In this article, I argue that there is a fundamental contradiction in Hobbes' political theory: the contradiction is between the method (which may be called “realism”) used in the deduction of the commonwealth and sovereign, and the sovereign's alleged obligation to obey the laws of nature. In order to explain how the contradiction arises, I begin by giving a brief account of the laws of nature in Hobbes, and the way in which he deduces the necessity for a sovereign. I then discuss a number of possible ways of avoiding the contradiction, and find them all unsatisfactory. Finally, I propose a solution to the problem. This solution involves some criticisms of Professor C. B. Macpherson's analysis of Hobbes, and also has some bearing on the relationship of the thought of Marx to more orthodox political theory.

In De Corpore Politico, Hobbes says that the laws of nature are “the dictates of natural reason … moral laws, because they concern the manners and conversation of men, one towards another; so are they also divine laws in respect of the author thereof. …” The laws of nature, then, can be seen in three ways: as rational, as moral, and as divine. It is because he says that they are both moral laws and dictates of reason, in that reason dictates on the basis of certain facts, that Hobbes is said to be guilty of the naturalistic fallacy, of attempting to deduce values from facts. And he calls them divine in order to emphasize that they cannot, according to his own account of law, properly be called laws at all except they be commands, in this case the commands of God. “And forasmuch as law, to speak properly, is a command, and these dictates, as they proceed from nature, are not commands, they are not therefore called laws, in respect of nature, but in respect of the author of nature, God Almighty.” Hobbes gives various explanations of just why the laws are moral, and all of them are unsatisfactory in one way or another. In the above passage he says that they are moral because they concern the manners and conversation of men, one towards another; but not everything which concerns the manners and conversation of men is moral.

During the 1950's and 1960's the high level of foreign investment in Canada has provoked a continuing public debate, but for the most part the controversy has raged unrestrained by any quantitative information on the potential benefit of foreign capital. The lack of data is understandable, for in attempting an estimate one encounters a multitude of conceptual and empirical problems that militate against any sort of precision.

Although it is impossible to be exact, I believe that the importance of the problem warrants making some rough guesses, and that is the task of this paper. My tools will be crude and there will be many compromises with reality, but by choosing my assumptions so that they impart an upward bias to my estimates, I can at least attempt to establish an upper bound to the true benefit of foreign investment. Even if the numerical estimates are not too reliable, making them forces us to separate the many issues related to the problem and to speculate on their relative importance.

It must be noted initially that the models of this paper consider only the benefits conferred by the inflow of real resources financed by foreign capitalists, and they do not take account of the technical knowledge and skilled personnel often accompanying direct foreign investment. My first model assumes that some new knowledge is implemented by foreign investment, but no more than would be implemented by the same amount of domestic investment. I consider neither the possibility that the technical change associated with foreign investment proceeds at a faster pace than that associated with domestic investment, nor the possibility that techniques introduced by foreigners have external effects. I take this narrow approach not only because it would be virtually impossible to isolate the impact of technical change introduced by foreigners but also because I do not think that foreign investment is necessary to the international transmission of technical information.

Considerable difficulty is presented for students of classical economics by the ambiguous use of the term “capital.” In particular there is much room for debate concerning the importance of technological capital as distinct from wage-goods capital in classical economic literature. This problem exists in the Wealth of Nations as well as in the work of Adam Smith's successors.

Malthus was quick to point out that serious error may result from Smith's analysis of wages wherein “every increase in the stock or revenue of the society” is regarded as “an increase in the funds for the maintenance of labour.” More recent writers recognize the references to “fixed capital” but imply that mere Up service was paid to such items; the emphasis was predominantly upon wage goods. In particular, it has been argued, Smith emphasized “the superior physical productivity of time-using processes” and the requirement that subsistence goods be available to permit the adoption of such techniques. “These accumulations are the simplest form of capital; machinery, tools, stocks of all sorts and human skill and knowledge are simply more complicated forms.

Perhaps the strongest criticism is by Marx. Marx did not deny that “constant” capital makes an appearance in the Wealth of Nations, but, he argued, it does so only at the micro-economic level of analysis: “Adam Smith, by a fundamentally perverted analysis, arrives at the absurd conclusion, that even though each individual capital is divided into a constant and a variable part, the capital of society resolves itself only into variable capital, i.e., is laid out exclusively in payment of wages.”