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HISTORICAL AND POLITICAL SCIENCE

HERBERT B. ADAMS, Editor

History is past Politics and Politics present History - Freeman

SECOND SERIES

III

THE PAST AND THE PRESENT

OF

POLITICAL ECONOMY

BY RICHARD T. ELY, Ph. D.

BALTIMORE

N. MURRAY, PUBLICATION AGENT, JOHNS HOPKINS UNIVERSITY
MARCH, 1884

JOHN MURPHY & CO., PRINTERS,

BALTIMORE.

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"THE Wealth of Nations" was published in 1776. Its centennial was celebrated in 1876 with more or less formality in various countries. In England prominent politicians and economists held a symposium to do homage to the memory of its author, Adam Smith. The occasion was remarkable on more than one account. At that time it was the only book to which had ever been awarded the honor of a centenary commemoration; though since then, in 1881, the centennial of Kant's "Critique of Pure Reason" has been celebrated both at Concord and Königsberg. But the chief significance of the event, taken in connection with the discussion thereby evoked, consisted in the fact that, while it brought to light dissatisfaction on the part of political economists themselves with previous economic methods and conclusions, it was at the same time the herald of a new era in political economy. It announced to the world that a revolution in political, social, and economical sciences had already begun, and in various countries had met with no inconsiderable success.

In this article will be found extracts from a paper published by the author under the same title in the Overland Monthly for September, 1883. The present essay is, however, an essentially different monograph.

5

Nevertheless, in 1876, as at present, there were not lacking ardent defenders of the earlier system. Upon the occasion referred to, a distinguished speaker claimed for Adam Smith "the power of having raised political economy to the dignity of a true science; the merit, the unique merit among all men who ever lived in the world, of having founded a deductive and demonstrative science of human actions and conduct; the merit, in which no man can approach him, that he was able to treat subjects of this kind with which political economists deal, by the deductive method." But the champions of this deductive science had already begun to feel disheartened at the attitude of the public with respect to it; and in the same year, Mr. Bagehot, an equally faithful follower of the old English school of political economy, wrote as follows: "The position of political economy is not altogether satisfactory. It lies rather dead in the public mind. Not only does it not excite the same interest as formerly, but there is not exactly the same confidence in it." And at the Adam Smith banquet itself, Émile de Laveleye, the distinguished Belgian professor, described a younger, rising school of political economists investigating economic problems with another spirit and different methods. Thus were brought together representatives of two schools: the older school proud of the age and respectability of their doctrines, but disheartened at the loss of public confidence; the younger school hopeful because convinced that the future belonged to them.

Although the contest between the opposing parties has continued from 1876 up to the present time, it cannot be claimed that a complete victory has been won by either side. The controversy has, however, been fruitful of good results, inasmuch as the differences between economists have related to the fundamental principles of the science, and new materials have been obtained for that firm foundation which is so manifestly essential to a safe superstructure.

A point has been reached where it is worth while to survey the fields occupied by the opposing forces, to examine the

ground yielded by either party and to ascertain their present relations to each other; and to do this is the purpose of the present paper.

Mention has already been made of an older and a newer school, which indicates a chronological difference of origin. But it must not be supposed that the lines can be drawn sharply, for such is not the case. There have always existed adherents of both parties. Nevertheless, the greatest strength of the one lies in a time past, that of the other in the present, and this circumstance justifies the convenient distinction of the title, "The Past and the Present of Political Economy."

These two main streams of economic thought have received various designations, each one of which is significant. They are called deductive and inductive, referring to methods pursued; English and German, referring to the land in which each had its origin and in which each has attained its highest development; idealistic and realistic, referring respectively to a foundation in the mind and to a basis in external nature.1 The older political economy is also called classical, on account of superior age and wide acceptance; while the term Manchester is frequently applied to it, in the designation "Manchester School," reference being had to the locality which for some time served as a centre of propaganda for its peculiar doctrines.2

Two of these terms, deduction and induction, require further elucidation, as they have often been used in a loose and

'This does not mean that the realistic school neglects the consideration of psychological motives. It is, in fact, a one-sided designation. It calls attention to two characteristics of the schools in question, viz., the fact that the one finds its chief premises ready-made in the mind and has little to do save to develop them, while the other continually looks to the outside world for premises. The realistic school, however, studies the mind even more carefully than the idealistic, and corrects its imperfect psychology. The realistic is also idealistic, in the sense that it attempts to realize high ideals.

2 Other more special designations of the newer school are mentioned farther on, where its principles are discussed.

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