to a system which traced all national wealth to agriculture, as the English writers were inclined to assume that foreign commerce was the only mode by which a nation could acquire wealth. In England, speculation confined itself almost exclusively to the interests of the foreign merchant. The French economic theories were the work of men who had before them a highly centralised government, and whose aim it was to simplify the administrative system. They opposed cumbrous restrictions, but were generally of absolutist tendencies, for the central power was to be invoked in order to overpower the obstacles of local prejudice and corrupt interest. The direction of their enquiries towards an investigation of the primary sources of wealth rather than the mere ebb and flow of foreign trade, their intellectual tendencies and their position in a centralised government, encouraged them to treat the subject in a more systematic method, and to raise profounder questions than those which occupied their English contemporaries. We are in presence of men who are not merely treating upon some external conditions of commercial prosperity, but have their fingers upon the main arteries through which the life-blood of the country is propelled from the centre to the extremities. They are not asking whether the ports should be open to more or less silk and tobacco, but what is the nature and distribution of the wealth by which the whole nation is supported.

22. There is, such is their most fundamental and valuable proposition, a certain natural order of society, independent of all legislation, and the recognition of which is the essential condition of all sound legislation. The Natural and Essential Order of all Political Societies' is the title of a treatise published by Lemercier de la Rivière in 1767; and the same doctrine is assumed, though less pretentiously expressed, in all their writings. To explain this order we must determine what is the true nature of the various industrial functions of the social organism. For, as they saw, the complexity of modern society had, in fact, given rise to the most complete misconceptions of the real tendency of many operations. Political economy, as I have said, begins with the division of labour, and the consequent differentiation of classes; and Turgot, like Adam Smith, begins his treatise by pointing out

the nature of this process. But so soon as the various functions are distributed amongst different classes, it becomes easy to misunderstand their true nature. Hasty observers had confounded operations productive of national and of merely personal wealth-between labour which adds to the total amount of valuable articles existing in the world, and labour which only enables a man to appropriate part of the wealth which would have existed without him. One form of this confusion, as we have seen, was the fallacy connected in England with the name of Mandeville. In France, the contrast between the luxurious or profligate expenditure of the government and the upper classes, and the poverty of the producers of wealth, had made the problem one of vital interest. Was the rich consumer really a benefit to the country? Who were to be rightfully regarded as mere parasites upon society, and who as contributors to its resources? If in some cases the line could be easily drawn, in others the question presented a real complexity. In an estimate of the national wealth, to count both the revenue of the master and that of the menial servant who depended upon him would obviously be to count the same portion twice over. To avoid such errors it was desirable to mark off the different classes of labour as unmistakably as possible. Practical consequences of immense importance would result from a clear theory. We may regard the national revenues as a reservoir which is being constantly filled and then flowing through innumerable channels to each of the numerous units of which society is composed. We have to distinguish between the perennial springs which fill the reservoir and the streams by which it is steadily drained. To solve this problem is to discover the natural order of society. The system of taxation had hitherto, so the economists taught, been grounded upon a false anatomy. The simplest and best plan would have been to draw the needed supplies directly from the head fountain. The actual practice was to collect them by driblets from the channels through which the wealth afterwards percolated. The plan involved not merely a cumbrous machinery, but an injurious system of vexatious restrictions. All manner of sluices and stops had to be provided to facilitate the collection of taxes; subsidiary interests were set up conflicting with the true.

interests of the nation, and illusory theories invented to justify arbitrary interference with the natural orde.. To sweep away the whole system, to leave the greatest possible liberty to the natural development of industry, to take away the grasp of the tax-gatherer from the minute vessels of circulation, and to send him directly to the original sources of wealth, was the object of the economists. Such an attempt indicates an advance in the philosophical conception of the study, as it harmonised naturally with their other theories of a philosophical reconstruction of the political order. Unluckily their method was still erroneous, and the error which vitiated Quesnay's arguments was indorsed with curious unanimity by his able followers.

23. What is the distinction, they asked, between productive and unproductive, or, as Quesnay called it, sterile' labour? The answer seemed to follow from some obvious reflections. Political economy begins with the division of labour; the division of labour implies exchange of the products of labour; and an article which is exchangeable is said to have value. Political economy, then, must be the science of value, value being the common quality of all the objects with which it deals. But in this simple theory there already lurks a fallacy. One of Adam Smith's most important remarks consists in the distinction between intrinsic value and exchangeable value. The worth of anything, according to one definition, is what it will fetch; its worth, according to the other, depends upon the number and importance of wants which it will supply. Things which have the highest value in one sense may have the lowest in the other. Air, according to the familiar illustration, has no exchange value, because everybody can get as much as he wants; and has the highest intrinsic value, because nobody can do without it. The two conceptions are radically distinct, though most intimately connected; and a theory of political economy which neglects the distinction must be defective in essential points. The French economists constantly overlook the difference, and the error is characteristic of the stage of speculation. The economists had seen through the vulgar fallacy which identified wealth with money. Gold and silver, they perceived, were merely articles of commerce, and formed but an insignificant item in the whole wealth of a

nation. But when for money they had substituted the abstract conception, value, the statement, though apparently more philosophical and leading to very simple conclusions, was still tainted by the old fallacy. An increase of value, like an increase of money, might be significant not of a real increase of national resources, but of an increased power of one part of the community over another. The French reasoners had ceased to regard the world through the eyes of shopkeepers. They had not yet risen to a thoroughly scientific point of view. A complete sociology, in fact, would exhibit the relations of different parts of the organism as ultimately determined by the external conditions to which it is subject, or, in other words, by the mode in which the wants of men must derive satisfaction from the external world. It must, that is, take into account the intrinsic, as ultimately determining the exchange, values of commodities. Men who regard political economy not as a branch of sociology, but as a theory of 'catallactics,' implicitly assume that it is unnecessary to look outside of the organism itself to determine the conditions of exchange. They, therefore, take the relative term to have an absolute value; and hold that the value, which is merely an index of the difficulty of obtaining a certain useful commodity, is a sort of inherent quality, indicative of a certain natural 'pre-eminence' of that commodity over others.

24. The confusion manifests its nature so soon as we endeavour to determine a law of value from this conception. Turgot, for example, states with perfect clearness that theory of the relation of supply and demand which had been given in his own phraseology by Locke, and which is, in fact, nothing but a generalisation of the familiar truth, known in the days of Joseph, that scarcity and plenty correspond to dearness and cheapness. The inadequacy of the statement to supply a true law of price is obvious from a simple consideration. The formula, in fact, that price must equalise supply and demand gives a condition of equilibrium, but does not fix the point at which equilibrium will be established. It tells us that, given a certain demand, the supply and the price will regulate themselves accordingly; but it does not help us to determine what the demand will be under any given circumstances. To solve this problem we have to take into ac

count another order of conditions, and, in fact, to consider the intrinsic value of the various commodities under consideration. We must pass, that is, from the 'catallactic' to the sociological point of view. Locke, for example, had already pointed out the very important fact that a diminution of supply would generally raise the price of necessaries more than the price of luxuries. Since everybody must have bread and water, the effect of straitening the supplies will be much more conspicuous in such cases than in the case of some luxury with which men can dispense at the cost of a little vanity instead of actual starvation. The remark leads the way to a whole series of observations, which lie beyond the sphere of pure catallactics. We have to examine the limitations imposed upon the growth of a given population by the limits of its territory, the alterations of its internal constitution by the appropriation of certain parts of that territory, the varying difficulty of raising different kinds of produce, and, in short, to solve a number of problems which imply that the doctrines of Smith must be supplemented by those of Malthus and Ricardo.

25. In the absence of any clear perception of this want, I the French economists seem to be studying the action of the several forces without considering them as limited by a certain base of operations. They seem to assume that the internal laws of growth may be treated satisfactorily apart from any reference to the medium from which it derives its existence. Thus the organism appears to be, so to speak, in the air, and capable of extending with equal facility in every direction. Hence follows the peculiar dogma with which their name is generally associated. Locke and Davenant 2 had thrown out the opinion that all taxes fall ultimately upon the land. In their writings this merely indicated a vague perception of the solidarity of all industrial interests, and an impression that, as land was in some sense the basis of all wealth, and the ownership of land the base of political power, the landowners must be affected by every burden imposed upon other classes. By the French economists the doctrine was worked into the

1 Locke, iv. 31. See the same principle well stated by Sir J. Steuart, i. 388, and elsewhere.

2 Locke, iv. 55; Davenant, i. 77, 269.