The working principles of political economy in a new and practical form : a book for beginners

Preface

The aim of this book is to give, in small compass, a sufficient view of economic doctrine for the ordinary needs of intelligent citizens. I have had two principal motives in writing it. In the first place, I wished to show that the principles of Political Economy may be developed in such a form as to bring out, more clearly than is done in the standard books, their close and vital connection with every-day industry. In the second place, I wished to suggest some modifications, chiefly in points of detail, of the conclusions commonly accepted hitherto by the leading economists.

Political Economy is among the most practical of sciences, yet it has been made to look very much like an abstract philosophy. The great writers seem to have been more concerned about the logical validity of their reasoning, than they were to keep their work, at all points, plainly and closely in touch with the mechanism of practical business. The result is, that their readers, after mastering the doctrine as a matter of abstract theory, are too often quite in the dark as to the precise mode of its application in practice. Economic truth can hardly obtain general acceptance, as the basis of industrial hygiene, until it is so presented as to apply, directly and without laborious interpretation, to the visible facts •of industrial life.

vi Preface.

In the little book here offered, the attempt is made to work out the leading principles of economics with a constant eye on actual affairs. The facts discussed are taken in their ordinary, observalole form ; the student is asked and helped to analyze them, with a view of perceiving their relations to each other, and the underlying principles by which they are controlled. The plan has difficulties which the more abstract treatment avoids ; but I hope the character of the result may be found a sufficient compensation.

The modifications of theory which I have ventured to suggest grow naturally out of the method I have followed. In all fundamental points, my results are in substantial harmony with the teachings of the older economists. But in the analysis of cost of production, and in the consequent distinction between savings and working capital, I have ventured on an innovation which seems to be called for in the interest of clearness, both in the discussion of wages and in the law of value. In the treatment of money and prices, I have departed considerably, in secondary points, from tlie beaten track. In developing the theory of prices, I found it necessary to have the use of a term which should recognize bank deposits as an integral part of the circulation. The term " bank currency," though not free from objection, seemed on the whole to be the one most suitable for the case. I accordingly adopted it, with the understanding that it includes, on the side of Notes, those issued by Governments as well as those issued by ordinary banks.

In the great question of Protection and Free Trade, I have simply tried to indicate the grounds of controversy. So long as the Tariff is a political issue, it seems only fair that a book intended, in part, for use in High Schools"

Preface. vii

should contain nothing offensive to either of the parties into which our citizens are divided.

This book makes no pretence of being easy reading. The subject-matter is, I think, too complex, and at some points too elusive, to admit of a treatment that shall be at once easy and adequate. The best a writer can hope for is that his work shall be found clear and instructive by those who give time to the study of. it. Not that Political Economy is, on the whole, a very difficult study. It merely calls for some patient reflection, especially at those critical points where sound reason is opposed to superficial appearances. There is nothing in the science that young persons of ordinary ability may not master, if only they apply themselves. It would be a happy reform in our national education, if a portion of the time that is now spent by our youth over barren puzzles in percentage, and the arid subtleties of formal grammar (English and other), were devoted to intelligent study of elementary economics. I cherish a hope that this little book may do something towards promoting 'such a reform.

Cambridge, Mass., Dec. 1889.

Contents

Chapter page

I. The Study of Political Economy ... 11 II. Division of Labor : Exchange of Products :

Wrong View of Money .... 17