Early

Journal Content on JSTOR, Free to Anyone in the World

This article is one of nearly 500,000 scholarly works digitized and made freely available to everyone in the world by JSTOR. Known as the Early Journal Content, this set of works include research articles, news, letters, and other writings published in more than 200 of the oldest leading academic journals. The works date from the mid-seventeenth to the early twentieth centuries. We encourage people to read and share the Early Journal Content openly and to tell others that this resource exists. People may post this content online or redistribute in any way for non-commercial purposes. Read more about Early Journal Content at http://about.jstor.org/participate-jstor/individuals/early- journal-content. JSTOR is a digital library of academic journals, books, and primary source objects. JSTOR helps people discover, use, and build upon a wide range of content through a powerful research and teaching platform, and preserves this content for future generations. JSTOR is part of ITHAKA, a not-for-profit organization that also includes Ithaka S+R and Portico. For more information about JSTOR, please contact support@jstor.org.

THE Several have shown economic understood. these theories.

NEW

THEORIES

OF

ECONOMICS.

criticisms of a work * that I have recently published me that certain points of view from which the new can be considered I propose have In this paper not been thoroughly to give a brief expose of

theories

The present study is purely to point out the part played formulation of the new theories, the large amount of work done modest contribution. so merely to avoid for errors I may have in the science

I attempted to separate from my own predecessors by my If I sometimes speak in my own name, I do on other writers placing the responsibility nor have introduced into their theories. When art and

It is not my intention objective. the various economists in the by

As a matter of fact, art has always preceded science. course of the evolution of human knowledge

have drifted apart, critics have never been wanting who were ready to assert that science was productive of no useful results. Criticisms of this kind are largely founded on the fact that a science nate art. teaching devices

a utility as the cog? has not nearly so immediate It is also to be said that art cannot confine itself to its its persuasive power. of certain rhetorical

As the most has nothing to do. the it is not soundest, happens that reasoning always persuasive economic science often differs from economic art in the means of with which science means of expression of their power to disclose the their consider art must whereas truth, efficiency as primarily means of persuasion. From this it follows that economic sci? ence will not hesitate to use mathematics, philology, physiology, to but a very etc.; whereas art can draw upon these sciences 1 Coursd1 economie politique; Lusanne, F. Rouge, 1896, 2 vols. expression employed. from the point solely Science considers of view 485

function ; it must also demonstrate to make use art is obliged Consequently

486 limited of those extent

JOURNAL

OF POLITICAL

ECONOMY understood by the majority

it undertakes

It is not my intention at this point to consider the general In passing it may question of the utility of the pure sciences. in that any person who believes be said by way of illustration the uselessness of the science not reading a book On the other hand, if he enjoys reading works on this subject. it would be foolish for him to stop at every page to science express the wish that the author had written a more valuable

for fear of not being to persuade.

of astronomy will act prudently in which shows that it treats of this of the title

It is also to be thoroughly under? work, e. g., a trade almanac. be entirely ignored or stood that a question may legitimately at all it must be treated if it is considered but aside, wholly put as fully as the resources of the science at the time permit. There can be no doubt that the exact and real sense of the famous phrase of Tacitus : Agri pro numero cultorum ab imiversis

in vices occupantur, quos mox inter se secundum dignationem partiwitur has nothing to do with the present welfare of humanity. .... of a law affecting the A statesman having in hand the passage landed property of his country might therefore be justly con? demned were he to waste his time in trying to find out the mean? this of Any person who might have the time and phrase. ing know to exactly what had been the system of property curiosity among the Germans must needs read the principal authors who have studied taken

better not to interfere but let those who are interested

The ancient Germans and their land system read that language. To the last remark I can only reply that if are not in my line." you are not interested in a certain line of work you would do proceed without interruption in the particular subject and who will take to lead them the pains to investigate it in every way calculated to the truth.

After having once this famous phrase of Tacitus. to be be it task the however, would, very annoying up remark of an intruder to this the in one's study by interrupted " Latin You use too much You are wasting your time. effect: ; cannot Greek so for in a mistake make often, many quoting you

THE

NEW

THEORIES

OF ECONOMICS than

487

manner

To acquire wealth may be pleasanter in which it is distributed. For

the means

opinion that a certain book would other to establish free trade in the world at large I would not hesitate an instant to give myself up heart and soul to the study of this particular work, putting aside for the time all study of The man in whose power it might be to find out pure science. the sufferings of the poor would have of alleviating done a far greater deed than the one who contents himself solely with knowing the exact numbers of poor and wealthy people in society.

only to know the my part, were I of the contribute more than any

However, if anyone wished to pursue such a line of he should be left at liberty to use such means as may study, him to discover the law according to which incomes enable vary. In speaking of a mathematical formula that gives an approx? imate expression of this law, Professor Charles Gide says that "the latter is endowed with no power, either of intimidating or discouraging any one of those who aspire to a greater equality " of social conditions ; which is equivalent to saying that astro? nomical studies will not have the power "of intimidating or dis? couraging" investigator wealth does simply that some lovers who in the choice of a star of their own. The of is in search of the law of the distribution

or dissuade not aim to encourage This intent on discovering the truth.

to a given law, but it is obvious attract each other according that in this study special attention will center on the movements which take place in so far as bodies are subject to attraction under this law and that no time will be wasted in exhaustive study of other laws hand. that have nothing

are not of greater questions than Thus mechanics scientific view others. affords us strictly the of movements celestial bodies which the means of studying

he is anyone; does not imply from a importance

to do with the matter in

Let us therefore put aside, once for all, discussions regarding the greater or less utility of science or its power of persuading for himself between alternatives, and let us anyone to choose

488

JOURNAL

OF POLITICAL

ECONOMY

direct our attention ena. sion tells kind. A reader

solely to the laws governing certain phenom? who may have no interest in following a discus? on this line may as well discontinue his reading. Voltaire how Micromegas descended to earth and observed before he could

man?

Micromegas, fully comprehend that a large class of activities actions, would have to perceive aims at providing what is useful or pleasant, that another class of actions depends on the sentiment arising from the mutual attrac? tion does class between not aim sexes, and that there is a third class which This third of sense. directly at the enjoyments of actions on certain sentiments called moral, proceeds the

human

if he is to make progress religious, patriotic, etc. Micromegas, in the study of this great number of actions going on before him, must soon see the necessity of classifying the activities and

each class separately. This ordering of things is examining needful in every line of study. It would not do to blend the This does not in the study of anatomy with that of chemistry. least imply that the anatomist underrates chemistry, or vice it only says that at a time. investigated versa; Economic strued come made results but one subject can be advantageously

questions up to this time have too often been con? to coincide with questions of law. The time has now

to separate the twTo, just as in its time a separation was between chemistry and physics. What are the economic of strikes ? as This to whether

question

is a question distinct from the other laborers have or have not the right to

is gained, from a scientific point of strikes. organize Nothing these two very different questions. . It view, in not separating must also be well understood that in dealing with a practical case both questions must be solved. Science proceeds by anal? ysis, whereas

synthesis is required where practice is concerned. that are exclusively scientific are of two kinds : Propositions ? describing what has taken place (i) descriptive propositions, so monetary systems are described with reference to time and which search into what propositions, (2) hypothetical have happened under given specific conditions ? so, for

place; would

THE instance, These what

NEW would

THEORIES

OF ECONOMICS

489

country accustomed

which are in mechanics

happen if paper money were issued in a to a circulation of gold. to those two kinds of propositions fairly correspond included Given under the two heads of actual

and virtual movements.

a system of material points, the This is of these points. movements to find the actual problem is a question the second Of under the first head. following kind would be the question as to what movements these points would between describe them. on the basis These latter of the relations movements, place without actually not realized existing in fact, the condi?

science and social economy have in view the study of two analogous kinds of movements. The first kind constitutes the doctrine of evolution ; it is the class of movements to which social science has given the greater attention. studies The second This class class of movements "historical" is characteristic of the which bear the name in political economy. is of interest as or questions

but which might have taken tions assumed, are what are called In my opinion both political

violating virtual movements.

of movements

bearing on the problem what relation given specific facts bear to the welfare of humanity ; in other words, what are the poten? tial movements conducive to the maximum welfare of humanity? In what relation do they stand to actual movements ? These

the shape of mathematical formulae would be very much like the his mathematical modification without to physicist trying apply formula for the movement descent of falling bodies in a vacuum to the These critics may of a feather floating on the wind.

for pursuing this method seem to be unaware of the economy fact that all sciences, must follow this without exception, method. Certain critics cry out apodictically against the new theories as being absurd because they attempt to state economic " in mathematical But no such pretentious formula;." phenomena in has been made. to state economic To phenomena attempt try

problems can be solved, if at all, through analysis and abstrac? tion. That is to say, an endeavor is to be made to isolate and the Those who censure political study principal phenomenon.

49? therefore

JOURNAL

OF POLITICAL

ECONOMY

closer approxima? which make a continually phenomena Let us take a very simple example tion to the concrete cases. ? the fall of a The complete theory of its move? heavy body. ment is unknown. Who, then, can give us the theory of the ideal movement

be told that, far from aiming to express complex phe? in a simple formula, economists nomena broadly avow that they do not know and will never know the theory of any concrete with in all its details. They are solely acquainted phenomena

If we simplify our problem by of a falling feather? be a to falling in a vacuum and attracted heavy body supposing theory of fall? by the earth alone, we may infer the well-known the problem by intro? We thereupon complicate ing bodies.

ducing the fact of the air's resistance, and in this way arrive at more and more closely to reality. theories approaching which lead to the method of Such are the considerations successive In my Cours I in political economy. approximations this theory more fully, and therefore shall only have developed indicate its nature here. Rational mechanics

to the gives us a first approximation In theory of the equilibrium and of the movements of bodies. the same way the theories of Jevons, Walras, Marshall, Irving to the full Fisher, and others present us with a first approximation

It must be clearly understood phenomena. theory of economic that it is only an approximation ; it is similar to that just made in Pure to fall in a vacuum. the case of the heavy body supposed the concrete eco? way of expressing than rational mechanics has for representing nomic phenomenon It is at this point that there is a mechanical one. the concrete economics has no better bears The problem of pure economics place for mathematics. in a striking likeness to that of rational mechanics. Now, point in treating the of empirical fact, men have as yet not succeeded latter problem without the aid to of mathematics. also to It therefore quite legitimate appears in the solution assistance appeal of the economic mathematics

for

problem. think that the advantage arising from the use Many people more rigorous. consists in making demonstration of mathematics

THE This

NEW

THEORIES

OF ECONOMICS

49 I

is an error. A demonstration well constructed by the method of ordinary logic is just as rigorous as one made hy the of that other kind of logic which bears the name of application mathematics. The this, that it permits than those generally insist of mathematics lies chiefly in advantage us to treat problems far more complicated solved by ordinary logic. Most economists

of different economic upon the mutual dependence phe? nomena. But a purely verbal recognition of this fact is not all that can be done or all that is required. What we want is to the relations existing between determine, at least approximately, the economic phenomena and so obtain a clear under discussion A their of conception interdependence. system of equations similar to the one used in mechanics and the movement of bodies

to represent the equilibrium is afforded of by this method This representation is, no doubt, in this way approximation. in a rough way at best, and yet the approximation approached serves better than nothing. It is better to know that the earth is nearly round than to imagine that it is a flat surface. Professor Walras' great contribution to economic discussion of was his discovery of a general to equations system express I cannot, for my part, sufficiently the economic equilibrium. admire

this portion of his work, but I must add that I entirely disagree with him on what he has to say in his work entitled Professor Walras thinks it possible to Etudes d'economie sociale. draw certain economic of jurisprudence. unable to accept mental facts. methods Foremost exist no valuable mathematics from metaphysical principles is opinion worthy of respect, but I am I am a believer in the efficiency of experi? it. to the exclusion of all others. For me there This demonstrations deductions

except those that are based on the among general problems to be solved by is the question of the determination or indetermin-

It is well known that wherever problems. the number of conditions is equal to the number of (equations) unknown quantities, a problem is easily solved. This simple con? sideration helps us instantly to understand why the so-called " laws ation of economic of maximum prices" contain a logical and formal impossibility.

492

JOURNAL

OF POLITICAL

ECONOMY

body of economic theory is henceforth bound together in this way are con? and knitted into an integral whole. If our equations structed each for a homogeneous and several of these group,

in this way. Is it not a most remarkable fact that a of thus be able to should not express equations only the system character but of economic general phenomena, every single detail as far as we may have any knowledge The entire of them. reached

I have endeavored to extend to dynamic questions the use of the equations for the static equilibrium. The most accu? given rate description is to be possible of the economic phenomenon

groups are considered, we get the theory of non-competinggroups of Cairns and an effectively complete theory of international with an scientific trade, together interpretation of the adequate of the use of these general form? cost. comparative theory By ulas we find the coefficients

of A consideration of production. their variability leads us up to a recognition of the function of the entrepreneurs and to the theory of different systems of pro? as we postulate or either free competition duction according It is to be borne in mind that regime. are reckoning in terms of marginal utility or "ophelimity," while the entrepreneur is counting in terms of money. Some of the criticisms that I have seen might have been unneces? monopoly consumers or a socialistic

A consider? sary if account had been taken of this distinction. ation of the size of industrial enterprises leads us to recognize that there exists in general a definite maximum at which the expansion of enterprises stops under a regime of free competition, in increasing them beyond or leaving there being no advantage them short of what corresponds to this magnitude. Our general formula also directs among study of the degree the different uses to the distribution of savings to which they can be put. From a I of facility with which savings can be turned our attention

II am not at all satisfied withthisway of presenting my idea; butto give it more with? without into a lengthy would be quite impossible entering precision, explanation, out makinguse of mathematical symbols. The desire to keep mathematical symbols out of the textexplains whyin ray Coitrs of rentappears in the notes. It the theory was impossibleto give it thedesired rigorousness and preciseness without theemploy? mentof mathematical symbols.

THE

NEW

THEORIES

OF ECONOMICS

493

be deduced.

a rigorous into different species of capital theory of rent can show us, besides, how the The general equations is thrown into vibration under the action of economic aggregate leads stimulate it. The study of these vibrations has to a theory of crises. When once the economic aggregate in this way been already apprehended it is easy to understand forces which that the divisions into which we break

in up the aggregate are and capitalization exchange, production, studying separately In quite arbitrary, although they may be useful helps in study. If this it these three be so are simultaneous. reality operations absolutely necessary to consider them again as a whole after having examined them in isolation ? to make a synthesis after having analyzed the phenomena. This general conception of economic aggregate finds an analogy in the conception which becomes an astronomer has of the solar system when he has apprehended the general equations of mechanics. It is to be borne in mind that, since any economic phenome?

non requires consideration duced

the use of capital could not be conceived apart from the time relation. Professor Irving Fisher has developed these consider? ations The with much ability.

the amount of goods under time for its completion, in any given case is the quantity which is pro? and consumed in a given period of time. Besides this

This, indeed, yield results which are borne out by experience. is the only adequate that demonstration of the propositions claims as makes the its its and of own political economy subject first part of the argument is of use only as and says noth? from certain hypotheses, drawing the conclusions as their as facts. To test to statements of concrete validity ing discussion. The experience; hypotheses probable

are of the economic general equations equilibrium and on the hypothesis of a decreasing marginal utility, it therefore becomes necessary to ask whether these equations obtained

their validity

in this respect deductions with must be compared because of the this affords the definitive proof (i) which until and (2) this test be made remain because it affords a means of

already made, ? a priori; only

494

JOURNAL

OF POLITICAL

ECONOMY economic phenomena in of the phenomena

testing whether really exhibits

this means the

of presenting bearing teaches

substantial

question. So, for instance, experience the quantity of goods demanded

us in a general way that decreases with an consumers by of Do or do not the general equations increase in their price. on theoret? the economic equilibrium lead us to this conclusion ical grounds ? If the question is answered in the affirmative the ground for accepting whilst if it is answered is strengthened, the general equations in the general equations in the negative must be rejected. Many of the critics who have com?

question mented upon my Cours have not understood that when they very erroneously imagined deductions with facts I intended thereby But a fact cannot be demonstrated ? it must then be used and these to test the most verifications. simplest

this to be the case ; thus comparing my to prove the latter. be observed ; it can Even the

validity of a deduction. facts are to be made elementary From a failure been

use

of in

making rule of procedure critics have on my work as the following: "After truthfulness simpler

this to appreciate led to make such reflections

from a formula he states that the a long deduction of that which is deduced can be seen at once from Such overfondness for mathematical

considerations.

on the basis of the well-known of light-interference But the theory of undulations of light-vibrations. equations of inter? not and cannot the phenomena does demonstrate discussion ference ; on the contrary it is on the ground of these phenom? of the The general equations ena that the theory is accepted. the law economic equilibrium are not of avail for demonstrating which of supply and demand ; on the contrary, the equations of supply and demand are proven the chief phenomena The accuracy There is no truism in all this. by experience. machine and therefore the value of a calculating might well be represent

that exists among many the impression strengthens machinery that this machinery is capable only of grinding out truisms." similar tenor might be made upon the Remarks of exactly

THE tested

NEW

THEORIES

OF ECONOMICS

495 15 by 12 and by the usual a demon?

by an actual operation, e. g., multiplying the product with the result obtained comparing But this verification

method.

must not be considered

he points out "After making the complex development, says: that substantially the same results might be obtained without the use of differential calculus. Professor Pareto cannot expect to reconcile confusing understand his non-mathematical him by telling the mathematical him reader with this method that if he does

and compli? stration, and it must not be said that an expensive for the sole purpose of cated machine has been constructed Another writer, Mr. H. L. Moore, 15 by 12. multiplying He in nearly the same words. repeats the foregoing objection'

of not

(? 56) he will have all the explanations " in in which the advantage learning language they are given ! Mr. Moore would convey the impression to his readers that the observation case. My be made which can otherwise, while the inference is a simple verification. "without the use oj differential calculus" Similar are to be found in any treatise upon verifications reached he quotes concerns this truism ; but this is not the be concern those results that cannot observation

mechanics ; but that such may be the case Mr. Moore does not seem to realize. If the rebuke administered by this acute critic is merited in the case just cited, it is also merited in numerous which seem to have

other cases

of such resort to verification

is precisely because cover a large number of economic onstrated formulae nomena.2

him, for the instances escaped Now it in my Cours are numerous. the general formulae of economic equilibrium questions which can be dem?

in other ways, often very simple, that we take these to represent this whole range of the economic phe?

1Annals oftheAmericanAcademy, May 1897. 2 The same critic is made in the economist says : 'A curiousslipfor a ?nathematic discussionof population, a slip thatparallels the errorof Malthus." To substantiate thishe isolates a phrase whichhe findsin the text? where thereare no mathematics ? and gives it to the readerunder the impressionthat to prove thatthe progressof wealth in England has not followedthelaw laid down by Malthus I furnish but this viz., thatbetweentwo given epochs the growthof wealth single groundof inference,

496

JOURNAL Vox a like reason

OF POLITICAL I have

ECONOMY

theoretical

deductions

J. S. Mill's work be worth the while for some

to verify my used every occasion and on this subject; statistics history by on logic contains several pages which it might of our critics to reread.

In the early stages of every science there is apt to be a good about terms rather than about the things deal of reasoning This method of procedure, however, is not entirely themselves. erroneous.

of the experience Words are often the depositories in of men, and so long as a new-born science has not succeeded a of direct for itself sufficient experi? accumulating aggregate to have recourse to the com? ence it may find it advantageous mon fund There

words. science

attached to the vague? sufficient and at which the disadvantages such as is given us by everyday ness of experience, words, out? This is pre? be from to derived them. the advantages weighs this in I believe the state of affairs political economy. cisely

of experience more or less vaguely by represented of comes a time, however, in the development becomes at which the fund formed by direct experience

has been morerapid than thatof population. He thenargues at lengthto show that one can always make out an arithmeticalprogressionin such form that its terms, will be greaterthan those of a given geometricalprogression. within given limits, " of it may Withoutgiving in detail " the complexdevelopment my critic'sargument, that it is always possible to show as equivalent to the proposition be characterized that within given limits the ordinatesof a straightline will be larger than those on withMr. Moore's assertion of a given curve. The readerwho may not be satisfied the case by reference this point,and who may be willingto take the troubleto verify to my Cours,will find (Vol. I, page 341) the following expressionforthe gross income in England : = R 346.30 X io?-OII?4t The followingwords, which explain the phrase isolated by Mr. Moore, should est beaucoup plus rapide que also be read : "On voit que la raisonde la progression celle qui a ete trouvee(2111) pour l'augmentationde la population. C'est ce qui la richessepar tete d'habitanta augmenteconsiderablement." explique comment in the textI have observedthatin England wealthhas grownmore Accordingly, the precise expressionfor rapidlythan population,and in the notes I have furnished whichhas been followed by the growthof wealth. Is it the geometrical progression not to have seen this? The reason whytheexplana? not " a curious slip " fora critic tionhas to be soughtforin the notes is simply this,?it could not be given without out of the text. In con? and I desiredto keep mathematics the use of mathematics to read the book one clusion it may be said thatit shouldnot be deemed unnecessary to criticise. attempts

THE science

NEW

THEORIES

OF ECONOMICS

497

a terminol? would gain a great advantage by developing and have as of its own, just chemistry, physics, anatomy ogy of But in this transition period many persons judge done. to the new methods as if works which are written according they had been written past. prevailed no value have been made upon the ter? consider of absolutely I For which have chosen to employ in my Cours. minology instance, it has seemed to me to be convenient to adopt Profes? I have not, however, deduced definition of capital; If anyone should from it. prefer a differ? any conclusions ent definition, there would be no objection to his using it, and he would obtain the same results as I have if he reasoned sor Walras' I should about things and not about words alone. exclusively even venture so far as to say that I could rewrite the whole of my Cours, and obtain the same results, without even mentioning the term " capital," if it were worth the while to attempt the feat. In in the to the principles which have according As a consequence, criticisms which I

as regards production fact, the base of calculations is the budget of the producer. Here is a person who owned a ship which cost him ,?2000 on the first of January 1895 > its value to ,?1800 by the first of January decreased the ing year 1895 the person in question expended received for the hire of his vessel ,?4100. must be from his whatever be 1896. ^"iooo These Dur? and facts

which

budget, gathered in reality only it appears. of production The equations But among the various formulate facts of a similar character. forms which a balance sheet can assume, there is one which is

the form in

worth only ,?1800 we are obliged to charge the sum of ,?200 to so as not to violate the form of the budget. Now, expenses first of same value on the the has the vessel know that since we January we may 1895 as on the ^rst ?^ eliminate just as well January of the following year, from the balance. it altogether

deductions. suitable for use in certain theoretical particularly Let us suppose that we are putting down the figures of our bal? ance sheet and that we put the vessel down for ,?2000, the As the smP ls now value it had on the first of January 1895.

49? The

JOURNAL

OF POLITICAL

ECONOMY

vessel figures in our business us a certain amount of "services" The method used in the case

these designate And let us refrain from thinking that in giving them a name we change their nature, and let us at all events not waste our time

of bookkeeping of many other things. As it is convenient to call them " capitals." a let us name, things by

only because it has rendered during the year 1895. we used for the vessel may be

in discussing the name to be given them. If anyone prefers a different name from the one we have selected, he is free to budget hesitate in some other form than that adopted, we need not The to do so, as the results will doubtless be the same. as not as same can or be considered capital, very thing capital according to our way of looking at it when we draw up the bal? ance sheet of production. To be capital is not to possess an consti? to specific weight, chemical objective quality analogous the which depends tution, etc.; it is a characteristic way upon we use a thing in the process of production. Another perfectly as to whether valueless discussion is the one adopt it. If it should be found convenient to state the

it is preferable question of production" Let us of industry." or the term "coefficients that hectoli? four are needed to hectares suppose produce eighty tres of corn. These four hectares are called "factors of produc? " tion of the corn. Professor Walras takes as a premise in his discussion the quantity of ground needed to give a unit of prod? uce. In the case assumed a hectare Walras is required of corn. Professor gives to this one-twentieth of a hectare the name "coeffi? cient of industry." Now, does it not amount to the same thing four-eightieths to raise one hectolitre or one-twentieth of

on the " factors to use the term

to say that four hectares of ground yield eighty hectolitres of corn, or that the one-twentieth part of a hectare yields one One must be overfond of disputing about hectolitre of corn? as to the best words, to let oneself drift into endless discussions mention a great fact. We term for presenting any given might ? of the same character all similarly many other discussions I to common But in sense. prefer drop this simple wanting

THE subject and

NEW

THEORIES on to the

OF ECONOMICS consideration of more

499 serious

to pass

of the economic phenomenon in its entirety affords a clear comprehension of the effects of all conceivable economic concerned ;, but it must be borne in mind organizations that this knowledge will always remain approximate only. Science does

questions. The presentation

not attempt to establish any particular method of economic of science to do so. and it is not the business organization, Science

does, however, attempt to solve problems of the follow? kind: What are the effects of a regime of free compe? ing (i) tition? (2) What are those of a regime of monopoly? (3) of a collectivist ? All of Those these must, questions regime course, be treated, not from a polemical point of view, but solely for the purpose of ascertaining what results would follow upon their installation. It is especially necessary for us to discover what relation

may appear to yield identical results if only a first approxima? tion be undertaken, and may differ materially in their results for the purpose of a second when reconsidered approximation. By following this line we have been able vigorously to prove that the coefficients

these results bear to the aggregate well being of do and to this not a first but a ; approximation, humanity only second and a third, and perhaps even more, must be made, because the later approximations take account of secondary facts which are easily neglected in the earlier ones. The regimes compared

This

of production are determined by the entre? in a regime of free competition preneurs precisely in the same to fix them if it as socialist would have a government way of ophelimity wanted to realize a maximum for its subjects. clas? proposition is one of the main points of the so-called sical political economy ; but it was necessary to give this prop? osition precision, in order to see clearly the limits within which it holds was also This conditions it assumes as given. in order to obtain a general necessary proposition that every indirect transfer of wealth from one individ? true and what

is accompanied As a result by a loss of wealth. of this it appears that if a socialist government is to obtain a max-

showing ual to another

500

JOURNAL

OF POLITICAL

ECONOMY

imum of well being for its subjects it must modify the distribu? tion of wealth only in a direct way ? say by taxing some people for the benefit of others, or by some similar means. A second will take account of the expense of putting the approximation into full play, and will compare mechanism of free competition this expense with that necessary for establishing some other new This is the way mechanism which society may wish to test. in which an

the subject differs substan? method of approaching of a class that from economists, who, large adopted by tially to a system, put forth all their after giving in their adhesion it against all and in defending power in showing its advantages This attacks am work far from I once more repeat that I to which it may be exposed. such for I regard their economists, condemning This being the situation, I have as one of great utility. to offer a substitute for their work, but simply to add All the conclusions to which study.

first compare would two systems of engineer of from a theoretic the to view, point keeping prin? machinery for steam engines; then he would ciples of. thermodynamics make tests of friction, loss of steam power, etc., in each system.

no desire deductive

of the eco? on the general equations can lead us must finally be verified by a care? nomic equilibrium is to say, by ful scrutiny of facts, both present and past?that and by the evidence of history. statistics, by close observation, Deductive studies This is the method of all the material sciences. in political economy must not be opposed to the inductive two lines of work should, on the contrary, supplement other, and neither should be neglected. The ditions incidence of duties is a special case when as the economic equilibrium undergoes The new theories are modified. of duties. certain ; these each

to it a purely scientific studies founded

of such alterations of its con?

the nature of the incidence with exactness on this incidence

give us an exact idea of In order to ascertain this

we must have at hand the numerical ; but statistics

This delays the practical the solution of the problem

data bearing have not as yet supplied them. toward A great advance application. has been made, however,

when the

THE method

NEW

THEORIES

OF ECONOMICS

501

has been found by which the problem is to be solved. for So, instance, if we wish to know the area of a rectangle two that the area is to be the knowledge things are required?(1) width the obtained the length and (2) the by by multiplying exact measurements of the width and the length. evidently Geometry depend on of society. taking as a gives us only the former item. The laws of the distribution

of wealth

the nature of man and on the economic

be com? of society. Will this work sometime organization we lack ? I cannot at it is certain that but ; pleted present say sufficient data made for undertaking it. must be considered to discover synthetically, if the distribution and

organization We might derive these laws by deductive reasoning, starting point the data of the nature of man and of the economic

remain

exceptions may be found, and I should not be greatly surprised if some day a well-authenticated exception were discovered. this it stands has most important theoret? law as Meanwhile, ical results, and these resulting formulae may be employed with? out limitations by statistics. of time and place, provided the law be verified

not for all mankind. At present, how? true, especially to the the statistics which we have no ever, present exceptions But law ; it may therefore provisionally be accepted as universal.

of wealth presents any uni? at all. the figures representing the distri? formity Fortunately bution of wealth group themselves to a very simple according which I to from have been enabled deduce law, unquestioned statistical data.1 This law being empirical, it may not always

At present the phenomena must be every endeavor

the numberof 7-;??- . In whichTVrepresents (x-\-o)a individuals whichforaggregate havingan incomegreaterthanx or A; b is a constant incomesis in general zero,or very near it; a is another constantwhose value lies between 1 and 2. The law applies onlyto incomesa littleabove the minimum. The formof the curve in the immediateneighborhoodof this minimum income is still forstatistics do not furnish information for its determina? us sufficient undetermined, tion. Since the publicationof my CoursI have examinedmanynew statisticaldata, and theyall verify the law which I had thereformulated. The resultsof my later have been publishedin the Giornaledegli Economisti investigations (Rome).

1This law is as follows : N=

502

JOURNAL

OF POLITICAL

ECONOMY

Mathematics is employed in connection with this law, but in a totally different way from that in which has been utilized in the studies considered In those studies the at the outset. analytical us to make use of phenomena compelled ; in the case we have just been considering they present us under the forms of a simple curve the entire sum of results supplied But in the one case, as in the by statistics. complexity mathematics other, those who are not well at home in the use of mathematics can nevertheless master the results gained through their use. In my Cours it has been possible to throw the mathematical parts into footnotes, and the text can thus be read without hin? drance by persons who have no knowledge of mathematics. This law of the distribution of wealth, which has so lately been discovered, may some day be of use in the study of the different races of men in this respect.1 The application of the of the

law is certainly conditioned of the popula? by the heterogeneity It does not in any way prejudice tion. other theories of the distribution of wealth, for the law is merely the synthesis of numberless statistical It can be compared in some facts. law in astronomy; respects to Kepler's that may make this law of distribution which the theory of universal rational. University of Lausanne. gravitation we still rational a theory in the way in has made Kepler's law VlLFREDO PARETO. lack

1Mr. Carlos C. Closson has made an to thisline of study contribution important in thisJournal forSeptember1896.