BAGEHOT AS AN ECONOMIST,*

BY ROBERT GIFFEN.

THE publication of these "Economic Studies," the incomplete fragments of a book on English political economy which Bagehot was engaged upon at the time of his death, suggests to me the task, I had almost said the duty, of endeavoring to estimate the position which he held as an economist and the service he has rendered to economic science. Readers of the present book will see at once the reason of this in Mr. Hutton's statement in the preface, that during the last years of Bagehot's life I "had a better knowledge of his economic mind than any other person." I should not like to claim for myself so much as this statement implies. Bagehot was not given to egotistical gossip about himself, or what he had done or meant to do; he left his works as they were completed to speak for themselves. To some extent I can only appreciate his finished work as it is open to all the world to appreciate it. But it was my happy fortune in the last nine years of his life, when his writing was mainly on economic subjects, to be intimately associated with him in the conduct of the Economist newspaper. During this period, accordingly, I had not only to discuss topics of political economy with him, especially the topics of banking and the money market, incessantly, but I had to know his mind so thoroughly on all leading subjects of the day as to be able to write in accordance with his views when he was himself at a distance. It will be my own fault, therefore, if I have not something to contribute towards a knowledge of his work; while the ability to do so constitutes a corresponding obligation, considering how important that work was: although, as I have said, I can pretend to little explicit knowledge, beyond what can be derived from the writings themselves, of what Bagehot thought or intended to accomplish.

I must claim, however, some indulgence in attempting the task I propose. I had only too little thought, whilst we were together, that such a task would ever devolve on me; and I should have

* Economic Studies. By the late Walter Bagehot. Edited by Richard Holt Hutton. London: Longmans. 1880.

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accounted it almost a profanation to contemplate writing of so intimate a friend, and on this subject also in some degree a master. I am thus unable to remember much that I should like to recall. Nor can I lay any claim to experience in literary criticism, which would be so invaluable in writing of a man himself so perfect in this kind of work. If I can tell something which may afterwards help an expert critic in discussing Bagehot's position and work as an economist, I shall be satisfied with my success, however imperfect my own estimate may be. It will be generally agreed, I believe, that his labors were so important as to command an attempt like this, at whatever cost and risk to the writer himself.

I.

LET me do something at the outset to describe my own view of his leading characteristics and qualifications as a writer on economic subjects. Mr. Hutton has described so fully and perfectly what Bagehot was as a writer altogether, and this upon a basis of knowledge and intimacy which no other friend could possess, that all I can hope to say is by way of supplement; but Mr. Hutton has purposely left a blank in his description, and perhaps there is something to be added. So far as he goes, however, I can only echo what he has said in protest against the common idea of Bagehot as being primarily an economist, instead of his being primarily a man of letters of strong genius and imagination, who happened, amongst other things, and subordinate to other things viewing his literary life as a whole, to take up with "Political Economy." This point is so important in any description of Bagehot as an economist, and of the characteristic work he did, that I may quote in extenso what Mr. Hutton has said: :

"While of course it has given me great pleasure, as it must have given pleasure to all Bagehot's friends, to hear the Chancellor of the Exchequer's evidently genuine tribute to his financial sagacity in the Budget speech of 1877, and Lord Granville's eloquent acknowledgments of the value of Bagehot's political counsels as editor of the Economist in the speech delivered at the London University on May 9, 1877, I have sometimes felt somewhat unreasonably vexed that those who appreciated so well what I may almost call the smallest part of him appeared to know so little of the essence of him, of the high-spirited, buoyant, subtle, speculative nature, in which the imaginative qualities were even more remarkable than the judgment, and were indeed at the root of all that was strongest in the judgment; of the gay and dashing humor which was the life of every conversation in which he joined; and of the visionary nature to which the commonest things often seemed the most marvelous, and the marvelous things the most intrinsically probable. To those who hear of Bagehot only as an original political economist and a lucid political thinker, a curiously false image of him

must be suggested. If they are among the multitude misled by Carlyle, who regard all political economists as 'the dreary professors of a dismal science,' they will probably conjure up an arid disquisitionist on value and cost of production; and even if assured of Bagehot's imaginative power, they may perhaps only understand by the expression that capacity for feverish preoccupation which makes the mention of Peel's Act' summon up to the faces of certain fanatics a hectic glow, or the rumor of paper currencies blanch others with the pallor of true passion. The truth, however, is, that the best qualities which Bagehot had, both as economist and as politician, were of a kind which the majority of economists and politicians do not specially possess. I do not mean that it was in any way an accident that he was an original thinker in either sphere; far from it. But I do think that what he brought to political and economical science he brought in some sense from outside their normal range, that the man of business and the financier in him fell within such sharp and well-defined limits that he knew better than most of his class where their special weakness lay, and where their special functions ended."

No one who drank even for a little of the champagne of Bagehot's wide discursive talk, full of humor and side lights on every subject he touched, will fail to appreciate this description. He was as far as possible from giving the idea of a man with a special genius for a subject and much absorbed in it. As far as my own experience goes, our business talks, though having for end and object the conduct of a political and business newspaper, always traveled much wider than the record. Not to speak of his interest in literature and philosophy, he had the keenest interest, for instance, in the essential differences of system between English and Scotch law and English and Scotch forms of local and judicial administration, a subject which grew out of some business topics in the beginning of our acquaintance; in the art of money-making, as distinguished from mere knowledge and skill in economics and the methods and subjects of business; in the working of personal motives of revenge and the like, as they affected the great game which was constantly playing before us in the City; similarly, in politics, in the personal element, the personal and family relationships of our public men, which he believed to have far more effect on the course of politics and parties, and the making or marring of careers, than the outside world supposes. I only mention a frag ment of the things about which he was intellectually curious, and which were yet far enough away from the special subjects before us. Nothing of this will seem surprising to the editors and contributors of our leading journals, who know how necessary it is that the mind should play freely about many subjects to be able to choose properly a line upon any one subject; but Bagehot undoubtedly possessed the quasi-omniscience so necessary in the highest journalism VOL. I-E

as well as the best literature in an unusual degree, and as such he could not be primarily an economist as the world understood him. He was something very much greater,- a thinker of some new ideas of great value in the science, and a describer of the modern world of business, which is so different from the world of business that existed only one or two generations ago, and which alone could be in the minds of earlier writers on political economy; and he was all this in part because the study of political economy formed only a portion of his intellectual interests.

ence.

Perhaps I may add, at the risk of saying something apparently tending to diminish his reputation, but which it seems absolutely necessary to say in order to make quite clear how he was great, that there was a disposition, among politicians especially, to defer to Bagehot as an economic authority on subjects where he had no claim to authority, and which were foreign to the special work he did. For reasons which will afterwards appear, he was not "first," I think, on currency or finance, or almost any of the dismal topics which are usually thought to be the main things in economic sciThere could be no better practical adviser on such topics, and the advice was so good that people did not reflect on its being due to qualities which were outside the economic range; but he was not the authority, in the strict sense, which those who took the advice supposed. To give only one illustration of how he was wrongly deferred to: the other day a remark in one of his Silver essays respecting the fall in silver, to the effect that "so grave a misfortune has seldom happened to any government so suddenly and so completely from causes out of its control," was quoted by a rising member of the present government as conclusive of the singularity and magnitude of the evil of loss by exchange on which the Indian government is always dwelling. I doubt if the obiter dicta of authors any more than of judges are properly quotable in this way; they ought not to count unless they are material in the argument and I am quite sure, if he had lived, Bagehot would have modified his judgment as to the loss of the Indian government, the statement of which he had been content at first to take from themselves. But what I wish to observe is, that Bagehot was no special authority on such a point at all, having neither the statistical nor financial knowledge at first sight necessary to form a judgment. The statement is palpably untrue. Every government that has had to submit to war and invasion has suffered far more from such causes than the Indian government from the fall in silver; and that government itself has suffered quite as much, if not more, from famines as it has really suffered from the fall in silver.

If Bagehot had had time to study the subject, and had had before him the evidence pro and con as to what the loss of the Indian government really is, his opinion would have been practically valuable, and probably a safe one to follow; but it would not have been so as that of an authority on the subject itself, forming a first-hand opinion upon it. His special province was something much greater, but at the same time entirely different.

While his wide imagination and various knowledge fitted Bagehot to be a discoverer and describer in the economic field, I would notice as a special quality his business imagination. He notes this as a quality of James Wilson, in language so felicitous that there is nothing more to be said in describing what is meant by this quality, though it was not in Bagehot, as he states it to have been in Wilson, a "predominating power." Still it was present so largely as to be most striking. What he says of Wilson is:

"He had a great power of conceiving transactions. Political economy was to him the science of buying and selling; and of the ordinary bargains of men he had a very steady and distinct conception. In explaining such subjects he did not begin, as political economists have been wittily said to do, with 'Suppose a man upon an island,' but 'What they do in the City is this,' 'The real course of business is so and so. His business imagination' enabled him to see what men did' and 'why they did it;' 'why they ought to do it' and 'why they ought not to do it.'"

Political economy was certainly more to Bagehot than the science of buying and selling; but so far as it is concerned with buying and selling, he had all the power which he ascribes to James Wilson to understand it. Given a set of circumstances, no matter how novel, he would predict what the business man would do and what the net result of the operation would be. Most people will recollect how he predicted in his Silver essays that the fall in the exchange with India would stimulate exports from that country and check imports of goods into it, thus stimulating the import of silver-a prediction which was strikingly fulfilled. This was entirely the fruit of his "business imagination." He knew, as by an instinct, what the business man would do in the new circumstances; and "putting two and two together," he was able to predict the result as well. But the quality with Bagehot was not confined to a knowledge of what particular operations and their results would be. As I have said, he was deeply interested in the art of money-making, and he imagined vividly the entire mental state of business men. How profits were made in different trades -in a whole class, for instance, such as insurance and banking, by means of money being brought to those engaged in them, who required no capital of their own except by way of guarantee and