Marx attributed the greatest importance to the discovery of the _law of the fall in the rate of profits_. Herein lay for him 'the mystery over which all economists from Adam Smith onwards have toiled'; and in the different attempts to solve the problem he saw the explanation of the divergence between the various schools of economists. Ricardo's bewilderment in face of the phenomenon of the progressive decrease in the rate of profits seemed to him fresh evidence of the earnestness of mind of that writer, who discerned the vital importance of the problem for capitalist society. That the solution had not been found before his, Marx's, time, appeared to him easily explicable, when it was remembered that until then political economy had sought gropingly for the distinction between fixed and floating capital without succeeding in formulating it, and had not been able to explain surplus-value in distinction from profits, nor profit itself in its purity, independently of the separate fractions of it in competition amongst themselves; and that, in the end, it had been unable to analyse completely the difference in the organic composition of capital, and much less, the formation of the general rate of profits. His explanation being now rejected, a double problem presents itself. The first question relates to fact. It is needful to ask: does the fact spoken of actually exist, and how does it exist? Has a gradual decline in the rate of profits been ascertained? And in which countries, and in what circumstances? The second question relates to the cause: since, whilst we have seen that there could only be one economic reason for the phenomenon, (the law of demand and supply), there may be several historical causes, and these may vary in different cases. The decline in the rate of profits may happen owing to a nominal increase in wages due to an increase in the rent of land, or it may happen owing to a real increase in wages due to stronger organisation among the workpeople, or it may happen owing to an increase, also real, in wages resulting from saving and from growing accumulations, which increase the capital in search of employment. This investigation must be made without prejudices, whether optimistic or pessimistic, apologetic or controversial; and economists have sinned but too often in all these ways. The listeners have seized upon the result of limited and qualified investigations, now in order to sing a hymn to the spontaneous force of progress, which will gradually cause the disappearance of capitalists or reduce interest to 1/2 per cent.; now in order to terrify their audience by a spectacle no less fantastic, of landed proprietors as the sole owners of all the goods of society![92] May 1899. FOOTNOTES: [89] See chaps. III. and IV.