goods, the fruits of this cooperation divided among the participants, the products themselves change hands from one person to another before they were used directly for the satisfaction of desire. In other words, they saw the economic sequence of production, exchange, distribution and consumption, and it became the object of political economy to discover the conditions and rules under which these phenomena were enacted in the daily affairs of men. As parts of one sequence they had relations one to another in which were enmeshed the relations of the human beings who conducted them. Upon what principle do the latter act?
Observation that to most men labor is irksome led to the axiom that in all economic activity men sought the maximum result with the minimum effort. This homely psychological generalization is as fundamental to the interpretation of economic phenomena as the equally homely physical generalization that nature's wants, with reference to man's desires, are limited. It has appeared in various guises, of which perhaps the most obnoxious is the concept of the economic man, who in all his doings follows the precepts of an enlightened self-interest—a being unknown to actual observation, who has merited the scorn which has been heaped upon him. Man in his economic dealings follows his self-interest according to the measure of his enlightment, but it cannot be denied that very frequently the light which is in him is darkness. The economic man is an ideal towards which, solely in their economic dealings and without reference to other activities, the men of every-day life strive. No adequate explanation of the affairs of life can be made on any other assumption than that men follow their rational interests so far as they perceive them and that foremost among them is the desire to obtain the largest result with the least expenditure of effort.
Thus understood, the economic man is the key by which the economist seeks to interpret the affairs of every-day life. It is simply the key, and not the subject matter to be interpreted. This the economist finds around him, varying at different stages of the world's progress with the growth of knowledge, the order of society and the diffusion of wealth.
These elementary considerations of the scope of political economy have briefly indicated the nature of its method. With a few simple generalizations it seeks to interpret the composite phenomena which it observes. Observation, therefore, and deduction are inextricably combined in it. If the concrete basis upon which it rests is forgotten and observation is thrown into the background, the result is a strongly deductive analysis which applies a few simple conditions to the successive phenomena of the economic sequence to be interpreted. This is the characteristic of the classical or orthodox school of political
