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the process of deductive reasoning may not be too difficulty.139 The
principle that men desire to increase their sum of satisfactions with the
The Scope and Method of Political Economy/111
smallest possible sacrifice to themselves, the law of decreasing final
utility as amount of commodity increases, the law of diminishing return
from land, and the like, are premisses which possess the requisite degree
of universality. The hypothesis of free competition, again, affords a fairly
simple basis for deductive reasoning, and, so far at any rate as modern
trade is concerned, is approximately valid in relation to a large number
of economic phenomena. The alternative hypothesis of pure monopoly
is in certain respects even simpler, but the cases in which it is approxi-
mately realised cover a much narrower area.140
Passing to the consideration of more concrete problems, the above
statement requires to be slightly modified. The first requirement now is
that the premisses shall ultimately include all the circumstances which
exert any very important influence upon the phenomena in question at
the period and place to which the investigation has primary reference.
The second requirement is again one of simplicity. The hypotheses
adopted should be capable of being made the basis of deductive infer-
ence; they should therefore take a definite and precise form, and should
be as few and as simple as is consistent with keeping fairly close to the
facts.141
Bagehot in his unfinished Postulates of Political Economy proposed
to enumerate the principal assumptions of economic science, and to ex-
amine the validity or the limits of the validity of each in turn. Such an
enumeration and examination may under certain conditions be highly
instructive; but unless the object in view is carefully explained, it may
also prove misleading. In the use of the deductive method in political
economy, and especially in the pure theory, there are some half dozen
premisses that are more fundamental and of more constant recurrence
than others. But unless great care is taken to emphasize the distinction
between abstract and concrete economics, the recognition of a limited
number of definite assumptions as fundamental and sufficient tends to
give to the science a formal and unreal aspect that is not properly char-
acteristic of it considered in its totality.142
The validity, moreover, of economic postulates varies not only from
time to time, and place to place, but also in different connexions at the
same time and place. Hence even if a preliminary enumeration of pre-
misses, supposed to underlie the whole science of economics, were re-
ally feasible, it would not be possible to examine once for all the validity
of such premisses; and on the whole it seems best to regard any prelimi-
nary enumeration and examination of economic postulates, not as de-
112/John Neville Keynes
finitive or exhaustive, but simply as illustrative of the general character
of economic theory.143
§ 6. Special of the deductive method. There are certain modifica-
tions of the deductive method which render it comparatively easy to deal
effectively with problems of considerable intricacy. It is particularly
helpful up gradually from simple to more and more complex hypoth-
eses. The conditions assumed at the outset may fail to represent even
approximately the actual facts. But the problem having first been treated
in the simplest conceivable form, it may be possible to grapple with it
under somewhat less simple conditions. And so we may go on, until at
last the assumptions do fairly corresponds with the facts. As remarked
by Bagehot, the maxim of science is simply that of common
sense--simple cases first: begin with seeing how the main force acts
when there is as little as possible to impede it, and when you thoroughly
comprehend that, add to it in succession the separate effects of each of
the encumbering and interfering agencies. 144 Mill s working out of the
theory of international values affords a familiar example of the above
method of procedure. He begins by supposing that international deal-
ings are carried on between two countries only, and in two commodities
only, which commodities are directly exchanged the one for the other,
without the intervention of money in any form. The countries are sup-
posed contiguous, so that cost of carriage may be left out of account:
neither country has any international liabilities except in payment for
imports: and complete free trade exists, neither export nor import duties
being imposed on either side. The problem having in this simplified
form been solved, the various limitations are one by one removed until
all hypothesis is at last reached that includes all the essential conditions
of actual trade between difficult communities. Similarly, in seeking to
determine the circumstances that regulate the range of general prices,
the most serviceable method is to begin with a very simple artificial
hypothesis, and thence pass gradually to the complex realities of mod-
ern trade.145
Another interesting and useful variety of the deductive method is
where a number of alternative conditions are taken, which between them
cover all cases that are practically possible, and an enquiry is instituted
as to what will happen under each in turn. In this way the limits within
which the truth will lie may be determined; and in so far as it is possible
in any concrete instance to discover the relation of the actual to the
hypothetical conditions, the deductive solution may be turned to practi-
The Scope and Method of Political Economy/113
cal account. Unless the different alternatives are formal contradictories,
a preliminary investigation of facts will of course be necessary in order
to determine what alternatives should be chosen.
Let the problem he to determine the ultimate consequences of a strike
of workmen, its immediate success being assumed. Enquiry may he made
as to what will happen under three different suppositions: first, in so far
as the rise in wanes leads to an increase of efficiently on the part of the
workmen, and is therefore not at the expense of other members of the
community; secondly, in so far as it raises prices, and is therefore at the
expense of consumers: thirdly, in so far as it lowers profits, and is there-
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