Lewis Haney, History of Economic Thought; A Critical Account of the Origin and Development of the Economic Theories of the Leading Thinkers in the Leading Nations

THE

LIBRARY

OF

THE

UNIVERSITY

OF

CALIFORNIA

RIVERSIDE

GIFT

OF

Dr.

Gordon

Watkins

NEWYORK BOSTON CHICAGO SAM FRANCISCO

MACMILLAN

& CO., LIMITED LONDON BOMBAY CALCUTTA

MELBOURNE

THE MACMILLAN

CO. _{OF CANADA,} LTD.

HISTORY

OF

A

CRITICAL

ACCOUNT

OF

THE

ORIGIN

AND

DEVELOPMENT

OF

THE

ECONOMIC

THEORIES

OF

THE

LEADING THINKERS

IN

THE

LEADING NATIONS

BY

tvV^

LEWIS

H^HANEY,

PH.D.

ASSOCIATE PROFESSORAND CHAIRMAN OF THE SCHOOL OF

ECONOMICS OF THE UNIVERSITY OF TEXAS

AUTHOROF"ACONGRESSIONAL HISTORYOF RAILWAYS"

THE

MACMILLAN

COMPANY

1913

H675

S

COPYRIGHT, 1911,

BY

THE

MACMILLAN COMPANY.

Setup andelectrotyped. Published June,19x1. Reprinted

April,1913;July,

1913-NorfaooB

J. 8._GushingCo. Berwick<feSmithCo.

ITis the

aim

of this

book

to_presenta criticalaccountof the

whole development of _{economic thought} in _{the leading nations} of the Occidental world; and, while keeping the purely

eco-nomic

_viewpoint, to indicate

some

of the

most

_important

rela-tions of economic thought with _philosophy

and

environmental

conditions.

As

it is _designed to serve as a text-book for the

growing

number

of advanced students

who

study the history of _{Economics, every} effort has been

made

to _give a fair

and

well-rounded account of the _thought of the _leading writers,

avoiding the emphasis of

some

_{newlydiscovered point or}

inter-esting but obscure writer which

would

characterize a

mono-graph.

Doubtless therewill be

some

difference of _{opinion over the}

relative _space here devoted to the different economists,

and

some

cases of omission or bare mention will be criticized.

It should therefore be stated that a twofold test has been the

basis of selection in this _regard: _first,

what

has beenthewriter's

effect

_upon

thestream of_{economic thought}? _next,

what

impor-tant _point in _theory has he _{originated or developed?} If his

contribution has been both _discovery in _theory

and

a _profound

effect

on

his _{contemporaries,} then he deserves considerable

discussion.

These

two phasesof_importance

do

_{not necessarily}

go together, as the experience of Lloyd, Gossen,

and

others

bears witness.

In_{covering so vast a} field it has

seemed

desirable to

stand-ardize the

method

of treatment to

some

extent. _Accordingly,

the _{general plan} of _procedure in _{dealing with} an individual

economist has been first to _{indicate briefly the pertinent} cir-cumstances of his _environment, bothobjective and subjective;

then to discuss his _{economic thought under} the heads ofvalue

state-ment

_{of his logical}

method and

_philosophy. But this_procedure

has not been _rigidlyadhered to,omissions being

made

in the

case of the less _important writers

and

additional points

devel-oped

in othercases.

_Any

_{noteworthypoint} which is associated

with an economist's

name

has _generally received attention.

In a word, value

and

distribution have

been

_{emphasized, but} are far_{from being the onlytopics treated.}

Some may

be inclined to criticize the relative _{space given}

toSocialism. Ithas been

common

for French writers todevote

a

much

_larger share of their attention to this _subject, while

our

most

available _{English work, Ingram's History of}Political

Economy, leaves it_virtually undiscussed.

The

writer has taken

a middle ground, merely presenting a short sketch of thechief

socialistic criticisms of theclassical _{English economic thought.}

More

comprehensive accounts of the _developmentof Socialism

are readily available in _English.

Finally, itwillbe observedthatafter

Adam

Smiththe

chrono-logical development of _{the subject}has been sacrificed to

some

extent for the sake of a

more

_{topical arrangement.} It is

believed that the _{analysis followed} will lend far

more

to the

interestand _{intelligibility}of _{the history}than would be _required

to offset thissacrifice.

It is _perfectly obvious that no writer of a

book

of this kind

can have read _carefully

and

_completelyall the works he

men-tions. Life is too short. _Moreover, so to read would be a

waste of time, even if life were _longer. It would _{take years}

to read all the works of all the minor

French

and

German

authors referred to in_{the period 1800-1850,}

and

would be_folly

at the

same

time.

Works

of this kind can sometimes be

"

sampled." Traditional views,too,

_may

often be tested in the

same

_way.

The

writer has endeavored to _{form independent}

judgments in _every case, and where traditional views are

pre-sented it is because _{they are believed} to be correct.

He

has

been far _{from opposing}a _{view simply because} othershave held

it. In the case of the majorwriters,

what

is essential hasbeen

read,

and some

of the important books have been gone over

again

and

again.

The

essential part of the views here

discovered _they will be corrected in future editions,

and

the

author will _appreciate the kindness of readers

who

will call

his attention to errors.

He

realizes that,especially inthe

treat-ment

of recent _{thought, the range} is so close that _accuracy

and

justperspective are verydifficult ofattainment.

In

_making

_recognition of the aid which he has received,

the writer wishes first of all to

make

clear the extent of his

obligation tothe editor,ProfessorRichardT. _Ely.

The

present

work

falls but little short of _{being a} joint product. Indeed,

it is _{only the magnanimity} of Dr. _Ely

which

has altered the

original intention topublish it as such.

Some

_{twenty-five years}

ago,

when

teachingat _Johns

_Hopkins

_{University, ProfessorEly}

prepared a _{history of economic thought} for publication; but

he withheld it for further work,

and

since that time has

made

numerous

additions. Five _{years ago, while the writer}

was

an

instructor in the State Universityof Iowa, Professor Ely

pro-posed to

him

that he take this old

and

incomplete manuscript

and so reviseit that it _{might be published} under their joint

authorship.

Meanwhile

the writer

had

been lecturing on the

same

_subject, so that his lecture notes were

combined

with

parts of Dr. Ely's manuscript to

make

_{the present work, the}

composition being conducted independently

by

him.

The

various _chapters were submitted to Professor _{Ely from time}

to time,

and

he

made

suggestions concerning style

and

matter.

Furthermore, during the

summer

of _1910, Professor _Ely

went

over the

work

in conference with the writer,

and

the discussions

of that time resulted in additions

and

_{improvements.} Both

directly

and

indirectly, therefore, Professor Ely's part has been

an _{important one.}

The

chapters on Carey, Bastiat,

and

List

are _largelyhis, alsoparts ofthe one

on

Mill,

and

his first-hand

familiaritywith the

German

Historical School has enabled

him

to

make

_{valuable suggestions} on that subject.

At

a fewpoints,

no doubt, even traces of his _language

_may

remain. Yet

_upon

Dr. _{Ely's suggestion}

and

advice, in view of the _predominance

of _independent

_{work by}

the writer in _{matter, composition,} and arrangement, it has been decided to _publish the

book

under

the latter's _single name. _Accordingly, the writer wishes to

present friend: in the first _place, for _{stimulating the}

produc-tion of this

work

as hehas so

_many

others; secondly, for

many

direct _{suggestions as} to _{style and emphasis}; and, _finally, for

a host of _{indirectly acquired ideas}

and

stimuli without which

the

book

would lack

_many

of such merits as it

_{may now}

possess.

He

assumes full _{responsibility for} the weaknesses

and

errors,

while he feels that an _{unusually large degree} of credit is due

the editor.

The

writer also wishes to gratefullyacknowledgethe receipt

of valuable criticisms from the _following economists: F.

M.

Taylor, of the _University of _Michigan; F.

W.

Taussig

and

T.N.Carver,of

Harvard

; I.A. Loos,ofthe UniversityofIowa;

C. _{C. Williamson,} of _Bryn

Mawr

; L.

M.

Keasby, of the

Uni-versity of

Texas

; J.

H.

Hollander, of Johns

Hopkins

;

and

David

Friday, of the University of Michigan.

He

is indebted

to these _friendly critics in the order

named,

his _{thanks being}

especiallydue to Professor F.

M.

Taylor,

who

read several of

the chapters in _{the manuscript.} Professor A.

H.

Lloyd, ofthe

UniversityofMichigan,

was

consulted on points in Philosophy,

and

made

several _{valuable suggestions.} Without the efficient

assistance given

by

his wife in _reading

and

correcting

manu-script

and

proof, the publication of the

book

at thistime would

have been _impossible.

LEWIS

H.

HANEY.

AUSTIN, TEXAS,

PAGE

A.

GENERAL

INTRODUCTION

I

I. NATURE AND IMPORTANCE OFTHE HISTORY OFECONOMIC

THOUGHT ₃

II. ORIGIN ANDTARDY DEVELOPMENTOF ECONOMICTHOUGHT ₁₅

B.

ECONOMIC

THOUGHT

BEFORE

THE

SCIENCE

OF

ECO-NOMICS

21

I. ECONOMICTHOUGHT OF THE ANCIENTS

....

22

II. MEDIAEVAL ECONOMIC THOUGHT 67

III.

THE

DAWN

OF

MODERN

ECONOMIC THOUGHT:

MERCAN-TILISM AND KAMERALISM ₈₅

C.

THE

EVOLUTION OF ECONOMICS

AS

A

SCIENCE

. ₁₃₁

I.

THE

FOUNDERS 132

II.

THE

EARLIER FOLLOWERS 190

1. PessimisticTendencies 190

2. _OptimisticTendencies

...

₂₃₇

3. OtherExpositors 262

III. OPPONENTSAND LEADING CRITICS ₂₉₁

i. The_{Philosophical}andEthical_System . . . ₂₉₂

IV.

THE

RESTATEMENT: MILL 344

V. OPPONENTS AND LEADING CRITICS _{Resumed} . . . ₃₇₅

1. The_{Philosophical}andEthicalSystem (Resumed) . ₃₇₇

2. The Method ₃₉₄

3. TheLogic 422

VI. ATTEMPTS AT RECONSTRUCTION 446

1. Earlier_Developmentsof_{the Marginal-utilityConcept}. ₄₄₈

2. TheAustrianSchool 461

D.

GENERAL

ACCOUNT OF RECENT LEADING SCHOOLS

OF

ECONOMIC

THOUGHT

477

I. GERMANY AND ITALY ₄₇₉

II. ENGLAND AND FRANCE

'

. ₄₉₄

III.

THE

UNITED STATES ₅₁₁

A.

GENERAL

INTRODUCTION

PACK

PREFACE

...

v viii

CHAPTER I. NATURE AND IMPORTANCE OF THE HISTORY OF

ECO-NOMIC THOUGHT _3-14

Scopeof the Subject Relation to Industrial History Reasons

for_Studyingit _{UnderlyingPhilosophies, Materialism, Idealism}

Method,Inductive,Deductive,Statistical Absolutismin_Thought

Comte's_Stages.

CHAPTER II.

THE

ORIGIN AND TARDY DEVELOPMENT OF ECONOMIC

THOUGHT 15-20

OrigininMoralCodes Reasonsfor_{TardyDevelopment}; Sub-jective,Objective.

B.

ECONOMIC

THOUGHT

BEFORE

THE

SCIENCE

OF

ECONOMICS

I.

ECONOMIC

THOUGHT

OF

THE

ANCIENTS

CHAPTER III. ECONOMICTHOUGHTOFTHEHEBREWS AND HINDUS _23-38

Generalizations concerning OrientalsLimited Reasons forthe

Chapter Economic Thought found in Rules ofConduct, Laws,

etc. Usury Commercial Regulations and Just Price Labor

and Caste Agriculture Favored Seventh and _JubileeYears

Summary Generalizations: _Simple Social _{Philosophy, Religion or}

Morals _Dominant, Minute Regulation, Conflict with Economic

Stimuli, FixityandConservatism, Conceptof Society.

CHAPTER IV. ECONOMIC THOUGHT OF THE ATHENIAN

PHILOSO-PHERS . _39-53

Origin of the State; First Economic_{Interpretation ofHistory}

Division ofLabor TheSocial_ViewpointTaken Inheritance

Population Communism Scopeand Classification ofAristotle's

Economic _Thought, Oikonomik, Chrematistik, Natural Uses

FACE

Value _Money and Interest _Industryandthe _Various

Occupa-tions Attitudetoward Riches EthicsDominant Contrast with

Hebrews andHindus.

CHAPTER V.

ROMAN

ECONOMIC THOUGHT _54-66

General Characterization _{Economic Thought} of the Jurists;

Natural Law, Private _{Property and} Contract,Money and Interest

The_{Philosophers; Ethics,}Interest _{Agriculture the only}

Honor-able Industry Quietism Writers on _Agriculture, Lati furufia, Slavery Roman Ideas on Value Regulation of _Industry and

Commerce Influence ofRomanThought Division ofLabor

Appendix: _{Quotations from}Writerson

Agriculture.

II.

MEDIEVAL

ECONOMIC

THOUGHT

CHAPTER VI. ECONOMIC THOUGHT OF THE MIDDLE AGES . _69-83

The Period Defined Germanic Contributions Christianity

andtheChurch Scholasticismand CanonLaw Value andJust

Price _Usury Economic Functions of the State Monasteries

Economic Thought of Medieval Townsmen General

Signifi-canceofthe Period.

III.

THE

DAWN

OF

MODERN

ECONOMIC

THOUGHT

CHAPTER VII. MERCANTILISM _87-112

Preliminary Definition ofPeriodand Doctrine Economic

Con-ditions PoliciesandTheories:_Importanceof"Treasure," Foreign

Trade, Balance ofTrade Idea Means of Insuring a Favorable

Balance _{Practical Applications of}Policies EconomicTheories:

Value, Interest, Population, Wages, Rent, Factors of Production, Productivity of Occupations, Taxation James Steuart, the Last of the Mercantilists CriticalEstimateand Summary.

CHAPTER VIII. KAMERALISM _113-130

Resume of Nature, Scope, and Development Some Typical

Kameralists: Bechers, Hornig, Danes, Justi Significance of Re-galian Rights KameralismandMercantilism; Summary.

C.

THE

EVOLUTION OF ECONOMICS

AS

A

SCIENCE

I.

THE

FOUNDERS

CHAPTER IX.

THE

PHYSIOCRATS AND THE REVOLUTION IN SOCIAL

PAGE

TheForerunnersof the Physiocrats:_{Boisguillebert,}Vauban,

Fene-Ion,Cantillon Forces_{which gave} Rise to _Physiocracy General

Outline of the PhysiocraticDoctrine: Nature_Philosophy,Produit

Netand_{Surplus,Wages}andInterest,SingleTax,Value,Schemeof Distribution, the Tableau Economique Chief _Physiocrats and

their Writings English Followers Opponents Practical

Influ-ence CriticalEstimate_{and Summary.}

CHAPTER X.

ADAM

SMITH, HIS IMMEDIATE _{PREDECESSORS,} AND THE

REVOLUTION IN INDUSTRY _158-189

ImmediatePredecessors: _{Locke,Berkeley, Mandeville,}

Hutche-son, Hume, Tucker, Ferguson, Harris Life and Relations with

the Physiocrats The _{Wealth of Nations} Laborand Division of

Labor Value Classes of Society and their Interests _Wages

Profits and Interest Rent Public Finance Government

Interference; LaisserFaire _Philosophyand Method Practical Influence The "_{Manchester School}"

Critical Estimate of

Wealth ofNations.

II.

THE

EARLIER

FOLLOWERS

1. PESSIMISTIC

TENDENCIES

CHAPTER XI. MALTHUS AND THE THEORY OF POPULATION . 191-211

LifeandCircumstances His Forerunners The_{Essay on}

Popu-lation: itsOrigin and FirstEdition Malthusian _Principleas

De-veloped in Later Editions: _(i) Tendencies of Population and

Subsistence; (2) Diminishing Returns; (3) Checksto _Population

Social Results: the Malthusian_Cycle OtherEconomicViews Critical Estimate of the Malthusian Doctrine _Biographical NoteonEarly Controversies.

CHAPTER XII. RICARDO AND THE THEORY OF DISTRIBUTION,

ESPE-CIALLY THE RENT DOCTRINE _212-236

Life and Circumstances; Chief_Writings The Principles of

Political_Economy: _{Value, Distribution, Rent, Wages,} Profits and

Interest, Ideas on Surplus Philosophy and Method Ricardo's

Followers.

2.

OPTIMISTIC

TENDENCIES

CHAPTER XIII. CAREY AND THE "AMERICAN SCHOOL" . . _238-250

Hamilton _{Raymond Carey's Life}and_Writings HisTheory

of Value Rent Theory of Population Method

PACK

CHAPTER XIV. BASTIAT AND THE FRENCH OPTIMISTS . . 251-261

Life and Writings Economic Harmonies: Value, Interests of

LaborandCapital, LandValues, Population,Government

Interven-tion Bastiatand _Carey Criticism EconomicOptimism.

3.

OTHER

EXPOSITORS

OF

THE

ENGLISH CLASSICAL

POLITICAL

ECONOMY

a. _{In England}

CHAPTER XV. SENIOR AND THE ABSTINENCETHEORY . . _263-269

An

Outline _of Political _Economy The _Scope of Political

Economy Abstinenceand_CapitalFormation Costvs._Expense;

Pastvs.PresentLabor Utility andDemand Monopoly Theory

Theoryof_Wages Increasing Returns Emphasisof the

Sub-jective CriticalEstimate.

b. _{Expositors outsideofEngland}:

CHAPTER XVI. SAY, RAU,AND OTHER CHIEF EXPOSITORS IN

GER-MANY AND FRANCE

...

_270-278

Nebenius, Thunen, Rau, and Others of the German Group

The Services ofthis _{Group Say}: _Arrangement of the Science,

TheoryofMarkets, Value Cournot Dunoyer.

CHAPTER XVII.

THUNEN

AND THE "ISOLATED STATE" . . _279-293

Method and Planof

Work

Rent Price andValue _Wages

and Interest,Marginal ProductivityTheory Tariff; and

Miscel-laneous.

III.

OPPONENTS

AND

LEADING

CRITICS

i.

THE

PHILOSOPHICAL

AND

ETHICAL

SYSTEM

a. Individualistic Critics

CHAPTER XVIII. LAUDERDALE AND RAE:

THE

DEFINITION OF

WEALTH

.'

'

^.' .' .'

...

295-301

Lauderdale Definitions Public Wealthvs. PrivateRiches

HisInfluence Rae Individualvs._{Social Capital} Invention

GovernmentInterference Criticism of Smith'sMethod _Summary.

CHAPTER XIX. SISMONDI:

THE

EMPHASIS OF INCOME AND

CON-SUMPTION . .

.""''

...

_302-312

LifeandWorks Economic Thought:

Scope ofEconomics and

Criteria of Progress, Scheme _{of Distribution,Overproduction} and

Machinery, Population,Reforms Advocated,Exploitation of Labor

b. Nationalist Criticism

PACK

CHAPTER XX. MULLER, LIST, AND CAREY:

THE

EARLY

NATIONAL-ISTS _3*3-329

Miiller; His Views on Protection, the State, Value, Capital,

Criticism of Smith List; His Life, the National System,

Criti-cism of the School, Historical Views, Division ofLabor, Immaterial

Capital, His ownAbsolutism Carey; HisArgument for

Protec-tion _Summary.

c. Socialistic Criticism

CHAPTER XXI. EARLY NINETEENTH-CENTURY SOCIALISM . . _330-343

The _Utopian or _Bourgeois Socialists: Saint-Simon and _the

Saint-Simonists,TheAssociationists,Owen,Fourier,andThompson TheTransitiontoaMore Realisticand Proletarian Socialism in France, 1840-1848: LouisBlanc,Proudhon Summary.

IV.

THE

RESTATEMENT

CHAPTER XXII. _JOHN STUART MILL _345-374

LifeandWorks ThePrinciplesofPolitical_Economy Value

TheSharesinDistribution,Rent,Wages,Profits _Consumption

and Production International Trade Influence of Progress on

Distribution The "Social _Question" Unearned Increment

GovernmentInterference _PhilosophyandMethod.

V.

OPPONENTS

AND

LEADING

CRITICS _(Resumed}

i.

THE

PHILOSOPHICAL

AND

ETHICAL SYSTEM

(Resumed)

CHAPTER XXIII.

THE

FOUNDERS OF "SCIENTIFIC" SOCIALISM IN

GERMANY _377-393

State Socialism: Rodbertus; Labor Productivity, Decreasing

Wage

Share, Rent, DistributiveJustice,TheoryofCrises,Remedies

Proposed,Criticismof Ricardo'sRentTheory Lassalle; Scheme

ofReform,Capitalism, Conjuncture International Revolutionary

Socialism: _Marx; Materialistic Interpretation of History, Capital

and _{Exploitation,Surplus}Value Criticism Opportunist or

Re-visionist Socialism Influence of the Socialists; Primary, Sec-ondary.

a.

THE METHOD

CHAPTER XXIV. CONCRETE-HISTORICAL CRITICISM IN ENGLAND _395-407

Richard Jones: Abstract_{AssumptionsCriticized,}Ricardian Rent

Theory, Method Walter Bagehot: Scope and Method of

to Abstract, a priori Methods, Realism, Class Interests,

Anti-utilitarianism, Negative Characterof his Work _Ingram

Toyn-bee: Relativity of the Classical Theory, Optimism Rogers Summary.

CHAPTER

XXV.

THE

GERMAN HISTORICAL SCHOOL . . . _408-421

Environmental Forces and Forerunners The Older or More

Negative Group: Roscher, Hildebrand, and Knies Roscher's

Program Hegelianism Hildebrand's Criticism Knies on

Ab-solutisminTheory,Criticism of Roscher,OntheNatureofEconomic

Laws The Younger or More Positive _Group: Schmoller The

VereinfurSozialPolitik BOcher Schaffle _Summaryof

Tend-encies General_SummaryandCriticalEstimate.

3.

THE

LOGIC

CHAPTER XXVI. LAUDERDALE AND

HERMANN

: EARLYCRITICISMON

THE THEORYOF CAPITAL, PROFITS, AND VALUE . . . _424-437

Lauderdale's Criticism of theTheoryof Capital andProfits, and his Doctrines of _Consumption andValue The Theories of

Her-mannand OtherGerman Economists on_Capital and Undertakers'

Gains Hermann'sCriticismof the Current Economics _Capital

Rent and _Wages Undertakers' Gains German Industrial Conditions Hufeland, Rau, Hermann, Mangoldt Consumption

Value Conclusion.

CHAPTER XXVII.

THE

DOWNFALLOFTHE WAGES-FUNDTHEORY _438-445

Richard _{Jones, Longe, Writer} in North British Review, Clifie

Leslie,Thornton,Mill'sRecantation, Walker,Taussig. VI.

ATTEMPTS

AT RECONSTRUCTION

CHAPTER XXVIII. EARLIER DEVELOPMENTS OK THE MARGINAL

UTILITY CONCEPT: LLOYD, GOSSEN, JEVONS, AND WALRAS . _448-460

First_Developments: _Condillac,Bentham,_{Craig, Longfield, Lloyd,}

Thomas,Dupuit, Senior Gossen Jevons: Value Theory, Other

Economic Theory Walras Summary.

CHAPTER XXIX.

THE

AUSTRIAN _SCHOOL, AND ESPECIALLY THE DEVELOPMENT OF SUBJECTIVE VALUETHEORIES . . . _461-475

The Austrians and their _{Value Theory: Menger;} Economic

Causation,Utility,Classes ofGoods,PriceLimits Wieser; Source

of Value,Imputation Theory,the Place ofCost Bohm-Bawerk;

Subjective Value, Subjective ExchangeValue, Objective Value, the

Determination of Value, Costs Interest Theories The Later

D.

GENERAL ACCOUNT

OF

RECENT

LEADING SCHOOLS

PAGE

CHAPTER

XXX.

RECENT ECONOMIC THOUGHT IN GERMANY AND

ITALY _479-493

GERMANY AND AUSTRIA: _{Scope and}Subdivision of _Economics,

Method, Schoolsof_{Thought, Value Theory, General}Characteristics

ITALY: Industrial Backwardness, Early Leaders, German

Influ-ence,The YoungerGroup, Recent SchoolsandChiefWriters.

CHAPTER XXXI. RECENT ECONOMIC THOUGHT IN ENGLAND AND

FRANCE _494-510

ENGLAND: Decline of the "Classical "

Economics,Cairnes and

Fawcett, Revival of Academic Economics, Recent Schools and

ChiefWriters FRANCEANDBELGIUM: Dominanceof"Classical"

Economics and Optimism, German Influence, Historical School,

Monopolyof the_AcademyBroken, Socialism, Solidarite Recent

SchoolsandWriters.

CHAPTER XXXII. RECENT ECONOMIC THOUGHT IN THE UNITED

STATESAND ITS BACKGROUND _511-527

The Background for Characteristic American Doctrines

His-tory: to 1860, Protection and _{Optimism; 1860-85,} "Classical"

Economics, Dogmatism; 1885,

New

Problems, GermanInfluence,

MarginalUtility,American EconomicAssociation Present

Condi-tionsandEconomists.

CHAPTER XXXIII. CONCLUSION _528-550

General Resume Continuity and Environment Some Main

Points of Difference in _{Economic Thought}: Ethical Dissent,

Op-timismandPessimism,Various Theoriesof Surplus, Costvs.

Utility,

SubjectiveandObjectiveViewpoints ThePresentandtheFuture:

PhilosophyandMethod, Theory.

BIBLIOGRAPHICAL NOTE 551-556

Chief_{Bibliographical} Sources: _Leading Works on the History

THE

NATURE

AND IMPORTANCE

OF

THE

HISTORY OF

ECONOMIC

THOUGHT

THERE

are at least three different branches of _study

whose

names

contain the _{words History}

and

Economics.

There

is,

on

the one hand,

Economic

History, or Industrial History,

as it is _{frequently called;}

and

on

the _other, there are the

closely related subjects, History of

Economics

and

History of

Economic

_Thought.

The

first concerns itself with _{the history}

of _{commerce, manufactures,}

and

other economic

_phenomena,

dealing objectivelywith the

ways

in which

men

_{gettheir living};

the second

and

third treat _primarily of _subjective matters,

dealing for the

most

part with the ideas

men

have

concerning

economic facts

and

forces.

Now

these last

two have

been _confused,

and

their _logical

relationship is

_commonly

overlooked.

The

history of

econom-icsdealswitha science with a

_body

of classified _knowledge;

it is limited to timesin

which

economic ideas have

become

dis-tinct, unified,

and

organized; it is a _history of systems of

eco-nomic

_thought.

But

the _Babylonians

had

ideas _concerning

interest

and

_mortgages; the Phoenicians thought about

com-merce

and

bills of _exchange; the Greeks wrote on _{the subject}

of division of labor.

Does

the _history of _{economics, then,}

date to such remote times?

_By

no means.

But

_{the history} of _{economic thought}

does,

and

from its _point of view the

un-related_{primitive ideas} of the earliest times arefull of_meaning.

Indeed, tounderstand fullytheorigin

and

growthofthe_science,

the underlying ideas are important.

The

history of economic

4

thought is broader than _{the history} of the science,

and

may

properly be divided into

two

parts, one taking

up

the _origin

and

_development of economic ideas _prior to the existence of

any

distinct

and

_{separate science;} the other _{beginning with}

the rise of Political

_Economy,

or the science of Economics.

The

point of view taken in _{the following pages} is to be the

broader one.

The

subject, the History of

Economic

Thought,

may

be defined as a critical account of the _development of

economicideas, searching intotheir origins, interrelations, and,

in

some

cases, their results.

The

close relationship between economic_history

and

the

his-tory of economic thought is at once to _{be emphasized.}

That

men's thoughts

depend

largely

upon

their _{surroundings,}

no

one

doubts.

And

so it is that economic ideas, to say nothing of

systems of economics, are colored

and

limited _determined,

sometimes

_by

industrial environment.

Thus

the

agricul-tural South believes in free _trade; as manufactures develop,

that belief weakens.

But

this interaction is _reciprocal; for

opinions

and

theories once formed _{are tenaciously} adhered to,

and

_may

become

_{a determining element} in their turn.

The

individualism of the _{laisser-faire}economists

and

statesmen

was

to a great extent the result of industrial evolution; but in its

turn it

became

a condition reacting

upon

industry.

1

The

his-tory of economic _{thought, then,} is

an

essential _part of _general

history, both explaining it

and

_{being explained}

_by

it.

To-day

it is not_{so necessary}to defend the_study of the

His-toryof

Economic Thought

asit oncewas.

Even

now, however,

there are those

who

_deny

the usefulness of _studying earlier

economic_thought.

And

in

_any

caseit will beofvalue tostate

clearly the advantages to _{be expected}

from

_{such a study} as

the present; for the statement

may

make

one's reading

more

purposeful

and

suggest

new

points ofview.

1

ThroughWilliamPittandRobertPeel,forexample,andtheeconomistsof

thedominant Frenchschool. Theformer wereactive inapplyingthelaisser-*

faire doctrine to thecorn laws; the latterdidmuch during thenineteenth

century,bothasgovernmentofficialsandwriters, tobring into practice their optimistic, let-alone theories.

First of all, a certain unity in economic thought is to be emphasized, a unity

which

connects us with ancient times.

Continuity in evolution has been denied,1 but such continuity

can be demonstrated.

Much

of the _difficulty

comes

about through

an

exaggeration of the negative aspect of the

Middle

Ages.

But

soto regarditis _{to misinterpret theperiod, for}the

medieval _{aloofness or quietism implied} a _{positive philosophy}

which

has countedin _{the history} of _thought ina _{positive way.}

Nor

was

this _{period a complete break;} in it were nourished

Greek

ideas _concerning

_money

and

interest,

communism, and

other economic matters, not to mention "nature

philoso-phy," which were

handed

down

to

modern

thinkers.

The

doctrines of the first _{economists concerning} the _importance of

land

and

the beneficent law of nature were

drawn

_{through a}

continuous line of thinkers

from

Plato

and

Aristotle.

As

will

appear further on, moreover, not only

do

Oriental ideas

in-heritedfrom a still

more

remotepast

come

down

to _{us through}

Greece, but through Christianity they

have

exerted a

con-tinuous _{though changing} effect

_upon

the _{economic thoughts} of

men. It is _{logical, then, to begin} a _history like _{the present}

with

some

account of_{ancient thought.}

Again, there is _great value in _{understanding} the _{origin of}a

science, especially one like _economics,

whose

_scope

and

nature

have been under_dispute. For one_thing,it_{gives a truerconcept}

of the_relationship

_among

_sciences,

an

_{important matter} forthe

thinker looking toward the_{properapplication}ofeconomic

prin-ciples.

Through

a study of the _Historyof

_{Economic Thought}

may

be gained a clear realization of _{the position} of

Economics

as a distinct

member

of _{a group} of social sciences: Ethics,

Jurisprudence, Philosophy, Sociology, etc.

While

it is_properly

concerned with man'sefforts _{to get}a _{living in} association with

his fellows, asasocialscienceit isrelatedtootherscienceswhich

deal with

human

wantsor affectthe

_way

men

_get their _living.

To

illustrate one such relationship, it

_may

be observed that

to the extent that

what

is uneconomical _becomes,

on

that

account,

"wrong," Economics

is _directly related to Ethics.

1

6

Economists, as _{practical men,}

must

realize that the economic

sanction cooperates or conflictswith the sanctionsofothersocial

sciences,a factwhichlimitsits_application.

There

is, therefore,

no better

_way

fora studentgrounded ineconomicsto find

him-selfinthewiderfieldof socialsciencethanto_{studythe history}of

economic_thought. Forinthe_beginningsocialscienceswereone.

Purely economicideas

may

be apparenttous,butin earlier times,

the

men who

had

them

did notdifferentiate.

Such

_{having been} thebroad _beginning, one

_may

wonder

if

some

_cycle

_may

not be completed

when

a scientific _synthesiswill _{again bring together}

feelings, desires, property, family,state, justice, law, happiness,

and

_{other concepts}

on

a_{rationally unified basis of}valuation.

Then,thereisthevalueofabroadbasis for_{comparison which}

sucha_{studybrings. Standing}at_{the highest point yet reached,}

after centuries ofeconomicthought,

and

looking

back

over the

path of truth, strewn with fallacies

and

truisms _though it _be,

the student feels his

_judgment

_broadened,

and

a well-balanced

and

reasonable conservatism

_may

fill his mind.

He

is not so

aptto_{be swept}offhis feet

_by

_fads,nortobe

made

confused

and

hopeless

when

controversies ragearound

him

; forhe

knows

that

fads

and

controversies

have

come

and

gone, while asubstantial

body

of economic truth has been _{so established that progress}

must

come, not through revolution, but through evolution.

The

_{conceptof relativity,}the pointofview_accordingto

which

ideasare_{not judged with dogmaticabsolutism,}butare_critically

examined

inthe_{light of}thetimes

and

placesin which they were

formed,

becomes

veryreal. Before

we

cancallmedievalthinkers

blockheads

on

the

_ground

that _they

condemned

_{interest-taking,}

we

must

examinetheir _premises

and

the circumstances ofthose

premises.

Men

being in part creatures of their _environment,

their _thoughtis often _guided

and

limited

_by

the _changing

phe-nomena

with _{which they} are confronted.

Back

of the different _systems of economic _{thought, there}lie

more

fundamental factors which condition

them and

determine

their nature

and

form.

The

more

immediate of these factors

are (I) the underlying philosophy

and

(II) the

method

of the

philosophy

and

the

method form

partof a premiseof the

syllo-gism, asitwere.

One

economistreachesoneconclusion,another

adifferent one.

We

_saytheir_pointsofview weredifferent.

But

eachpointofviewis

made

_up

ofacertainbasal_philosophyoflife

and

a_{closely alliedtendency}toacertain

_methodology

inthought.

Not

the least service of a_history of economic _thought is the

lightitthrows

_upon

this_questionof_viewpoint,

and

itisdesirable

here to sketch thehistorical outlines of_philosophy

and

method

as a

_background

forthe

more

_{detailed historyof strictly}economic

thought

which

is to follow.

I. _Philosophy. Since the fifth _century before _Christ,

two

great philosophies

have

ever opposed

and

reacted

upon

one

an-other: Idealism

and

Materialism.1

Idealists _generally

have

regarded

man

not as a

mere

creature of natural _environment,

but asa

more

orless _{independentforce, capable} ofmolding

na-ture.

These

men

have

_{upheld social activity}

and

institutions

(societism) against individualistic tendencies, opposing society

and

the stateto_egoism.

_They

arethe conservatives. Intheir

ranks

_may

be_{placed Plato}

and

theStoics of_antiquity; the

Neo-Platonists, St. _Augustine,

Thomas

_Aquinas,

and

_Hugo

Grotius,

in the

_{Middle Ages}

;

and

the

German

philosophers, Leibnitz,

Kant, Schelling, Hegel,

and

the

Frenchman, Comte,

of

modern

tunes.

Such

thinkers

have

_{emphasized morality}

and

duty,

opposing the

_good

to the "natural." _Spiritual

and

abstract

considerations.

have

been

uppermost

with them. In a word,

idealism standsforthe

human

element

and

theinstitution.

Materialists,

on

the otherhand,

have

tendedto_regard

man

as

dominated

_by

his natural environment.

_They

have

believed that

man

_qannot

_presume

to dictate terms to nature, therefore

laissez_faire, let _{things alone,} that natural forces

_may

rule.

Pleasure, orutility, gainedlargely throughmaterial _{means, has}

been the center of their_philosophy; though latterly their

con-ceptshave been broadened

by

making

happinesstheir criterion.

The

materialist _{has thought}

most

of the immediate material

1_{These termswillnot be usedin their strict}

metaphysical significance,

butin themore popular sense as indicating ageneral non-technical

8

resultor _utility; butlittleofthespiritual or ideai.

The

great-est material

_good

for _{the greatest}

number

has been hisultimate

test

and

goal.

The

leaders in this philosophy

have

been such

men

as _{the Sophists}

and

_Epicureans in _antiquity;

Hobbes and

Locke

in _early

modern

times;

and

the French Encylopedists,

Jeremy Bentham,

and, in his earlier _thought,

_John

Stuart _Mill,

more

_recently.

This philosophy has generally, as a matter of fact, tended towardindividualism.1

That

is its_logical outcome.

Under

its

sway, individualism

grew

up

in political

and

_{economic thought}

toward the

end

ofthe

Middle

Ages.

The

thought of its

ad-herents has been the ferment that has led to the dissolution of

inherited religious

and

moral systems,

and

the casting off of

outlivedcultures.2

These

_{philosophies represent}

two

sides of

human

social _life,

and

_they constantly react

upon

one another.

_They

have

ever

been interrelated.

_They

are indicative of

what

is _perhaps the

most

fundamental contrast in economic _{theory, that} between

man

and

"nature," labor

and

"

land." Idealism is related to

the institution,

and

isconservative. Reasonable idealists,

how-ever,

do

not uphold the letter,butthe spirit of theinstitution;

and

thus, under changing conditions, material factors enter

throughthedoor_{of realism,}ortheinstitution losesits_efficiency.

The

outsideisletin. It

must

beletinto_{preserve the}institution.

On

the other _{hand, materialism,} in _opposing institutions

and

denying

man's power

to dictate terms _{to nature,}

must

not be thoughtof as _{merely negative}

and

unrelated.

The

negativeis

alwaysrelatedtothe positive. Individualismdoes not

necessa-rily

mean

non-organization. Intheirrelationtooneanother, the

two

_{philosophies are analogous} to

man

and

"_{nature," heredity}

and

environment;

and

each reacts

upon

the other in a similar

fashion.

Incriticism of the

two

_{philosophies,} taken _separately, it

_may

1

Cf. _{Bonar, Philosophy}and Political_{Economy, chapters} on _Epicureans,

Hobbes, Locke, etc. But, on the other hand,

many

phases of socialism

arebaseduponasimilarphilosophy, though perhapsillogically so.

J

be said that materialists overvalue reason

and

_{understanding,}

while idealism rests

on

ideal postulates; that the one takes a

one-sidedviewofmoralforces,whilethe other neglects material

facts; one,

by

undervaluing the concept of society, unduly

re-stricts thefield for social action, while the _other,

_by

_frequently

conceiving of the individual as existing for society, goes to the

other extreme.

Every

thinker, economist or not,

must

at

some

timeor other

putthe questionto himself, is_{your viewpoint}thatofa

material-istoranidealist? _Or,ifthe_attemptis

made

toattainthetruest

viewpoint of all

_by

_{harmonizing the two, the question always}

remains, where shall the linebe

drawn?

II.

Method.

_Broadly speaking, the history of science in

general reveals

two

distinct methods,

two

processes

by

which

truthis _sought.

These

are

_commonly

called inductive

and

de-ductive. There is a

method

whichis neither inductive nor

de-ductive in the technical sense of _{the terms,}

and

which

_may

be

calledthestatisticalmethod.1 _This

last,however,is,inthefinal

analysis, a combination of the first two. Moreover, one can

scarcely follow either

method

to the absolute exclusion of the

other; but rather _they are _{complementary.}

Yet

with

some

economists, deduction so _predominates that their

method

is

1

Schonberg,Handbuch d.Pol. Ok., 3Band 2,p. 206, art. by Riimelin.

Also,Oncken,Geschichte der National Okonomie,p.9, distinguishes(i)"die

exacte oder _{philosophische,} (2) die historische oder besser historisch-sta-tistische,undendlich(3)die historisch-philosophische,

'

welcheeinen

synthet-ischen Character besitzt.'" _{Quesnay, Ricardo,}VonThiinen, Jevons,etc.,

pursuedthefirst

; the Mercantilists,Miiller, List,Hildebrand,etc.,followed

thesecond

; Aristotle,Smith,Marx, and Kantillustratethelast. Rumelin

in the able discussion of this _{point just referred to properly distinguishes}

betweenthe inductiveand the statistical_methods,on the_groundthat the

formerdealswithclassesorkindsofwhichonething or casecanbe takenas

typicalandmadethe basisforinduction,whereasin statisticsasamethod

pluralitiesare dealtwithwhichhavesome distinguishing characterin com-mon, butmaydiffermoreorlessas to other features. Thismakesanalysis necessary. Thus we

may

oppose the statistical method to the inductive or to the deductivemethodtakenalone. It_{seems, however,}that the

dif-ferenceliesin thefactthat thestatisticalmethodcombines both,only thus

10

called deductive,

and

vice versa. In all _times, each

method

appeals to its

own

_type of mind.

As

will _{appear further on, there} has been

much

debate,

es-pecially in

Germany,

overtherelativemeritsofthe

two

methods,

though few, if _any,

now

_deny

that each has its_place. In fact,

the dispute generally sprang fromdifferent ideas asto_{the scope}

and

_completeness ofeconomics.

Thus

those writers

who make

economicsdeal chieflywith suchsubjects as the theoryofvalue

and money,

especiallyifinclinedto_emphasize the_completeness

of the science,

make

large use of deduction.

And

_properly so.

Indealingwith such a question as the incidence of taxation, for

example, observation

and

induction would, until _very recent

times,at least,

have thrown

relativelylittle light.

When,

how-ever, the tendency is to broaden economics

_by

bringing in

political

and

ethical considerations or

making

it an "_applied"

science,thereis a natural inclination toask for

more

facts

and

to use a

more

historical

and

inductive method.

The

deductive or " _isolating"

method

is that

which

works

from

_{the general}to _{the particular orspecial.} Itleads a thinker

tolook withinfor his_{premises, turning}overin bis

mind

his

own

concepts, familiar facts,

and

definitions. _{In a word,} it relies

much

_upon

introspection.

Sometimes

it is maintained

_by

such

thinkers that sufficient _{premises can be}

drawn

from

common

experience; then abstract, unverified

"

natural" _{impulses are}

apt tobe

depended

upon.

Thus

Richard Whately, Archbishop

of_{Dublin, argued}that_political

_economy

needed

no

collection of

facts.1

When,

a

number

of_{years ago, an attempt}

was

made

to

organizeasocietyfor thestudyofeconomic

_phenomena

in

Min-neapolis, the organizer

was

constrained towrite,

"

The

opinion

prevails far too widely that political economists

must

be

mere

doctrinaires,

and must

contendfor

some

setof_opinions

and some

course _{of policy.} Critical _study of

_phenomena

is as _unpopular

as free-thinkingin religion."2

Itis this _{extreme type} of deductive

method

_{that gives}rise

to

what

the

German

economist Knies has called absolutism of 1

Political_{Economy,IX,pp.} 148-150. 1

theory.

God

is _{unchangeable,}

and

so is the _{mind, sometimes}

runs the_{argument, hence} deductions

drawn

fromthe nature of

God

and

the

mind

areofthe

same

absolute character.

_They

are

good

for all _{times (perpetualism)}

and

for all _places

(cosmopoli-tanism). "

Political

_economy,"

said

an

_{English economist}ofa

formergeneration, 1 "

belongs to

no

nation; it isof

no

country;

it isfounded

on

the attributesofthe

human

mind,

and

no

power

can changeit."

And

it

was

suchaspirit

which

ledanother

Eng-lish economist (Torrens) to state that the period of doubt

and

controversy

was

passing away, so that within a _generation all

men

would

believe alike in economic _theory.2

There

have

been

_many

revolts_againstthis

method

of_thought,

a

method

which, itwill

have

been_{observed, goes} easilywith

the_philosophyof idealism. Socrates3

and Bacon

led such

re-volts in their_days,

and

about the middle of the last _century

the Historical School arosein

_Germany.

Thisstood for the

in-ductive method,thatis, the

method

whichleadsathinkertolook

without to the externalworld forfacts toserve as thebasis for

the conclusions

which

aretobehis_premises.

The

Historical School, aswill be seen

more

in _detail,denied

thateconomicdoctrines, especially in their practical application as _policies, are

_good

for all times

and

places.

Human

nature

itself is not unchangeable.

Told

that selfishness is_{the guiding}

principle of

man

in his economic actions, they refused to_adopt

this idea as _{a premise} before _they

had

investigated the

phe-nomena

of actual life

and

searched into the manifestations of

human

motives.

1_Lowe

(Robert), "

Recent AttacksonPolitical _Economy," Nineteenth

Century,November, 1878.

1

Essay on Productionof Wealth, 1821.

3

True,Socrates told

man

tostudyhimself. Butinhisdaythat wasa

step in the direction of the concrete and inductive. The apparatus and

methodforthe_studyof_{nature were not developed,}and_{the abstract}

specu-lation of his time was concerned with the actual physical universe, etc.

Itwasin Bacon's_{spirit,then, that Socrates}urged observationin _studyof

man. Induction works out from the observation of _special individual

cases to the general rule or"law"whichexplainsandwhich

may

serve as

abasisfordeductions. Socrates himselfwasboth deductiveandinductive.

12

ECONOMIC

As

one looks

back

over the course of _{economic thought}

and

examinesits_{changing methods, one}isremindedof_attemptsthat

have

been

made

to _{distinguish certain stages}in the evolutionof

human

thought in general,notably the three stages of

Comte.

These

_stages were called

_by

Comte

*

the _theological, the

meta-physical,

and

thepositive. Inthefirststage

men

seeka

"

cause"

for

_{phenomena, and}

find it to lie in the immediate action of

supernaturalbeings. Inthe second,onegreatentity,

"

nature,"

is_{substituted as the cause,}

and

_phenomena

aresaid tobe

due

to

abstract "essences"orforceswithin the_objects,but_separatefrom

them

: _sleepiscaused

_by

a

"

soporificprinciple

"

; waterrisesin

thetube because" nature abhors a

vacuum."

In _{the positive}

stage,

men

classify

phenomena

and

establishsequencesinthe

na-tureofcause

and

effect;theydiscover quantitativerelations

and

seek to _representall

_phenomena

_{as aspects}of a_{single general}

fact.

_During

the _theological

and

metaphysical stages, the

de-ductive

method

is _{predominant. Early investigators}

_may

be

regardedas

overwhelmed

by

a_multiplicityof _facts, to_gather

to-gether

and

classify

which

req uiredtime.

Meanwhile

it

was

neces-sarytoregard

them

simplyas

more

orlessisolatedfacts,

which

left themind'sdesire for_unityunsatisfied, orseek

an

explana-tion

from

within the thinker's

own

consciousness.

The

result

was

the

_dogma

that it is God'swill, or

some

metaphysical law

of " nature."

Those

who

thus traced all

_phenomena

to a few

easily grasped "causes

"

bore everythingbefore them.2

The

_triumph of such abstract deductive

methods was

_only

temporary.

Becoming weary

of

_empty

_{speculations,} as their

slight foundations were perceived,

men

turned to follow those

who

confined theirattention to the

knowable

and

_attempted to

explain that

by

more

rational

and

concrete methods.

Thus

there

came

about a conditionsimilar to Comte's_positive stage.

It_{is, however, improper} to _speak of these

methods

as stages

inthe senseof their_followingone anotherinchronological order;

for_theyoverlap,

and

cases

_may

befoundof thecontemporaneous

1

Positive Philosophy,Chap.I; Martineau'stranslation,p. 26.

2

Cf.Hobhouse on

"

Comte'sThreeStages"in the SociologicalReviewfor

existenceof all the _stages, even in the field of a _{single science.} There are "_theological " economists to-day, perhaps,

and

cer-tainly there are economists

whose

mode

ofthoughtplaces

them

in the_metaphysicalstage.

An

extremeillustrationwillserve to

make

the

_meaning

clear.

The

American

_economist,

_Henry

C.

Carey, in_speakingofthe_{Malthusian theory} of_{population, asks}

how

a

_good

God

could allow such _{things as}it teaches.

He

de-claresthe doctrine_{incompatible with God's}character

; therefore

it is untrue.

Of

coursehe does not_{stop here}in his

argumenta-tion, but the point is that he introduces this reasoning as

an

essential _support for his ideas. Political economists of the

metaphysical type,a type preeminentlyEnglish,tend todeduce

all economic

_phenomena

from so-called fundamental _principles

of

human

nature, axioms,

and

definitions. Their earmark is

a certain use of the

word

"natural." _{Glib explanations that}

thisorthatis_{according to}a lawofnatureor that

human

nature

is thus

and

so, are the danger signals.

The

legal thought

of _{the past generation}is anotable _{lingeringplace} of thistaint;

and

those economists

who

argue about "natural rates" (for

wa.ges, railway charges, etc.), maintaining that competition is

natural, for instance,

show

a similar tendency.

As

already

stated, the

method

ofthoughtofsuch

men

is _necessarily

deduc-tive.

Itremainstobe observedthat_{cycles in}

method seem

to

have

existed.

The

_{deductive or philosophical-abstract}

method

pre-vailedinall_earlyeconomic thoughtofa formalcharacter that is

recorded.

Then

the Mercantilists

and

Kameralists of the

six-teenth

and

seventeenthcenturies

showed some

tendency toward

an

_{inductive, though} rather _empirical, method.

But

the early

French economists

and

Adam

Smith

were primarily deductive,

and

the" _Epigones"

who

followed_degeneratedinto_dogmatism.

The

_{early historical}economiststhenarose asaninductive_school,

perhaps evengoingtoextremes; and,afterageneration given to

the collection

and

_comparison of _facts, the need for deduction

became

effective.

The

Austrian school ofeconomists

and

Pro-fessor Marshall in

_England

then

came

to the front; but their

14

the preceding era ofinduction

and

_{largely free}from _theological

or _{metaphysical tendency.}

The

_cycle has notbeena _circle,but a_spiral,rising tohigherplanes.

At

the presenttime economists

are _largely engaged in concrete _{investigations,} historical

and

statistical; but

numerous

treatises are appearing, indicating

theconcomitant

and

scientific use ofboth methods. Induction

and

deduction, the concrete

and

the abstract,

must

go

hand

in

THOUGHT

THE

origin of economic thought is lost in the _past. In its

simplest form it

must have

_always existed wherever thinking

beings soughtto gain a_living.

Economic

ideas of

_any

definite-ness _{find their earliest expression, however,} in rules ofconduct

or moral codes formulated

_by

priests or lawgivers. These

moral _{codes, like} the

Mosaic

law, for _example, in dealing with

man's _place in _{the world,} with life

and

_death,

and

the ends of existence,

1

necessarily touch

upon

economic ideas. If it be

said that

custom

ruled the _early civilizations

and

that these

codes are the expression of _custom, the

same

conclusion holds.

The

_{philosophy underlying} is broad

and

_simple,

and

economic

concepts are presented with ethics

and

religion as one whole.

Not

until _grouplife_begins to

move

inthe

new

and

_complicated

ways

of

_money

_economy

do economic _{ideas begin to}

become

sharply differentiated. It is

when

_{problems of colonies,}

inter-national _trade,

_money,

_{taxation, etc., arise,} that the Greeks

begin to discuss economic _questions.

The

reasons for the _{tardy development} of _important

eco-nomic

ideas

_among

the ancients are significant, for they throw

light

upon

the _{origin of}the science

and

the factors essential to

its_growth.

These

_{reasons, being partlysubjective,partly}

objec-tive, fall into

two

great classes, though the close interrela-tion between

them

is _noteworthy.

Among

the subjective or psychological causes, perhaps the

first tobe noted is the_tendencyof the ancient thinkers tolook

down

_upon

_{physical wants. Material pleasures}

and

the

gratifi-cation of _bodily desires were _{frequently frowned upon.}

Soc-rates _thought that to

have

few wants

was

_godlike,

and

that

1

Schmoller,Grundrissder_{dlgemeinen Volkswirthschaftslehre,}S.69ff.

ECONOMIC

was

the _spirit of the

Hindu

_people.

Where

such

an

attitude

prevails, the development of a science which deals with the

satisfaction of

wants

is difficult.

This disregard for material considerations is a concomitant

ofthe

dominance

of ethical ideas.

The

_good

life, leadingtothe

happy

life,

was

the object,

and

so closely

was

this _{end kept} in

mind

that the material basis forit

was

little _regarded.

_To-day

we

willfind it _{impossible to think as the}

men

_livingin,

say, 400

B.C. _{thought, so inseparable} were their ideas about _right

and

wrong on

the one

hand and

_{economic advantage}

and

disad-vantage on the other.

But

the ethical sanction

dominated

this

simple, undifferentiated social _philosophy of theirs.

Part

and

parcel of this _{subjective attitude} is the fact that

some

of the interests

most

conducive to _{economic study were}

especially deprecated.

One

of the

most

fruitful sources of

economic _speculation has been the earnest desire to better the

condition of _{the laboring} classes. _{But,in general,}

_pagan

phi-losophy teaches that industry, except, perhaps, in agriculture,

is _degrading to

_{body and}

intellect. Artisans _belonged to the

lowest _caste,

and

_{during the greater part} of their _{history the}

Greeks

and

Romans

despised the laboring

and

trading classes.

Aristotle_{argues that} in the best _{government, where}the citizens

areallvirtuous

and

_happy, "

none

of

them

should_{be permitted}

to exercise

_any

low mechanical

_employment

or traffic, as being

ignoble

and

destructive to virtue;

" 1

and

Plato, intreating of

the ideal state,

deems

it not

worth

while to concern himself

with the _trading

and

artisan classes.

The

_{above quotation}

from

Aristotle _goes

on

to _say that those destined for _public

office should not even be

_husbandmen,

for leisure is _necessary

to _improve in virtue

and

fulfill one's

_duty

to the state. This

suggests that his _disapproval of labor arises in _part from other

grounds than its _{inherent baseness, namely,}

from

his belief in the _expediency of leisure. This side of _{the philosophers'} atti-tude toward labor has often been overlooked.

When

it is

remembered

to

what an

extent the _development of political

economy

has gone

hand

in

hand

with a recognition of the

im-1