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INCLUDING STRICTURES ON
THE MANAGEMENT OF THE CURRENCY
AND THE FINANCES SINCE 1861
WITH A CHART SHOWING THE FLUCTUATIONS IN THE PRICE OF GOLD.
ALFORD PROFESSOR OF NATURAL RELIGION, MORAL PHILOSOPHY, AND
CIVIL POLITY IN HARVARD COLLEGE.
CHARLES SCRIBNER & CO.
Entered according to Act of Congress, in the year 1870, by
in the Clerk's Office of the District Court for the Southern District of New York.
UNIVERSITY PRESS: WELCH, BIGELOW, & Co.,
DURING the last eight years, the United States have been trying experiments in the management of the Currency, in Banking, Finance, and Taxation, on a larger scale than the world had ever witnessed. The trial has cost the country much; we have not yet recovered from its consequences, and probably it will yet be long before we shall cease to feel them. But the experience thus gained has been valuable for the interests both of science and of practical legislation. It has thrown much light on the theories of Currency and Finance, which are the most interesting, because the most practically important, portions of the science of Political Economy. It has demonstrated by the logic of facts some of the main doctrines in these theories, disclosed some important qualifications of maxims formerly received, and raised questions of broad scope for further inquiry. I have here endeavored to bring together the results of these experiments, and to read the lessons which they teach. The book is to be regarded more as a new work, than as a new edition of the volume which I published, fourteen years ago, under the title of "Principles of Political Economy." Several chapters have been added, others suppressed or rewritten, and the remainder much condensed and modified.
The title under which the book now appears may seem to require defence or explanation. I hold, with Mr. Samuel Laing, that "every country has a Political Economy of its own, suitable to its own physical circumstances of position on the globe," and to the character, habits, and institutions of its people. Unquestionably there is a universal science of
Political Economy, applicable not only to America, but to France, England, and Germany, to all nations under the sun. There must be such a science, for the habits and dispositions of men, as manifested in the pursuit of wealth, may be reduced to general principles, and thus become subjects of legitimate scientific classification and inquiry, just as much as those other habits and dispositions which appear in the constitution and history of organized society, and which, when generalized and classified, become the science of Politics. There is a general science of Human Nature, of which the special sciences of Ethics, Psychology, Politics, and Political Economy are so many distinct and co-ordinate departments. It is the science as taken in this broad sense which such writers as Ricardo, Malthus, McCulloch, and J. S. Mill have endeavored to develop and to teach; though, as it seems to me, with very limited success. They have even assumed to treat it deductively, deriving its principles from their knowledge of human nature, and tracing these down to the outward conduct of men and to the social phenomena which these general motives produce or influence.
But it must be admitted, I think, that these universal principles are comparatively few and unimportant, and if the science were limited to them, it would be of narrow compass and limited utility. It can be fully and profitably set forth only in the inductive method, by observing and analyzing the phenomena in a particular case, and tracing these up to their sources, the circumstances of the people and the principles of human nature in which they originated. Because Adam Smith, in the main, adopted this method, his great work is a mine of information respecting the economical condition of Great Britain in the middle of the last century, and the institutions and laws by which this condition was affected. Even the writings of Ricardo, J. S. Mill, and their followers, though professing to treat the subject deductively and in the abstract, so that their conclusions shall be universally applicable, are pervaded with a tacit reference to the circumstances and institutions of the particular people for whom
The system which they have expounded is really the Political Economy of England alone, and is even more characteristic and peculiar than her social organization and civil polity. Here in America, as it seems to me, we need an American Political Economy, the principles of the science being adapted to what is special in our physical condition, social institutions, and industrial pursuits. The facts need to be fully presented, before they can be analyzed and referred to their scientific principles.
Political Economy is eminently a practical science, and a treatise on it may profitably include much valuable information respecting the habits of business, the course of domestic and foreign trade, and the methods which have been suggested by experience for applying Labor and Capital to the best advantage. I have endeavored to incorporate into this work such particulars respecting the operations of banking, the disposal of the public lands, the office of bills of exchange, the functions of the currency, the supply of the precious metals, the various modes of taxation, and the financial history of this country for the last ten years, as might be useful, not only to young men in College, but to those who are about to enter the mercantile profession.
CAMBRIDGE, February 24, 1870.