The Economic Point of View: An Essay in the History of Economic Thought
...What does the economist economize? " 'Tis love, 'tis love," said the Duchess, "that makes the world go round." "Somebody said," whispered Alice, "that it's done by everybody minding their own business." "Ah well," replied the Duchess, "it means much the same thing." Not perhaps quite so nearly the same thing as Alice's contemporaries thought. But if we economists mind our own business, and do that business well, we can, I believe, contribute mightily to the economizing, that is, to the full but thrifty utilization of that scarce resource Love—which we know, just as well as anybody else, to be the most precious thing in the world.
It is impossible to draw a clear-cut boundary around the sphere or domain of human action to be included in economic science.
Social phenomena, like other matters of interest to be found in the real world, lend themselves to analysis by a number of disciplines. The same raw data may be capable of classification and explanation in a variety of ways, each of which complements the others and so contributes to the full grasp of the phenomena under consideration. In the interests of reaping the advantages attendant upon the division of labor, a sequence of events may be seen as reflecting the simultaneous operation of several distinct chains of cause and effect. Each of these chains may then become the focus of inquiry, and it may enhance the advantages to be derived from the division of labor to be able to set forth in precisely what ways any one such causal chain constitutes a potentially fruitful theme for separate investigation.
Such a classification of the factors in the observed phenomena that require explanation will, of course, reflect the different points of view with which the observer approaches the data. In the final analysis, the definition of a particular field of investigation is tantamount to the exposition of the point of view chosen by the investigator.
With regard to economics and to the "economic point of view," many attempts, under a variety of guises, have been made to describe this peculiar field of investigation. Writers have defined the noun "economy"; they have expatiated on the precise demarcation of the scope of economics; they have indulged in lengthy disquisitions on the character of economic activity and on the nature of economic interpretation. They have discussed at length the relationship of the economist to the sociologist, the psychologist, the moralist, the technologist, and the jurist. And they have, in addition, engaged in heated and protracted controversies about the utility of these same definitions, disquisitions, and discussions.
They have, in short, made a large number of attempts to determine precisely the particular point of view of the economist, to dispute existing expositions of it, or to deny altogether to the economist the joy of having a distinct point of view. The sum total of this activity over the better part of two centuries is a vast and fascinating literature. The contemplation and subsequent digestion of this literature yields a series of formulations of the economic point of view that are astounding in their variety. The present essay attempts to survey the literature and to review in historical perspective this wide range of formulations. As a chapter in the history of ideas, this account of the constant search for the precise expression of the point of view of the economist focuses on the particular avenues by which it has been approached and on their remarkable heterogeneity.
Although the present account is historically oriented, we shall adopt the topical, rather than the chronological, approach. We shall not present the various formulations in the order in which they were successively proposed in the history of economic thought. Instead, we shall take up one by one the principal groups of definitions to be found in the literature and shall treat each of them separately as fully as possible. The part played by each group in the history of the problem will become apparent from the discussion of the definitions themselves. We shall discover, in fact, that at any one time a number of widely differing formulations have usually been current. It will be convenient, therefore, to devote to each of these groups of formulations a discussion of its development that will be complete in itself, without the distraction of noticing the simultaneous parallel developments of other definitions.
In this introductory chapter we shall attempt to bring our problem into perspective. It will be helpful in this connection to discuss the significance to be attached to the task of making explicit the nature of the economic point of view; to make clear which operation is, and which related operations are not, the objects of our interest; and to survey briefly the place that has been occupied in economic thought by the attempts to elucidate this economic point of view.
The formulation of the nature of the economic point of view is, of course, intimately related to discussions concerning the scope of economics. The problem of the scope of economics, however, has frequently involved questions with which this essay has nothing to do, and it is perhaps worthwhile to make this clear at the outset. Marshall once wrote to John Maynard Keynes: "It is true of almost every science that, the longer one studies it, the larger its scope seems to be: though in fact its scope may have remained almost unchanged. But the subject matter of economics grows apace..."*1
This growth in the subject matter of economics of which Marshall writes is typical of those aspects of the question with which we are not concerned. A perusal of a list of courses offered in the economics department of any university or a cursory examination of the catalogue of the economics room in a large library will easily convince one of the luxuriance of this growth. It is clear that "economics" covers a body of facts, figures, theories and opinions embracing a vast range of phenomena related to one another only in the most tenuous way—often merely by historical accident. At least one outside observer of the controversies concerning the scope of economics has hinted darkly that they represent simply a way of claiming the exclusive right to teach certain subject matter in the universities.*2 Dealing, over half a century ago, with the "economic" interpretation of history, Benedetto Croce wrote:
When it is asserted, that in interpreting history we must look chiefly at the economic factors, we think at once of technical conditions, of the distribution of wealth, of classes and subclasses bound together by definite common interests, and so on. It is true these different representations cannot be reduced to a single concept, but no matter, there is no question of that; here we are in an entirely different sphere from that in which abstract questions are discussed.*3
Discussions concerning the scope of economics frequently involve these "different representations" that cannot be reduced to a single concept. Our own inquiry, on the other hand, concerns that entirely different sphere in which abstract questions are discussed. And in this sphere it does indeed matter whether or not the term "economic" is understood as being reducible to a single concept; whether, in other words, it is understood as connoting a distinct "point of view."*4
Our problem, then, relates not to the scope of the subject "economics," but to "economic theory." When we speak of the point of view of the economist, we shall have him specifically in mind, either as a theorist or as the applier of theory. For ordinary purposes, as Cannan remarked,*5 it may well be true that economic things can best be described as economic. The emergence of a voluminous literature attempting to define the economic point of view is not, however, to be dismissed as unfruitful pedantry; it is rather the expression of concern with the epistemological character of economic theory to an extent that goes far beyond that sufficient for ordinary purposes.*6
The point can perhaps be expressed somewhat more succinctly by the use of the terminology of the logician. Definitions in general lend themselves fundamentally to classification as either nominal definitions or real definitions.*7 The former relate to "names" and attempt to interpret given symbols, verbal or otherwise. Real definitions, on the other hand, try to define "things," to expose in some way the "essence" and "nature" of the thing defined. The formulations of the economic point of view that are of interest to us in this essay do not content themselves with providing a translation of the word "economic"; they seek to reveal to us the "nature" of the definiendum—which in this case is a concept, a "point of view." The fascinating variety of these formulations reflects, as we shall see, the numerous, quite distinct operations that logicians have discovered to have been actually performed when men have set out to seek real definitions.
Certainly the most outstanding result of the urge to expound the nature of the economic point of view has been the number and the range of the definitions to which it has given rise. This startling multiplicity and variety of formulations was noticed long ago—at a time when their number was modest in comparison with the subsequent accumulations. And for over three-quarters of a century the depressing lack of unanimity among these formulations has led writers to doubt seriously whether they have any value at all.*8
Economists have, for example, been well agreed among themselves that the operations of the merchant are of specific interest for the economic perspective on social phenomena; but at this point their unanimity abruptly breaks down. For some, the merchant is engaged in economic activity because he deals in material goods; for others, because his operations involve the use of money; for still others, because these operations hinge on acts of exchange. Some writers see the merchant as an economic agent be- cause his activities are allegedly motivated by selfishness or marked by a peculiar shrewdness in calculating the pros and cons of his dealings. Others see his relevance for economics in that his wares are to some extent related to the maintenance of human life; others, in that they pertain to human "welfare." Still others classify mercantile pursuits as economic because they involve the judicious disposition of scarce means, while others again find their economic character in their reflection of human motives that permit of measurement. And the list could be still further extended.
The disquietude to which the contemplation of such an array of criteria gives rise is deepened by the realization that in most cases each of them represents a completely different opinion concerning the function of economic analysis. Nor is our equanimity restored by observing the diversity of ways in which the problem of definition is approached. Probably the most significant differences are not those among the specific definitions arrived at, but the disagreements among writers concerning the kind of entity that they are seeking to define and the very direction in which they are to begin their search. Definitions of economic science have time and again required preliminary discussions revolving around the question whether the discipline concerned a kind of object, a kind of activity, a kind of man, or a kind of satisfaction or welfare.
The natural consequence of this state of affairs has been to stimulate frequent soul-searching among economists about the fundamental purpose of defining the economic point of view, as well as a salutary awareness of the real complexity of the problem. The fact that so many different starting points to a territory of knowledge are conceivable is a sign of the intricacy with which the purely economic must be intertwined with other phenomena. And it raises serious questions regarding the very concept of a specifically economic point of view and the usefulness of its precise formulation through rigorous definition.
As we shall discover, a number of sharply contradictory opinions have been expressed on the usefulness of undertaking the careful definition of the economic point of view or of the nature of the subject matter of economic theory. To those who have considered such a task as significant, its fulfilment represents in itself a distinct scientific achievement. On the other hand, many writers have been at pains to disassociate themselves from an undertaking whose accomplishment seems, in their opinion, to possess no scientific value in itself nor to promise any fruitful results for further work. This book will deal in some detail with many more or less careful attempts at such a definition; and it is only proper to pause to consider the question whether these attempts were potentially fruitful or were by their very character necessarily doomed to be wordy disquisitions, fertile in nothing but the stimulation of sterile controversies.
Among those considering any search for a precise definition of the economic point of view to be a barren enterprise, we find Pareto, Myrdal, and Hutchison.*9 Pareto denied that there is objectively an economic phenomenon and considered it therefore "a waste of time to investigate what it may be," since only a manmade distinction is in question. Myrdal, writing some thirty years later, voiced a closely similar view. A definition of economics can only be a search for arbitrarily drawn boundary lines. "Economics," in Myrdal's view, is the only term regarding the precise definition of which the economist need not be concerned; nothing in economic science depends upon it. Hutchison has flatly declared that "the actual assignment of a definition to the word 'Economics' does not appear to solve, or even help in the solution of, any useful scientific problem whatsoever." These pronouncements seem typical of what one writer has noticed as a widespread impression that the discussions concerning the nature and scope of economics "are merely an endless and useless logomachy."*10
But the contrary opinion has been repeatedly expounded. The very voluminous literature on defining economic theory, including the works of the most illustrious masters of the science, constitutes in itself a formidable monument to this position.*11 Robbins especially has several times vigorously denied that it is a waste of time to attempt a precise delimitation of the field. It is, on the contrary, a "waste of time not to do so."*12 The science has developed to the point where further progress can take place only if the objective is clearly indicated; where problems are suggested only by "gaps in the unity of theory." Knight has referred to the delimitation of the nature and content of value theory as "perhaps the ultimate conceptual problem in economics."*13 Macfie, among others, has pointed out the harm that can be done by a lack of a clear-cut definition; more especially he has stressed the distortion that a faulty definition could introduce into the character of the science.*14
For the appreciation of the historical trend to the investigation of which this essay is devoted, it is important to understand the nature of this sharp divergence of views concerning the usefulness of a precise definition of the economic point of view. It is possible to interpret the disagreement as merely the expression of different attitudes towards the utility of expending energy in discussing the nature of economics, as compared with that of the effort devoted to the actual increase of our stock of economic knowledge. Numerous justifications for merely perfunctory attempts to provide a definition of the economic point of view do, in fact, stress the great difficulty of the undertaking, in conjunction with its alleged lack of importance for the work of the economist.*15 The disagreement might thus be understood as simply reflecting differing estimates of the worthwhileness of the alternatives costs involved in achieving intellectual tidiness in the systematic exposition of the science. But such an interpretation would be a superficial one and would ignore the most significant aspect of the controversy.
The writers who have denied the fruitfulness of the precise delimitation of the scope of economic theory must be considered as constituting a group whose views, in effect, make up yet another "definition" of the economic point of view—one that altogether denies any such concept. The notion of a peculiarly economic point of view has been variously defined in terms of a large number of different criteria. The subsequent chapters of this essay set forth the more important of these formulations. Certainly it is of moment that there is place found for yet a further attitude towards the notion of a uniquely economic perspective—an attitude that completely fails to recognize any such unique point of view. The disagreement concerning the usefulness of defining economics is thus reducible to a far more interesting controversy: one that deals with what, in fact, is meant at all by defining economics; a controversy concerning the very existence of that economic point of view which we are asked to define.
The issue may be seen most clearly in the question with which one writer found himself faced before embarking on the search for a definition of the economic principle. He asked himself whether economics is "a pie which every economist can...make up with his own 'recipe,' or is it a given pie...which is basically made up of well-defined and hardly changeable ingredients? In other words, is economics what the economist is prepared to let it be, or does economics have a 'nature' of its own...?"*16 Once it is denied that economics has a "nature" of its own, once it is declared that no recipe for a uniquely economic pie, in fact, exists, then, of course, any lengthy search for such a recipe must seem a waste of time. And, similarly, the determination of the particular recipe that may, quite arbitrarily, have been used by some or many economists to make up their own pie then becomes a quite uninteresting undertaking.
If, however, it is maintained that economics has a nature of its own, then it may clearly seem of the highest interest to bring to light the precise character of this economic point of view. Moreover, once the existence of a given recipe has been discovered, and the conviction has been acquired that economics is not a pie to be made up at will, then definition becomes important for yet another reason. It becomes of the first moment to expose the specific character of economics, if only to convince the doubtful of the existence of this uniquely economic point of view that they are so much inclined to deny. The search for the precise nature of economic theory becomes of importance simply because it offers proof that economics has a "nature of its own."
Definitions, as we have seen, may be either real definitions or nominal definitions. Now, a nominal definition may be given to a term even though one is convinced that no real "thing" in the world in fact corresponds to what the term signifies. But one can embark on a search for a real definition only if it is recognized that the term to be defined actually represents a thing or a concept the essence or nature of which can be set forth. If it is denied that the subject of economic theory displays any essential unity that might be worthy of precise characterization in a definition, then it is clear that any definition of the discipline must remain merely nominal. And if it is believed that economists have been arbitrary in their selection of their problems, then there can be little value in the formulation of the nominal definition of economics.
On the other hand, the discovery in economics of an entity of which a real definition may be advanced promises an interesting range of investigation. It has been demonstrated that when men have attempted to obtain real definitions, they have in many cases proceeded to engage in a wide variety of operations.*17 In some cases a search for a real definition of X has meant the search for the key to X, for a single fact from which all the facts of X can be deduced. In other cases the search for real definitions has meant the search for "abstractions," i.e., the "becoming aware for the first time of a new general element in one's experience and giving it a name." In still other cases real definition has concealed the attempt to analyze an abstraction. (A school child in learning that the circle is the locus of all points in a plane equidistant from a given point has learned the analysis of a previously known abstraction, the circle.)
It is not difficult to understand that when writers concerning the scope of economic theory believe themselves to have discovered the "key" with which to explain all departments of economic life, they may feel pardonably complacent about the usefulness of the "definition" in which their discovery is crystallized. It is still more understandable that economists should stress the usefulness of definition when their own formulation of the nature of economics reveals to the world their awareness of a new general element in their experience. Croce provides perhaps the best example of this situation. He was aware of a new general element in his experience of human affairs. This element was not moral, it was not technical, nor did it coincide with any other already-named abstractions. In his formulations, Croce made a vigorous attempt to present this abstraction to the attention of the world by ascribing to it the word "economic."
When definition entails, in addition, the task of analyzing this newly presented abstraction, that operation becomes more than ever meritorious. If in the effort to provide an adequate definition of economics, an attempt is made to analyze the concept of economy, for example, one necessarily becomes involved in a problem of economic science itself. It was here that Croce could most effectively criticize Pareto's view that the cutting off of that slice of phenomena which is to constitute the field of economics is a quite simple and arbitrary affair.
You talk of cutting away a slice from a concrete phenomenon, and examining this by itself, but I enquire how you manage to cut away that slice? For it is no question here of a piece of bread or cheese into which we can actually put the knife, but a series of representations which we have in our consciousness, and into which we can insert nothing except the light of our mental analysis. In order to cut off your slice you would thus have to carry out a logical analysis...*18
When the nature of economics is defined in this way, by the analysis of a unique general element in our consciousness to which only the term "economy" corresponds, then it must seem very obvious indeed that faulty definitions can seriously distort the character of the science. And when the analysis of this element has been made possible only by virtue of familiarity with the substantive content of the science itself, then its formulation into a definition can clearly take on the character of a positive scientific contribution. It is in this sense that Hayek, in a somewhat different context, was able to write:
It is one of the causes of the unique position of economics that the existence of a definite object of its investigation can be realized only after a prolonged study, and it is, therefore, not surprising that people who have never really studied economic theory will necessarily be doubtful of the legitimacy of its existence...*19
From this perspective it will be useful to survey rapidly in the next few pages the historical trend in the attention that economists have paid to the definition of their subject. This will make clear what they have, at various times, looked for in such a definition. Our survey will thus provide a useful introduction to the more detailed discussions in the subsequent body of the essay.
Modern investigations into classical economic thought are gradually providing us with a more coherent picture of the intellectual scenery in early nineteenth-century political economy. Among the more important contributions in this direction is the final interment of the idea that there was ever a happy unanimity of opinion, a generally accepted body of theory in the propagation of which the classical economists were a united band of enthusiastic missionaries. Similarly the notion, once widespread, that the classical economists were as a body unconcerned with the methodological foundations of their work is rapidly disappearing from discussions of the subject.*20
It seems worthwhile to dispel the rather common impression that the classical economists were generally unconcerned with attaining and enunciating a precise definition of the subject of their inquries.*21 This is by no means the case. It is true that J. S. Mill, writing in 1836,*22 felt obliged to apologize for the lack of a definition of political economy "framed on strictly logical principles," by explaining that the definition of any science "has almost invariably not preceded, but followed, the creation of the science itself." But many economists had already felt the need to delineate the boundaries of their inquiries. And while it is true that the classical economists were generally in broad agreement concerning what it was that they were talking about, they were by no means agreed about how to demarcate this area of their in- vestigations or even how to conceive the unity and logical nature of their field.
The early economists, in fact, when offering definitions of their science, were often far more earnestly concerned with expressing its true essence and nature than were many of their successors. Although the latter, as Mill asserted, may have been better equipped for this task, they had far less occasion to engage in it. For the thinkers of the late eighteenth and early nineteenth centuries, there was a real need for a mode of definition that could justify the conception of a new and separate science. While their definitions might only imperfectly indicate the actual character of their inquiries, they still had to demonstrate the peculiarity in subject matter or method of investigation that prevented economics from being subsumed under some wider, extant discipline.
Classical writers could express themselves about the nature of the economic in two distinct ways. They could define the subject known as political economy. Or, having defined political economy as the science of wealth, they could proceed to set forth the nature of that wealth with which it was maintained that economics is concerned. Each of these approaches was freely used both before and after Mill's own elaborate attempt to define political economy.
Yet it is true that after 1830 a trend toward more sophistication in definition is undeniably visible. Methodological self-examination became a fairly fashionable undertaking. It was in this period that many of the assumptions hitherto implicitly accepted by economists were first brought to light, and most of the important issues that were to be the subject of methodological controversy over the succeeding century were first given explicit statement. As far as the question of the scope of economics was concerned, discussions treated it as a problem in its own right rather than as one merely introductory to a more important topic. Senior, J. S. Mill, and later Cairnes all devoted careful attention to definition, and so also did many lesser-known economists. At a meeting of the Political Economy Club of London in 1835 the question of the scope of the discipline was put up for discussion. (In 1861 Senior proposed a similar question for debate at the club.)*23
Moreover this period reflected a significant advance in the actual approach taken to the task of setting forth the nature of the economic. As will be seen in the subsequent chapters of this essay, writers after 1830 began to rebel against the more extremely objective view of it as the science of wealth that the earlier classical economists had generally held. To several writers after 1830 it was becoming increasingly evident that what they were investigating was not so much a set of objective phenomena whose common denominator was wealth as the phenomena resulting from the wealth-oriented actions of men. What the fundamental characteristic of such actions was, and what the precise balance to be maintained in political economy between the facts of human nature and those of the external world should be, were the subjects of lively discussion. But the first step had been taken along the road toward emancipating economics from its ties to wealth and material welfare.*24
After 1870, attempts to define the nature of the economic were definitely colored by the intellectual background of the period. In Germany, Austria, and England economists were paying a good deal of attention indeed to the necessity for reconstructing economics "from the ground up." This necessity was proclaimed by both groups that were in reaction against the hitherto dominant classical economics. Those following Roscher, Hildebrand, and Knies in their revolt against the abstract reasoning of Ricardian-type economics, as well as those who with Menger and Jevons were dissatisfied with the objectivism of the classical economists—all were imbued with the desire to make over the entire discipline. Inevitably this desire was accompanied by a flourishing self-consciousness on the part of economists in regard to the status of their discipline as a science, its relation to kindred branches of learning, and, in general, its objectives and the kind of knowledge it might be expected to furnish. Together with their researches into economic problems proper, the leaders of both new schools of economic thought felt called upon to still both their own misgivings and those of the public at large concerning the nature and significance of a subject whose methods of approach, after a century of study, its own students were branding as unsound.
It is true, of course, that these discussions came to hinge on the narrower problem of method rather than on that of scope. Even definitions of economics were required, during this period, to embrace statements concerning the purpose and the method of the discipline as well as the character of its subject matter.*25 But the methodological points that were at issue in the Methodenstreit did have a direct bearing on the conceptions that were formed of the character of economic phenomena. At the risk of some excusable simplification, the controversy over method could, indeed, be described quite clearly in terms of the different conceptions of the phenomena purportedly investigated by economics. According to the Historical School, economics seeks to describe the phenomena of the real, empirical economic world as it unfolds in its setting of time and space. According to the "theoretical," "abstract" school of thought, on the other hand, the task of economics is not—or, rather, cannot be—to explain "individual" (or particular) economic phenomena, but only to discover the regularities, the "general" chains of cause and effect, that underlie the innumerably various forms that present themselves in economic history.*26
Although this statement of the disagreement does not, of course, point to any simple parallel disagreement concerning the nature of the economic, it does throw light on the background against which discussions about the character of economic phenomena were carried on in the last quarter of the nineteenth century. During this period we find, especially in the German literature, a concern with the correct characterization of economic phenomena that went far beyond previous investigations. It may safely be said that almost all the numerous criteria that have, during the history of economics, been used to define the economic aspect of affairs were in some way mentioned already in the formidable German literature of these decades. Even some definitions that were clearly discussed only in the twentieth century were at least vaguely envisaged during these years. Dietzel and Neumann in particular demonstrated considerable insight in their work in this area. Under the influence of Menger and his followers, writers of this period devoted careful attention to the scarcity criterion and to the operation of the "economic principle." On the other hand, economists of the Historical School tended to stress the social character of economic phenomena. Both groups still clung to the idea that wealth stands at the core of economic affairs, but frequently the retention of conventional phraseology merely concealed a far more advanced and sensitive grasp of the real nature of economic phenomena.
In England at this time, despite its own form of the Methodenstreit, far less advance was to be seen in formulations of the scope of the discipline. Jevons had kept his economics closely tied to hedonism, and he was followed in this by Edgeworth. Marshall devoted part of his inaugural Cambridge lecture in 1885 to the problem, with interesting results. Several of the methodological rebels were intent on denying economics a separate status apart from sociology. There was even a proposal put forward in the British Association for the Advancement of Science during the late seventies to abolish the very existence of a separate economic section of the association. J. N. Keynes contributed to the judicious resolution of the methodological issues, but did little to advance the conception of the character of the economic point of view. It was not until the appearance of Wicksteed's brilliant work in this field in 1910 that we find a contribution comparable in exhaustiveness and refinement to several of the German discussions.
Meanwhile in other countries economists were giving the problem careful attention. In the United States literature a number of useful pronouncements are to be found concerning the importance of a correct definition, as well as several highly refined and well-reasoned substantive formulations.*27 In France*28 and Italy too, parallel advances are to be found in the literature. In 1883 Supino published the first book devoted to an account of the existing definitions of economics.*29 Pantaleoni, Pareto, and Croce devoted considerable space to the question of definition, and the famous correspondence at the turn of the century between the two last-named writers contains considerable material that is of particular value for any history of this question.
Fraser has classified definitions of economics into Type A definitions and Type B definitions.*30 Type A definitions consider economics as investigating a particular department of affairs, while Type B definitions see it as concerned with a particular aspect of affairs in general. The specific department singled out by Type A definitions has usually been wealth or material welfare. The aspect referred to in Type B definitions is the constraint that social phenomena uniformly reveal in the necessity to reconcile numerous conflicting ends under the shadow of an inescapable scarcity of means.
During the twentieth century two distinct trends are visible in the definitions of the economic point of view. On the one hand, a transition from Type A to Type B definitions has been vigorously carried forward. On the other hand, there has been a pronounced movement toward the denial of any distinctly economic point of view whatsoever, and the consequent conviction that all attempts to present such a point of view with clarity must be a waste of time.
It will be seen in subsequent chapters that the classification of definitions of the economic point of view into Types A and B is far from an exhaustive one. The voluminous literature since the turn of the century dealing with the problem of definition reveals, indeed, the entire range of formulations that are discussed in this essay. Nevertheless, it remains true that the most outstanding development in the history of the problem is the switch from the search for a department of human affairs to which the adjective "economic" applies, to the search for the appropriate aspect of affairs in which economic concepts are of relevance. (It should be noticed that almost all the numerous formulations of the specific point of view of economic science are considered by their authors, not as describing a new science, but as offering a more consistent characterization of the existing discipline.)*31 The emergence of the Type B definitions is reflected in a considerable body of literature on the continent as well as in the English-speaking countries. Type A definitions are treated in the second chapter of this essay, and the transition to Type B definitions is traced in the sixth chapter. Type B definitions are associated especially with the name of Professor Robbins, whose work of 1930 has had an outstandingly stimulating effect on all subsequent discussions.
The final chapter of this essay traces the further development, in recent decades, of this trend away from the association of economics with specific "ends" or a specific department of human affairs. In this development the work of Robbins has been consistently pursued to what appears to the writer to be the most adequate solution of the problem. The developments described in this final chapter are made up of the contributions of several eminent economists, including Mises and Knight. These writers in no way constitute a "school," and although in this essay the developments of the final chapter are described as "praxeological" (following Mises' terminology), it is not to be understood that all the writers cited in that chapter fully subscribe to what is here called the praxeological outlook. It is maintained, however, that the consistent and refined development of the ideas first brought to a focus in the Type B definition constitutes a distinct contribution to the history of the problem. The path-breaking work of Mises in this regard has a significance that, in the writer's opinion, has not been sufficiently recognized because it has not yet been brought into historical perspective.
The movement from Type A definitions toward Type B definitions and finally to the praxeological position runs, of course, in a direction diametrically opposed to that taken by writers who disparage painstaking definitions of economics altogether. What is common to all these writers is, as was noticed earlier in this chapter, that they deny the existence of any given "pie" that could constitute economics. There is no specifically economic point of view, and economic science does not investigate any uniquely separate group of phenomena, or phenomena in general from any uniquely economic aspect. The consistent development of the Type B definition and of praxeological ideas represents the completest denial of this view. Both these conceptions of economics have been able to focus attention, with a clarity never hitherto attained, on an element in our experience that corresponds to nothing else in our consciousness. This element in our experience conforms precisely to the foundation that is discovered to be rigorously necessary and sufficient for the construction of economic theory as it has developed during the past two centuries.
Notes for this chapter
Memorials of Alfred Marshall, ed. A. C. Pigou (London: Macmillan & Co., 1925), p. 499.
R. Robinson, Definition (Oxford, 1950), p. 15.
B. Croce, Historical Materialism and the Economics of Karl Marx (English ed.; London: Macmillan & Co., 1915), p. 29.
These considerations will account for the absence of references in this essay to the achievements in recent years in mathematical programming, input-output analysis, and game theory. Rivett has suggested, in "The Definition of Economics," Economic Record, November, 1955, pp. 229-230, that progress in linear programming might one day require review of the borderlines of economics. Apart from its special relevance to Rivett's own definition of economics, this suggestion can refer only to the scope of the subject, not at all to the delineation of the economic point of view. On this point see especially W. J. Baumol, "Activity Analysis in One Lesson," American Economic Review, December, 1958, p. 837.
E. Cannan, Wealth (3rd ed.; London, 1945), p. 4.
For examples of the specific restriction of definitions of economics to "economic theory," or even more narrowly to "price theory," see J. A. Schumpeter, History of Economic Analysis (New York, 1954), pp. 535-536; F. H. Knight, "The Nature of Economic Science in Some Recent Discussion," American Economic Review, Vol. XXIV, No. 2 (June, 1934), p. 226.
On the distinction between real and nominal definitions, see, e.g., J. S. Mill, A System of Logic (10th ed.; London, 1879), I, 162 f.; L. S. Stebbing, A Modern Introduction to Logic (6th ed.; London, 1948), p. 426; C. K. Ogden and I. A. Richards, The Meaning of Meaning (3rd ed. revised; London, 1930), p. 109 n.
For examples of writers who saw in the multiplicity of definitions a proof of their fundamental weakness, see L. Walras, Eléments d'économie politique pure, ou Théorie de la richesse sociale (Lausanne, 1874), p. 3; A. P. Usher, "The Content of the Value Concept," Quarterly Journal of Economics, August, 1917, p. 712; F. Kaufmann, "On the Subject Matter and Method of Economic Science," Economica, November, 1933, pp. 381-382.
For Pareto's views on the usefulness of defining economic affairs, see the translation of his paper "On the Economic Phenomenon" (first published in Giornale degli economisti, 1900, II, 139-162) in International Economic Papers, No. 3, p. 194. See also V. Pareto, "L'économie et la sociologie au point de vue scientifique," Rivista di scienza, 1907, p. 294. Myrdal's views are expressed in his The Political Element in the Development of Economic Theory (Harvard, 1954), pp. 154-155; for those of Hutchison see his The Significance and Basic Postulates of Economic Theory (London: Macmillan & Co., 1938), p. 53.
G. Tagliacozzo, "Croce and the Nature of Economic Science," Quarterly Journal of Economics, Vol. LIX, No. 3 (May, 1945), p. 308.
For examples of earlier views recognizing the importance of an adequate definition of economic affairs, see E. de Laveleye, "Les lois naturelles et l'objet de l'économie politique," Journal des économistes, April, 1883, p. 92; S. Patten, "The Scope of Political Economy," The Yale Review, November, 1893, reprinted in S. Patten, Essays in Economic Theory (New York, 1924), p. 178.
L. Robbins, An Essay on the Nature and Significance of Economic Science (2nd ed.; London: Macmillan & Co., 1935), p. 3. Robbins put forward the same view, as well as the suggestion for a history of the stream of thought leading up to modern definitions, in his Introduction to Wicksteed's The Common Sense of Political Economy (London, 1933), I, xxii. See also L. Robbins, "Live and Dead Issues in the Methodology of Economics," Economica, August, 1938, p. 344, for an acknowledgment of the minor importance of the precise wording in the expression of the (correct) definition.
F. H. Knight, review of L. Mises, Nationalökonomie, in Economica, 1941, p. 410 n.
A. L. Macfie, An Essay on Economy and Value (London, 1936), pp. 2-3.
For examples of economists convinced of the insuperable difficulty of achieving a determinate definition of economic affairs, see P. T. Homan, "Issues in Economic Theory, an Attempt to Clarify," Quarterly Journal of Economics, May, 1928, pp. 349, 364; F. St. Leger Daly, "The Scope and Method of Economics," The Canadian Journal of Economics and Political Science, May, 1945, p. 169.
G. Tagliacozzo, "Croce and the Nature of Economic Science," Quarterly Journal of Economics, May, 1945, p. 307.
See, e.g., R. Robinson, Definition, pp. 162-172.
B. Croce, "On the Economic Principle II," translated in International Economic Papers, No. 3, 1953, pp. 197-198, from Giornale degli economisti, I (1901). See also International Economic Papers, No. 3, p. 203, for an interpretation by Pareto of the differences between Croce and himself in terms of the philosophical clash between the medieval nominalists and realists.
F. A. Hayek, "The Trend of Economic Thinking," Economica, May, 1933, p. 131.
On these points see, e.g., L. Robbins, The Theory of Economic Policy in English Classical Political Economy (London, 1952), p. 3; M. Bowley, Nassau Senior and Classical Political Economy (London, 1937), pp. 27 f.
See, e.g., A. Amonn, Objekt und Grundbegriffe der theoretische Nationalökonomie (2nd ed.), pp. 23 f.
J. S. Mill, "On the Definition of Political Economy: and on the Method of Investigation Proper to It," (in Essays on Some Unsettled Questions of Political Economy) London reprint, pp. 120 f.
See the Centenary Volume of the Political Economy Club, London, 1921, p. 44.
It was in this period too that one of the earliest denials of a specifically economic side of affairs was put forward by Comte. Any such separation was "irrational" and evidenced the "metaphysical" character of economics. For an account of Comte's criticism of economics and of J. S. Mill's reaction to it, see Ashley's Introduction to his 1909 edition of Mill's Principles, pp. xi f. See also R. Mauduit, A. Comte et la science économique (Paris, 1929); F. A. Hayek, The Counter-Revolution of Science (Glencoe, 1952), pp. 181-182. An early discussion of Comte's views on economics is J. E. Cairnes' "M. Comte and Political Economy," in Essays in Political Economy (London, 1873).
Knies required of a definition of economics that it comprise a) "das Gebiet der Untersuchungen," b) its "Aufgabe," and c) its "Methode." (K. Knies, Die politische Oekonomie vom geschichtliche Standpuncte [Braunschweig, 1883], p. 157.) Menger required a similar scope for a definition. (C. Menger, Untersuchungen über die Methode der Sozialwissenschaften und der politischen Oekonomie insbesondere [Leipzig, 1883], p. 238.)
The distinction between the "individual" (or concrete) and the "general" (or abstract) in economic phenomena was made famous by Menger in his Untersuchungen, pp. 3 f.
Prominent United States writers who applied themselves to the careful definition of the economic point of view during this period include in their ranks Ely, Patten, Davenport; Taussig, Hadley, Giddings, Hadley, and Ward.
Among French writers of the period who concentrated most directly on definition may be mentioned: R. Worms (La science et l'art en économie politique, Paris, 1896); E. Levasseur (De la methode dans les sciences économiques, Paris, 1898); A. Jourdan (Des rapports entre le droit et l'économie politique, Paris, 1884); G. Schmidt ("Rapports de l'économie politique avec la morale et le droit," Revue d'économie politique, 1900); G. Tarde (Psychologie économique, Paris, 1902).
Cammillo Supino, La definizione dell'economia politica (Milan, 1883).
L. M. Fraser, Economic Thought and Language (2nd printing, 1947), ch. 2.
The following references support the conclusion that writers who have sought to define the scope of economics have done so with regard to the discipline as it has actually developed, not to any projected subject: A. Marshall, The Present Position of Economics (London, 1885); L. Robbins, Nature and Significance of Economic Science (2nd ed.; London, 1935), p. 22; R. T. Bye, "The Scope and Definition of Economics," Journal of Political Economy, October, 1939; A. Amonn, Objekt und Grundbegriffe der theoretischen Nationalökonomie (1911), p. 12.
End of Notes
Return to top