I. Introduction

The process of estimating the effects of these measures is dependent likewise primarily on direct experience, as, for instance, where similar methods have already been applied in other circumstances. Often these experiences can be condensed into proposi tions of a general character, and capable of precise formulation, about the causal connexion between measures and effects. Rules drawn up in this way can be handed down from one economic politician to another and can be used to build up a groundwork of maxims for his guidance. It may be noted also that these maxims and opinions play an especially important role in the press. The theories-as in fact they are-w hich originate in this way are no different from the propositions of general economic theory as regards their construction and the manner in which they are acquired, for pure theory is also, as was once aptly observed, " congealed experience." They do, however, differ from general theory by the fact that there exists between the single propositions no systematic coherence uniting the different maxims which they contain. Moreover, they do not display the same logical validity since they arise out of the mere observance of concrete facts and do not in general guarantee that the events singled out as the "effects" are the right ones and do in fact exhibit a causal connexion with the measures con cerned. There is always therefore the suspicion that one and the sam·e proposition is supposed to belong sinlultaneously to different levels of abstraction, which is impossible. This explains the permanent state of INTRODUCTION 3 contradiction which is at all times and universally to be found in popular notions (using " popular" in the best sense) about the results of measures of economic policy. 'fhe opinions of economic politicians who frame such measures must equally, however high a position they may hold in Government or in business circles, be described as " popular," in so far as the strict criteria of scientific method and knowledge cannot be applied to these opinions. This is not to say that they may not frequently have the formal character of theories, but not everything which satis fies this condition is necessarily correct.

The case just considered of the formulation of maxims of economic policy was a matter Qf construct ing theories; for the science of political economy or economics on the other hand the problem is exactly the opposite one of applying theoretical propositions. The application of any science to concrete problems always gives rise to its particular problem of applica tion. In some sciences, such as chemistry or physics, this is a simple matter, but in others it is most diffi cult. It is to the latter that economics belongs: and in this science the problem of application as such has so far received but little attention. And yet the central problem of economic science is precisely that of establishing a direct connexion between deductions made on the basis of empirical postulates and further empirical data relevant to these deductions. Applica tion and verification thus frequently overlap and, what is of utmost importance in an empirical science such as economics, this problem of application is continu ally cropping up at every stage and in every section of the theory. Consequently it is one of the funda mental prerequisites Qf scientific and practical work 4 THE LIMITS OF ECONOMICS in this sphere that the connexions between theory and its application should be made clear. To do this-in so far as it relates to economics-is the task of the subsequent pages. It must be emphasized once again that the discussion will proceed on the assumption that we have to deal only with the elucidation of questions remaining after abstraction from the general meta-economic problem, that is, after the selection of aims. The aims will be assumed to be given: their validity is subject to scientific examination only if they are originally conceived as intermediate aims for reaching other more ultimate objectives. But the ultimate objectives must necessarily be left out of consideration because they belong-to the sphere of ultimate values about which no pronouncements of an economic nature can be made. On the other hand, it is always important to detect cases where inter mediary aims of an apparently purely economic character are in reality introducing additional value judgments into economic policy.

Quite apart from the necessity for a step by step verification of theory, there is one other-we may, if we like, call it moral-connexion between pure theory and practice. Economics as such does not fulfil its role as an empirical science, unless it offers a contribu tion to. the mastering of practical life. It is but an intellectual plaything, at best a mental training similar to chess, and serves only to satisfy a perverted desire for purely mental exercise, if its possibilities of practical application are not continually being investigated and extended. It will be shown, as the argument develops, how extremely important the observance of this seemingly obvious and simple requirement must be for the actual form of concrete INTRODUCTION 5 economic policy. Its form will depend, to some extent, of course, on the personal mentality of the investigator. l'he latter needs a certain instinct for reality and a well-developed sense of proportion and balance if he is duly to. retrace his steps from the-of course, inevitable-speculations of theory to the actual facts and is yet not to get lost in a mass of detail.

Here the artistic turn of mind which is latent in every science comes into play. 'For this reason it is only possible within very narrow limits to "learn" or " teach" eoonomic theory and applied economios. Strange as it may seem, the relevance of the artistic turn of mind is particularly great in the social sciences since they are concerned with the understand ing and eontrol of human behaviour. And since there are so few people who are gifted in this direction, there are among the many people who are theoretical economists and economic politicians by profession but few, indeed, who prove to be so by vocation.