place

MILL'S METHOD MISLEADS.

11

depend upon their cost of production." In the spaces marked by points, Mr. Mill had inserted two unmeasurable quantities to be deducted from his main proposition. These were: (1) "In places sufficiently adjacent for capital to move freely between them." (2) "Temporary fluctuations apart." Who knows what is a free movement of capital as distinguished from a constrained movement of capital? Who knows what places are sufficiently adjacent for a free movement of capital? If values of commodities depend on their cost of production, then the fluctuations in value must also depend on their cost of production. For of what worth would an explanation of values be which would not explain fluctuations in value? But if fluctuations in value depend on cost of production, then cost of production (of a single commodity) must itself be a fluctuating quantity. But this is absurd, for when a thing has been once produced the cost of production of that individual thing is fixed, and cannot change. The only element which can fluctuate is the cost of producing other things like it.* If Mr. Mill means by "cost of production" the cost of producing the individual thing to which the value attaches, then the value of every object would be fixed on the completion of it as a commodity, and there could be no fluctuations in value either temporary or permanent. If he means by cost of production the cost of producing other things essentially like the thing to which the value attaches, then values can vary with every new cost of production, and there is no ground for a distinction between permanent and temporary fluctuations.

Eliminating these elements of fog, let us see if we really grasp a tangible idea when we say that values of any kind (or in any place, are fixed by their cost of production. Who can measure one single absolute cost of production in its entirety? The cost of production of my pen, when estimated absolutely as a cost to society, involves a cost of producing the gold from the mine, and the cost of producing the man who dug the gold, the implements with which he dug it, and the process by which the gold was separated, assayed, melted, and worked up. The cost of the handle involves the cost of cutting the tree from which it was taken, and of inventing and perfecting the ax with which it was cut, and the iron and steel manufacture which rendered it possible. Cost to an individual is measurable, because as to him the means

*This is styled by Mr. Carey "the cost of reproduction."

with which he works have a measurable money cost. But cost to society, in labor, is immeasurable, because the attempt to measure it involves a measurement of all the antecedent labor which culminated in it whether mediately or immediately. The cost to an individual has a beginning when he pays for certain raw materials. But society lives perpetually, works continually, and has no antecedent worker to furnish it with any raw materials. Each attempt to compute a cost of production to society goes back to the time when society began the labors leading up to it

"When Adam delved and Eve spun."

Hence in referring us to cost, to society, of the production of the thing valued, as the source of the value of the commodity, Mr. Mill refers us to an immeasurable quantity.

He then proceeds to 'suppose that ten yards of broadcloth cost in England as much labor as fifteen yards of linen, and in Germany as much as twenty."

What does he mean here by labor? The mere time of a human being without regard to age, sex, skill, or fitness? Or does he mean the appropriate application of physical force to textile fibers to produce cloths? If he means the former, then ten hours' work of a Hindoo coolie, without other mechanism than a hole in the ground to put his legs in, and a tree overhead to hang his yarn on, would be expected to measure against an Englishman working at his loom. If he means the latter, then a machine in England, without any man in it, but producing many yards an hour, might be measured against a man without a machine working days to produce a yard. He then says, "When each country produced both commodities for itself, ten yards of cloth exchanged for fifteen yards of linen in England and for twenty in Germany. They will now exchange for the same number of yards of linen in both. For what number? If for fifteen yards, England will be just as she was, and Germany will gain all. If for twenty yards, Germany will be as before and England will derive the whole of the benefit."

He then proceeds with an intricate process of metaphysical disquisition of exactly the same order, and of no more value than those which the schoolmen of the middle ages gave to the question, "What would happen when an irresistible body in motion comes into collision with an impenetrable substance at rest."

From the view of political economy taken by the historical

BARREN RESULTS.

13

school of economists, in which Adam Smith, Roscher, Henry C. Carey, and Henry Dunning MacLeod are prominent, the exercise in mental gymnastics found in Mr. Mill's chapter on international values does not lie within the domain of economic science

1. Because it is a supposititious case, and economic science must rest upon facts.

2. Because it is a cloudy, foggy, and indefinable case, expressly made to defy human powers of analysis, and which depends for its claim to respect not upon the fact that it communicates knowledge, but that it resists in a moderate degree the effort to prove that its author slipped in his logic.

3. Because it becomes an impossible case if its terms are made so tangible by construing them in a definite way, as to give them a definite meaning. It is not possible that in two civilized industrial nations, having facilities for production essentially alike, an inequality of the kind supposed in the rate of exchanging broadcloth against linen could exist, unless England and Germany were both cut off from all trade in broadcloth and linen and their equivalent fabrics, not only from each other, but from all other countries.

When Mr. Mill has waded through the morass of what he calls "the windings and entanglements of complex international transactions," he comes out at last with what he calls a "law of the equation of international demand." He states it thus: "The produce of a country exchanges for the produce of other countries at such values as are required in order that the whole of her exports may exactly pay for the whole of her imports." What have we got here save the truism that a country, like an individual, can only buy what it pays for, or more simply, in all exchange there is an exchange. Of course, to make this true, it is necessary to regard the exportation of gold and silver in such quantities as to drain a country of its coin supply, and even an exportation of debts and promises to pay, as a payment.

But what we arrive at is the truism with which the chapter began, viz., that in all international exchange there is an exchange. If something was got without giving any thing in return it would be a free gift and not an exchange. Hence, nothing is evolved at the end of the chapter except what the terms used in the very title of the chapter are pregnant with.

If, however, the principle is sought to be applied between any two nations without including all others, it is converted from a

truism into a falsehood. If, for instance, its application be," The United States must buy its manufactured goods in England if it would succeed in selling its breadstuffs there, it becomes a falsehood," as the two facts, what we shall buy of any one nation, and what we shall sell to it, stand in no relation of interdependence whatever. We may and do sell to some nations three times as much as we buy of them, and buy of others five times as much as we sell to them. The so-called law of the equation of international demand might as well be applied to an individual. The total of every man's outgo in the long run must equal the total of his income.

5. Decline of the Metaphysical and rise of the Historical Method. There are certain conveniences and even charms in treating political economy, as Mill and Ricardo have done, as a study of the logic of social tendencies merely. It fits in with the fact that all economic quantities are in a continual state of transition and fluidity-of flux and reflux. The forces with which it deals, based as they are on human interest and desire, emulation and competition, affection and emotion, vary every moment in direction and intensity. The values we compare vary while we are comparing them, and even the standards for com paring and measuring them sometimes outstrip the values in their variations. The instant an economic quantity is seized in one point of view it insists on putting on another function, and appearing in another character. Terms resolutely resist firm and stable definitions, because the things they represent are incapable of resting in the performance of a single function.

Take the term labor. If a man carries mortar from the street to the roof of a building in a hod, is that labor? Certainly not, if the man is a British lord practicing to show his muscle. It is amusement. Certainly not also if the man is a slave in Cuba, working by the compulsion of enforced ownership. In such case the man is capital, in the economic sense, as truly as if he were a steam engine or a horse. Does his labor consist in applying physical force to raise the mortar, or in expending human energy? If the former be true, then if a horse or engine be substituted, that is labor; and, if so, we find capital laboring and interest becomes wages.

Every other economic term, wealth, value, utility, profit, rent, interest, capital, money, land, production, trade distribution, exchange, consumption, taxation, savings, banks, credits, currency, and political economy itself eludes fixation in any one meaning,

END OF LAISSEZ FAIRE.

15

because the things it stands for perform many offices. It takes on of necessity a change of definition for each office it performs. Mr. S. Dana Horton* shows that the word "standard" takes on nine distinct meanings, each of them exact as to its own function.

Mr. Mill evades defining wealth, as the law evades defining fraud, by saying "though nobody can tell what it is, everybody knows what it is."

This very fluidity, apparent everywhere in economic quantities and terms, begets an inclination to avoid definitions, as being merely fallacious attempts to attribute a fixity to the flowing, and to steer clear of historical causes and effects in their sequence as being too complex and intractable to illustrate principles.+

Prof. Sidgwick regards the metaphysical school of economists, commonly known as the English or Manchester school, as having reached the climax of its power at the period of the repeal of the corn laws (1846-50), as having begun to wane in 1860, and as finally losing its authoritative hold on the thinking men of England in 1871. The leading principles of this school are that free competition, laissez faire, or to be "let alone " by the government is all that industry asks or needs, that the government is to be run asa fiscal agency, having no other concern than to provide itself with revenue and keep the peace between workers of all kinds, and that the actual world of industry is either at all times the best world possible, or if not it will become so under the stimulus of a little more non-interference on the part of government than it has hitherto enjoyed. The generation from 1828 to 1846 was largely occupied in giving increased popularity to this idea, whose dominant principle was laissez faire, and whose political and popular cure-all was called " Free Trade."

Mr. Sidgwick dates the decline of the school from the period, in 1871, when Mr. Mill, reviewing Mr. Thornton's book on Labor, and its attack on the "Wages Fund theory," acknowledged that the theory had been shown to be really no theory at all, but only a circuitous statement which ended where it began. Wages depend on the proportion which capital bears to labor, so long as

See extract in chapter on Money.

+ The philosopher Hegel is said to have been engaged in pointing out to his class the "principle" of mathematical harmony which required that on logical principles there should be a vacant orbit space between the orbits of Mars and Jupiter, when one of his pupils informed him that asteroids had just been discovered in that space. "Very likely," replied Hegel; "the principles of pure reason require that the space should be vacant, but the accidents of Nature seldom come up to the standard of pure reason.