Editor’s Introduction THE History of Economic Analysis, upon which Joseph A.Schumpeter worked during the last nine years of his life and which he had not quite finished, was the result of his intention to translate, revise, and bring up to date the ‘little sketch of doctrines and methods’ (Epochen der Dogmen—und Methodengeschichte) written for the first volume of Max Weber’s Grundriss, which was published in 1914. 1 This was a long essay (about 60,000 words) of a little more than a hundred pages which was divided into four parts or chapters. An examination of the table of contents will show that these four parts or chapters cover very briefly the same general topics that are treated in much more detail in Parts II, III, and IV of the 1200-page History of Economic Analysis. The first two, which are concerned with (1) the development of economics from the work of the philosophers and the popular discussion and (2) the discoveries in economics associated with the physiocrats, Turgot, and Adam Smith, are discussed in a single part in the present work (Part II: From the Beginnings to 1790). The third and fourth divisions in the two works are roughly parallel. The four main headings in the Epochen were as follows: I. Die Entwicklung der Sozialökonomik zur Wissenschaft (The Development of Economics as a Science). II. Die Entdeckung des wirtschaftlichen Kreislaufs (The Discovery of the Circular Flow of Economic Life). III. Das klassische System und seine Ausläufer (The Classical System and its Offshoots). IV. Die historische Schule und die Grenznutzentheorie (The Historical School and the Marginal Utility Theory). The old essay had been out of print; it had never been translated from German into English; many people had been interested in it and had urged a translation. After herculean labor, J.A.S. had finished his monumental Business Cycles in 1938 and sought relaxation in Capitalism, Socialism, and Democracy, which he regarded as distinctly a ‘popular’ offering that he expected to finish in a few months. He completed it some time in 1941. In the meantime he began to give a half course in the History of Economic Thought at Harvard. He gave this course for the first time in the fall term, 1939 and for the last time in the spring term, 1948—giving it in every year except in 1940 when he was on leave. This last development was probably the decisive factor. He was once more teaching in a field which had always interested him. It was natural to think of writing in that field. He would translate, revise, and bring up to date the Epochen. In the beginning he did not stress so much the purely analytic element in the 1 Grundriss der Sozialökonomik, I.Abteilung, Wirtschaft und Wirtschaftswissenschaft, pp. 19–124, published by J.C.B.Mohr (Paul Siebeck), Tübingen, 1914; 2nd ed. 1924. writings of the economists discussed in his course and about whom he wrote. In fact, for a long time I had the impression that he was writing a history of economic thought. His original plan was not a very ambitious one. He certainly had no intention of spending nine or ten years on a history of economic analysis. At first he probably thought of giving his spare time for a few months or a year to a little book of three or four hundred pages. Later he thought of one large volume of six or seven hundred pages. His main interest was his work on theory and he planned to write his major contribution in this field. He worked constantly at his mathematics because he believed it to be an indispensable tool of modern theory. He envisaged a theory which might some day synthesize dynamic economics in the same way that the Walrasian system summed up static economics. Eventually he modified this program to the extent that he would first write a little Introduction to Theory which would be for this kind of theory what the General Theory of Employment, Interest, and Money was for Keynesian theory. He read the current theoretical literature (largely in periodicals), worked at his mathematics, and assembled voluminous notes. The results of this work are reflected in some of the later parts of the History, especially in those parts which sum up modern developments. It is hard to say just why his work on the History constantly became more and more elaborate and took up more and more of his time. It was partly because his interests were constantly broadening, and he found it increasingly difficult to treat very briefly something which was to him a fascinating development. (For example, the scholastics and the philosophers of natural law became an absorbing interest in the early forties.) Here also he could weave together the threads of all his interests—philosophy, sociology, history, theory, and such applied fields in economics as money, cycles, public finance, socialism. I believe also that the war had something to do with it. I remember his telling one or two friends that he found work on the History a rather soothing occupation for wartime. It removed him temporarily from a grim reality which grieved him beyond measure because he was convinced it would destroy the civilization he loved. As always he wrote out everything in his own hand and kept everything that he wrote. It is possible to see, therefore, how the early treatments became more and more elaborate. He probably began writing the History in 1941. During the years 1942 and 1943 he seems to have had typed a good many chapters and sections, most of which were subsequently revised. The only substantial parts of the History written in the early years which were not later rewritten are the chapter The ‘Mercantilist’ Literature, which was typed in June 1943, the chapter on Sozialpolitik and the Historical Method, part of which was typed in January 1943 and the rest in December 1943, and the section on Senior’s Four Postulates at the beginning of Chapter 6 of Part III (General Economics: Pure Theory). These, too, would probably have been revised or rewritten had J.A.S. lived to complete the History. Occasionally a few pages of an earlier version were incorporated in later versions. This process is described in some detail in the Appendix. As time went on, he began to emphasize that this was a history of economic analysis and not a history of economic thought. He makes this clear in a brief description which he wrote early in 1949 for his English publishers, Allen & Unwin, in which he stated: This book will describe the development and the fortunes of scientific analysis in the field of economics, from Graeco-Roman times to the present, in the appropriate setting of social and political history and with some attention to the developments in other social sciences and also in philosophy. The ideas on economic policy that float in the public mind or may be attributed to legislators and administrators, whether or not embodied in elaborate systems, such as liberalism or solidarism and the like, which are commonly referred to as economic thought, come in only as part of that setting. The subject of the book is the history of the efforts to describe and explain economic facts and to provide the tools for doing so. Since the very possibility of treating the history of economics like the history of any other science is controversial, Part I of the book is devoted entirely to the methodological questions that this approach raises and especially to the question how far the distinction between scientific economic analysis and economic thought is valid in spite of the interaction between the two. Part II then tells the story of the growth of historical, statistical, and theoretical knowledge of economic phenomena from its beginnings in ancient Greece to the emergence of economics as a recognized special field and to the consequent appearance in the second half of the eighteenth century of systematic treatises, of which A.Smith’s Wealth of Nations proved to be the most successful one. Part III covers the period between 1776 [later changed to 1790] and 1870, and Part IV the period between 1870 and 1914. Part V is to help the reader to relate the present state of economics to the work of the past. Throughout, an effort has been made to make the most important contour lines stand out without sacrificing correctness to simplicity of exposition. I stated at the beginning that J.A.S. had been working on his History of Economic Analysis during the last nine years of his life. In a larger sense, he had been working on it all his life. Probably all of his writing and all of his teaching contributed to the final result. The lecture which he gave on leaving Czernowitz in 1911, for example, was entitled ‘Vergangenheit und Zukunft der Sozialwissenschaften.’ 2 This was a brief outline of what first became the Epochen and finally the History of Economic Analysis. His Presidential Address before the American Economic Association in December 1948— ‘Science and Ideology’—was concerned with some of these problems of methodology which he takes up in Part I of the History. The course which he gave at Harvard on the History of Economic Thought covered essentially the period between A.Smith and A.Marshall, with special emphasis on the Ricardian system of economic theory. In the course on Advanced Economic Theory 3 he discussed many of the problems which are written about in Part IV, Chapter 7 (Equilibrium Analysis) and in Part V. He also taught at Harvard a course on Socialism and sometimes a course on Business Cycles and the course on Money. At the University of Bonn, J.A.S. held the Chair of Public Finance, but 2 ‘The Past and Future of the Social Sciences.’ A revised and enlarged version was published by Duncker & Humblot (1915) in the Schriften des Sozialwissenschaftlichen Akademischen Vereins in Czernowitz. 3 At the beginning of the reading list for this course (Economics 203a) in the fall term of 1948–9 occurs the following brief description: also conducted a seminar which was concerned largely with theory, including the theory of money, and with epistemology. While at Yale for a year, he taught the course in International Trade. Not only his courses, but also his many articles on almost every aspect of economics, his numerous book reviews, his biographical essays, his books—all were part of the preparation for writing the History of Economic Analysis. Even his reading for pleasure and recreation—he loved to read biographies, preferably those in many volumes—contributed to that fascinating knowledge of men, events, and backgrounds which is apparent throughout the History and which will liven for some readers sober discussions on fine points of economic analysis. No part of the manuscript was in final form but some parts were more nearly complete than others. The three main Parts (II, III, and IV) were practically finished, with the exceptions noted in the Appendix; the introductory Part I and the concluding Part V were being written at the very end. The last thing written, at the close of 1949, was apparently the chapter on Keynes and Modern Macroeconomics at the end of Part V. This was left behind to be typed when he went to Taconic for Christmas and to New York for the meetings of the American Economic Association. On his return from the meetings, he started to write up his address, ‘The March into Socialism,’ and also to read the typescript of Part III of the History. He left several pages of notes for revisions in the first three or four chapters in this part on ‘classical’ economics. His death on January 8, 1950, made it impossible for him ever to carry out these revisions. The entire History was first written in longhand. Some portions, such as the early chapter on Money (Part II, ch. 6) and much of the material on the The primary object of this course is to train the students in the art of conceptualizing the salient features of the economic process. But discussion of individual problems will give the opportunity of rehearsing critically large parts of traditional theory, old and new. The program for this term includes, first, a preliminary survey of certain fundamental notions, especially determinateness and stability; second, the general dynamics of economic aggregates; third, the general theory of the behavior of households and firms. Though some knowledge of the calculus and of differential equations is desirable, purely mathematical aspects will not be stressed. Walrasian system of equilibrium (Part IV, ch. 7, sec. 7), existed only in longhand and had never been typed. In a few cases there were even several alternative versions in longhand. Other portions had been typed but not read by the author after typing. Still others had been read in typescript and corrected in pencil with notes and questions for subsequent revision. There were occasional references to be filled in, and J.A.S. told me that the references needed to be checked. I was to have helped at this task. The interested professional reader will find more detailed information on these points in editorial notes throughout the work and in the Editor’s Appendix. J.A.S. had no regular secretarial assistance during most of the period when he worked on this book, but he did have people who knew his handwriting and who typed for him. Occasionally he sent off a large batch of completed manuscripts to be typed. He wrote most of his letters in his own hand. This, of course, added immensely to the burden of his work and meant that his material was never filed as an efficient secretary might have filed it. He did not acquire a part-time secretary until the summer of 1948, when he was president of the American Economic Association and simultaneously carrying on all his other work. Even then he was reluctant to take the time to instruct her properly because the days and weeks were never long enough to do all the things he planned to do—his teaching, his consultations, his reading, his writing, his correspondence. I conceived my editorial task to be the simple one of presenting as complete and accurate a version of what J.A.S. actually wrote as possible but not to attempt to complete what he had not written. No outline of the whole work existed, and I had read none of it before his death because J.A.S. wished me to begin with the introduction, upon which he was working, and to read the whole work in its proper order. The material was found in many places—some of it in file boxes, some of it piled on shelves—in the Cambridge study on Acacia Street, in the Taconic study, and a little of it in his office at Littauer Center. It took me two or three months to discover that the History was nearly completed, and sections or subsections kept turning up for some time. The initial fitting together of the pieces was made difficult by the fact that the manuscript pages were often not numbered at all, and that the typescript was not numbered consecutively from the beginning but only in small batches as typed. J.A.S. used only the first typescript for the publisher. He never bothered with a carbon copy for himself. Fortunately the various people who typed the manuscript kept a carbon copy, and these carbon copies were stacked in a room on the third floor of the Acacia Street house. Some of these—those done in 1943 and 1944 especially—were dated. I kept looking until I found manuscript and a first typescript to match the carbons. In a number of cases, the carbons represented early treatments subsequently discarded or partially incorporated in later versions. As I read the whole work over and over again I found that, though no outline or table of contents had been written out, such an outline existed within the text. There was a minor complication due to the fact that the number of chapters originally planned was reduced from eight to seven in the case of Part II and from ten to eight in the case of Part IV. In the end, however, I had almost no difficulty in determining where each section or subsection belonged or in deciding which was the latest of two or more versions. These problems are discussed in the Appendix. The task was immensely complicated by the length of the book. Even though I am an economist with some editorial experience, it was not easy to put together so long a work dealing with so many economists, writing in so many languages over so long a period. In general, the procedure was as follows: the sections still in manuscript were typed; then various assistants read the manuscript to me from beginning to end while I corrected the typescript; references were completed and checked; titles and subtitles were supplied where necessary; after the Oxford University Press edited the typescript, I went through it once more to pass on the changes made, to supply cross references to other parts of the work, to check against a card catalogue of authors; finally various assistants read the author’s copy to me from beginning to end while I corrected the galley proofs. During each successive reading of the History, more and more minor inaccuracies and uncertainties were cleared up. Doubtless this process could have gone on indefinitely, but considerations of time imposed a reasonable stopping place. It seems appropriate at this point to acknowledge gratefully a gift from David Rockefeller and a grant from the Rockefeller Foundation which made possible much of the secretarial and editorial assistance outlined above. One difficulty should perhaps be touched upon here. It applies especially to the unfinished portions of the History. J.A.S. often started and abandoned many treatments of the same subject. He kept all these trial efforts and his original notes together with the finished bits of manuscript so that it was not always easy to know what was a more or less final version. Sometimes the date of a reference or the incorporation of a page or two of an earlier version was a clue. Another difficulty is that his plans or his notes for revision were often in a mixture of English, German, and shorthand. Four pages of such notes are reproduced in the Appendix (the plan and the final page for the money chapter in Part II and two outlines for Part V). I made no effort to interpret or carry into effect either such shorthand revisions or brief suggestions as to revisions. I merely incorporated the straightforward corrections on the first typescript. The original manuscript, the alternative versions, the notes, and the first typescript with corrections and suggested revisions in the hand of J.A.S. will all be deposited in the Houghton Library at Harvard University, where they may be consulted by the interested scholar. Material has been added by the editor only for clarity or consistency, and such additions are enclosed in square brackets. This applies especially to titles and subtitles, editorial notes in the text, and editorial footnotes. In the beginning, J.A.S. merely numbered his sections. As time went on, he added titles for both sections and subsections. Occasionally he left a blank where he had not made a final decision. The titles supplied by the editor were based on the text and are all enclosed in square brackets. There are both author’s comments and editor’s notes in square brackets, but it is almost always possible to distinguish between them. The author’s comments are usually in the midst of quotations, whereas the editor’s material occurs as complete sentences at the end of notes, as complete footnotes, or as a complete paragraph in the text printed in the footnote type. Where there is danger of confusion, the initials ‘J.A.S.’ or the abbreviation ‘Ed.’ are used. There are some repetitions, of which J.A.S. was well aware, and some omissions of material promised ‘above’ or ‘below.’ For the most part, I did not attempt to eliminate repetitions except such as were very close together and obvious. When the same article was quoted several times in different connections or the same idea expressed several times in different parts of the text, I did not feel competent to remove some references and leave others, although the author himself would have done so. I have attempted to call attention in footnotes to the more important omissions, which were the consequence of some parts of the work being not quite complete. At the suggestion of Richard M.Goodwin, I also called attention in footnotes to some of the other writings of the author which had a bearing on problems under discussion, since J.A.S. hardly ever referred to his own work either in his teaching or in his writing. Other people could doubtless have done this better but no one else had the time to go through this long work again and again. Occasionally it was impossible to read a word or a word was omitted or a sentence was incomplete. I dealt with such problems to the best of my ability. The vocabulary used was extensive and many an unusual English word had to be tracked down in the great Oxford Dictionary. Many of the foreign titles quoted were not to be found in any of the Harvard Libraries, nor were they listed by the Library of Congress. By using various foreign book lists and with the help of scholars in this country and in Europe, I was able eventually to verify almost all the authors and titles. For the most part, J.A.S. was specific about the editions used where this was important, but occasionally there was a little difficulty in this connection, because the author had worked in so many places over such a long period that inevitably he had used different editions and printings of the works quoted. He undoubtedly used European university libraries and his own extensive library for his notes and writings before he came to Harvard in 1932. At that time his library was packed up and stored in Jülich near Bonn. It was not brought to the United States before the war because at first he did not have room for it and later there were various ‘practical difficulties’ (perhaps more imaginary than real). Then came the war. Eventually it was destroyed in the bombing of Jülich by the American Air Force. Only about a hundred books (mostly English biographies) were salvaged from the rubble. After 1932, J.A.S. used working books acquired in this country and my library of economics books in Taconic. He spent much time during the war working quietly in the Kress Library of Business and Economics at the Harvard School of Business Administration. (He also read extensively in the professional periodical literature, and he read the current books and reprints in many languages which scholars everywhere sent him.) This may help to explain why both earlier and later editions of the same work are listed in the History and why I found page references to two different English translations of Volume I of Das Kapital and to both English and American editions of Cairnes (Some Leading Principles) and Keynes (Tract on Monetary Reform). The original work on Turgot’s Réflexions was obviously done before the publication of the Schelle edition. There is no attempt to present a bibliography with this History of Economic Analysis. In a sense the whole history may be regarded as a bibliography. I do, however, present a list of books frequently quoted where the edition used is important and where this is not specifically mentioned on each occasion. J.A.S. used the fourth edition of Marshall’s Principles (1898) because both he and I owned this edition. (He had many qualms about this and wondered if he shouldn’t shift to a later edition.) This list of books (with the edition or printing used) is to be found at the end of the work, following directly after the Appendix. The reader may be puzzled by the significance of the indented material which occurs in the first 566 pages of this work. It must be admitted at once that this is an error, the consequence of a misunderstanding between the printer and publisher on the one hand and the editor on the other. All the indented material should have been set in footnote type (not indented) as being supposedly of lesser interest to the average reader. It will be recalled that J.A.S. was attempting to write a history which could be published in one volume of possibly six or seven hundred pages. As time went on, however, his treatment became more and more elaborate, and he was aware of the fact that the book was getting too long—also that he was treating subjects which might not interest the average reader. He therefore decided to write the book on two levels, with the more or less technical material, the epistemological and philosophical discussions, and the biographical sketches set in small type so that they would take up less space and so that they could be easily skipped. He indicated this by having them typed in single space like the footnotes. The printer, having chosen an appropriate type for the book, decided that there would be too much of the small or footnote type and evolved the plan of putting this ‘secondary’ material in the text type but indented, thus reversing what the author had intended to be the relative importance of this material. Unfortunately this plan was not made clear to me and nearly half the History was in galleys before I saw any proof. Resetting all this would have involved both considerable expense and considerable delay. I therefore let it stand for the most part and had only small sections of incomplete or very technical discussion reset in small type. A glance at pages 414–18, 449–52, and 464–9, where Comte, Mill’s Logic, and Longfield, Thünen, and John Rae are discussed, will illustrate the kind of material which the author intended to have subordinated. I am not sure that he was always right in his emphasis, especially with reference to the biographical sketches, which appeal to most people who have read them. In the rest of the History (the last two chapters of Part III and Parts IV and V), I divided the ‘secondary’ material between the text type and the footnote type, with only two or three ‘philosophical’ discussions indented as had been done earlier. The biographical sketches, some of which were rather long, were almost all printed in the larger rather than in the smaller type, as originally intended. I did this because I was persuaded that it would be difficult to read so much material in the very small footnote type already chosen, although this change was, of course, contrary to my policy of publishing the History as nearly as possible as J.A.S. had written it. The manuscript and first typescript deposited in the Houghton Library will show what the author planned in this respect. It is possible for me to mention here only a very small number of the people without whose advice or assistance I could not have prepared the work for publication. Arthur W.Marget was the first person to read the entire History in typescript, to advise me about the unfinished sections, and to discuss general editorial policy with me. He also put together and edited the chapter on Value and Money in Part II. This chapter had never been typed, the manuscript pages had not been numbered, and there was some uncertainty about the order of the pages in a few cases. Gottfried von Haberler also read most of the typescript and helped me check obscure references and any theoretical points which troubled me. Paul M.Sweezy read all of the proof, made many valuable suggestions, and caught several errors which had escaped me. Richard M.Goodwin first put together for me the material in Part IV, Chapter 7, and Part V, which were unfinished and upon which J.A.S. was working at the time of his death. This was the important material upon equilibrium analysis and upon modern developments. Alfred H.Conrad read some of the typescript and much of the proof and checked mathematical formulations. William J.Fellner read some of the typescript, and Alexander Gerschenkron read some of the proof. Frieda S.Ullian was both resourceful and indefatigable in tracking down obscure authors. Anna Thorpe has helped at every stage of this book from typing some of the early manuscript many years ago to helping me read proof and prepare an index. Her familiarity with J.A.S.’s somewhat difficult handwriting and his methods of work helped solve many a problem. My gratitude goes out to these people and to all the others who helped me in one way or another to edit this History of Economic Analysis. ELIZABETH BOODY SCHUMPETER Taconic, Connecticut July 1952 NOTE: After Professor Schumpeter’s death and up to the last weeks of her prolonged illness, Mrs. Schumpeter devoted most of her time to preparing this book for publication. At her death the author index was nearly finished, but the work on the subject index had been barely started. Dr. Robert Kuenne undertook the difficult and extensive task of preparing the subject index; he also completed the author index and co-ordinated the two. The publishers are deeply grateful to Professor Wassily Leontief for his help in making publication possible. PART I INTRODUCTION SCOPE AND METHOD . much more detail in Parts II, III, and IV of the 1200-page History of Economic Analysis. The first two, which are concerned with (1) the development of economics from the work of the philosophers. was writing a history of economic thought. His original plan was not a very ambitious one. He certainly had no intention of spending nine or ten years on a history of economic analysis. At first. the History in 1 941 . During the years 1 942 and 1 943 he seems to have had typed a good many chapters and sections, most of which were subsequently revised. The only substantial parts of the History