358 POLITICAL ECONOMY Sir William Pettv. Hobbes. Some occasional traits of an economic scheme in harmony with ; these new tendencies are to be found in the DC Give and Leviathan of Hobbes. But the efficacy of that great thinker lay rather in the ! general philosophic field ; and by systematizing, for the first time, the whole negative doctrine, he gave a powerful impulse towards the demolition of the existing social order, which was destined, as we shall see, to have momentous consequences in the economic no less than in the strictly political department of things. A writer of no such extended range, but of much sagacity and good sense, was Sir WILLIAM PETTY (j.r.), author of a number of pieces containing germs of a sound economic doctrine. A leading thought in his writings is that "labour is the father and active principle of wealth, lands are the mother." He divides a population into two classes, the productive and the unproductive, according as they are or are not occupied in producing useful material things. The value of any commodity depends, he says, anticipating Ricardo, on the amount of labour necessary for its production. He is desirous of obtaining a universal measure of value, and chooses as his unit the average food of the cheapest kind required for a man s daily sustenance. He understands the nature of the rent of land as the excess of price over the cost of production. He disapproves of the attempt to fix by authority a maximum rate of interest, and is generally opposed to Governmental interference with the course of industry. He sees that a country requires for its exchanges a definite quantity of money and may have too much of it, and condemns the prohibition of its exporta tion. He holds that one only of the precious metals must be the foundation of the currency, the other circulating as an ordinary article of merchandise. Petty s name is specially associated with the progress of statistics, with which he was much occupied, and which he called by the name of political arithmetic. Relying on the results of such inquiries, he set himself strongly against the opinion which had been advanced by the author of Britannia Lan- cjucns (1680), Fortrey, Roger Coke, and other writers, that the prosperity of England was on the decline. Sir The most thorough-going and emphatic assertion of the free- Dudley trade doctrine against the system of prohibitions which had North." gained strength by the Revolution was contained in Sir Dudley North s Discourses upon Trade, 1691. He shows that wealth may exist independently of gold or silver, its source being human industry, applied either to the cultivation of the soil or to manu factures. The precious metals, however, are one element of national wealth, and perform highly important oilices. Money may exist in excess, as well as in defect, in a country ; and the quantity of it required for the purposes of trade will vary with circum stances ; its ebb and flow will regulate themselves spontaneously. It is a mistake to suppose that stagnation of trade arises from want of money ; it must arise either from a glut of the home market, or from a disturbance of foreign commerce, or from diminished con sumption caused by poverty. The export of money in the course of traffic, instead of diminishing, increases the national wealth, trade being only an exchange of superfluities. Nations are related to the world just in the same way as cities to the state or as families to the city. North emphasizes more than his predecessors the value of the home trade. With respect to the interest of capital, he maintains that it depends, like the price of any commodity, on the proportion of demand and supply, and that a low rate is a result of the relative increase of capital, and cannot be brought about by arbitrary regulations, as had been proposed by Child and others. In arguing the question of free trade, he urges that individuals often take their private interest as the measure of good and evil, and would for its sake debar others from their equal right of buy ing and selling, but that every advantage given to one interest or branch of trade over another is injurious to the public. No trade is unprofitable to the public ; if it were, it would be given up; when trades thrive, so does the public, of which they form a part. Prices must determine themselves, and cannot be fixed by law ; and all forcible interference with them does harm instead of good. No people can become rich by state regulations, only by peace, industry, freedom, and unimpeded economic activity. It will be seen how closely North s view of tilings approaches to that embodied some eighty years later in Adam Smith s great work. Locke. Locke is represented by Roscher as, along with Petty and North, making up the "triumvirate" of eminent British economists of this period who laid the foundations of a new and more rational doctrine than that of the mercantilists. But this view of his claims seems capable of being accepted only with considerable de ductions. His specially economic writings are Considerations of the lower iny of Interest ami raising the value of Money, 1691, anil Further Considerations, 1698. Though Leibnitz declared with respect to these treatises that nothing more solid or intelligent could be said on their subject, it is difficult absolutely to adopt that verdict. Locke s spirit of sober observation and patient analysis led him indeed to some just conclusions ; and he is entitled to the credit of having energetically resisted the debasement of the currency, which was then recommended by some who were held to be eminent practical authorities. But he falls into errors which show that he had not by any means completely emancipated himself from the ideas of the mercantile system. He attaches far too much importance to money as such. He says expressly that riches consist in a plenty of gold and silver, that i*, as he explains, in having more in proportion of those metals than the rest of the world or than our neighbours. " In a country not furnished with mines, there are but two ways of growing rich, either conquest or commerce." Hence he accepts the doctrine of the balance of trade. He shows that the rate of interest can no more be fixed bylaw than the rent of houses or the hire of ships, and opposes Child s demand for legislative interference with it. But he erroneously attributed the fall of the rate -which had taken place generally in Europe to the increase of the quantity of gold and silver by the discovery of the American mines. He sets too absolute a value on a numerous population, in this point agreeing with Petty. On wages he observes that the rate must be such as to cover the indispensable wants of the labourer ; when the price of subsistence rises, wages must rise in a like ratio, or the working population must come on the poor-rates. The fall of the rent of land he regards as a sure sign of the decline of national wealth. "Taxes, however contrived, and out of whose hands soever immediately taken, do, in a country where their great fund is in land, for the most part terminate upon land." In this last proposition we see a foreshadowing of the imjiot unique of the physiocrats. Whatever may have been Locke s direct economic services, his principal importance, like that of Hobbes, lies in his general philosophic and political principles, which power fully affected French and indeed European thought, exciting a spirit of opposition to arbitrary power, and laying the foundation of the doctrine developed in the Contrat Social. 1 THIRD MODERN PHASE : SYSTEM OF NATURAL LIBERTY. Both in England and France the ruling powers had already begun to be alarmed by the subversive tendencies which appeared inherent in the modern movement, and took up iu consequence an attitude of resistance. Reaction became triumphant in France during the latter half of the reign of Louis XIV. under the disastrous influence of Madame de Main tenon. In England, after the transaction of 1688, by which the government was consolidated on the double basis of aristocratic power and official orthodoxy, the state policy became not so much retrograde as stationary, industrial conquest being put forward to satisfy the middle class and wean it from the pursuit of a social renovation. In both countries there was for some time a noticeable check in the intellectual development, and Roscher and others have observed that, in economic studies particularly, the first three decades of the 18th century were a period of general stagnation, eclecticism for the most part taking the place of originality. The movement was, however, soon to be resumed, but with an altered and more formid able character. The negative doctrine, which had risen and taken a definite form in England, was diffused and popularized in France, where it became evident, even before the decisive explosion, that the only possible issue lay in a radical social transformation. The partial schools of Voltaire and Rousseau in different ways led up to a violent crisis, whilst taking little thought of the conditions of a system which could replace the old ; but the more complete and organic school, of which Diderot is the best representative, looked through freedom to reorganization. Its constructive aim is shown by the design of the Ency clopedic, a project, however, which could have only a temporary success, because no real synthesis was forth coming, and this joint production of minds often divergent could possess no more than an external unity. It was with this great school that the physiocrats were specially connected; and, in common with its other members, whilst i Minor English writers who followed the new economic direction were Lewis Roberts, Treasure ofTraffick, I(i41; Kice Vaughan, Discourse of Coin and Coinage, 1<>75 ; Nicholas Harbon, Discourse concerniny Coining the new money lighter, HUG, in which some of Locke s errors were pointed out ; and Hie author of an anonymous book entitled Considerations on the East India Trade, 1701. Practical questions much debated at this period were those connected with banking, on which a lengthened controversy took place. S. Lamb, W. Potter, F. Cradocke, M. Lewis, M. Godfrey, R. Munay, H. Chambcrlen, and W. 1 ateison, founder of the Bank of England (NJ9-1), producing many pamphlets on the subject; and the manage ment of the poor, which was treated by Locke, Sir Matthew Hale, R. Haines,
T. Firrnin, and others.