Much more important was Friedrich List (1789-1846), who was born and died in Ger many, but who spent a number of years in the United States where he accumulated a fortune. The title of his principal work, 'Das Nationale System der Politischen Oekonomie,' gives the key to his position. It is really a treatise on international trade in which he attacks the free trade principles of the classical school: His chief contribution was his theory of the stages of economic development. Every nation, he says, passes through the stages of pastoral life, agriculture, commerce and manufacturing, but not all nations are in the same stage of develop ment at a given time. Hence the government should assist a people who wish to pass from a lower to a higher stage against the competi tion of those nations which had already attained their full industrial growth. Practically he ad vocated protection for undeveloped Germany against industrial England. His doctrines had great influence upon German thought.
Henry C. Carey (1793-1879), an American writer, was also a protectionist and a nationalist, and on both these grounds criticized the teach ings of the classical school. The best ex position of his views is to be found in his 'Principles of Social Science.' His main argu ments in favor of protection are, first, that manufactures would develop association and diversity of interests, by which civilization would be better promoted than by agriculture alone. His second argument was more original, and is based on the necessity of returning to the soil what is taken from it. If a country exports foodstuffs and raw materials in ex change for manufactured goods, it depletes the soil and the land soon becomes exhausted; the ideal is a community where manufactures and agriculture are carried on side by side. He also attacked the Ricardian theory of rent and the Malthusian doctrine of population. Carey exer cised considerable influence in the United States by his writings.
(3) Socialist Critics.— The third group of critics of the classical school was the early socialists. Most of these were French. Ortho dox economists had always treated private property as an inevitable and necessary institu tion. Now, however, we meet a group of writers who attack the ideas of private property and of competition. The Industrial Revolution had wrought sweeping changes in society since the time of Adam Smith and had been followed by many economic maladjustments and evils, such as child labor, low wages and crises. In seeking an explanation of these phenomena the socialists were led to attack the existing system of industrial organization and the economic school which defended it. The most important of these writers were C. H. Saint Simon (1760 1825), Robert Owen (1771-1858), Charles Fourier (1772-1837), Louis Blanc (1813-82) and P. J. Proudhon (1809-65). The first three of these wished to organize the labor force of the country for productive purposes into small associative or co-operative groups by voluntary action. Blanc proposed that the government should assist the establishment of such associa tions by advancing capital. Proudhon would have abolished government. They all attacked the existing institutions of competition, which Blanc insisted was the cause of every economic evil, and of private property which Proudhon said was theft. While often utopian and vision ary they were important as critics of existing economic theory by their attacks on institutions which had been accepted as matters of fact, while their insistence on the social nature of production was a valuable corrective to the individualistic tendencies of the classical school.
Mill's Restatement.— Modern economic sci ence had first been formulated by Adam Smith; since his time Ricardo had added his theory of rent, Malthus his theory of population and Senior that of abstinence. On the other hand various writers had attacked certain phases of his teachings or had modified certain conclu sions. And more than all the Industrial Revo lution had completely changed the economic world which Smith described and had brought new problems to the front. The time was now ripe for a restatement of the principles of economics which should take account of all these changes. In John Stuart Mill (1806-73) such an expositor was found. His book, 'Prin ciples of Political Economy, with some of -their Applications to Social Philosophy,) published in 1848, combined and organized all that was enduring in his predecessors' work. It is ex tremely logical and well written, but contains little that is original. As the clearest statement of English classical economics we may note its main teachings.
Self-interest was accepted as the motive to economic activity. Since each individual is the best judge of his own interests individual liberty is essential to economic progress; state inter ference was therefore disapproved of save in exceptional instances. Value is determined in general by demand and supply. Mill distin guished between normal and market value; at any given time demand and supply determine market value, but in the case of freely re producible goods their normal value is set by the cost of production. His theory of value is therefore a cost theory. The Ricardian theory of rent and the Malthusian doctrine of popula tion were fully accepted, and Mill often de clared that there was no hope of improvement in the lot of the working class unless they checked the growth of population. His theory of wages is essentially that of the wages-fund, which may be stated as follows: there is a determinate number of laborers who must work and a determinable amount of capital uncon ditionally destined to the payment of wages (i.e., the wages fund) ; this fund is distributed among the laborers solely by means of com petition, and the rate of wages depends on the proportion between capital and population. Only by encouraging the growth of capital by means of saving, or by discouraging the growth of population, can the equation be favorably modi fied and wages raised. Mill made a real con tribution to economics by his development of the Ricardian theory of trade—it is not the difference in absolute costs of production as be tween two countries, but in comparative costs, that determines international trade; foreign trade is therefore an advantage to all countries, but especially to backward ones. He did not give any space in his book to the subject of consumption, which finds a large place in mod ern works, but he showed himself very sym pathetic with the demands and aspirations of the working classes. Indeed in his later years he recanted the wages-fund theory and took a long step toward socialism.