History of Economic Analysis part 9 pdf

be sure that the ideological bias, if there be any, must be sought for among the other elements of our reasoning. Second, there are tools or theories that, though they can be shown to be actually neutral, yet acquire a putative ideological importance because people erroneously believe that they are relevant to their ideologies. We have just noticed the unchallenged fact that the transition from the marginal utility theory of value to a theory of value based upon the concept of marginal rate of substitution was ideologically neutral in the sense that either can be shown to be equally compatible with any ideology whatsoever. But this was not so with the preceding phase of the development of the theory of value. Among the opponents of the marginal utility theory of value were the Marxist sponsors of a labor theory of value who believed—as did many marginal utility theorists also—that the choice between labor and marginal utility ‘explanations’ of economic value depends upon our vision of the economic process and is ideologically relevant. Specifically, the Marxist notion that value is congealed labor was the first link in what Marxists considered to be a proof that the source of all incomes except wages is exploitation. However, as will be shown in Part III, the ideology… [J.A.S. had nearly finished Section 1 of Chapter 4 (Is the History of Economics a History of Ideologies?). For a further discussion of some of these problems, the reader is referred to the presidential address (by J.A.S.) before the American Economic Association, ‘Science and Ideology,’ American Economic Review, March 1949. Chapter 4 was apparently to have been the last chapter of the introductory Part. There were to have been two more sections (2. The Motive Forces of Scientific Endeavor and the Mechanisms of Scientific Development, and 3. The Personnel of Science in General and of Economics in Particular). These subjects are discussed at intervals throughout the History (see Index under these headings) and in connection with the author’s concept of ‘schools.’ About the Ricardians, for example, he said: ‘Moreover, the group was a genuine school in our sense: there was one master, one doctrine, personal coherence; there was a core; there were zones of influence; there were fringe ends.’ A few preliminary paragraphs (probably dictated), which deal to some extent with the personnel of science, were found among the author’s notes and are printed below.] The reader will have no difficulty in perceiving the relation which exists between the definition of a science as a technique that develops in a social group professionally devoted to its cultivation and the ideological aspects of the methods and results that emerge from the ‘scientific’ activities of such a group. Evidently there must be a certain amount of cohesion between its members, at least when the group has attained a sufficiently definite existence, a corporative spirit that produces explicit or subconscious rules according to which the members recognize each other and admit certain individuals and exclude others. In noticing a few of the phenomena to which these facts give rise we shall complete the little that can be said here on the subject of the sociology of science. If it be possible at all to imagine an individual who no matter for what reason embarks for himself and by himself upon the investigation of any of those sets of phenomena that have ever become the objects of scientific efforts, it should also be possible to realize a very simple yet very fundamental truth. Our individual must first recognize the phenomena on which he is going to work and he must recognize them as being somehow connected with one another and distinct from others. This recognition is a cognitive act. History of economic analysis 42 But it forms no part of the analytic work. On the contrary, it supplies the object or material on which analysis works and is therefore a prerequisite of it. The analytic work itself then consists of two different though inseparable activities. The one consists in conceptualizing the contents of the vision. By this we mean the fixing of its elements into precise concepts that receive labels or names in order to retain their identity, and in establishing relations (theorems or propositions) between them. The other consists in hunting for further empirical data (facts) with which we enrich and check the ones originally perceived. It stands to reason that these two activities are not independent of one another but that there must be an incessant give and take between them. Attempts at conceptualization invite the hunt for further facts and the new facts discovered must themselves be inserted and conceptualized. In an endless sequence both activities improve, deepen, and correct the original vision and also each other’s results. We do try at any given stage of our scientific endeavors to construct schemata or systems or models by which to describe as best we can the set of phenomena we are interested in, which are then developed ‘deductively’ or ‘inductively.’ But they are provisional by nature and are always relative to the stock of facts we command. This is indeed a very imperfect description of scientific procedure but it brings out a fact that will be emphasized again and again in these pages: there is not and there cannot be any fundamental opposition between ‘theory’ and ‘fact finding,’ let alone between deduction and induction. It will be one of our tasks to show why the appearance of such opposition has emerged nevertheless. In practice, of course, no scientific worker ever goes through all the stages of the work beginning with an independent vision of his own. Intuitive perception of novel aspects is indeed never absent so long as a science is really alive. But vision of the kind that produces novel methods or propositions or else leads to the discovery of novel facts— which then enter the science in the form of new hypotheses or restrictions—only adds to and perhaps partly displaces existing scientific structures, the bulk of which is handed from generation to generation as a matter of course. And practically always it isn’t society as whole or even a random collection of members that hands on the stock of scientific knowledge but a more or less definite group of professionals who teach the rising generations not only their methods and results but also their opinions about the direction and the means of further advance. In a majority of cases competence in doing scientific work cannot be acquired, or can be acquired only by individuals of quite exceptional originality and force, from any source other than the teaching of recognized professionals. Let us briefly glance at some of the consequences of this fact. First of all, it should be observed that this social mechanism is tremendously laborsaving. By means of it any beginner who follows the advice received and who does the work assigned to him acquires knowledge of facts, grasp of problems, mastery of methods with an economy of energy that should set the bulk of his force free for exploration of lands that lie beyond the boundary line at which the competence of the teacher ends. There should be no reasonable doubt about it, therefore, that primarily the social mechanism glanced at is not only favorable to the development of conceptual apparatus and to the accumulation of factual knowledge but even that it supplies the most potent motive power of what is usually referred to as scientific progress. Obviously, however, there is also another side to the medal. Teaching in any established science stereotypes the mind of the tyro and may stunt such originality as he may have. This has The sociology of economics 43 another and less obvious consequence. Owing to the resistance that an existing scientific structure offers, major changes in outlook and methods, at first retarded, then come about by way of revolution rather than of transformation and elements of the old structure that might be permanently valuable or at least have not yet had time to yield their full harvest of result are likely to be lost in the process. There is thus plenty of justification, just as there is for the resentments of the revolutionary, for the propensity of a certain type of mind to emphasize continuity and to defend old insights against new ones. Many examples of this will be noticed in this book. Second, the fact that existing structures once established tend to persist accounts in the field of scientific endeavor as it does in others for a phenomenon that is not easy to explain, the phenomenon of ‘generations.’ Consider a population with constant age distribution in which moreover the number of people that enter scientific vocations are equal to the number of people who retire. A given profession, say the profession of scientific economists, would then also display a constant age distribution. It is no doubt possible to construct sub-groups whose outlooks and methods may be expected to develop and there is no problem whatever in the antagonism of these age groups that we might observe. But this is not the problem of scientific generations for we also observe that at any given time a majority of the people in all the age groups display certain similarities of attitude so that, for example, it is possible to speak of a generation of 1880–1900 and to contrast it with the generation of 1920–1940 although younger and older men presumably differed in the first period as much as they did in the second. There would be no point in this if change in methods and results proceeded at an even rate. In the case of economists one might be tempted to explain this phenomenon by the change in social and economic conditions and by the consequent change in the practical problems that attracted attention in the two periods. But we find the same phenomenon in sciences that work on invariant environments. It is precisely this which gives us the clue to the nature of the problem and at the same time to its solution. Problems and methods not only change because environments change. They also change in consequence of the [fact that the] analytic work that is embodied in a given structure of a science has a way of resisting change. Third, the professionals that devote themselves to scientific work in a particular field and even all the professionals who devote themselves to scientific work in any field tend to become a sociological group. This means that they have other things in common besides the interest in scientific work or in a particular science per se. In most cases they teach the science which they are trying to bring up and to make their living by teaching. Naturally, this will tend to evolve a social and economic type. The group accepts or refuses to accept co-workers also for reasons other than their professional competence or incompetence. In economics this grouping took long to mature but when it did mature it acquired much greater importance than it did in physics. We shall see how in most countries writers on economic topics hail from all the sectors of society. There were indeed factors that made for grouping at an early time, the most important instance being the Catholic scholastic doctors, but all the rest consisted of types that came from anywhere in the scales of social rank or of income brackets. In England, this was so even in the first half of the nineteenth century. In such cases we must use the word profession with a proviso. In England there was at the time indeed a profession of economists in the sense that there were writers on economic topics who mutually recognized their History of economic analysis 44 professional competence. But later on the association of scientific work with teaching produced an economic profession in a fuller sense of the word and this economic profession developed attitudes to social and political questions that were similar also for reasons other than similar scientific views. This similarity of conditions of life and of social location produced similar philosophies of life and similar value judgments about social phenomena. It would be unnecessary to dwell on the consequences of this were it not for the fact that it was closely associated with the phenomenon of scientific schools. Since this concept will inevitably play a considerable role in our story we had better stay for a moment in order to investigate its meaning. The sociology of economics 45 History of economic analysis 46 PART II FROM THE BEGINNINGS TO THE FIRST CLASSICAL SITUATION (TO ABOUT 1790) CHAPTER 1 Graeco-Roman Economics 1. PLAN OF THE PART IT HAS BEEN explained in Part I that no science, in the sense there defined, is ever founded or created by a single individual or group. Nor is it in general possible to assign any precise date to its ‘birth.’ The slow process by which economics, as we now call it, rose into recognized existence ran its course between the middle of the seventeenth and the end of the eighteenth centuries. However, a concept that has been introduced in Part I may help us to be somewhat more precise, at least so far as the exigencies of exposition are concerned: the concept of Classical Situations. 1 Such a classical situation emerged in the second half of the eighteenth century and no such classical situation had ever emerged before. Availing ourselves of this, we might be tempted to start somewhere between 1750 and 1800, perhaps with the peak success of that epoch, A.Smith’s Wealth of Nations (1776). But every classical situation summarizes or consolidates the work—the really original work—that leads up to it, and cannot be understood by itself. Therefore, we shall try to cover in this Part, as best we can, the whole span of more than 2000 years that extends from ‘beginnings’ to about twenty years after the publication of the Wealth of Nations. This task is much facilitated by the further fact that, so far as the purposes of this history are concerned, many centuries within that span are blanks. The classical situation of the second half of the eighteenth century was the result of a merger of two types of work that are sufficiently distinct to justify separate 1 [J.A.S. did not complete the sections of Part I in which he would have discussed his concept of Classical Situations (and the difficulties inherent in periodizing) with special reference to his reasons for arranging the subject matter of the history of economic analysis in the three main divisions covered by Parts II, III, and IV. The reader will, however, find references to these problems at intervals throughout this book, especially in Part III, ch. 1 and again in Part IV, ch. 1. As J.A.S. points out, the term classic in this book has three meanings which should be distinguished from one another. Formerly it referred to the economic literature of the period from Adam Smith to J.S.Mill. ‘It retained this label until, at a time when the word “classic” had lost its eulogistic connotation and was beginning to stand for “obsolete,” Lord Keynes used the word in order to denote the teaching of A.Marshall and his immediate followers (or simply, pre-Keynesian economics).’ J.A.S. himself uses the term Classical Situation to describe the achievement of substantial agreement after a long period of struggle and controversy—the consolidation of the fresh and original work which went before. When he wishes to use the term classic in the first sense (Adam Smith to J.S.Mill), he puts it in quotes ‘to prevent confusion’ (Part III, ch. 1, sec. 1).] consideration. 2 There was the stock of factual knowledge and the conceptual apparatus that had slowly grown, during the centuries, in the studies of philosophers. And, semi- independent of this, there was a stock of facts and concepts that had been accumulated by men of practical affairs in the course of their discussions of current political issues. These two sources of nascent economics cannot be separated strictly. On the one hand, there were numerous intermediate cases that cannot be classified without cutting many a Gordian knot. On the other hand, right into the time of the physiocrats, the scholar’s technique was so very simple that most of it was within the reach of ordinary common sense and easily rivaled by unlearned practitioners, whose writings, therefore, cannot be dismissed as irrelevant to our purpose: on the contrary, they frequently rose to what we call in this book the scientific level. Broadly, however, our distinction is valid all the same. Let us recall our distinction between Economic Thought—the opinions on economic matters that prevail at any given time in any given society and belong to the province of economic history rather than to the province of the history of economics—and Economic Analysis—which is the result of scientific endeavor in our sense. The history of economic thought starts from the records of the national theocracies of antiquity whose economies presented phenomena that were not entirely dissimilar to our own, and problems which they managed in a spirit that was, in fundamentals, not so very dissimilar either. But the history of economic analysis begins only with the Greeks. Ancient Egypt had a kind of planned economy that turned upon her irrigation system. The Assyrian and Babylonian theocracies had huge military and bureaucratic establishments and elaborate legal systems—of which the code of Hammurabi (about 2000 B.C.) is the earliest legislative monument; they pursued an activist foreign policy; also they developed monetary institutions to a high degree of perfection, and knew credit and banking. The sacred books of Israel, especially the legislative portions of them, reveal perfect grasp of the practical economic problems of the Hebrew state. But there is no trace of analytic effort. More than anywhere else we might expect to find such traces in ancient China, the home of the oldest literary culture of which we know. We find in fact a highly developed public administration that dealt currently with agrarian, commercial, and financial problems. These problems are frequently touched upon, mainly from an ethical standpoint, in the remains of Chinese classical literature, for instance in the teaching of Kung Fu Tse (551–478 B.C.), who was himself at two stages of his life a practical administrator and reformer, and of Mêng Tzû (Mencius, 372–288 B.C., works trans. by L.A. Lyall, 1932), from whose works it is possible to compile a comprehensive system of economic policy. Moreover, there were methods of monetary management and of exchange control that seem to presuppose a certain amount of analysis. The phenomena incident to the recurrent inflations were no doubt observed and discussed by men much superior to us in 2 Like periodization, the setting up of such types is an expository device. Though certainly based upon provable facts, neither must be taken too seriously or else what is intended to be a help for the reader turns into a source of misconceptions. Periods and types are useful only so long as this is remembered. Graeco-roman economics 49 cultural refinement. But no piece of reasoning on strictly economic topics has come down to us that can be called ‘scientific’ within our meaning of the term. 3 The obvious inference is of course highly uncertain. There may have been analytic work, the records of which failed to survive. But there is reason to suppose that there was not much of it. We have seen before that commonsense knowledge, relative to scientific knowledge, goes much farther in the economic field than it does in almost any other. It is perfectly understandable, therefore, that economic questions, however important, took much longer in eliciting specifically scientific curiosity than did natural phenomena. Nature harbors secrets into which it is exciting to probe; economic life is the sum total of the most common and most drab experiences. Social problems interest the scholarly mind primarily from a philosophical and political standpoint; scientifically they do not at first appear very interesting or even to be ‘problems’ at all. [2. FROM THE BEGINNINGS TO PLATO] So far as we can tell, rudimentary economic analysis is a minor element—a very minor one—in the inheritance that has been left to us by our cultural ancestors, the ancient Greeks. Like their mathematics and geometry, their astronomy, mechanics, optics, their economics is the fountainhead of practically all further work. Unlike their performance in these fields, however, their economics failed to attain independent status or even a distinctive label: their Oeconomicus ( house, and νóµoς law or rule) meant only the practical wisdom of household management; the Aristotelian Chrematistics ( possession or wealth), which comes nearest to being such a label, refers mainly to the pecuniary aspects of business activity. They merged their pieces of economic reasoning with their general philosophy of state and society and rarely dealt with an economic topic for its own sake. This accounts, perhaps, for the fact that their achievement in this field was so modest, especially if compared with their resplendent achievements in others. Classic scholars as well as economists who rate it more highly think of that general philosophy and not of technical economics. Also they are prone to fall into the error of hailing as a discovery everything that suggests later developments, and of forgetting that, in economics as elsewhere, most statements of fundamental facts acquire importance only by the superstructures they are made to bear 3 See, however, E.D.Thomas, Chinese Political Thought (1927); S.Y.Ly, Les grands courants de la pensée économique chinoise dans l’antiquité…(1936); and Huan Chang Chen, The Economic Principles of Confucius and His School (1911). History of economic analysis 50 and are commonplace in the absence of such superstructures. Such as they were, the scientific splinters of Greek economic thought 1 that are accessible to us may be gleaned from the works of Plato (427–347 B.C.) and Aristotle (384–322 B.C.). Greek thought, even where most abstract, always revolved around the concrete problems of human life. These problems of life in turn always centered in the idea of the Hellenic city-state, the polis, which was to the Greek the only possible form of civilized existence. Thus, by virtue of a unique synthesis of elements that with us dwell in different worlds, the Greek philosopher was essentially a political philosopher: it was from the polis that he looked into the universe, and it was the universe—of thought as well as of all other human concerns—that he found reflected in the polis. The Sophists seem to have been the first to analyze this universe very much as we do now: they are, in fact, the forefathers of our own methods of thought, our logical positivism included. But Plato’s aim was not analysis at all but extra-empirical visions of an ideal polis or, if we prefer, the artistic creation of one. The picture he painted of the Perfect State in his Politeia (The 1 We are not concerned with economic conditions and with public opinion about them. But the reader can with little trouble get an instructive glimpse of both from G.M.Calhoun, The Business Life of Ancient Athens (1926). This book may also bring home to him, among other things, the curious affinity that exists between our own reactions to business practice and those of the ancient Greeks. The works of Greek poets and historians are relevant only from this standpoint and need not be considered here though some of the latter, especially Thucydides and Polybius, are of absorbing interest to any student of society. Nor is it necessary to discuss Xenophon, whose Oeconomicus is precisely the sort of treatise on household management that went under similar titles until the sixteenth century, and whose Poroi, a treatise on Attic public finance, is of course very interesting for the economic historian (as is also the pseudo-Xenophontic treatise on the Athenian commonwealth, the survivor of what may have been a large literature written mainly by opponents of the radical regimes in post-Periclean Athens). Among ‘philosophers,’ Plato and Aristotle are of such commanding importance that reference may be confined to them, in a sketch like this. The huge literature about them naturally pays but little—and sometimes dilettantic— attention to the topics that matter to us. The purposes of the general reader will be served adequately by the perusal of M.L.W.Laistner, Greek Economics (1923), which also contains translations of portions of representative works. See also Auguste Souchon, Les Théories économiques dans la Grèce antique (1898). It seems, however, impossible not to mention such classics as Fustel de Coulanges’ La Cité antique (12th ed. of the English trans. by W.Small, 1921); T.Gomperz’ Griechische Denker (trans. by Magnus and Berry, 1901–12), and U.von Wilamowitz- Moellendorp’s Staat und Gesellschaft der Griechen und der Römer (2nd ed., 1923)—masterly pictures of the cultural backgrounds from which sprang, among so many more important things, also the beginnings of economic analysis. Graeco-roman economics 51 . history of economics—and Economic Analysis which is the result of scientific endeavor in our sense. The history of economic thought starts from the records of the national theocracies of antiquity. economics 45 History of economic analysis 46 PART II FROM THE BEGINNINGS TO THE FIRST CLASSICAL SITUATION (TO ABOUT 1 790 ) CHAPTER 1 Graeco-Roman Economics 1. PLAN OF THE PART IT HAS. act. History of economic analysis 42 But it forms no part of the analytic work. On the contrary, it supplies the object or material on which analysis works and is therefore a prerequisite of