works, and water works. In the chapters on Socialism and the Nationalisation of the Land, reference is made to a new economic movement, which I have designated modern socialism. Between modern socialism and the socialism of earlier days, there is this characteristic difference, that whereas the latter sought to effect its objects by voluntary associations, the socialists of the present time make a direct appeal for State intervention. The recent marked rise in the price of coals is referred to as affording an illustration of the laws which determine the price of mineral produce; and in the chapter on Wages, I have directed attention to the very important fact that the unprecedented increase in wealth, which has taken place in England during the last quarter of a century, has not been accompanied by a corresponding improvement in the material condition of many classes of labourers. Since the last edition was published, the cooperative movement has so rapidly developed that it has been necessary entirely to re-write the chapter on Cooperation. Great stress has been laid on the important economic advantage which would result, if the entire people were brought under the influence of a comprehensive system of national education. Among the many circumstances which tend to perpetuate poverty, particular allusion is made to the encouragement given to improvidence by our Poor Law system and by the facility with which out-door relief is granted. In preparing this edition I have derived the most. valuable assistance from my wife, who in applying herself to the work has shown the greatest care and assiduity. I also have to thank her for having suggested many improvements, and she has also pointed out many defects which had previously escaped my notice. CAMBRIDGE, February, 1874 PREFACE TO THE FIRST EDITION. IT T has been often remarked that Political Economy is more frequently talked about than any other science, and that its principles are more frequently appealed to in the discussions of ordinary life. No science, however, is perhaps more imperfectly understood. Profound mathematicians, or accomplished geologists and botanists, are far more numerous than real masters of the principles of Political Economy. Such a fact is somewhat surprising, when it is remembered that Political Economy must be appealed to, in order properly to discuss almost any political, financial, or social question. Sometimes it has no doubt happened, that people have not become generally familiarised with a science, because its principles have not been clearly explained. But Political Economy has never wanted able expounders. Adam Smith wrote the first systematic treatise on the subject, and his work will long continue to be read as a masterpiece of clear exposition. Mr John Stuart Mill's treatise on 'The Principles of Political Economy' is perhaps the most remarkable work of that great author, and the book will be remembered as amongst the most enduring literary productions of the nineteenth century. It is therefore necessary for me to explain the object I have had in view in writing the present work. The end I hope to attain, I may briefly state to be this. I think that all who take an interest in political and social questions, must desire to possess some knowledge of Political Economy. Mr Mill's treatise is so complete and so exhaustive, that many are afraid to encounter the labour and thought which are requisite to master it; perhaps, therefore, these may be induced to read an easier and much shorter work. I so well remember the great advantage which I derived from reading Mr Mill's book, that I would not publish my own work if I thought that it would withdraw students from the perusal of a more complete treatise. I am, however, convinced that those who become acquainted with the first principles of Political Economy, will be so much struck with the attractiveness and importance of the science, that they will not relinquish its study. I have not attempted to discuss all the principles of Political Economy in full detail; but I believe no important branch of the subject has been omitted; and I therefore think that the principles which are explained in the present work will enable the reader to obtain a tolerably complete view of the whole science. In order to show how intimately Political Economy is connected with the practical questions of life, I have devoted a separate chapter to some subjects of great present interest; such, for instance, as Cooperative Societies-Strikes and Trades'Unions-and The Effects of the Recent Gold Discoveries. For the convenience of the ordinary reader, and especially for those who may use the book to prepare themselves for examinations, I have prefixed a very detailed summary of Contents, which may be regarded as an analysis of the work. I cannot conclude these prefatory remarks without acknowledging the kind assistance which I have derived from those who have verified my statistical facts; but I have especially to thank my friend, Mr Leslie Stephen, Fellow of Trinity Hall. He has given me many most important suggestions, and has carefully revised the work: the accurate and complete knowledge which he possesses of the science makes his revision peculiarly valuable. The labour of writing these pages would have been much greater, if I had not been fortunate enough to have a most patient and excellent amanuensis in the youth who is to me so faithful an attendant. TRINITY HALL, CAMBRIDGE, CONTENTS. CHAPTER I. Introductory Remarks. In an introductory chapter it is better to give a general description of Political Economy, rather than to attempt an accurate definition of the science-Political Economy investigates the laws which regulate the production, the distribution, and the exchange of wealth-Popular pre- judice considers that Political Economy is hardhearted and selfish-This fallacy explained and refuted-Any commodity which has an exchange- able value is wealth-The civilization of a country determines to what extent its natural resources can be classed as wealth-Fallacies now CHAPTER II. The Requisites of Production. The production of wealth has three requisites: land, labour, and capital- Capital defined to be wealth which is saved, and applied to the future CHAPTER III. Labour as an Agent of Production. The simplest commodity cannot be made available for consumption with- out the application of many different kinds of labour-All labour does not contribute to the production of wealth-Hence labour is classed as productive and unproductive-Labour is productive when it either directly or indirectly embodies utilities in material objects-The most useful labour may be sometimes unproductive-As an example, a railway may be partly made and never opened-Labour which is unproductive may yet be very useful-Mr Mill's definition of productive labour would make the labour of the schoolmaster to be unproductive, and this may be obviated by a wider definition-Consumption also It is sometimes fallaciously supposed that capital consists of money, to An individual cannot increase the capital of the country by spending wealth upon his own enjoyments-A demand for commodities is not a demand for labour-hence, the man who saves, and not the spendthrift, is the labourer's best friend-The science of Political Economy often only affirms tendencies, and therefore the results deduced from its principles do not always come into immediate operation-It is fallacious to suppose that there can be a glut of capital, and that consequently, without the unproductive expenditure of the rich, the poor could not be adequately employed - Wealth can only perform the functions of capital by being wholly or partially consumed-Foregoing principles illustrated by examples-The rapidity with which a country recovers from a devastating war explained-The consequences of raising revenue by loans investigated-The effects of loans and taxation compared, with especial reference to England and India-The distinction between circulating and fixed capital-The former is consumed by a single use, the latter may continne to perform its functions for a long period; food which feeds labourers is circulating capital; whereas fixed capital consists of machinery, buildings, railroads, &c.-The conversion of circulating into fixed capital may temporarily injure the labourers, and may in certain cases permanently injure some classes of labourers. CHAPTER V. On the Productive Power of the Three Political Economy would embrace a great number of sciences, if it |