social effort, might stand as an expression of the aims of a collectivist or socialist of the present day. But with Bastiat it expressed a doctrine, not a precept; and therefore bears an interpretation diametrically opposed to the theory of the communist. For indeed Bastiat's fundamental principles of harmony he termed property and liberty; and his doctrine of economic harmony is that, under absolutely free exchange of labour and other commodities, and the fullest security of private property, whether in land or other things, the arrangements of providence are such as to continually improve the condition of the human race; and that any disturbance of these fundamental laws retards that improvement. Professor Marshall (Principles, 1st ed., vol. i. p. 453) states the doctrine thus: "The maximum satisfaction is generally to be attained by encouraging each individual to spend his own resources in the way which suits him best ;" and he follows with some interesting criticisms of the theory, or rather limitations, of its operation. The latter definition, which is a description of what has been termed "enlightened self-interest,' scarcely includes all that is involved in the individualist theory of Bastiat; but it is an accurate statement of the principle which underlies it.

The phrase economic harmony represents, in another form, the extreme individual theory, and can hardly be properly called an economic doctrine; it is rather an ethical or utilitarian deduction from economic data. But it is used as a normal rule chiefly to exhibit the limitations to which it is subject. It rests really upon the premiss that it is indifferent to any one except the consumer in what manner wealth is consumed; a position not seriously maintained by any economist, and explicitly opposed to the last of Mill's four classical propositions regarding capital-"a demand for commodities is not a demand for labour." The importance of consumption as a factor in economics has of late years come to be more highly appreciated; and its effect on an idea of maximum satisfaction will be found to modify greatly, if not to destroy as a normal principle, the doctrine of economic harmony.

[See HARMONIES OF INDUSTRY.] M. G. D. ECONOMIC HISTORY. As to the relation between economic history and economic theory, five views are possible, which may for convenience be given the following brief designa

tions:

(1) "The no-connection view." This was the view of those who regarded political economy as a purely deductive science, derived infallibly from a few simple abstract postulates which every reasonable being must necessarily grant. Political economy, in this view, was not only not "greedy of facts"; it could be constructed in absolute disregard of any alleged facts except

675

the assumed postulates. To those who held this view, economic history had no direct interest, any more than heraldry or genealogy.

(2) "The hand-maid view." This view, which is but a slight modification of (1), is still very generally current. It is that of those who while believing that "economic laws" are to be obtained by deduction from given assumptions, are interested to find illustrations or confirmations of their conclusions in facts furnished by economic history. If the facts agree with the theory, so much the better for the facts; if not, then they are left alone, and the implication is that the historian is mistaken with regard to them.

(3) "The corrective view" is again a modification of the preceding. It grants that economic history may sometimes furnish reason for questioning abstract conclusions, and proposes in that case to re-examine the original postulates, and either to modify them, or, if they are still tenable, to examine into the disturbing influences which have affected the result. This is a position which has been avowedly held by many recent writers, e.g. by Cairnes; but there are few examples of the practical application of the implied rule.

(4) "The concurrent view" is one appropriate to a period of compromise following upon one of controversy, and it is at present not infrequently expressed. It is that economic history and economic theory have each an interest and importance of their own which will attract students whose bent is in one or other direction; and it leaves to the future the decision of the question what bearing historical work may have on economic method.

(5) Finally "The supersession view," which is one often held by what are called " economists of the historical school," teaches that the science of political economy, as it has been created by the classical economists, will ultimately be replaced by, or incorporated in, a science based on historical investigation. Among the writers of this school, again, there are two divergent tendencies. Some think that the political economy of the future will resemble that of the classical school in containing “laws” or brief generalisations concerning rent, wages, profits, interest, etc., but derived wholly or chiefly from induction from observed facts past or present. This view, however, is seldom directly formulated, and may perhaps be said to be due to a certain vagueness of thought as to the character of economic "laws." Others hold that political economy will ultimately be replaced by a doctrine of economic development-a philosophy of economic history; a view which is largely due to the influence of modern conceptions of evolution, and of the organic nature of society (see HISTORICAL SCHOOL and HISTORICAL METHOD). In their view, abstract deductive theory will continue to

676

be of use, as a minor method of investigation, and as a useful preparatory training, but it will no longer dominate the field of economic thought.

[G. Schmoller, on Die Schriften von Karl Menger u. W. Dilthey zur Methodologie der Staatsund Sozialwissenschaften in Zur Litteraturgeschichte der Staats- und Sozialwissenschaften (1888).-K. Menger, Methode der Sozialwissenschaft.-Die Irrthümer des Historismus (1884).J. N. Keynes, Scope and Method of Political Economy (1891), ch. ix., note B.-W. J. Ashley, Economic History, vol. i. pt. 1 (1888), preface; and On the Study of Economic History in the (Harvard) Quarterly Journal of Economics for January 1893.-J. K. Ingram, History of Political Economy (1888), ch. vi. These books, especially those of Ingram and Keynes, will guide the reader to the very considerable literature upon the subject.]

W. J. A.

ECONOMIC LAW. This phrase has frequently given rise to confusion. Law, in its imperative sense, belongs to no science; properly speaking, it is a term in the art of legislation. Law, in its indicative sense, as a statement of cause and effect, is purely scientific; and when political economy is treated as a positive science, it is in this sense that the phrase is used (see Marshall, Principles, introd.). In common parlance, however, an economic law is frequently understood to be something imperative, or at least a statement that a certain course of action is wise or just; and the confusion between the art of legislation based on economic formula and the science of economics itself (from which the works even of the classical English economists are not free) has done much to spread this misunderstanding. То break the laws of a science is in one sense impossible, as they are merely generalised statements of fact; yet it is not uncommon to hear it said that a certain course of action will break the laws of political economy; when what is intended to be conveyed is that it will lead to a result different from that expected, and that the laws of economics prove this. Thus it is often said that to regulate the hours of labour, or to introduce differential import duties, is to break economic law; and M. de Laveleye, in his very able effort to include the science of economics in an art of sociology, evidently considers luxury liable to be condemned in a similar manner. (See also his Elements of Political Economy, for an account of economics treated as an art with definite moral aims.)

The laws of a science are always in themselves useful as guides to action, merely because of the deductions we draw from them. The objection made to this view of the subject, that such laws are entirely barren and uninstructive, is therefore one which would apply equally to every science. In another form, however, the objection has considerable force. A scientific law presupposes unchanging circumstances; and any alteration in these introduces a new law to

vary the relations of cause and effect. In physical science we find uniformity to a far greater extent than in economics. It is this uniformity which has caused the phrase "exact science" to be used; and mathematics, in which the circumstances never change, is the most exact of all sciences. But in economics, where the conditions are dependent, not on the inanimate forces of nature, but on the variations of human feeling, passion, sentiment, and taste, it may well be thought that no generalisation, comprehensive enough to be useful, can be made. The older English economists were aware of this; and to get out of the difficulty they presupposed a state of matters in which mankind is governed by one single passion, viz. the desire for wealth. Happily they never adhered to the limitation they set for themselves; indeed, a science of economics on these lines is as inconceivable as a science of dynamics where every force is neglected excepting that of gravity. The great complexity and variety of circumstance which surround every economic problem are such as to render the enunciation of general laws, on a large scale, barely possible, and if possible barely useful. In consequence of this, few efforts have been made to reduce any economic truths to theorems; nor is it probable that any such theorems will be found of great value. Economic laws are rather expressions of tendencies than actual predictions of cause and effect (see LAWS OF POLITICAL ECONOMY).

[See Der Gebrauch des Ausdruckes “Gesetz” in der National Ökonomie, by J. Bonar, Zeitschrift für Volkswirthschaft, 1892.]

M. G. D.

ECONOMIC MAN. This term has been often used to indicate a more or less imaginary being postulated for theoretical purposes by ABSTRACT POLITICAL ECONOMY (q.v.) Those writers who defend the use of the conception, have regarded it as analogous to the perfectly rigid or perfectly smooth body assumed in theoretical mechanics. Speaking roughly, the economic man is one who in his economic relations is moved only by regard to his own material interests. But in reality there is considerable ambiguity in the use of the term. It can be most clearly understood when applied to the sphere of contracts. Thus Dr. Keynes, maintaining in a qualified form the legitimacy of the conception, writes (Scope and Method of Political Economy, 1891, p. 121): "Is it not a patent fact that in buying and selling, in agreeing to pay or to accept a certain rate of wages, in letting and hiring, in lending and borrowing, the average man aims at making as good a bargain for himself as he can?" Hence in relation to contract, the notion of the economic man is tolerably clear. He may perhaps be best defined negatively, either as one who is not moved by regard to the interests of the opposite party to the contract; or, more gener

ally, as one who is not influenced by such motives as class-prejudice, public opinion, resentment, compassion, or personal partiality. When we pass to economic actions outside the sphere of contract, it is not so easy to define the economic man. We may consider first the nature of the objects upon which a man's material resources are expended. So far as economists have treated the problem of demand and consumption on a deductive basis, they have certainly not assumed that the economic man normally or necessarily expends such wealth as he may have acquired only upon objects subserving his individual interests. For example, the family, rather than the individual, is often taken as the unit in economic science. But the economic man may be admitted to determine his expenditure under an indefinite variety of influences, such as philanthropy, love of ostentation, etc. In fact,

the deductive economist, in his indifference to the purposes for which wealth in general is desired, cannot rightly be charged with recognising none but egoistic motives to its acquirement. Passing from consumption to production, we have to recognise the universally antagonising principles to the desire of wealth, namely, aversion to labour and to the postponement of enjoyments. These aversions are no doubt of a purely egoistic kind. But, as all economists have recognised their importance, they clearly have not represented the economic man as inspired merely by a desire for accumulation, irrespective of the effort or sacrifice involved. Indeed, they have gone further in differentiating the various motives operating in industry. For, from Adam Smith downwards, they have allowed, not only for aversion to toil in general, but also for various degrees of aversion corresponding to various kinds of employment. But another and somewhat different qualification is necessary in concrete applications of economic doctrine. In the abstract sciences it is frequently convenient to take no account of forces of the nature of friction. Thus there are influences which retard, and perhaps permanently modify, the tendency to equilibrium of supply and demand. These influences are mainly those of custom, habit, and ignorance. For example, a labourer is not, or has not been, easily moved to change his abode or mode of employment, in circumstances in which he would immediately do so if he were deliberately to balance its advantages and disadvantages, including risk of adventure and breach of old associations, etc. Similarly, important limits to the mobility of capital exist. The actions neither of the labourer nor of the capitalist are wholly the result of cool, unimpassioned, and completely informed reason. Economists of all schools have, of course, recognised these facts. it may specially be noted that the deductive

But

677

economists of the most declared type have attributed to the working classes a character which is the reverse of economic. An important part of the doctrines of Ricardo and of his followers is based on the tendency of the labouring class to multiply until their resources are reduced to the level of bare subsistence. In this notable case, the chiefs of the deductive school have postulated a particularly uneconomic man. With respect to the range of application of the conception of the economic man, there are some not unimportant differences of view among the supporters of the abstract method. Bagehot, for example, regards the conception as applicable only to the latest phases of economic development. Mill and Cairnes, on the other hand, hold that the results of the abstract method indicate universally operative tendencies, the realisation of which is, more or less, actually interfered with by conflicting forces. A slight modification of this view represents the motives of the purely economic man as manifesting themselves in the long run,- -on the ground that other and conflicting motives cancel one another when a sufficiently large area is contemplated.

[Mill, Unsettled Questions of Political Economy, Essay v.-Cairnes, Logical Method of Political Economy, Lecture ii.-Bagehot, Economic Studies, Essays i., ii.-Keynes, Scope and Method of Political Economy, chs. i., iv., vii.-Sidgwick, Principles of Political Economy, Introduction, ch. iii.—Marshall, Principles of Economics, 1891, vol. i. pp. 71-81.-Cliffe Leslie, Essays in Political Economy, 1888, Essays i., xv.-G. J. Goschen, Address on "Ethics and Economics," to the British Economic Association, Economic Journ., Sept. 1893.]

The idea of a semi-economic man, one for whom the advantage of another counts, not indeed for as much as his own, but still for something, is suggested by Prof. Edgeworth in his Mathematical Psychics, pt. i. end of § 2. A similar conception is more usefully employed by Prof. Marshall in his consideration of the compromise benefit of a monopolist (Principles, bk. v. ch. xii. ). The whole subject of egoism and sympathy in their economic aspect is well treated by Prof. Pantaleoni in the beginning of his Principii di Economia pura. See also Mr. Bonar's discussion of utilitarianism in his Philosophy and Political Economy, 1893. W. E. J.

ECONOMICS, for other articles under this heading see POLITICAL ECONOMY.

ECONOMIC SCIENCE AND ECONOMICS. The terms " "economy" and "economic" or "economical," are now used chiefly in two meanings, which it is well to distinguish clearly; since, though divergent in their history, they are liable to fusion, and therefore in some degree to confusion.

"Economy" originally meant, in Greek, the management of the affairs of a household, especially the provision and administration of its income. But since both in the acquisition and in the employment of wealth it is

678

fundamentally important to avoid waste either of labour or of its produce, 66 economy" in modern languages has come to denote generally the principle of seeking to attain, or the method of attaining, a desired end with the least possible expenditure of means; and the words economy,' "economic," "economical," are often used in this sense, even without any direct relation to the production, distribution, or consumption of wealth. Thus we speak of "economy of force" in a mechanical arrangement without regard to its utility, and of "economy of time" in any employment whether productive of wealth or not.

On the other hand, as there is an obvious analogy between the provision for the needs of a state and the provision for the needs of a household, "political economy," in Greek, came to be recognised as an appropriate term for the financial branch of the art or business of government. It is found in this sense in a treatise translated as Aristotle's in the 13th century; and so, when, in the transition from medieval to modern history, the question of ways and means obtrusively claimed the attention of statesmen, "political economy" was the name naturally given to that part of the art of government which had for its aim the replenishment of the public treasury, and,- -as a means to this,the enrichment of the community by a provident regulation of industry and trade. And the term retained this meaning till the latter part of the 18th century without perceptible change-except that, towards the end of this period, the enrichment of the people came to be less exclusively regarded from the point of view of public finance, and more sought as a condition of social wellbeing.

But in the latter part of the 18th century, under the influence primarily of the leading French "Économistes or "Physiocrats " Quesnay, De la Rivière, and others the conception of political economy underwent a fundamental change, in consequence of a fundamental change in the kind of answer which these thinkers gave to the question "how to make a nation wealthy." The Physiocrats proclaimed to France, and through France to the world, that a statesman's true business was not to make laws for industry and trade in the hope of increasing wealth; but merely to ascertain and protect from encroachment the simple and immutable laws of nature, under which the production of wealth would regulate itself in the best possible way if governments would abstain from meddling. A view broadly similar to this, but less extreme, and, partly for this reason, more directly influential, was expounded in Adam Smith's Wealth of Nations. Instead of showing the statesman how to "provide a plentiful revenue or subsistence for the people"-which was one of the two main objects of political economy, according to the traditional view-Adam Smith aims

at showing him how nature, duly left alone, tends in the main to attain this end better than the statesman can attain it by governmental interference. Accordingly, so far as the widespread influence of Adam Smith's teaching went, that branch of the statesman's art which aimed at "providing a plentiful revenue for the people" tended almost- though not altogether to shrink to the simple maxim of laisser faire: leaving in its place a scientific study of the processes by which wealth is produced, distributed, and exchanged, through the spontaneous and partly unconscious division of labour among the members of human society, independently of any governmental interference beyond what is required to exclude violence or fraud. A part, indeed, of the old art of political economy-that which aimed at "supplying the state with a revenue sufficient for the public service"-remained indispensable to the statesman; but it was held that this traditional art required to be renovated by being rationally based on the doctrines of the new-born science just described. It is, then, this scientific study of a department of social activity that most writers on the subject now primarily mean by the term "political economy": such part of the old governmental art so called, as the doctrine of the new science is held to admit, being commonly regarded as "applied political economy.' In consequence of this change the adjective "economic," instead of the too cumbrous "politico-economic," has come to denote the matters investigated by the science of political economy, and the propositions and arguments relating to them.

By thinkers and duly-instructed students this distinction between "science" and "art" -between the study of "what is" and the study of "what ought to be "-is usually regarded as simple and clear; and accordingly when such persons speak of the "laws of political economy" they mean not rules by which the process of the social production and distribution of wealth ought to be governed, but general relations of co-existence and sequence among phenomena of this class, ascertained by a scientific study of this process as it actually takes place. This distinction, however, has been found difficult to establish in common thought: even well-educated persons still occasionally speak of the "laws of political economy" as being "violated" by the practice of statesmen, trades-unions, and other individuals and bodies. It is partly in order to prevent this confusion that the terms "economic science' and "economics" have recently come more and more into use, as a preferable alternative for political economy, so far as it is the name of a science. As to the scope of this science, -it would be generally agreed that it is a branch of a larger science, dealing with man in his social relations; that it is to an important extent, but not altogether, capable

-as

of being usefully studied in separation from other branches of this science; and that it is mainly concerned with the social aspectdistinct from the special technical aspect-of such human activities as are directed towards the production, appropriation, and application of the material means of satisfying human desires, so far as such means are capable of being exchanged. It would also be generally agreed that the method of economic science is partly deductive, partly inductive and historicostatistical. But to attempt a more precise determination of its method and scope, and especially of its relation to the art or system of practical rules which should guide the action of governments or private individuals in economic matters, would require us to enter into questions of a highly controversial kind; which will be more conveniently discussed when we come to deal with the older and wider term POLITICAL ECONOMY (q.v.) H. S.

ECONOMISTES. The narrower term PHYSIOCRATS (q.v.) is now generally applied to the writers who were known in their own time, and to Adam SMITH, MALTHUS, etc., as the Economistes. The chief members of the "sect" were QUESNAY, the elder MIRABEAU, Mercier de la RIVIÈRE, DU PONT de Nemours, ABEILLE, BAUDEAU, ROWLAND, SAINT PÉRAVY, LE TROSNE.

J'y

As to the origin of the name compare Mirabeau (Letter of 20th December 1767 to J. J. Rousseau): "De ma part, je fondai chez moi un diner et une assemblée tous les mardis. reçus tous les étrangers qui viennent voir le bâton flottant sur l'onde, les magnats qui me viennent voir, et surtout la jeunesse. C'est de ces assemblées, qui ont été fructueuses à l'excès, que nous est venu le nom d'Économistes." Levallois, J. J. Rousseau, ses amis et ses ennemis, Paris, 1865, ii. 385.

[For further remarks on the Economistes, see PHYSIOCRATS.]

H. H.

ECU. A French coin, so called from the shield covered with fleurs-de-lis which was stamped upon it. It was originally a gold coin, and was first struck in 1336. But the historic écu of the 17th and 18th centuries was a silver coin (écu blanc), corresponding to the English "crown," and worth six francs. There was also petit écu or demi-écu, worth three francs. These coins were in circulation at the beginning of the present century. In recent times the term écu has been applied to a piece of five francs.

R. L.

The gold écu of 1336 was made of pure metal. (See Traité Historique des Monnoyes de France, Le Blanc, Paris, 1692.) The silver écu, first struck in 1641, was of silver, 913 fine. (See Traité des Monnaies d'or et d'argent, Bonneville, Paris, 1806.)

F. E. A.

EDEN, SIR FREDERICK MORTON, Bart. (1766-1809), graduated at Oxford, and was chairman and one of the founders of the Globe

679

Insurance Company. Eden's independent position was favourable to his completing, in the thirty-second year of his age, his principal work, involving much study and expensive research, The State of the Poor. This book, called by M'Culloch, "the grand storehouse of information respecting the labouring classes of England," entitles its author to rank with Arthur Young as one of those immediate successors of Adam Smith who best developed the inductive branch of political economy. The importance of facts as a foundation of theory is insisted on in the preface and opening pages of this work (p. xxix and p. 4); "These and many similar questions [relating to the poor laws] cannot, as it seems to me, be fully and satisfactorily answered, unless many minute circumstances are previously stated, which have rarely been sufficiently attended to in the plausible and ingenious but unsolid speculations of several merely theoretic reasoners." Such writers "voluntarily impose upon themselves the task, so much and so justly complained of by the Israelites, of making bricks without straw." "The edifice of political knowledge cannot be reared without its 'hewers of stone' and 'drawers of water.' I am content to work among them." "I have purposely and almost wholly abstained from drawing conclusions from the facts here presented to the public." Fortunately not "wholly." In the first chapter of his second book Eden discourses freely "of national establishments for the maintenance of the poor, and of the English Poor Laws, and of Mr. Pitt's proposed bill for the better relief of the poor." His reflections upon the events and opinions which he records are just and striking : for instance, on the "fathers of the poor,' whom CHILD (q.v.) proposed to create, "not only clothed in the garbs, but vested with the powers of papal inquisitors" (p. 188); or, with reference to Henry VIII.'s confiscations, on the danger of reposing confidence in "the most specious promises made by any reformers by violence, whether they be overbearing despots like Henry the Eighth, canting Puritans like the parliament and their adherents in the time of our First Charles, or blustering and boastful constitution-mongers like many of the modern revolutionists." Although Eden declares, "I have never wasted that time in polishing a sentence which I thought I could better employ in ascertaining a fact," he enhances by considerable literary attractions the curious and important information which he has collected.

The subjects which Eden principally dealt with are sufficiently indicated by a title which is almost a catalogue: The State of the Poor, an history of the labouring classes in England from the Conquest to the present period, in which are particularly considered their domestic economy with respect to diet, dress, fuel, and habitation, and the various plans which from time to time have been proposed