Elements of political economy

Front matter

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Book , JV &1_

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Preface

This work is intended primarily for the use of students. The leading principles are stated, as far as possible, without the introduction of controversial matter. At the same time, throughout the work indications are given of the points still in dispute and of the difficulties involved in the further development of the principles and theories of which an elementary exposition is given. The work is based on the "Principles of Political Economy" (3 vols.) by the same author. It is, however, not simply an abstract. In the first four books the material used has been almost entirely recast. In the last book it was thought better to omit certain topics altogether rather than attempt any further condensation of the argument.

In order to keep the volume within reasonable limits the greater part of the historical matter which forms a characteristic feature of the larger work has been excluded, though the results of the application of the historical method have been retained. Little space also was available for the history of economic thought and doctrines. In the text, however, the importance of these and other omitted topics has been emphasised, and the student is recommended throughout to supplement his reading by reference to special works. At the end of each chapter references are given to books which the

VI PEEFACE

author has found useful and suggestive, and it is hoped that the selection as far as it goes is representative and impartial.

I am more than usually indebted to Mr. A. B. Clark, M.A., my assistant in the University, not only for his supervision and correction of the proofs, but also for the very full index.

J. SHIELD NICHOLSON.

University of Edinburgh, October, 1903.

Contents

INTRODUCTORY SCOPE AND METHODS

§ 1. The Magnitude of Economic Literature .

2. Of the Relation of Political Economy to Other Sciences

Chapter I. — Wealth, Utility, and Con sumption

§ 1. The Popular Conception of Wealth 21

2. The Economic Analysis of Wealth 21

3. Utility and Disutility 22

4. The Relativity of Utility 23

5. Economic Meaning of Consumption 23

6. Total and Marginal Utility . . . ... . .24

7. Transition from the Individual to the Nation .... 26

8. The Measurement of Utility by Money — Consumers' Surplus 20 Note on the Use of Curves in Economics — Utility Curves . 29

Chapter II. — Production and the Agents of Production

§ 1. Meaning of Production 32

2. The Agents of Material Production 34

3. Nature 35

4. Labour 37

vii

Viii CONTENTS

PAGE

5. Capital 41

6. The Connection between Consumption and Production . . 45 Note on the Curve representing the Quantity of Labour and

the Utility of the Product 45

Chapter III. — Division of Labour

§ 1. Meaning of Division of Labour 47

2. Advantages of Division of Labour 48

3. Division of Labour is limited by the Extent of the Market . 50

4. The Localisation of Industry 51

5. Disadvantages of Division of Labour 52

Chapter IV. — Production on a Large and Small Scale

§ 1. Production on a Large Scale in Manufactures ... 56

2. Other Cases 57

3. Counteracting Causes 57

4. Joint-stock Companies 59

Chapter V. — Production on a Large and Small Scale in Agriculture

§ 1. Complexity of the Question 62

2. Large and Small Farming compared 64

3. Historical and Social Influences 65

Chapter VI. — Tlie Laws of Diminishing and Increasing Return

§ 1. Plan of the Argument . . . . . . . .68

2. The Law of Diminishing Return to Land .... 68

3. Counteracting Causes 71

4. Other Applications of the Law 73

5. The Law of Increasing Return 74

Chapter VII. — The Principle of Popidation

§ 1. The Theory of Malthus 78

2. The Three Propositions of Malthus . . . . .79

CONTENTS IX

Chapter VIII. — TJie Growth of Capital PACK

1. Meaning of the Growth of Capital 83

2. The Limits to the Growth of Capital during any Period . 85

3. The Power to save 86

4. The Will to save 87

5. The Growth of the Different Species of Capital ... 89

6. The Limits to the Production of Wealth . . . .91

Chapter I. — Distribution and Property

1. Meaning of Distribution 95

2. On the Nature of the Laws of Distribution .... 97

3. The Conception of Sovereignty and its Application to Distri-

bution 98

4. Economic Definition of Private Property .... 99

5. The Economic Bases of Private Property .... 100

Chapter II. — Inheritance and Bequest

1. Economic to be distinguished from Legal and Ethical Ideas . 106

2. General View of Bequest and Inheritance .... 106

3. Inheritance 108

4. Bequest 109

Chapter III. — Property in Land — Expropriation — Compensation

2. Expropriation 114

3. Compensation 116

Chapter IV. — Socialism

1. Historical Variations in the Institution of Property . .120

2. Definition of Socialism 122

3. Classification of Socialistic Schemes 123

CONTENTS

PAGE

4. State Socialism or Collectivism 125

5. The Socialist Critique of Individualism 128

6. Difficulties of Socialism . . . 130

7. The Benefits of Socialist Ideals 134

Chapter V. — Quantitative Distribittion

§ 1. Of the Quantitative Distribution of Property .... 136

2. The Distribution of the Agents of Production as determined

by Law and Custom 137

3. The Quantitative Distribution of Incomes .... 139

4. Money Incomes and Eeal Incomes 142

Chapter VI. — Wages and the General Rate of Wages

§ 1. Wages as the Real Reward of a Quantity of Labour . . 145

2. Real as compared with Nominal Wages 146

3. Wages as Payment for Work done 147

4. The General Rate of Wages 149

5. The Wages Fund Theory 154

6. The Produce Theory of Wages 160

7. General Relations of Wages to Profits and Rents . . . 164

Chapter VII. — Relative Wages

§ 1. Differences of Wages 166

2. Particular Cases ......... 169

3. Wages of Individuals 171

4. The Effects of Machinery on Wages 172

6. Conclusion 173

Chapter VIII. — Profits

§ 1. Analysis of Profits ......... 174

2. Loan-interest and Profit-interest 175

3. Insurance against Risk 178

4. Wages of Management 180

5. The Reward of Enterprise and Good Fortune . . . 181

6. The Tendency of Profits to Equality 182

7. The General Rate of Profits 183

CONTENTS xi

Chapter IX. — Harmonies and Conflicts of Labour and Capital PAGE

§ 1. Relations of Labour and Capital in General .... 185

2. Conflicts of Interest ; Origin of Trade Unions . . . 186

3. Functions of Trade Unions 187

4. Wages and the Consumer 188

5. Wages and Profits 191

6. Evils of Conflicts of Labour and Capital .... 195

7. The Harmonies of Labour and Capital 196

Chapter X. — Economic Rent

§ 1. Different Meanings of the Term Rent 199

2. Economic Rent from Extensive Cultivation .... 201

3. Economic Rent from Situation 202

4. Economic Rent from Intensive Cultivation .... 203

5. Economic Rent from Scarcity 204

6. Combination of the Different Forms of Economic Rent . . 204

7. Rent of Non-agricultural Land 206

8. Quasi-rent 208

BOOK III EXCHANGE Chapter I. — Value and Markets

§ 1. Exchange 211

2. Value 211

3. Value in Exchange 212

4. Relative Prices must be adjusted to Relative Values . . 215

5. A General Rise of Values is impossible 215

6. Other General Propositions on Value 216

7. Markets 217

Chapter II. — On Demand and Sujyly

§ 1. The Law of Demand 220

2. Changes in Demand — Rise and Fall in Demand . . . 222

3. The Law of Supply 224

Xii CONTENTS

PAGE

4. The Equation between Demand and Supply — the Temporary

Equilibrium Price 225

5. The Immediate Effects of Changes in Demand and Supply . 227

6. Ulterior Effects of Changes in Demand and Supply . . 228 Motes on Curves illustrating Demand and Supply and the

Immediate Effects of Changes in Demand and Supply on

Price 229

Chapter III. — Normal Value and Cost of Production

§ 1. Meaning of Normal Value 231

2. Eeal Cost and Money Cost 232

3. The Analysis of Cost of Production '. 234

4. Case of Joint Products 239

Note on Expenses of Production 240

Chapter IV. — Rent and Value — Monopoly Value

§ 1. Economic Rent as a Eactor in Price

2. Quasi-rent

3. Monopoly Value

4. Competition and Monopoly Prices compared

5. Conditions requisite to a Seller's Monopoly

6. Buyer's Monopoly

241 243 245 248 249 250

Chapter V. — Functions and Systems of Money

§ 1. What is Money ? 252

2. The Primary Functions of Money 253

3. The Qualities of Good Metallic Money 258

4. Systems of Metallic Money 259

Chapter VI. — The Quantity Theory of Money

§ 1. A Hypothetical Market 261

2. Influences modifying that of Quantity 263

3. Cost of Production of Gold in Relation to its Value . . 265

Chapter VII. — Gresham's Law — Token Coins — Inconvertible Notes

§ 1. Gresham's Law 269

2. Token Coins 271

3. Inconvertible Notes 273

4. The Evils of Depreciation of Notes 276

CONTENTS Xlll

Chapter VIII. — Credit and General Prices

PAG!

§ 1. Credit and the Quantity Theory of Money . 2"!

2. Gold Reserves as a Limit to Credit Prices .... 279

3. The Limits imposed by Foreign Trade 281

4. Conclusion of the Quantity Theory of Money . . . 282

Chapter IX. — Bimetallism

1. Meaning of Bimetallism

2. Instability of Bimetallism in One Country

3. International Bimetallism

4. Difficulties of International Bimetallism .

5. The Advantages claimed for International Bimetallism

284 284 285 288 290

Chapter X. — Banks of Issice

1. Development of Banking 292

2. Origin and Uses of Bank-notes 293

3. The Limitation of the Issues of Notes 296

4. The Denomination of Notes 298

Chapter XI. — Banks of Dejiosit and Commercial Crises

§ 1. Progress of Deposit Banking 304

2. Limits to the Creation of Bank Money 305

3. The Management of Banking Reserves 306

4. Commercial Crises 309

Chapter XII. — TJie Rate of Interest and the Rate of Discount

§ 1. Interest on Capital and Interest on Money . . . .311

2. Interest on Loanable Capital 312

3. Interest on Loanable Money — the Rate of Discount . . 316

4. Causes of Difference in the Rates for Long and Short Periods 320

5. The Relative Stability of the Rate for Long Periods . . 322

6. The Exchange Value of Money and the Rate of Interest . 324

XIV CONTENTS

Chapter XIII. — TJie Theory of Foreign Trade PAGE

§ 1. The Problems of Foreign Trade 327

2. Meaning of Foreign Trade 328

3. The Pure Theory of Foreign Trade 329

4. The Theory of Comparative Cost in Terms of Barter . . 332

6. The Theory of International Values 336

6. Money in International Trade 338

Chapter XIV. — The Foreign Exchanges

§ 1. International Debts ........ 340

2. International Debts are payable in Money .... 343

3. The Mint (or Nominal) Par of Exchange . . . . 345

4. Gold Points 346

5. Favourable and Unfavourable Exchange .... 347

6. Effects of Depreciation of the Currency 350

7. Indirect Effects of a Depreciation of the Currency on the

Foreign Trade of a Country 351

8. On the Distribution of Gold throughout the Commercial

World 354

Chapter I. — Economic Functions of Government

§ 1. The Principle of Natural Liberty, Laisser-faire, or " Minimum Interference " 415

2. The Principle of Maximum Utility 416

3. Summary of the Benefits and Defects of Individualism . . 418

4. The Methods of Legal Interference 420

5. The Methods of Governmental Action 423

6. General Limitations to Governmental Interference . . . 425 xvi CONTENTS

Chapter II. — Character and Definition of Taxation PAOK

§ 1. The General Characteristics of Taxation 429

Chapter III. — The Canons of Taxation

§ 1. Adam Smith's Canons of Taxation : First Equality . . 434

2. Equality of Sacrifice 437

3. The Faculty Theory of Taxation 440

4. Taxation of Unearned Increments 442

5. The Benefit or Social Dividend Theory of Taxation . . 444

6. The Social Function of Taxation 445

7. The Principle of Formal Justice 447

8. Adam Smith's Other Canons of Taxation .... 447

9. Other Rules of Taxation 449

Chapter IV. — Incidence of Taxation

§ 1. Direct and Indirect Taxes 452

2. The Incidence of Taxation as determined by Law and Custom 454

3. Incidence of Taxation as determined by Contract and

Exchange 455

4. The Immediate Effects on Price of a Tax .... 456

5. Ulterior Effects of Taxation on Prices 458

Note on Curve illustrating the Immediate Effects on Price of

a Tax 459

Chapter V. — Taxes on Bent and Land

§ 1. Taxes on Pure Economic Rent : Agricultural Land . . 461

2. Taxes on Economic Rent : Building Land . . . . 463

3. Taxation of Land Values : Practical Conclusions . . . 465

Chapter VI. — Taxes on Consumable Commodities

§ 1. Methods of taxing Commodities 471

2. The Incidence of Taxes on Commodities .... 474

3. Rules for Taxes on Consumable Commodities . . . 480

4. Direct and Indirect Taxes compared 481

Chapter VII. — Free Trade and Protection

§ 1. Meaning of Free Trade 484

2. Free Trade and the Consumer 485

CONTENTS XV11

PAGE

3. The Protection of Home Industries : General View . . 486

4. The Assumptions of the General Argument for Free Trade . 487

5. Theoretical Exceptions to Free Trade 490

6. The Negative Argument for Free Trade 494

Chapter VIII. — Principles of Public Expenditure

§ 1. Nature of Public Expenditure 497

2. Classification of Public Expenditure 499

3. Analogies from Taxation 601

4. The Principles of Expenditure 502

Chapter IX. — Colonies and Dependencies

§ 1. Early History of British Colonies and Dependencies . . 511

2. The Profit and Loss to the Mother Country of Colonies and

Dependencies 515

3. Trade and the Flag 516

4. Imperial Federation 518

INTRODUCTORY

1. The Magnitude of Economic Literature. — In 1845 there was published a book which now has a considerable scarcity value ; namely, the Literature of Political Economy, by J. R. McCulloch. This work is described as a classified catalogue of select publications in the different departments of that science. It begins with the general treatises and the fundamental principles, occupying some thirty pages ; the second chapter, on commerce and commercial policy, is divided into ten sections and covers more than a hundred pages ; and there follow eighteen more chapters on various topics, e.g. money, banks, prices, roads, canals, railways, statistics, fisheries, insurance, interest, population, wages, poor laws, property, successions, revenue, and finance, concluding with a chapter entitled miscellaneous. The index of authors gives about eight hundred names, and the index of books about double that number. Even in 1845 the work only professed to give a selection, and since that time attention has been directed to many works not noticed by McCulloch, of high value in economic literature. The number of works that have been written since 1845 is enormous, and of recent years the rate has been increasing b l rapidly. Some idea of the present range of economic studies may be formed by a glance at Palgrave's Dictionary of Political Economy, in the compilation of which he had the assistance of nearly two hundred experts. It is not only in England, or even principally in England, that this growth of economic literature is observed. In Germany, Austria, the United States, in France, Italy, Switzerland, and Holland, many books have been written in every department, and in addition there are a number of special journals devoted to the subject. Such and so great is the literature of economics. It follows at once that it is quite impossible to give any adequate idea of this literature in an elementary treatment of principles.

At the same time it may be observed that the study of economic literature is probably of more importance than the study of the literature of almost any other science. In most sciences the latest authority may be expected to have digested or at least to have congested the best results of his predecessors. But in economics we cannot fully appreciate the real meaning of fundamental conceptions and leading principles without tracing their gradual development. And especially if we wish to understand the industrial and commercial or more generally the economic history of a people, we must understand the ideas by which it was dominated at various periods ; and in his standard work on the economic history of England Dr. Cunningham has done well to introduce chapters on opinions, ideas, and theories, although economic history is concerned with the positive treatment of facts and institutions.

There are also great advantages to the student in reading at first hand the works of the principal writers.

Adam Smith's Wealth of Nations cannot be reduced to an abstract, and the attempt to frame a short and simple creed of economic doctrine out of this elaborate work was not only a failure, but caused very great mischief. And even as regards many forgotten writers and obscure pamphlets, it is surprising what may be gained. The great writers, notably Adam Smith himself, fed largely on the little writers.

The history of the development of economic theories is an important study for which there is ample material. In the present survey of principles, however, it can only be introduced occasionally by way of illustration.

2. Of the Relation of Political Economy to Other Sciences. — The progress of all the sciences has been associated with ever increasing specialisation. When Adam Smith was Professor of Moral Philosophy in the University of Glasgow, his course of lectures was divided into four parts. The first embraced Natural Theology ; the second, Ethics in the narrow sense of the term ; the third examined more at length " that branch of morality which relates to justice," and it is noteworthy that in dealing with this subject he adopted largely the historical method ; and in the fourth part he gave the lectures which were afterwards expanded into the Wealth of Nations. His course on Ethics was the foundation of the essay on the theory of Moral Sentiments which was in its day as famous as his economic work; and he had intended to develop his course on jurisprudence in a similar way, but was overtaken by old age and siekness. The separation of economics from ethics and jurisprudence was an example of the necessity of specialisation after a certain point had been attained ;

and it also explains the emphasis laid in the Wealth of Nations on one part of social and political life to the apparent exclusion of interests of at least equal importance. So far from underestimating the principles of morality, law, and religion, he supposed that they were of such importance that they required special investigation. The object of the course on economics is recorded by one of his students in these words : " In the last part of his lectures he examined those political regulations which are founded, not on the principle of justice, but on that of expediency, and which are calculated to increase the riches, the power, and the prosperity of a state. Under this view he considered the political institutions relating to commerce, finance, and to ecclesiastical establishments," and there may be added to this account, the expense of the administration of justice and of the provision of national education in the broadest sense of the term.

This specialisation of economics was continued by the English successors of Adam Smith with few exceptions, and indeed by the systematic writers it was carried farther, that is to say, the field of inquiry was contracted and stress was laid on the scientific character of Political Economy as distinct from its practical applications. Recently however, in the reaction against this excessive specialisation, there has been a tendency to bring in on the one side moral and political considerations, and on the other to give the science a more practical character in relation to business in the narrow sense of the term. Without expressing any opinion on the controversy involved, regarding this change of attitude, it is sufficient in this place to state that the scientific treatment of economic principles and methods, to the exclusion of these various moral and social influences and of various practical applications, is a subject of sufficient importance and difficulty for specialisation, and forms the best introduction to these wider and more practical applications. To take one or two examples : the theory of money is a necessary preliminary to banking ; that of monopoly values, to trusts ; that of wages and profits, to trade unions ; that of the incidence of taxation, to finance, — and the list might be extended indefinitely. It is not too much to say that every day the newspapers offer problems that involve, for their adequate understanding and an appreciation of their bearings, the use of economic methods and principles, but it would be impossible to anticipate the actual problems that will arise. The social reformer, the legislator, and the man of business (whose name is legion) will all benefit from the preliminary study of scientific economics, although the special problems in which they are interested are not treated in the text-books. In precisely the same way the engineer may benefit from mathematics, the miner from geology, and the navigator from astronomy, although the industrial arts are not directly treated of in the corresponding sciences.

At the same time it is, no doubt, often desirable to illustrate the theory by reference to actual or historical examples that in themselves are interesting and important; although, on the other hand, in certain parts it is better to show the abstract nature of the treatment by making an avowed use of hypothetical examples.

3. The Scope and Definition of Political Economy. — The scope of Political Economy may be indicated by showing its relation to other sciences. It must be classed with the group of moral or mental sciences because it deals primarily with human beings as possessing certain moral or mental characteristics. Its fundamental conceptions always have reference to qualities of mind. It is true that sometimes physical facts are of great importance. Thus, it is often said that the laws of production partake of the character of physical laws, e.g. the law of diminishing return ; and often definite appeals are made to physical facts and conditions, e.g. in treating of the causes affecting the efficiency or the degradation of labour, or the influence of natural resources and climatic conditions on the production and accumulation of wealth. But the end in view is not the mere statement of physical facts, but their relations to human beings. Wealth itself is treated as giving pleasure and involving effort, and not as possessing weight, extension, or other physical characters ; that is to say, it is considered from the human standpoint. During the first half of the nineteenth century great social evils arose from the materialisation of wealth, or forgetting the end in the means.

Of the moral sciences some treat mainly of the individual, e.g. psychology, some of the social relations of human beings, e.g. jurisprudence. The term political, taken in its original sense, implies that in the main economic science deals with man in his social relations. Sometimes, no doubt, in the preliminary explication of conceptions, it is useful to isolate the individual, e.g. in treating of utility we may begin with the direct consumption of the individual. Also in the stud}*- of the motives to action we may begin with the individual and in general before considering the probable effects of legal regulations, it is best to show the probable results, if individuals are left to their own devices. But the object in view is always to discover the effect on the whole society or some group, and not merely on the individual.

Again, in its mode of dealing with social phenomena, political economy must be classed with the positive sciences. In the main, it deals with facts and not with ideals ; it observes certain kinds of social facts in order to make classifications, and to discover uniformities and causal connections. It describes what has happened in the past, or is actually occurring in the present, and will probably occur in the future under similar conditions. But strictly speaking from this positive standpoint, it does not lay down moral precepts or deliver moral judgments. And the reason is not that moral and religious elements are not of importance in practical problems, but simply that they are outside the sphere of economics. If Adam Smith found it desirable in the eighteenth century to separate economics from morality and religion, that is to say, for scientific treatment, the presumption is that in the twentieth century this specialisation must be retained. And it is observed in the study of economic history, that, as a matter of fact, the economic elements can be considered apart. No doubt the moral and the religious ideas of people often have indirectly an economic influence, but again, as throughout, it is a question of emphasis. We may, for example, consider the economic aspects of the mediaeval church apart from its moral or religious teaching. And similarly, in investigating present conditions, we can distinguish between the positive examination of facts, and the suggestion of reforms with the view of promoting certain ideals. We may, indeed, in some cases go bej^ond the actual facts and pass from the past and the present, to the future, and consider the probable effects of various proposed economic reforms. But even here we are in the domain of facts in so far as these proposals are such as to modify human action and are not purely imaginary. Thus we may discuss socialism, and consider the meaning, the advantages and disadvantages, etc., on the ground that socialistic ideas influence present legislation and economic action — in other words, the socialistic tendency of much modern governmental action is an economic factor that must be taken account of. But in considering any social reform or proposed remedy, we must remember that, in general, there are more than the economic elements to be considered. Wealth, the subject-matter of economic inquiry, even in the most extended meaning and having regard to its remote influences, is only one element of civilisation, and often not the most important.

Political economy, then, may be defined as the science which investigates the nature and the causes of the wealth of nations ; it seeks to discover the laws affecting the production and the consumption, the distribution and the exchange, of wealth. All of these terms, it will appear in the sequel, require careful analysis.

4. The Uses of Definitions in Economics. — Most words used in economics are used also in ordinary language or at any rate in the language of the market-place, and there are relatively few technical terms. The question then naturally arises, Why should we waste time over definitions and explanations when the words are already familiar ? The answer is that this very familiarity is deceptive and sometimes conceals real difficulties, and sometimes leads to positive errors. If we search carefully into the meaning of these familiar terms, we shall often be led to notice important facts instead of stopping at a verbal explanation. For a long time people were accustomed to say that wages were high because capital provided a large wages fund, which in most cases had no more meaning than the assertion that the labourers receive much, when the employers pay much, in wages. But the inquiry into the meaning of this familiar expression led to the discovery of the true relations between labour and capital. Again, people were accustomed to say that the fall in prices that set in in gold-using countries after 1874 was caused by the appreciation of gold, and in most cases this had no more meaning than the statement that the fall in prices was caused by the fall in prices. But the inquiries that were made as to the meaning of these expressions were again, to say the least, fruitful in their results. Real difficulties were exposed and some advances were made towards their solution.

But very often this familiar use of economic terms led people into positive errors, and even governments into mistaken lines of action. Most of the crude fallacies of protection can be exposed by the careful analysis of the terms employed. The idea, formerly so prevalent and still not extinct, that the advantage of foreign trade can be measured by the excess of exports over imports is shown to be fallacious by analysing the terms. Similarly also, many of the popular fallacies regarding the connection between labour and prices, consumption and production, low wages and cheap labour, may be got rid of by a consideration of what ideas the words stand for. It is true that in all these cases much more than verbal analysis is required, but in all cases also it is a necessary preliminary.

Some of the definitions of terms in constant use prove on inquiry to involve such difficulties that a simple definition is impossible, e.g. capital, money, etc. Accordingly it is found desirable to lay down certain rules for definitions in economics. The rules now generally accepted are as follows : —

5. Rules for Definitions. — (1) As far as possible our definition should coincide with the best popular usage. Otherwise, if a writer gives a different meaning in the course of his argument, he may be led by association to use the term in its popular sense, and thus be involved in error ; or even if he himself escapes the confusion, his argument may be misunderstood and misquoted. This difference between the popular and the quasi-technical usage is the source of many of the popular delusions regarding the teachings of economists. Thus, for example, in the pure theory of economic rent, the term is used in a sense far more narrow than the popular meaning. The proposition that with the progress of society rents tend to rise was only held in reference to these economic rents, but when used in popular arguments in reference to unearned increments the wider meaning was given.

Similarly, the economic use of the terms labour and wages is much wider than in popular discourse; and propositions which economists have framed with regard to labour in the wide sense are repeated with the narrower meaning. In the economic sense all wealth may be said to be the result of labour, if we include the highest professional skill, the labour of "first occupancy," and an endless number of forms of human activity besides mere manual labour. But too often, in popular discussions, what is attributed by the economists to labour in general is confined to manual labour in particular.