atmosphere to projectiles, are not available in the practice of political economy. Often indeed the resisting medium is invisible as air, and its presence escapes attention. There occurs the difficulty of perceiving all the data which should be taken into account in our reasoning. For, as it has been said in a well-known essay by John Stuart Mill-one of those who have rendered it superfluous at the present day to discourse at length upon the method of political economy-" Against the danger of overlooking something, neither strength of understanding nor intellectual cultivation can be more than a very imperfect protection." As an instance in which eminent theorists may have omitted a relevant circumstance may be taken the question whether it is possible for trade unionists by standing out for a higher than the market rate of wages to benefit themselves permanently without injuring other workmen. The negative answer which has sometimes been given omits the consideration that an increase of wages tends to increased efficiency, and increased efficiency to increase of the produce to be distributed among all the parties. There are those who attach much weight to this consideration. How much weight should be assigned to it is a question of a sort which often baffles the theorist to determine the quantity, after you have assigned the quality or direction of an agency. The possibility that diminished hours of work will not cause a proportional diminution of work done may be instanced both as a material consideration which has often been left out of account by serious reasoners in old times; and one of which it is not easy to determine the force, as well as the direction. Against "the danger of overlooking something," no remedy can be prescribed except to cultivate open-mindedness and candour, and above all sympathy, the absence of which has aggravated the most serious mistakes which have been committed in political economy. I refer particularly to errors relating to the remuneration of the wage-earning classes. Slips accidentally committed by the great theorists through carelessness or the passion for simplicity would probably have been far less serious, if those who interpreted political economy in the press and in parliament and applied it in the conduct of their business had entered more fully into the life and conditions, views and wants of the wageearners. A generous caution would have softened the harsh tenets that the introduction of machinery could not ever be detrimental to workmen, that the Factory Acts were a mischievous interference with the liberty of the labour-market, that workmen could not possibly benefit themselves by union. I would dwell longer on this all-important topic-the conduciveness of good-feeling to wisdom-if I were able to convey a feeling by a discourse. I can best express myself by pointing to an example which will be present to the memory of all here, the example of ardent sympathy perfecting reason which is afforded by the noble life of Toynbee. To return to what I was saying about the difficulty-even when you have perceived a relevant consideration of rightly appreciating its weight, there is a specific for this failing, namely statistics. Statistics are an indispensable part of the equipment of the modern publicist; and it is truer now than in Plato's time that he who has no regard for the art of counting will not be himself of much account. It will be my duty to take occasional opportunities of discoursing on the methods of statistics—the logic of numbers, in which fallacies unfortunately form a large chapter. When we have done our best to correct our practical judgments, there will still be, as Mill says, "almost always room for a modest doubt as to our practical conclusions." This modesty and this doubt are particularly appropriate in the case of the academic teacher, who, expected to know something about all the branches of his subject, cannot be expected to have examined many of them closely and at first hand. In the balance of judgment he may measure those weights which, so to speak, are most regularly shaped and admit of theoretical determination; but he must be ever prepared for the balance being turned by practical considerations of which he has not taken due account. Therefore he should "teach, not preach," in the words of Professor Walker. Or, as it has been said by another eminent American economist, Professor Dunbar, a high authority on method (in a recent essay on the "Academic Study of Political Economy ") 1 the instructor is not concerned with "the propagation of his own views. He is interested in making his reasoning process clearly understood; but this is because of the value of the logical process itself." Professor Dunbar specifies several good reasons why "the teacher's opinion upon some burning question of the day" should not be communicated to his pupils. There occurs to me as pertinent another case in which the teacher will not give an opinion-he may not have got one. Having dilated at such length on theory and its application to 1 Quarterly Journal of Economics, July, 1891. practice, I am unable to devote proportionate attention to the advantages of historical studies. But you will not expect me to expatiate upon advantages which are known to most of you from personal experience. I will only advert to a secondary and less obvious benefit attending historical researches. To trace the affiliation of ideas in the progress of science is calculated to correct our estimates of authority to reduce in general the extravagant regard which the youthful student is apt to entertain for contemporary leaders, and to assign due weight to real originality. It is impossible to overrate the importance of the historical method; understanding it in the sense defined by one of those who have most ably recommended and practised it, Professor Ashley, as "direct observation and generalisation from facts past or present." I do not pretend to determine with precision the parts played by theory and history in this sense; I would as soon attempt to solve the old dispute, whether nature or man does more in the production of wealth. As the producer of wealth will push his investment in the different agents of production up to a certain limit which has been called the "margin of profitableness"; so, in the manufacture of economic wisdom, each of us should expend his little fund of energy, partly on the fixed capital of the deductive organon and partly on the materials of historical experience. The margin of profitableness in the intellectual as in the external world will differ with the personality of individuals. No general rule is available, except that, like the cultivated Athenians, we should eschew the invidious dispåragement of each others' pursuits. I rejoice that such illiberal jealousy among the votaries of economic science is becoming as obsolete as the Battle of the Books. As it has been well said by one among us, Mr. Price, "The quarrel between the 'old' and "new' economists seems to be giving way on all sides to a hearty desire to recognise good work wherever it is to be found, and to an honest endeavour to seek for grounds of agreement rather than reasons for difference." 3 In this broad and liberal spirit our school of modern history has included political economy among its studies. In this spirit the teachers of both subjects will, I hope, cordially co-operate. While referring to the historical side of political economy, I cannot but think of my immediate predecessor,* whose brilliant 1 Inaugural Address, University of Toronto. 2 Pericles apud Thucydiden. 3 ECONOMIC JOURNAL, No. 3, p. 509. achievements have reflected lustre on this University; who not only extracted the crude ore of historical material from the dim and dusty mine of medieval records, but also himself elaborated, purified, polished the precious mass for permanent use and solid ornament. Nor can I be unmindful of the first occupant of this chair, of Senior, who, while advancing the boundaries of the science at almost all its frontiers, was at the same time versed and active in affairs, and contributed to history by recording the opinions of the men who made history. When I remember the distinguished publicists who have occupied this chair, I am conscious of the deficiencies of their successor. I can but promise that zeal in academic teaching will not be deficient. I venture also to indicate a more external advantage which is likely to conduce to the usefulness of my office. I allude to the opportunity of collecting contemporary opinions and events-as it were into a focus-which is afforded by the position of the editor of the journal which is the organ of the British Economic Association.* In furthering the objects of that Association I hope for much assistance from my fellowstudents in this University. *Now the Royal Economic Society. (B) THE THEORY OF DISTRIBUTION [THE Theory of Distribution is the substance of lectures delivered at Harvard University in the autumn of 1902; and published, in the form now reproduced, in the Quarterly Journal of Economics, February, 1904. The Theory of Distribution is treated as involving the general theory of Value determined by Supply and Demand in so far as in a regime of competition the shares of the parties are settled by that process. The general principle is contemplated in its application to the three markets in which the entrepreneur deals with the respective owners of the classical factors of production. Here, as more fully in papers included in the mathematical section, there is disputed the dogma that the remuneration of the entrepreneur is null; together with the less paradoxical tenet that his gain is exactly equateable to the loss which the community would suffer by his withdrawal (see Index sub voce entrepreneur). The argument that the remuneration of the entrepreneur cannot be expressed by such simple formulæ is buttressed by an added note referring to the treatment of Risk in Mr. Keynes' Treatise on Probability. As the regime of Competition is not universal, the theory of Distribution requires also the consideration of monopoly, in particular of two-sided monopoly; as when a compact association of entrepreneurs confronts a solid trade union. Is the ideal of distribution in such cases the arrangement which would result from an imaginary perfect competition, or rather a reasonable compromise rendered possible by a better mutual understanding, an enlarged sympathy ?] Distribution is the species of Exchange by which produce is divided between the parties who have contributed to its production.1 Exchange being divided according as botu, or one only, or neither of the parties have competitors, n 1 This definition, if not made more specific, includes s national Trade, just as the generic definition of Internatio some kinds of Distribution. See II. 5, 19. 13 tion is Inter-ludes |