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been provided for them by their parents; on the other hand, the number
of hours during which they would be willing to work might be dimin-
ished. That the amount of wealth produced would in some such ways as
these be affected by changes in distribution seems practically certain;
although it is impossible to say a priori in what direction the effect
would predominate.
Turning to the connexion between production and exchange, it is to
be observed that, as soon as division of labour is carried at all far, the
former involves in some form or other the latter. Those whose function
may prima facie appear to be simply and entirely to facilitate the ex-
change of wealth for example, bankers and bill-brokers, wholesale
merchants and retail dealers all play their part, and sometimes an im-
portant part, in assisting in the production of wealth. For without ex-
change in some form or other it is obvious that production could be
carried but a very little way; and, strictly speaking, the work of produc-
tion ought not to be considered complete, until commodities have found
their way into the possession of those persons whose intention it is to
consume them.54 In the case of exchange and consumption, there is a
still more intimate connexion; for rates of exchange depend fundamen-
tally upon laws of demand, and these in their turn depend directly upon
laws of consumption.
The connexion between distribution and exchange may be discussed
from more than one point of view. If it is asked how the distribution of
wealth is effected under modern industrial conditions. the answer clearly
is by means of exchange. As it has been well expressed,  the adjustment
of rates of exchange constitutes, in the aggregate the process of distri-
bution. 55 We may go even further, and say that in an individualistic
society the theory of distribution resolves itself immediately into a theory
of exchange-value. Each share into which the net produce of a commu-
nity is divided represents the price paid for a certain service or utility
afforded by the recipient of that share. Wages may thus be regarded as
The Scope and Method of Political Economy/53
the exchange-value of labour, interest is the exchange-value of the use
of capital, rent as the exchange-value of the use of land.56
From another point of view, the theory of the exchange-value of
material commodities depends upon the theory of distribution. At any
rate, as Cliffe Leslie insists, the theory of cost of production involves
the whole theory of wages and profits; for unless we have already deter-
mined a law of normal wages and a law of normal profits, the doctrine
of cost of production is meaningless.
It is, therefore, clear that theories of distribution and exchange can-
not be divorced from one another, or discussed to any purpose in isola-
tion.
In connexion with the interdependence of economic phenomena, we
may touch briefly upon a controversy that has been raised as to whether
the consumption of wealth should or should not be regarded as consti-
tuting a distinct department of political economy.57 The question is to a
large extent one of convenience of arrangement, rather than of actual
divergence of view in regard to the scope of the science.
The following are among the topics, in addition to an analysis of the
nature of economic consumption, that have been treated by different
economists under the head of the consumption of wealth: the theory of
utility, and the relation between utility and value;58 the distinction be-
tween different kinds of consumption, and in particular the distinction
between productive and unproductive consumption;59 the effects kinds
of consumption, and in particular the effects of luxury:60 the policy of
sumptuary laws, and of other laws attempting to regulate consump-
tion;61 the causes of commercial depression, and the impossibility of
general over-production;62 insurance and its economic advantages;63
government expenditure and the theory of taxation;64 the doctrine of
population, and in particular the existence of economic wants and a
standard of comfort as affecting the increase of population.65
It is easy to shew that most of the above topics may quite naturally
be dealt with in other departments of the science, as in fact they are by
those economists who do not profess to treat explicitly of the consump-
tion of wealth. The distinction, for instance, between productive and
unproductive consumption. and the effects generally of different forms
of consumption on production, are not inappropriately discussed under
the head of production itself; while the phenomena of (actual or appar-
ent) over-production may be taken in connexion with the theory of ex-
change, since only under a system of exchange can these phenomena
54/John Neville Keynes
arise. Again, the incidence of taxation is directly connected with the
phenomena and laws of the distribution of wealth; and the remainder of
the theory of taxation, except in so far as it relates to the effect of differ-
ent forms of taxation on production, belongs to applied economics, rather
than to the positive science of economics, with which alone we are here
concerned. This last remark applies also to the discussion of sumptuary
laws, and to all enquiries how far and in what directions the increase of
consumption should be encouraged or discouraged. Insurance may fairly
be regarded as a question of distribution. As to the theory of population,
since labour is one of the requisites of production, the law of its increase
may be discussed in connexion with production; or it may be included in
the theory of distribution, in connexion with the laws regulating, through
the supply of labour, the normal rate of wages. The theory of utility
occupies, as we go on to show, a unique position. It is, however, inti-
mately connected with the determination of laws of exchange-value.
The truth is that the phenomena of production, distribution, exchange,
and consumption, respectively, all so act and react upon one another,
that if any one of these classes of facts is given no independent treat-
ment, it must nevertheless come in for a large share of discussion in
connexion with the others. Whether all propositions relating to con-
sumption should be arranged by themselves or discussed as they arise in [ Pobierz całość w formacie PDF ]