The Economic Point of View: An Essay in the History of Economic Thought
By Israel Kirzner
The present essay is an attempt to explore with some thoroughness an extremely narrow area within the field of the history of economic thought. Although this area is narrow, it merits a scrutiny quite out of proportion to its extension, relating as it does to fundamental ideas around which the entire corpus of economic thought has revolved for some two centuries. It remains as true today as ever before that the direction taken by economic theory is in large measure determined by the “point of view” adopted by the economist as his special perspective. It is in this connection that the present study seeks to make its contribution, by setting up the problem in its proper context as a chapter in the history of ideas…. [From the Preface]
Laurence S. Moss, ed.
First Pub. Date
Kansas City: Sheed and Ward, Inc.
2nd edition. Foreword by Ludwig von Mises.
The text of this edition is copyright ©1960, The Institute for Humane Studies. Introduction to the second edition is copyright ©1976, The Institute for Humane Studies. Reprinted by permission of the Institute for Humane Studies.
This fatal word “material” is probably more responsible for the ignorant slanders on the “dismal science” than any other economic description…Alec L. Macfie
Political Economy is a science in the same sense in which Astronomy, Dynamics, Chemistry, Physiology are sciences. Its subject-matter is different; it deals with the phenomena of wealth, while they deal with the phenomena of the physical universe.J. E. Cairnes
…In becoming consciously a science of human behavior economics will lay less stress upon wealth and more stress upon welfare.Wesley C. Mitchell
It is almost as difficult to define the boundaries of welfare economics as it is to define economics itself.Kenneth E. Boulding
We take up first of all the class of writers for whom the specifically economic point of view is in some way necessarily associated with wealth or with welfare. It seems fair to consider this view before examining the many other opinions extant in the literature, simply because its supporters (those espousing what Fraser calls the Type A viewpoint)
*32 were for a long time
the ones most frequently to be found in discussions on the subject. And it is a matter of no little significance that it was one form of this view, viz., the description of the economic side of affairs exclusively in terms of
wealth, that the earliest classical economists almost invariably adopted. In the course of our discussion it will become apparent that a number of quite different conceptions of economic phenomena at various times found expression in the definitions that simply spoke of wealth or welfare as being the central focus of economic interest. Yet despite the variety of these conceptions they all admit of being broadly grouped together. Those writers who speak of the production of wealth and the distribution of wealth or of some special type of human welfare as being the peculiar interest of the economist share a common outlook on the subject. No matter how widely their opinions on the nature of wealth or welfare may diverge, what is common to all these writers is that they see the distinctive peculiarity of economic phenomena in the class of
objects around which they especially revolve or in the specific human
condition that they are thought especially to affect. The criterion used by the student of economic phenomena to mark out the scope of his subject is the fact that it is concerned with a special class of
objects or a special type of human
condition. The botanist studies the phenomena of plant life, the astronomer studies celestial phenomena, the philologist studies a specific “object,” viz., languages—and the economist quite analogously occupies himself with the study of wealth or welfare. The conditions governing the production of wealth or the enhancement of economic welfare, the effects of given events on the exchange and the distribution of wealth—all these are “economic” phenomena because they have to do with wealth or welfare.
We shall see that many writers of this opinion still further narrowed down the concept of wealth to the idea of
material wealth, and many of those stressing
welfare qualified the term by singling out the
material welfare of mankind. These developments meant that more than ever economics has to do with a particular
class of objects as its special province of study. And we shall be concerned in this chapter to explain the emergence of this general
outlook on the nature of economics simultaneously with the emergence of the science of economics itself. We shall also be concerned to trace the various forms that this general outlook has taken in response to developments within the science of economics and to discover some of the implications of this outlook.
The writers on economics at the time of the emergence of the subject as a serious discipline in its own right, where they made any attempt at all to outline the scope of their inquiries, did so quite as a matter of course by reference to “wealth” as its subject matter. By the latter half of the eighteenth century, thinkers in England, France, and Italy were coming to recognize that the subject of the mass of writings and speculations dealing with commerce, industry, foreign trade, money, interest, taxation, and the like constitutes a distinct theme of inquiry. Hitherto these speculations (such as those of the mercantilist writers and of those whom Schumpeter has called the consultant administrators and pamphleteers) had been isolated inquiries seeking to explain specific phenomena of the real world. Where inquiries on these and kindred subjects had been incorporated into more general systems, they appeared as unmistakably subsidiary material introduced to round out treatises whose subjects were juristic, political, or moral.
With the recognition of the fundamental unity of the principles underlying these scattered inquiries and of their analytical independence of juristic, political, and moral systems, economics, or political economy, emerged as a distinct discipline. Works appeared attempting to deal with economic phenomena
in general, and these works typically identified their subject matter as being “wealth.”
It is worthy of notice that the existence in “wealth” of a subject matter ripe for independent investigation seems to have been assumed with little discussion. The conception of wealth as being a distinct phenomenon with its own peculiar scholarly interest
not a creation of the classical economists.
*33 Adam Smith, who defines political economy as treating of the “nature and causes of the wealth of nations,”
*34 freely applies the term to denote the area of concern of mercantile policy-makers of a century earlier.
*35 What converted scattered scraps of knowledge on the subject of “wealth” into an integrated system of ideas was simply the discovery of the regularity of the phenomena of wealth as determined in the market. Newly discovered, seemingly inexorable “laws” governing the wealth of nations turned this “wealth,” already the center of many isolated investigations, into the subject matter of a new science.
That this new science was considered, not as explaining the operation of a specific type of social organization or the results of a certain kind of human behavior or any of the various other matters that economists have at times believed it to be their principal concern to explain, but as primarily explaining the phenomena of wealth, is a circumstance that deserves some closer attention. It seems appropriate to glance briefly at the background against which economic thought developed, in order to throw some light on this interesting circumstance before we trace the later history of this idea on economic affairs.
In later chapters there will come under discussion a number of possibly more sophisticated conceptions of that economic point of view from which the economist scrutinizes the world. In the course of these discussions, the failure of the classical economists to perceive the unity of their subject to be implied in such conceptions will be more fully understood as stemming at least in part from their freedom from those influences that were operative in the emergence of the later views. At this point four positive elements in the background of early economic thought and its surrounding
Zeitgeist may be distinguished as possible catalysts in the precipitation of wealth as the recognized subject matter of a distinct discipline.
1) Later methodologists were to devote considerable effort to the problem whether to treat political economy as a positive
science or as an
art, whether to cast its teachings in the indicative
or the imperative moods. There can be little doubt that the founders of economics felt themselves to be expounding an art. According to Adam Smith, political economy “proposes to enrich both the people and the sovereign.”
*36 A recent writer has characterized the classical economists as a school of economic and social reform.
*37 The roots of this attitude toward their teachings are not hard to find. Economics, as we have seen, developed, in part at least, from the work of mercantilist writers, the “consultant administrators and pamphleteers.” This class of writers was quite simply interested in practical results. Any scientific work that came from their hands must quite naturally be considered the by-product, rather than the attained goal, of their endeavors. The growing application, in the eighteenth century, of sober and sound analysis to the questions that these earlier writers had discussed did not involve any change in this attitude. Hence, the conception that Smith, the economist, had of his subject was not much removed from that of Steuart, the mercantilist, to whom “oeconomy…is the art of providing for all the wants…” and to whom the “principal object” of his inquiry was “to secure a certain fund of subsistence for all the inhabitants.”
It is not difficult to see that this attitude toward the utility of economic inquiries necessarily carried with it the elevation of wealth into an object of scientific study. An investigation that sets out to find the means of enriching the people and the sovereign, if it discovers laws governing the attainment of this objective, may not unnaturally presume to have discovered the laws of wealth. If we grant the assumption that the goal of economics is to make the nation wealthy, a goal to which a fairly well-understood meaning was attached, then it follows that economists must be considered, both by themselves and by the public, as expounding the principles of wealth—understood in the same sense—and its acquisition by the nation. How a nation wrests wealth from niggardly nature, how this wealth is distributed and exchanged within the nation—all these inquiries focus the attention on that which now becomes an
object of scientific scrutiny. The general objectivism of the classical school in its substantive economic doc-
trines here finds its counterpart in that school’s very conception of its task: an economist investigates the phenomena of a special class of objects that together comprise wealth.
2) Another force in the eighteenth-century environment that must have helped to set up wealth as the subject matter of a separate discipline seems to have been the intellectual interest in private property. Despite the variety of meanings that we shall find to have been attached to the term “wealth” by classical economists, almost all these meanings find some common ground with a definition of wealth as consisting in the objects of ownership. Throughout the seventeenth and eighteenth centuries a peculiar attraction seems to have resided in inquiries into the legal and moral bases of the institution of private property. Grotius had discussed the matter from a juristic standpoint. With Hobbes the inquiry into the nature and origins of private property became merged with his theories on the origins of the organization of society under the sovereignty of the state. Locke saw the origin of and justification for private property in natural law. These speculations and theories affected much of the thought of the leading writers throughout the eighteenth century. Discussions of civil justice must turn on the acceptance and justification of property rights; discussions of the legitimacy of slavery must involve the question of the admissible extent of property rights; the movements in France and America towards democracy were generally accompanied by specific attention to private property. For many years democracy was to mean democracy for the property owners. Godwin’s call for the abolition of private property once again drew attention to the foundation of the entire institution.
Myrdal has attempted to show that it was the heritage of the ideas of the natural-law philosophers regarding property rights that accounts for the classical, and especially the Ricardian, theories of value.
*40 For the purposes of the present study the relevance of this observation seems sufficiently obvious. The isolation from the other ends of human action of that end represented by property on the one hand reflected, and on the other hand itself
strengthened, the artificial line drawn between the study of the phenomena connected with property and the study of human action in general. The focusing of the attention of jurists, philosophers, and moralists on the institution of property cannot but have helped in keeping wealth in a compartment all its own. Moreover, the fundamental defect of classical economics, its lack of appreciation of the subjective nature of its phenomena, may perhaps be partly due to the fact that serious thought had for a long time been devoted to property and wealth in inquiries to which, indeed, this subjective element bore little direct relevance.
3) Yet another element in the environment of early scientific economics must be briefly alluded to in connection with the emergence of wealth as an object of intellectual interest. This is the approach of the moral philosophers of the period to the problems of the relation of the individual to society, and especially of the egoistic and altruistic motives. The birth of political economy may be regarded as a reflection of the confluence at this time of two streams of thought, ethics and politics. Ethics discussed the meaning of good and bad, the source of the sense of moral obligation. Politics explored the origins of society, the most desirable form of its organization, and the rights of the individual in relation to the state. In a society whose economy was becoming more and more dependent on the division of labor, it was natural for the ethics of the individual to become increasingly involved with his relation to society as a whole. The discovery of market regularities, predicated on individual avarice, in the phenomena of the wealth of nations meant in itself a unified application of ethical and political doctrines.
The controversy stirred up during the eighteenth century by Mandeville’s
Fable of the Bees was typical of the problem to which the thinkers of the time sought the solution. Mandeville’s provocative conclusion was “that what we call evil in this world,…is the grand principle that makes us sociable creatures, the solid basis, the life and support of all trades and employments…”
*42 His critics, including both Hume and Smith, used all manners of approach to dispute his conclusions. Closely allied to
this problem was that recognized by Mandeville’s paradox, the venerable feud in human nature between the forces of self-interest and the forces of altruism. Whether or not the urge in a human being to benefit others than himself is a real one or merely the illusory reflection of a selfish desire to relieve one’s own pain incurred by another’s misery was a question well to the fore during this period. Hobbes had been the first of modern philosophers to expound his theory of egoism. Eighteenth-century philosophers, including Butler, Hume, and Smith generally rejected Hobbes’ egoism and postulated a real distinction between selfishness and altruism.
This reaction against extreme egoism and especially against the effect on the nation’s welfare ascribed to egoism seems to be at least partly responsible for the division of the field of human action into two independent classes, the one class of acts being induced by purely egoistic motives, the other class being constituted of acts in which the motivating forces are the altruistic and “higher” impulses. And it is not difficult to see how the acts induced by selfishness could be easily confused with acts aimed at fulfilling material desires. Careful thinking had demonstrated the existence of regularities in the phenomena of wealth. The identification of the study of these regularities with the study of material or other wealth thus obviously provided the new science with an appropriate and distinct niche within the structure of knowledge as conceived by the eighteenth-century thinkers.
4) One final strand in the web of eighteenth-century thought onto which a science of wealth was to be woven must be noticed. This is the position occupied by the natural sciences, and their relation to and influence upon the social sciences. In general the eighteenth-century view has been characterized as “anthropological and subjectivist,” in contrast to the “cosmological and objectivist view which the nineteenth century had of the world.”
*43 Nevertheless, the position of the nineteenth century had its roots in ideas that go back well into the eighteenth century and earlier.
The tremendous advances in the natural sciences, especially mathematics and astronomy, associated with such names as New-
ton, Clairault, Euler, and d’Alembert, were radically transforming the intellectual atmosphere in which the eighteenth-century philosophers thought and taught. The reaction against airy metaphysical speculation set in motion by Hume and the other British empiricists, and the quasi-positivist philosophy of the French Encyclopedists, with its anathematization of all forms of anthropomorphism and animism, were all part of the environment in which economic science emerged.
It is not to be wondered at, then, that the enthusiasm engendered by the signal successes of the objective and impersonal methods of the physical sciences should have left its mark on the earliest researches of the classical economists. It has been well remarked that some of the founders of abstract economic theory in the eighteenth century were at the same time the founders of the positivism that was later to be deployed against that abstract economics.
Differences of opinion may legitimately exist concerning the weight to be assigned to utterances by the moral philosophers that seem to illustrate the all-pervasive Newtonian influence.
*45 But these references are persistent. Hutcheson and Hume, Helvetius and Beccaria expressed the desire to treat the data of ethics analogously to the data of experimental physics, or they made analogies between the force of self-interest and the force of gravity.
*46 The simplification in the conception of the cosmos to which the physical sciences owed their characteristic fascination—i.e., the reduction of seemingly heterogeneous phenomena to a system governed by a few fundamental laws—seems to have perceptibly colored the thinking of the founders of economics. The extent of the gap between the conception of a science embracing the totality of action, on the one hand, and the conception of a science of wealth, on the other, owes something, it would appear, to the ease with which the latter could be incorporated into a structure of universal knowledge in which the physical sciences occupied so conspicuous a position. According to the English individualists, social phenomena spring, not from the interaction of individual subjective preference systems, but from the inter-
action of individuals under an impersonal pervasive force of self-interest in relation to objective, material wealth.
Our account of the history of the point of view that sees economic affairs as essentially concerned with a special class of objects, i.e., with wealth, finds a convenient point of departure in an early and long-lived form of this idea, which confined economics to the consideration of
From the beginning alternative suggestions were made by the economists themselves about what should and what should not be included under the heading of wealth even when the latter was universally regarded as the subject matter of economics. Indeed, many writers, in their definition of political economy, expressly included in its scope the exposition of “the nature” of wealth. Smith, Lauderdale, Malthus, and Senior all felt the elucidation of this question to be part of their task. As has been the lot of other problems taken up by economists, this question was treated in a variety of ways. As early as 1810 the French economist Ganilh cited eight distinct definitions of “wealth” by economists; Senior, writing on terms “peculiarly liable to be used ambiguously” in economics, somewhat despairingly quotes seven different definitions, besides his own contribution.
Of these controversies over the meaning of the term “wealth” probably the best known was that concerning its restriction exclusively to material goods. It must be remembered that the issue was not between a “materialistic” economics and one that embraced the catallactic consequences of man’s “higher” interests and desires. The fact is that the classical economists were little concerned about why an item of wealth was desired. To invest an object with the quality of wealth (apart from other specific conditions, such as scarcity, that may have been required), it sufficed that it was desired. The issue between definitions of “wealth” formulated in material terms and those that extended the concept to include the immaterial was purely one of convenience in
analysis. Both sides of the controversy had the same objectivistic outlook on wealth; neither side laid stress on the character of economic
behavior. Malthus clearly states his reason for recognizing only material goods as wealth:
If we wish to attain anything like precision in our inquiries, when we treat of wealth, we must narrow the field of inquiry, and draw some line, which will leave us only those objects, the increase or decrease of which is capable of being estimated with more accuracy.
The discussion concerning material vs. immaterial wealth began with Adam Smith’s distinction between productive and unproductive labor. While not as limiting as the physiocrats’ concept of the “sterile” classes, Smith’s dichotomy put material wealth, the production of which was his criterion of productive labor, on a different level from immaterial wealth.
*48 On the Continent, the French writers after Smith, following Say’s leadership, generally rejected this artificial line of demarcation. In England Lauderdale defined individual wealth as consisting in “all that man desires as useful or delightful to him; which exists in scarcity.”
*49 This definition was quoted again and again by later writers and was in most cases criticized as too vague.
*50 Such a criticism is illuminating in its revelation of classical economic conceptions. Thus Malthus:
This definition obviously includes everything, whether material or intellectual, whether tangible or otherwise, which contributes to the advantage or pleasure of mankind, and of course, includes the benefits and gratifications derived from religion, from music, dancing, acting, and similar sources. But an inquiry into the nature and causes of these kinds of wealth would evidently extend beyond the bounds of any single science….
For Malthus there was evidently no single bond in logic that could place these benefits and gratifications in a single discipline. McCulloch’s comments are even more revealing:
…if political economy were to embrace a discussion of the production and distribution of all that is useful and agreeable, it would
include within itself every other science…Good health is useful and delightful, and therefore, on this hypothesis, the science of wealth ought to comprehend the science of medicine; civil and religious liberty are highly useful, and therefore the science of wealth must comprehend the science of politics…”
It would be difficult to discover a more damaging statement indicative of the kind of thinking exemplified by the less enlightened classical economists. Ricardo, to whom political economy meant only the
distribution, not the production, of wealth, would never have excluded good health from economics on the ground that it involved the science of medicine. If the production of health involves medical science, the production of cement just as much involves chemistry, and the production of wheat, biology. According to McCulloch, wealth was clearly a distinct objective entity, the production of which involved the science of political economy. To draw the line so as to exclude from its purview such inconvenient studies as medicine and politics, McCulloch included only material goods in his technical definition of wealth. Apparently it was believed that certain general laws governing the physical production of material commodities could be abstracted from the several sciences concretely concerned with the production of each specific good. These laws, however, did not admit of further generalization so as to comprise the production of such immaterial goods as health or good government. The only sciences that were relevant to the latter were those of medicine and politics.
The striking feature of this discussion concerning Lauderdale’s definition is that the criticisms levelled against it could easily have led to a
less limited view of economic phenomena. It was clearly seen that the extension of the concept of wealth to include everything that is desired would mean the abandonment of the effort to arrive at any scientific laws involving objective wealth. But what was overlooked was that the very broadest conceptions of wealth involved an essential unity, from which a less limited political economy might take its point of departure.
However, the exclusive stress on
material wealth was motivated by other considerations, besides those expressed by McCulloch. There appears to be a significant degree of correlation between
the restriction of wealth to commodities and the restriction of the scope of political economy to the
distribution of wealth, leaving out its production, exchange, and consumption. Ricardo and Read provide excellent examples of this. Both conceived of wealth exclusively as material goods.
*53 And both emphatically limited political economy to the treatment of the
distribution of wealth. Alike in his
Principles and in his correspondence with Malthus, Ricardo had stressed this limitation of the scope of economics.
*54 Read (“an acute but neglected writer,”
*55 and one of the economists rediscovered by Seligman) treated economics as “an investigation concerning the right to wealth,” teaching what the rights and duties of men in society are with regard to property.
*56 Read may be considered to have invested with normative and ethical significance Ricardo’s conception of a science of the distribution of wealth. According to Ricardo, economics shows how wealth is distributed among the factors of production; according to Read, economics, in so doing, is at the same time laying down the law of the natural rights of the factors of production to their several shares.
There is every reason why economists concerned purely with the distributive aspects of economics should tend to concentrate on the tangible “pie” from which each of the factors of production is to receive a slice proportioned according to the laws of political economy. Students of “production” may find it difficult to exclude the production of any “utility,” whether or not embodied in a material good. But the laws of distribution can clearly afford to be confined (and with so much more elegant definiteness) to the long-run tendencies in the division of tangible wealth. Where, as with Read, the laws of distribution are the handmaidens of the laws of private property, the convenience and reasonableness of a restriction of wealth to material, alienable goods must have appeared irresistible.
Thus far the account of what the economic point of view has meant to economists has treated of the classical conception of it as
a science of wealth, with special reference to the restriction of the latter concept to that of material goods. The account of the gradual advance of economics from a science of wealth to one of welfare will be resumed later in the chapter, with special attention to those elements of the earlier “material” conception of wealth that continued to be retained. At this point a discussion is in order of a special case of this “material” approach to economics, which seems to have held a fascination for a number of economists over an extended period of time, viz., the view that saw economics as essentially concerned with the goods necessary to ensure the
physical subsistence of mankind.
This view seems to be the most extreme form of the materialistic outlook on economic affairs. The distinctive feature of all conceptions of economics as a science of wealth or of material goods, as against alternative conceptions of the discipline, consists in their identification of economics with some special
end of human action. Not all action is subject to economic law, but only such action as is directed towards a more or less well-defined class of objects, viz., wealth or material goods. Most of the definitions advanced during the greater part of the nineteenth century can be considered as variants of this view. The earlier ones saw economics as concerned with the results achieved with regard to these ends themselves, its enquiries being directed at describing the phenomena of this desired wealth. The later, less objectivistic definitions looked at economics, as will be seen in subsequent chapters, as a description of man in one department of his activities—that directed towards, or pertaining to, the desired wealth.
When economics is narrowed down still further by restricting it to the study of the goods necessary for human survival, the relevant range of human ends is contracted to the point where the term “end” begins to lose its meaning. No matter how objective a view one had of the wealth around which political economy was supposed to revolve, it was extremely difficult to close one’s eyes to the fact that wealth is wealth only because it is desired by human beings, i.e., that it is an end of human endeavor. But when the only parts of wealth permitted to come into consideration are biological necessities, then it is dangerously tempting to consider
these necessities as not being the ends of human desire at all. Instead of being goods brought under the play of market forces by being the goals of human aspirations, these necessities gain their economic relevance purely objectively, by being the physiologically determined causes of quasi-biological tropisms. And this, indeed, is the direction towards which a number of “subsistence” definitions of economic phenomena have tended.
There had been discussions for a long time concerning the question whether wealth should properly include luxuries as well as “necessaries.”
*57 Steuart had seen the goal of his subject as being “to secure a certain fund of subsistence for all the inhabitants.
*58 It is noteworthy that during the period of the classical economists most writers did not embrace this “subsistence” approach. As a matter of fact several writers explicitly took a view diametrically opposed to the “subsistence” criterion. So far from confining wealth to necessities, these writers defined wealth as
*59 Wealth was the
surplus, often the surplus after all expenditures. Political economy was exclusively the science of great
riches, of luxury phenomena. (Both Bentham and Malthus found it necessary to reject this view of economics and attempted to make it absolutely clear that
their political economy was concerned with the poverty of nations quite as much as with their wealth.)
Despite the general absence of the subsistence view in classical economics, there appears to be at least one sturdy offspring of the classical school to which this view is central. This is to be seen in the work of the Marxist writers in developing the thesis of the economic, or materialist, interpretation of history. The significance of the materialist interpretation in Marxist thought lies, of course, in its consequences for the “noneconomic” aspects of history. For the purposes of the present account, however, the Marx-Engels approach to history yields a fresh view of the scope of economic affairs. Superficially one might be content to explain the fact that Marx and his followers equated the “economic” with the “materialist” interpretation of history as deriving merely from the classical economists’ stress on material wealth. An examination of Marx’s writings, however, reveals his conception of political
economy to have been even narrower. Professor Knight seems to have put his finger on the essential point when he writes: “The socialistic popularisers of [the economic interpretation of history] have leaned toward the narrower and more definite…conception of downright necessities.”
This view of the economic interpretation of history seems to be expressed in Marx’s own writings. In a note in which he compares his conception of history to the doctrines of Darwin, Marx writes: “Technology discloses man’s mode of dealing with Nature—the process of production by which he sustains his life, and thereby lays bare the mode of formation of his social relations, and of the mental conceptions that flow from them.”
*62 In the passage that Kautsky considered the classic formulation of the economic interpretation, Marx explains:
In the social production which men carry on they enter into definite relations; these relations of production correspond to a definite stage of development of their material powers of production…The mode of production in material life determines the general character of the social, political, and spiritual processes of life.
It is of interest to note that the words which in this extract (from Stone’s translation of Marx’s preface to his
Critique of Political Economy) are rendered “…in the social production which men carry on…” are in the German original:…in
in der gesellschaftlichen Produktion ihres Lebens…Other translators of Marx have rendered this phrase: “…in the social production of their every-day existence”
*64 and “…in the social production of their subsistence…”
Engels too made this subsistence approach very clear. “According to the materialist conception,” he wrote, “the decisive factor in history, is, in the last resort, the production and reproduction of immediate life.”
*66 And again, “We understand by the economic relations, which we regard as the determining basis of the history of society, the methods by which the members of a given society produce their means of support…”
Clearly, then, there emerges from the various formulations of
the materialist interpretation of history a conception of economic affairs that centers about biological survival. Not the provision of wealth, but the provision of bare life is the realm of economics. Nor is it that life referred to in Ruskin’s phrase, “There is no wealth but life” (in which life includes “all its powers of love, of joy, and of admiration”), but the elemental existence that is the subject of biology. Not “wants,” in the sense of the reflections of standards of ultimate values, but rather the inexorable, objective requisites of survival—”needs”—are the data of economics.
In such a scheme, in which the relationship between ends and means as arranged by rational action is completely obliterated, economics and economic affairs clearly take their place as part of biology. Kautsky is easily understood when he insists that the materialist conception of history does not postulate the dominance of economic
motives. We must, we are told, sharply distinguish between economic
motives and economic
conditions. It is only the latter that are assigned the decisive role in the Marxist scheme of history.
It is not clear whether economists in general were greatly influenced by this idea. The literature yields very scanty traces of any school of economic thought that placed human survival at the center of their subject.
*69 Yet it is of interest to notice passages in American economic and sociological literature at the turn of the century that do have a pronounced relevance to this general conception of the economic domain. It is, perhaps, not a complete surprise to find that it is Veblen who seems to approach most closely to the “biological” outlook on economics. Veblen explicitly points out that in the earlier stages of industry the “struggle for wealth” meant “a struggle for subsistence.”
*70 He considered the essence of the physiocratic system to consist in the fact that it saw “economic reality” in “the increase of nutritive material.”
*71 Again and again in his writings the phrase “the material means of life” is used as the criterion for distinguishing economic activity. “In economics, the subject of inquiry is the conduct of man in his dealings with the material means of life.” This is a typical Veblenian sentence in this respect.
We must probably see in this Veblenian tendency to identify
economics with the maintenance of life a reflection of a fashionable pastime of applying biological analogies to the phenomena of the social sciences. The terminology of biologists seems to have strengthened this tendency. Franklin Giddings drew attention to the different meanings that the word “economy” had for economists and for biologists. Inherent in the economists’ use of the term is the presumption of “a conscious being, endowed with the capacity for pain and for pleasure, to plan and direct the economy and to profit by it.” The biologists, on the other hand, use “the highly general notion of economy as any system of activities and relations which furthered the well-being of any class or species of living things.” It is this concept that produces such phrases as “the economy of the animal kingdom” and the “economy of nature.” “In these notions there is no implication of consciousness, of pleasure or of pain, and no presumption of intelligent planning or management on the part of the organisms that are benefited by their economy. The thought is altogether objective.”
The same explicit warning against the biological view of economic affairs was sounded by Sherwood.
In applying the physical formulae of evolution to psychical phenomena, sociologists are guilty of unscientific procedure…The physical formulae of evolution are statements of unexplained fortuitous change. The “fitness” which survives is an unforeseen fitness, an adjustment wrought out in consequence of the struggle. Psychical activities, on the contrary, are essentially teleological. They are directed to ends. The “fitness” in social adjustments is foreseeable, prearranged. Further than that, this fitness is nothing other than “utility” to the individual.
This statement formulates the issue precisely. The imposition of “subsistence” as the goal of economic activity sets up a value involving among all others the least troublesome subjective differences between individuals. The only area of choice left to human intelligence is in the means objectively best suited to attain this one end. Once man’s power to select his own ends is prescinded from economics, the subject is at once reduced to an only slightly more involved version of biology.
Meanwhile, side by side with this subsistence approach to economics, which it had fostered, the concept of wealth—and even of material wealth—continued to provide a convenient, if facile, criterion for defining the domain of the economic long after the close of the classical period. Mill, Senior, and Cairnes debated whether economics was a physical or a mental science. But Cairnes, famous as the last of the economists of stature to adhere to the general classical tradition, could write in 1875: “…neither mental nor physical nature forms the
subject matter of the investigation of the political economist…The subject matter…is wealth.”
*75 And again, even more clearly: “Political Economy is a science in the same sense in which Astronomy, Dynamics, Chemistry, Physiology are sciences. Its subject matter is different; it deals with the phenomena of wealth, while they deal with the phenomena of the physical universe.”
Bonamy Price, even while describing the confusion regarding the definition of economics, was still able to declare: “All are agreed that it is concerned with wealth.”
*77 It is true that many of the pronouncements referring to wealth as the key concept were modified so as to conform more or less closely with more sophisticated views. Especially in a number of German definitions after 1870, the vital role played by acting, choosing man in all the phenomena connected with wealth was well recognized, and yet this did not prevent these definitions from assigning the key position to
From both of the opposing sides in the
Methodenstreit came statements tying the economic world to material goods. In so far as this criterion appeared in the works of economists of the Historical School, the matter admits of some explanation. In later chapters it will be seen that the earliest rebellion against the conception of economics as a science of wealth came as a result of the analysis of actual human behavior and the hypothetical isolation of a specific pattern of behavior in economic affairs. This diverted attention from the wealth itself towards the activity of the wealth-
seeker. Such a way out from the limited conception of economics as a science of wealth was obviously closed to the Historical School. It was, after all, the very postulation of such hypothetical patterns of behavior on the part of “economic man” that had initially aroused the protests of the adherents of the Historical School and later became the butt of the ridicule expressed by those of their successors who went to the greatest extremes. The urge to restrict economics arbitrarily to material goods and to see the essential character of economic phenomena in their relationship to these objects may therefore well have been stronger for the adherents of the Historical School. So long as action is to be considered only in its empirical totality, any attempt at an
analytical separation of economic phenomena from the rest is ruled out from the start.
In England a similar tendency is noticeable in the writings of proponents of the historical method during the small-scale British counterpart of the
Methodenstreit. Such prominent writers as Cliffe Leslie and John K. Ingram found themselves embracing definitions of economics that were closer to those of the earlier classical writers than to those, say, of Mill, against whose then dominant type of economics they were now in rebellion. These writers, insisting on the scientific excommunication of
homo oeconomicus and pouring scorn on the abstract constructions of earlier economists, were advocating the new science of sociology. While not going so far as Comte, who had flatly denied the existence of a separate field for economic inquiry, they stressed the futility of seeking laws in economics apart from the laws of society as a whole. “The study of wealth cannot be isolated…from the other social phenomena. There is, in fact, properly speaking, but one great science of sociology…” The laws of economics “must be sought in the great science of Society.”
All this meant only one thing. If any separate field is to be recognized for economics, it must be the result of viewing a class of objects constituting wealth as forming a distinct category whose conditions represent a legitimately separate area of knowledge. This knowledge, of course, can only be tapped from the larger Science of Society. “Political Economy is thus a department of the
science of society which selects a special class of social phenomena for special investigation.” By this “special class of social phenomena” there is no doubt that Leslie means the phenomena of wealth.
What gives unusual interest to the German literature on “material goods” is the fact that goods and material goods are stressed even by the writers who gave the most careful and explicit attention to the problems of defining economics and economic activity. Writing in the eighties and nineties of the last century, Dietzel dealt exhaustively with the various criteria offered for use in definitions of economics. Most of the ideas to be incorporated in the more careful attempts at definition in recent decades seem to have been anticipated either directly in Dietzel’s own writings or by the writers whom he cites. Dietzel came close to recognizing the universality of the category of human action and yet clung tenaciously to the objectivistic outlook on economics throughout his writings.
*81 Characteristic is his remark that it is not method, but rather the
object, that provides the criterion for distinguishing the activities that are the subject matter of economics.
A similar situation to that in Britain and Germany prevailed in the United States and France during the same period. Again we find the traditional retention of the wealth formula often merely as a cover for a less limited conception of the scope and character of the science. And yet economists seem to have felt that it was their preoccupation with wealth that made their discipline in any way a development from, or a successor to, classical political economy. In one of Ely’s earlier writings, in which he subjected classical political economy to severe criticism, he could yet find some merit in the older economics. “It separated the phenomena of wealth from other social phenomena for special and separate study.”
*83 For the eminent Belgian economist, de Laveleye, and for many French writers, the
définition habituelle of their subject was unquestionably that which ran in terms of
richesses, often with explicit limitation to material goods.
The decades after 1870 were full of change for economics in many directions. The numerous alternative definitions to be con-
sidered in subsequent chapters may almost all be traced to the ferment of economic ideas that were revolutionizing economic theory at this time. Again and again it will be found that the application of methodological self-consciousness and precision to fundamental questions of economic epistemology began in earnest during the
Methodenstreit of the eighties. The discussion in the foregoing pages demonstrates the persistence, in the face of these developments, of the older conception of economic affairs. Side by side with the newer views to be noticed later, definitions of economics as a science of wealth or of material wealth continued to occupy a central place in economic thought.
It is convenient here to notice a point of view that enjoyed the endorsement of a number of writers. They see economics and economic activities as consisting in the constant struggle on the part of man to subdue nature to his own ends. This creates a line of cleavage between two categories of resources. On the one hand, we have the human agent with all his powers of brain and brawn, emotions and skills. These resources he marshals to attack those of the external physical world which he turns to his own purposes. The interaction between man and his physical environment is the area of economic activity.
The earliest writer to have explicitly applied such a distinction to economic phenomena at all seems to have been the German economist (who wrote his book in French while at the Russian court in St. Petersburg) Storch.
*85 Writing in 1815, Storch emphatically rejected the prevalent viewpoint, which confined political economy to wealth. Not the wealth of nations, but the “prosperity” of nations, should be the subject of political economy. By prosperity Storch included all “civilization,” and in this connection he spoke of “inner goods” such as health, strength, reason, knowledge. These inner goods stand in contradistinction to wealth, which is comprised of “outer goods.” Storch includes both inner and outer goods in his political economy, but his divi-
sion between the two categories of goods shows what he understood to be meant by an exclusive science of wealth.
The eminent British historian Lecky appears to have considered this distinction between “inner” and “outer” resources as of great importance. Writing in one of his earlier works, Lecky seems to feel the arbitrary nature of the conception of a science dealing with the phenomena of wealth. He considers political economy as an expression of what he calls the “industrial” philosophy, which he contrasts with the “ascetic” point of view. The latter philosophy acknowledges happiness as a condition of the mind and seeks to attain it by acting directly on the mind through diminishing the desires. The industrial philosophy seeks happiness, not by diminishing desires, but by acting on surrounding circumstances in order to fulfil the desires. This conception of economics clearly shifts the emphasis from material wealth as such and sees economic activity as the attempt to fulfil desires by altering the configuration of the external world.
Among economists such a view seems to have found especial favor in Germany. Albert Schäffle, one of the earliest to stress the fundamental role of man in economic phenomena, appears to have consistently gone out of his way to avoid characterizing economics as concerned with “goods.” The key word in Schäffle’s many writings on the nature of the economy is the
Aussenwelt—i.e., the external physical world.
*88 Schäffle’s avoidance of the criterion of goods in favor of a definition formulated in terms of the “external world” is best interpreted as a conscious attempt to draw attention to human activity directed at want-satisfaction. Not goods, but man’s struggle and conquest of the external world is the subject matter of economics.
Other and later German writers referred to the “external world” in their writings, but often merely as an alternative expression for “goods.” Mangoldt, Cohn, Sax, and several other writers may be mentioned in this connection.
A fundamentally similar attitude to that of Lecky and Schäffle is evidenced about the turn of the century by the American Tuttle. Tuttle speaks of the “fundamental and universal economic
principle”—a phrase that he uses in a sense quite different from the usual one. “Three primary facts,” he writes,
lie at the basis of all economic phenomena: namely, man, man’s environment—the outside world, nature-and the dependence of man upon nature. Man has…an economic relation to his material environment…a relation which may very properly be called the weal-relation. This weal-relation…is the fundamental and universal economic principle…
Here again the economic relationship is conceived as one involving man and his surroundings. This view of the matter bears the clear imprint of the definition of economic phenomena in terms of material wealth. From the external world man creates the goods with which to satisfy his wants. To effect the production of these goods, man applies his own human resources to the external world. The changes that acting man imposes on the outer world both affect and are affected by the changes that are constantly taking place “within” man himself. Envisaging economic activity in this light, as the interaction of man—with all his shifting desires and human resources—and external nature, Tuttle offers a definition in consonance with the more popular conceptions, formulated in terms of wealth, and at the same time suggestive of the place of acting man in the phenomena of economic life.
The period in which economic affairs were chiefly considered as being concerned with a class of objects known as wealth coincided roughly with the nineteenth century. Only since the turn of the century have economists been increasingly inclined to consider the scope of their subject in less objective terms. Yet most of the newer views on the question of definition had already found some expression in the writings of the more thoughtful students of economic methodology well before the present century. These murmurings of dissatisfaction with the traditional wealth-bound conception of economics may most illuminatingly
be interpreted as the reflection of the more general revolt against the classical system that came to a head in the last quarter of the century.
This general revolt found expression in various ways. In the domain of formal reasoning, the development of the theory of marginal utility in the seventies by Jevons, Menger, and Walras marked the shift of attention from objective cost to subjective utility. In discussions concerning the nature and scope of economics, the change showed itself in the increasing awareness that this subject has as much to do with man as it has with wealth. Well before 1870 there were already many signs in England of the recognition of the humanistic character of economics.
*91 Schaffle in Germany and Droz in France had insisted on placing the role of man in economics higher than that of goods.
*92 Ely described the development of economics as occurring in three steps:
Writers of the first class regard political economy as a science which has to do with external valuable things or economic goods—that is, with wealth…; writers of the second class, as the science which has to do with economic goods in their relation to man; writers of the third class, as the science which has to do with man in his relations to economic goods.
All this made necessary a search for some new criterion for determining the scope of economics. If economics has to do with goods, then its scope is as clear as is permitted by the definition of the word “goods.” But if it is urged that economics is primarily concerned with man, then there is an obvious need to make clear precisely which aspect of the study of man economic theory is concerned with. The subsequent chapters of this book deal with some of the different approaches that have been made toward the solution of this problem. At this point in the chapter describing the conception of economics as a science of wealth, attention must be drawn to one of the most popular of these approaches, viz., the view that sees economics as dealing with the phenomena connected with economic
This view of economics had, in fact, the most persuasive claim
to qualify as the natural successor to the earlier definition of it as a science of wealth. Wealth promotes the economic welfare of man. If exclusive attention to the objects of wealth was to be declared scientifically inexpedient, then the problem could be avoided by shifting attention from the goods themselves to the welfare to which they minister. Instead of studying the effects of various measures on the wealth of a nation, economic analysis may be viewed as going a step further and studying the welfare of the nation as affected by these measures.
Such a conception of economics provided a framework into which the received body of doctrine could be fitted without excessive strain, while at the same time it reflected the new recognition of the subjective basis of market phenomena. The shift to this fresh conception seemed merely a broadening of the scope of the subject from one narrowly concerned with goods to one concerned with happiness.
*94 Cannan, writing at the beginning of this century on developments since the appearance of Mill’s
Principles, saw this broadening as the work of the theory of marginal utility:
Whatever definition of economics may be adopted, it is clear that the conception of its subject has become wider than it was…The economist of today recognizes that he has to do with man in relation to one particular kind of human welfare…Ever since Jevons…it would be impossible for any economist of the present day to repeat Malthus’ remark that Adam Smith mixes the nature and causes of the wealth of nations with the causes which affect the happiness and comfort of the lower orders of society.
From the point of view of the long-run developments in the definition of economic phenomena, this broadening of the economics of wealth into the economics of welfare does not mark so radical a change as that marked by the appearance of any of a number of later conceptions to be taken up in subsequent chapters. In fact, as against the other definitions of economics, both the wealth and the welfare formulations contain much in common; many of the features found to be objectionable in the wealth criterion appear unchanged in its welfare counterpart.
Both formulations are “classificatory” and “departmental” rather than “analytical.”
*96 Both see economics as studying
something that is produced, whether goods or happiness, rather than a certain type of
activity.*97 Especially where economic welfare is understood as meaning
material welfare, the concept of welfare evinced a strong bond of continuity with that of material wealth.
Nevertheless, as the neoclassical expression of the classical wealth-oriented definition of economics, the welfare and utility criterion did call for a conscious alteration of focus in the contemplation of economic phenomena. This point of view, while it became popular only after the introduction of marginal utility economics, had its forerunners as far back as the classical economists. One of Adam Smith’s successors, Dugald Stewart, considered political economy as dealing with “the happiness and improvement of political society.”
*98 The position of Henri Storch has already been noticed in this chapter. He broadened economics so as to deal, not with the wealth of nations, but with the “prosperity” of nations—a concept that included “civilization” as well as wealth. John Stuart Mill, when he came to consider the question of defining economics, criticized Say for having a similarly wide conception of political economy. Sismondi’s emphasis on happiness and consumption in economics
*99 and Lauderdale’s all-embracing definitions of wealth place their conception of economics in the same group.
The more general movement towards the idea of economics as a science of welfare rather than of wealth that accompanied the reaction against the classical school is evidenced in the literature in a number of directions. Cliffe Leslie, who was to become the vigorous proponent of historical consciousness in British economics, had a hand in this development. Writing as early as 1862 in a frequently cited essay,
The Love of Money, Leslie attacked the notion that the pursuit of wealth represented a self-contained human motive. The love of money means completely different things to different people. To the scholar it may mean the love of books; to the toper it may mean love of liquor. There is nothing unique in the motives that lead men to seek monetary gain; they are as heterogeneous as are human tastes themselves. Later
arguments like these were to lead Leslie and others to denounce the classical economists for their postulation of the possibility of valid laws of
wealth apart from the “laws of society.” Yet the impact of these ideas undermining the concept of a unique category of wealth through reference to the heterogeneity of the demand side of economics undoubtedly contributed toward a better grasp of the nature of economic theory. For example, it was the increased attention to the demand factor that made it possible for Jevons to “take utility…as the subject matter of economics,” or for an American writer to declare that all definitions of economics reduce to “the science of enjoyment or…the science of the means of enjoyment.”
In France a long tradition of stress on utility lent force to the growing dissatisfaction with the definitions of economics formulated in terms of wealth.
*101 Welfare, utility, ophelimity—these were the terms around which expositions of economic doctrines revolved. The “ethical neutrality” with which these terms were explicitly invested even further removed the newer views from the wealth-bound conception of the subject, while it at the same time provided the bridge across which economics could, if desired, pass in order to become a science of conduct or a logic of pure choice.
By the early years of the present century, the idea that economics is essentially concerned with welfare, or at least with material well-being, was probably the view most generally accepted among the English economists. Both Marshall and Cannan introduced widely used textbooks, running to many editions, with definitions formulated in terms of material welfare.
*102 Marshall, it is true, had made it clear that it is only an accident that economics is concerned with material wealth and that its “true philosophic
raison d’etre must be sought elsewhere.
*103 Cannan, however, held the criterion of material welfare to be the real distinguishing feature of economics. When Robbins, in attacking this proposition, took Cannan’s enunciations of it as his principal target, Cannan gladly took up the cudgels in its defense.
*104 In America economists representing such different outlooks as Fetter and Mitchell both called for a shift in interest away from wealth itself
towards the human welfare with which it is related; both saw a need for such a shift in the very conception of the nature of economic science.
Of course, the identification of economics with the study of economic welfare raised fundamental questions about the justifiability and validity of propositions concerning changes in social welfare. It is under the shadow of this thorny problem, involving the admissibility of interpersonal comparisons of welfare and the legitimacy of possible ethical assumptions, that welfare economists in recent decades have been consciously working.
*106 Sir Dennis Robertson cites the contention that the implications of envy make it uncertain that welfare would be increased even if everyone had more of every commodity. Robertson’s characteristic reply to this possibility would certainly have won Cannan’s concurrence:
How much better, surely, to assert as a plain matter of fact that
economic welfare undoubtedly
will be increased in this event; and
then to call in the Archbishop of Canterbury to smack people over the head if they are stupid enough to allow the increased happiness which might be derived from this plain fact to be eroded by the gnawings of the green-eyed monster; and I cannot at present persuade myself that such a common-sense distinction between the economic and the not is fatally undermined by the fact that the Archbishop draws a salary and that his gaiters embody scarce resources which might have been devoted to an alternative use.
Robertson’s words gives added salience to the difficulty that the advance from wealth to welfare brought in its train. If economics is concerned with a part of welfare, how is this part to be identified? The “material wealth” criterion embraced by Cannan provided an answer to this question by retaining a direct bond to the discarded conception of economics as a science of wealth. The objections which might be raised against such a criterion, and which Robertson here brushes aside, are clearly in large measure those that can be levelled at the type of definition treated generally in the present chapter.
This chapter on the definitions of economics as a science of wealth cannot close without taking account of the stigma which has persistently clung to economics, and for which these definitions of the subject in terms of wealth must bear a major share of responsibility. Well over a century ago, Bailey discussed the popular view that economics is “a mean, degrading, sordid inquiry.”
*108 Economists have shrugged off somewhat uneasily Carlyle’s contemptuous description of their subject as a “pig-science.” But economists themselves, especially by conceiving of their subject as a science of wealth, have clearly laid themselves open to such criticisms. From the start an economics centered around wealth had to contend with a climate of opinion in which the so-called “economic virtues” had long been held in moral disrepute.
By the close of the main period of classical economics, leading writers on the subject found it necessary again and again to defend the ethical standing of their discipline against its detractors.
*110 Economists of the 1830’s and 1840’s refuted the criticisms levelled against their moral status with indignation, with ridicule, or with disdain. The unworthiness of political economy in public opinion stemmed directly from its explicit preoccupation with so degrading a subject matter as wealth. All the depravities that moralists throughout the centuries have ascribed to wealth became naturally attached to the science of wealth.
The defenses raised by some of the economic apologists against those strictures are revealing. A popular argument that was used did not attempt to deny the possible immoral associations of wealth. But then, the argument ran, political economy must be studied all the more diligently in order to know how to
Nevertheless, despite rather extensive apologetics on the part of these writers, the observer may be excused if he gains the impression that many economists themselves were not altogether convinced by these discussions. If they did not consider their subject
as actually a degraded one, they very certainly did consider it as concerned chiefly with the lower and seamier side of human nature. R. Jennings, one of the “precursors” of subjectivism in economics, painted a highly repulsive picture of the motives with which economics is concerned. Writing in 1855, he announced that “Political Economy treats only of those human susceptibilities and appetences which are similar or analogous to those…in the brute creation;…it never attempts to enter those higher paths of human conduct which are guided by morality, or by religion.”
Among later writers, especially those who favored the hedonistic view of economics, a similar opinion prevailed. Economists displayed a sense of moral inferiority towards the votaries of the “higher,” less mundane branches of knowledge. Bagehot speaks of other studies “which are much higher, for they are concerned with things much nobler than wealth or money.”
*113 Jevons wrote: “My present purpose is accomplished in…assigning a proper place to the pleasures and pains with which the Economist deals. It is the lowest rank of feelings which we treat…” Edgeworth considered economics as “dealing with the lower elements of human nature.”
*114 It comes as no surprise to find Jevons hopefully writing that he does “not despair” of “tracing the action of the postulates of political economy” among dogs and other more intelligent animals.
The whole literature on the “lower” side of human nature with which economics was held to be concerned provides a commentary on the wealth-bound conception of the subject.
*116 The foremost characteristic of this type of definition is that it associates economic activity with a specific type of
ends. Of the many goals of human endeavor, one, that known as wealth, is singled out as the subject of economics. Grant that wealth ministers, or at least ministers chiefly, to physical wants, and the sordidness of economic phenomena is well established. It was only in the twentieth century that the need for the ethical insulation of economics became widely recognized, so that the identification of the subject with any one type of
end has receded from fashion.
Economic Thought and Language (London, 1947), pp. 21 ff.
Principles of Economics, [8th ed.; Macmillan & Co.], p. 758 n.).
An Inquiry into the Nature and Causes of the Wealth of Nations, ed. Cannan (Modern Library, 1937), p. 643.
op. cit., p. 403.
The Scope and Method of Political Economy [4th ed.; London, 1930], p. 39 n.) that although Smith’s work has the form of a science, he himself conceived his subject primarily as an art. In this connection, however, a note of Jeremy Bentham is of considerable interest. He wrote (
Economic Writings, ed. Stark, Vol. III [George Allen and Unwin, 1954], p. 318 n.): “To Adam Smith, the science alone has been the direct and constant object in view: the art the collateral and occasional one.”
The Theory of Economic Policy in English Classical Political Economy (London, 1952), pp. 170-171.
An Inquiry into the Principles of Political Economy (1767), cited in L. Haney,
History of Economic Thought (4th ed.), p. 138.
The Growth of Philosophic Radicalism (Boston, 1955), p. 45; L. Robbins,
The Theory of Economic Policy, pp. 50 f.; J. Bonar,
Philosophy and Political Economy (3rd ed.; London, 1922), pp. 142 f. Perhaps the most clear example of an economist who was stimulated by concern with private property rights was Samuel Read. Read, one of the economists “rediscovered” by Seligman (“Some Neglected British Economists,”
Economic Journal, 1903), called his book
Political Economy. An Inquiry into the Natural Grounds of Right to Vendible Property or Wealth (Edinburgh, 1829). He treated economics, not as concerning wealth, but as concerning the “right to wealth.” It is of interest to note that the alternative name which Read suggested (p. xvii) for political economy, “Political Justice,” is the title of Godwin’s book of 1793 fiercely attacking the institution of private property.
The Political Element in the Development of Economic Theory (English ed.; Harvard, 1954), pp. 69 f. Contrast Schumpeter’s remark in this regard (
History of Economic Analysis, New York, 1954), p. 120.
moral tradition represented by the Mandeville-Shaftesbury-Hutcheson realm of thought and to the
political tradition of the Grotius-Pufendorf-Hobbes-Locke filiation. See, e.g., J. T. Merz,
History of European Thought in the Nineteenth Century (Edinburgh, 1914), IV, 127-128; J. Bonar,
Philosophy and Political Economy, pp. 6, 85, 151; W. Hasbach,
Untersuchungen über Adam Smith (Leipzig, 1891), pp. 23 f., 140 f. See also F. A. Hayek, “Individualism: True and False” (reprinted in
Individualism and Economic Order, Chicago, 1948).
Fable of the Bees (ed. of 1723), pp. 427-428.
The Social Crisis of Our Time (English edition; Chicago, 1950), p. 68.
The Counter-Revolution of Science (Glencoe, 1952), p. 107.
Economists and the Public (Jonathan Cape: London, 1936), pp. 301-302.
The Growth of Philosophic Radicalism (Beacon Press: Boston, 1955), pp. 13, 19, 57.
Principles of Political Economy (1820), p. 27. Ricardo in his
Notes on Malthus (ibid.) seems to agree with Malthus.
A History of the Theories of Production and Distribution in English Political Economy from 1776 to 1848 (3rd ed.), pp. 14 f.
Inquiry into the Nature and Origin of Public Wealth (Edinburgh, 1804), p. 57.
Edinburgh Review, Lauderdale speaks of himself as having defined wealth as consisting “of the objects of man’s desire.” Lauderdale,
Observations on the Review of his Inquiry into the Nature and Origin of Public Wealth, published in the VIIIth number of the Edinburgh Review (Edinburgh, 1804).
Principles of Political Economy (1820), p. 27.
Supplement to the Encyclopaedia Britannica, quoted in Malthus,
Definitions in Political Economy (London, 1827), pp. 70 f.
Political Economy (Edinburgh, 1829,), p. 1.
Principles of Political Economy and Taxation (1817). Original Preface, (Everyman’s ed., p. 1); P. Sraffa, ed.,
The Works and Correspondence of David Ricardo, Vol. VIII, Letter No. 392, Ricardo to Malthus, 9th October, 1820. Ricardo’s stress on distribution was noticed by, among others, G. Ramsay,
Essay on the Distribution of Wealth (Edinburgh, 1836), p. v. There is perhaps room for conjecture concerning Ricardo’s position in 1817. Early in 1817 Malthus had written to Ricardo referring to “the causes of the wealth and poverty of nations” as the “grand object” of economic enquiries (Sraffa ed., Volume VII, Letter 200), and we have no record of any adverse reaction from Ricardo. Although in his
Principles (1817) Ricardo had referred to distribution as the “principal problem” in political economy, this is not quite the same as his declaration to Malthus in 1820 that the laws of distribution are “the only true objects” of the subject. To Malthus in 1820 Ricardo was writing that he was “every day…more satisfied” of the correctness of his view. This might support the conjecture that Ricardo’s 1817 statement was meant to be less emphatic than his later views. There is some support for the view that the scope of Ricardo’s
Principles (which treated distribution as the “principal problem”) was not meant to cover the whole science. On this see Ricardo’s letter to Mill (Sraffa ed., Vol. VII, Letter No. 196); see also T. De Quincy’s remarks to this effect in
Dialogues of Three Templars on Political Economy, in Vol. X of De Quincy’s
Works, 1877, p. 205. For a contrary view see Trower’s letter to Ricardo (Sraffa ed., Vol. VII, Letter No. 214).
Nassau Senior and Classical Political Economy (London, 1937), p. 303 n., and see above n. 8.
Political Economy, Preface, p. ix.
Philosophy and Political Economy, p. 107.
Inquiry into the Various Systems of Political Economy (English ed.; New York, 1812), pp. 2-4, cites Palmieri’s
Pubblica felicità (1787) and Canard’s
Principes d’économie politique (1801) for the view that wealth is
superfluous. Boileau (
An Introduction to Political Economy [London, 1811], Ganilh himself (
op. cit. p. 22) and the American economist Raymond (
The Elements of Political Economy, [2nd ed.; Baltimore, 1823], p. 40) all defined wealth as surplus over current expenditure for “wants.” This position seems to have considerable bearing on the classical attitude towards the consumption of wealth. (On this see J. N. Keynes,
Scope and Method of Political Economy, [4th ed.; London, 1930], pp. 105 f; L. Robbins,
The Theory of Economic Policy, p. 7.) The conception of wealth as surplus after expenditure implies a finite area of human “needs” which are objectively fixed. This conception led to the view that the consumption of wealth is the
destruction of wealth rather than the
consummation of the process of production. One recalls J. S. Mill’s unhappy description of the desire for present enjoyment of goods as being antagonistic to the desire for wealth (
Essays on Some Unsettled Questions of Political Economy, London reprint, p. 138).
poverty of nations in the scope of economics (Sraffa ed., Vol. VII, Letter No. 200). Samuel Bailey, celebrated critic of Ricardian value theory, ascribed the popular view of political economy as a “degrading” inquiry to the mistaken belief that it treats only of excessive wealth. S. Bailey,
Discourses on Various Subjects Read Before Literary and Philosophical Societies (London, 1852), p. 125. For examples of later writers clinging to the “surplus” view of wealth, see Sargent,
Science of Social Opulence (London, 1856); M. Liberatore,
Principles of Political Economy (English ed.; London, 1891).
The Ethics of Competition (Harper & Bros.), p. 24. See also on this point K. Mannheim,
Essays on the Sociology of Culture (New York, 1956), p. 35. For bibliography on the materialist interpretation of history, see W. J. Blake,
Elements of Marxian Economic Theory and Its Criticism (New York, 1939), pp. 686-691. See also T. Parsons, “Some Reflections on ‘The Nature and Significance of Economics,'”
Quarterly Journal of Economics, May, 1934, p. 534, n. 4.
Capital (English ed.; Ch. Kerr & Co., Chicago, 1915), I, 406, n. 2. See, however, the significantly different translation of this note by E. and C. Paul (Everyman’s ed.; 1930), p. 393 n.
A Contribution to the Critique of Political Economy (translated by N. Stone, Chicago, 1904), pp. 10-11.
The Economic Interpretation of History (New York: Columbia University Press, 1902), p. 43.
The Origin of the Family, Private Property, and the State (English translation, Moscow, 1940), p. 5. For another statement by Engels in virtually the same words, see Knight,
Ethics and Competition, p. 24 n.
Der sozialistische Akademiker (1895), quoted in Seligman,
The Economic Interpretation of History, pp. 58-59.
Die materialistische Geschichtsauffassung (Berlin, 1927), I, 3-6.
Die Nationalökonomie der Gegenwart und Zukunft, ed. by Gehrig (Jena, 1922), p. 305: E. Sax,
Das Wesen und die Aufgaben der Nationalökonomie (Vienna, 1884), p. 12; P. Leroy-Beaulieu,
Précis d’économie politique (Paris, 1888), p. 1; C. Perin,
Premiers principes d’économie politique (Paris, 1896), p. 2.
The Theory of the Leisure Class (Modern Library, 1934), p. 24.
The Place of Science in Modern Civilization and Other Essays, (New York: Viking Press, 1919), p. 91.
Journal of Political Economy, 1909; reprinted in
The Place of Science in Modern Civilization, p. 241. A list of passages in Veblen’s writings in which the material-means-of-life criterion is used would include: T. Veblen, “Why Is Economics Not an Evolutionary Science?”
Quarterly Journal of Economics, 1895, reprinted in
The Place of Science in Modern Civilization, pp. 71, 76; T. Veblen, “Mr. Cummings’ Strictures on ‘The Theory of the Leisure Class.'”
Journal of Political Economy, 1899, and “The Instinct for Workmanship and the Irksomeness of Labor,”
American Journal of Sociology, 1898, both reprinted in
Essays in Our Changing Order (New York, 1943), pp. 27, 78, 80. It is of special interest to note that Veblen uses the phrase “material means of life” as synonymous with the object of Marx’s materialism. (See his “The Socialist Economics of Karl Marx and His Followers,”
Quarterly Journal of Economics, 1906, reprinted in
The Place of Science in Modern Civilization, p. 415.)
Political Science Quarterly, June, 1901, p. 195. For a similar distinction between human economy and its biological analogues, see Lester F. Ward, “Psychological Basis of Social Economics,”
Annals of the American Academy of Political and Social Science, 1893, pp. 464-465.
Publications of the American Academy of Political and Social Science (October 5, 1897), p. 71.
The Character and Logical Method of Political Economy (London, 1875), p. 31. (The lectures published in the book were delivered during the 1850’s.)
op. cit., p. 18.
Chapters on Practical Political Economy (London, 1878), p. 19. For further references in which the wealth-focus of economics was retained, see the quotation from a speech by Robert Lowe in Cliffe Leslie,
Essays in Political Economy (2nd ed.; 1888), p. 21; H. Sidgwick,
The Principles of Political Economy (2d ed.; 1887), p. 12; W. F. Marriott,
A Grammar of Political Economy (London, 1874), p. 1; J. N. Keynes,
The Scope and Method of Political Economy (4th ed.; 1917), p. 100. Jevons and Marshall made free use of such terms as “the laws of wealth” and the “study of wealth.” W. S. Jevons, “The Future of Political Economy,”
Fortnightly Review, November, 1876, reprinted in his
Principles of Economics and Other Papers (London, 1905), p. 193; A. Marshall,
Principles of Economics (8th ed.; London, 1920), p. 1. When Mr. Norman, a veteran member of the Political Economy Club, rose at the club dinner in 1876 to express his sentiments, he was not fighting an uphill battle when he asserted that the “real essence of Political Economy” is the explanation of wealth phenomena;
Revised Report of the Proceedings at the Dinner of 31st May, 1876, held in Celebration of the Hundredth Year of the Publication of the “Wealth of Nations” (Political Economy Club: London, 1876), p. 26.
Sachgüter include: G. v. Schönberg, “Die Volkswirtschaft,”
Handbuch der politischen Oekonomie (4th ed.; Tübingcn, 1896), p. 15; K. Knies,
Die politische Oekonomie vom geschichtliche Standpuncte, (Braunschweig, 1883), p. 158; C. Menger,
Untersuckungen (1883), p. 232 n.; E. v. Philippovich,
Über Aufgabe und Methode der politischen Ökonomie (Freiburg, 1886), pp. 20-21; E. Sax,
Das Wesen und die Aufgaben der Nationalökonomie (Vienna, 1884), H. Dietzel,
Ueber das Verhaltnis der Volkswirthschaftslehre zur Sozialwirthschaftslehre (Berlin, 1881), p. 9; see also Dietzel “Beitrage zur Methodik der Wirtschaftswissenschaft,”
Conrads Jahrbucher, 1884, p. 18.
Introduction to the Study of Political Economy (quoted by Ely in his Introduction to the enlarged edition of Ingram’s
A History of Political Economy [London, 1915], p. xvii); and Cliffe Leslie, “On the Philosophical Method of Political Economy,”
Hermathena, 1876 (reprinted in his
Essays in Political Economy, p. 189).
op. cit., p. 212.
Tübinger Zeitschrift, 1883; and his article “Selbstinteresse” in the
Handwörterbuch der Staatswissenschaften (3rd ed.; Jena, 1911), VII, 435 ff.
Theoretische Sozialökonomik (Leipzig, 1895), p. 182.
The Past and the Present of Political Economy (Baltimore, 1884), p. 20.
Journal des économistes (April, 1883), p. 92. French writers of this period stressing
richesses include: Arendt, Limousin, Landry, Beauregard, Herve-Bazin, Courtois, Worms, and Levasseur.
Political Economy and Capitalism, pp. 19 f.; H. Myint,
Theories of Welfare Economics, pp. 2 f.
Cours d’économie politique (St. Petersburg, 1815), I, ii.
History of the Rise and Influence of the Spirit of Rationalism in Europe (1865; American ed., 1955), pp. 335 f. On the possible influence on Lecky exerted by Comte, see Hayek,
Counter-Revolution of Science, p. 187.
Aussenwelt is stressed, see A. Schäffle,
Die Nationalökonomie oder allgemeine Wirtschaftslehre (Leipzig, 1861), pp. 2, 24;
Das gesellschaftliche System der menschlichen Wirtschaft (3rd ed.; Tübingen, 1873), p. 2; “Die ethische Seite der Nationalökonomischen Lehre vom Werthe,”
Gesammelte Aufsätze (Tübingen, 1885).
Das Wesen und die Aufgaben der Nationalökonomie (Vienna, 1884), pp. 14-15. On Cohn’s position, see Menger,
Untersuchungen, p. 243. Julius Lehr in his
Grundbegriffe und Grundlagen der Volkswirtschaft (Leipzig, 1893), p. 67, instead of referring to
Güter, speaks of “die Dinge der Aussenwelt.”
Quarterly Journal of Economics, 1901, p. 218.
Nassau Senior and Classical Political Economy, ch. II.
Gesammelte Aufsätze, pp. 158 ff.; Droz’s very strongly held position is cited by an American economist, Stephen Colwell, in a preliminary essay to an edition of F. List’s
National System of Political Economy (Philadelphia, 1856), p. xxxvii; see also P. Cauwés,
Précis du cours d’économie politique (Paris, 1881), p. 6.
An Introduction to Political Economy (New York, 1889), p. 105.
Theories of Welfare Economics, p. xii.
A History of the Theories of Production and Distribution in English Political Economy from 1776 to 1848 (3rd ed.; London, 1917), p. 312. The quoted passage first appeared in the second edition (1903).
Nature and Significance of Economic Science (2nd ed.), pp. 16 f.; A. L. Macfie,
An Essay on Economy and Value, p. 2; L. Fraser,
Economic Thought and Language, pp. 26 f.
A Critique of Welfare Economics (Oxford, 1950), p. 9.
Political Economy, ed. Hamilton (1855), I, 9. The passage was written about 1810. Cf. Bonar,
Philosophy and Political Economy (London, 1922), p. 152.
Nouveaux principes d’économie politique (3rd ed.; Geneva, 1951), p. 66.
The Principles of Economics (London: Macmillan & Co., 1905), p. 49; H. H. Powers, “Wealth and Welfare,”
Publications of the American Academy of Political and Social Science (April 4, 1899), p. 16.
richesses were: H. Dameth,
Introduction à l’étude de l’économie politique (Paris, 1878), p. 89; A. Girault, “Les grandes divisions de la science économique,”
Revue d’économie politique, 1900, p. 796; E. Villey,
Principes d’économie politique (Paris, 1894), p. 5; C. Gide,
Principles of Political Economy (2nd American ed.; Boston, 1905), p. 3 n.; G. Tarde,
Psychologie économique (Paris, 1902), I, 127.
Nature and Significance, p. 4 and footnotes.
Quarterly Journal of Economics, November, 1931, pp. 106 ff. For a discussion of the limitations circumscribing Marshall’s adoption of the welfare formulation, see also F. Fetter, “Price Economics Versus Welfare Economics,”
American Economic Review, 1920, p. 721.
Nature and Significance in Economic Journal, September, 1932, pp. 424-427.
American Economic Review, 1920; W. C. Mitchell,
The Backward Art of Spending Money and Other Essays, p. 381.
The Political Element in the Development of Economic Theory (1954).
Economic Journal, December, 1954, reprinted in his
Economic Commentaries (London: Staples Press), pp. 57-58. Robertson has coined the term “ecfare” to denote the specific area of human welfare which is of concern to the economist.
Discourses on Various Subjects Read Before Literary and Philosophical Societies (London, 1852), p. 125. This essay was written about 1835.
Religion and the Rise of Capitalism (London, 1926), ch. IV.
Inquiry into the Various Systems of Political Economy (translated by D. Boileau, New York, 1812), Ganilh devoted some thirty pages to a survey of classical and modern civilizations, attempting to show that in the latter the desire for wealth bears no similarity to its objectionable counterpart in the former.
Introductory Lectures on Political Economy (4th ed.; London, 1855), p. 25; M. Longfield,
Lectures on Political Economy (Dublin, 1834), p. 3.
Natural Elements of Political Economy (London, 1855), p. 41.
Works (Hartford, 1889), V, 224.
The Theory of Political Economy (1871); (4th ed.; London: Macmillan & Co., 1911), p. 26; F. Y. Edgeworth,
Mathematical Psychics (London, 1881), pp. 52-53.
Principles of Economics and Other Papers, pp. 197-199.
The Road to Serfdom (Chicago, 1956), pp. 88-89, for an interesting commentary on the possible sinister consequences of the belief that economic affairs pertain to the more sordid sides of life.