History of Economic Analysis part 7 pptx

mix techniques in a manner that differs considerably from what their chosen specialties might be thought to require—a fact that we must keep in mind if we are to understand why economics is what it is. In principle, however, it is impossible to divorce any of the applied fields from the fundamental ones. But, third, such divorce is also impossible because the applied fields not only apply a stock of facts and techniques that lies ready for their use in general economics but also add to it. These fields may accumulate ‘private’ stocks of facts and methods that are of little or no use outside their boundaries. Beyond this, however, they have repeatedly developed accumulations of facts and conceptual schemata that should be recorded as contributions to general economic analysis, even though the appointed wardens of the latter have sometimes been slow to welcome them. Modern agricultural economics affords some examples, the fields of transportation and public finance afford others. It follows that we cannot confine ourselves to the history of ‘general’ economic analysis but shall have to keep an eye on developments in applied fields as best we can. History of economic analysis 22 CHAPTER 3 Interlude II: [Contemporaneous Developments in Other Sciences] FROM TIME TO TIME, we shall look up from our work in order to view a piece of intellectual scenery. Slightly less perfunctorily, we shall, for every one of our periods, register some contemporaneous developments in other sciences (in our sense of the term) that were relevant or might, for one reason or another, be expected to have been relevant to the development of our own. What has to be said now about this aspect of our exposition is so preponderantly concerned with ‘philosophy’ that I might as well have entitled this chapter: Economics and Philosophy. The rest will be disposed of in the two paragraphs that follow. [1. ECONOMICS AND SOCIOLOGY] After what has been said in the preceding chapter about the paramount importance for economic analysis of history—and all the sciences and branches of sciences that this term stands for 1 —and of statistics, it goes without saying that we must try to keep some contact with them; the reason why this will be done in a fragmentary manner is not that a more systematic treatment would not be desirable but that such treatment is impossible within the space at our disposal and within the limits of my own knowledge—and even if it were possible, it would drown our own story in an unfathomable ocean. Similarly, it goes without saying that we cannot afford, subject to the same restrictions, to neglect the developments of sociology. This term we shall use in the narrow sense in which it denotes a single though far from homogeneous science, namely the general analysis of social phenomena such as society, group, class, group relations, leadership, and the like. And we shall use the term in this sense throughout, that is, for developments that antedate by centuries the introduction of the word. In a wider sense it means the whole of many 1 Amplifying what has been said about this point, I want to point out that all the historical sciences and branches of sciences that specialization (mainly of philological competence to deal with particular bodies of material) has produced are to some extent relevant for us even where they do not treat of specifically economic facts. For instance, the Graeco-Roman civilization is the subject of research by three clearly distinguishable groups of scholars, namely historians proper, philologists, and jurists. All three of them deal with many things that do not concern us. But even when they do so they contribute to the cultural picture of that world which as a whole is not a matter of indifference to us; and even where they describe military history or the history of the arts, they use the same techniques that they use in describing economic or social events and institutions, so that there is no hard and fast frontier at which our interest could be definitely said to stop. overlapping and unco-ordinated social sciences—which is the term we prefer and which includes, among other things, our own economics, jurisprudence, hierology, ‘political science,’ ecology, and descriptive ethics and aesthetics (in the sense of sociology of moral behavior patterns and of art). In the footnote below the kinds of relations that may make developments in these and other fields relevant to a history of economic analysis are illustrated by the example of jurisprudence. 2 The closeness of some of these relations has been recognized by our setting up the ‘fundamental field’ of Economic Sociology in which neither economists nor sociologists can get very far without treading on one another’s toes. But it does not follow either that the co-operation between the two groups has actually been particularly close or fertile; or that either of them would have got along better if there had been more co-operation. As regards the first point it is the fact that ever since the eighteenth century both groups have grown steadily apart until by now the modal economist and the modal sociologist know little and care less about what the other does, each preferring to use, respectively, a primitive sociology and a primitive economics of his own to accepting one another’s professional results—a state of things that was and is not improved by mutual vituperation. As regards the second point it is by no means certain that closer co- operation, so often clamored for by laymen who expect great things from ‘cross- fertilization’ with a certainty untroubled by professional competence, would have been an unmixed blessing. For it could certainly not have brought net gains because there would have been some loss of that efficiency which is the result of strict or even narrow specialization. This holds even for the division of economics and of sociology (in the wider sense) into departments that have developed into what are, to all intents and 2 The science or sciences (in our sense) whose subjects consist of statutory or customary ‘law,’ of legal practice, and of legal techniques are relevant to a history of economic analysis, first of all, because, to a considerable extent, economists have been lawyers (or, as we prefer to say, jurists) who brought to bear the habits of the legal mind upon the analysis of economic phenomena. For instance, the sociological and economic systems of the scholastic doctors of the sixteenth century (the literature de jure et justitia) cannot be understood if we do not realize that they were primarily treatises on the political and economic law of the Catholic Church and that their technique was derived primarily from the old Roman law as adapted to the conditions of the time. Second, the legal framework of the economic process, and the shaping influence of either upon the other, are, to say the least, of considerable importance for economic analysis. Third, the historical roots of the concept of ‘economic law’ are in the purely legistic concept of ‘natural law’ (see below Part II, ch. 2). Fourth, certain nineteenth-century economists professed to have derived inspiration for a historical view of the economic process from a school of jurisprudence that called itself the ‘historical school’ and whose emergence and position must be understood more completely than economists usually do if the elements of truth and error in that view are to be disentangled. I take the opportunity to add that the sociological analysis of law as a social phenomenon is one thing; that the study of the techniques of legal practice—the sort of thing that is taught in American law schools—is quite another thing; and that historical jurisprudence is still another thing: so we must distinguish at least three different ‘sciences’ of the law that differ in material, tools, and aims and are cultivated (though there are overlappings) by different groups of workers, and similarly in the fields of religion, ethics, and aesthetics. Confusion becomes almost excusable under these circumstances and great battles about principles and ‘methods’ have been fought on issues (e.g., in the sciences of art) that clear themselves up automatically as soon as it is realized that the contestants aim at different targets. History of economic analysis 24 purposes, semi-independent sciences. This is precisely why we prefer to speak of social sciences rather than to speak of sociology in the wider sense. As an eminent economist once observed, cross-fertilization might easily result in cross-sterilization. This does not affect what has been said about the necessity of following up, at least in a fragmentary fashion, the developments of all the ‘neighboring fields’ in this book. It was only to avoid a possible misunderstanding that I thought it necessary to write the last sentences. [2. LOGIC AND PSYCHOLOGY] For the rest we are particularly interested in logic and psychology. The former claims our attention because economists have made a not inconsiderable contribution to it but especially because of their propensity to dogmatize and to quarrel about ‘method’: economists who enjoy this sport are apt to be influenced by the writings of the logicians of their time which therefore, though more apparently than really, gain some influence, legitimate or otherwise, upon our work. As regards psychology, there is the view that came first to the fore in the eighteenth century, and hence has been sponsored intermittently, that economics like other social sciences deals with human behavior. Psychology is really the basis from which any social science must start and in terms of which all fundamental explanation must run. This view, which has been defended as strongly as it has been attacked, we shall denote by the term Psychologism. Actually, however, economists have never allowed their analysis to be influenced by the professional psychologists of their times, but have always framed for themselves such assumptions about psychical processes as they thought it desirable to make. On the one hand, we shall note this fact occasionally with surprise because there exist problems in economic analysis that might be attacked with advantage by methods worked out by psychologists. On the other hand, we must avoid a very natural delusion. If we use an assumption the contents of which seem to belong to a particular field, this does not necessarily mean that we actually invade that field. For instance, the so-called law of decreasing returns from land refers to what might be termed a physical fact. But, as has been pointed out already, this does not mean that in formulating this assumption we are entering the field of physics. Similarly, when I state the assumption that as I go on eating successive pieces of bread my desire for further such pieces decreases, I may be said to be stating a psychic fact. But, in doing so, I am not borrowing anything from professional psychology, good or bad; I am simply formulating what rightly or wrongly I believe to be a fact of common experience. If we place ourselves on this standpoint, we shall find that there is much less of psychology about economic propositions than one might think at first sight. To speak of psychological laws, such as the Keynesian law of the propensity to consume, is a flagrant abuse, because this practice suggests justification for our assumptions, which, in effect, do not exist. Nevertheless, it is necessary to glance occasionally at the developments in the field of professional psychology, and this necessity arises, though less often, also with respect to a number of other sciences. For the moment, we confine ourselves to mentioning biology as an example. There is, or has been, such a thing as social and economic Darwinism. If we are to appraise this phenomenon, it is just as well to make sure of what Charles Darwin actually said and of the methods and materials that induced him to say it. Interlude II 25 [3. ECONOMICS AND PHILOSOPHY] Now we turn to the subject of the relations between economics and philosophy. Or, to put it more precisely, to the question, how far economic analysis has experienced influences from philosophy. 1 Owing to the many meanings that have been assigned to the word philosophy, some care is needed in order to avoid confusion. There is first a meaning for which our question is very easy to answer, or rather, for which no problem exists. The Greek ‘philosopher,’ who shaded off into the rhetor and sophist, was simply the man of intellectual pursuits. Taken in this sense, which was transmitted to the Middle Ages and survived right into the eighteenth century, philosophy meant the sum total of all scientific knowledge. It was simply the universal science, of which metaphysics formed a part not less than did physics, and physics not less than mathematics or any ‘philosophy’ on the nature of society and of the polis. This usage was bound to maintain itself so long as the stock, both of analytic tools and facts, remained small enough for one brain to encompass. More or less, this was the case until, very roughly, the middle of the eighteenth century, when the time of the polyhistors was definitely over. 2 As we have seen, St. Thomas Aquinas fell in with this use of the word philosophy, except that he excluded the sacred doctrine which was a science apart. All the others were ‘philosophical disciplines.’ It is interesting to note that St. Thomas made no attempt to assign to the former any other prerogative but that of super-mundane dignity and did not give it any authority over the latter. 1 For reasons that will appear presently, we shall not go into the large literature on this subject any more than we can help. For the moment, it is sufficient to mention the English standard work, James Bonar, Philosophy and Political Economy (1st ed., 1893; 3rd ed., 1922). 2 Of these polyhistors, or universal scientists, Gottfried Wilhelm Leibniz (1646–1716) was perhaps the most famous. His thought ranged from pure mathematics to political economy and back again to physics and to the metaphysical speculation of his monadology. His views on economics that have been collected with loving care by W.Roscher are too insignificant to be mentioned again. But Giambattista Vico (1668–1744) was a sociologist of outstanding importance, and in advertising for pupils he promised to teach everything that is knowable (tutto lo scibile). And never forget: Adam Smith wrote—and brilliantly—on the development of astronomy. It is true, of course, that many or most polyhistors excluded certain specialties from their universal competence. Thus, most of the great historians were nothing but historians; most of the great physi- History of economic analysis 26 When we look over those comprehensive systems 3 of science, we cannot fail to make a discovery of the utmost importance for the problem in hand. Neither Aristotle nor any of the later polyhistors succeeded in unifying, or even attempted to unify, the various departments of his teaching and, in particular, to assert in each of them his views on the ‘last causes,’ the ‘ultimate meaning’ of things, and the like. The physical theories of Aristotle, for instance, are entirely independent of his views on those ‘fundamentals’ and could, so far as these are concerned, just as well have been different from what they were. And this is as true of his political sociology (for example, his investigations into the constitutions of Greek city-states) as it is of his physics. Similarly, Leibniz’ views on foreign trade have nothing whatever to do with his fundamental vision of the physical and the moral world and he could, so far as these are concerned, just as well have been a free trader. Therefore, we had better speak of a compound of sciences rather than a universal science. This compound broke to pieces as the exigencies of the division of labor asserted themselves. It was then in the seventeenth and eighteenth centuries that philosophy was usually divided into natural and moral philosophy, a division that foreshadowed the German one between Natur—und Geisteswissenschaften. 4 There is another sense of the word philosophy in which no question arises of its influencing economics. This is the case if philosophy is conceived of as a science, like any other, that asks certain questions, uses certain materials, and produces certain results. Examples of the problems that arise, if we then define philosophy in this sense, would be: what is meant by matter, force, truth, sense perception, and so on. This conception of philosophy, which ap- peals to many who are not philosophers, makes philosophy completely neutral as regards any particular proposition in any other science. It comes near to making philosophy synonymous with epistemology, the general theory of knowledge. But a problem, and a very important one, does arise if we define philosophy to mean all theological and non-theological systems of beliefs (‘speculative systems’) concerning ultimate truths (realities, causes), ultimate ends (or values), ultimate norms. Ethics and aesthetics enter into such systems, not as sciences of certain sets of phenomena (behavior cians were nothing but physicians. The Greek philosophers kept aloof from the utilitarian (‘banausic’) arts. 3 The reader is warned that the term System—which in fact carries no more a definite meaning than did its Greek prototype—is used in this book in a variety of different senses which should not be confused, for instance: a set of more or less co-ordinated principles of political action (e.g. liberal system, free-trade system); an organized body of doctrine (e.g. the scholastic system, Marshall’s system); a set of quantities between which certain relations are assumed to exist (e.g. system of prices); a set of equations expressing such relations (e.g. the Walrasian system). 4 For the sake of brevity we neglected a development that culminated around 1900 and produced philosophy in a sense that has some affinity with the sense in which philosophy simply means science in general: namely, the sense that makes philosophy an attempt to construct a consistent picture of the empirical world from the contributions made by the individual scientists. This conception will be mentioned in its place, but all that we need to say about it here is that it does not create any difficulty or problem concerning the relation between philosophy and economics. A philosophy in this sense evidently does not undertake to restrict the autonomy of any of the individual sciences. Interlude II 27 patterns) which they seek to describe (explain) but as normative codes that carry extra- empirical sanctions. 5 One may well ask whether economics does not also enter in the sense that a writer’s ‘philosophy’ determines, or is one of the factors which determine, his economics. In order to prepare the ground for our answer I shall first mention a few illustrative cases from the history of other sciences. For any worker whose philosophy includes Christian belief, research is research into the works of God. For him, the dignity of his vocation flows from the conviction that his work is revealing a part, however small, of the Divine order of things. Thus, Newton expressed Christian beliefs in a purely scientific work. Leibniz went readily from matters of pure physics and mathematics to matters of theology—he evidently saw no difference of methodological principle between the two, and theological aspects suggested themselves to his mind with the utmost ease. Leonhard Euler (1707–83) argued for his ‘method for finding curves that enjoy certain extremal properties’ on the ground that the world is the work of the most perfect Creator and hence must be amenable to description in terms of maximum and minimum propositions. James P.Joule (1818–89), the co-discoverer of the fundamental principle of modern thermodynamics, the principle of the mechanical equivalent of heat, adduced the argument that, in the absence of the equivalence between heat and motion, something (energy) could be lost in the physical universe which it would be contrary to the dignity of God to assume. The last two instances might even be construed as proving direct influence of Euler’s and Joule’s beliefs upon their analytic work. Nevertheless nobody doubts that there was no influence of this kind, that is, (a) that the scientific work of the four authors mentioned was not deflected from its course by their theological convictions; (b) that it is compatible with any philosophical positions; and (c) that there would be no point in trying to explain its methods or results by their philosophical positions. They simply co-ordinated their methods and results with their live Christian belief as they would co-ordinate with it everything else they did. They put their scientific work in a theological garb. But, so far as the content of this work is concerned, the garb was removable. I hold that the garb of philosophy is removable also in the case of economics: economic analysis has not been shaped at any time by the philosophical opinions that economists happened to have, though it has frequently been vitiated by their political attitudes. But this thesis, as it stands, is open to so many misinterpretations that we must now spell it out carefully. The best method of doing so is to state explicitly what it does not involve. 5 This also applies to materialism in its technical philosophical sense, that is, to the doctrine that has not changed from the days of Leucippus and Democritus to this day and holds that ‘matter’ is the ultimate reality and exists independently of experience. I take the opportunity offered by the need for an illustrative example of the text above to bring home to the reader that the word ‘materialism’ means many things that have nothing to do with the technical meaning just defined. The ‘idealist’ philosophy that turns around the proposition (equally devoid of meaning for me personally) that in the last analysis reality (or the ‘world’) is ‘spirit’ would have served both purposes equally well: it would have given an example of philosophy in the sense in which it raises a problem of influence upon economics; and it would have served as another example of a word of many meanings that are commonly confused, the word Ideal. History of economic analysis 28 First, it does not involve ‘scientism’ (see above ch. 2, sec. 3). That is, I am not arguing that because the philosophical or theological garb is removable from propositions belonging to the physical sciences, it must therefore also be removable from propositions belonging to the social sciences. Our examples have been presented merely in order to illustrate what I mean by saying that the theological or philosophical creeds of a scientific worker need not exert any definite influence upon his analytic work, but not in order to establish my thesis. So far as those examples go, it is still an open question whether or not it also applies to the sciences of human action. Second, my thesis does not imply of course that human action itself and the psychic processes associated with it—motives or methods of reasoning, whether political or economic or of any other type—are uninfluenced by, or uncorrelated with, philosophical or religious or ethical convictions. It so happens that it is part of my own social psychology to hold that this correlation is far from perfect—a robber baron may have professed quite sincerely a creed of meekness and altruism—but this is an entirely different matter. We are now concerned with the propositions of the sciences of human behavior about this human behavior and are not questioning that religious or philosophical elements must indeed enter into any explanations of this behavior whenever they aim at completeness or realism. And this also applies to the scientific economist’s ‘politics’ and to any advice or recommendation he may tender with a view to influencing ‘policies.’ All that our thesis involves is that it does not apply to his tools and ‘theorems.’ 6 Third, my thesis does not involve reliance on general considerations about the logical autonomy of the economic proposition or theorem from philosophy. This would be still compatible with the latter’s influences creeping into the procedures of analytic work in a logically illegitimate manner. It might indeed be made plausible that such propositions, as that towns frequently developed from meeting places of merchants, do not carry any particular philosophical connotation; or that such propositions, as that ordinary significance tests are useless in the case of correlation between time series are valid alike for the deist and the atheist; or that propositions, such as that increase in the rate of remuneration of a factor of production may decrease its supply, are compatible with any philosophy and imposed by none. But I am not asking my readers to put their trust in any arguments of this kind, however convincing they may seem to some. At the moment I am not making any attempt to establish my thesis. I am only announcing it and explaining its meaning. The proof will be supplied in the subsequent Parts, when it will be shown that even those economists who held very definite philosophical views, such as Locke, Hume, Quesnay, and above all Marx, were as a matter of fact not influenced by them when doing their work of analysis. 6 If the reader finds this a difficult distinction to make, I sympathize with him. It is in fact this relation between an economist’s political preferences and his analysis and the relation of the former with his philosophy—particularly evident if we extend ‘philosophy’ to include the sum total of a man’s views on what is ‘fair,’ ‘just,’ ‘desirable,’ and so on—which do prevent most economists from accepting the argument above, which is after all only simple common sense if correctly understood. Interlude II 29 The reason why so much emphasis has been placed upon the thesis that philosophy in any technical sense of the term is constitutionally unable to influence economic analysis and actually has not influenced it, is that the opposite thesis is one of the most important sources of pseudo-explanations of the evolution of economic analysis. These pseudo- explanations have a strong appeal for many historians of economics who are primarily interested in philosophical aspects and therefore attach an undue weight to the references to such aspects which in fact abound in the literature and are not always easy to recognize for what they are—frills without importance that nevertheless obliterate the filiation of scientific ideas. History of economic analysis 30 CHAPTER 4 The Sociology of Economics WE HAVE ALREADY referred to a department of science that we called the Science of Sciences (Wissenschaftslehre). This science, starting from logic and to some extent also from epistemology, treats of the general rules of procedure in use in the other individual sciences. But there is another science about science which is called the Sociology of Science (Wissenssoziologie) 1 and treats of science as a social phenomenon. That is, it analyzes the social factors and processes that produce the specifically scientific type of activity, condition its rate of development, determine its direction toward certain subjects rather than other equally possible ones, foster some methods of procedure in preference to others, set up the social mechanisms that account for success or failure of lines of research or individual performances, raise or depress the status and influence of scientists (in our sense) and their work, and so on. Our emphasis upon the fact that the workers in the fields of tooled knowledge are apt to form distinct vocational groups qualifies particularly well for conveying to the reader the reasons why, and the extent to which, science constitutes a proper subject of sociological research. Our interest in this subject is of course confined, primarily at least, to the topics that may usefully figure in an introduction to a history of economic analysis. Of these the problem of ideology is by far the most important and will be dealt with first (1); under a second heading we shall consider the motive forces of scientific endeavor and the mechanisms of scientific development (2); and finally we shall discuss some topics concerning the personnel of science in general and economics in particular (3). 1. IS THE HISTORY OF ECONOMICS A HISTORY OF IDEOLOGIES? [(a) Special Nature of ‘Economic Laws.’] The historical or ‘evolutionary’ nature of the economic process unquestionably limits the scope of general concepts and of general relations between them (‘economic laws’) that economists may be able to formulate. There is indeed no sense in denying, a priori, as has 1 [J.A.S. left space for this note but did not write it. In Capitalism, Socialism and Democracy (New York, 1950), p. 11, he explains the term Sociology of Knowledge as follows: ‘The German word is Wissenssoziologie, and the best names to mention are those of Max Scheler and Karl Mannheim. The latter’s article on the subject in the German Dictionary of Sociology (Handwörterbuch der Soziologie) can serve as an introduction.’] . filiation of scientific ideas. History of economic analysis 30 CHAPTER 4 The Sociology of Economics WE HAVE ALREADY referred to a department of science that we called the Science of Sciences. sense) whose subjects consist of statutory or customary ‘law,’ of legal practice, and of legal techniques are relevant to a history of economic analysis, first of all, because, to a considerable. raises a problem of influence upon economics; and it would have served as another example of a word of many meanings that are commonly confused, the word Ideal. History of economic analysis 28