the papers in detail, for the simple reason that they should be studied at first hand by every one who has occasion to use the American Census reports, for clues are given to the maze of figures, caution boards are erected in dangerous places, and with this help the figures are found to be prepared more soundly than would at first sight appear.

A. L. BowLEY

The Science of Finance, an Investigation of Public Expenditures and Public Revenues. By Prof. H. C. ADAMs. (New York: Holt and Co. 1898).

THE author of this work has for a long time been known to English economists as a prominent American representative of what is somewhat vaguely described as "the new school" of political economy. His reputation as a writer on financial questions has been solidly established by the standard treatise on Public Debts, which is indispensable to the student of that particular topic.

Hence the announcement that Prof. Adams had in preparation a comprehensive work covering the whole field of finance naturally aroused high expectations. After a protracted delay, the task has been achieved, and is presented to students in the book before us. It is unnecessary to say that a great deal of valuable matter and suggestive thought are contained in this "advanced text book" of "The Science of Finance." No writer of Prof. Adams' ability can handle a subject at the stage of development which financial theory has now reached without giving instruction and stimulation to learners and investigators. To contemplate the many debatable problems from the special American standpoint is by itself to perform an important service, for which we may be thankful.

But notwithstanding our sense of obligation, we must also confess to a feeling of disappointment. It may have been that we hoped for more than was reasonable; but there is, we cannot help thinking, a good deal that is unsatisfactory, and even defective, in our author's arrangement and handling of his matter. The adoption of a purely American point of view leads to limitations, and, in some cases, to positive mistakes, that detract from the great merits of the work. We miss the consistent and thorough use of the comparative method of study that is so prominent in the writings of some other American economists. Independence and originality of thought are markedly shown in Prof. Adams' work; a fuller employment of the results attained by others, and a more careful study of the mass of facts which financial institutions afford in such embarrassing abundance, would have been, we venture to think, an enhancement of the first-mentioned qualities.

The strength of the book lies, it is evident, not in development and expansion of the growing body of financial doctrine, nor, again, in its co-ordination or explanation of the financial systems of States, but

rather in its "analysis "-the term is a favourite one with Prof. Adams -of special financial conditions, notably those existing at present in the United States. Work of this class is indeed of high importance, especially when done so excellently as by Prof. Adams. There remains, however, the doubt whether it can fitly be regarded as covering the field of finance. The American reader naturally wishes to know the facts and theories that concern his own country; but would he not profit more by a wider and less one-sided examination? Recent events show clearly that in all departments of political science each nation can learn much from the experience of other countries, and finance is no exception to the rule.

Still, the task of special analysis is an essential part of financial theory, and some of the analyses in The Science of Finance may be regarded as permanent contributions; e.g., the study of the corporation tax is of the utmost value, worked out as it is on so many different sides. (See pp. 381 sq., 449 sq.) In only one respect does there appear to be some weakness in these critical investigations, and that is on the purely economic side. Much greater use might have been made of modern economic theories (it is curious and suggestive that there is no mention of any English economist later than J. S. Mill); and in at least one instance a familiar economic theory is misinterpreted. We allude to the passage on p. 249, in which it is stated that "Under a system of annual lease the payment for land will be determined by competition, and will equal the full economic rent. That is to say, the Government will take the total of the excess profit' arising from the industry of farming, leaving to the farmer his wages as a labourer and the interest on improvements, provided they represent an investment of his capital. The Government might, it is true, leave a portion of this pure rent in the hands of the tenant, and in this manner create a system of rent-sharing between itself and the tenant. According to modern fiscal theories, by which the revenue of the State is determined according to public necessities, this must be the case, since the payment by the farmer of the full economic rent to the Statewould result in his paying a relatively higher amount than would be paid by those engaged in commerce or manufacture." Here there is no recognition of the farmer's "profit" in the sense in which the term is used by Ricardo and Mill. Surely the "pure rent" is merely the excess over "interest" and "earnings of management," and its payment to the State will only equalise the position of the farmer with that of the merchant or manufacturer, and not impose "a relatively higher amount on him. The slip is the more singular as the correct view is implied in the discussion of the property tax on land in another place (pp. 368-369).

In Prof. Adams' conception of the subject there are two main questions comprised in finance, viz., (1) "What are the legitimate and necessary wants of a State?" and (2)" How may these wants be the most economically and advantageously supplied?" This mode of No. 35.- VOL. IX

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formulation raises the preliminary question whether such inquiries are the subject matter of a "science"? Can we with propriety speak of an independent "Science of Finance" as distinct from either" Economics" or "Political Science?" Even if an affirmative answer is given to these questions, it is hard to see how a passage like the following can be justified: "It is probable that such a provision would be followed by two results, both of which approve themselves to the Science of Finance" (p. 189). Is it not the function of an "art" to express approval or the reverse? To regard the "Science of Finance" as approving or disapproving, seems perilously like a return to the times when "the inexorable laws of political economy" forbade workmen to strike for higher wages. Perhaps, however, the French and German equivalents (Science des Finances and Finanzwissenschaft) may afford sufficient justification for using an English or Anglo-American parallel.

The opening definition determines the arrangement of the treatise, which is divided into two main parts, one dealing with public expenditure, the other with the different forms of revenue. An introductory chapter explains that the wants of the State are, speaking broadly, reducible to a demand for money by which services and commodities can be purchased. Prof. Adams also shows very clearly that public expenditure is properly included in financial theory (pp. 20-23). The subdivisions of these two great heads present some interesting variations from the usual treatment. Thus under "Expenditure" a first Book is devoted to the topics naturally associated with the term, but a second Book follows, entitled, "Budgets and Budgetary Legislation," in which the methods of financial organisation and the preparation and passing of financial laws are discussed. This collocation suggests a criticism; for it is hard to see any valid reason for putting such matters in connection with the examination of public wants. "The Budget " has, indeed, been always a difficulty to writers on finance. Plausible grounds may be given for making it a starting point of financial investigation. There are somewhat better reasons in favour of reserving it for the conclusion; but its assignment as a section of "expenditure" has, so far as we know, no precedent, and appears to be illogical. Financial legislation is as much concerned with receipts as with expenditure, while in its history the "opening of the budget," from which the use of the term is derived, is made in "Committee of Ways and Means," not in "Committee of Supply," and is, therefore, primarily associated with revenue, not with outlay.

A similar effort to include different classes under a comprehensive heading is found in the second part of The Science of Finance, viz., in its placing "Public Credit" as one of the heads of revenue. "The revenue which flows into the Treasury of a State is," says our author, "of three sorts. It may be a direct revenue, a derivative revenue, or an anticipatory revenue. . . . In addition to direct and derivative revenues the State may secure funds through the use of its credit, that is to say, it may borrow money. This revenue is properly characterised

as anticipatory revenue (pp. 219-220). It seems to us that there is here a confusion between "a procuring of funds" and "revenue" in the stricter sense of the term. In the analogous case of a private person, would it be right to include a loan received by him in his "income"? Prof. Adams' treatment raises a further difficulty. If public borrowing be a form of revenue, must not the repayment of public debt be a form of expenditure? and yet the subject of debt-payment is handled in the concluding section (§ 84, not 83, as in the text) of the treatise, i.e., under the head of "Revenue."

These, however, are merely matters of external arrangement. In substance, the Book on "The Budget " is quite separate from its companion Book, and the Book on "Public Credit" is really an abridgment of some of the theory in the author's earlier Public Debts, and thus essentially independent. But though arrangement is subordinate, it is not to be neglected, as it often throws light on the gradation and connection of thought of the writer, and we have therefore felt bound to notice the deviations from the normal grouping which find favour with Prof. Adams.

It is not possible for a reviewer to follow in detail the serried order of exposition setting forth critical analyses of the many problems in each department of finance, many of them of a convincing character, and all forcing the reader to fresh thought on each point, even though the final result may be dissent from the author's conclusion. We have to be content with a reference to some salient features of the discussions and notice of the comparatively few cases where error makes its appearance.

In considering the question of public outlay, the mode of investigation is adapted to obtain a general law controlling the action of States, rather than to provide a concrete picture of the system and degrees of State expenses. The industrial, social, and political development of the society will condition the amount and proportion of its outlay, and the financier must take these as data of his problem. The expenditure of the State is grouped by Prof. Adams under three heads-viz., "protective," "commercial," and "developmental," and his "law seems to be that the first tends to decrease, while the last tends to grow with the progress of society (pp. 61, 79, 81). General commercial expenses are also likely to increase (p. 81). Such clear-cut divisions and positive statements of tendencies possess a great attraction, but when tested by application to particulars they do not prove so satisfactory. Is it possible to mark off" protective" from "developmental" outlay? The expense of reformatories is "protective," but is the cost of State inspection of factories, or of merchant shipping, or that of the maintenance of a railway commission, all of which are regarded as developmental, in any respect different? Is it not more correct to say that public outlay is, or should aim at being, at once. "protective" and "developmental," as punishment should be preventive and reformatory? Again, we read "that an absolute as well as a relative

decrease may be expected in military expenses as time goes on " (p. 57), but the proposition is not supported by adequate evidence. Indeed, in some references an important part of the example is omitted. Thus (p. 41) the expenditure of Victoria for defence is put at a very low amount, without any mention of her position as a British colony, enjoying the advantages of the English Army and Navy. It is rather dangerous to reason from the empirical law that "the necessary expenses of the individual decrease in proportion as he rises in condition," to the conclusion that the defence of the State will become less costly in proportion to its other tasks.

Another general proposition, "that the burden of the fiscal system lies rather on the rules adopted for collecting revenue than on the amount of revenue collected" (p. 94) is remarkable as showing the recoil from Ricardo's view, "that the great evil of taxation lies in its amount," and from Say's "golden maxim," and as indicating the advance in economic conditions during the century.

The chapters on the Budget are full of important matter. Particularly valuable are the descriptions of the American financial system, which bear the impress of first-hand knowledge and close observation. Less admirable are the notices of the English system, where our author appears to have relied too much on M. Stourm's Le Budget— a serviceable work, but one not free from error. For example, the idea that in the English committees of "ways and means" and "supply," as a matter of fact, none but the leaders commonly attend, and none but the representatives of some party, or some faction of a party, venture to take part in the discussion" (p. 147), is altogether unfounded. The "bore" has a peculiarly "happy hunting ground" in the discussions on "supply." This mistake is the more unfortunate in that it leads to an ignoring of the vital difference between the English and Continental methods of dealing with financial legislation. The former places the weight of responsibility on the Cabinet; the latter distributes it between the Government and the Chamber, and thereby practically removes it altogether. A similar criticism must be passed on the explanation of the basis of distinction between " consolidated fund" and annual charges (p. 156). The Army and Navy are "permanent institutions," far more so than the "Irish Queen's Colleges," but Army and Navy depend on annual votes, while the main revenue of the Queen's Colleges is charged on "the Consolidated Fund." In fact, the division is partly arbitrary, and sometimes is the result of Parliamentary needs.

A point of more scientific interest is the decision on the respective merits of the French and English (as also American) methods of conceiving the Budget. In the former the transactions of each year are taken as a unit. The latter deals with actual receipts and outlay. Prof. Adams, with an unusual hesitation, seems to favour the French system, which is, he justly remarks, the system of "the best corporation accounting" (p. 206). The two cases are not,