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Professor of Political Economy in the University of Cambridge,

Honorary Fellow of Balliol College, Oxford.

(Sixth Impression).



[All Rights reserved.]

First Edition printed 1892. Reprinted 1893, 1894. Second Edition 1896, 1898,



M HIS Volume is an attempt to adapt the first Volume of

L my Principles of Economics (Second Edition, 1891), to the needs of junior students.

The necessary abridgement has been effected not by systematic compression so much as by the omission of many discussions on points of minor importance and of some difficult theoretical investigations. For it seemed that the difficulty of an argument would be increased rather than diminished by curtailing it and leaving out some of its steps. The argumentative parts of the Principles are therefore as a rule either reproduced in full or omitted altogether; reference in the latter case being made in footnotes to the corresponding places in the larger Treatise. Notes and discussions of a literary character have generally been omitted.

The influence of Trade-Unions on wages depends much on the course of Foreign Trade and on Commercial Fluctuations; and therefore in the Principles all discussion of the subject is postponed to a late stage. But in the present Volume, the practical convenience of discussing it in close connection with the main theory of Distribution seemed to outweigh the disadvantages of treating it prematurely and in some measure incompletely; and a Chapter on Trade-Unions has been added at the end of Book VI.

A few sentences have been incorporated from the Economics of Industry, published by my wife and myself in 1879.

Though she prefers that her name should not appear on the title-page, my wife has a share in this Volume also. For in writing it, and in writing the Principles, I have been aided and advised by her at every stage of the MSS. and the proofs; and thus the pages which are now submitted to the reader are indebted twice over to her suggestions, her judgment and her care.

Dr Keynes, Mr John Burnett and Mr J.S. Cree have read the proofs of the Chapter on Trade-Unions, and have given me helpful advice with regard to it from three different points of view.

18 February, 1892. *** The changes in this edition follow those made in the third edition of my Principles. Book I. Ch. IV. and v. and Book III. Ch. vi. have been rewritten in order to make more clear how closely the economist adheres in substance to the methods of inference and judgment of ordinary life; and how thorough are the harmony and the mutual dependence between the analytical and the historical methods of economic study. In Book II., Ch. iv. and v. have been thrown together to make a new Chapter iv.; the old definition of Capital regarded from the point of view of the business man is retained; but Capital is defined from the general point of view as wealth which yields “income” in forms that are admitted in the broader use of the term in the market place. Book VI. Ch. I. and 11. have been recast, with further explanations, and a fuller rehearsal of the chief results obtained in the earlier Books.

June 1896.



Chapter I. Introduction. § 1. Economics is a study of wealth, and a

part of the study of man. § 2. Urgency of the problem of poverty.

$ 3. Economics is a science of recent growth. $ 4. Characteristics of

modern business. Free Industry and Enterprise. § 5. Preliminary

account of value . . . . . . . . . pp. 1-9

Chapter II. The Growth of Free Industry and Enterprise. $ 1.

Early civilizations. Influence of climate and of custom. 8 2. The

Middle Ages. Free towns. § 3. New forces promoting freedom.

pp. 10-13

Chapter III. The Growth of Free Industry and Enterprise con-

tinued. § 1. Englishmen early developed a faculty for organized

action. § 2. Influence of the Reformation. $ 3. Beginnings of modern

forms of business management. § 4. Rise of the factory system. The

new organization accompanied by great evils. $$ 5, 6. Many of these

were due to the pressure of war, taxes and bad harvests; and competition

was seen at its worst. But now with the increase of knowledge and

wealth we should seek to restrain its evil and to retain its good

influences . . . . . . . . . . pp. 14-25

Chapter IV. The Growth of Economic Science. 1. Origin of

modern Economics. Early regulation of trade. $ 2. The Physiocrats.

Adam Smith. § 3. Ricardo and his followers. $ 4. Mill and modern

Economics . . . . . . . . . . pp. 26–32

Chapter V. The Scope of Economics. § 1. Economics as a social

science. $$ 2–4. Chiefly concerned with motives that are measurable,

but not exclusively selfish. Difficulties of measurement. $ 5. The

desire for money is the result of many various motives. Motives to col-

lective action. § 6. Economics deals mainly with one side of life, but

not with the life of fictitious beings . . . . . pp. 33–41

Chapter VI. Methods of Study. Nature of Economic Law. $$ 1, 3.

Induction and deduction are inseparable. Neither reasoning alone nor

observation alone is of much service. § 4. Uses of the machinery of

science. $$ 5, 6. Social Law. Economic Law. Normal. The Action

of a Law

pp. 42–48

Chapter VII. Summary and Conclusion. § 1. Order of economic

inquiries. Relation of science to practice. § 2. Questions to be in-

vestigated. $ 3. Practical issues lying partly within the range of

Economics . . . . . . . . . . pp. 49–53

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