tions and customs, unless, indeed, customs of the poor. Instead of a science of wealth, they give us a science for wealth." 1

The optimistic side of Adam Smith's political economy is, to the cursory reader, at least, the most striking. Of such a nature is his doctrine that the unrestrained action of individual self-interest leads of itself to a happy and harmonious social order. If this and similar ideas of Adam Smith are separated from those parts of his work which modify and limit them, we have indeed a happy optimism.

Formerly man had been taught that this life was a struggle into which peace and good will could be brought only by sacrifice and generous self-denial; and he had been instructed to look forward to a future state as one which would harmonize adverse interests and render duty uniformly agreeable. But thinkers like Carey and Bastiat maintained or implied that the reign of happiness had not appeared on earth largely because man had perversely restrained himself and had not systematically and scientifically pursued the policy of selfishness.

1 See his article in the Fortnightly Review, for Sept. 1, 1873, on Political Economy in Germany."

3. OTHER EXPOSITORS

Thus far the discussion of the followers of Adam Smith has served to emphasize the development of two divergent lines of thought with regard to the working out of economic forces. One has brought out the existence of conflict, and the harsher possibilities; the other has seen ultimate harmony and beneficence in all. As already stated, the pessimistic tone of some has been due rather to the mode of their statement than to the logic of their thought, and the classification into optimists and pessimists does not have the deepest and most clear-cut significance in economic theory. Without attempting to push it further, then, other followers of the Smithian Economics may be considered without regard to the hopefulness of their viewpoint. Indeed, it would be difficult to classify a number of them on that basis.

And first a thinker in the direct line of evolution of the English Classical School deserves attention, one who wrought independently, but on the whole within the framework of Smith's doctrines as developed by Ricardo.

a. IN ENGLAND

CHAPTER XV

SENIOR AND THE ABSTINENCE THEORY

NASSAU WILLIAM SENIOR (1790-1864) by exact and acute reasoning made such additions to economic theory that a chapter must be devoted to him. During the greater part of his life he was outside academic circles, and he did not write a complete treatise; but he brought so keen and rigid an analysis to bear that his limited application was unusually fruitful. He was for a time professor at Oxford, and was a member of the Royal Commission of 1832, established to examine the operation of the poor laws and report remedies.

His principal work was An Outline of Political Economy (1836) which appeared in the Encyclopedia Metropolitana, but was also published separately. To this outline attention will be largely confined; and no attempt will be made to make a complete statement of Senior's views, but chiefly those in which he made distinct contributions.

The Scope of Political Economy. - First is to be noted his

1 Other writings of importance are: —

An Introductory Lecture on Political Economy, 1827.

Three Lectures on the Transmission of the Precious Metals and the Mercantile Theory of Wealth, 1828.

Two Lectures on Population, 1831.

Three Lectures on the Cost of Obtaining Money, and of Some Effects of

Private and Government Paper Money, 1830.

Three Lectures on the Rate of Wages, 1831.

Four Introductory Lectures, 1852.

Summary of the Ambiguities in the terms of Political Economy, appended to Whately's Logic.

idea of Economics as a science. In his own words: The subject treated by the Political Economist . . . is not Happiness, but Wealth; his premises consist of a very few general propositions, the result of observation, or consciousness, and scarcely requiring proof, or even formal statement; . . . and his inferences are nearly as general, and, if he has reasoned correctly, as certain as his premises." Senior went very far in narrowing the scope of the science and in making it an abstract and deductive one, and in this his influence on later writers was considerable, e.g. J. S. Mill and Jevons. He would have had the economist refrain from a single word of advice and keep clear of morals and political science. Then, within his proper field, he must confine himself to deductions from a few postulates.

Senior allowed Political Economy four postulates: (1) a universal desire to obtain more wealth with the least sacrifice; (2) the Malthusian principle of population; (3) "that the powers of Labour, and of the other instruments which produce Wealth, may be indefinitely increased by using their Products as the means of further Production "; (4) the law of diminishing returns from land.2

In his subdivision of the field of the science it seems clear that he foreshadows Mill's distinction between the laws of production and distribution.3

Senior's emphasis of the need for accurate definitions and his criticisms of predecessors on this score are noteworthy.

Value. Some of his best work lies in the field of value, and especially in the analysis of cost of production. Value he defines as " that quality in anything which fits it to be given and received in exchange." The forces which determine it fall into two sets the demand and supply of the one good, and the demand and supply of that for which it is exchanged. Supply, however, is somewhat unsatisfactorily defined as equaling the obstacles which limit quantity. Senior is here filled with the idea that it is merely limitation of supply, as such, that functions 1 Political Economy (reprint, 6th ed., 1872), p. 2. See also Four Introductory Lectures for his views. 3 Ibid., p. 3.

Ibid., p. 26.

in value, and justly criticizes Ricardo's classification 1 for omitting this idea in the case of reproduceable commodities. Abstinence and Capital Formation. - Just here comes Senior's great contribution, the concept of abstinence as a cost of production. With equal competition goods sell for their cost of production, which cost equals labor plus the abstinence of the capitalist. Abstinence is "a term by which we express the conduct of a person who either abstains from the unproductive use of what he can command, or designedly prefers the production of remote to that of immediate results.” 3 In the formation of capital" some delay of enjoyment must in general have reserved it from unproductive use." This cost, then, as well as the sacrifice of labor, is an obstacle limiting production, and so, through supply, entering value."

The significance of this new factor is apparent. Ricardo, with some misgivings, had in his formal writings left labor as the determinant of exchange value, profits being a sort of residual claimant. His followers, James Mill and M'Culloch, took the bull by the horns and expressly reduced all to labor, including even the growing value of wine or trees. Lauderdale had attacked the notion, making capital an independent factor which replaces labor rather than supports it; and Malthus made profits an independent cost along with wages. But there had been no analysis which would make capital coördinate with labor as a cost factor in production, and the labor theory was for the time dominant.

Senior may have caught the idea of abstinence from G. P. Scrope, who wrote three years prior to his article. Scrope states

1 Above, p. 215.

2 Political Economy, p. 24. Senior, however, confuses value of labor (wages) with labor pain, the latter being Ricardo's idea.

3 Ibid., p. 58.

4 Böhm-Bawerk in his Capital and Interest (p. 285 of Smart's translation) accuses Senior of making his interest theory part of a theory of value in which he explains the value of goods by their costs; and concludes that as some goods are not reproduceable, it is but a partial theory. He overlooks Senior's express insistence on limitation of supply as distinguished from cost of production.