History of Economic Analysis part 55 pot

FAWCETT AND CAIRNES MILL’S Principles was not only the most successful treatise of the period under survey but also qualifies well for the role of the period’s classic work in our sense

General Economics: A Cross Section

1 J.S.MILL AND HIS Principles FAWCETT AND CAIRNES

MILL’S Principles was not only the most successful treatise of the period under survey but also qualifies well for the role of the period’s classic work in our sense Having

decided to choose it as headquarters from which to survey the general economics of that period, we had better begin by a preliminary glance at the man and the book

John Stuart Mill (1806–73) was—John Stuart Mill That is to say, he was one of the chief intellectual figures of the nineteenth century and is so familiar to every educated person that it might seem superfluous to add anything to what can be read in dozens of books Moreover, most of what economists need to know about him has been admirably

said by Sir W.J.Ashley in the introduction to his edition (1909) of the Principles, which I

hope is in the hands of every student.1 A few points must be touched upon all the same Most of us have heard or read of the severe intellectual training to which James Mill, the father, subjected his son from early childhood and which, much more cruel and injurious than daily whippings would have been, accounts for that impression of stunted growth and lack of vital strength that comes to us from many passages in the imposing work of his life Most of us, I suppose, also know that it was first a salary and then—after 1858—

a pension from the East India Company which financed his needs (fairly comfortably), and that his duties, though not on the average very arduous, meant further injury to his thought: as has been pointed out already, not only interruption but also mere anticipation

of possible interruption paralyzes creative research Then, too, his unflagging interest in current issues caused additional interruption and loss of energy This interest and the office combined account for the incessant hurry that all his writings display, even the one

that is the most finished of all in a literary sense, the essay On Liberty Finally, being all

intellect and having been taught to despise any but intellectual interests—and of these all that do not come within the pale of utilitarianism, though he outgrew this part of his father’s teaching as he did others—he never knew what life really is He did create an

intimate foyer for himself by his friendship and, later, marriage with Mrs Taylor But he

intellectualized that too, and anyone who has an ear for the note of hysteria in the Preface

to the essay On Liberty will need no other indications—to be gleaned, for example, from his Autobiography—in order

1

Attention is called particularly to the appendix of this edition, which puts, with substantive success, many items of Millian doctrine into their relation to contemporaneous, earlier, and even later thought, and should be carefully studied For the rest, competent analyses of Mill’s economic work are rarer than are competent appraisals of his work in philosophy and logic But there is one

that has been written by a master: Edgeworth’s article—‘Mill, John Stuart,’ in Palgrave’s

Dictionary—on no account to be omitted Moreover, E.Cannan’s Theories of Production and Distribution (3rd ed., 1917), the most important individual reference for this and the next chapter,

discusses Mill’s economics very fully

to feel that he lacked many of the requisites, not indeed of the theorist but of the philosopher of social life

We behold the picture of the purebred laicist radical But, unlike other laicist radicals, this one never allowed indoctrination to stifle criticism With an honesty and internal freedom that cannot be too much admired, he took the critical axe to the foundations of his laicist and utilitarian religion—for this is what it was—and, still more important, he opened the doors of his mind to any message he was able to comprehend He tried to get

on terms with the ideas of Carlyle and Coleridge;2 he studied Saint-Simonism and Comtism profoundly; by his critique he proved how seriously he took the question raised

by the Hamiltonian philosophy; and, honestly wrestling with all this and much besides,

he actually allowed himself to be drawn away from his early moorings He was the opposite of a zealot Not only the range of his interests but also, in a sense, the range of his comprehension was quite abnormally wide

But now I have to add a point that is extremely difficult to make and very liable to be misunderstood You can travel far and wide and yet wear blinkers wherever you go Mill’s comprehension never went below certain layers—we have noticed this already

when discussing his Logic—and his intellect never got over certain barriers What was

below these layers and beyond those barriers he put down as nonsense by means of the well-known trick of our subconscious apparatus of self-defense

2

In two articles contributed to the London and Westminster Review (1838 and 1840, reprinted in

Dissertations and Discussions, vol I) J.S.Mill formulated his mature opinion on the contribution of

Coleridge and his group to sociology and, by implication, on their influence upon himself Perusal

of these articles must, I think, enhance our respect for their author Mill goes a long way toward accepting their criticism of eighteenth-century rationalism—and the ‘interest philosophy of the Bentham School’—and shows himself quite open to their romanticist conception of history: in fact,

I do not think that the man who wrote these articles—and the passages on James Mill’s theory of

government in the Logic (see above, ch 3, sec 5c)—can properly be called a utilitarian at all But

he understood technical economics too well to throw it overboard on that account To critics who did not understand it equally well, this looked like hesitation and like endless shifting of

standpoints Actually, however, his views were, in this respect, perfectly consistent and, in

addition, far ahead of his time

Of his three great works, the Logic (1843), the Examination of Sir William Hamilton’s Philosophy (1865),3 and the Principles of Political Economy with Some of their Applications to Social Philosophy (1848), only one is in our field The list of his other

writings4 strengthens an impression that interests other than economics were dominant with him, since the list contains only one item that deals with questions of technical

economics: Essays on Some Unsettled Questions of Political Economy, containing his

freshest and most original contributions to economics And in fact, if we claim him for our own, nevertheless, we must always remember in justice to the man that, after his late twenties, he never was a full-time (or even ‘full leisure-time’) economist except in 1845–

7, when he wrote the Principles As regards the influences that helped to shape his

economics, those of his father and of Ricardo himself come first, of course But I have said already, and have emphasized by my refusal to include J.S.Mill in Ricardo’s school,

that the economics of the Principles are no longer Ricardian This is obscured by filial

respect5 and also, independently of this, by J.S.Mill’s own belief that he was only qualifying Ricardian doctrine But this belief was erroneous His qualifications affect essentials of theory and, still more, of course, of social outlook Ricardianism meant no doubt more to him than it did to Marshall But Mill’s and Marshall’s cases are similar in that for reasons of their own, commendable or not, they stressed Ricardian influences

unduly at the expense of others From Marshall’s Principles, Ricardianism can be removed without being missed at all From Mill’s Principles, it could be dropped without

being missed very greatly The influence that J.S.Mill failed to stress adequately was Say’s He did stress it in one point only, the Law of Markets But it is present in Mill’s theory of value and cost—which is essentially a compromise between Ricardo’s and Say’s, with all the emphasis put upon the Ricardian elements—that is to say, in the very heart of his theoretical structure The other influence to which Mill submitted, semiconsciously and rather reluctantly, was that of Senior, who also receives explicit recognition in one point only—abstinence There are many others, Malthus’ and Rae’s, for example, which Mill accepted consciously and hence recognized frankly—for he was scrupulously fair to others, always ready to give credit to them, and quite indifferent to any claims of his own This fairness and this indifference are among the strongest and most lovable traits of his

3

The Logic and Hamilton’s Philosophy have been discussed above in ch 3

4

Any work of reference will give this list For us, the most important items, in addition to the three

above, are: the Autobiography (1873; two new editions by J.J.Coss, 1924, and H.Laski, 1924);

Some Unsettled Questions (publ 1844; written about 1829 and 1830); On Liberty (1859);

Considerations on Representative Government (1861); Utilitarianism (1863); and Auguste Comte and Positivism (1865)

5

This no doubt commendable attitude of the son also obscures the nature of the influence of the father in other respects, e.g in respect to associationist psychology This influence may indeed be called dominant if we mean by influence the total effect of a man’s teaching upon another man But

it is not dominant at all if we count as influence only effects that show in conformity of views In many if not in most departments of thought, the son, though still reacting to his father’s opinions, arrived at different, often opposite, standpoints On one point noticed above, it is an enemy of James Mill’s teaching that speaks to us from the pages of the son

character and the remarks above on the influence of Say and Senior must not be interpreted to imply any aspersion or any doubt on this score

Mill’s declared purpose in writing the Principles and the performance

actually embodied in it fit like hand and glove The original preface is worth reading He might with little change have reprinted the preface to

the Logic Once more, the program was to untie knots and build bridges

There is no claim to novelty or originality—though several would have been justified Mill simply explained that there had been no equally comprehensive treatise, especially none that paid so much attention to

practical applications, since the publication of the Wealth of Nations This,

however, was obsolete, both as regards facts and as regards theory So he would aim at the ‘sufficiently useful achievement’ of writing ‘a work similar in its object and general conception to that of Adam Smith, but adapted to the more extended knowledge and improved ideas of the present age’ which is ‘the kind of contribution which Political Economy at present requires’—and exactly the kind of book he wrote For a man of Mill’s powers and standing, modesty could not have gone further Two comments should be added

First, there is a side to this admirable modesty that may perhaps be held responsible for a less admirable consequence Had Mill conceived a less modest idea of his task, he might have produced an even better book As it was, he took his task altogether too lightly: not Hercules himself could

write a Wealth of Nations in eighteen months, which seems to have been

the actual time invested But, as we have had occasion to remark with

respect to the Logic, Mill, however modest on his own behalf, was not at

all modest on behalf of his time ‘This enlightened age’ had solved all problems And if you knew what its ‘best thinkers’ thought, you were in a position to answer all questions I do not mean to repeat what I have previously said on Mill’s attitude of speaking from the vantage ground of definitively established truth But I mean to add that this attitude, besides being ridiculous, made for sterility and—yes—superficiality There is too little attention to groundwork There is too little thinking-things-through and much too much confidence that most of the necessary thinking had been done already The Smith-Mill-Marshall line is clear enough But the middle term is not on a par with the other two, owing to relative insufficiency of labor applied What looks like so many tergiversations or what gives the impression, energetically voiced by Marx, that Mill never says a thing without also saying its opposite is in part due to this cause But to a greater part it is due to Mill’s judicial habit of mind that forced him to consider all aspects of each question Also, it is due to something that is still more creditable He was a man of strong preferences But he also was incorruptibly honest He would not twist either facts or arguments if he could help it When the preferences—his social sympathies—did assert themselves all the same, he was not slow to apply

the pruning knife Hence many an inconclusive result, or even many a contradiction

Second, Mill emphasized repeatedly, though not in his preface, that his

Principles differed from other treatises in something he ascribed to his

wife’s influence, namely, in moral tone or atmosphere There is, in fact, plenty of warm-hearted humanitarianism about the book and plenty of solicitude for the welfare of the laboring class More important, however,

is a cognate aspect: he restricted the domain of inexorable law to the physical necessities to which production is subject and emphasized for all the rest, all institutions in particular, that they are man-made, changeable, malleable, and ‘progressive.’ There was for him no invariable natural order of things social, and economic necessity meant to him largely necessity in regard to a given state of the changing institutional frame However much he glorified his age in other respects, the actual state of society he beheld he did not consider as either ideal or permanent Book

IV, Chapter 7 of the Principles and many other passages, even some of

those that criticize the utopian socialism of his time, are conclusive on this point and also as regards the direction that he expected social development to take Though repeatedly changing his position in details,

he was, from about his middle twenties on, an evolutionary socialist of associationist complexion For a history of analysis, this fact is important only in as much as it refutes the absurd indictment that ‘classic’ economists believed in the capitalist order as the last and highest wisdom

that was bound to persist in secula seculorum If it be replied that Mill

was a solitary exception, the answer is that this is not true, but that, even if

it were true, this exception was responsible for the most successful and most influential treatise of that age For the sociologist of capitalism, this fact is still more interesting: nothing can be more revealing of the character of bourgeois civilization—more indicative, that is, of its genuine freedom and also of its political weakness—than that the book to which the bourgeoisie accorded such a reception carried a socialist message and was written by a man palpably out of sympathy with the scheme of values

of the industrial bourgeoisie

J.S.Mill was exactly what is meant by an evolutionary socialist His attitude toward socialism went through a steady development, the traces

of which are but imperfectly discernible in the successive editions of the

Principles Moreover, the three articles on socialism which Miss Helen Taylor published in the Fortnightly Review (1879) after Mill’s death are

perhaps more misleading than helpful: they were written in or about 1869

as exploratory sketches for a book on socialism which Mill then intended

to write, and contain little more than critical appraisals of the French and English socialist literature prior to 1869 and of current socialist slogans; the book presumably would have contained a positive complement that might have reversed the impression the reader of these sketches is likely

to get However, neglecting all minor points, we may with some confidence describe Mill’s attitude to socialism as follows Emotionally,

socialism always appealed to him He had little taste for the society he lived in and plenty of sympathy with the laboring masses As soon as he had gained intellectual independence, he readily opened his mind to the socialist—mainly French—ideas of his time But, being a trained economist and thoroughly practical-minded, he could hardly fail to perceive the weaknesses of what a little later was labeled Utopian Socialism by Marx Reluctantly and with a partial exception in favor of Saint-Simonism, he therefore arrived at the conclusion that those plans were but beautiful dreams This was the first stage On the face of it, a completely negative attitude to socialism—coupled with thoroughgoing radicalism in some respects, for example, with respect to property in land—might be considered compatible with what he wrote in the first

edition of his Principles But there is no reason to doubt his statement in

the preface to the third edition (1852) which was to the effect that he never intended to ‘condemn’ socialism ‘regarded as an ultimate result of human progress,’ and that his objections merely rested on ‘the unprepared state of mankind.’ The alterations and emendations in the text went, however, further than this suggests (see in particular the new second

paragraph of ch 7 of Book IV) and really amount to explicit recognition

of socialism as the Ultimate Goal This marks a second stage And there was a third: on the one hand, he came to believe that ‘progress’ was accelerating wonderfully and that this ‘ultimate end’ was coming rapidly within view; on the other hand, he came to believe that capitalism was near to having done its work so that purely economic objections were losing part of their force At the same time he always stoutly denied the presence of any tendency in the capitalist system to deteriorate the condition of the working class or to reduce its relative or absolute share in the social product; and not less stoutly he refused to entertain the idea of transition by revolution, basing his argument against it mainly on what seemed to him the insuperable difficulties of management that would arise

in this case But such views define Evolutionary Socialism They do not

substantially differ from those which the leader of German Revisionism, E.Bernstein (see below, Part IV, ch 5, sec 8b), was to defend thirty years later Naturally, they were gall and wormwood not only to Marxists but to all socialists who base their argument on the thesis of inevitably increasing misery and for whom the revolution is an essential article of faith And Mill’s teaching on the subject, precisely because it was so perfectly honest and because it expounded unpalatable truth in evident sympathy with the Ultimate End, grew much more distasteful to them than would have been straight hostility All this is very important for

understanding Mill’s Weltanschauung—particularly for those of us who

hold that a man’s class interest or philosophy will determine his economic theory and his views on economic policy, and who have been taught to

look upon the Principles as a verbalization of bourgeois ideology

The success of J.S.Mill’s Principles was sweeping and much more general, also much

more evenly distributed over all countries in which economics received attention, than was that of Ricardo’s This was primarily due to a happy combination of scientific level and accessibility: Mill did present analysis that satisfied competent judges, yet, barring very few points that proved stumbling blocks, every economist could understand him The book’s many editions measure only its direct influence To this must be added, so far

as teaching is concerned, the litter of other textbooks it produced Both students and general readers seem to have experienced a need for a still simpler presentation, even in England And this demand was provided for by Fawcett.6 On a higher level, even people who accepted Mill’s claim of finality in substance could not fail to discover that many individual stones in his structure were loose The most eminent of the English economists

of this period who undertook to mend the structure—with debatable success—was

Cairnes.7 He

6

Henry Fawcett’s (1833–84) Manual of Political Economy (1863) ran through six editions in his

lifetime The heroic energy of this eminent man, who lost his eyesight at twenty-five and

nevertheless taught, wrote, practiced sports, was an active and independent Member of Parliament, and even a successful cabinet minister (Postmaster-General), cannot be sufficiently admired: he rightfully commanded the highest respect of his fellow economists He was Marshall’s predecessor

in the Cambridge chair In a history of economic analysis, however, he must rank below many far lesser men and no attempt can be made to do justice to him

7

John E.Cairnes’s (1823–75) career—if career is indeed the word to be used—as a research worker, writer, academic teacher, and, though behind the scenes, politician was marred by ill health, the obvious reason why he failed to fill to the full the measure of his great ability Even so

he attained front rank: everyone would have mentioned him when asked, after Mill’s death in 1873 (Jevons not being as yet appreciated according to merit), who was England’s first scientific

economist The work of his that is for us the most important, Some Leading Principles of Political

Economy Newly Expounded, appeared in 1874 Nevertheless, we allocate its author (unlike Jevons,

whose Theory was published earlier, i.e 1871) to the period under survey, because he expounded

the old analytic economics and explicitly distanced himself from the new, which had just emerged into the light of day—showing, in doing so, that he entirely failed to appreciate its significance and possibilities We range him, therefore, with the ‘classics’ (in quotes) but not with the Ricardian school He belongs in Mill’s group and there is the same reason as in the case of Mill for not calling him Ricardian Of course, we might have deferred notice of him until the next period and made him, with Sidgwick, Nicholson, and others, a member of the group of ‘survivals.’ The other work

of his that matters to us is his Character and Logical Method of Political Economy (1857), a

landmark in the history of methodology

may be called Mill’s pupil, for he always reasoned with reference to the latter’s teaching—even where he did not mention the fact explicitly—and he entertained toward Mill, as his correspondence shows, feelings that can be rendered only by the term

‘reverence.’8 Nevertheless, he sometimes criticized Mill sharply and, by virtue of this criticism, constructed something that, though entirely within the Millian groundwork, was in some measure his own He was a born, but not a very original, theorist Though most of his contributions have been sterile, his work, both analytical and methodological, marks an important stage In calling him a born theorist, we must not forget however—as has been forgotten by some critics, particularly of the German historical school—that the bulk of his working hours went into practical problems and that it was his ‘factual’

contribution (in particular his Slave Power, 1862), which accounts for his reputation with

the English public of his time

2 SCOPE AND METHOD: WHAT ECONOMISTS THOUGHT THEY

WERE DOING The preceding chapter has given us some idea of what the economists of that period actually did We shall see presently how far their work reflected itself in J.S.Mill’s

Principles But it is one of the characteristic features of the period that economists began

to interpret themselves, that is to say, to theorize on (or to ‘rationalize’) their own aims and procedures In research as elsewhere we first act and then think It is only when a field has grown into an established science that its votaries will develop an interest, not untinged with anxiety, in problems of scope and method and in logical fundaments generally This is perfectly natural, although excessive activity of this type may be a pathological symptom—there is such a thing as methodological hypochondria The emergence of that interest—almost, though not quite, absent before—is indicative of the relative maturity that economics then gained The results that this interest produced are,

in themselves, of no great importance for us We are all of us bad interpreters of ourselves and untrustworthy witnesses to the meaning of our practice But precisely because of this, we cannot afford to neglect the period’s methodology entirely For critics have taken it literally, and hence it has become a source of misunderstandings concerning the scope and meaning of ‘classic’ economics

(a) Definitions of the Science

We know that economists had experienced a need for defining their field even before A.Smith During the period under discussion, their sense of responsibility for a distinct field having grown much stronger, practically all the writers of treatises tried their hands

at defining it Here are a few samples J.B.Say defined Political Economy, by way of

subtitle, as exposition de la manière dont se forment, se distribuent et se consomment les richesses McCulloch defined Political Economy as the ‘science

8

A few of Mill’s letters to Cairnes have been published by Mr Hugh S.R.Elliot (ed Letters of John

Stuart Mill, 2 vols., 1910) The correspondence I mean, however, has been published by G.O’Brien

in ‘J.S.Mill and J.E.Cairnes,’ Economica, November 1943 It whets one’s appetite for more

of the laws which regulate the production, accumulation, distribution, and consumption

of those articles or products that are necessary, useful, or agreeable to man and which at

the same time possess exchangeable value’ or the ‘Science of Values’ (sic!) According

to Storch, Political Economy is the science ‘of the natural laws which determine the prosperity of nations.’ Senior’s Political Economy is ‘the Science which treats of the Nature, the Production, and the Distribution of Wealth.’ J.S.Mill contented himself in the

Principles with ‘the nature of Wealth, and the laws of its production and distribution,

including: directly or remotely, the operation of all the causes by which the condition of mankind…is made prosperous or the reverse.’ Roscher said: ‘Our aim is simply to describe man’s economic nature and economic wants, to investigate the laws and the character of the institutions which refer to the satisfaction of these wants, and the greater

or smaller measure of success they have had.’ These examples will suffice to give an idea If we realize that it is hopeless and, moreover, pointless to try to frame a definition that will fit all the activities of the economics profession, we shall not feel inclined to judge harshly any of the obvious inadequacies of these and other definitions Certain features are worth noting, however

All the definitions of the period emphasize the autonomy of economics as against the other social or moral sciences—which is, of course, perfectly compatible with the recognition of close relations Most of them emphasize its analytic (scientific) character.1 Both these facts, though they may not be to the taste of every critic, should be registered

as landmarks on the road of analytic economics A third fact must also be noted, however, because it gave rise to one of the most important, as well as irritating, of those misunderstandings to which I alluded above The reader will observe that the definitions quoted are none too specific as regards the facts and problems that are to come within the scope of economics: J.S.Mill’s, for example, reads like a comprehensive catchall, and even Senior’s, taken by itself, leaves the reader in doubt as to what it is that Production and Distribution of Wealth imply, since the whole of a society’s institutional pattern is obviously relevant to production and distribution Now, the ‘science’ to be defined was,

of course, called Political Economy.2 Most continental writers used this term in a very wide sense But most of the leading Englishmen, and especially James Mill and Senior, confined it to what is perhaps more properly called economic theory, and it is to this that 1

This seems to indicate a break with the past, if we go, e.g., by Sir James Steuart’s definition or by

the one A.Smith offered at the beginning of the Fourth Book of the Wealth But the break is more

apparent than real On the one hand, some authors, Sismondi for instance, kept to the old practice

of defining economics by a practical aim On the other hand, most of A.Smith’s work is genuinely analytic in nature in spite of that definition; and the economists of the period continued to proffer value judgments and to recommend policies in spite of their definitions This will be discussed below in subsec c

2

With the exception of Staatswirtschaft, which was used by some German writers, the terms used

on the Continent, even Nationalökonomie, were equivalents of Political Economy The term

Economics came into use in the subsequent period and then only in England and the United States

The German equivalent of this, Sozialökonomie or Sozialökonomik, never caught on

their methodological pronouncements referred.3 To critics, this looked like a tremendous difference in attitude and outlook They felt that the English ‘classics’ had no

eye for anything but ‘wealth,’ that their political economy was nothing but speculative

‘chrematistics’ (Sismondi) and so on But we have already seen that this was not so Their practice proves that they did not mean to restrict either their activities or their interests What they did restrict was the use of a word Thus, Senior would indeed have excluded from his political economy any factual analysis and any treatment of welfare problems But what did that matter if at the same time he welcomed both to what he called the Great Science of Legislation?4

(b) Methodology

From the standpoint thus gained we have no difficulty in absolving, once more, the

‘classics’ of any major errors of procedure Their procedures were crude and often clumsy Many of their controversies arose from nothing but an inability to see the opponent’s point and some were purely verbal (as are many of ours).5 The ridiculous

‘method’ of trying to analyze a phenomenon by hunting for the meaning of a word was

rampant But such as they were, the procedures actually used were not open to any serious objection of principle They were thoroughly sensible and exactly what the nature

of each type of problem would suggest to minds that were armed with little more than simple common sense The ‘classics’ theorized in order to straighten out points that involved some logical complications; they assembled facts whenever they thought it useful to do so The same cannot, however, be said about their methodological pronouncements, even apart from the fact that these—at least the English ones6—referred

to economic theory alone

3

Realizing the danger that lurked in this terminology, Archbishop Whately made the unsuccessful

suggestion: to replace the term Political Economy in this sense by the term Catallactics—from

to exchange In this he showed his usual good sense But having failed to make his meaning clear, he himself was misunderstood and thus really made matters worse The reader will not have to tax his imagination very heavily in order to visualize how this must have struck critics: What!—Political Economy, the science of the economic fate of humanity, entirely reduced to a miserable theory of bargaining!

4

J.S.Mill adopted instead the term Social Philosophy

5

One of the points at issue between Ricardo and Malthus was, e.g., whether the rent of land owed its existence to the ‘bounty’ or to the ‘niggardliness’ of nature Nothing shows so clearly the primitivity of the analytic apparatus of the time as does the fact that two able men could actually

discuss whether the return to a factor is due to its productivity or its scarcity!

6

The most important methodological treatises of the period are: Senior’s Four Introductory

Lectures on Political Economy (1852); Cairnes’s Logical Method; and J.S Mill’s fifth essay in Some Unsettled Questions (this essay was first published in the Westminster Review, 1836) and the

relevant passages in his Logic Several critics have held that Mill’s position in the latter differed from that he had taken in the essay This is a misunderstanding The essay deals with the

methodological aspects of ‘political