POLITICAL ECONOMY. The word Economy is from the Greek oeconomia (oinovopia), " holm- management," or " household management," the notion of which is generally understood. It does not signify in the original language merely " saving" or " thrift," but the judicious and profitable management of a man's property ; and this is the sense of the word in the treatise of Xenophon entitled Oeconomicos (01novonaas).
Political Economy or Public Economy should mean a management of a State analogous to the management of a private property. But this is not the sense in which the term is used ; and the term itself is objectionable by reason of the false analogy which it suggests. It is however true that many governments have acted on the notion that the su preme power should direct the industry of individuals, and in some degree pro vide for their wants ; and many persons still have an opinion that one of the time lions of government is to regulate agri culture, manufactures, and commerce ; not to prescribe exactly to every man how he shall employ himself, but to make regulations which shall to a considerable extent direct the industry of the members of the State. Adam Smith gave to his work the title of the Wealth of Nations,' a term which indicates much better than the term Political Economy the object of his investigations, which is, " to explain in what has consisted the revenue of the great t body of the people, or what has been the nature of those funds which in different ages and nations have supplied their annual consumption." The word Wealth indicates that the inquiry is mainly conversant about material results. about the products which man by his labour produces for his necessities and his pleasures. The word Nations implies that the object of the inquiry is the ag gregate wealth which any political society acquires ; but this investigation further implies an examination into the condi tions under which the individual mem bers of a state labour for the production of a nation's wealth, and what they get for their labour; for the wealth thus ac quired is not the wealth of a nation in the sense in which some things belong to a nation or to the public. The great
mass of products are appropriated by in dividuals in accordance with the rules of property or ownership, that exist in some form or other in all nations, and the terms of contract between capitalists and labourers. All that is produced, ex cept that part which the State produces as a State, or takes for the purposes of the general administration, is appropriated by individuals, and is either saved or con sumed. The term Political Economy would have an exact meaning, if we un derstood it to express that economy or management which the State as a State exercises or should exercise for the be nefit of all. It would comprehend all that the State should do for the general interest, and which individuals or asso ciations of individuals cannot do as well; it would thus in a sense coincide with the term Government. Being thus de fined, it would exclude all things that a State as a State should not do ; and thus the inquiry into the Wealth of Nations would mean an inquiry into all those conditions under which wealth is pro duced, distributed, accumulated, and con sumed or used by all the individuals who compose any given political community. But though the subject of Government is easily separated from the proper subject of Political Economy, everybody per ceives that there is some connection be tween the two things ; and this is the foundation of some of the false notions that have prevented Political Economy from attaining the form of an exact sci ence. Everybody perceives that a Go vernment can do much towards increasing or diminishing "the revenue of the great body of the people ;" but everybody does not see what a Government should do or should not do in order that this revenue may be the greatest and most beneficially distributed.