parts; and that in most economic problems the best startingpoint is to be found in the motives that affect the individual, regarded not indeed as an isolated atom, but as a member of some particular trade or industrial group; but it is also true, as German writers have well urged, that economics has a great and an increasing concern in motives connected with the collective ownership of property and the collective pursuit of important aims. Many new kinds of voluntary association are growing up under the influence of other motives besides that of pecuniary gain; and the Co-operative movement in particular is opening to the economist new opportunities of measuring motives whose action it had seemed impossible to reduce to any sort of law.

member of an

industrial group.

§ 6. To conclude provisionally: We study the actions of individuals, but study them in relation to social life; and concern ourselves but little with personal peculiarities of temper and character. We take as little notice as possible of individual The individual peculiarities of temper and character. We watch regarded as a the conduct of a whole class of people—sometimes the whole of a nation, sometimes only those living in a certain district, more often those engaged in some particular trade at some time and place: and by the aid of statistics, or in other ways, we ascertain how much money on the average the members of the particular group we are watching, are just willing to pay as the price of a certain thing which they desire, or how much must be offered to them to induce them to undergo a certain effort or abstinence that they dislike. The measurement of motive thus obtained is not indeed perfectly accurate; for if it were, economics would rank with the most advanced of the physical sciences, and not as it actually does with the least advanced.

But yet the measurement is accurate enough to enable experienced persons to forecast fairly well the extent of the results that will follow from changes in which motives of this kind are chiefly concerned. Thus, for instance, they can

estimate very closely the payment that will be required to produce an adequate supply of labour of any grade, from the lowest to the highest, for a new trade which it is proposed to start in any place. And, when they visit a factory of a kind that they have never seen before, they can tell within a shilling or two a week what any particular worker is earning, by merely observing how far his is a skilled occupation and what strain it involves on his physical, mental and moral faculties.

And, starting from simple considerations of this kind, they can go on to analyse the causes which govern the local distribution of different kinds of industry, the terms on which people living in distant places exchange their goods with one another, and so on. They can explain and predict the ways in which fluctuations of credit will affect foreign trade, or again the extent to which the burden of a tax will be shifted from those on whom it is levied on to those for whose wants they cater, and so on.

of life but not

the life of a fictitious being.

In all this economists deal with man as he is not with an abstract or 66 economic " man; but a man of flesh and blood; influenced by egoistic motives and shaping his business life to a great extent with reference to them; but not Economists above the frailties of vanity or recklessness, and deal mainly not below the delight of doing his work well for with one side its own sake, nor below the delight in sacrificing himself for the good of his family, his neighbours, or his country, and not below the love of a virtuous life for its own sake. They deal with man as he is. But being concerned chiefly with those aspects of life in which the action of motive is so regular that it can be predicted, and the estimate of the motor-forces can be verified by results, they have established their work on a scientific basis1.

1 Some further considerations, chiefly philosophical and logical, bearing on this subject will be found in Principles I. v.

CHAPTER VI.

METHODS OF STUDY. NATURE OF ECONOMIC LAW.

Induction and

§ 1. IT is the business of economics, as of almost every other science, to collect facts, to arrange and interpret them, and to draw inferences from them. All the devices for the discovery of the relations between cause and effect, which are described in treatises on scientific method, have to be used in their turn by the economist: there is not any one method of investigation which can properly be called the deduction are method of economics; but every method must be made serviceable in its proper place, either singly or in combination with others. And as the number of combinations that can be made on the chess-board is so great that probably no two games exactly alike were ever played; so no two games which the student plays with nature to wrest from her her hidden truths, which were worth playing at all, ever made use of quite the same methods in quite the same way.

inseparable.

But in some branches of economic inquiry and for some purposes, it is more urgent to ascertain new facts, than to trouble ourselves with the mutual relations and explanations of those which we already have. While in other branches there is still so much uncertainty as to whether those causes of any event which lie on the surface and suggest themselves at first are both true causes of it and the only causes of it, that it is even more urgently needed to scrutinize our reasonings about facts which we already know, than to seek for more facts.

The reasoning from particular facts to general principles is called induction; the reasoning from general principles to

particular facts is called deduction. Prof. Schmoller, an eminent German historian and economist, says well: "Induction and deduction are both needed for scientific thought as the right and left foot are both needed for walking....They rest on the same tendencies, the same beliefs, the same needs of our reason.'

Long chains of

profitable.

§ 2. There is however no scope in economics for long chains of deductive reasoning; that is for chains in which each link is supported, wholly or mainly, by that which went before, and without obtaining further support and guidance from observation and the direct study of real life. This can be done in astronomy and in some other mere reasonbranches of physical science, in which the cha- ing are not racter and strength of all the chief causes at work are known so exactly that we can predict beforehand the effect of each singly, and thence infer the combined effect of all. But it cannot be done as yet in chemistry; for we cannot be quite sure how a new combination of chemical elements will work until we have tried. And when drugs are used medicinally, it is often found that they affect different people in different ways: it is not always safe to give a large dose of a new drug to one patient, trusting to the fact that it has worked well in an apparently similar case. And economics has as various and uncertain a subject-matter to deal with as has medical science.

Thus if we look at the history of such strictly economic relations as those of business credit and banking, of tradeunionism or co-operation, we see that modes of working, that have been generally successful at some times and places, have uniformly failed at others. The difference may sometimes be explained simply as the result of variations in general enlightenment, or of moral strength of character and habits of mutual trust; but sometimes the explanation is more difficult'.

1 In the corresponding section of Principles (Ed. III.) this class of considerations is studied at length. It is shown how in some respects economic

tion of observed facts involves reasoning.

§ 3. On the other hand, there is need at every stage for The explana- analysis, that is, for taking to pieces each complex part and studying the relations of the several parts to one another and to the whole: and in doing this we are constantly making inferences, that is, short steps of reasoning both inductive and deductive. The process is substantially the same whether we are explaining what has happened or predicting what is likely to happen. Explanation and prediction are really the same mental operation; though they are worked in opposite directions, the one from effect to cause, the other from cause to effect1.

Observation may tell us that one event happened with or after another, but only by the aid of analysis and reason can we decide whether one was the cause of the other, and if we reason hastily we are likely to reason wrong. Wider experience, more careful inquiry, may show that the causes to which the event is attributed could not have produced it unaided; perhaps even that they hindered the event, which was brought about in spite of them by other causes that have escaped notice3.

forces resemble mechanical rather than chemical forces, because their action in combination can often be predicted with some certainty from their separate action; and how this fact enables deduction to go a little further in economics than it otherwise would. The classical economists are often supposed to have forged long chains of deductive reasoning: but they did not: they had too much common sense and practical knowledge of the affairs of life to attempt it. 1 It is only when we go beyond a first step that a great difference arises between the certainty of prediction and the certainty of explanation: for any error made in the first step of prediction will be accumulated and intensified in the second; while in interpreting the past, error is not so likely to be accumulated; for observation or recorded history will probably bring a fresh check at each step.

2 If we are dealing with the facts of remote times we must allow for the changes that have meanwhile come over the whole character of economic life: however closely a problem of to-day may resemble in its outward incidents another recorded in history, it is probable that a closer examination will detect a fundamental difference between their real characters. Till this has been made, no valid argument can be drawn from one case to the other.

This line of argument is developed in Principles I. vI. §§ 3, 4, where Captain Mahan's remark that more light is thrown on modern problems by the