llowed to act, and tending
ultimately towards something like a social millennium or perfection of
human society. One easily recalls the almost reverent attitude of Adam
Smith towards this system of industrial liberty which he exalted into a
kind of natural theology: and the way in which Mill, a deist but not a
Christian, was able to fit the whole apparatus of individual liberty
into its place in an ordered universe. The world "runs of itself," said
the economist. We have only to leave it alone. And the maxim of _laissez
faire_ became the last word of social wisdom.

The argument of the classicists ran thus. If there is everywhere
complete economic freedom, then there will ensue in consequence a regime
of social justice. If every man is allowed to buy and sell goods, labor
and property, just as suits his own interest, then the prices and wages
that result are either in the exact measure of social justice or, at
least, are perpetually moving towards it. The price of any commodity at
any moment is, it is true, a "market price," the resultant of the demand
and the supply; but behind this operates continually the inexorable law
of the cost of production. Sooner or later every price must represent
the actual cost of producing the commodity concerned, or, at least, must
oscillate now above and now below that point which it is always
endeavoring to meet. For if temporary circumstances force the price well
above the cost of producing the article in question, then the large
profits to be made induce a greater and greater production. The
increased volume of the supply thus produced inevitably forces down the
price till it sinks to the point of cost. If circumstances (such, for
example, as miscalculation and an over-great supply) depress the price
below the point of cost, then the discouragement of further production
presently shortens the supply and brings the price up again. Price is
thus like an oscillating pendulum seeking its point of rest, or like the
waves of the sea rising and falling about its level. By this same
mechanism the quantity and direction of production, argued the
economists, respond automatically to the needs of humanity, or, at
least, to the "effective demand," which the classicist mistook for the
same thing. Just as much wheat or bricks or diamonds would be produced
as the world called for; to produce too much of any one thing was to
violate a natural law; the falling price and the resulting temporary
loss st