THE important and commanding position occupied by Adam Smith not only in the history of Political Economy in genera] but in the evolution of the Orthodox Economy in particular, makes the question of the sequence and order in which his views are to be presented to the reader one of more than usual importance. In this historical section my aim is to unite as far as possible into a single presentation the opinions of the respective authors whom we are to pass under review, the evolution of these opinions, and the extent to which they have been interpenetrated and modified by the political, legal, and social forces proper to the civilization of the time. And as Adam Smith, besides being the first authoritative exponent of what was afterwards to become the orthodox political economy of the Schools, was also the last exponent of what may be called a natural system of political economy, like that of the Mercantilists, where State policy formed an even more important element in its structure than purely economic considerations, it would seem more than likely that traces of the system would be found in the evolution of his doctrine, mixed up and lying side by side with the more purely speculative views which he derived from the Physiocrats. These elements I have thought it well to tabulate and set aside at the outset, in order to concentrate on those parts of his system from which the succeeding stages of the evolution of the orthodox economy took their rise and point of departure.

The keynote of those portions of his work in which traces of the old Mercantile system are apparent is to be found in the remark which he appends to his defence of the Navigation Act, that 'the defence of a country is of more importance than its opulence,' going on to add impressively that this Act 'is perhaps the wisest of all the commercial regulations of England.' But as he has just been arguing that the Act was not favourable to the increase of national wealth as such, inasmuch as by it we had to buy foreign goods dearer and sell our own goods cheaper than would have been the case with perfect freedom in the shipping trade, it is evident that we have here a pure piece of old Mercantilism and Protection welded into his system of Free Trade, like a fragment of older rock into a geological conglomerate.

Another reversion to the Mercantile system is to be seen in his support of the principle of granting temporary monopolies to joint-stock companies for the purpose of opening up and establishing new avenues for trade with remote or semi-barbarous peoples. This procedure, which was also one of pure Protection and entirely opposed to his doctrine of Free Trade, was justified by him on the ground that the general public would afterwards reap the benefit of what without such assistance would not be undertaken at all by private individuals, owing to the pecuniary risks which attended it. Now this is precisely the ground that is taken at the present day by young and vigorous nationalities in protecting those 'infant industries' for which they are naturally adapted, but which without such protection are too weak to stand alone; and is a piece of pure Protection. He also advocated the subsidizing by the State of institutions and public works for facilitating commerce, which it would not repay either private individuals or groups of individuals to undertake - still another infraction of his own doctrine of Free Trade.

Now these intrusions of fragments of the old Mercantile theory into his own body of economic doctrine were, in spite of their logical contradiction to it, deliberately defended by Adam Smith on the ground that they were necessary to the full and adequate performance of the functions of a State when placed in an environment where many things that had been absolute necessities in the older system could not as yet altogether be dispensed with in the new. They were not defended because they were economically true, or as being calculated to add to the wealth of the country even at the time of which he is writing; on the contrary they lessen, he contended, the wealth of the country, and if it were a question only of the national wealth he would have abolished them there and then, lint as national defence is with him of more importance than national opulence, he defends them purely on grounds of State necessity or expediency; much in the same way as he defended the export duty on wool, not on economic grounds but as a proper object of taxation for raising the necessary revenue of the State. From all of which it is evident that Adam Smith, although he thought that he had reduced Political Economy to a science, still felt strongly. what so many of his orthodox successors have ignored, that it could not be detached as a free scientific specialism and let loose on the world to work out its principles to their logical issues, divorced from the larger and higher interests of Polices. Morality, and Civilization.

With these preliminaries we are now in a position to advance to the main object of this chapter, - namely the consideration as to the nature of the modifications made by Adam Smith in the system of the Physiocrats, to whose principles he had in general terms given his adhesion; and especially to determine whether these modifications so far altered the organic structure of that system as to justify 'The Wealth of Nations,' not only in having supplanted it, but also in having become, in its main structural lines at least, the basis of the whole future development of the orthodox Political Economy down to the present time.