The Principles of Political Economy Henry Sidgwick

The State of the Text

At present we have the text of the third book of the Principles, but the footnotes are not yet linked in, and the cross reference links are not yet made. The rest of the text has been digitized, but not yet proofread. We will do the notes and cross-references for book III first, then add the rest of the text.

The Source of the Text

This text was digitized from the Second (1887) edition published by MacMillan and Company, London. (This was the final edition, so far as I know [Paul Lyon]).

Table of Contents

Prefaces

• Preface to the First Edition
• Preface to the Second Edition

INTRODUCTION.

CHAPTER I.

THE PRESENT STATE OF ECONOMIC CONTROVERSY IN ENGLAND AND
THE SPECIAL AIM OF THE PRESENT WORK.

• Section 1. During the last thirty years Political Economy in England has risen from the state of controversy on fundamental principles and method into that of an apparently established science, and again relapsed into the state of controversy.
• Section 2. My special aim is to eliminate needless polemics by a guarded restatement of traditional doctrines, with due recognition of the advances made in economic theory by recent writers.

CHAPTER II.

THE SCOPE OF POLITICAL ECONOMY.

• Section 1. Is Political Economy a Science, concerned with what is, or an Art, concerned with what ought to be done?
• Section 2. Originally it was conceived as an Art, and is formally so defined by Adam Smith ; but the substance of the latter's doctrine inevitably rendered his exposition mainly that of a science;
• Section 3. but not entirely, since the doctrine of laisser faire, characteristic of Adam Smith and his school, belongs to Art;
• Section 4. and, in the department of Production, the line between Science and Art is difficult to draw.
• Section 5. In this treatise, all questions as to proper governmental interference in economic matters are treated separately (in Book III.) as questions belonging to the `Art of Political Economy'.

CHAPTER III.

THE METHOD OF ECONOMIC SCIENCE.

• Section 1. The ordinary treatment of the Theory of Production is mainly inductive and analytical---e.g. Mill's treatment is so.
• Section 2. The traditional method of determining the Laws of Distribution. and Exchange is primarily deductive and hypothetical, but obviously requires for application to concrete cases the aid of induction.
• Section 3. Both the general legitimacy of this method and its necessary limitations may be briefly shown by considering its chief hypotheses.
• Section 4. In using the method, quantitative precision should be attained as far as possible; but the limits of attainable precision should also be carefully noted.

BOOK III.

THE ART OF POLITICAL ECONOMY.

CHAPTER I.

• Chapter 1. The Art of Political Economy, as here treated, consists mainly of the theory of what ought to be done by government to improve Production or Distribution, and to provide for governmental expenditure.

CHAPTER II.

THE SYSTEM OF NATURAL LIBERTY CONSIDERED IN RELATION TO PRODUCTION.

• Section 1. The general argument in favour of leaving industry alone has much force, but needs important qualifications and exceptions,
• Section 2. even in the most abstract theoretical treatment, owing to divergence between utility to the individual and utility to society; illustrated generally in reference to Bequest and Contract;
• Section 3. exemplified further by special cases, in which the utility of socially useful services cannot be adequately appropriated by the persons who might render them:
• Section 4. also where the gain of a change is largely counterbalanced by loss; and in the case of monopoly, especially monopoly resulting from combination.
• Section 5. Sometimes, however, governmental intervention is needed to secure such combined action or abstinence as is socially advantageous:
• Section 6. Note also the imperfectly employed labour that competition normally involves, and the labour spent in attracting business:
• Section 7. also the case of utilities distant in time.
• Section 8. Hence complete laisser faire is not to be taken as a political ideal: the problem for the statesman is to balance its disadvantages against the disadvantages of extending the sphere of government.
• Section 9. Our reasoning so far has left unassailed the assumption that the individual is a better judge than government of his economic interests: but this assumption is not completely true, nor even tending to become so.

CHAPTER III.

THE RELATIONS OF GOVERNMENT TO INDUSTRY.

• Section 1. The strictly economic interferences of government are to be distinguished from its interferences with industry in the exercise of its necessary functions.
• Section 2. Such interferences are of various kinds and degrees of intensity,
• Section 3. may take place for national defence,
• Section 4. for protection of life, health, reputation of individual citizens, adults or children,
• Section 5. or for protection from theft or fraud. Observe, too, that governments have importantly restricted their enforcement of contracts---e.g. by bankruptcy laws---and, under the guise of judicial interpretation, have practically determined the conditions of ordinary engagements.
• Section 6. Again many important questions as to the limits of the right of property have to be determined by government; e.g. in the case of land, patents, copyrights, inheritance.

CHAPTER IV.

IMPORTANT CASES OF GOVERNMENTAL INTERFERENCE TO PROMOTE PRODUCTION.

• Section 1. Governments (central or local) have interfered specially in businesses concerned with transfer; partly from their tendency to become monopolies, partly from the importance of their indirect utilities:
• Section 2. as in the case of ordinary roads,
• Section 3. of railways and canals.
• Section 4. and the post-office. On somewhat similar grounds they have intervened in the provision for gas and water.
• Section 5. Coining is obviously adapted for governmental management, on various grounds; but there seems no reason why it should not pay its expenses.
• Section 6. A bimetallic currency may be maintained under certain conditions and has certain advantages.
• Section 7. The establishment of a Tabular Standard would much reduce fluctuations in the value of deferred payments: but it would be a matter of difficulty.
• Section 8. The issue of convertible notes should be at least regulated, and there are important advantages in its being undertaken by government;
• Section 9. which render it desirable that government should form a special connexion with a bank; but not that it should undertake ordinary banking business-though certain kinds of lending seem suited to government.
• Section 10. There are certain other departments in which governments have intervened partly with a view to production: thus in providing for education and culture they have partly aimed at making labour more efficient.
• Section 11. They have partly on similar grounds assisted emigration:
• Section 12. and arranged the sale of unoccupied lands on other than strictly commercial principles.
• Section 13. Even in fully occupied countries, there are reasons for keeping certain portions of land under governmental management, as forests for restricting private property in mines;
• Section 14. and perhaps---though this is more doubtful---for interference with the tenure of agricultural land, in order to promote production.

CHAPTER V.

PROTECTION.

• Section 1. Temporary Protection, though not practically to be recommended, is under certain circumstances defensible in abstract economic theory;
• Section 2. even from a cosmopolitan point of view: especially to foster a new industry:
• Section 3. still more from a purely national point of view, in spite of important drawbacks.
• Section 4. And Free Trade may tend, in certain cases, to be accom panied by a displacement of population between the trading communities.

CHAPTER VI.

THE PRINCIPLES OF DISTRIBUTIVE JUSTICE.

• Section 1. The present individualistic organization of society cannot be maintained to be theoretically just, on account of its long duration, or unjust on account of its origin.
• Section 2. The institution of private property, as extended to land, cannot be defended as strictly `realizing freedom', or `securing the fruits of labour'; though the gain to labour in the aggregate from the accumulation of capital that the institution has caused vastly outweighs its loss through exclusion from appropriated land.
• Section 3. It does not however appear that private property and free contract together tend to give each labourer the wages he deserves. But exact remuneration of desert seems an unattainable ideal.
• Section 4. It has been believed that laisser faire gives, or will give, the greatest possible equality of opportunities to labour: but it certainly leaves room for serious inequality from monopoly and combination, from fluctuations of industry,
• Section 5. from the unearned increment in the value of land,
• Section 6. from the large earnings of owners of capital, and from the payment of interest, which would not be required if capital were accumulated by the community. The grounds for not removing these inequalities by governmental interference are productional, not distributional.

CHAPTER VII.

ECONOMIC DISTRIBUTION.

• Section 1. A more equal distribution of wealth tends prima facie to increase happiness:
• Section 2. but we have to allow for loss through increased idleness, decreased saving, lessened efficiency of capital, pressure of population, checked growth of culture.
• Section 3. It seems impossible to dispense, as Communism seeks to do, with the individualistic stimulus to labour and care, and check to population.
• Section 4. But the ideal of Socialism is not open to the same objections; and a certain advance in the direction of this ideal, by a judicious and gradual extension of governmental functions, is not opposed to sound economic theory.
• Section 5. The chief communistic institution, actually established in England, is the provision for poor-relief; this, however might perhaps be made in other ways.
• Section 6. Other distributional interferences have been usually---and rightly---designed also to benefit production. In determining the proper limits of such interference, one important consideration is the efficiency of voluntary provision for social needs.
• Section 7. In determining a `fair' division of produce between opposing combinations, an arbitrary point of departure is necessary: political economy can only assist in showing how `fairness' arbitrarily defined is to be maintained under changing conditions.

CHAPTER VIII.

PUBLIC FINANCE.

• Section 1. We have to treat generally of the provision for public expenditure (the amount of which must partly depend on the possibilities of conveniently providing for it).
• Section 2. The commodities required for the use of government are generally obtained by free purchase; though under certain circumstances it is more economical to obtain services---especially of soldiers---by direct compulsion.
• Section 3. The funds for such purchases may come from (1) Rents, or (2) Loans---which are under certain circumstances legitimate, whether for productive employment, or as a means of lightening an occasional burden by spreading it over a longer period,
• Section 4. or (3) from payments for commodities supplied by government---the price of which, when they are monopolised, may be determined on various principles.
• Section 5. Taxes, commonly so called, can be only to a very limited extent treated as payments for services rendered by government.
• Section 6. Distinguishing `taxes proper' from such payments, we may note the complexity of considerations, political and economical, productional and distributional, which ought to have weight in the selection of taxes.
• Section 7. We should aim at proportioning taxation mainly to that part of the income which is not spent in necessaries, nor in ways socially useful, nor saved: the adjustment can at best be rough, especially if taxes be largely laid on commodities---a method however which is on several grounds to be recommended.
• Section 8. The incidence of taxes is hard to determine, from the varying degrees of completeness and rapidity with which their burden tends to be transferred: illustrated by taxes on Incomes, taxes on Land,
• Section 9. and taxes on Production---which as `indirect' taxes are sometimes thought to be transferred completely to the consumers; but the rapidity and even the extent of the transference varies much according to circumstances.
• Section 10. Such taxes are liable to cause an extra loss to consumers, over and above the gain to the treasury.
• Section 11. Taxes on inheritance require special and separate treatment.

CHAPTER IX.

POLITICAL ECONOMY AND PRIVATE MORALITY.

• Section 1. Political economy tends to influence the common notion of fair dealing especially in respect of taking advantage of (a) ignorance,
• Section 2. and (b) need. Properly understood, it does not generally justify a man in exacting more than the normal competitive price for his service; but it shows the danger of condemning any one for taking full advantage of competition, except in case of extreme need, when humanity requires some gain to be foregone.
• Section 3. Economic teaching has had a doubtful effect on the current dislike of `rings' and other combinations---and the severer censure commonly passed on `making work', `scamping work,' &c.
• Section 4. The egoistic influences of the individualistic organisation of industry need to be counteracted: hence the moral value of Cooperation.
• Section 5. Political economy has exploded the fallacy that the luxurious expenditure of the rich benefits the poor; but it has also drawn attention to the dangers of almsgiving.