opposition to the notions then prevailing, he distinctly asserted, that all commodities, though apparently bought by money, are in reality bought by labour.82 Money, therefore, is not the subject of commerce, and is of no use except to facilitate it.83 Hence, it is absurd for a nation to trouble itself about the balance of trade, or to make regulations to discourage the exportation of the precious metals.84 Neither does the average rate of interest depend on their scarcity or abundance, but upon the operation of more general causes.8 As a neces entirely neglected until entered upon by Rae. Neither did Hume know any thing of the law of the ratio between population and wages; nor of the ratio between wages and profits. He even supposes (Philosophical Works, vol. iii. p. 299, Edinburgh, 1826) that it is possible for the labouring classes by combination "to heighten their wages;" and again (p. 319) that the richer a nation is, and the more trade it has, the easier it will be for a poor country to undersell its inanufactures, because the poor nation enjoys the advantage of a "low price of labour." Elsewhere, he asserts that coin can be depreciated without raising prices, and that a country, by taxing a foreign commodity, could increase its own population. Were all our money, for instance, re-coined, and a penny's worth of silver taken from every shilling, the new shilling would probably purchase every thing that could have been bought by the old; the prices of every thing would thereby be insensibly diminished; foreign trade enlivened; and domestic industry, by the circulation of a great number of pounds and shillings, would receive some increase and encouragement." Philosophical Works, vol. iii p. 324. "A tax on German linen encourages home manufactures, and thereby multiplies our people and industry." p. 365. These are cardinal errors, which go to the very root of political economy; and when we fairly estimate what has been done by Malthus and Ricardo, it will be evident that Hume's doctrines do not "rule the world of science." This is no disparagement of Hume, who, on the contrary, effected wonderful things, considering the then state of knowledge. The mistake is, in imagining that such a rapidly advancing science as political economy can be governed by doctrines propounded more than a century ago. 82Every thing in the world is purchased by labour, and our passions are the only causes of labour." Essay I. on Commerce, in Hume's Philosophical Works, vol. iii. p. 294. Hence, he saw the fallacy of the assertion of the French economists, "that all taxes fall ultimately upon land." p. 388. 83"Money is not, properly speaking, one of the subjects of commerce, but only the instrument which men have agreed upon to facilitate the exchange of one commodity for another." Essay on Money, in Philosophical Works, vol. iii. p. 317. "It is, indeed, evident that money is nothing but the representation of labour and commodities, and serves only as a method of rating or estimating them." p. 321. "See Essay V. on the Balance of Trade, in Hume's Philosophical Works, vol. iii. pp. 348-367. 85 Hume's Philosophical Works, vol. iii. pp. 333-335. Even now, a knowledge of this truth is so little diffused, that, lately, when Australia and California began to yield immense quantities of gold, a notion was widely sary consequence of these positions, Hume inferred that the established policy was wrong, which made trading states look upon each other as rivals, while, in point of fact, the question, if considered from a certain height, was one, not of rivalry, but of coöperation; every country being benefited by the increasing wealth of its neighbours.86 Those who know the character of commercial legislation, and the opinions of even the most enlightened statesmen a century ago, will consider these views as extremely remarkable to have been propounded in the year 1752. But what is more remarkable still, is, that their author subsequently detected the fundamental error which Adam Smith committed, and which vitiates many of his conclusions. The error consists in his having resolved price into three components, namely, wages, profit, and rent; whereas it is now known that price is a compound of wages and profit, and that rent is not an element of it, but a result of it. This discovery is the corner-stone of political economy; but it is established by an argument so long and so refined, that most minds are unable to pursue it without stumbling, and the majority of those who acquiesce in it are influenced by the great writers to whom they pay deference, and whose judgment they follow. It is, therefore, a striking proof of the sagacity of Hume, that in an age when the science was but dawn circulated that the interest of money would consequently fall; although nothing can be more certain than that if gold were to become as plentiful as iron, the interest of money would be unaffected. The whole effect would fall upon price. The remarks on this subject in Ritchie's Life of Hume, London, 1807, pp. 332, 333, are interesting, as illustrating the slow progress of opinion, and the difficulty which minds, not specially trained, experience when they attempt to investigate these subjects. 86"Nothing is more usual, among states which have made some advance in commerce, than to look on the progress of their neighbours with a suspicious eye, to consider all trading states as their rivals, and to suppose that it is impossible for any of them to flourish, but at their expense. In opposition to this narrow and malignant opinion, I will venture to assert, that the increase of riches and commerce in any one nation, instead of hurting, commonly promotes the riches and commerce of all its neighbours." "I go farther, and observe, that where an open communication is preserved among nations, it is impossible but the domestic industry of every one must receive an increase from the improvements of the others." Essay on the Jealousy of Trade, in Hume's Philosophical Works, vol. iii. pp. 368, 369. ing, and when he could receive little help from his predecessors, he should have discovered a mistake of this sort, which lies so far beneath the surface. Directly the Wealth of Nations appeared, he wrote to Adam Smith, disputing his position that rent is a part of price;87 and this letter, written in the year 1776, is the first indication of that celebrated theory of rent, which, a little later, Anderson, Malthus, and West, saw and imperfectly developed, but which it was reserved for the genius of Ricardo to build up on a broad and solid foundation. It is very observable, that Hume and Adam Smith, who made such immense additions to our knowledge of the principles of trade, had no practical acquaintance with it.88 Hume had, at an early period of his life, been in a mercantile house; but he threw up that employment in disgust, and buried himself in a provincial town, to think, rather than to observe.89 Indeed, one of the capital 87 This letter, which I have referred to in my first volume, p. 229, was published, for, I believe, the first time, in 1846, in Burton's Life and Correspondence of Hume, vol. ii. p. 486. It is, however, very difficult to determine what Adam Smith's opinion really was upon this subject, and how far he was aware that rent did not enter into price. In one passage in the Wealth of Nations (book i. chap. vi. p. 21) he says of wages, profit, and rent, "In every society, the price of every commodity finally resolves itself into some one or other, or all of those three parts; and in every improved society, all the three enter, more or less, as component parts, into the price of the far greater part of commodities." But in book i. chap. xi. p. 61, he says, High or low wages and profit are the causes of high or low price; high or low rent is the effect of it." This latter opinion we now know to be the true one; it is, however, incompatible with that expressed in the first passage. For, if rent is the effect of price, it cannot be a component of it. 66 ss Hence, when the Wealth of Nations appeared, one of our wise men gravely said that "Dr. Smith, who had never been in trade, could not be expected to write well on that subject, any more than a lawyer upon physic." See Boswell's Life of Johnson, edit. Croker, 1848, p. 478, where this remark is ascribed to Sir John Pringle. 89" He was sent to a mercantile house at Bristol in 1734; but he found the drudgery of this employment intolerable, and he retired to Rheims." Brougham's Life of Hume, Glasgow, 1856, p. 169. See also Ritchie's Life of Hume, p. 6. In Roberts' Memoirs of Hannah More, 2d ed. 1834, vol. i. p. 16, it is said that "two years of his life were spent in a merchant's countinghouse in Bristol, whence he was dismissed on account of the promptitude of his pen in the correction of the letters intrusted to him to copy." The latter part of this story is improbable; the former part is certainly incorrect; since Hume himself says, "In 1734, I went to Bristol, with some recommendations to eminent merchants, but in a few months found that scene defects of his mind, was a disregard of facts. This did not proceed, as is too often the case, from that worst form of moral obliquity, an indifference to truth; since he, on the contrary, was an ardent lover of it, and was, moreover, a man of the purest and most exemplary character, utterly incapable of falsehood, or of prevarication of any kind.90 In him, a contempt for facts was merely the exaggerated result of a devotion to ideas. He not only believed, with perfect justice, that ideas are more important than facts, but he supposed that they should hold the first place in the order of study, and that they should be developed before the facts are investigated. The Baconian philosophy, which, though it allows a preliminary and tentative hypothesis, strongly insists upon the necessity of first collecting the facts, and then proceeding to the ideas, excited his aversion; and this, I have no doubt, is the reason why he, who was usually so lenient in his judgments, and who was so keen an admirer of totally unsuitable to me. I went over to France, with a view of prosecuting my studies in a country retreat." Own Life, p. v. 90 What Sir James Mackintosh says of him is only a faint echo of the general voice of his contemporaries. "His temper was calm, not to say cold; but though none of his feelings were ardent, all were engaged on the side of virtue. He was free from the slightest tincture of malignity or meanness; his conduct was uniformly excellent." Mackintosh's Memoirs, vol. ii. p. 162. A greater than Mackintosh, and a man who knew Hume intimately, expresses himself in much warmer terms. "Upon the whole," writes Adam Smith, "Upon the whole, I have always considered him both in his lifetime and since his death, as approaching as nearly to the idea of a perfectly wise and virtuous man as perhaps the nature of human frailty will permit. Hume's Philosophical Works, vol. i. p. xxv. Some notices of Hume will be found in an interesting work just published, Autobiography of Alexander Carlyle, Edinburgh, 1860, pp. 272-278. But Carlyle, though a man of considerable practical skill, was incapable of large views, and was, therefore, unable, I will not say to measure, but even to conceive, the size of such an understanding as that possessed by David Hume. Of his want of speculative power, a decisive instance appears in his remarks on Adam Smith. He gravely says (Autobiography, p. 281), "Smith's fine writing is chiefly displayed in his book on Moral Sentiment, which is the pleasantest and most eloquent book on the subject. His Wealth of Nations, from which he was judged to be an inventive genius of the first order, is tedious and full of repetition. His separate essays in the second volume have the air of being occasional pamphlets, without much force or determination. On political subjects, his opinions were not very sound." It is rather too much when a village-preacher writes in this strain of the greatest man his country has ever produced. intellectual greatness, is, nevertheless, grossly unfair towards Bacon, with whose method it was impossible for him to sympathize, though he could not deny its utility in physical science.91 If Hume had followed the Baconian scheme, of always rising from particulars to generals, and from each generalization to that immediately above it, he would hardly have written one of his works. Certainly, his economical views would never have appeared, since political economy is as essentially a deductive science as geometry itself.92 Reversing the inductive process, he was in favour of beginning with what he termed general arguments, by which he hoped to demonstrate the inaccuracy of opinions which facts were supposed to have proved.93 He did not stop to investigate the facts from which the inference had been drawn, but he inverted the order by which the inference was to be obtained. The same dislike to make the facts of trade the basis of the science of trade, was displayed by Adam Smith, who expresses his want of confidence in statistics, or, as it was then termed, political arithmetic.94 It is, however, evident, that statistical facts are as good as any other facts, and, owing to their mathematical form, are very precise.95 But when " He speaks of him in the following extraordinary terms. "If we consider the variety of talents displayed by this man; as a public speaker, a man of business, a wit, a courtier, a companion, an author, a philosopher; he is justly the object of great admiration. If we consider him merely as an author and philosopher, the light in which we view him at present, though very estimable, he was yet inferior to his contemporary Galileo, perhaps even to Kepler." "The national spirit which prevails among the English, and which forms their great happiness, is the cause why they bestow on all their eminent writers, and on Bacon among the rest, such praises and acclamations as may often appear partial and excessive." Hume's History of England, vol. vi. pp. 194, 195, London, 1789. See the note in vol. i. pp. 228, 229 of Buckle's History of Civilization. Thus, for instance, in his remarkable Essay on the Balance of Trade, he says (Philosophical Works, vol. iii. p. 349), "Every man who has ever reasoned on this subject, has always proved his theory, whatever it was, by facts and calculations, and by an enumeration of all the commodities sent to all foreign kingdoms;" therefore (p. 350), “It may here be proper to form a general argument to prove the impossibility of this event, so long as we preserve our people and our industry." "I have no great faith in political arithmetic." book iv. chap. v. p. 218. Wealth of Nations, Indeed, the only possible objection to them is that the language of their collectors is sometimes ambiguous; so that, by the same return, one VOL. II, H H |