom to express his own views in his own manner. The result is sometimes not devoid of piquancy. Thus two articles, standing side by side, deal with the tariff question from different standpoints.

It is impossible within the compass of a review to deal with the very varied material here provided. Our only quarrel with these chapters is that too often they are disappointingly short,