History of Economic Analysis part 18 pptx

and Klemm Vico was professor in Naples, professing to teach ‘all the knowable’ (tutto lo scibile). The fact that, among other things, he was a lawyer and always stressed legal aspects (the history of law was to him the history of the human mind) is important because it brings out his relation to the philosophers of natural law. The influences that contributed to shaping his thought and the problems raised by the various cases of earlier occurrence of ideas similar to his own are much too complex for us. The Greeks, the Roman jurists, Grotius, the English empiricists, Descartes (by way of antagonism), the scholastics, and many other groups would have to be mentioned, among them also the Arab historian Abu Said Ibn Khaldun (1332–1406; see de Slane’s French trans. of the first introductory part of his history, 1863–8, all I know). The only work of Vico’s that need be mentioned specifically is Principii di una scienza nuova… (1725; almost rewritten for the 2nd ed. of 1730). Esquisse presents a definite theory of historical evolution or ‘progress’: its goal is equality 23 and its motive force is the ever-increasing knowledge that the indefinitely perfectible human mind keeps on acquiring. This, of course, is very poor sociology. But the work is the outstanding example of an uncompromisingly ‘intellectualist’ view of the historical process. In sharp contrast, Montesquieu’s Esprit des lois, despite inadequate workmanship—especially inadequate as to critical use of material—is serious sociology. The chief virtue of the latter work, both as regards method and performance, is that it envisaged historical states of societies and their changes in the light of a number of objective factors, 24 which yield realistic explanations and in this sense analytic theories but no simple, in particular no rationalist, general formula. This was indeed a new departure and methodologically spelled a significant break with natural-law ideas: it was sociology based upon actual observation of individual temporal and local patterns, not merely of general properties of human nature. For our purposes, this was Montesquieu’s essential achievement, foreshadowed in this treatment of the particular case of ancient Rome. His success, at the time and later, was of course due to the appeal of his ‘constitutional’ theories—contrebalance des pouvoirs and the like—which are of no interest to us. Vico’s achievement was quite different and met with little success until late in the nineteenth century. His New Science (scienza nuova) is best described by the phrase ‘an evolutionary science of mind and society.’ But this must not be interpreted to mean that the evolution of the human mind shapes the evolution of human society; nor, though this would be nearer the truth, that the historical evolution of societies shapes the evolution of the human mind; but that mind and society are two aspects of the same evolutionary process. Reason, in the sense of the rational or logical operations of the human mind, is no causal factor in this process which Vico conceived in a thoroughly anti-intellectual spirit. Neither has reason, in the sense of goals or meanings perceived by the observer’s reason, anything to do with it: Vico’s theory of recurrent processes (corsi e ricorsi) emphatically denies any tendency toward, and in fact the existence of, any such goals and 23 The sociologist of thought will, of course, see in this a secularized scheme of salvation. 24 The emphasis upon the influence of geographic environments that may have hailed from Thucydides and may have inspired later anthropogeographical researches such as that of Vidal de la Blache deserves to be specially noticed. History of economic analysis 132 meanings. In this scheme philosophy and sociology had become one—thought and action had become one—and this unit was essentially historical in nature. 25 And, after all, though the common currents of eighteenth-century waters did not reach up to his knees, Vico too was eighteenth century. [(e) The Encyclopédistes.] We have had occasion to notice the increase in the demand for dictionaries or encyclopaedias during the seventeenth century. Further increasing during the eighteenth, this demand was satisfied by ever more ambitious ventures (Chambers’ Cyclopaedia, Zedler’s Universal-Lexicon, and others). All of these were surpassed by the great French Encyclopédie (from 1751 on), 26 which, among other things, excelled the other works of its type and time by the number and quality of its articles on economic subjects. But it is mentioned here for an entirely different reason: whoever believes at all in the concept of the ‘spirit’ of an age will be inclined to look upon the Encyclopédie as the very incarnation of the eighteenth-century spirit. So far as this is correct, the work itself is an important part of the cultural background of which we are trying to reconstruct some patches. But how far is it correct? Like all encyclopaedias of such range, this one contained articles that differed widely not only in quality but also in point of view. The economic articles referred to, for instance, were written by writers as far apart from one another as were Quesnay and Forbonnais, while the bulk of the articles—physics and technology were particularly attended to—left no scope for difference of point of view in the philosophical or political sense. Nevertheless, the strong personality of the editor-in- chief, Diderot, succeeded in imparting some uniformity to what was called the Tower of Babel by hostile critics. In order to realize this, it is sufficient to name a few of the leading members of the circle that gathered round Diderot: d’Alembert, Voltaire, Condorcet, Holbach, Helvétius—all vowed to the service of la raison in the particular sense in which it meant enmity to the Christian faith and especially to the Catholic Church. With varying measures of reserve, the opportunity afforded by the articles on history, philosophy, and religion was exploited for purposes of propaganda in that respect. But this was all. In other respects not much uniformity was either aimed at or achieved. The philosophy is mainly empiricist, but not wholly so. The politics reflects the opinions about state, public administration, and policy that were carried far beyond the specifically encyclopaedist circle. Beyond this there was no definite program. In particular, there was no revolutionary program: those intellectuals no doubt had their dig at the regime of Louis XV and occasionally aimed at its special features; on the whole, however, they felt too comfortable to long for a violent upheaval; some of them saw points in the enlightened 25 This scheme, very obviously, points forward toward Hegel and, less obviously, toward Husserl. This fact explains both his comparative failure in his own day and his success after nearly two centuries. But it should not be allowed to obliterate the purely analytic aspects of his work which parallel (i.e. anticipate) some feature of the less spacious and profound work of Montesquieu, especially as regards emphasis upon environmental factors. 26 The reader will find more than enough information in the Encyclopædia Britannica’s article ‘Encyclopædia.’ The scholastic doctors and the philosophers 133 despots of their time who reformed—and paid well; those who lived to witness the realities of revolution were not very happy about it. Thus, though it remains true that the great French venture may be taken as a symbol of an important current of thought, its importance for us is not as considerable as it seemed to its contemporary enemies, who insured its success by fighting it. There is one point, however, that should be emphasized or emphasized again (see above, sec. 5), namely, the relation of the thought of the encyclopédistes to that of the seventeenth-century philosophers of natural law. The teaching of the latter fared quite well at the hands of the former. The encyclopédistes—and all the writers whom this term, in a wider sense, may be said to cover—did not always give credit to the philosophers as they should have done. But they displayed no hostility to the natural-law system and in fact developed its ideas. Nor is this surprising. Was not natural law derived, by reason, from human nature and hence the very embodiment of their own program? And the Natural Rights of the philosophers were, of course, thoroughly to their taste. The religious barrier hid from them the true origin of these ideas: they could not have quoted St. Thomas’ statement that the natural law was rationis regula. But no such barrier existed in the case of the philosophers who were, at least, no Catholics. And so the encyclopédistes, within and without the volumes of the encyclopaedia, and many other men, such as Quesnay, who were not encyclopédistes in the strict sense (even if they were contributors), continued to use the philosophers’ analytic schema and, sometimes, even their most dubious arguments. Quesnay’s ordre naturel would be recognizable as an offshoot of the natural-law stem, even if Quesnay had never written his article on droit naturel. The Abbé Morellet, an ardent free trader, was quite content to argue that, since man is naturally free and since this implies that he can buy and sell where he pleases, protection stands condemned for violation of natural law—which argument occurs also in other writings of the time and must evidently have impressed some people, 27 a most interesting comment upon the age of reason. [(f) The Semi-Socialist Writers.] It has been stated that, as a body, the encyclopédistes were not politically revolutionary. Neither were they socialists. The equalitarianism of the time—both normative and analytic—suggested the criticisms of inequalities, especially great inequalities, of wealth that we find in Helvétius and many other writers. And the obvious weaknesses of natural- law philosophies about the natural right to property that were expounded either on the lines of Locke or in the special form adopted by the physiocrats (see below, ch. 4), invited criticism that sometimes went from attack upon particular arguments in defense of property to attack upon property itself. But though the historian of socialist ideas is no doubt able to compile a lengthy list of socialist or communist or near-communist 27 The Abbé André Morellet (1727–1819) was, it is true, a very minor light among the encyclopédistes—not more than an effective pamphleteer. We need not mention his economic works. But he is interesting as a type, which is why perusal of Lytton Strachey’s essay on him has been recommended above. However, he collected materials that went into Peuchet’s Dictionnaire History of economic analysis 134 universel de la géographie commerçante (1799–1800), which is an important link in the long chain of economic or semi-economic dictionaries. publications that were not without influence on nineteenth-century socialism, the historian of economic analysis has little of interest to record: he can only agree with Karl Marx’s opinion about that literature. It should be observed, however, that socialist or semi-socialist writers, when arguing against conclusions drawn from natural-law premisses by natural-law methods, almost invariably used these premisses and methods themselves. Thus, exactly as the votaries of la raison fought scholasticism while remaining its pupils so far as methods and results of analysis are concerned, so the socialist or semi-socialist writers of the eighteenth century remained natural-law philosophers in their way of thinking: the concepts of natural law and of natural rights were quite capable of serving opposite practical aims, and few if any writers thought of attacking the method they embodied. Rousseau, Brissot, Morelly, and Mably are illustrative examples. For the sake of convenience, we add here a very different figure, Godwin, whose only contribution to economic analysis will, however, have to be considered later. J.J.Rousseau (1712–78), in spite of his glorification of the natural state of society and of equality, can hardly be called a socialist—he was typically what our term ‘semi-socialist’ is meant to convey. But neither can he be called an economist. His article on political economy in the Encyclopédie contains next to no economics. His essay on the origin of inequality (1755) is not a serious effort to account for the phenomenon. In particular, despite some superficial similarities in phrasing, he was not a physiocrat or a forerunner of the physiocrats. Such ideas as he entertained on economic subjects were, however, of considerable influence with the public. J.P.Brissot de Warville (1754–93), a Girondist politician executed in 1793, holds a place among reformers of criminal law. The work relevant for our subject, the Recherches philosophiques sur le droit de propriété et sur le vol…(1780), is pure natural-law speculation of the kind that made later critics of natural-law sociology and economics completely overlook its serious achievements. The nonexistence of the right to private property is the thema probandum. Brissot seems to have been unaware of practically all the realistic and really damaging arguments that may be forged against it. The doctrine that Property is Theft, made famous in the nineteenth century by Proudhon is the centerpiece of the book. Morelly’s Code de la nature (1755) is a program of full-fledged state communism of considerable merit: it presents, in minute detail, solutions of the practical problems of the structure and management of a communist society, many of which turn up, mostly without acknowledgment, in the nineteenth- century literature of socialism and most of which reflect a sober sense of ‘workability.’ The doctrine, much more often implied than frankly stated, that all the deviations from normal behavior that are felt to be immoral are caused by the conditions of life in capitalist society, was, so far as I know, first stated in this book. We cannot go beyond pointing out that this book, too, is pure natural-law philosophy: strictly state-controlled communism is The scholastic doctors and the philosophers 135 the form of existence that corresponds ideally to natural laws discerned by reason. Gabriel Bonnot de Mably (1709–85), though he was not a communist from the beginning, and though in the end he resigned himself to practical programs that did not go beyond rather commonplace reforms, must also be classed as a straight communist on the strength of the implications of the only work that can be mentioned here, Doutes proposés aux philosophes économistes sur l’ordre naturel et essentiel des sociétés politiques (1768). This work contains an elaborate attack not only upon the physiocrat theory of private property but also upon private property itself, which is held to be an almost unmixed evil. But though one-sided and otherwise defective analysis, Mably’s argument is still analysis of facts and not merely a discussion of ‘rights.’ The theory that property in land is the ultimate cause of all inequalities of wealth— repeatedly espoused in the nineteenth century and, by F.Oppenheimer in the twentieth—may be wrong, but is still an analytic proposition or theory. The authors mentioned as well as many others have received considerable attention from historians of thought, including economists primarily interested in the history of thought. See, for example, A.Lichtenberger, Le Socialisme au XVIII e siècle (1895). The French ideas of the Enlightenment were good sailors (crossing the Channel easily), the more so because they had important English— especially empiricist and associationist—roots. High above the common run of enthusiasm rose the book that is to represent this literature for us, William Godwin’s Enquiry concerning Political Justice (1793). It is only semi-socialist and even this only by virtue of its dogma that property in the product of other people’s labor is ‘unjust.’ Perhaps those are right who, on the strength of Godwin’s extreme distaste for violence and compulsion of any kind, class him as an anarchist. In any case, the view of human nature, according to which man’s mind is a blank—but indefinitely perfectible—to be filled in by experience conditioned by social institutions has hardly ever, before or after, been made to serve absolute equalitarianism so uncompromisingly. Godwin was indeed goaded into doing a piece of analytic work by the attack of Malthus. But his work itself is essentially nonanalytic and therefore beyond the range of scien- tific criticism. It expounds a creed that is impervious to argument and at the present time counts more adherents than it ever did. [(g) Moral Philosophy.] All the facts presented above about eighteenth-century thought go to show that the natural-law approach to sociology and economics held its own to a considerable extent and that the notion that a new ‘experimental’ spirit rose victoriously against it—or else that the cult of la raison was something fundamentally new—is as illusory as is the analogous notion that the work of the seventeenth-century philosophers of natural law spelled a violent break with scholastic analysis. In other words, these facts teach a lesson of continuity in development. Nevertheless, the natural-law system of thought History of economic analysis 136 disintegrated or, at least, underwent a transformation. We know that, originally, it had been a system of jurisprudence and that all nonlegal material had been fitted into the legal framework in an ancillary role. But in the eighteenth century, the increase of this material and the addition of new fields of research burst that framework. From having been in the position of a governing holding company that unified and co-ordinated everything, ‘natural jurisprudence’ became merely a specialty of a new comprehensive unit that was no longer primarily legal in character. 28 This new unit was called, especially in Germany and Scotland, Moral Philosophy—the word philosophy being taken in its old sense of the sum total of sciences (St. Thomas’ philosophicae disciplinae), so that, roughly, moral philosophy means the social sciences (the sciences of ‘mind and society’) in contrast to Natural Philosophy that denoted the physical sciences plus mathematics. It was the subject of a standard course offered within the university curricula and consisted, mainly, of natural theology, natural ethics, natural jurisprudence, and policy (or ‘police’) which included economics and also public finance (‘revenue’). 29 Francis Hutcheson, the teacher of A.Smith, was professor of moral philosophy in this sense at the University of Glasgow, and so was A.Smith. Both the Moral Sentiments and the Wealth of Nations are blocks cut out from a larger systematic whole. Thus the old universal social science of the scholastic doctors and of the philosophers of natural law survived in the new form. But not for very long. Though the moral-philosophy course figures in university curricula even in the first half of the nineteenth century—universities are conservative—it was rapidly losing, in most places, its old meaning and position toward the end of the eighteenth. This was due to the same cause that burst the natural-law system. The accession of material in the individual branches of moral philosophy tended to bring them into the hands of specialists, every one of whom had inevitably to concentrate on his own branch and to neglect both the other branches and the comprehensive principles. This applies with particular force to economics because in this case the new material came from outside (see next chapter). It is highly significant that A.Smith found it impossible to do what Hutcheson had done as a matter of course, namely, to produce a complete system of moral philosophy or social science at one throw. The time for doing this had passed: absorption of the new material—both facts and analyses—had become a full-time job. As long as this absorption was not consummated, the little body of scientific economic knowledge that had been inherited from the scholastics and nursed along by the philosophers of natural law retained not only independent existence but also a distinctive character of its own. Owing to the greater intellectual refinement of the men who had created it, and to their detachment from the immediately practical issues of economic policy, their economic analysis was different from the analysis of other people. Beholding it we cannot fail to notice more correct formulation of fundamentals and a wider view of practical problems, both anticipating much later opinions. But so soon as that absorption was consummated, we naturally lose sight of it, though we do not lose its contribution. This happened, roughly speaking, between 1776 and 1848: the latest natural-law system, utilitarianism, getting under sail when the economic specialists had established their claim to autonomy, was not, as were its predecessors, able to exert effective control over them. The scholastic doctors and the philosophers 137 28 As we already know, the Historical School of Jurisprudence was very hostile to this natural jurisprudence and saw nothing in it but entirely unscientific speculation. This view was very influential; it was in fact from the lawyers of this school that people learned to despise everything that was in any way connected with the concept of natural law. It should be repeated, however, that this view, while quite understandable considering the abuse of the idea of natural rights of all kinds, neglects an important nonspeculative core of natural-law analysis. The natural jurisprudence of which I speak in the text was an inadequate but still scientific theory—or general logic—of law for which it is possible to make out a case similar to that which can be made out for economic theory. 29 The contents of the course varied, however. Also, the division of all sciences into moral and natural philosophy was neither complete nor invariable. Pure philosophy in the narrow sense stood outside and so did logic, philology and literature, history, and other fields. History of economic analysis 138 CHAPTER 3 The Consultant Administrators and the Pamphleteers 1. MORE FACTS FROM SOCIAL HISTORY WE KNOW ALREADY that, as the eighteenth century wore on, economics settled down into what we have decided to call a Classical Situation, and that, mainly in consequence of this, it then acquired the status of a recognized field of tooled knowledge. But the sifting and co-ordinating works of that period, among which the Wealth of Nations was the outstanding success, did not simply broaden and deepen the rivulet that flowed from the studies of the schoolmen and of the philosophers of natural law. They also absorbed the waters of another and more boisterous stream that sprang from the forum where men of affairs, pamphleteers, and, later on, teachers debated the policies of their day. In this chapter we shall take a bird’s eye view of the various types of economic literature produced by these debates, reserving for subsequent chapters fuller treatment of works and topics that seem to require it. This literature is not a logical or historical unit. The men who wrote it, unlike the philosophers of natural law, form no homogeneous group. Nevertheless there is a link between them all which it is necessary to emphasize: they discussed immediately practical problems of economic policy, and these problems were the problems of the rising National State. Therefore, if we are to understand the spirit that animates those writers, their lines of reasoning, the data they took for granted, we must for a moment digress into the sociology of those states whose structure, behavior, and vicissitudes shaped European history—thought as well as action—from the fifteenth century on. The important point to grasp is that neither the emergence nor the behavior (‘policies’) of those states were simply manifestations of capitalist evolution. Whether we like it or not, we have to face the fact that they were the products of a combination of circumstances that, viewed from the standpoint of the capitalist process as such, must be considered as accidental. 1 1 Like all theorists, theorists of social history are reluctant to admit not only the importance of causal factors other than the ones emphasized by their own theories but also the importance of chance in the evolution of actual patterns. But the historical processes that produced the situations, created the problems, and shaped the attitudes reflected in that literature cannot be interpreted as many observers, Marxists especially, would like to interpret them, viz., as effects of the rise of capitalism. Even so far as they are traceable to capitalist evolution, they worked out in a way that differed radically from that prescribed by either capitalist interests or the capitalist mind. Let us note in passing how important this is not only for our own limited purpose but also for our diagnosis of the nature and modus operandi of the capitalist system in general—and even for our philosophy of history in general. [(a) Incidental Factors in the Emergence of the National States.] First, it was an accident that the rise of capitalism impinged upon a social framework of quite unusual strength. ‘Feudalism’ no doubt gave way, but the warrior classes that had ruled the feudal organism did not. On the contrary, they continued to rule for centuries and the rising bourgeoisie had to submit. They even succeeded in absorbing a great part of the new wealth for their own purposes. The result was a political structure that fostered but also exploited the bourgeois interest and was not bourgeois in nature and spirit: it was feudalism run on a capitalist basis; an aristocratic and military society that fed on capitalism; an amphibial case very far removed from bourgeois control. This pattern produced problems and—‘militarist’—angles from which to look at them, which were completely different from what the mere logic of the basic process would lead us to expect. 2 Thus, for the majority of economists, monarchs that were primarily warlords and the class of aristocratic landowners, remained the pivots of the social system as late as the middle of the eighteenth century, at least on the continent of Europe. The reader should therefore apply the requisite qualification to what he has read in the preceding chapter on the increasing social weight of the bourgeoisie. Also, it was an accident that the conquest of South America produced a torrent of precious metals. The growth of capitalist enterprise might presumably have been expected to produce inflationary situations in any case, but this torrent made a lot of difference to the course of events. In a way that is too obvious to need elaboration, it speeded up capitalist development, but much more important are two other facts about it that point in the opposite direction. On the one hand, this access of liquid means greatly strengthened the position of those rulers who were able to get hold of them. Under the circumstances of the times, this conferred a decisive advantage in the planning of military ventures on lines that often, as for instance in the case of the Spanish Hapsburgs, were quite unconnected with bourgeois interests in the component parts of their farflung empire or with the logic of the capitalist process. On the other hand, the price revolution that ensued 3 spelled social disorganization, and hence was not only a propelling but also a distorting factor. Much that might have been gradual change, if nothing but the basic process had been at work, became explosive in the feverish atmosphere of inflation. Particular notice must be taken of the effect on the agrarian world. By the time that inflation set in, the greater part of the dues that continental peasants owed to their lords 2 I tried to illustrate this by a short analysis of an outstanding instance, the state of Louis XIV, in Capitalism, Socialism, and Democracy, ch. XII. 3 This price revolution set in before the impact of the new gold and silver had made itself felt, and was at no time a function of their inflow alone. For our purposes, however, the popular opinion that it was may be allowed to stand as an approximation. History of economic analysis 140 had been converted into terms of money. With the purchasing power of money rapidly falling, the lords attempted in many countries to raise the monetary values of those dues. The peasants resisted. Agrarian revolutions were the consequence, and the revolutionary temper thus engendered was an important factor in the political and religious upheavals of that epoch. But, owing to the strength of the top feudal stratum, these revolutions did not, as we might have expected, accelerate social developments in accordance with the basic process. The risings of the peasants and of the other groups that had revolted in sympathy were put down with ruthless energy. The religious movements met with success only so far as they were sponsored by the aristocracies and in the most important cases quickly lost such social or political radicalism as had been originally associated with some of them. Princes and barons, armies and clergies, emerged from the trial with enhanced prestige and power whereas the prestige and the political power of the bourgeoisie declined, especially in Germany, France, and Spain. The great exception, on the Continent, was the Netherlands. A third historic event of prime—and lasting—importance was the breakdown of the only effective international authority the world has ever seen. As has been pointed out, the medieval world was a cultural unit and, in principle at least, professed allegiance both to the Empire and to the Catholic Church. Although widely different views were held as to their true relation to one another, these two together formed a supernational power that was not only ideologically acknowledged but also politically invincible so long as they were united. According to the traditional view, this power was bound to wane as soon as the acids of capitalism began to dissolve the basis of medieval society and its beliefs. This is not so. Whatever those acids might have eventually done to that dual power, they had nothing to do with the actual breakdown that occurred long before those beliefs were impaired, simply because of the fact—which, from the standpoint of the basic process, was again accidental—that, for reasons which cannot be analyzed here, the empire was unable either to accept the supremacy of the Popes or to conquer them. A prolonged struggle that shook the Christian world to its foundations ended in a Pyrrhic victory of the Popes in the time of Frederick II (1194–1250). But in this struggle both parties had so thoroughly exhausted their political resources that it is more correct to speak of a common defeat of both: the Popes lost authority, the empire disintegrated. In consequence medieval internationalism was at an end and the national states began to assert their independence from that supernational authority which had been formidable only so long as the Roman church co-operated with the ‘temporal sword’ of Germany. 4 4 Perhaps it is misleading to stress the national element in this change. Though it shows well enough in the most important cases, those of France, Spain, and, earlier than anywhere else, in England, the true nature of the phenomenon will be more clearly visualized if we take account of the fact that in Germany and Italy, the countries that had been immediately subordinated to the imperial power, such states or ‘principalities’ emerged on a nonnational basis: it was not, at first, national feeling that welded those units but rather the interest of feudal princes who were strong enough to organize, to defend, and to rule a territory. Frederick II’s own kingdom of Naples and Sicily is the earliest example, the Prussian state of another Frederick II the most telling. Popular support that might be linked up with capitalist interests and national sentiment came later and was The consultant administrators 141 . Said Ibn Khaldun (1332–1406; see de Slane’s French trans. of the first introductory part of his history, 186 3–8, all I know). The only work of Vico’s that need be mentioned specifically is Principii. namely, the relation of the thought of the encyclopédistes to that of the seventeenth-century philosophers of natural law. The teaching of the latter fared quite well at the hands of the former the natural-law system of thought History of economic analysis 136 disintegrated or, at least, underwent a transformation. We know that, originally, it had been a system of jurisprudence and