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Any attempt to discuss the way in which railroads have promoted the rise of the American economy must assume some theory of economic evolution. The following analysis is based upon Schumpeter's theory of innovations. Briefly this theory holds that economic evolution in capitalistic society is started by innovation in some production function, that is, by new combinations of the factors in the economic process. These innovations may center in new commodities or new services, new types of machinery, new forms of organization, new firms, new resources, or new areas. As Schumpeter makes clear, this is not a general theory of economic, much less of social, change. Innovation is an internal factor operating within a given economic system while the system is also affected by external factors (many of them sociological) and by growth (which means, substantially, changes in population and in the sum total of savings made by individuals and firms). These sets of factors interact in economic change. "The changes in the economic process brought about by innovation, together with all their effects, and the response to them by the economic system" constitute economic evolution for Schumpeter.

In June, 1929, James Pugh, an Irish seaman, was arrested in a bar in the city of Colon, Republic of Panama, because of his belligerent attitude toward two policemen and his refusal to pay a bill. On the way to the police station a serious fight occurred, the circumstances of which were in dispute. Pugh died shortly thereafter. The Panamanian judicial investigation of the affair acquitted the two policemen of criminal responsibility for Pugh's death, a result which apparently was not satisfactory to the British Government, for in July, 1930, a formal request was made upon the Government of Panama by the British Government for an indemnity of ®1,000 on behalf of the children of the deceased, based upon the allegation that his death had been caused by unjustified acts of Panamanian policemen in beating him and dissatisfaction with the manner in which the police agents had been tried.

It is impossible to deny that the early rule of international law was that the head of state, either directly or through his agents, was alone competent to make treaties, which were binding upon his successors. This was natural at a time when no type of international agreement was known other than the treaty in solemn form to which monarchs were parties. Today, new types of agreement have come into being, to which the parties are not heads of states but either the state itself (as in the Treaty of Versailles, 1919) or governments or departments of state. In all these cases, and even in cases where the parties are formally the heads of states, the unit now considered to be bound is the state, through its organs. This substitution of states for monarchs as the subjects of the law of nations, at any rate in the matter of treaties, has been brought about very largely by the French and American Revolutions of the eighteenth century, and by the development of the notion of the state as an international person. The question of the competence to make treaties binding on states, who may by their laws have limited that competence, has therefore become one of great interest in modern theory.

Political science has dealt too long, on the one hand, with the ideal, and, on the other hand, with the abnormal and perverted features of political society, rather than with the normal and the eventual. Our theory of ideal democracy is perhaps more suited to the Greek and Roman city-state, with participation as the test of the good citizen. Representation has been heralded as the device which makes the ancient ideal possible on a large scale. But in practice it has been found that the enormous expansion of the public, i.e., the body of persons who have the right of participation, has made the problem far more complex than was at first thought possible. Greek ideals of education and coercion of the citizen body toward general improvement have been carried out with greater success, and our statute books reflect a Hobbesian attitude toward human nature which is true only in part. The political philosophy of democracy must be built on the facts of political life.Shall we break with the Greek and Roman ideal of the participation of the citizen group in the affairs of the state? It is true that the present attitude is a revised form of the democratic ideal of antiquity, but with a different interpretation of the meaning of citizenship. All democratic governments must finally rest on some theory of the suffrage; any study of the fact of non-voting must be based on a theory of the suffrage likewise. With the expansion of the theory of citizenship to include all subjects, a corresponding theory of limited participation was developed—no doubt a product of the Middle Ages. The totality of citizens was distrusted, and some test of participation had to be devised. Such was the origin of religious tests for political participation; such was the origin of the distinction between the right to vote and the fact of citizenship.

The decisions of international bodies may be based either on the rigid principle of unanimity or on the more convenient doctrine that the majority shall govern. In a world where national sovereignty is so widely stressed, the former method has a natural appeal. The rule of unanimity has, in fact, been treated by many persons as an inevitable corollary of the theory of sovereignty, which, as it is generally understood, would subject no state to any limitation against its will. Such an idea was very probably in the mind of former Secretary of State Hughes when he stated in the opening address of the Conference on Central American Affairs in December, 1922, " Unanimity is a part of the consequence of the status of states in international law." Writers on internationallaw have often so defined sovereignty and independence that the requirement of unanimity for any concerted action of a group of nations would follow.

On an early page of his celebrated Constitutional Limitations, Judge Cooley defines "constitution" in the following curt terms: "That body of rules and maxims in accordance with which the powers of sovereignty are habitually exercised." Returning later to the subject, he quotes with approval a more elaborate conception, couched in these words: "What is a constitution, and what are its objects? It is easier to tell what it is not than what it is. It is not the beginning of a community, nor the origin of private rights; it is not the fountain of law, nor the incipient state of government; it is not the cause, but consequence, of personal and political freedom; it grants no rights to the people, but is the creature of their power, the instrument of their convenience. Designed for their protection in the enjoyment of the rights and powers which they possessed before the constitution was made, it is but the framework of the political government, and necessarily based upon the preëxisting condition of laws, rights, habits, and modes of thought. There is nothing primitive in it, it is all derived from a known source. It presupposes an organized society, law, order, property, personal freedom, a love of political liberty, and enough of cultivated intelligence to know how to guard it against the encroachments of tyranny. A written constitution is in every instance a limitation upon the powers of government in the hands of agents; for there never was a written republican constitution which delegated to functionaries all the latent powers which lie dormant in every nation, and are boundless in extent, and incapable of definition."

Most people today mean not one but two things, when they speak of "Economic Policy". Sometimes they mean the attainment of economic ends by means of political techniques: the "economic" concept of economic policy. Or again they mean the attainment of noneconomic, political ends by means of economic techniques: the "political" concept of economic policy. The first concept is the one the professional economist would be likely to use; and it is the only one current in economic theory. The other, the "political" concept, is that of practical politics today. It is not only war economics—whether of the Democracies or of the Nazis—that is based on a "political" economic policy but also many plans for the future such as, for instance, the Beveridge Report. For the "security" to which this and similar plans aspire, is not an economic concept but a political and social one; and it is "economic security" only because its realization is sought through economic means.

Liberalism is based upon bold assumptions. It is a political doctrine built upon confidence in the rationality and good will of men. Crisis might well be treated as endemic to any theory so premised. Hence, difficulties caused by the failure of men to act in a manner consistent with such assumptions could be easily anticipated and readily dismissed. The present difficulty seems to go much deeper and to rest upon a questioning of liberal assumptions as valid guides to action.It is but a step from such pragmatic probings to a challenge of the essential philosophic value of liberalism. To lose faith today in the values of liberalism would, I think, be tragic. The liberal tradition is the strongest political heritage of western culture, and particularly of the United States and the British Commonwealth of Nations. What are the essentials of this heritage?The essentials of liberalism are familiar to us all—civil rights, the tolerance of political differences, freedom of opportunity and a career open to talents, belief in the dignity and integrity of human personality, the acceptance of diversity and of compromise. These are the elements, and to many bred in the liberal faith they are taken as universal truths.

Last year you heard my distinguished predecessor, Dr. Coats, set forth a by-no-means modest claim for statistics in his brilliant address "Statistics Comes of Age". Sweeping as his claim was, Dr. Coats, by his great organizing and administrative abilities, has established it in this country. That he has through the shifting experiences of more than thirty years of public administration retained his vision and resourcefulness, is evidence of a high courage.It is now more than a hundred and sixty years since Adam Smith's Wealth of Nations, popularly conceived to be the beginning of specialized study of economics, was launched into the world of letters and affairs, and it is about fifty since Economics became a subject of specialized study in Canadian universities. One has only to scan university examination papers of the late eighties, based mainly on John Stuart Mill and Fawcett's little manual, to realize that in form at least the subject has changed profoundly. But what has been accomplished? Is it an instrument or a game that has been fashioned? If an instrument, what are its limitations?These and related questions have often been asked and answered, and the answers are not always to the economist's liking. Three years ago the then president of this Association asked, "What is left of Adam Smith?" and answered in substance, nothing except the economic man. Avoiding discussion of his exception, and adding one or two of our own, we can accept his answer as broadly not untrue. The implication, however, that modern economics even in rudimentary form is set forth in the Wealth of Nations, needs emphatic denial. As Professor Schumpeter has justly said: "Classical theory has no other claim to its epithet than pristine simplicity." And yet, the economics of the Wealth of Nations is of a type which the economist's critics would have him adopt—the espousal of a doctrine, the initiation of a movement, propagandizing a policy. Any body of doctrine limited and attached to a policy is necessarily tied to a particular era; most of the Wealth of Nations is now of historical interest only.

From 1905, when Saskatchewan was made a province, to 1911, the Liberal party in Saskatchewan controlled both the federal and the provincial patronage. These six years gave it an enviable opportunity for laying firm foundations for a political organization. During the next ten years the federal patronage was in the hands of a Conservative or a Union party but the more important provincial patronage remained with the Liberals. Then in their last eight years of uninterrupted power, the Saskatchewan Liberals once more had the support of a federal Liberal government. Thus for twenty-four years after the formation of the province the Liberal rule over Saskatchewan was uninterrupted, and for fourteen of those years the Liberals also ruled over the Dominion. Until a few years before its defeat in 1929, it seemed as if the longer the party remained in power the stronger grew the party organization. It is this long period of development under favourable conditions which makes the Liberal organization in Saskatchewan worthy of close study.The Liberal party in Saskatchewan, like Liberal and Conservative parties in the other provinces, had two sides to its organization—one formal and ineffective, the other informal and effective. In its formal aspect it resembled party organization elsewhere. The Liberals in each polling sub-division elected one or two representatives. These met to elect a constituency executive. Each constituency executive had one representative on the central council of the provincial party, on which there also sat the executive elected at a party convention. This formal organization, which paid so strict a homage to democratic theory in its pyramidical structure based upon the people's will, was unimportant. The constituency organization, for example, did very little; it met, perhaps, once a year. The formal organization constituted a democratic façade which hid from the common gaze the naked autocracy of effective party management. In the effective party organization which did the work, won the elections, and consequently possessed the reality of political power, appointments were from the top down.

This essay, as a section out of the history of the Newspaper-Press, deals with the collaboration between agitational papers and street-terrorism on the basis of characteristic examples. The author draws a distinction between partial and absolute terrorism. In the case of the former, a minority by means of intimidation with violence, presses the majority and their prominent leaders to political actions which in all human probability they would never have decided upon on their own initiative.The American War of Independence is quoted as an example, or rather the deeds of violence which, as practised by a radical minority, influenced the course of event.A sketch is then given of the importance of the American Press, at that time in its infancy, with regard to the political successes of the young government, both at home and abroad.As an instance of absolute terrorism, the reign of terror of the French Revolution is taken. There the terrorists themselves seized the power. A survey is given of the various agitational papers and their methods, Their development is described up to the institution of a press-dictatorship by Napoleon Bonaparte. Finally the attention is drawn to the causes of the intimidating effect of the War-Press in times of political tension, all of which is based on historical instances taken from the latter half of the 19th century.The essay endeavours to prove that in social-psychological descriptions it frequently occurs that insufficient attention is paid to the part played by coercion and intimidation.The periodical press offers adequate information to permit of ascertaining the leading ideas and their modifications during agitated times. At the same time, its pages reveal the modifications in the views of the leading men and their influence on the masses.Accurate and specialized research on the basis of similar material taken from the history of the Newspaper-Pres, will complete and justify many a theory on mass-passions and mass-disturbances of reason in the field of social psychology.