explanation of this truth is that luxury is an even greater violation of the social than of the moral order. Inordinate luxury is a result of an excessive inequality, which gives rise to civil dissensions, despotism and the overthrow of states.

Rightly does Voltaire say, "Luxury is the result, not of the rights of property, but of bad laws. It is bad laws which give birth to luxury, it is good laws that can destroy it." This is one of the effects which a system of equal inheritance in time might be expected to bring about.

Montesquieu says, "When wealth is equally divided luxury cannot exist, for this is only supported by the commodities obtained through the labour of others."

"Were there no luxury," says Rousseau, "there would be no poor." A visit to the Alpine cantons of Switzerland, or to the valleys of Norway will show that Montesquieu and Rousseau were in the right.

§ 2. Insurances.

By ingenious applications of the principle of combination, insurances have become the very embodiment of the spirit of thrift and foresight.

If a large number of people pay an annual contribution proportionate to the eventual loss against which they wish to guarantee, a fund can be formed out of which the victims of the misfortune may be indemnified. This fund must be equal to the average

of annual losses, increased by the cost of management. Houses are in this way insured against fire, crops against hail, ships and their cargoes against the perils of the sea, travellers against accident, men against death.

A payment of eighteenpence per 1007. on the real value of a house will confer a claim to receive this value should the house be burnt. By the annual payment of a certain premium, a man may secure a capital sum to his heirs. The premium depends on the capital contracted for and the chances of the insurer's dying. The younger he is the smaller will be the premium, since there is a higher probability that he will continue to pay it for many years.

Assurances are based on the calculation of probabilities and averages. Their advantages are great. They free the individual from the mishaps of fate. They set his mind at ease for the future. They develop the spirit of thrift and foresight from which they proceed. They furnish a solid basis for real or personal credit, since the insurance policy constitutes security for the loan. They disseminate the habit of co-operation, and favour the re-constitution of capital.

The sick clubs and pension funds of friendly societies are managed on a similar principle. By means of a daily or weekly deduction from the workman's pay or the clerk's salary, a fund is formed out of which compensation is paid in cases of accident and pensions granted in old age.

CHAPTER III.

PUBLIC CONSUMPTION.

1. The Usefulness of Public Consumption. PUBLIC consumption is the consumption of public bodies, such as the state, the county, or the parish.

Because money is not annihilated by being spent it has been thought that the consumption of public bodies destroys nothing and favours production. This is the same error as that as to the outlay on luxuries: the money continues to circulate, but the goods for which this money has paid have been consumed.

"The King of England," says Voltaire, "has a million a year to spend ; this million, as he consumes it, is returned undiminished." Undoubtedly the precious metal is not destroyed, but the commodities purchased by the king have been made away with, and the people are so much the worse off. Instead of maintaining soldiers in barracks, make them board with the inhabitants of the country; the latter will then soon perceive that there is less food for themselves. The taxes they pay to maintain the soldiers represent the provisions which in this case they would consume in their natural forms.

Thus all consumption is a destruction of utilities.

The problem to be solved is whether the utility produced by the action of the state is greater than the utilities destroyed by its agents.

§ 2. Functions of the State.

Bad governments have done mankind so much harm, by war, by organised spoliation, and by excessive and badly-arranged taxes, that economists desire to reduce the action of the state as much as possible. They consider the state as an ulcer which eats into the heart of the people, and would gladly say with La Fontaine, "Our enemy is our master; or commend, with Proudhon, that negation of all government which is called anarchy (ȧvapxía).

The

Nevertheless the progress of civilisation has only been made possible by the action of the state. definition and enforcement of law is the work of the state, and it is the law which, by guaranteeing the fruits of his labour to their creator, gives production an object.

Bacon has said: "In societate aut vis aut lex valet," "the ruling power in society is either force or law." Where it is law, there is order, industry, economy, formation of capital, science, prosperity. Where it is force, there is strife, robbery, indolence, and misery.

The state, by making roads and protecting those who travel by them, has favoured exchange, the division of labour, large manufactures, commerce, the enrichment and unification of the human race. By

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providing instruction it diffuses science and the indispensable knowledge which together are, as we have seen, the principal sources of prosperity and true civilisation. Lastly, the first interest of a people is that justice should be well organised; in other words, that its administration should be upright, speedy, and inexpensive. Only the state can secure this.

Some years ago a President of New Granada, thoroughly imbued with political economy in all its purity, announced that henceforth the state, restricted to its true functions, would leave everything to individual enterprise. In a short time roads were destroyed, harbours choked with sand, public security utterly lost, and education nowhere to be found. Α return had been made to barbarism and the life in the primitive forests.

In Turkey the state does nothing, having no funds at its disposal; it is imprudent, however, to try personally to ascertain the advantages of the system.

All public consumption is so much withdrawn from private consumption; but the first is often much the more useful of the two. Apply the taxes on truffles and wine to public libraries and schools, and no one will have cause for complaint, not even the payers of the taxes.

"Public expenditure," says Rossi, "is a method of making the national co-operation a benefit not only to some, but to all its members."