The British Economists
J.S. Nicholson
from The Cambridge Modern History, volume 10
1907


    The Wealth of Nations was published in 1776. The work was
based on lectures which formed part of Adam Smith's course of
Moral Philosophy when Professor in the University of Glasgow
(1752-63). After resigning his Chair, Smith travelled on the
Continent for three years as tutor of the duke of Buccleuch. A
considerable part of the time was spent in Paris, where he made
the acquaintance of Quesnay, the founder of the Physiocratic
system, which Smith described as "with all its imperfections
perhaps the nearest approximation to the truth that has yet been
published upon the subject of political economy." On returning to
Scotland, Smith settled at Kirkcaldy, and for the next ten years
devoted himself entirely to the composition of his great work. It
ran through several editions during his lifetime; but, although
he made many small alterations, he introduced no substantial
changes and only added one new chapter. 
    The social conditions and institutions of his time (1723-90)
which chiefly affected, or modified the proportions of, "the
wealth of nations," were, first and foremost, the survivals of
medieval regulations and ideas in the governmental management of
home industries and the predominance of the Mercantile System in
foreign trade and colonial policy. In consequence, a large part
of the work of Adam Smith was critical and destructive. "Laws
frequently continue in force long after the circumstances which
first gave occasion to them, and which could alone render them
reasonable, are no more." Large estates, supported by
primogeniture and entails, might have been necessary under the
insecurity of the feudal system; but in the actual state of
Europe the proprietor of a single acre was as secure as the
proprietor of 100,000. The survivals of feudal institutions
checked the improvement of agriculture. "After small proprietors,
rich and great farmers are in every country the great improvers."
Feudal survivals checked the subdivision of land and the
establishment of peasant proprietors and yeomen, and checked also
the investment by large tenant farmers of capital in land. Smith
allowed that the land system in England was less hurtful than
that prevailing in most parts of Europe; but he is hardly just to
the "spirited landowners" of the seventeenth and eighteenth
centuries. The reform of the land laws has, however, proceeded in
England on the lines laid down by Adam Smith; freedom of transfer
has been promoted, settlements have been restricted, and the
security of the tenant's capital has been increased. Cobden
declared that in the reform of the English land laws he would
rely entirely on the teaching of Adam Smith. Labour, like land,
in Adam Smith's opinion, remained in fetters or in
leading-strings no longer required. The Statute of Apprenticeship
(or Artificers), 5 Eliz. cap. 4, and the customs which enforced
the same ideas, imposed restrictions on the advancement of labour
and the "ill-contrived" laws of settlement limited its mobility.
Combinations of masters were tacitly if not openly permitted,
while those of labour were suppressed. Adam Smith advocated free
trade in labour as in land. 
    With regard to capital, although he held strongly that, from
the national stand-point, there were differences in the relative
advantages of employing capital in different ways, he still
considered that the direction of private people as to the
employment of their capital could be "safely trusted not only to
no single person but to no council or senate whatever." His view
that the State should not attempt to direct the employment of
capital is the more remarkable because he did not think profit,
by which individuals are guided, was the measure of national
advantage. On the contrary he maintained that, with equal or
nearly equal profits, there might be great differences in
national advantages. The most remarkable frustration of this
doctrine is the argument that the monopoly of the colonial trade
had, by raising the general rate of profit, affected adversely
the national interests, and even the separate interests of the
three great classes which make up the nation-labourers,
capitalists, and landlords. Of all employments of capital, that
in agriculture was by him considered the most advantageous to a
nation; but "those systems which, preferring agriculture to all
other employments, in order to promote it impose restraints on
manufactures and foreign trade, act contrary to the very end
which they propose and indirectly discourage that very species of
industry which they mean to promote." Adam Smith condemned
equally the laws intended to prevent speculation and those
designed to regulate the inland trade in corn; he condemned alike
the bounties intended to encourage the export of corn and the
extension of the area under cultivation, and the restraints on
the importation of foreign corn. 
    The main part, however, of Adam Smith's criticism was
directed against the regulations framed for the management and
direction of foreign and colonial trade, which are generally
summarised under the title of the Mercantile System. In his
Fourth Book he examined the foundations of this system,
especially from the point of view of the encouragement alleged to
be given to home labour and the promotion of native industries.
He attacked the general theory of the balance of trade, and then
examined in detail, with an abundance of historical and
statistical illustrations, the various expedients by which it was
sought to attain a favourable balance: restraints on imports,
encouragements to exports, commercial treaties, and the
exploitation of colonies. It has been well said by Adolf Held
that anyone who reads the Book carefully will find in it a
wonderful picture of the whole social relations and of the state
of the economic and financial legislation of England about the
middle of the eighteenth century-and he might have said, not only
of England, but of the whole world. On surveying mankind from
China to Peru, Adam Smith discovered an enormous mass of what he
considered useless or harmful regulations, not merely, as is so
often supposed, from what List calls the cosmo-political point of
view, but from that of the various nations concerned. He set
himself to cut away these growths and give free play to the
natural economic forces. And the conclusion of the Fourth Book is
that, "all systems either of restraint or preference being thus
completely taken away, the obvious and simple system of natural
liberty establishes itself of its own accord."
    This passage, divorced from its context, has often been
quoted to show that Adam Smith was the founder and supporter of
the most extreme form of laisser faire. But, before examining
this popular error, it is desirable to recall briefly other
historical conditions and events by which his work was naturally
influenced. While he was living the life of a recluse at
Kirkcaldy, on one side of the world the British Colonies were
being driven to rebellion, and on the other the races of India
were being brought under British dominion. Naturally some of the
longest and best chapters in the Wealth of Nations deal with
British policy as regards the Colonies and India. No part of his
work is better calculated to show that Adam Smith did not
consider it the duty of British statesmen simply to let India and
the Colonies look to themselves. On the contrary, as a basis of
colonial policy, he expounded a most elaborate and far-reaching
scheme of imperial federation involving imperial taxation with
imperial representation; and, as regards India, he maintained
strongly that a company of merchants was unfitted to exercise the
functions of government. With respect to European policy, the
most noticeable feature of Adam Smith's position is his advocacy
of better trade relations with France. Until his time the
commercial relations of the two countries had been marked by
animosity and distrust, evidenced by heavy duties and
prohibitions. The treaty negotiated by Eden (1786) was the direct
outcome of Pitt's approval of Adam Smith's teaching, though the
wars which ensued from political causes did not permit the fruits
to be seen. Adam Smith also strongly approved of a union with
Ireland on the lines of the union with Scotland. "By a union with
Great Britain, ireland would gain, besides the freedom of trade,
other advantages much more important, and which would much more
than compensate any increase of taxes that might accompany that
union."
    Attention has been directed in the first place to the
critical or negative side of Adam Smith's work, because by that
he is best known popularly, and because this side of his teaching
has possibly had the greatest influence on practical policy. But
on the positive or constructive side the Wealth of Nations has
had very great influence in the development of economic science
and in the enunciation of ideas of far-reaching effect. 
    In the positive as in the negative part of his work Adam
Smith made equal use of the two methods or rather kinds of
methods on the relative merits of which a great controversy was
raging a century later. Adam Smith's treatment was on the one
side abstract, deductive, hypothetical, a priori, and on the
other it was positive, inductive, historical, comparative; but in
his mind there was no opposition between the two methods, and
they are always complementary. We find abstract theories on land
and labour so strongly expressed that they have been taken as the
basis of the most extreme forms of socialism; but, with Adam
Smith himself, the constant reference to history and experience
makes them the "promoters" not of sudden and violent revolutions
but of gradual and peaceful reforms. Two frustrations may be
offered: one general, the other particular. After bestowing on
Quesnay. the eulogy already quoted he goes on to say in effect:
Quesnay, who was himself a physician, and a very speculative
physician, seems to have imagined that the political body (like
the human body) would only thrive under a certain precise
regimen, the exact regimen of perfect liberty and perfect
justice. But if, Adam Smith objects, a nation could not prosper
without the enjoyment of perfect liberty and perfect justice,
there is not in the world a nation which could ever have
prospered. Adam Smith maintains that in the body political as in
the body natural a considerable margin of variation from
standards of perfection is compatible with health. In particular
he considered that to expect the perfect establishment of free
trade in Britain was utopian; and of the system of the Corn Law
of his day he remarked that with all its imperfections we might
say of it what was said of the laws of Solon, namely, that,
though not the best in itself, it is the best which the interest,
prejudices, and temper of the times would admit. 
    Adam Smith's contributions to abstract theory were in fact so
great that a leading representative of the mathematical method
has asserted that his chief work was the application of the idea
of measurement to economic motives, and that he used history and
experience simply for illustrations of his theories. it may be
shown, however, that alike in its general plan and in the
treatment of particular topics, the Wealth of Nations is
dominated by the historical method. No merely abstract treatment
could reveal the meaning and the importance of the change from a
natural to a money economy, which may be said to be the economic
counterpart of the formula of "progress from status to contract."
No mere theory of capital would have sufficed to show the
increasing predominance of capital as compared with land in the
distribution of economic power. Paradoxical as it may seem, the
constant reference to history widened rather than restricted the
application of economic theory. Adam Smith applies his theories
to churches, to Courts of justice, to navies and armies, to
education in the most extended sense of the term, and to the
development of all kinds of social institutions in which economic
or money considerations are of importance. His account of the
fall of the medieval Church is in remarkable conformity with the
latest historical judgment. The main cause was that the Church
had ceased to give value for the money received. Rome had made a
monopoly of religion and applied the principles of monopoly to
the distribution of her services. 
    Adam Smith often speaks of labour, and of the price of
labour, as if labour were a commodity like other commodities;
but, taking his treatment as a whole, owing to historical
influences he is more humane than any of his immediate
successors. In opposition to the prevalent ideas of the time, he
insisted on the "economy of high wages," and warned masters and
men of the dangers of over-pressure. In his survey of political
economy considered as a practical science, he places first the
provision of a plentiful revenue for the masses of the people. He
was the author, except in name, of the theory of the unearned
increment, and argued that, wherever they could be got at, the
gains of monopolists should be subject to differential taxation.
The most decisive test of the prosperity of a nation is the
advance in the numbers of the people; and the reason is not any
admiration for mere numbers, but because, to Use the modern
phrase, with increasing population the law of increasing return
comes into play, and with an increase of numbers there is an
increase of general prosperity. There are indeed constant
references to the dictates of common humanity. Education should
be universal and compulsory, not because it would add to the
economic efficiency of labour, but because it would add to the
dignity and worth of mankind. It is the duty of the Government to
encourage the military virtues of the people, not simply for
defence, but also on account of the improvement in their manhood;
"cowardice is as loathsome a disease as leprosy," and should be
as effectively guarded against. 
    This broad humanity of Adam Smith might, perhaps, be
suggested by philosophy; but it was made a living thing by
history. In the same way his treatment of capital was dominated
by the historical method. He realised the growing importance of
capital in economic progress; but he realised also the growing
danger of its abuse. His attitude of distrust towards the
capitalist as the adviser of the legislator is in marked contrast
to that of his immediate successors. "The interest of the dealers
in any particular branch of trade or manufactures is always in
some respects different from and even opposite to that of the
public.... The proposal of any new law or regulation of commerce
which comes from this order of men ought always to be listened to
with the greatest precaution, and ought never to be adopted till
after having been long and carefully examined, not only with the
most scrupulous but with the most suspicious attention." He is
much more favourable to the landowners and capitalist farmers:
"they are, to their honour, of all people the least subject to
the wretched spirit of monopoly." And yet in his analysis of rent
he says it is naturally at a monopoly price. it is not
proportioned to what the landlord may have laid out on the land,
but to what the farmer can afford to give. The landlord exacts
rent from land that is incapable of improvement; he exacts it
even from the sea. With regard to property in land we have the
often-quoted expression on entails, that they are founded on the
most absurd of all suppositions, the supposition that successive
generations of men have not an equal right to the earth and to
all that it possesses. 
    In accounting for the prosperity of colonies we are told that
in the old countries rent and profit eat up wages, and the
expenses or the extortions of governments are heavy, while in new
countries wages are high. Here we have the application of the
more general proposition that forms the introduction to the
treatment of wages. "The produce of labour constitutes the
natural recompense or wages of labour." In the original state of
things, which precedes both the appropriation of land and the
accumulation of capital ", the whole produce of labour belongs to
the labourer; he has neither landlord nor master to share it with
him." Then, again, Adam Smith adopts with emphasis the labour
foundation of property. "The property which every man has in his
own labour, as it is the original foundation of all other
property, so it is the most sacred and inviolable." He avoided,
however, the extravagances to which later socialistic writers
pushed these doctrines, partly because his analysis though less
formal is more thorough, and partly because he always tested his
philosophy by history. "The original state of things was at an
end long before the most considerable improvements were made in
the productive powers of labour; and it would be to no purpose to
trace further what might have been its effects upon the
recompense or wages of labour." Rent and profit very soon began
to eat up wages. 
    With Adam Smith, moreover, it must be remembered, in
connexion with the development of socialistic doctrines, that he
always used the term "labour" in the widest sense. It was applied
to the highest offices and professions; and perhaps the only
notable exception is that in the analysis of profits the element
of wages of management is reduced to much less importance than is
the case with other economists. In fact, we are told that wages
and profits are altogether different; and, conversely, that the
reward of the capitalist or employer is not due mainly to his
labour. 
    The Fifth Book of the Wealth of Nations is entitled: "Of the
revenue of the sovereign or commonwealth" but in reality it
treats of the economic functions of. the State and forms the
necessary complement to the obvious and simple system of natural
liberty which is erroneously interpreted to mean unqualified
laisser faire. In this Book, it is true, we also find a
destructive criticism of many existing financial and legislative
expedients; but in it the foundations are laid of a reformed
system which certainly cannot be described as the
"individualistic minimum." In forming an accurate idea of Adam
Smith's attitude towards the general doctrine of laisser faire it
must also be borne in mind that the Wealth of Nations forms only
a part of his whole system. He had published previously the
Theory of Moral Sentiments, the foundation of which is sympathy;
and he tells us in the preface to the latest edition that he had
drawn up the plan of a separate work on the philosophy of law and
government. It is usual to regard Adam Smith as the founder of
political economy in the modern sense of the term, because he was
the first to make a definite study of the wealth of nations apart
from other objects of social or political union. It does not
follow that in his view wealth is to be considered as of
fundamental importance, to the exclusion of these other objects;
and the contrary may be easily shown from many noticeable obiter
dicta in the Wealth of Nations itself. "Defence is of more
importance than opulence"; and the recommendation of the simple
and obvious system of natural liberty is conditioned by the
reservation that every man should be left perfectly free to
pursue his own intent in his own way, both as regards industry
and capital, only so long as "he does not violate the laws of
justice." The ideas of justice and humanity are, with Adam Smith,
always of greater cogency than the ideas of opulence or property.

    The Wealth of Nations has given rise to a voluminous
literature both critical and expository. Probably no work of
importance in economics has since been written which has not been
directly or indirectly influenced by it. And yet the freshness of
the original has survived like that of a work of nature; it is,
in short, one of the rare great creative works of genius. It
still stands unrivalled as the foundation of economic science;
though improvements have been made in every part taken in
isolation, it still holds the field as the best general survey,
especially for the student of history. Much labour has been
devoted to showing that Adam Smith was not original, that all his
doctrines are to be found in earlier writers. Even in the narrow
literal sense this charge of want of originality can hardly be
maintained. The discovery and publication of the notes of his
lectures in the University of Glasgow show that he had already
given to his students the ideas he was supposed to have taken
from Quesnay and the Physiocrats during his stay in France some
years later. It is no doubt true that many of his criticisms of
the mercantilist position had been anticipated so early as the
seventeenth century; and that even the benefits of free trade and
the advantages of division of labour bad been observed and
described. Nicolas Barbon in his work A Discourse of Trade (1690)
had insisted that imports must of necessity be paid for by
exports; and Sir Dudley North in his Discourses upon Trade (1691)
had argued that money was distributed amongst the nations
according to their economic needs for it through the adjustment
of prices, and had maintained that the classes in any nation, and
also the different nations constituting the commercial world,
were bound together by a solidarity of interests, and that
absolute free trade was the best means to the acquisition of
wealth. The general argument for free trade was still more
emphatically stated by the French economist, Marquis d'Argenson,
in an essay published in the Journal Oeconomique (1751). To him
is ascribed the first statement of the rule "ne pas trop
gouverner" and of the still more famous "laisser faire."
    The movement of trade should be as free as that of the air;
all Europe should be organised as one market ; public security
should be maintained; and then "laissez faire, morbleu, laissez
faire." In the same way, before Adam Smith there was a vast
literature -- largely, it is true, in pamphlets and fugitive
writings -- on every important topic treated in the Wealth of
Nations: e.g. the nature of usury and interest in the modern
sense, the canons of taxation, the foundations of banking and
credit, public debts, population, etc. And although Adam Smith is
very sparing in quotations of the names of authors, he had read
everything bearing on his subject and worked up all that he
considered of value into his own argument. Apart from these
special studies of economic problems, there had been before Adam
Smith expositions of political economy as a science, notably by
Richard Cantillon, whose work written 1730-4 (Essay on the Nature
of Commerce at large), and first published in 1755, is pronounced
by Jevons to be the first systematic treatise of political
economy. Cantillon's work had been handed about in manuscript,
and had largely influenced Mirabeau and the Physiocrats; and he
is one of the few writers whom Adam Smith quotes by name. Turgot
separated economics from jurisprudence in his Reflections
(published 1769) on the formation and distribution of wealth, a
work of which a too partial biographer has said that it contains
in a short compass all that is of value in the Wealth of Nations
"without its tedious prolixity." Quesnay had died two years
before the publication of Adam Smith's work, which it is recorded
it was the intention of the Scotchman to dedicate to the
Frenchman; and Quesnay's first article had appeared in 1755.
david Hume, whose Political discourses were published in 1752,
was Adam Smith's most intimate friend. He treated of some of the
most general problems of economics; and his writings are to a
great extent in accord with those of Adam Smith, though they
differ in details. Sir James Steuart's Inquiry into the
Principles of Political Oeconomy (1767) attained a considerable
reputation in England at the time; and in recent years attempts
have been made to reestablish his reputation. He is generally
described as a moderate mercantilist, though in many points he
emphasises as clearly as Adam Smith the benefits of
individualism. 
    Enough has been said to illustrate the position now accepted
that neither in its general scope nor in the details of the work
was the Wealth of Nations entirely due to the inventive genius of
one man. Even the breadth of view by which Adam Smith compares so
favourably with his successors must be ascribed largely to the
training he had received in philosophy and jurisprudence. And
yet, when all allowances have been made for the materials and the
influences of other sources, the Wealth of Nations must be
considered one of the greatest of original works, epoch-making
and path-breaking in the fullest sense of the terms. If Adam
Smith knew how to absorb and assimilate, he knew also, what is
infinitely harder, how to reject and east aside. He accepted
nothing on authority; whatever its origin or suggestion, every
opinion became part of his own living thought. This is no doubt
one reason why he makes so few references to other writers by
name. His reading had been absorbed in his thinking. If any of
Adam Smith's predecessors have had any influence either on the
practical economic policy or on the economic theory of the
nineteenth century, it is chiefly in so far as their work became
part and parcel of the Wealth of Nations. Adam Smith is quoted
more than all previous authorities put together.
    The success of the Wealth of Nations was immediate, and,
considering the nature of the work, unprecedented. Smith, it must
be remembered, had already made a European reputation by his
Theory of Moral Sentiments; and besides he was in touch with the
greatest men of the time in letters, thought, and politics. The
story is well known of the dinner of celebrities to which Adam
Smith came late, and was received by the whole company rising and
with the greeting by Pitt, "We will stand till you are seated,
for we are all your scholars." Had it not been for the continued
and exhausting wars into which the country was plunged, there is
no doubt that Pitt would have inaugurated the era of free trade.
The popular idea that free trade is to be ascribed entirely to
the influence of Cobden and the Anti-Corn Law League is quite
erroneous. The ideas of Adam Smith were beginning to dominate
political thought on economic affairs in the early years of the
nineteenth century. Two documents are of special interest in this
connexion. There is, first, the protest against the Corn Law of
1815 drawn up by Lord Granville and subscribed by ten peers and
entered in the Journals of the House of Lords. Here is one
phrase: "Because we think that the great practical rule of
leaving all commerce unfettered applies more peculiarly and on
still stronger grounds of justice as well as of policy to the
corn trade than to any other." There is, secondly, the petition
of the London merchants drawn up by Thomas Tooke, the celebrated
author of the History of Prices. This document, inter alia,
"showeth, that freedom from restraint is calculated to give the
utmost extension to foreign trade and the best direction to the
capital and industry of the country." The petition was presented
to the House of Commons in May, 1820. 
    In the early part of the nineteenth century, however, it was
mainly through his influence on Ricardo that Adam Smith affected
the commercial and economic policy of England. It has so long
been the custom to look upon Ricardo as the originator of the
abstract deductive method in political economy and the propounder
of certain unpopular theories which have been pushed to an
extreme by other writers, that his influence on the practical
politics of England and thus on English history has been
underrated and almost forgotten. His theories were popularised by
John Stuart Mill, who in any conflict of opinion between Adam
Smith and Ricardo always preferred the latter. Mill, however,
unfortunately had neither the historical knowledge of Adam Smith
nor the practical acquaintance with business of Ricardo, so that
he was inclined to pay too little attention to the modifications
expressed by Adam Smith and implied by Ricardo. To understand the
historical influence of Ricardo, it is necessary to pass over the
popular adaptation by Mill of his doctrines and to take account
of the personality and conduct of the man. David Ricardo was the
son of a Jew who early in life had migrated from Holland and
settled in this country. He was educated partly in England and
partly in Holland; and, as his friend and biographer McCulloch
states, classical learning formed no part of his early
instruction. In fact he was trained solely for business, and
began to be confidentially employed by his father in the business
of the Stock Exchange when he was only fourteen years old. From
his youth up Ricardo was a fearless and independent thinker. In
spite of his personal Section for his father, much against his
father's will he abandoned the Jewish faith, and about the age of
twenty-one married and began business on the Stock Exchange on
his own account. In a few years he had made a fortune. His
success at the time was unequalled; and, long before he was known
to the public, he was regarded as one of the ablest men of
business of his time. He first read Adam Smith in 1799, when he
was twenty-seven years of age. Ten years later he wrote the
letters on currency which were afterwards republished in pamphlet
form with the title, The High Price of Bullion a Proof of the
depreciation of Bank Notes. It was this tract which was the
principal cause of the appointment of the Billion Committee; and
the celebrated report of that body is based almost entirely on
the opinions of Ricardo. His reputation was much raised by his
controversy with Charles Bosanquet on the theory of currency and
of the exchanges (1810-1); and about this time he became intimate
with James Mill and Malthus. 
    James Mill began the process of over-emphasising the abstract
character of Ricardo's principles in the lessons he gave to his
much enduring son, so that Ricardo was impressed on the younger
Mill from the beginning of his economic training. For the
present, however, we are concerned with the practical influence
of the real Ricardo. In 1816 he published his Proposals for an
Economical and Secure Currency, with Observations on the Profits
of the Bank of England. The idea was to issue notes not against
sovereigns, but bars of standard gold bullion. The plan was
approved by Robert Peel and was actually carried out. It broke
down on the allegation that the one-pound notes were extensively
forged. In the meantime Ricardo had begun to write on the price
of corn and the Corn Laws. During the discussions on the Corn Law
Bill of 1815, he argued in favour of giving greater freedom to
the corn trade, as against Malthus, who advocated greater
restrictions. Ricardo's views on the Corn Laws found their final
expression in the tract entitled Protection to Agriculture. He
proposed that the duty should be gradually reduced until it
reached ten shillings a quarter, which he thought was justifiable
by way of compensation to the English landed interest for the
public burdens imposed on land. The Principles of Political
Economy and Taxation was published in 1817; and in 1819, he
entered the House of Commons. His first speech, made in response
to loud calls from all parts of the House, was on Peel's
resolutions on the resumption of cash payments. From this time
till his death (1823) his opinion on economic or financial
questions was considered of the greatest weight; and he exercised
on these questions great political influence. 
    McCulloch has recorded that Ricardo was much more effective
in conversation than in writing, and that his speeches were
greatly superior to his publications. "His style of speaking was
easy, fluent, and agreeable." "Nothing could exceed the ease and
felicity with which [in speaking] he frustrated and explained the
most difficult questions in political economy." This evidence is
important because there is little doubt that, just as Adam Smith
had influenced Pitt, so Ricardo influenced Peel. The practical
difference was that, owing to the circumstances of the time, Peel
was better able to carry into effect the ideas of his master in
economics. To Ricardo, then, may be ascribed directly or
indirectly the principles which were adopted by Peel as the
foundation of his reforms in currency and banking as well as in
financial policy, though the Bank Charter Act was only passed in
1844, and the Corn Laws were repealed in 1846. The harsh and
crabbed style of Ricardo's writings, his excessive condensation,
his habit of purely abstract reasoning, his avoidance of
illustrations except those of hypothetical arithmetic, his
frequent transitions without notice from one set of assumptions
to another-these characteristics, with his want of literary
education, make his writings extremely difficult even to a
trained economist. His clearness of thought is unsurpassed, but
so also is the infelicity of his mode of expression. 
    Although Ricardo was the greatest exponent of Adam Smith's
theories, and was the connecting link between Adam Smith and
Peel, his name is now more often associated with the dogmas
which, by a natural reaction, gave rise to Socialism. His
abstract principles being taken without the qualifications always
expressed or implied, he was credited with the " iron law of
wages" on the one side and the theories of the continuous growth
of rent and the unearned increment on the other. If in the
natural progress of society wages were to tend constantly towards
the bare minimum of subsistence, the cost of labour to increase
by the increase in the cost of food, and profits were thereby to
fall, while the resort to inferior soils only benefited the
landlord, the ease for a revolution in a society so constituted
seemed not only plausible but reasonable. Even in pure economic
theory, in which the disturbing element of social sentiment was
not present, the difficulty of Ricardo's style led to
misunderstanding, as was long afterwards evidenced by the
onslaught of Jevons; and the rehabilitation of Ricardo has hardly
yet been effected to the extent demanded by his real
contributions to economic science. His analyses of cost of
production, of the incidence of various taxes, of the
determination of international values, all suffered from the
style in which they were presented; and in McCulloch and Mill,
his principal translators into common thought, he found admirers
too indiscriminate in their judgment. Fortunately it was Peel who
translated into practice his ideas on currency, taxation, and
free trade; and it is through Peel that Ricardo's political
economy became dominant in these departments of the national
policy. 
    The influence of Ricardo may be traced in the stress laid by
the so-called Manchester School on the importance of capital, and
in the neglect of the wider humanitarian ideas of Adam Smith on
labour; though personally Ricardo was the most charitable of men.
Much of the original thought of Ricardo is of interest mainly in
connexion with the development of economic theory, and not as
bearing on the history of the nation. He Was, for example, the
originator of the quantity theory of money; and, if he did not
originate the theory of economic rent, he placed it in such a new
light that it is generally known by his name. His explanation of
the distribution of the precious metals throughout the commercial
world, and his theory of international values, are among the best
examples of the classical political economy. His works will
always be read by the serious student of economic theory, not
only for their place in the history of thought, but for their
energising and stimulating qualities. Of all economists, Ricardo
is the most notable "agitator mentis." The Ricardian theory of
rent; resting as it does on the law of diminishing return to
land, is closely connected with the Malthusian theory of
population. The father of Malthus was a correspondent of
Rousseau, and a great believer with Condorcet in infinite
progress, and with Godwin in the perfectibility of mankind. At an
early age young Malthus took up the opposite side; and in 1798 he
published anonymously An Essay on the Principle of Population as
it affects the Future Improvement of Society. The leading idea
was that all schemes for the promotion of equality break down
through neglect of the tendency of population to outstrip the
means of subsistence. In the essay in this first form the
argument was mainly theoretical and was pushed to the extreme of
pessimism. But, under the influence of personal observations in
several of the countries of Europe and a more extensive reading
on the subject, he entirely recast the essay; and the new edition
appeared with his name in 1803, under the title, An Essay on the
Principle of Population or a View of its Past and Present Effects
on Human Happiness. The change in the title, with the
substitution of past and present for future, is significant of
the change from the deductive and abstract to the inductive and
historical method. The sixth edition, revised by the author,
appeared in 1826, three years after the death of Ricardo. 
    Malthus has, perhaps, suffered more than any great writer
from popular misunderstanding. His wide inductions have been
forgotten; and his principles have been perverted beyond
recognition. Malthus had been influenced from the first, not only
by the ideas of his time, but by the actual conditions that
prevailed in England. The old Poor Law was accumulating its evils
from year to year; and, owing to a variety of causes -- war, bad
seasons, Corn Laws, expansion of manufactures, and the increase
of the towns -- a large part of the population was always on the
verge of famine. The pressure of population on the means of
subsistence seemed a natural deduction from the law of
diminishing returns. And it was this easy deduction that under
the conditions of the time seized the popular imagination. The
theory of Malthus had much the same reception as later the theory
of Darwin, of which, indeed, it suggested the leading idea. But,
although Malthus was reviled, his work made a durable impression
on the understanding of those most interested, namely the
economists and the philanthropists. The effect is best seen in
that extraordinary combination of the two, Thomas Chalmers. His
treatise on Political Economy in connexion with the Moral State
and Moral Prospects of Society, published in 1832, is dominated
by the Malthusian theory. In an Appendix dealing with the Corn
Laws, Chalmers approves of their abolition, but argues in effect
that the cheapness of food would be of no benefit to the working
classes unless, under the influence of moral restraint, they
adopted prudential habits regarding the increase of population.
Chalmers, like Malthus, relied on education and religion; and,
again like Malthus, he relied for the relief of the poor on
voluntary effort, and in his parish in Glasgow applied his
principles in one of the most remarkable and successful social
experiments of the century. 
    On the whole, however, the doctrines of Malthus had more
influence on speculative thought than on practical politics. It
is true that he set himself to prove that the Poor Law had done
more harm than good; and the essay directly controverted the old
idea that people who had enriched their country with a number of
children should receive relief as a matter of right and honour.
But the evils of the indiscriminate relief of the old Poor Law
were not confined to the grant of bounties on the production of
children, even if illegitimate; and the general argument of the
essay in its final form was of far wider range. It cannot be said
that the Report of the Commission which led to the Poor Law
Amendment Act was governed by the influence and ideas of Malthus
as the Bullion Report had been governed by Ricardo. Malthus
proposed the gradual abolition of the Poor Law; but the Act
simply cut away the abuses that had grown up under lax
administration and what may be termed accidental legislation, and
really made the application of the old Elizabethan principles
more effective. The speculative influence of the essay, however,
was enormous. John Stuart Mill, who, without making any original
contribution to economic science, coordinated and restated the
old theories in such a way as to make them seem almost new, made
the theory of Malthus a principal part of his system, and carried
the practical applications far beyond the widest interpretation
of his master's teaching. Mill, indeed, set himself to prove,
that in general it was immoral to have a large family, and that
the example of the clergy was specially to be condemned. 
    In this way the application of the abstract method to the
principles of Ricardo and Malthus, without regard to the
circumstances in which they were propounded, and the
qualifications with which they were openly or implicitly guarded,
converted political economy, according to the popular
interpretation, into a truly "dismal" science. The humanity of
the real Adam Smith was forgotten or neglected; and his name was
attached to the purblind dogmas and narrow maxims which passed
for economic principles. In this way the authority of political
economy was used to oppose the factory legislation, under the
idea that it was, it was supposed to be proved contrary to the
system of natural liberty by the same authority that Trade Unions
could have no beneficial effects on wages, or rather, by checking
the accumulation of capital, tended to lower them; almost every
kind of industrial or commercial reform was opposed by some
interest or other as contrary to the laws of political economy.
McCulloch, who in most matters out-Ricardo'd Ricardo, proved on
economic principles that absenteeism from Ireland did no harm to
that country, and that it was a matter of indifference where the
Irish rents were expended. 
    And yet, in one department, the orthodox political economy in
its most extreme form had achieved a triumph so great that the
reflected glory, for. the time being, made the authority of the
science respected by the masses. The battle of Free Trade was won
by the insistence on certain broad principles, and by the
exposure of certain crude fallacies regarding the nature and
advantages of foreign trade: the arguments in both eases being
derived from the economists. It was of course necessary, in order
to give the economic ideas sufficient driving force, to free them
from the clogging effects of hypotheses and exceptions. And, as
it happened, the circumstances of the times in England were such
that what was required for practical purposes was insistence on
the general rule, and not the ingenious application of suitable
exceptions. England, it was urged, had nothing to fear and
everything to gain from the freest importation. Distance, it was
supposed, gave a sufficient natural protection to agriculture;
and the competition of foreign manufactures in the home market
was negligible. The manufacturers hoped that the free importation
of food would lower the cost of labour; and on the Ricardian
theory this meant a rise in profits. The labourers were told, and
in time began to believe, that wages would rise by the expansion
of trade and the greater accumulation of capital, while food
would fall in price, or at any rate be kept below the level which
it would otherwise have reached. 
    This popular interpretation of Ricardian principles was most
effective. It was proved that the only class who could benefit by
the import duties on corn were the landlords; and the landlords
already were gaining a continuous rise in rents, while they
slept, from the general progress of society. The interests of the
country were set against the interests of the towns; the country
was identified with the landlord, and the towns with the masses
of the people. A line was drawn from Inverness to London; and the
agricultural east was pitted against the manufacturing west.
During the Great War, the tariff had become so intricate and
complex, so all-embracing and burdensome, that almost any kind of
reduction was sure to do immediate good; and the movement for
reduction and simplification began five-and-twenty years before
the repeal of the Corn Laws. As a matter of fact, in nearly every
ease, every reduction of the tariff was followed by an expansion
of trade; and Peel had intended to repeal or largely reduce the
corn duties as part of his general policy of tariff reform. It is
beyond the range of the present chapter to consider the political
forces which led to the adoption in its extreme and simple form
of the doctrine of Free Trade, or to judge the part played by the
statesmen of opposing parties. The point of present importance is
that in popular estimation the battle of Free Trade was won with
the weapons taken from the economists. Cobden was never tired of
appealing to Adam Smith; and probably the influence of Ricardo
had been unconsciously working in Peel long before his actual
reforms. Peel, as was well said, had emphatically the
politico-economic mind; and his first great instructor had been
Ricardo. 
    Ricardo did not devote much attention to those parts of
political economy which lie on the borders of moral and political
philosophy, although he wrote in favour of an extension of the
suffrage and of election by ballot. In these more purely
political questions he was intent to follow Bentham, who had been
the intimate friend of James Mill, and is said to have called
himself the spiritual father of Mill, and Mill the spiritual
father of Ricardo. Ricardo emphasised with Bentham the importance
of security and of private property, and took for granted his
analysis of society into a mass of individuals actuated by
self-interest. Accordingly, the corner-stone of the orthodox or
Ricardian political economy came to be extreme laisser faire, and
the ideal, the minimum of governmental interference. Freedom of
competition and the pursuit of self-interest began to be regarded
not only as the necessary postulates of the deductive political
economy, but as the necessary conditions of national well-being.
And, although Ricardo is generally spoken of as if he were
dealing professedly with abstractions and hypotheses, there is no
doubt that he considered the economic forces, of which he
examined the actions and interactions, to be the great forces by
which the wheels of society were actually driven. He considered
that the main problem of political economy was to discover the
laws which determine the division of the produce of industry
amongst the classes which incur in its formation; and these laws
he deduced from the economic bases of individualism, competition,
self-interest, and private property. At the beginning of the
nineteenth century, as a consequence of the industrial
revolution, the old social organisations were broken up; and the
assumptions of individualism were nearly realised in the world
with which Ricardo was familiar in this world money-power and
capitalism were supreme. 
    The so-calLed orthodox political economy was so generally
adopted by the educated classes after the repeal of the Corn Laws
that John Mill's favourable attitude (in theory) towards
socialism came to many as a revelation of some quite new thing in
social philosophy. Godwin's Political Justice (1793) was indeed
known by repute, and Robert Owen had been celebrated both for his
ideas and his social experiments; but it has been only recently
recognised, largely owing to the researches of Foxwell and
Menger, that from the first there had been in England a reaction
against the anarchy of individualism and a movement towards
constructive socialism. Karl Marx indeed is shown to have derived
the leading ideas of Das Kapital from the early English
socialists who had been forgotten. Of this school Godwin may be
considered the father; and it is worthy of note that the youthful
Malthus had directed his first Essay against the reasonings of
Political Justice. Godwin considered the established system of
property as the root of all social evil; he desired to substitute
some system of equality, and to make the distribution of wealth
depend upon the wants or capacities of individuals. Godwin,
however, was an idealist who imagined that people could be
educated to realise that their true interest after their animal
wants were satisfied, was to be found in the knowledge of truth
and the practice of virtue. He had extraordinary notions of the
perfectibility of the human race even as regards the prolongation
of life; his intellectual optimism made his anarchical communism
quite harmless; but his ideas stimulated thought, and he has been
described by Foxwell as the Adam Smith of socialistic
speculation. But Godwin's socialism was the exact opposite of the
modern state socialism. He was, in truth, an anarchist and looked
to the dissolution of government and instituted authority as the
goal of all efforts at political reform. 
    Robert Owen (1771-1858) is perhaps the best example both of
the strength and the weakness of modern socialism. The son of a
shopkeeper, he began life in the retail trade; but, before he was
twenty years of age (1790), he became manager of a cotton-mill in
Manchester, and in this capacity was the first to introduce an
important change in cotton spinning. Four years later he started
a cotton-twist factory on his own account, and in 1797 acquired
for himself and partners the manufacturing business of D. Dale at
New Lanark at a cost of £60,000. He entered on the government of
this business on January 1, 1800, and at once began to put his
ideas of social reform into practice. During the whole period of
his management of New Lanark he conducted the business so as to
obtain large profits; and he must be considered as a successful
capitalist employer. He showed, however, by his own practice that
it was possible to earn large profits, and yet at the same time
to introduce great improvements in the conditions of the
employment of labour. For more than a quarter of a century public
attention was directed to Owen's work at New Lanark; and in this
way he contributed greatly to the initiation and development of
factory legislation and generally to the better education and
upbringing of children. His ruling idea was that "circumstances
formed character," and accordingly that the education of children
and healthy conditions of employment were the first requisites of
the efficiency of labour, as of moral well-being. He established
infant-schools, in the literal sense: prodding for children of
two years and later even for infants of one year at their
mothers' request. These infant-schools were the first of their
kind in the United Kingdom; and the example was largely followed.
Owen endeavoured to make the instruction mutual and recreative;
the pupils were to make one another happy; drill was prodded for
the boys, domestic economy for the girls, and dancing and singing
for both. As regards the adult workers, he imposed checks on
drunkenness, uncleanliness, and immorality; the fines imposed
were paid into the " support " fund, which was used for the
benefit of the sick and aged and those injured by accidents, and
was also contributed to by the workers out of their wages. He
established a common store, for which the goods were bought at
wholesale prices and, though of much better quality, were sold at
25 per cent. less than the usual rates and still yielded a
profit. The effects of these arrangements were seen in the
absence of convictions for crime, the disappearance of
dram-shops, and the encouragement of thrift. As regards religion,
Owen, considering his own speculative views, showed a large
toleration; he maintained a clergyman on the establishment at his
own expense, and allowed Bible-reading and Sunday-schools. 
    The project of a new institute for the formation of character
led to the break-up of the old partnership; and eventually, in
1814, he bought New Lanark for himself and another set of
partners for the sum of £114,000. Of these partners the most
noteworthy was Bentham; but several were Quakers, and it was the
opposition of his Quaker partners that, in 1828, led to his
retirement from the firm. The ideas applied by Robert Owen at New
Lanark were all shown by subsequent experience to be of great
practical value; and he must be always ranked as one of the
greatest pioneers in the industrial reformation of the nineteenth
century. His later schemes proved impracticable, and he spent
large sums on projects of what may be called "domestic"
socialism, as contrasted with modern ideas of state socialism-the
most famous being the community at New Harmony in Pennsylvania.
These more extreme ideas and projects, in spite of their failure,
had considerable influence on the growth of socialistic opinion,
and in this way served as the basis of the attack on the
Ricardian economics. 
    Charles Hall, in his profession as physician, was impressed
by the misery of the masses and the inequality in the
distribution of wealth. He published in 1805 a work On the
Effects of Civilisation on the People in European States. The
leading idea is that in the course of progress the rich become
richer and the poor poorer, which is also the leading idea in
modern so-called evolutionary socialism. Hall's remedy was what
would now be termed nationalisation of the land; and the method
which he proposed, in its essential features, resembled the
Russian village community. Hall's work had considerable influence
on the leaders of the Owenite societies, though it never attained
any widespread popularity. In the development of socialistic
ideas, William Thompson, though long overlooked, is now
considered to be the most eminent founder of scientific
socialism; and St Simon, Proudhon, Rodbertus, and Marx, are all
indebted to his works for their leading economic opinions.
Thompson was a pupil of Bentham, who regarded himself as the
spiritual begetter of Ricardo; and his argument rests on the
basis of utility and is presented with formal enumerations and
elaborate classifications in the style of his master. But, while
Bentham never advanced beyond the stage of philosophical
radicalism and was specially opposed to systems of equality,
Thompson was a supporter of Robert Owen's communistic schemes. 
    In Thompson the socialistic reaction against the Ricardian
political economy is strongly marked. He accePted the Ricardian
analysis of actual social conditions; and, even as regards the
distribution of wealth, he insisted on the freedom of labour and
the freedom of the exchange of the products of labour as natural
laws, as fully as the most extreme supporter of laisser faire. In
fact, like Godwin, he showed a strong preference for voluntary
methods of reform and relied much on the possibilities of
education. But, instead of taking it for granted, as Ricardo
does, that the present system of private property and competition
must continue, he makes the deduction that it ought to be ended.
Under the present system all wealth is the creation of labour;
things are valuable in proportion to the quantity of labour
required for their production; and therefore labour has a natural
right to the whole product of labour. But, owing to the iniquity
of present social arrangements and institutions, labour obtains a
decreasing share; and more and more of the increasing wealth of
society is taken by the owners of land and other privileged
classes. On this view capital ought to obtain only what may be
termed a bare subsistence minimum, instead of labour obtaining
only a bare subsistence wage. The voluntary exchange of the whole
products of labour by their producers was vitiated by capitalism
and competition. In this analysis we have all the ideas of modern
socialism; but Thompson looked to much simpler remedies. He had
no conception of state socialism, even in the municipal form, but
relied on cooperation and communism on the Owenite models. His
most important work is entitled An Inquiry into the Principles of
the distribution of Wealth most conducive to Human Happiness;
applied to the newly proposed System of Voluntary Equality of
Wealth. It appeared in 1824, when the reputation of Ricardo's
principles was firmly established. The title indicates the
influence of Bentham and Owen. 
    John Gray was the author of a Lecture on Human Happiness
(1825), which was ostensibly a defence of Owen's schemes. Later
in life he abandoned his socialistic ideas and sought for social
salvation in the avoidance of dislocations in industry and the
better adjustment of supply to demand; and his practical remedy
was to be found in a peculiar scheme of paper currency. Thomas
Hodgskin wrote Labour Defended against the Claims of Capital; or
the Unproductiveness of Capital proved with reference to the
Present Combinations amongst Journeymen (1825). The occasion of
this book was the attempt to reenact the Laws against Combination
repealed in 1824. In one notable sentence we have the germ of
List's main argument: "All the effects usually attributed to the
accumulation and storing up of circulating capital are derived
from the accumulation and storing up of skilled labour." in
another we have the root-idea of the modern produce theory of
wages directed against the popular idea of the time that wages
are paid out of preaccumulated capital. "As far as food, drink,
and clothing are concerned, it is quite plain that no species of
labourer depends on any previously prepared stock, for in fact no
such stock exists; but every species of labourer does constantly
and at all times depend for his supplies on the coexisting labour
of some other labourers." Hodgskin was an ardent admirer of Adam
Smith, and pointed out that in many ways his successors had
narrowed his fundamental ideas. John Francis Bray was the author
of Labour's Wrongs and Labour's Remedies (1839), a work in which
the analysis of profits given by Marx in das Kapital is clearly
anticipated. His social remedy was a system of labour exchanges
based on a number of Joint-Stock Companies: such companies
consisting of 100 to 1000 men and confined to one trade. 
    This brief survey of the early English socialists shows
clearly that, while Ricardo and his followers were developing, in
an extreme form, some of the doctrines of the Wealth of Nations,
another school of thinkers in England were pushing to an extreme
the ideas of Adam Smith which were overlooked by the Ricardians.
There can be little doubt that these humanitarian ideas had
considerable effect in promoting social legislation, and in
leading to the abandonment of laisser faire as regards the
conditions of employment. For the time, no doubt, in economic
literature and in journalism the Ricardian political economy was
predominant; but the history of labour legislation and of Trade
Unions shows that in practice there was from the beginning a
reaction against the capitalistic abuses consequent on the
industrial Revolution; and the raison d'etre of this reaction was
disclosed in the writings of the socialists. 
    The criticism most generally directed against the Ricardian
school of economists is that they have overlooked altogether or
at any rate failed to appreciate the value of the historical
method; and it is generally supposed that the Germans of a later
generation discovered this weakness of the Ricardians and also
supplied the remedy. It is no doubt true that neither Ricardo,
nor any of the systematic writers who developed his system, had
the appreciation of history shown by Adam Smith; but, just as
there were English socialists in the early nineteenth century, so
also there were English historical economists. And in fact, from
Adam Smith onwards, we have the historical side of economics
represented by works of the first rank. Sir Frederick Morton Eden
(1766-1809) published in 1797 his celebrated work, The State of
the Poor, rightly described by McCulloch as the grand storehouse
of information respecting the labouring classes of England. In
this work, and the large appendix, a mass of facts bearing on the
history of labour from the Conquest to the time of writing is
brought together; and in the preface the author insists on the
importance of historical facts as a foundation of theory. He
attacked the "ingenious but unsolid speculations of merely
theoretic reasoners," and declared that he never wasted time in
polishing a sentence which he thought he could better employ in
pertaining a fact. No writer has illustrated more forcibly the
value of induction, and especially of induction based on history.

    Arthur Young (1741-1820) began to write in 1767 (The Farmer's
Letters); and for nearly forty years he devoted himself to
publications on the economics of agriculture. His best works are
based on his travels in France and his tours in England and
Ireland. Although he was attracted by the natural theories of
Rousseau, he condemned natural right as unhistorical, and he
traced many economic evils to political causes. He considered the
misery of the French to be due almost entirely to their
government, and often expressed and illustrated the doctrines of
laisser-faire, e.g. by showing that the Irish measures, meant to
encourage the silk and woollen trades, had the contrary effect,
and that the French measures, meant to avert, actually created,
famine. At the same time, however, he resisted with Malthus the
movement towards free trade in corn advocated by Ricardo. Young's
chief merit is as an observer and recorder of economic facts,
though some of his general obiter dicta have become classical,
e.g., "the magic of property turns sands into gold."
    David Macpherson (1746-1816) published in 1805 his large work
in four quarto volumes, The Annals of Commerce, Fisheries, and
Navigation, partly based on the earlier work of Anderson. The
method adopted, of recording year by year the events, treaties,
regulations, etc., of commercial interest all the world over,
does not lend itself to the discovery of principles by the
historical method; but the work is still largely used as the
basis of English economic history. Thomas Tooke (1774-1858) was
born in St Petersburg, and at an early age had the management of
a large Russian house in London. He was also actively engaged in
the promotion of various industrial schemes in connexion with
docks, railways, insurance companies, and, like Ricardo, was
regarded as a leading practical authority in all questions
connected with commerce and banking. As already stated, he drew
up in 1820 the celebrated petition of the London merchants in
favour of free trade. He wrote several monographs on the corn
trade and on the connexion between currency and prices, and used
the materials collected as the basis of his principal work, A
History of Prices and of the State of the Circulation during the
years 1793-1856, which was completed by William Newmarch, his
collaborator. This work is still the standard history of its
subject. On the main point of theory Tooke was opposed to the
principle of the Bank Act of 1844, chiefly on the ground of the
want of elasticity in the note issues from the banking point of
view. 
    Richard Jones (179O-1855) definitely attacked the
hypothetical character of Ricardo's work, and insisted on the
importance of the appeal to experience and the danger of hasty
generalisation. He projected a great work, based on the
application of the historical method, on the distribution of
Wealth and on the Sources of Taxation and in 1831 published the
First Book, on Rent; but the undertaking was never carried
further. He has been termed "the founder of the English
historical school."
    George Richardson Porter (1792-1855) married a sister of
Ricardo. On the formation of a statistical department of the
Board of Trade, Porter was placed at the head, and became one of
the founders of the Statistical Society. His principal work is
The Progress of the Nation in its Social and Commercial Relations
from the beginning of the Nineteenth Century to the Present day.
The first two parts appeared in 1836, and it was completed in
1843; new editions, bringing the figures down to date, appeared
in 1846 and 1851. Porter was one of the strongest advocates of
Free Trade, and published a translation of Bastiat's Popular
Fallacies. His own work, however, is written in the most
impartial style, and is a classic in economic history. 
    There is probably no branch of economic enquiry in which
English writers did not follow the example of Adam Smith in
testing theory by the appeal to history. Even McCulloch, who is
generally quoted as an extreme Ricardian, devoted his best
energies to economic history, and especially to economic
literature. And apart from the works of individual writers, in
any survey of the influence of English economists account must be
taken of the invaluable series of governmental reports as for
example the celebrated documents, often republished, which led to
the Poor Law Amendment Act of 1834. William Nassau Senior
(1790-1864) was one of the most active of the Commissioners who
drew up this Report. He is often regarded as an extreme
representative of the hypothetical or abstract school. It
appears, however, that Senior based his opposition to Trade
Unions, not on any abstract theory of wages, but on the abuses
which had been associated with their early history; and in the
same way his statement, in the Letters on the Factory Act, that
"the whole net profit in cotton-factories was derived from the
last hour," was founded on the analysis of actual returns and was
not a deduction from pure theory. And, generally, it may be said
that Senior's support of laisser faire was based on the evils
which had resulted from the interference of the State, especially
in the management of the poor, and in the attempts to encourage
agriculture by protective duties. 

    The appeal to the actual literature of Political Economy
during this period proves not only that the British economists,
from the time of Adam Smith, made popular certain fundamental
ideas on the benefits of freedom of competition, or more
generally of the system of natural liberty, but also that they
showed the necessity of testing ideas by experience. Hence their
influence on practical legislation and policy was always real and
considerable: the so-called abstract ideas were themselves
modified by circumstances of the times in which they were
propounded.