they produce, and these effects are best brought to light by observation of the discrepancy which frequently occurs between actual events and those which our a priori reasoning would lead us to anticipate. Now the function of statistics in relation to Political Economy is to afford us the means of instituting the comparisons which are necessary in order to bring such discrepancies into view. Where the results of statistical investigation are at variance with the conclusions of Political Economy, we are inevitably forced into one or other of these conclusions; either our reasoning is incorrect, or we have omitted from our premises some principle affecting the result. If there be no defect in the logical process, we are then sent in search of the new principle or disturbing cause which has produced the discrepancy.

It is important to observe that the relation of statistics to Political Economy is in no respect different from that in which it stands to other sciences at the same stage. The registered observations of the astronomer are the statistics of astronomy, which it is his business to compare with the deductions of pure science. This combination of the inductive with the deductive method constitutes, we are told by the highest authorities,* the most powerful engine for the prosecution of new physical discoveries.† In those

Vide Herschel's Natural Philosophy, p. 175.

"For example: the return of the comet predicted by Professor Encke, a great many times in succession, and the general good agreement of its calculated with its observed place during any one of its periods of visibility, would lead us to say that its gravitation towards the sun and planets is the sole and sufficient cause of all the phe

sciences which admit of experiment, as e. g. chemistry, formal statistics are, it is true, little used. Statistics here are unnecessary, because experiment affords, only in a more efficacious way, the means of instituting the same comparison. What are known by the chemist as residual phenomena" are precisely analogous to those discrepancies between the conclusions of the economist and the facts of the statistician to which I have been adverting, and lead in the same way to the discovery of new elements or principles before overlooked.

The course of economic inquiry will thus proceed like that of the analogous physical sciences, by alternate inductive and deductive processes, establishing ultimate principles; then tracing these to their consequences; then comparing the conclusions thus obtained with the actual phenomena, with a view to the discovery of new principles, from which again we may proceed to new conclusions.

Such is the method of investigation to be followed in Political Economy, which the nature of the evidence available as well as the analogy of the physical nomena of its orbitual motion; but when the effect of this cause is strictly calculated and subducted from the observed motion, there is found to remain behind a residual phenomenon, which would never have been otherwise ascertained to exist, which is a small anticipation of the time of its reappearances or a small diminution of its periodic time, which cannot be accounted for by gravity, and whose cause is therefore to be enquired into. Such an anticipation would be caused by the resistance of a medium disseminated through the celestial regions; and as there are other good reasons for believing this to be a vera causa, it has therefore been ascribed to such a resistance."Herschel's Natural Philosophy, p. 156.

sciences, so far as they correspond with it in character, would suggest; and such also is the method which has in fact been followed, whether it has been distinctly stated or not, by all those writers, from Adam Smith to Mr. J. S. Mill, who have contributed most effectually to the advancement of economic knowledge. Those principles of the science which require no proof, depending directly upon consciousness, as, for example, the desire for wealth and the aversion to labour, they have silently assumed, proceeding at once to argue on them without formally stating them. Those which are liable to dispute, such as the physical properties of productive agents, and the physiological character of human beings in relation to their capacity of increase, they have established by such evidence as is suitable. The celebrated essay of Malthus on Population, e. g. is almost wholly devoted to the establishment and illustration of the two latter principlesviz. the capacity of human beings to multiply their species, and the capacity of the earth under assumed conditions of agricultural skill to yield subsistence. The foundations of the primary principles being thus laid, they have proceeded to consider the consequences which result in the production and distribution of wealth; how these principles, coming into action under the guidance of human intelligence, lead naturally to the division of labour, to the mutual interchange of products amongst the different producers, to the use of money as a medium of exchange, and, as communities advance, to the rise of rent, and

the slower progress of population. They have proceeded then to trace the general laws of value, of rent, of profits, and of wages, which result from the operation of the same principles. But the conclusions thus arrived at being frequently found to differ in various degrees from the observed facts, their attention has thus been drawn (in strict conformity with the order which I have described) to the influence of subordinate principles in modifying the force of the more powerful causes. Thus, the chapter of Adam Smith on the different rates of wages in different employments is wholly an inquiry into the nature and force of such secondary principles. The chapter of Ricardo on "foreign trade," and those of Mr. J. S. Mill on "international values," are inquiries of a similar character; the object being to discover those special causes which, in the case of international exchanges, intervene to modify the general laws of value. Again, Mr. Senior's essay "on the cost of obtaining gold" is an example of the same kind.

But perhaps the best example of the use of statistics in the advancement of economic science is afforded by Mr. Tooke in his well known History of Prices. One of the first and most elementary principles in the theory of money is that, cæteris paribus, the value of money is inversely as its quantity. In the discussions which took place during the earlier part of the present century on the phenomena of prices and the circulation, this principle was assumed as true, not simply hypothetically, i. e. in the absence

of disturbing causes, but as representing the sole, or at least principal, cause regulating general prices. By the ultra-bullionists on the one hand, and by the advocates of an inconvertible currency on the other, it was alike taken for granted that all fluctuations in the prices of commodities are to be attributed, at least

a principal degree, to alterations in the amount of money, including under that term coin and banknotes.* Now the result of Mr. Tooke's elaborate examination of the history and statistics of that period was to show that no such correspondence between prices and the circulation, as these different authorities assumed, was in fact to be found. Here, then, was an example of that discrepancy between the conclusions of abstract reasoning and actual phenomena, which it is the business of statistical investigation to bring to light. The inevitable inference, therefore, was, either that the logical process by which these conclusions had been established was unsound, or that some cause

* To such an extent did this delusion prevail, that the celebrated Bullion Committee of 1810, in its admirable though not faultless report, finding that the note circulation had at that time increased in amount, and concluding from other considerations that it was excessive, took it for granted without inquiry, that "the prices of all commodities had risen." (Report, p. 11.) I say without inquiry, 1st, because no witnesses with reference to this point were examined, and 2ndly, because, had they inquired, it is certain they would have found the facts to be precisely the reverse of what they had assumed; the reaction consequent upon the excessive speculation of 1809 and 1810 having then taken place, and the general markets being in a state of extraordinary depression. Vide Tooke's History of Prices, vol. I., chap. 5, section 2. Mr. Huskisson, in his Question, &c. stated," also makes the same assumption.