On the assumption that the primary interest in the “ancients” in such a field as economics is to learn from their mistakes, the principal theme of this discussion will be the contrast between the “classical” system and “correct” views. The system is taken in the sense indicated by the title, with little regard to other writers than Ricardo's own great master and the two successors most competent and closest to his own spirit, Senior and Mill. While our special interest is distribution theory, it is useful to have in the background clear views of essential doctrines or points of view in the authors' theory of value or price; for these are often closely connected with fallacies in the other field. It will be appropriate to give by way of introduction a kind of formal list of main deficiencies and sources of error in the system as a whole. At least seven such “aberrations” appear to have vital importance.

The first to be noticed is the unfortunate conception of value, in negative terms—cost, interpreted as “pain”—instead of positive terms—desire or utility. This fallacy occurs explicitly in the parts of the argument which have come to be referred to in the literature as the “philosophical” account of value. Specific discussion of the determination of value (price) as a quantity (the “empirical account”) runs, indeed, largely in other, more “correct” terms, of the equalization of return from productive expenditure in different fields through correct allocation.

The unusual stresses and strains of the depression during the last four years have drawn attention more definitely to certain weaknesses in the financial structure of the Canadian federation. The province of Nova Scotia has performed a very valuable service in initiating an economic inquiry into Dominion-provincial relations as affecting that province. An inquiry such as this removes the problem from the realm of speculation and political expediency and relates it to the actual facts of the situation. It would be of great value if similar investigations were made by the other provinces into their own peculiar problems, followed by an examination of the whole question by an impartial body from the point of view of the Dominion as a whole. Investigations along this line have been carried out in the Commonwealth of Australia and a Commission appointed which has reported on the applications made by the states of South Australia, Western Australia, and Tasmania for financial assistance from the Commonwealth, based on certain disabilities affecting these states as a result of Commonwealth policy.

The financial arrangements made between the Dominion and the provinces at the time of Confederation were essentially in the nature of a compromise and designed to meet the situation as it then existed. This appears to have been more or less the situation in the original financial arrangements of practically all existing federations. Apparently, however, it was considered at the time of the Canadian Confederation that these arrangements would be of a somewhat permanent character. This optimistic view was early shown to be wrong when within two years it was necessary to make adjustments. Further, it was not anticipated at that time that there would be any change in the accepted functions of government. The prevailing idea was that the fewer functions surrendered by the individual to the government, the better. John Stuart Mill was still the authority, and his ideas with regard to the limitation of government marked the general line of thought. While there were those who took a wider view of the functions of government and who anticipated the collectivist movement of the last quarter of the century, the echo of this was at that time scarcely heard in Canada. There was no thought that many of the services now rendered to the community by governments would become necessary. Consequently, the division of authority, both political and financial, in the British North America Act, was based on a form of society and an idea of government which no longer exists.

Here are two sciences—Philosophy and Political Economy—both bankrupt. The one went through the courts at least a hundred years ago and is now a cheery old bankrupt, bright and garrulous in old age. It talks most interestingly about its case, citing a long list of opinions and judgments that go back to the Greeks. The other bankrupt has just been thrown into the receiver's hands, still protesting angrily, still claiming that it has wonderful assets, that everything will be all right. It cites a wilderness, not of opinion, but of statistics and facts, all apparently bearing on nothing, gets confused, breaks down and cries—a very picture of senile collapse.

There are those who dislike metaphor; let us say the same thing in a plain way. Philosophy means the attempt to discover the ultimate nature of existence, of consciousness, of time and space. Has it found it? No. Is it going to? Not a chance of it. Where is it? Nowhere. Some people do not understand this. They read of the work of the Mayos and the Carrels and the Rutherfords and think that they are getting somewhere. In the philosophical sense it is not so. No ultimate dissection of the human body will ever find the human soul. The substitution of Rutherford's atom for Huxley's—replacing a solid particle infinitely small by a huge cavern empty except for centres of force—does not carry us one inch further in our quest of the final relations of mind and matter. Our greatest medical men know no more of the ultimate nature of consciousness than did a horse doctor in Asia Minor B.C. 500. Einstein, as far as the ultimate truth of space, time, and number goes, is no further on than Rodin's “Penseur”—his statue of the primitive man, buried in stubborn thought and trying, let us say, to think out whether two and two is four, or is five.

It is self-evident that the existence of ten jurisdictions, each having the right to make its own laws for the incorporation and regulation of limited liability companies and each exercising that right, must not only complicate matters greatly for the individual investor, shareholder, or creditor but must also operate as a serious drag on the commercial and industrial development of the nation. One way out of the impasse in which Canada finds herself would be to secure an amendment to her constitution whereby the federal legislature would be given exclusive jurisdiction over companies, and the provinces would surrender their exclusive jurisdiction over property and civil rights so far as was necessary to ensure the effectiveness of the federal control over corporations. This solution is ideal rather than practical, for it assumes self-negation on the part of politicians and comprehension on the part of the electorates greatly exceeding any yet evinced.

An alternative, but distinctly inferior, solution would leave the jurisdiction divided as it is at present but induce all ten legislatures to agree upon uniformity in the essential features of their company laws. This plan would do nothing to remove the handicap under which the federal legislature labours by reason of its lack of jurisdiction in the law of contract, but it has been talked about and is regarded by the mass of people as a practical step—notwithstanding the abortive results of the two Dominion-Provincial Conferences already held on the subject.

In his study of William Cobbett, Chesterton makes the paradoxical remark that poor Tom Paine really believed that the Age of Reason was just beginning when in fact it was just ending. For once, Chesterton is entirely wrong. The Age of Reason did begin at the close of the eighteenth century, and, like the nineteenth century, it has gone on ever since. The two preceding centuries had paved the way. Bacon gave it a definite start by holding out the dream of escaping, by the help of Intellect, from the “mera palpatio” (mere feeling our way) which had so far been our only mode of action in politics and all human affairs. The discoverers of the seventeenth century followed, with their shining proof of what Intellect could do to dissipate darkness and substitute certainty for mere groping, in our attempts to understand the world we live in. Astronomy, chemistry, physics were in turn illuminated by an almost dazzling light; and the very genuine triumphs of Intellect in its proper sphere predisposed the political and social thinkers of the eighteenth century (who believed that they too were intelligent) to have visions of a complete reign of Intellect in all departments of thought and activity.

Bentham's disastrous philosophy was a cold attempt to realize these visions. Hope was turned into apparent certitude by the hedonistic calculus and an intellectually enlightened Democracy, for which there need be no more groping in the dark. Auguste Comte carried the claim of Intellect farther. The realm of Science—with its proved motto of “Savoir, pour prévoir, pour pouvoir”—was definitely extended to all existence, including the whole life of human society. The intelligentzia of the British world, who had already proved their intelligence by swallowing as final truth a political economy which was much less than half true, embraced the new vision with enthusiasm. The Age of Reason had arrived.

This report naturally falls into two separate and almost completely unrelated parts. The final chapter, “Proposals and Remedies”, is wholly admirable. For the judgments expressed in it the writer has the greatest respect. The first four chapters are another matter. They contain some useful information, a great deal of banal comment on facts already known, some statements which are plainly false, and others which, while not altogether wrong, are likely to give a wholly distorted impression of the facts which they are supposed to report. It is the purpose of this article to cite some of these statements, to give the facts which they are supposed to summarize, to show that these facts were brought to the attention of the Commission, and thus to prove that this condemnation is justified.

All of the statements to which exception is taken are, with one exception, concerned with the relative operating efficiency of the Canadian National and Canadian Pacific Railways. (The exception charges, by implication, the Canadian National with extravagance in branch-line construction costs.) The form of railway operating accounts has been worked out in the very greatest detail by the Interstate Commerce Commission of the United States. They are designed to show the costs of performing particular functions, maintenance of way and structures, maintenance of equipment, conducting transportation, etc. Every general rate case and many of the cases involving rates on particular commodities have turned on the question of costs, and on the significance of such factors as density of traffic and length of haul in causing variations in unit costs.