Chapter II: Ends and Means

CHAPTER II ENDS AND MEANS 1. WE have now established a working definition of the subjectmatter of Economics. The next step is to examine its implications. In this chapter we shall be concerned with the status of ends and means as they figure in Economic Theory and Economic History. In the next we shall be concerned with the interpretation of various economic "quantities". 2. Let us turn first to the status of ends.1 Economics, we have seen, is concerned with that aspect of behaviour which arises from the scarcity of means to achieve given ends. It follows that Economics is entirely neutral between ends; that, in so far as the achievement of any end is dependent on scarce means, it is germane to the preoccupations of the economist. Economics is not concerned with ends as such. It assumes that human beings have ends in the sense that they have tendencies to conduct which can be defined and understood, and it asks how their progress towards their objectives is conditioned by the scarcity of means—how the disposal of the scarce means is contingent on these ultimate valuations.

It should be clear, therefore, that to speak of any end as being itself "economic" is entirely misleading. 1 The following sections are devoted to the elucidation of the implications of Economics as a positive science. On the question whether Economics should aspire to a normative status, see Chapter VI., Section 4, below. 24 ¤ ENDS AND MEANS 25 The habit, prevalent among certain groups of economists, of discussing "economic satisfactions" is alien to the central intention of economic analysis. A satisfaction is to be conceived as an end-product of activity. It is not itself part of that activity which we study. It would be going too far to urge that it is impossible to conceive of "economic satisfactions". For, presumably, we can so describe a satisfaction which is contingent on the availability of scarce means as distinct from a satisfaction which depends entirely on subjective factors—e.g., the satisfaction of having a summer holiday, as compared with the satisfaction of remembering it. But since, as we have seen, the scarcity of means is so wide as to influence in some degree almost all kinds of conduct, this does not seem a useful conception. And since it is manifestly out of harmony with the main implications of our definition, it is probably best avoided altogether.

It follows, further, that the belief, prevalent among certain critics of Economic Science, that the preoccupation of the economist is with a peculiarly low type of conduct, depends upon misapprehension. The economist is not concerned with ends as such. He is concerned with the way in which the attainment of ends ie limited. The ends may be noble or they may be base. They may be "material" or "immaterial" —if ends can be so described. But if the attainment of one set of ends involves the sacrifice of others, then it has an economic aspect. All this is quite obvious if only we consider the actual sphere of application of economic analysis, instead of resting content with the assertions of those who do not know what economic analysis is. Suppose, for instance, a community of sybarites, their pleasures 26 SIGNIFICANCE OF ECONOMIC SCIENCE OH. gross and sensual, their intellectual activities preoccupied with the "purely material", *lt is clear enough that economic analysis can provide categories for describing the relationships between these ends and the means which are available for achieving them.

But it is not true, as Ruskin and Carlyle and suchlike critics have asserted, that it is limited to this sort of thing. Let us suppose this reprehensible community to be visited by a Savonarola. Their former ends become revolting to them. The pleasures of the senses are banished. The sybarites become ascetics. Surely economic analysis is still applicable. There is no need to change the categories of explanation. All that has happened is that the demand schedules have changed. Some things have become relatively less scarce, others more so. The rent of vineyards falls. The rent of quarries for ecclesiastical masonry rises. That is all. The distribution of time between prayer and good works has its economic aspect equally with the distribution of time betw«en orgies and slumber. The "pig-philosophy" — to use Carlyle's contemptuous epithet—turns out to be all-embracing. To be perfectly fair, it must be admitted that this is a case in which economists are to some extent to blame for their own misfortunes. As we have seen already, their practice has been more or less unexceptionable.

But their definitions have been misleading, and their attitude in the face of criticism has been unnecessarily apologetic. It is even said that quite modern economists who have been convinced both of the importance of Economics and of its preoccupation with the "more material side of human welfare" have been reduced to prefacing their lectures on general Economic Theory with the rather sheepish apology that, after ii ENDS AND MEANS 27 all, bread and butter are necessary, even to the lives of artists and saints. This seems to be unnecessary in itself, and at the same time liable to give rise to misconception in the minds of those who are apt to find the merely material rather small beer. Nevertheless, if Carlyle and B,uskin had been willing to make the intellectual effort necessary to assimilate the body of analysis bequeathed by the great men whom they criticised so unjustly, they would have realised its profound significance in regard to the interpretation of conduct in general, even if they had been unable to provide any better description than its authors. But, as is abundantly clear from their criticisms, they never made this effort. They did not want to make the effort. It was so much easier, so much more congenial, misrepresenting those who did. And the opportunities for misrepresenting a science that had hardly begun to become conscious of its ultimate implications were not far to seek.

But, if there is no longer any excuse for the detractors of Economics to accuse it of preoccupation with particularly low ends of conduct, there is equally no excuse for economists to adopt an attitude of superiority as regards the subjects that they are capable of handling. We have already noticed Professor Carman's rather paradoxical attitude to a political economy of war. And, speaking generally, are we not entitled to urge that in this respect Professor Cannan is a little apt to follow St. Peter and cry, "Not so, Lord: for nothing common or unclean hath at any time entered into my mouth"? In the opening chapter of Wealth,1 he goes out of his way to say that "the criterion of buying and selling brings 1 First; edition, p. lõ.

28 SIGNIFICANCE OF ECONOMIC SCIENCE OH. many things into economics which are not commonly treated there and which it does not seem convenient to treat there. A large trade has existed since history began in supplying certain satisfactions of a sensual character which are never regarded as economic goods. Indulgences to commit what would otherwise be regarded as offences against religion or morality have been sold sometimes openly and at all times under some thin disguise: nobody has regarded these as economic goods". This is surely very questionable. Economists, equally with other human beings, may regard the services of prostitutes as conducive to no "good" in the •ultimate ethical sense. But to deny that such services are scarce in the sense in which we use the term, and that there is therefore an economic aspect of hired love, susceptible to treatment in the same categories of general analysis as enable us to explain fluctuations in the price of hired rhetoric, does not seem to be in accordance with the facts. As for the sale of indulgences, surely the status in Economic History of these agreeable transactions is not seriously open to question. Did the sale of indulgences affect the distribution of income, the magnitude of expenditure on other commodities, the direction of production, or did it not? We must not evade the consequences of the conclusion that all conduct coming under the influence of scarcity has its economic aspect.

3. A very interesting example of the difficulties which may arise if the implications which we have been trying to drag into the light are neglected, is afforded in a paper by Sir Josiah Stamp on Æsthetics as an Economic í`actor.1 Sir Josiah, in common with 1 Some Economic Factors in Modern Life, pp. 1-2S.

a ENDS AND MEANS 29 most men of vision and imagination, is anxious to preserve the countryside and to safeguard ancient monuments. (The occasion of the paper was a decision on the part of his railway company not to destroy Stratford House, a sixteenth-century halftimbered building in Birmingham, to make room for railway sidings.) At the same time, he believes that Economics is concerned with material welfare.1 He is, therefore, driven to argue that "indifference to the æsthetic will in the long run lessen the economic product; that attention to the æsthetic will increase economic welfare".2 That is to say, that if we seek first the Kingdom of the Beautiful, all material welfare will be added unto us. And he brings all the solid weight of his authority to the task of stampeding the business world into believing that this is true. It is easy to sympathise with the intention of the argument. But it is difficult to believe that its logic is very convincing. It may be perfectly true, as Sir Josiah contends, that the wide interests fostered by the study of ancient monuments and the contemplation of beautiful objects are both stimulating to the intelligence and restful to the nervous system, and that, to that extent, a community which offers opportunities for such interests may gain in other, "more material", ways. But it is surely an optimism, unjustified either by experience or by a priori probability, to assume that this necessarily follows. It is surely a fact which we must all recognise that rejection of material comfort in favour of æsthetic or ethical values does not necessarily bring material compensa1 " ... I use . . . economics as a term to cover the getting of material welfare" (op. cit., p. 3). 8 Ibid., p. 4.

30 SIGNIFICANCE OF ECONOMIC SCIENCE OH. tion. There are cases when it is either bread or a lily. Choice of the one involves sacrifice of the other, and, although we may be satisfied with our choice, we cannot delude ourselves that it was not really a choice at all, that more bread will follow. It is not true that all things work together for material good to them that love God. So far from postulating a harmony of ends in this sense, Economics brings into full view that conflict of choice which is one of the permanent characteristics of human existence. Your economist is a true tragedian. What has happened, of course, is that adherence to the "materialist" definition has prevented Sir Josiah from recognising clearly that Economics and Æsthetics are not in pari materia.1 Æsthetics is concerned with certain kinds of ends. The beautiful is an end which offers itself for choice in competition, so to speak, with others. Economics is not concerned at all with any ends as such. It is concerned with ends in so far as they affect the disposition of means. It takes the ends as given in scales of relative valuation, and enquires what consequences follow in regard to certain aspects of behaviour.

But, it may be argued, is it not possible to regard the procuring of money as something which competes with other ends, and, if this is so, may we not legitimately speak of an "economic" end of conduct? This raises questions of very great import. Full discussion of the part played in economic analysis of the assumption that money-making is the sole motive of conduct must be deferred until a later chapter, where it will be investigated fully. But, for the 1 It is only fair to state that there are passages in the same essay which seem to be dictated by this sort of consideration, especially the remarks on pp. 14-16 on balance in consumption.

ii ENDS AND MEANS 31 moment, it may be replied that the objection rests upon a misconception of the significance of money. Money-making in the normal sense of the term is merely the intermediate stage between a sale and a purchase. The procuring of a flow of money from the sale of one's services or the hiring out of one's property is not an end per se. The money is clearly a means to ultimate purchase. It is sought, not for itself, but for the things on which it may be spent—whether these be the constituents of real income now or of real income in the future. Money-making in this sense means securing the means for the achievement of all those ends which are capable of achievement by the aid of purchasable commodities. Money as such is obviously merely a means—a medium of exchange, an instrument of calculation. For society, from the static point of view, the presence of more or less money is irrelevant. For the individual it is relevant only in so far as it serves his ultimate objectives. Only the miser, the psychological monstrosity, desires an infinite accumulation of money. Indeed, so little do we regard this as typical that, far from regarding the demand for money to hold as being indefinitely great, we are in the habit of assuming that money is desired only to be passed on. Instead of assuming the demand curve for money to hold to be a straight line parallel with the y axis, economists have been in the habit of assuming, as a first approximation, that it is of the nature of a rectangular hyperbola.1 1 On all this, see Wicksteed, The Commonsenae of Political Economy, pp. 155-157. It is not denied that the acquisition of the power to procure real income may itself become an objective, or that, if it does, the economic system will not be affected in various ways. All that is contended is that to label any of these ends "economic" implies a false view of what is necessarily embraced by economic analysis. Economics takes all ends for granted.

They "show" themselves in the scales of relative valuation whioh are assumed by the propositions of modern economic analysis.

32 SIGNIFICANCE OF ECONOMIC SCIENCE CH. 4. Economics, then, is in no way to be conceived, as we may conceive Ethics or Æsthetics, as being concerned with ends as such. It is equally important that its preoccupations should be sharply distinguished from those of the technical arts of production —with ways of using given means. This raises certain issues of considerable complexity which it is desirable to examine at some length. The relation between Economics and the technical arts of production is one which has always presented great difficulties to those economists who have thought that they were concerned with the causes of material welfare. It is clear that the technical arts of production are concerned with material welfare. Yet the distinction between art and science does not seem to exhaust the difference. So much scientific knowledge is germane to the technical arts of production that is foreign to Economic Science. Yet where is one to draw the line? Sir William Beveridge has put this difficulty very clearly in his lecture on Economics as a Liberal Education. "It is too wide a definition to speak of Economics as the science of the material side of human welfare. A house contributes to human welfare and should be material. If, however, one is considering the building of a house, the question whether the roof should be made of paper or of some other material is a question not of Economics but of the technique of house building".1 Nor do we meet this difficulty by inserting the word "general" before "causes of material welfare". Economics is not the aggregate of the technologies. Nor is it an attempt to 1 Economica, vol. i.. p. 3. Of course the question whether the roof shall be of slate or tiles, for instance may well depend on the relative prices of these materials and therefore ha ve an economic aspect .Technique merely prescribes certain limits within which choice may operate. See below, p. 35.

n ENDS AND MEANS 33 select from each the elements common to several. Motion study, for instance, may yield generalisations applicable to more than one occupation. But motion study has nothing to do with Economics. Nor, in spite of the hopes of certain industrial psychologists, is it capable of taking its place. So long as we remain within the ambit of any definition of the subjectmatter of Economics in terms of the causes of material welfare, the connection between Economics and the technical arts of production must remain hopelessly obscure. But, from the point of view of the definition we have adopted, the connection is perfectly definite. The technical arts of production are simply to be grouped among the given factors influencing the relative scarcity of different economic goods.1 The technique of cotton manufacture, as such, is no part of the subjectmatter of Economics, but the existence of a given technique of various potentialities, together with the other factors influencing supply, conditions the possible response to any valuation of cotton goods, and consequently influences the adaptations which it is the business of Economics to study.

So far, matters are supremely simple. But now it is necessary to remove certain possible misunderstandings. At first sight it might appear as if the conception we are adopting ran the danger of tipping the baby out with the bath water. In regarding technique as merely data, are we not in danger of - * Professor Knight in a recent article ("Economic Science in Recent Discussion", American Economic Review, vol. xxiv., p. 225 et seq.) complains that I do not make clear that technique in relation to economics is simply so much data. I cannot help thinking that the passage above must have escaped Professor Knight's attention. I certainly agree with his views in this respect. But I do not know how to put the matter more strongly than I have done already. 3 34 SIGNIFICANCE OF ECONOMIC SCIENCE OH. excluding from the subjectmatter of Economics just those matters where economic analysis is most at home? For is not production a matter of technique?

And is not the theory of production one of the central preoccupations of economic analysis? The objection sounds plausible. But, in fact, it involves a complete misapprehension—a misapprehension which it is important finally to dispel. The attitude we have adopted towards the technical arts of production does not eliminate the desirability of an economic theory of production.1 For the influences determining the structure of production are not purely technical in nature. No doubt, technique is very important. But technique is not everything. It is one of the merits of modern analysis that it enables us to put technique in its proper place. This deserves further elucidation. It is not an exaggeration to say that, at the present day, one of the main dangers to civilisation arises from the inability of minds trained in the natural sciences to perceive the difference between the economic and the technical.

Let us consider the behaviour of an isolated man in disposing of a single scarce commodity.2 Let us consider, for instance, the behaviour of a Robinson Crusoe in regard to a stock of wood of strictly limited dimensions. Robinson has not sufficient wood for all the purposes to which he could put it. For the time being the stock is irreplaceable. What are the influences which will determine the way in which he utilises it? 1 Whether this theory is to be conceived, as it sometimes has been in the past, as concerned with aggregates of wealth is another matter which will be dealt with in the next chapter. See below, Chapter III., Section 6. a Compare Oswalt, Voiïräge über wirtschaftliche Orundbegriffe, pp. 20-41.

¤ ENDS AND MEANS 35 Now, if the wood can only be used at one time and for one purpose, or if it is only wanted at one time and for one purpose, and if we assume that Eobinson has ample time to devote to its utilisation, it is perfectly true that his economising will be dictated entirely by his knowledge of the technical arts of production concerned. If he only wants the wood to make a fire of given dimensions, then, if there is only a limited supply of wood available, his activities will be determined by his knowledge of the technique of fire-making. His activities in this respect are purely technical. But if he wants the wood for more than one purpose—if, in addition to wanting it for a fire, he needs it for fencing the ground round the cabin and keeping the fence in good condition—then, inevitably, he is confronted by a new problem—the problem of how much wood to use for fires and how much for fencing.

In these circumstances the techniques of fire-making and fencing are still important. But the problem is no longer a purely technical problem.1 Or, to put the matter another way, the considerations determining his disposal of wood are no longer purely technical. Conduct is the resultant of conflicting psychological pulls acting within an environment of given material and technical possibilities. The problem of technique and the problem of economy are fundamentally different problems. To use Professor Mayer's very elegant way of putting the distinction, the problem of technique arises when there is one end and a multiplicity of means, the problem of economy when both the ends and the means are multiple.2 1 All this can be made very clear by the use of a few Paretean curves. Given the production opportunity curves, we know the technical possibilities. But the problem is not determinate unless the consumption indifference curves are also known. 2 See Hans Mayer, op. cit., pp. 5 and 6.

36 SIGNIFICANCE OF ECONOMIC SCIENCE OH. Now, as we have seen already, it is one of the characteristics of the world as we find it that our ends are various and that most of the scarce means at our disposal are capable of alternative application. This applies not only to scarce products. It applies still more to the ultimate factors of production. The various kinds of natural resources and labour can be used for an almost infinite variety of purposes. The disposition to abstain from consumption in the present releases uses of primary factors for more than one kind of roundabout process. And, for this reason, a mere knowledge of existing technique does not enable us to determine the actual "set" of the productive apparatus. We need to know also the ultimate valuations of the producers and consumers connected with it. It is out of the interplay of the given systems of ends on the one side and the material and technical potentialities on the other, that the aspects of behaviour which the economist studies are determined. Only in a world in which all goods were free goods would technical considerations be the sole determinants of the satisfaction of given ends. But, in such a world, by definition, the economic problem would have ceased to exist.

All this sounds very abstract. But, in fact, it merely states, in terms of a degree of generality appropriate to the very fundamental questions we are examining, facts which are well known to all of us. If we ask the concrete question, why is the production of such a commodity in such and such an area what it is, and not something else, our answer is not couched in terms which, in the first instance, have a technical implication. Our answer runs in terms of prices and costs; and, as every first-year student knows, prices ii ENDS AND MEANS 37 and costs are the reflection of relative valuations, not of merely technical conditions. We all know of commodities which, from the technical point of view, could be produced quite easily.1 Yet their production is not at the moment a business proposition. Why is this? Because, given the probable price, the costs involved are too great. And why are costs too great?

Because the technique is not sufficiently developed? This is only true in a historical sense. But it does not answer the fundamental question why, given the technique, the costs are too high. And the answer to that can only be couched in economic terms. It depends essentially on the price which it is necessary to pay for the factors of production involved compared with the probable price of the product. And that may depend on a variety of considerations. In competitive conditions, it will depend on the valuations placed by consumers on the commodities which the factors are capable of producing. And if the costs are too high, that means that the factors of production can be employed elsewhere producing commodities which are valued more highly. If the supply of any factor is monopolised, then high costs may merely mean that the controllers of the monopoly are pursuing a policy which leads to some of the factors they control being temporarily unemployed. But, in any case, the process of ultimate explanation begins just where the description of the technical conditions leaves off.

But this brings us back—although with new knowledge of its implications—to the proposition from which we started. Economists are not interested in 1 The production of motor oils from coal is a very topical case in point.

38 SIGNIFICANCE OF ECONOMIC SCIENCE CH. technique as such. They are interested in it solely as one of the influences determining relative scarcity. Conditions of technique "show" themselves in the productivity functions just as conditions of taste "show" themselves in the scales of relative valuations. But there the connection ceases. Economics is a study of the disposal of scarce commodities. The technical arts of production study the "intrinsic" properties of objects or human beings. 5. It follows from the argument of the preceding sections that the subjectmatter of Economics is essentially a series of relationships—relationships between ends conceived as the possible objectives of conduct, on the one hand, and the technical and social environment on the other. Ends as such do not form part of this subjectmatter. Nor does the technical and social environment. It is the relationships between these things and not the things in themselves which are important for the economist.

If this point of view be accepted, a farreaching elucidation of the nature of Economic History and what is sometimes called Descriptive Economics is possible—an elucidation which renders clear the relationship between these branches of study and theoretical Economics and removes all possible grounds of conflict between them. The nature of Economic Theory is clear. It is the study of the formal implications of these relationships of ends and means on various assumptions concerning the nature of the ultimate data. The nature of Economic History should be no less evident. It is the study of the substantial instances in which these relationships show themselves through time. It is the explanation of the historical manifestations of "scarcity". Eoonomic ¤ ENDS AND MEANS 39 Theory describes the forms, Economic History the substance. Thus, in regard to Economic History no more than in regard to Economic Theory can we classify events into groups and say: these are the subjectmatter of your branch of knowledge and these are not.

The province of Economic History, equally with the province of Economic Theory, cannot be restricted to any part of the stream of events without doing violence to its inner intentions. But no more than any other kind of history does it attempt comprehensive description of this stream of events;1 it concentrates upon the description of a certain aspect thereof—a changing network of economic relationships,2 the effect on values in the economic sense of changes in ends and changes in the technical and social opportunities of realising them.3 If the Economic Theorist, manipulating his shadowy abacus of forms and inevitable relationships, may comfort himself with the reflection that all action may come under its categories, the Economic Historian, freed from subservience to other branches of history, may rest assured that there is no segment of the multicoloured weft of events which may not prove relevant to his investigations.

1 On the impossibility of history of any kind without selective principle see Rickert, Kulturwissenschaft und Naturwissenschaft, pp. 28-60. 2 Cp. Cunningham: "Economic History is not so much the study of a special class of facts as the study of all the facts from a special point of view" (Qrou>th of English Industry and Commerce, vol. i., p. 8). 3 On the relation between Economic Theory and Economic History, see Heckscher, A Plea for Theory in Economic History (Economic History, vol. i., pp. 525-535); Clapham, The Study of Economic History, passim; Mises, Soziologie und Oeschichte (Archiv für Sozialwissenschaft und Sozialpolitik, Bd. 6Ì, pp. 465-512). It may be urged that the above description of the nature of Economic History presents a very idealised picture of what is to be found in the average work on Economic History. And it may be admitted that, in the past, Economic History, equally with Economic Theory, 40 SIGNIFICANCE OF ECONOMIC SCIENCE OH.

A few illustrations should make this clear. Let us take, for example, that vast upheaval which, for the sake of compendious description, we call the Reformation. From the point of view of the historian of religion, the Reformation is significant in its influence on doctrine and ecclesiastical organisation. From the point of view of the political historian, its interest consists in the changes in political organisation, the new relations of rulers and subjects, the emergence of the national states, to which it gave rise. To the historian of culture it signifies important changes both in the form and the subjectmatter of the arts, and the freeing of the spirit of modern scientific enquiry. But to the economic historian it signifies chiefly changes in the distribution of property, changes in the channels of trade, changes in the demand for fish, changes in the supply of indulgences, changes in the incidence of taxes. The economic historian is not interested in the changes of ends and the changes of means in themselves. He is interested only in so far as they affect the series of relationships between means and ends which it is his function to study.

Again, we may take a change in the technical processes of production—the invention of the steam has not always succeeded in purging itself of adventitious elements. In particular it is clear that the influence of the German Historical School was responsible for the intrusion of all sorts of sociological and ethical elements which cannot, by the widest extension of the meaning of words, be described as Economic History. It is true too that there has been considerable confusion between Economic History and the economic interpretation of other aspects of history—in the sense of the word "economic" suggested above —and between Economic History and the "Economic Interpretation" of History in the sense of the Materialist Interpretation of History (see below, Section 6). But I venture to suggest the main stream of Economic History from Fleetwood and Adam Smith down to Professor Clapham bears the interpretation put on it here more consistently than any other.

u ENDS AND MEANS 41 engine or the discovery of rail transport. Events of this sort, equally with changes in ends, have an almost inexhaustible variety of aspects. They are significant for the history of technique, for the history of manners, for the history of the arts, and so on ad infinitum. But, for the economic historian, all these aspects are irrelevant save in so far as they involve action and reaction in his sphere of interest. The precise shape of the early steam engine and the physical principles upon which it rested are no concern of the economic historian as economic historian—although economic historians in the past have sometimes displayed a quite inordinate interest in such matters. For him it is significant because it affected the supply of and the demand for certain products and certain factors of production, because it affected the price and income structures of the communities where it was adopted.

So, too, in the field of "Descriptive Economics"— the Economic History of the present day—the main object is always the elucidation of particular "scarcity relationships"—although the attainment of this object often necessarily involves very specialised investigations. In the study of monetary phenomena, for instance, we are often compelled to embark upon enquiries of a highly technical or legal character— the mode of granting overdrafts, the law relating to the issue of paper money. For the banker or the lawyer these things are the focus of attention. But for the economist, although an exact knowledge of them may be essential to his purpose, the acquisition of this knowledge is essentially subservient to his main purpose of explaining the potentialities, in particular situations, of changes in the supply of circulating 42 SIGNIFICANCE OF ECONOMIC SCIENCE OH. media. The technical and the legal are of interest solely in so far as they have this aspect.1 6. Finally, we may notice the bearing of all this on the celebrated Materialist or "Economic" Interpretation of History. For, from the point of view we have adopted, certain distinctions, not always clearly recognised, are discernible.

We have seen already that, although in the past Economics has been given what may be described as a "materialist" definition, yet its content is not at all materialistic. The change of definition which we have suggested, so far from necessitating a change of content, serves only to make the present content more 1 Considerations of this sort suggest the very real dangers of overmuch sectionalism in economic studies. In recent years there has been an immense extension of sectional studies in the economic field. We have institutes of Agricultural Economics, Transport Economics, Mining Economics, and so on. And, no doubt, up to a point this is all to the good. In the realm of Applied Economics, some division of labour is essential, and, as we shall see later, theory cannot be fruitfully applied to the interpretation of concrete situations unless it is informed continually of the changing background of the facts of particular industries. But, as experience shows, sectional investigations conducted in isolation are exposed to very grave dangers. If continual vigilance is not exercised they tend to the gradual replacement of economic by technological interests. The focus of attention becomes shifted, and a body of generalisations which have only technical significance comes to masquerade as Economics. And this is fatal. For, since the scarcity of means is relative to all ends, it follows that an adequate view of the influences governing social relationships in their economic aspects can only be obtained by viewing the economic system as a whole. In the economic system, "industries" do not live to themselves. Their raison d`i(re, indeed, is the existence of other industries, and their fortunes can only be understood in relation to the whole network of economic relationships. It follows, therefore, that studies which are exclusively devoted to one industry or occupation are continually exposed to the danger of losing touch with the essentials. Their attention may be supposed to be directed to the study of prices and costs, but they tend continually to degenerate either into mere accountancy or into amateur technology. The existence of this danger is no ground for dispensing with this kind of investigation.

But it is fundamental that its existence should be clearly recognised. Here as elsewhere, it is the preservation of a proper balance which is important' Our knowledge would be very much poorer if it were not for the existence of many of the various specialised research institutes. But many serious misunderstandings would be avoided if the workers engaged therein would keep more clearly in mind a conception of what is economically relevant.

n ENDS AND MEANS 43 comprehensible. The "materialism" of Economics was a pseudo-materialism. In fact, it was not materialistic at all. It might be thought that a similar state of affairs prevailed in regard to the "Economic" or Materialist Interpretation of History—that a mere change of label would suffice to make this doctrine consistent with the modern conception of economic analysis. But this is not so. For the socalled "Economic" Interpretation of History is not only labelled "Materialist", it is in substance through and through materialistic. It holds that all the events of history, or at any rate all the major events in history, are attributable to "material" changes, not in the philosophical sense that these events are part of the material world, nor in the psychological sense that psychic dispositions are the mere epiphenomena of physiological changes— though, of course, Marx would have accepted these positions—but in the sense that the material technique of production conditions the form of all social institutions, and all changes in social institutions are the result of changes in the technique of production.

History is the epiphenomenon of technical change. The history of tools is the history of mankind.1 Now, whether this doctrine is right or wrong, it is certainly materialistic, and it is certainly not deriva1 In what follows, the distinctions I employ are very similar to those used by Dr. Strigl (op. cit., pp. 158-161). The differences in our emphasis may be attributed to a difference of expository purpose. Dr. Strigl is trying to exhibit the Materialist Interpretation as a primitive theory of what he calls Datenänderung. He, therefore, tends to slur its deficiency in refusing to take account of changes in ultimate valuations save as derivative from changes on the supply side. I am anxious to show the fundamental distinction between any explanation of history springing from economic analysis as we know it and the explanation attempted by the Materialist Interpretation. I therefore drag this particular point into the light. I do not think that Dr. Strigl would question the logic of my distinctions any more than I would question the interest of his analogy.

44 SIGNIFICANCE OF ECONOMIC SCIENCE OH. tive from Economic Science as we know it. It asserts quite definitely, not only that technical changes cause changes in scarcity relationships and social institutions generally—which would be a proposition in harmony with modern economic analysis—but also that all changes in social relations are due to technical changes—which is a sociological proposition quite outside the limited range of economic generalisation. It definitely implies that all changes in ends, in relative valuations, are conditioned by changes in the technical potentialities of production. It implies, that is to say, that ultimate valuations are merely the by-product of technical conditions. If technical conditions alter, tastes, etc., alter. If they remain unchanged, then tastes, etc., are unaltered. There are no autonomous changes on the demand side. What changes occur are, in the end, attributable to changes in the technical machinery of supply. There is no independent "psychological" (or, for that matter, "physiological") side to scarcity. No matter what their fundamental make-up, be it inherited or acquired, men in similar technical environments will develop similar habits and institutions. This may be right or wrong, pseudoHegelian twaddle or profound insight into things which at the moment are certainly not susceptible of scientific analysis, but it is not to be deduced from any laws of theoretical Economics. It is a general statement about the causation of human motive which, from the point of view of Economic Science, is completely gratuitous. The label "Materialist" fits the doctrine. The label "Economic" is misplaced. Economics may well provide an important instrument for the elucidation of history. But there is nothing in economic analysis which entitles us to assert that n ENDS AND MEANS 45 all history is to be explained in "economic" terms, if "economic" is to be used as equivalent to the technically material. The Materialist Interpretation of History has come to be called the Economic Interpretation of History, because it was thought that the subjectmatter of Economics was "the causes of material welfare". Once it is realised that this is not the case, the Materialist Interpretation must stand or fall by itself. Economic Science lends no support to its doctrines. Nor does it assume at any point the connections it asserts. From the point of view of Economic Science, changes in relative valuations are data.1 1 It might be argued, indeed, that a, thorough understanding of economic analysis was conducive to presumptions against the Materialist Interpretation. Once it is realised how changes in technique do directly influence amounts demanded, it is extraordinarily difficult to bring oneself to postulate any necessary connection between technical changes and autonomous changes on the demand side. Such an attitude of scepticism towards the Marxian theory does not imply denial of metaphysical materialism— though equally it does not imply its acceptance—it implies merely a refusal to believe that the causes influencing taste and so on are technical in nature.

The most intransigent behaviourist need find nothing to quarrel with in the belief that technical materialism in this sense is a very misleading half truth.