The first four chapters of Book I. remain what they were in all probability originally intended to be, an essay on the causes and consequences of the division of labour. They thus contain only a fragment, though, doubtless, in Adam Smith's opinion a large fragment, of a theory as to the skill, dexterity, and judgment with which labour is generally applied. The second of the two different circumstances,' fares even worse than the first. The fourth paragraph of the Introduction and Plan gives some warning of its approaching fate, by depreciating its importance compared with that of the first circumstance. Savage nations, it seems, are miserably poor, though among them 'every individual who is able to work is more or less employed in useful labour,' while civilised nations are well off, though a great number of people do not labour at all, many of whom consume the produce of ten times, frequently of a hundred times, more labour than the greater part of those who work.' The fifth and sixth paragraphs are obviously intended to suggest that the first circumstance will be dealt with in Book I., and the second in Book II., but the sixth paragraph in reality substitutes something entirely different :— 'Whatever be the actual state of the skill, dexterity, and judgment with which labour is applied in any nation, the abundance or scantiness of its annual supply must depend, during the continuance of that state, upon the proportion between the number of those who are annually employed in useful labour, and that of those who are not so employed. The number of useful and productive labourers, it will hereafter appear, is everywhere in proportion to the quantity of capital stock which is employed in setting them to work, and to the particular way in which it is so employed. The Second Book, therefore, treats of the nature of capital stock, of the manner in which it is gradually accumulated, and of the different quantities of labour which it puts into motion, according to the different ways in which it is employed.' To give us a real theory of production, the Second Book ought, according to this arrangement of the matter, to show what regulates, not the number of useful and productive labourers,' but the proportion between the number of those who are annually employed in useful labour, and that of those who are not so employed.' This it does not do. Most of it deals only with the absolute number of useful labourers, a 'circumstance' which has nothing to do with per capita produce, and chapter iii. deals not with the proportion between the number of those who are employed in useful labour, and that of those who are not so employed, which is the second circumstance according to the third paragraph of the 'Introduction and Plan,' but with the proportion between the number of those who are employed in productive labour, and those who are not so employed, and it is expressly admitted that 'unproductive' labour may be, and often is, in the highest degree 'useful.' The lame attempt in the sixth paragraph of the 'Introduction and Plan' to gloss over the discrepancy between the third paragraph and Book II., by first speaking of 'useful' labour alone, and then of 'useful and productive' labourers, as if 'productive' were a mere synonym of 'useful,' could scarcely, one would suppose, succeed except in the case of the most careless readers. So, instead of a full discussion of the causes which affect the skill, dexterity, and judgment with which labour is applied, we are put off with an essay on the division of labour, and instead of a discussion of the causes which regulate 'the proportion between the number of those who are employed in useful labour and that of those who are not so employed,' we are given a treatise on 'the proportion between the productive and unproductive hands,' productive' meaning something quite different from useful. If Ricardo had been asked where his theory of production was to be looked for in his Principles of Political Economy and Taxation, he would have answered with perfect justice, that in spite of the generality of its title, his work did not profess to deal with the production of wealth. It was merely an attempt to offer a solution of the principal problem in political economy,' which is, he thought, to determine the laws which regulate' the distribution of the produce of a country between rent, profit, and wages. He certainly had much to do with the addition to nineteenth-century political economy of the 'law of diminishing returns,' but he 1 Bk. II. ch. iii. p. 146 b. Ibid., p. 147 b. and Malthus and West seem always to have been more concerned with the effects of that law on distribution than with its effects on production. Malthus's theory of production lies hidden in the confused tangle of the seventh chapter of his Political Economy, ‘On the immediate causes of the progress of wealth.' Its chief feature seems to have been an insistence on the necessity of consumption in order to cause or stimulate production. In the first edition of James Mill's Elements (1821), the inquiry as to 'What are the laws which regulate the production of commodities'1 fills less than four sparsely printed pages. These merely explain that man can do nothing more than produce motion,' that capital is a requisite of production, that capitalists and labourers are separate classes, and that division of labour and great manufactories are advantageous. It was Torrens who set the example of writing a considerable quantity about production. His Essay on the Production of Wealth (1821) contains 430 pages and is about the same length as the Book on Production in J. S. Mill's Principles. A considerable portion of it, however, deals with questions of value, trade, currency, and demand and supply, which by most later writers have been relegated to the separate division of political economy entitled 'Exchange.' The main body of the work consists of four chapters on the different kinds of industry-appropriative, manufacturing, agricultural, and mercantile. Stimulated perhaps by the appearance of Torrens's book, James Mill, in the second edition of his Elements, added a dozen new pages to his chapter on production, dividing them into two sections, of which the first is on 'Labour,' and consists chiefly of an exposition of the advantages of division of labour, more expanded than that contained in the first edition, and the second is on 'Capital,' and consists chiefly of an explanation of the nature of capital. M'Culloch considered that with regard to production, the business of the economist is an investigation of the means by which labour in general may be rendered most productive."2 Accordingly the bulk of his discussion of production falls in the section which treats of the 'Means by which the Productive Powers of Labour are increased.'1 Senior and J. S. Mill conceived the treatment of production as properly consisting of a collection of observations about the three requisites of production. § 3. The Three Requisites of Production. One of the most familiar and striking features of the theory of production, as taught in the text-books of the second half of the nineteenth century, is the practice of ascribing production to the co-operation or concurrence or joint use of three great agents, instruments, or requisites of production, Labour, Land, and Capital. This triad of productive requisites did not very early become an integral part of English political economy. Its origin is apparently to be - found in Adam Smith's division of the component parts of prices into wages, profit, and rent. When Adam Smith had divided the prices of commodities and afterwards the revenue of the community into the wages of labour, the profits of stock, and the rent of land, it was to be expected that some one would say that the revenue of the community is produced by labour, capital, and land, and proceed to arrange the theory of production under the three headings, labour, capital, and > land. This was done by J.-B. Say. The first chapter of Book 1. of his Traité explains what is meant by 'production,' the second deals with 'the different sorts of industry and the manner in which they co-operate in production,' the third explains what a productive capital is and how capitals co-operate in production,' the fourth discusses 'the natural agents, especially land, which are of service in the production of wealth,' and the fifth, on 'how industry, capitals, and natural agents join in production,' begins 'Nous avons vu de quelle manière l'industrie, les capitaux et les agens naturels concourent, chacun en ce qui les concerne, à la production; nous avons vu que ces trois élémens de la production sont indispensables pour qu'il y ait des produits créés.' 2 D. Boileau, in his Introduction to the Study of Political Economy, adopts an arrangement similar to that of Say, 1 Principles, Pt. II. § 2. 2 2d ed., 1814, vol. i. p. 35. having chapters on land, labour, capital, and the 'conjoint operation of land, labour, and capital.' But the familiar triad of productive requisites can scarcely have been present in the mind of Ricardo, when, in the first words of his Preface, he spoke of 'the produce of the earth-all that is derived from its surface by the united application of labour, machinery, and capital.' Malthus and M'Culloch make no use of it. James Mill says 'the requisites to production are twoLabour and Capital.'2 Torrens, however, teaches the doctrine of the triad very clearly: 'In the language of political economy,' he says, 'the original acquisition of wealth is called production; and those things by means of which this acquisition is made are termed instruments of production. Thus the land which supplies the primary materials of wealth, the labour by which these materials are appropriated, prepared, augmented, or transferred, and the capital that aids these several operations, are all instruments of production.' 8 But he does not divide his exposition of production into divisions on labour, capital, and land. Senior and J. S. Mill make labour and land (which Senior, like Say, calls 'natural agents') the 'primary' requisites of production, and capital (which Senior calls 'abstinence') only a secondary requisite. Senior says: 'We now proceed to consider the agents by whose intervention production takes place. 'I. Labour. The primary instruments of production are Labour and those Agents of which Nature, unaided by man, affords us the assistance. ... 'II. Natural Agents.-Under the term "the agents afforded to us by Nature," or, to use a shorter expression, "Natural Agents," we include every productive agent so far as it does not derive its powers from the art of man. 'III. Abstinence.-But although human labour and the agency of Nature, independently of that of man, are the primary productive powers, they require the concurrence of a third productive principle to give them complete efficiency. 'To the third principle... we shall give the name of Abstinence.' ' 1 For a further reference to this passage, see below, ch. iv. § 5. 2 Elements, 1st ed. p. 7. 3 Production of Wealth, p. 66. • Political Economy, Svo ed. pp. 57, 58. |