Senior onTheory

Senior's discussion of the fundamental premises in economics was the most significant difference between his treatment of method compared with his predecessors. They were first outlined in an Introductory Lecture delivered in Oxford in 1826 and published in 1827.

Senior's approach changed in his Outline of the Science of Political Economy which appeared in 1836. He then argued that economics should be restricted to the field of pure theory—the science which treats of the nature, the pro­duction and the distribution of wealth.

I shall think myself justified, for instance, in showing how the natural distribu­tion of wealth may be affected by the institution of poor laws. And I shall not confine myself to their effects upon wealth. I shall consider how far a well­framed poor-law may promote the moral as well as the material welfare of the labouring classes, and an ill administered poor-law may produce moral, intel­lectual, and physical degradation. But these discussions must be considered as episodes. They form no part of the science which I profess. I shall enter into them, not as a political economist, but as a statesman or a moralist; and I shall expect from those who do me the honour of listening to them, not the full con­viction which follows scientific reasoning, but the qualified assent which is given to the precepts of an art (ibid.: 55—56).

It is refreshing to be able to read the link between Senior's own personal assessment of his approach to economic theory and his real-world efforts on policy.

In 1860, the British Association for the Advancement of Science held its thirtieth annual meeting in Oxford. Senior delivered the Opening Address before Section F (Economic Science and Statistics) over which he presided (Senior 1860). He spoke on the scope of political economy and its relation to statistics and the art of government (see Levy 1943: 334).

Senior made a significant contribution to value theory. In the Outline of the Science of Political Economy (1836), he defined wealth has having three con­stituents: utility, limitation in supply and transferableness of which limitation in supply is most important. He argued that the desires of people aim not so much at quantity as at diversity and correctly outlined the principle of dimin­ishing marginal utility, although he did this, somewhat confusingly, under the heading “Limitations in Supply”:

It is obvious, however, that our desires do not aim so much at quantity as at diversity. Not only are there limits to the pleasure which commodities of any given class can afford, but the pleasure diminishes in a rapidly increasing ratio long before those limits are reached. Two articles of the same kind will seldom afford twice the pleasure of one, and still less will ten give five times the pleasure of two. In proportion, therefore, as any article is abundant, the number of those who are provided with it, and do not wish, or wish but little, to increase their provision, is likely to be great; and, so far as they are concerned, the additional supply loses all, or nearly all, its utility.

However, as O'Brien has argued, Senior did not take this further by, for example, using it to derive a demand curve or the notion of effectual demand in the Smithian sense (see O'Brien 2004: 118).

Senior is well known for his concept of abstinence. In his discussion of “Instruments of Production”, he includes labour and natural agents (land, mines, forests, rivers, animals) as the primary productive powers. He also included abstinence as a third instrument of production: ‘[A] term by which we express the conduct of a person who either abstains from the unproductive use of what he can command, or designedly prefers the production of remote to that of immediate results' (Senior 1836: 58). He then went on to outline the links with the four fundamental propositions:

It was to the effects of this Third Instrument of Production that we adverted, when we laid down, as the third of our elementary propositions, that the Powers of Labour and of the other Instruments which produce Wealth may be indefinitely increased by using their Products as the means of further Production. All our subse­quent remarks on abstinence are a development and illustration of this proposi­tion; we say development and illustration, because it can scarcely be said to require formal proof (Senior 1836: 58-59; italics in original).

Senior then argued that capital is the result of all three productive instru­ments combined: ‘By the word Abstinence, we wish to express that agent, distinct from labour and the agency of nature, the concurrence of which is necessary to the existence of Capital, and which stands in the same relation to Profit as Labour does to Wages' (ibid.: 59).

Later in the Outline, he provided further clarification:

Perhaps the best plan might appear to be, to apply the term wages to the remu­neration of mere labour, the term interest to the remuneration of mere absti­nence, and the term profit to the combination of wages and interest, to the remuneration of abstinence and labour combined.

Marian Bowley argued that Senior's introduction of the idea of abstinence had more influence on later theory than any of his other contributions. John Stuart Mill took up the idea presenting it in his Principles and thereby incor­porating it more or less permanently in English capital theory (see Bowley 1937: 163).^[30]

In 1830, Senior published Three Lectures on the Rate of Wages which com­prised the lectures delivered at Oxford in the Easter term of that year together with a “Preface on the Causes and Remedies of the Present Disturbances”. At the beginning of the “Preface”, Senior briefly outlined the simple “wages fund doctrine” proposition ‘that the rate of wages depends on the extent of the fUnd for the maintenance of labourers, compared with the number of labourers to be main­tained (Senior 1830: iii-iv; italics in original) The rest of the “Preface” exam­ined the role of the Poor Law in the agricultural riots of 1830 which were protests against agricultural machinery and rural poverty mainly in southern and eastern England.

In the first chapter of Three Lectures on the Rate of Wages, Senior outlined his definitions of high and low wages and the factors that influence the level of wages. In chapters two and three, he went on to argue that the wages fund proposition is ‘inconsistent with opinions which are entitled to consideration, some from the number and others from the authority of those who maintain them' (ibid.: 18-62). Examples of ‘opinions' included matters such as the effects of the non-residence of landlords; the introduction of machinery; the impact of imports; the consequences of unproductive consumption; and the proposition later known as the ‘demand for commodities is not demand for labour' (see Mill 1848 [1965]: 78-88). All of these opinions or examples involved two time periods and as such were not inconsistent with the wages fund doctrine.

Senior argued strongly against the Malthusian orthodoxy on population. In 1829, he published Two Lectures on Population (To Which Is Added a Correspondence Between the Author and the Rev. TR. Malthus) (Senior 1829). The lectures were numbers seven and eight of the second lecture course deliv­ered in Easter term at Oxford 1828. The first strand of Senior's argument in the lectures was that the desire of man to improve his position himself was at least as important as sexual desire. He was quite clear that this went against the prevailing orthodoxy. In a letter to Malthus of 15 March 1829, repro­duced in the Lectures, Senior argued that Malthus's argument was opposed by the tendency of man to try to better himself.

The second strand in Senior's argument in the Lectures is that productivity in agriculture may increase with population and offset the tendency towards diminishing returns. Picking up the theme of his 15 March letter in another to Malthus dated 26 March 1829, Senior argued that when he said ‘subsis­tence has generally increased in a greater ratio than population' (ibid.: 73; ital­ics in original) he meant that looking back through the history of the world, and comparing the state of each country every two or three hundred years, one can see that there have been periods where subsistence has grown faster than population for a number of reasons, including mechanical inventions and improved modes of cultivation and transport. These periods may be fol­lowed by periods where population growth exceeds the growth of subsistence, but the ‘retrogression would not be to the point at which food and population relatively stood before' (ibid.: 75). Thus, there may be a “ratchet effect” at work, leading to rising living standards over time.^[31] None of these arguments were accepted by Malthus.

Why then did Senior adopt this “heretical” position? There was some empirical evidence. Thus, Barton argued in An Inquiry into the Causes ofthe Progressive Depreciation of Agricultural Labour in Modern Times that it was not a rising birth rate but a falling death rate which was responsible for the increase in population (see Barton 1820: 40-43). More recently, Routh has noted that Malthusianism was a doctrine which was likely to ‘enrage rather than subdue the rick-burning, machine-wrecking mobs that were beginning to terrify and terrorise farmers and manufacturers and against whom the agencies of law and order offered a very uncertain defence' (Routh 1989: 151).

The important point about Senior's views on population is that they went on to underpin his approach to the Poor Law and his role in and contribution to its reform.

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