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8 paragraphs found in the 1 Book listed below
Risk, Uncertainty, and Profit; Knight, Frank H.
8 paragraphs found.
Preface
Note:
Cf. Mill's Essays on Unsettled Questions, no. 5, which really leaves little to be said on the subject. Also Cairnes, on the Character and Logical Method of Political Economy, and the discussions of methodology of the English economists generally. The conception of the "economic man" was one way of emphasizing the abstract and simplified character of the premises of the science. Keynes's Scope and Logical Method of Political Economy is as ably clear and conclusive discussion of this whole subject.
Pt.I,Ch.I
I.I.10

That such a theoretical first approximation is indicated in a theoretical sense, that it is the natural logical way of going at the problem, conforming to the workings of our thought processes, is sufficiently evidenced by the fact that this is what economists have always in fact done, ever since there has been such a science or such a social system to be studied. They have, to be sure, been criticized for doing it, and severely. But in the present writer's judgment theorists of the past and present are to be justly criticized not for following the theoretical method and studying a simplified and idealized form of competitive organization, but for not following it in a sufficiently self-conscious, critical, and explicit way. In their discussions of methodology the historic economists have, indeed, been as clear and explicit as could be desired, *6 but in the use of the method as much cannot, unfortunately, be said.

I.I.19

The opposition to pure theory in general is based on a failure to understand it, and especially common is the misconception as to the meaning of static or normal hypotheses. It is not recognized that their use is inherent in the methodology of science, is in fact the very essence of scientific procedure; that it is not at all recondite or intellectual in its appeal, but is mere practical common sense. The aim of science is to predict the future for the purpose of making our conduct intelligent. *10 Intelligence predicts, as shown above, through analysis, by isolating the different forces or tendencies in a situation and studying the character and effects of each separately. Static method and reasoning are therefore coextensive. We have no way of discussing a force or change except to describe its effects or results under given conditions.

Note:
Cf. Mill's Essays on Unsettled Questions, no. 5, which really leaves little to be said on the subject. Also Cairnes, on the Character and Logical Method of Political Economy, and the discussions of methodology of the English economists generally. The conception of the "economic man" was one way of emphasizing the abstract and simplified character of the premises of the science. Keynes's Scope and Logical Method of Political Economy is as ably clear and conclusive discussion of this whole subject.
Pt.I,Ch.II
I.II.4

Under these early conditions it was natural to connect the income of the business manager with the ownership of capital, and in all the classical writings we find the word "profit" used in this sense. A further source of confusion was the indefiniteness of the conception and use of the ideas of natural and market price in the minds of the early writers. It is natural and inevitable that a distinction which goes to the heart of the fundamental problems of the nature and methodology of economic science should be but imperfectly worked out in the initial stages of the speculation. Only recently, again, has the analysis of long-time normal price by Marshall and of the "static state" by Clark and Schumpeter begun to give to economists a clearer notion of what is really involved in "natural" or normal conditions. To the earlier classical writers this obscurity hid the fundamental difference between the total income of the capitalist manager and contract interest. The only separation considered necessary in the explanation of distribution was to restrict the theory of the business manager's income to the explanation of "normal profit," which was regarded as substantially equivalent to contract interest. Another barrier to the formulation of a clear statement of the relations between interest and profit was the lack of an adequate understanding of the productivity of capital, which also these authors did not possess and which has first been worked out in recent years.

Note:
Cf. Mill's Essays on Unsettled Questions, no. 5, which really leaves little to be said on the subject. Also Cairnes, on the Character and Logical Method of Political Economy, and the discussions of methodology of the English economists generally. The conception of the "economic man" was one way of emphasizing the abstract and simplified character of the premises of the science. Keynes's Scope and Logical Method of Political Economy is as ably clear and conclusive discussion of this whole subject.
Pt.II,Ch.IV
II.IV.25

Padan, in the article referred to, further attacks Professor Clark's exposition of the productivity theory on the express ground that the amount received by any factor would depend on the arbitrary size assigned to the marginal unit. This point also is hypothetically sound, but irrelevant. The size of the unit is not an arbitrary matter of methodology, but a question of fact, and Professor Clark may be open to criticism only for seeming to imply the contrary. The soundness of the theory, the possibility of competitive distribution at all, in fact, depends on the actual division of productive agencies into bargaining units of small size. *58 We should hold that it is an error to say that "labor" or any "factor" gets or tends to get its product. This holds good only for the actual individual men or other agencies.

Pt.II,Ch.V
Note:
Marshall's organization of economic theory about the fundamental problems is not very clear. We have already seen that he does not bring out the relations between market and normal price in the case of consumption goods. He refers to the problem of secular changes in normal price, but relegates discussion of the subject to later volumes not yet published. In his treatment of distribution he fails to make clear that the short-time distribution problem is a phase of the same fundamental analysis as normal prices of consumption goods. Moreover, he has very little interest in this short-time distribution problem. Book VI of the Principles is almost entirely devoted to the long-time equilibrium tendencies of the distributive shares, hardly more than passing notice being given to the conditions of equilibrium from the standpoint of distribution at any given time or for short periods when the supply is to be taken as fixed. Nor does he identify or even explicitly connect the question of the long-time tendencies in distribution with that of secular changes in normal price, which are phases or points of view in the analysis of the same fundamental problem of social economic organization. In the writer's view the problem of intelligible exposition and of fundamental comprehension of the price organization can be greatly lightened by the recognition and emphasis of these lines of relation. In addition, it is helpful to stress the close analogy in methodology of treatment between the short-time price theory of value and that of distribution, and similarly with respect to the two long-time or normal price theories.

In this connection it is interesting to compare Marshall with Professor J. B. Clark, who is especially known in connection with the use of the static hypothesis in this country. Clark's organization is even more inadequate, and it is especially striking that he does not acknowledge the connection between his method and that of Marshall. The "static state" of Clark is the same problem as Marshall's long-time normal price, while his economic dynamics corresponds with the secular changes in the field of value and the long-time tendencies in distribution. But Clark, under Austrian and German historical influence as Marshall was under English classical, gives us as the theory of distribution the short-time analysis, and hardly goes beyond recognizing the existence of the problem of progressive change, the long-run results or conditions of equilibrium of which are Marshall's almost exclusive concern. He is, indeed, much less satisfactory in this field than is Marshall in the short-time theory, for the latter does give, in passing, a very fair statement of the productivity analysis. It would, of course, be a serious error to confuse Clark's "static state" with the "stationary state" of the classical economists. The stationary state of these writers was the naturally static or equilibrium condition, which is the goal of progress or the subject matter of the third division of the study, not a state made static by arbitrary abstraction as a methodological device. It seems, however, that virtually all discussion of static conditions is vitiated by the failure to distinguish adequately between these two concepts. And we still lack a complete discussion of distribution which will give due weight to both the short-time and long-time problems; i.e., separate the assumption of fixed supplies of productive agencies from the assumption that supply is a function of price. A rough tabulation of the natural divisions of the theory may help to clarify their relations:

Value
(i.e., consumption goods)
Distribution
(productive services)
Problem I.
Given supplies of goods and given wants to be satisfied. (The situation at a moment.)
Market price.No problem of distribution involved.
Problem II.
Given productive resources and given wants to be satisfied.
Normal price. (Marshall's long-time normal price.) Supply of each good a function of price.Short-time or market price distribution theory. (Fixed supply of thing being priced.)
Problem III.
Use of resources to increase resources and change wants as well as satisfy wants.
Secular changes in normal price.Long-time distribution theory. Supply a function of price.