John Elliott Cairnes
Encyclopedia
John Elliott Cairnes was an Irish
economist
. He is often described as the "last of the classical economists".
, County Louth
, Ireland, the son of William Elliott Cairnes (1787–1863) of Stameen, near Drogheda
, and Marianne Woolsey, niece of Sir William Bellingham, 1st Baronet
of Castlebellingham. Against the wishes of his mother (Catherine Moore of Moore Hall, Killinchy), William Cairnes decided upon a business career, becoming a partner in the Woolsey Brewery at Castlebellingham. In 1825 William Cairnes started on his own account in Drogheda
, making the Drogheda Brewery an unqualified success. He was remembered for his great business capacity and for the deep interest he took in charity.
After leaving school, John Cairnes spent some years in the counting-house of his father at Drogheda. His tastes, however, lay altogether in the direction of study, and he was permitted to enter Trinity College, Dublin
, where he took the degree
of B.A.
in 1848, and six years later that of M.A.
After passing through the curriculum of Arts, he engaged in the study of Law, and was called to the Irish bar
. But he felt no very strong inclination for the legal profession, and during some years he occupied himself to a large extent with contributions to the daily press, treating of the social and economical
questions that affected Ireland. He devoted most attention to political economy
, which he studied with great thoroughness and care.
While residing in Dublin, he made the acquaintance of Archbishop Whately
, who conceived a very high respect for Cairnes' character and abilities. In 1856, a vacancy occurred in the chair of political economy at Dublin founded by Whately, and Cairnes received the appointment. In accordance with the regulations of the foundation, the lectures of his first year’s course were published. The book appeared in 1857 with the title Character and Logical Method of Political Economy. It followed up on and expanded J. S. Mill's
treatment in the Essays on some Unsettled Questions in Political Economy, and formed an admirable introduction to the study of economics as a science. In it the author’s peculiar powers of thought and expression are displayed to the best advantage. Logical exactness, precision of language, and firm grasp of the true nature of economic facts, are the qualities characteristic of this as of all his other works. If the book had done nothing more, it would still have conferred inestimable benefit on political economists by its clear exposition of the true nature and meaning of the ambiguous term law. To the view of the province and method of political economy expounded in this early work the author always remained true, and several of his later essays, such as those on Political Economy and Land, Political Economy and Laissez-Faire, are but reiterations of the same doctrine. His next contribution to economical science was a series of articles on the gold question, published partly in Fraser's Magazine
, in which the probable consequences of the increased supply of gold attendant on the Australian
and Californian gold discoveries
were analysed with great skill and ability. And a critical article on M. Chevaliers' work, On the Probable Fall in the Value of Gold, appeared in the Edinburgh Review
for July 1860.
In 1861, Cairnes was appointed to the professor
ship of jurisprudence
and political economy in Queens College Galway, and in the following year he published his admirable work The Slave Power, one of the finest specimens of applied economical philosophy. The inherent disadvantages of the employment of slave
labour were exposed with great fulness and ability, and the conclusions arrived at have taken their place among the recognized doctrines of political economy
. The opinions expressed by Cairnes as to the probable issue of American Civil War
were largely verified by the actual course of events, and the appearance of the book had a marked influence on the attitude taken by serious political thinkers in England
towards the Confederate States of America
. During the remainder of his residence at Galway, Professor Cairnes published nothing beyond some fragments and pamphlets, mainly upon Irish question
s. The most valuable of these papers are the series devoted to the consideration of university education. His health, at no time very good, was still further weakened in 1865 by a fall from his horse. He was ever afterwards incapacitated from active exertion and was constantly liable to have his work interfered with by attacks of illness. In 1866 he was appointed professor of political economy in University College, London. He was compelled to spend the session 1868-1869 in Italy
, but on his return continued to lecture till 1872. During his last session he conducted a mixed class, ladies being admitted to his lectures. His health soon rendered it impossible for him to discharge his public duties; he resigned his post in 1872, and retired with the honorary title of professor emeritus of political economy. In 1873 his own university conferred on him the degree of LL.D. He died at Blackheath
, near London, on the 8 July 1875.
and Auguste Comte
, and the essays on Political Economy and Land, and on Political Economy and Laissez-Faire, which have been referred to above. In 1874 appeared his largest work, Some Leading Principles of Political Economy, newly Expounded, which is beyond doubt a worthy successor to the great treatises of Adam Smith
, Thomas Malthus
, David Ricardo
and J.S. Mill. It does not expound a completed system of political economy; many important doctrines are left untouched; and in general the treatment of problems is not such as would be suited for a systematic manual. The work is essentially a commentary on some of the principal doctrines of the English school of economists, such as value
, cost of production, wage
s, labour and capital
, and international values, and is replete with keen criticism and lucid illustration. While in fundamental harmony with Mill, especially as regards the general conception of the science, Cairnes differs from him to a greater or less extent on nearly all the cardinal doctrines, subjects his opinions to a searching examination, and generally succeeds in giving to the truth that is common to both a firmer basis and a more precise statement. The last labour to which he devoted himself was a republication of his first work on the Logical Method of Political Economy.
Taken as a whole, the works of Cairnes formed the most important contribution to economical science made by the English school since the publication of J. S. Mill's Principles. It is not possible to indicate more than generally the special advances in economic doctrine effected by him, but the following points may be noted as establishing for him a claim to a place beside Ricardo and Mill.
Cairnes' exposition of the province and method of political economy: He never suffers it to be forgotten that political economy is a science
, and consequently that its results are entirely neutral with respect to social facts or systems. It has simply to trace the necessary connections among the phenomena of wealth
and dictates no rules for practice. Further, he is distinctly opposed both to those who would treat political economy as an integral part of social philosophy, and to those who have attempted to express economic facts in quantitative formulae and to make economy a branch of applied mathematics. According to him political economy is a mixed science, its field being partly mental, partly physical. It may be called a positive science, because its premises are facts, but it is hypothetical
in so far as the laws it lays down are only approximately true, i.e. are only valid in the absence of counteracting agencies.
From this view of the nature of the science, it follows at once that the method to be pursued must be that called by Mill the physical or concrete deductive, which starts from certain known causes, investigates their consequences and verifies or tests the result by comparison with facts of experience. It may, perhaps, be thought that Cairnes gives too little attention to the effects of the organism of society on economic facts, and that he is disposed to overlook what Walter Bagehot
called the postulates of political economy.
Cairnes' analysis of cost of production in its relation to value: According to Mill, the universal elements in cost of production are the wages of labour and the profits of capital. To this theory Cairnes objects that wages, being remuneration, can in no sense be considered as cost, and could only have come to be regarded as cost in consequence of the whole problem being treated from the point of view of the capitalist
, to whom, no doubt, the wages paid represent cost. The real elements of cost of production he looks upon as labour, abstinence and risk
, the second of these falling mainly, though not necessarily, upon the capitalist. In this analysis he to a considerable extent follows and improves upon Nassau William Senior
, who had previously defined cost of production as the sum of the labour and abstinence necessary to production
.
Cairnes' exposition of the natural or social limit to free competition
, and of its bearing on the theory of value
: He points out that in any organized society there can hardly be the ready transference of capital from one employment to another, which is the indispensable condition of free competition; while class distinctions render it impossible for labour to transfer itself readily to new occupations. Society may thus be regarded as consisting of a series of noncompeting industrial groups, with free competition among the members of any one group or class. Now the only condition under which cost of production will regulate value is perfect competition
. It follows that the normal value of commodities-the value which gives to the producers the average and usual remuneration will depend upon cost of production only when the exchange is confined to the members of one class, among whom there is free competition. In exchange between classes or non-competing industrial groups, the normal value is simply a case of international value, and depends upon reciprocal demand
, that is to say, is such as will satisfy the equation of demand. This theory is a substantial contribution to economical science and throws great light upon the general problem of value. At the same time, it may be thought that Cairnes overlooked a point brought forward prominently by Senior, who also had called attention to the bearing of competition on the relation between cost of production and value. The cost to the producer fixes the limit below which the price cannot fall without the supply being affected; but it is the desire of the consumer-i.e. what he is willing to give up rather than be compelled to produce the commodity for himself that fixes the maximum value of the article. To treat the whole problem of natural or normal value from the point of view of the producer is to give but a one-sided theory of the facts.
Cairnes' defence of the wages fund doctrine: This doctrine, expounded by Mill in his Principles, had been relinquished by him, but Cairnes still undertook to defend it. He certainly succeeded in removing from the theory much that bad tended to obscure its real meaning and in placing it in its very best aspect. He also showed the sense in which, when treating the problem of wages, we must refer to some fund devoted to the payment of wages, and pointed out the conditions under which the wages fund may increase or decrease. It may be added that his Leading Principles contain admirable discussions on trade unions and protection, together with a clear analysis of the difficult theory of international trade
and value, in which there is much that is both novel and valuable. The Logical Method contains about the best exposition and defence of Ricardo’s theory of rent; and the Essays contain a very clear and formidable criticism of Bastiat’s economic doctrines.
Ireland
Ireland is an island to the northwest of continental Europe. It is the third-largest island in Europe and the twentieth-largest island on Earth...
economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
. He is often described as the "last of the classical economists".
Biography
Cairnes was born at CastlebellinghamCastlebellingham
Castlebellingham is a village and townland in County Louth, Ireland. The village has got a lot quieter since the construction of the new M1 motorway which bypasses the village...
, County Louth
County Louth
County Louth is a county of Ireland. It is part of the Border Region and is also located in the province of Leinster. It is named after the town of Louth. Louth County Council is the local authority for the county...
, Ireland, the son of William Elliott Cairnes (1787–1863) of Stameen, near Drogheda
Drogheda
Drogheda is an industrial and port town in County Louth on the east coast of Ireland, 56 km north of Dublin. It is the last bridging point on the River Boyne before it enters the Irish Sea....
, and Marianne Woolsey, niece of Sir William Bellingham, 1st Baronet
Sir William Bellingham, 1st Baronet
Sir William Bellingham, 1st Baronet was an Irish-born British politician and the "controller of the storekeepers' accounts" for the Royal Navy. Bellingham was charged with organizing and procuring provisions for the Vancouver Expedition...
of Castlebellingham. Against the wishes of his mother (Catherine Moore of Moore Hall, Killinchy), William Cairnes decided upon a business career, becoming a partner in the Woolsey Brewery at Castlebellingham. In 1825 William Cairnes started on his own account in Drogheda
Drogheda
Drogheda is an industrial and port town in County Louth on the east coast of Ireland, 56 km north of Dublin. It is the last bridging point on the River Boyne before it enters the Irish Sea....
, making the Drogheda Brewery an unqualified success. He was remembered for his great business capacity and for the deep interest he took in charity.
After leaving school, John Cairnes spent some years in the counting-house of his father at Drogheda. His tastes, however, lay altogether in the direction of study, and he was permitted to enter Trinity College, Dublin
Trinity College, Dublin
Trinity College, Dublin , formally known as the College of the Holy and Undivided Trinity of Queen Elizabeth near Dublin, was founded in 1592 by letters patent from Queen Elizabeth I as the "mother of a university", Extracts from Letters Patent of Elizabeth I, 1592: "...we...found and...
, where he took the degree
Academic degree
An academic degree is a position and title within a college or university that is usually awarded in recognition of the recipient having either satisfactorily completed a prescribed course of study or having conducted a scholarly endeavour deemed worthy of his or her admission to the degree...
of B.A.
Bachelor of Arts
A Bachelor of Arts , from the Latin artium baccalaureus, is a bachelor's degree awarded for an undergraduate course or program in either the liberal arts, the sciences, or both...
in 1848, and six years later that of M.A.
Master of Arts (postgraduate)
A Master of Arts from the Latin Magister Artium, is a type of Master's degree awarded by universities in many countries. The M.A. is usually contrasted with the M.S. or M.Sc. degrees...
After passing through the curriculum of Arts, he engaged in the study of Law, and was called to the Irish bar
Bar association
A bar association is a professional body of lawyers. Some bar associations are responsible for the regulation of the legal profession in their jurisdiction; others are professional organizations dedicated to serving their members; in many cases, they are both...
. But he felt no very strong inclination for the legal profession, and during some years he occupied himself to a large extent with contributions to the daily press, treating of the social and economical
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
questions that affected Ireland. He devoted most attention to political economy
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
, which he studied with great thoroughness and care.
While residing in Dublin, he made the acquaintance of Archbishop Whately
Richard Whately
Richard Whately was an English rhetorician, logician, economist, and theologian who also served as the Church of Ireland Archbishop of Dublin.-Life and times:...
, who conceived a very high respect for Cairnes' character and abilities. In 1856, a vacancy occurred in the chair of political economy at Dublin founded by Whately, and Cairnes received the appointment. In accordance with the regulations of the foundation, the lectures of his first year’s course were published. The book appeared in 1857 with the title Character and Logical Method of Political Economy. It followed up on and expanded J. S. Mill's
John Stuart Mill
John Stuart Mill was a British philosopher, economist and civil servant. An influential contributor to social theory, political theory, and political economy, his conception of liberty justified the freedom of the individual in opposition to unlimited state control. He was a proponent of...
treatment in the Essays on some Unsettled Questions in Political Economy, and formed an admirable introduction to the study of economics as a science. In it the author’s peculiar powers of thought and expression are displayed to the best advantage. Logical exactness, precision of language, and firm grasp of the true nature of economic facts, are the qualities characteristic of this as of all his other works. If the book had done nothing more, it would still have conferred inestimable benefit on political economists by its clear exposition of the true nature and meaning of the ambiguous term law. To the view of the province and method of political economy expounded in this early work the author always remained true, and several of his later essays, such as those on Political Economy and Land, Political Economy and Laissez-Faire, are but reiterations of the same doctrine. His next contribution to economical science was a series of articles on the gold question, published partly in Fraser's Magazine
Fraser's Magazine
Fraser's Magazine for Town and Country was a general and literary journal published in London from 1830 to 1882, which initially took a strong Tory line in politics. It was founded by Hugh Fraser and William Maginn in 1830 and loosely directed by Maginn under the name Oliver Yorke until about 1840...
, in which the probable consequences of the increased supply of gold attendant on the Australian
Victorian gold rush
The Victorian gold rush was a period in the history of Victoria, Australia approximately between 1851 and the late 1860s. In 10 years the Australian population nearly tripled.- Overview :During this era Victoria dominated the world's gold output...
and Californian gold discoveries
California Gold Rush
The California Gold Rush began on January 24, 1848, when gold was found by James W. Marshall at Sutter's Mill in Coloma, California. The first to hear confirmed information of the gold rush were the people in Oregon, the Sandwich Islands , and Latin America, who were the first to start flocking to...
were analysed with great skill and ability. And a critical article on M. Chevaliers' work, On the Probable Fall in the Value of Gold, appeared in the Edinburgh Review
Edinburgh Review
The Edinburgh Review, founded in 1802, was one of the most influential British magazines of the 19th century. It ceased publication in 1929. The magazine took its Latin motto judex damnatur ubi nocens absolvitur from Publilius Syrus.In 1984, the Scottish cultural magazine New Edinburgh Review,...
for July 1860.
In 1861, Cairnes was appointed to the professor
Professor
A professor is a scholarly teacher; the precise meaning of the term varies by country. Literally, professor derives from Latin as a "person who professes" being usually an expert in arts or sciences; a teacher of high rank...
ship of jurisprudence
Jurisprudence
Jurisprudence is the theory and philosophy of law. Scholars of jurisprudence, or legal theorists , hope to obtain a deeper understanding of the nature of law, of legal reasoning, legal systems and of legal institutions...
and political economy in Queens College Galway, and in the following year he published his admirable work The Slave Power, one of the finest specimens of applied economical philosophy. The inherent disadvantages of the employment of slave
Slavery
Slavery is a system under which people are treated as property to be bought and sold, and are forced to work. Slaves can be held against their will from the time of their capture, purchase or birth, and deprived of the right to leave, to refuse to work, or to demand compensation...
labour were exposed with great fulness and ability, and the conclusions arrived at have taken their place among the recognized doctrines of political economy
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
. The opinions expressed by Cairnes as to the probable issue of American Civil War
American Civil War
The American Civil War was a civil war fought in the United States of America. In response to the election of Abraham Lincoln as President of the United States, 11 southern slave states declared their secession from the United States and formed the Confederate States of America ; the other 25...
were largely verified by the actual course of events, and the appearance of the book had a marked influence on the attitude taken by serious political thinkers in England
England
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
towards the Confederate States of America
Confederate States of America
The Confederate States of America was a government set up from 1861 to 1865 by 11 Southern slave states of the United States of America that had declared their secession from the U.S...
. During the remainder of his residence at Galway, Professor Cairnes published nothing beyond some fragments and pamphlets, mainly upon Irish question
Irish question
The Irish Question was a phrase used mainly by members of the British ruling classes from the early 19th century until the 1920s. It was used to describe Irish nationalism and the calls for Irish independence....
s. The most valuable of these papers are the series devoted to the consideration of university education. His health, at no time very good, was still further weakened in 1865 by a fall from his horse. He was ever afterwards incapacitated from active exertion and was constantly liable to have his work interfered with by attacks of illness. In 1866 he was appointed professor of political economy in University College, London. He was compelled to spend the session 1868-1869 in Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
, but on his return continued to lecture till 1872. During his last session he conducted a mixed class, ladies being admitted to his lectures. His health soon rendered it impossible for him to discharge his public duties; he resigned his post in 1872, and retired with the honorary title of professor emeritus of political economy. In 1873 his own university conferred on him the degree of LL.D. He died at Blackheath
Blackheath, London
Blackheath is a district of South London, England. It is named from the large open public grassland which separates it from Greenwich to the north and Lewisham to the west...
, near London, on the 8 July 1875.
Family
Cairnes had married Elizabeth Charlotte, daughter of George Henry Minto Alexander, a Judge of the High Court in India. They were the parents of two sons and a daughter.Work
The last years of Cairnes' life were spent in the collection and publication of some scattered papers contributed to various reviews and magazines, and in the preparation of his most extensive and important work. The Political Essays, published in 1873, comprise all his papers relating to Ireland and its university system, together with some other articles of a somewhat similar nature. The Essays in Political Economy, Theoretical and Applied, which appeared in the same year, contain the essays towards a solution of the gold question, brought up to date and tested by comparison with statistics of prices. Among the other articles in. the volume the more important are the criticisms on Frédéric BastiatFrédéric Bastiat
Claude Frédéric Bastiat was a French classical liberal theorist, political economist, and member of the French assembly. He was notable for developing the important economic concept of opportunity cost.-Biography:...
and Auguste Comte
Auguste Comte
Isidore Auguste Marie François Xavier Comte , better known as Auguste Comte , was a French philosopher, a founder of the discipline of sociology and of the doctrine of positivism...
, and the essays on Political Economy and Land, and on Political Economy and Laissez-Faire, which have been referred to above. In 1874 appeared his largest work, Some Leading Principles of Political Economy, newly Expounded, which is beyond doubt a worthy successor to the great treatises of Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
, Thomas Malthus
Thomas Malthus
The Reverend Thomas Robert Malthus FRS was an English scholar, influential in political economy and demography. Malthus popularized the economic theory of rent....
, David Ricardo
David Ricardo
David Ricardo was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator,...
and J.S. Mill. It does not expound a completed system of political economy; many important doctrines are left untouched; and in general the treatment of problems is not such as would be suited for a systematic manual. The work is essentially a commentary on some of the principal doctrines of the English school of economists, such as value
Value (economics)
An economic value is the worth of a good or service as determined by the market.The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods...
, cost of production, wage
Wage
A wage is a compensation, usually financial, received by workers in exchange for their labor.Compensation in terms of wages is given to workers and compensation in terms of salary is given to employees...
s, labour and capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
, and international values, and is replete with keen criticism and lucid illustration. While in fundamental harmony with Mill, especially as regards the general conception of the science, Cairnes differs from him to a greater or less extent on nearly all the cardinal doctrines, subjects his opinions to a searching examination, and generally succeeds in giving to the truth that is common to both a firmer basis and a more precise statement. The last labour to which he devoted himself was a republication of his first work on the Logical Method of Political Economy.
Taken as a whole, the works of Cairnes formed the most important contribution to economical science made by the English school since the publication of J. S. Mill's Principles. It is not possible to indicate more than generally the special advances in economic doctrine effected by him, but the following points may be noted as establishing for him a claim to a place beside Ricardo and Mill.
Cairnes' exposition of the province and method of political economy: He never suffers it to be forgotten that political economy is a science
Science
Science is a systematic enterprise that builds and organizes knowledge in the form of testable explanations and predictions about the universe...
, and consequently that its results are entirely neutral with respect to social facts or systems. It has simply to trace the necessary connections among the phenomena of wealth
Wealth
Wealth is the abundance of valuable resources or material possessions. The word wealth is derived from the old English wela, which is from an Indo-European word stem...
and dictates no rules for practice. Further, he is distinctly opposed both to those who would treat political economy as an integral part of social philosophy, and to those who have attempted to express economic facts in quantitative formulae and to make economy a branch of applied mathematics. According to him political economy is a mixed science, its field being partly mental, partly physical. It may be called a positive science, because its premises are facts, but it is hypothetical
Hypothesis
A hypothesis is a proposed explanation for a phenomenon. The term derives from the Greek, ὑποτιθέναι – hypotithenai meaning "to put under" or "to suppose". For a hypothesis to be put forward as a scientific hypothesis, the scientific method requires that one can test it...
in so far as the laws it lays down are only approximately true, i.e. are only valid in the absence of counteracting agencies.
From this view of the nature of the science, it follows at once that the method to be pursued must be that called by Mill the physical or concrete deductive, which starts from certain known causes, investigates their consequences and verifies or tests the result by comparison with facts of experience. It may, perhaps, be thought that Cairnes gives too little attention to the effects of the organism of society on economic facts, and that he is disposed to overlook what Walter Bagehot
Walter Bagehot
Walter Bagehot was an English businessman, essayist, and journalist who wrote extensively about literature, government, and economic affairs.-Early years:...
called the postulates of political economy.
Cairnes' analysis of cost of production in its relation to value: According to Mill, the universal elements in cost of production are the wages of labour and the profits of capital. To this theory Cairnes objects that wages, being remuneration, can in no sense be considered as cost, and could only have come to be regarded as cost in consequence of the whole problem being treated from the point of view of the capitalist
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
, to whom, no doubt, the wages paid represent cost. The real elements of cost of production he looks upon as labour, abstinence and risk
Risk
Risk is the potential that a chosen action or activity will lead to a loss . The notion implies that a choice having an influence on the outcome exists . Potential losses themselves may also be called "risks"...
, the second of these falling mainly, though not necessarily, upon the capitalist. In this analysis he to a considerable extent follows and improves upon Nassau William Senior
Nassau William Senior
Nassau William Senior , English economist, was born at Compton, Berkshire, the eldest son of the Rev. JR Senior, vicar of Durnford, Wiltshire.-Biography:...
, who had previously defined cost of production as the sum of the labour and abstinence necessary to production
Production, costs, and pricing
The following outline is provided as an overview of and topical guide to industrial organization:Industrial organization – describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions...
.
Cairnes' exposition of the natural or social limit to free competition
Competition
Competition is a contest between individuals, groups, animals, etc. for territory, a niche, or a location of resources. It arises whenever two and only two strive for a goal which cannot be shared. Competition occurs naturally between living organisms which co-exist in the same environment. For...
, and of its bearing on the theory of value
Theory of value (economics)
"Theory of value" is a generic term which encompasses all the theories within economics that attempt to explain the exchange value or price of goods and services...
: He points out that in any organized society there can hardly be the ready transference of capital from one employment to another, which is the indispensable condition of free competition; while class distinctions render it impossible for labour to transfer itself readily to new occupations. Society may thus be regarded as consisting of a series of noncompeting industrial groups, with free competition among the members of any one group or class. Now the only condition under which cost of production will regulate value is perfect competition
Perfect competition
In economic theory, perfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets...
. It follows that the normal value of commodities-the value which gives to the producers the average and usual remuneration will depend upon cost of production only when the exchange is confined to the members of one class, among whom there is free competition. In exchange between classes or non-competing industrial groups, the normal value is simply a case of international value, and depends upon reciprocal demand
Demand
- Economics :*Demand , the desire to own something and the ability to pay for it*Demand curve, a graphic representation of a demand schedule*Demand deposit, the money in checking accounts...
, that is to say, is such as will satisfy the equation of demand. This theory is a substantial contribution to economical science and throws great light upon the general problem of value. At the same time, it may be thought that Cairnes overlooked a point brought forward prominently by Senior, who also had called attention to the bearing of competition on the relation between cost of production and value. The cost to the producer fixes the limit below which the price cannot fall without the supply being affected; but it is the desire of the consumer-i.e. what he is willing to give up rather than be compelled to produce the commodity for himself that fixes the maximum value of the article. To treat the whole problem of natural or normal value from the point of view of the producer is to give but a one-sided theory of the facts.
Cairnes' defence of the wages fund doctrine: This doctrine, expounded by Mill in his Principles, had been relinquished by him, but Cairnes still undertook to defend it. He certainly succeeded in removing from the theory much that bad tended to obscure its real meaning and in placing it in its very best aspect. He also showed the sense in which, when treating the problem of wages, we must refer to some fund devoted to the payment of wages, and pointed out the conditions under which the wages fund may increase or decrease. It may be added that his Leading Principles contain admirable discussions on trade unions and protection, together with a clear analysis of the difficult theory of international trade
International trade
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...
and value, in which there is much that is both novel and valuable. The Logical Method contains about the best exposition and defence of Ricardo’s theory of rent; and the Essays contain a very clear and formidable criticism of Bastiat’s economic doctrines.
External links
- New School: John Elliott Cairnes
- NUI Galway: John Elliott Cairnes NUI Galway is the successor to Queen's College Galway
- The Slave Power, online text of the second edition from, Making of America Books, at the University of Michigan.
- An Examination into the Principles of Currency (1854)
- The Character and Logical Method of Political Economy (1875)
- The Character and Logical Method of Political Economy (1875)