land No. 1, the first dose of capital, represented by 10 men's labour, yielded 180 quarters, the second dose 170, the third 160, and the fourth 150; while on 30 acres of land No. 2 the first dose yielded 170 quarters, the second 165, the third 162, the fourth 160, the fifth 155, the sixth 152, and the seventh 150; then, supposing 150 to be the return to the least productive dose applied, the rent of 30 acres of land No. 1 would be 30+20+10=60, while the rent of No. 2 would be 20+15 +12+10+5+2=64. Modern economists have met the objection by abandoning the attempt to arrange lands in a scale of fertility which shall remain valid, whatever be the quantity of produce required.1 Subsequent writers were by no means always so careful as James Mill to make it plain that the surplus produce of the later doses of capital, as well as the first, must be brought into account in determining the rents of different acres. M'Culloch rashly says: 'When recourse had been had to these inferior lands, the corn rent of those that are superior would plainly be equal to the difference between the amount of the produce obtained from them and the amount of the produce obtained from the worst quality under cultivation.' 2 The meaning which any ordinary reader, unacquainted with the history of the subject, would attach to these words would be that the corn rent per acre of the superior lands would be equal to the difference between their produce per acre and the produce per acre of the worst quality of land under cultivation. This is obviously untrue, unless we make with West the absurd supposition that all acres are cultivated with equal capitals. The idea which M'Culloch had in his mind was no doubt the Ricardian one, that the rent paid in respect of a given amount of capital employed on the superior lands would be equal to the difference between the amount of the produce obtained by it and the amount of the produce obtained by an equal amount of capital employed on the worst 1 See Marshall, Principles of Economics, 4th ed. p. 234, 'A mere increase in the demand for produce may invert the order in which two adjacent pieces of land rank as regards fertility.' 2 Principles, p. 267. quality of land under cultivation. It was too much, however, to ask readers to supply all this. J. S. Mill was an even worse offender. For a summary of the third section of his chapter Of Rent' he says in his Contents, 'The rent of land consists of the excess of its return above the return to the worst land in cultivation.'1 This might be taken as merely the ordinary inaccuracy of rapid epitomising, but the section itself opens thus: 'If then, of the land in cultivation, the part which yields least return to the labour and capital employed on it gives only the ordinary profit of capital without leaving anything for rent, a standard is afforded for estimating the amount of rent which will be yielded by all other land. Any land yields just as much more than the ordinary profits of stock, as it yields more than what is returned by the worst land in cultivation. The surplus is what the farmer can afford to pay as rent to the landlord; and since, if he did not so pay it, he would receive more than the ordinary rate of profit, the competition of other capitalists, that competition which equalises the profits of different capitals, will enable the landlord to appropriate it.'2 Obviously if any land' is to mean any acre of land, and if the worst land in cultivation is to mean an acre of the worst land in cultivation, we require the assumption that all acres of land are cultivated with equal capitals, in order to make it true that any land yields just as much more than the ordinary profits of stock as it yields more than the worst land in cultivation.' Hitherto, however, Mill has said nothing about the amount of capital employed. He proceeds : 'The rent, therefore, which any land will yield is the excess of its produce beyond what would be returned to the same capital if employed on the worst land in cultivation.' It would require an enormous straining of words to interpret this to mean 'The rent which an indefinite amount of any land will yield is the excess of its produce beyond what would be returned to the same capital if employed on a not necessarily equal area of the worst land in cultivation,' and something of this kind is needed to make it true. 1 Principles, heading of Bk. II. ch. xvi. § 3 in Contents. CHAPTER IX GENERAL REVIEW: POLITICS AND ECONOMICS § 1. Unsatisfactory character of the theories of production and distribution regarded from a purely scientific point of view. WHEN we look back after the lapse of another eventful half-century upon the theories of production and distribution elaborated by English economists between 1776 and 1848, it is not very easy to understand the admiration which was once felt for the progress made during that period. As we have seen,1 Adam Smith declared in his 'Introduction and Plan' that the per capita amount of a nation's annual produce is regulated, first, by the skill, dexterity, and judgment with which its labour is directed; and, secondly, by the proportion between the number of workers and the number of non-workers. The proposition, though incomplete, shows a perfectly clear conception of what is required in a theory of production. All that later economists were required to do was to add what was omitted, and to trace the immediate causes, as far as possible, to their origin. Instead, however, of grappling with this task, they allowed the subject of production to be split up by the unlucky invention of the three requisites or agents. So in the First Book of Mill's Principles, which was long the most systematic treatise on Production extant, we find the first six chapters devoted to a 'general survey of the requisites of production' before the second great question in political economy, on what the degree of productiveness of these agents depends,' is reached. Then, for two or three chapters, Mill restores unity to the subject 1 Above, p. 36. 2 2 Bk. 1. ch. vii. § 1; 1st ed. vol. i. p. 119; People's ed. p. 63 a. by treating the productiveness of all three agents together, without attempting seriously to distinguish variations in the productiveness of labour from variations in the productiveness of capital and the productiveness of land. But even thus, the elevation of capital into an agent of production coordinate with labour, and the imagination that it possesses a productiveness of its own, prevent any clear and adequate recognition of the fact that variation in the magnitude of the capital of a community is one of the most important causes of variation in the productiveness of labour. When the degrees of productiveness of three 'agents' are being discussed, it is obviously impossible to represent variation in the magnitude of one of the agents as a cause of variation in the productiveness of another. Similarly, the elevation of land into an agent of production co-ordinate with labour prevents variation in the density of population being treated in its proper place as a cause of variation in the productiveness of labour. Mill is consequently driven to the awkward expedient of bringing these factors into a theory as to 'the increase of production,"1 that is to say, not the increase of the productiveness of industry or of the produce per head, but the increase of the aggregate produce. When the degree of productiveness' of labour is given, the aggregate produce obviously depends simply on the amount of labour, but Mill represents it as dependent on three laws,' the law of the increase of labour,' the 'law of the increase of capital,' and the 'law of the increase of production from land.' Thus he succeeds in dividing the subject of production once more into a collection of observations about labour, capital, and land. Of these observations, those offered with regard to labour were sensible enough, though very incomplete. The principal of those offered with regard to land may be looked on as a somewhat confused exaggeration of the truth that increase of population may lead to a diminution of the returns. to industry. But the observations with regard to capital appear to the modern inquirer a most hopeless farrago of blunders. The nature, origin, and function of the capital of p. 96. 1 Principles, Bk. I. ch. x. § 1; 1st ed. vol. i. pp. 186, 187; People's ed. 2 Ibid., Bk. I. titles of chapters x, xi, xii. 3 Above, chap. iii. 5 Above, chap. iv. Above, chap. v. a country were totally misunderstood. It was distinguished from the accumulated stock of the country, with which, in any scientific view of the question, it must be regarded as identical, and was mixed up with periodical working expenses. Its origin was attributed to 'saving,' but to saving which is not saving but consuming. Its principal function was supposed to be to support labour. The extraordinary confusion which prevailed in Mill's mind upon the subject is shown by the fact that he spent page after page in the futile endeavour to prove the truth that purchasing produce is not employing labour." Of the plain fact that 'employing labour' or paying wages is simply a method of purchasing produce under a particular kind of contract, he was so completely oblivious that, after floundering from one inaccurate illustration to another, he finally gave an example in which wages are treated as equivalent to alms, the amount of produce which the employer receives in exchange for them being entirely ignored.2 The treatment of Distribution in the period under review appears even more unscientific and illogical than the treatment of Production. Adam Smith's rough division of incomes into wages of labour, profits of stock, and rent of land was accepted almost as a matter of course, no regard being paid to the much more important division into incomes derived from the performance of labour, and incomes derived from the possession of property. Erroneous ideas as to the functions of capital' prevented the attainment of any clear 1 Principles, Bk. I. ch. v. § 9; 1st ed. vol. i. p. 99: theorem, that to purchase produce is not to employ labour,' People's ed. p. 50 b. 2 'Suppose,' he says, 'that a rich individual, A, expends a certain amount daily in wages or alms, which, as soon as received, is expended and consumed in the form of coarse food by the receivers. A dies, leaving his property to B, who discontinues this item of expenditure, and expends in lieu of it the same sum each day in delicacies for his own table' (People's ed. p. 53; not in 1st ed). It is quite forgotten that if A paid wages, he would get something in return for them, and that this something may very well have been 'delicacies for his own table,' either produced by the labourers he employed, or bought with the proceeds of the sale of the things produced by them. As a recent writer has observed, if wages and alms were exactly alike, 'philan thropy would become very cheap indeed' (H. M. Thompson, The Theory of Wages and its Application to the Eight Hours Question and other Labour Problems, 1892, p. 29). 3 Above, p. 188. |