Keynes The Scope And Method Of Political Economy

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.On Political Economy and Laisser FaireThe connexion between political economy and laisser faire may be dis-cussed from two different points of view, which are not always as clearlydistinguished as they should be.There is, first, the connexion betweenpolitical economy and laisser faire considered as an assumption or ba-sis of reasoning; there is, secondly, the connexion between politicaleconomy and laisser faire considered as a maxim or rule of conduct.(1)Abstract economic doctrines are for the most part based upon the as-sumption of free competition and absence of government interference.This assumption may indeed be said to have occupied a central positionin the development of economic theories during the last hundred andforty years.There are two reasons why this has been so.One is to befound in the general principle of reasoning that it is best to take thesimplest cases first.If we can accurately determine what will ensueunder conditions of economic freedom, we shall be the better able todeal subsequently with more complicated cases, and to estimate the in-fluence exerted by various interfering agencies.The second reason isthat is modern economic societies laisser faire has been as a matter offact the general rule.Conclusions, therefore, based on the assumptionof non-interference have more nearly corresponded with the actual factsof modern industry than any conclusions obtained from other equallysimple hypotheses could have done.Beyond this, however, there is no essentially necessary connexionbetween political economy and laisser faire regarded as a basis of rea-soning.Economists recognise that in certain states of society, actual orpossible, the conditions are so different from those of modern industrythat conclusions depending on the hypothesis of noninterference are noteven approximately applicable.Moreover, in relation to modern eco-nomic phenomena themselves, it becomes necessary ultimately to dealwith more complex problems in which various interferences with thor-oughgoing competition have to be taken into account.The assumptionof laisser faire represents, therefore, only a preliminary stage, and byits aid we traverse only a portion of the ground that has to be covered inthe course of our economic reasonings.A little reflection will shew that it is far from being the ease thatpolitical economy always presupposes the absence of government inter-ference.It investigates the effects of export and import duties, of boun-ties, and of state-created monopolies such as the opium monopoly in36/John Neville KeynesBengal.It seeks to determine the influence exerted on wages by theexistence of poor relief guaranteed by the State.In nearly all moderncurrency discussions as, for instance, those relating to bimetallism orthe regulation of convertible paper currencies the whole argument isso far from being based on the assumption of laisser faire that every-thing turns on the supposition that some control over the currency isexercised by governments.In short, wherever government interventionbecomes a prominent factor, the economist recognises and discusses theinfluence exerted by it; and if in the future the part played by the State ineconomic affairs is extended, account will have to be taken of the fact incurrent political economy.A contrast is sometimes drawn between a socialistic and an eco-nomic state of society; but when the distinction is thus expressed, theterm economic is not used in the sense given to it by economists them-selves.It is true that in a purely communistic society a good deal ofordinary economic theory relating to distribution and exchange wouldbe irrelevant or inapplicable.But although in such a society men s eco-nomic activities would be in certain directions controlled, they wouldclearly not be annihilated; and a scientific discussion of economic phe-nomena would, therefore, be by no means unnecessary.The functions ofcapital and the manner of its co-operation with labour would, for ex-ample, still require elucidation.Cost of production would still admit ofanalysis, and we should still have the phenomena of increasing and di-minishing returns.We should indeed still have the phenomenon of rent,moaning thereby the difference between cost of production under morefavourable and under less favourable circumstances.Schemes of socialism, moreover, as distinguished from pure com-munism, do not necessarily involve the entire abolition of free exchange.tinder such schemes, therefore a theory of exchange would still be re-quired.And unless our socialistic community- were isolated from allothers, there would still remain for discussion extremely complicatedquestions of foreign trade and international exchanges.We may be sure, finally, that if some of the old economic phenom-ena were to become obsolete, new ones would arise demanding scien-tific treatment.While then a contrast may be drawn between our current [ Pobierz całość w formacie PDF ]

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