Contributions to the History of Economic Thought: Essays in Honour of R.D.C. Black (Routledge Studies in the History of Economics)

Contributions to the History of Economic Thought

This book is a celebration of the work of Robert Denis Collison Black by distinguished fellow researchers in the history of economic thought and economic history. Black produced a body of work which ranged over the history of political economy and evolved beyond it into the realm of history proper. His masterpiece, Economic Thought and the Irish Question, an attempt to trace out concretely the interaction between economic theory and policy, is admired by historians, economists and historians of thought equally. This volume is divided into six parts. The first part consists of an interview with Black and a historiographical and methodological analysis of his work. The interview offers a rare glimpse of the deeply held humanist beliefs and values that shape Black’s approach to his work. Part II consists of essays which discuss the history of economic thought as an intellectual discipline. Part III contains essays relating to Adam Smith which throw further light on themes broached by Black in his essay on Smith’s contribution in historical perspective. Part IV pays tribute to Black’s outstanding contribution to scholarship on the life and work of William Stanley Jevons. Part V makes extensive use of original archival material and involves elements of what Black has described as toolmaking as opposed to the use of tools to generate further studies in the history of economics. In the final part, Black’s interest in issues relating to the relationship between the abstract and the concrete and the general problem of relativity is examined. This volume features original contributions from some leading contemporary figures in the history of economic thought and offers new perspectives on key topics. It will be of essential interest to any serious scholar of economic thought.

Antoin E. Murphy is an associate professor at Trintity College, Dublin. He has been a visiting scholar at the Center for International Affairs at Harvard, the Institut d’Etude Demographiques in Paris, the Hoover Institution and the department of economics at Stanford University. Renee Prendergast is a reader in economics at Queen’s University Belfast. She was previously a research fellow at the University of Strathclyde, Glasgow. She has been a visiting scholar at Wolfson College, Cambridge and a visiting fellow at the University of Cape Coast Ghana and Clare Hall, Cambridge.

Routledge Studies in the History of Economics 1

Economics as Literature Willie Henderson

2

Socialism and Marginalism in Economics 1870–1930 Edited by Ian Steedman

3

Hayek’s Political Economy The socio-economics of order Steve Fleetwood

4

On the Origins of Classical Economics Distribution and value from William Petty to Adam Smith Tony Aspromourgos

5

The Economics of Joan Robinson Edited by Maria Cristina Marcuzza, Luigi Pasinetti and Alesandro Roncaglia

6

The Evolutionist Economics of Léon Walras Albert Jolink

7

Keynes and the ‘Classics’ A study in language, epistemology and mistaken identities Michel Verdon

8

The History of Game Theory, Vol 1 From the beginnings to 1945 Robert M. Dimand and Mary Ann Dimand

9

The Economics of W.S. Jevons Sandra Peart

10

Gandhi’s Economic Thought Ajit K. Dasgupta

11

Equilibrium and Economic Theory Edited by Giovanni Caravale

12

Austrian Economics in Debate Edited by Willem Keizer, Bert Tieben and Rudy van Zijp

13

Ancient Economic Thought Edited by B.B. Price

14

The Political Economy of Social credit and Guild Socialism Frances Hutchinson and Brian Burkitt

15

Economic Careers Economics and Economists in Britain 1930–1970 Keith Tribe

16

Understanding ‘Classical’ Economics Studies in the long-period theory Heinz Kurz and Neri Salvadori

17

History of Environmental Economic Thought E. Kula

18

Economic Thought in Communist and Post-communist Europe Edited by Hans-Jürgen Wagener

19

Studies in the History of French Political Economy From Bodin to Walras Edited by Gilbert Faccarello

20

The Economics of John Rae Edited by O.F. Hamouda, C. Lee and D. Mair

21

Keynes and the Neoclassical Synthesis Einsteinian versus Newtonian macroeconomics Teodoro Dario Togati

22

Historical Perspectives on Macroeconomics Sixty years after the ‘General Theory’ Edited by Philippe Fontaine and Albert Jolink

23

The Founding of Institutional Economics The leisure class and sovereignty Edited by Warren J. Samuels

24

Evolution of Austrian Economics From Menger to Lachmann Sandye Gloria

25

Marx’s Concept of Money: the God of Commodities Anitra Nelson

26

The Economics of James Steuart Edited by Ramón Tortajada

27

The Development of Economics in Europe since 1945 Edited by A.W. Bob Coats

28

The Canon in the History of Economics Critical essays Edited by Michalis Psalidopoulos

29

Money and Growth Selected papers of Allyn Abbott Young Edited by Perry G. Mehrling and Roger J. Sandilands

30

The Social Economics of Jean-Baptiste Say Markets and virtue Evelyn L. Forget

31

The Foundations of Laissez-Faire The economics of Pierre de Boisguilbert Gilbert Faccarello

32

John Ruskin’s Political Economy Willie Henderson

33

Contributions to the History of Economic Thought Essays in Honour of R.D.C. Black Edited by Antoin E. Murphy and Renee Prendergast

34

Towards an Unknown Marx A commentary on the manuscripts of 1861–63 Enrique Dussel

35

Economics and Interdisciplinary Exchange Edited by Guido Erreygers

36

Economics as the Art of Thought Essays in honour of G.L.S. Shackle Edited by Stephen F. Frowen and Peter Earl

37

The Decline of Ricardian Economics Politics and economics in post-Ricardian theory Susan Pashkoff

38

Piero Sraffa His life, thought and cultural heritage Alessandro Roncaglia

39

Equilibrium and Disequilibrium in Economic Theory The Marshall–Walras divide Edited by Michel de Vroey

40

The German Historical School The historical and ethical approach to economics Edited by Yuichi Shionoya

41

Reflections on the Classical Canon in Economics Essays in honor of Samuel Hollander Edited by Sandra Peart and Evelyn Forget

42

Piero Sraffa’s Political Economy A centenary estimate Edited by Terenzio Cozzi and Roberto Marchionatti

43

The Contribution of Joseph A. Schumpeter to Economics Richard Arena and Cecile Dangel

44

On the Development of Long-run Neo-Classical Theory Tom Kompas

45

Economic Analysis and Political Economy in the Thought of Hayek Edited by Thierry Aimara and Jack Birner

46

Pricing and Change Gunnar Myrdal

Contributions to the History of Economic Thought Essays in honour of R.D.C. Black

Edited by Antoin E. Murphy and Renee Prendergast

London and New York

First published 2000 by Routledge 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 Routledge is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2001. © 2000 Antoin E. Murphy and Renee Prendergast for editorial material and selection; individual contributors for their own contribution All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Contributions to the history of economic thought: essays in honour of R.D.C. Black / edited by Antoin E. Murphy and Renee Prendergast / p. cm. Includes bibliographical references and index. 1. Black, R.D. Collison. 2. Economists–Great Britain. 3. Economics. I. Black, R.D. Collison. II. Murphy, Antoin E., 1946– III. Prendergast, Renee, 1952– HB103.B58 C66 2001 330.1–dc21 ISBN 0–415–21552-8 (Print Edition) ISBN 0-203-18324-X Master e-book ISBN ISBN 0-203-18399-1 (Glassbook Format)

00-055229

Contents

List of illustrations List of contributors Acknowledgements

ix x xii

Introduction

xiii

ANTOIN E. MURPHY AND RENEE PRENDERGAST

PART I

R.D.C. Black – historian of economic thought 1

Interview with R.D.C. Black

3

ANTOIN E. MURPHY AND RENEE PRENDERGAST

2

R.D.C. Black: an historiographical and methodological analysis

18

A.W. COATS

PART II

History of economic thought as an intellectual discipline 3

History of economic thought as an intellectual discipline

31

D.P. O’BRIEN

4

Reflections on the history of economic thought or ‘a trip down memory lane’

55

BERNARD CORRY

PART III

Perspectives on Adam Smith 5

‘A very amusing book about old times’ DONALD WINCH

73

6

Adam Smith: an historical perspective on The Wealth of Nations

96

ANDREW S. SKINNER

7

The Wealth of Nations censored: early translations in Spain

118

PEDRO SCHWARTZ

PART IV

Jevons, Gossen and Shadwell 8

The Jevonian revolution re-appraised

141

MARGARET SCHABAS

9

Jevons and Gossen

154

JOHN K. WHITAKER

10 John Emilius Lancelot Shadwell on value and wages

169

IAN STEEDMAN

PART V

Into the archives 11

Brotherhood at arms: the Cairnes–Leslie controversy

201

TADHG FOLEY AND TOM BOYLAN

12

The famine, the New York Irish and their bank

227

CORMAC Ó GRÁDA

PART VI

Abstraction and relativity 13 The political economy of Edmund Burke

251

RENEE PRENDERGAST

14

Menger’s organic view of institutions

272

CHARLES HICKSON

15

Canons of monetary orthodoxy and John Law

294

ANTOIN E. MURPHY

Bibliography Index

318 342

Illustrations

Tables 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 12.10

The growth of the Emigrant Savings Bank The bank’s first ten years Occupations of the early Irish account holders Emigrants and population by region The provincial origins of parishioners and EISB depositors Age and male skills in the Sixth Ward Sums accumulated in accounts opened 1851–4 Opening deposits Opening deposits by Irish women savers, 1850–1 Age of first-time depositors, 1862

230 230 232 233 234 238 245 245 246 246

Figures 12.1 12.2 12.3 12.4 12.5 12.6

Accounts opened and closed, 1851–63 Deposits and withdrawals, 1851–63 Amounts ($) deposited and withdrawn, 1851–63 Emigrant Savings Bank, deposits and withdrawals per month Emigrant Savings Bank, accounts opened and closed per month Monthly withdrawals, New York and Philadelphia

242 242 243 243 244 244

Contributors

Professor R.D.C. Black, Emeritus Professor, School of Management and Economics, Queen’s University Belfast, BT7 1NN, Northern Ireland. Professor Tom Boylan, Dean of Research, National University of Ireland, Galway, Ireland. Professor A.W. Coats, The Orchards, Church Lane, Attenburgh, Nottinghamshire, NG9 6A5, UK. Professor Bernard Corry, Economics Department, Queen Mary and Westfield College, University of London, Mile End Road, London, E1 4NS. Dr Tadhg Foley, Department of English, National University of Ireland, Galway, Ireland. Dr Charles Hickson, School of Management and Economics, Queen’s University Belfast, BT7 1NN, Northern Ireland. Professor Antoin E. Murphy, Department of Economics, Trinity College, Dublin 2, Ireland. Professor D.P. O’Brien, Department of Economics, University of Durham, 23–26 Old Elvet, Durham, DH1 3HY, UK. Professor Cormac Ó Gráda, Department of Economics, University College, Belfield, Dublin 4, Ireland. Dr Renee Prendergast, School of Management and Economics, Queen’s University Belfast, BT7 1NN, Northern Ireland. Professor Margaret Schabas, Department of Philosophy, York University, 4700 Keele Street, North York, Ontario, Canada, M3J 1P3. Pedro Schwartz, IDELCO, Plaza Marqués de Salamanca 2.50, 28006, Madrid, Espana.

Contributors xi Professor Andrew S. Skinner, Department of Political Economy, University of Glasgow, Adam Smith Building, Glasgow, G12 8RT, UK. Professor Ian Steedman, Department of Economics, The Manchester Metropolitan University, Mabel Tylecote Building, Cavendish Street, Manchester, M15 6BG. Professor John K. Whitaker, Department of Economics, Rouss Hall, University of Virginia, Charlottesville, Virginia, 22903–3288, USA. Professor Donald Winch, School of Social Sciences, University of Sussex, Falmer, Brighton, BN1 9QN, UK.

Acknowledgements

The editors wish to thank Mary Trainor, Senior Research Officer in the School of Management and Economics at Queen’s University Belfast for her invaluable editorial contribution to this book. In so far as we have managed to achieve a consistent style in the various contributions, it is entirely due to her efforts. We also wish to record our thanks to Mairead McIvor who assisted Mrs Trainor in this work.

Introduction Antoin E. Murphy and Renee Prendergast

Robert Denis Collison Black was born in Dublin in 1922. In 1937, at the young age of 15, he entered Trinity College, Dublin. Four years later, having graduated with bachelors degrees in Arts and Commerce, he embarked upon a study of Mountifort Longfield for which he was awarded a PhD in 1943. Following a period spent lecturing in economics at Trinity College, Bob Black left Dublin in 1945 to take up the post of Assistant Lecturer in economics at Queen’s University, Belfast. He remained there until his retirement in 1985. His distinguished career at Queen’s included appointments to the Chair of Economics and various administrative posts including Head of Department, Dean of Faculty and Pro-ViceChancellor. Despite the onerous nature of these duties, always carried out to his own extremely high standards, Bob Black managed to produce a body of work which ranged over the history of political economy and evolved beyond it into the realm of history proper. His masterpiece, Economic Thought and the Irish Question, an attempt to trace out concretely the interaction between economic theory and policy, is as much admired by historians as it is by economists and historians of thought. Equally remarkable is the variety in the kinds of contribution he made. In addition to his several studies of thought and policy, there is his authoritative catalogue of Pamphlets on Economic Subjects and his definitive seven volume edition of the Papers and Correspondence of William Stanley Jevons.

HISTORIAN OF ECONOMICS

The present volume is a tribute to R.D.C. Black by fellow researchers of the history of economic thought and economic history. Its fifteen chapters are divided into six parts. The first part consists of interview with R.D.C. Black carried out by the editors in late August 1999 and an historiographical analysis of Black’s work by A.W. Coats. Although the interview necessarily goes over some old ground, it offers a rare glimpse of the deeply held humanist beliefs and values that shape Bob Black’s approach to his work. Black reminds us that the

xiv Murphy and Prendergast economic dimension is a vital aspect of people’s lives and that they necessarily evolve policies to deal with it. He regards abstraction as a necessary response to complexity but insists that, if abstraction is to not mislead, it must be based on reality. In his investigation of Bob Black’s beliefs and practices as an historian (Chapter 2), Bob Coats notes Black’s emphasis on the relativity of much of economic theory and his consequent belief in the value of the historical and comparative approach. Coats points out that relativity can be taken to include not only the notion that an economic theory is true only given a particular set of institutions, but also the notion that how a theory is viewed and the content ascribed to it may vary from period to period. Coats notes that both forms of relativity are important in Black’s work but rightly recognizes Black’s unwillingness to accept that it was not possible to choose between rival theories, interpretations and explanations.

HISTORY OF ECONOMIC THOUGHT AS AN INTELLECTUAL DISCIPLINE

The second part consists of two chapters which discuss the history of economic thought as an intellectual discipline. O’Brien’s chapter considers the nature and value of the subject while Corry’s chapter draws on his own experience to reflect on various strategies for teaching and researching the subject. Broadly speaking the authors agree in their claims for the continuing value of the discipline: that it provides a means of preserving general truths; that it is a corrective of narrower prejudices, deceptive associations and dogmatism more generally; that it is a basic part of scholarship; that it is an aid to understanding and that it preserves for posterity important truths whose value is currently overlooked. Both authors are concerned to avoid any slide into relativism. O’Brien believes that this can be done by adopting a ‘mainstream’ approach having at its heart rational reconstruction. In Corry’s case, the distaste for relativism is tempered by a taste for pluralism. Consequently, rather than advocate a single approach to the history of economics, he is inclined to accept that there are many different approaches to the subject each with its own strengths and weaknesses.

SMITH

The third part contains three chapters relating to Adam Smith, all of which one way or another draw inspiration and throw further light on themes broached by R.D.C. Black in his 1976 essay on Smith’s contribution in historical perspective. Chapter 5, by Donald Winch, presents an eloquent survey of Smith’s changing role in the national imagination in the thirty years following the centenary of the Wealth of Nations. In Chapter 6, Andrew Skinner considers

Introduction xv why the modern student of economics should be interested in Smith and he argues, as did Black in 1976, that there is much to be gained from a system of thought that placed economics in the context of ethics and jurisprudence. In Chapter 7, Pedro Schwartz examines early Spanish translations of the Wealth of Nations. His examination uncovers several excisions that were forced on the translators by the need to comply with the demands of the censors. The translators’ own views on the extent to which material in the Wealth of Nations was inappropriate to Spanish conditions is also of considerable interest.

JEVONS, GOSSEN AND SHADWELL

The three chapters in the fourth part pay tribute to Bob Black’s outstanding contribution to scholarship on the life and work of William Stanley Jevons. In Chapter 8, Margaret Schabas argues that the reconstruction of economic theory initiated by Jevons was more thorough going than Bob Black seemed willing to allow. John Whitaker’s chapter on Jevons and Gossen shows that while Jevons and later Walras acknowledged Gossen’s achievement with respect to the theory of utility maximization, they failed to recognize the wider aims of Gossen’s work. These related to the creation of an ideal society which could be brought about if individuals adopted appropriate rules for living while society adopted suitable policies and institutions. Jevons had corresponded with Shadwell and mentioned him as one of the English language authors whose works contained valuable suggestions towards the improvement of political economy. Here Ian Steedman provides for the first time a substantial overview of Shadwell’s contribution to the marginal theory of value and distribution. Steedman acknowledges that Shadwell’s work had certain limitations, but he is of the opinion that it merited the respect accorded to it by Jevons whose own contributions were sometimes suggestive rather than definitive.

INTO THE ARCHIVES The two chapters in Part V make extensive use of original archival material and involve elements of what Bob Black has described as toolmaking as opposed to the use of tools to generate further studies in the history of economics. In Chapter 11, Tadhg Foley and Tom Boylan use original archive material in an attempt to throw light on the Cairnes–Leslie controversy. The chapter publishes for the first time what remains of the highly charged correspondence between these two important Irish political economists. It also includes additional correspondence between Cairnes and William Nesbitt and between Leslie and John Kells Ingram. The authors conclude that, although the doctrinal

xvi Murphy and Prendergast and methodological differences between the two Irish political economists were substantial, the acrimonious relationship between them is more likely to have been due to professional jealousy, including rivalry for the attention of John Stuart Mill. Economic historians have always recognized that Bob Black’s Economic Thought and the Irish Question involved a great deal of original work in Irish economic history. This aspect of his work is reflected in the contribution by Cormac Ó Gráda which makes innovative use of the archives of the Emigrant Industrial Savings Bank in New York and other archival sources to throw light on such issues as the effectiveness of immigration as a form of famine relief as well as the lives of the immigrants once they arrived in the new world.

ABSTRACTION AND RELATIVITY Bob Black’s concern about the dangers of developing policy on the basis of abstract principles that have little connection with reality has been noted above. This concern echoes that of his famous countryman and fellow graduate of Trinity College, Edmund Burke, who warned that reasoning about policy on mere abstract principles was likely to lead to the greatest errors imaginable. In Chapter 13, Renee Prendergast provides an overview of Edmund Burke’s contribution to political economy. Prendergast concludes that Burke’s most original and lasting contribution was his conception of the economy as embedded in a wider social framework which had evolved over generations and embodied a level of implicit knowledge not available to legislators. In Chapter 14, Charles Hickson shows that, like Burke, Menger emphasized the importance of traditional social institutions which he regarded as the product of human action but not human design. However, an examination of the actual evolution of systems of jurisprudence demonstrates that Menger’s organic theory of institutions fits the case of merchant law and that, in all other cases, overwhelming evidence points to the predominance of state law. In the introductory interview, Bob Black describes himself as a ‘bit of a relativist’ and makes it clear that ‘a lot of new ideas in our field turn out to be old ones refurbished’. Antoin Murphy’s chapter on the fate of John Law’s approach to monetary policy is a perfect demonstration of the wisdom of Black’s view. As Murphy shows, for well nigh three centuries, John Law’s theories were rejected by most orthodox economists. Ultimately, however, Law’s vision has proved to be more relevant. This can be regarded as proof of Bacon’s dictum that it is an error to believe that the best has prevailed. But, as Murphy recognizes, it could be said that Law’s opponents were correct in the context of their time. In our time, this is no longer the case so that relativism and absolutism coincide at least for the moment.

Introduction xvii Bob Black has suggested that it is the particular duty of the historian of economic thought to remind economists that ideas evolve in particular contexts which are themselves sure to change presently. The ideas may develop new content to reflect the changing context but vigilance is required on the part of the policy maker to insure that the abstraction fully reflects the concrete reality of the time. Bob Black has also recognized that the content of a particular set of ideas as set out in the great texts of our subject acquire new meanings given the prejudices and temper of the times. All this potential for relativism is troubling for historians of economic thought and several of the contributors to this volume have suggested strategies for overcoming it which are tolerant of variety to varying extents. Bob Black’s approach was to admit to being a relative relativist while seeking to adhere to the highest standards of analytical and historical research. We would do well to emulate him in this.

Part I

R.D.C. Black Historian of economic thought

1

Interview with R.D.C. Black – 25 August 1999 Antoin E. Murphy and Renee Prendergast

I:

When you came to Morehampton Terrace, in Dublin where I [Murphy] currently live, and where you were born, I remember you saying to me that you could remember the colours of the panes of glass on the door and yet you only lived in that house until you were about 2 years old. It shows that you acquired a prodigious memory at a very, very early age.

R:

Well, if I had, I’ve lost it since. Actually I lived in that house until I was 5 so it is not as great as it seems, but memory is a funny thing, you know. People do have these snatches of very early memory. I can remember actually sitting in what in those days was known as a go-car and just looking at the colours of the glass in the window of the hall door. I was probably about 2 or 3 at that time. Then I can remember sitting amongst all the packing cases in the dining room because we were moving, which was a great habit of my parents. They abandoned Morehampton Terrace for Waltham Terrace, where Dermot McAleese [current holder of the Whately Chair of Economics in Trinity] now lives.

I:

At the age of 15, you start showing precocious talent because you entered Trinity College when you were extremely young.

R:

Well, the plain fact that I entered Trinity at the age of 15 is undeniable, but I do not think it was a sign of any notably precocious talent really. It simply was the case that in those days the educational system in Ireland was less closely organized than it is now. The Intermediate and the Leaving Certificate – public examinations intended to be taken at the ages of 16 and 18 respectively – did exist, but there were other routes by which you could move from second to third level if you wished; the universities had their own matriculation examinations and you could enter for one of those.

I: R:

So you did the matriculation then? I did the matriculation for Trinity which in those days, let’s face it, was not a particularly difficult examination and they did not require anything else. You went along, filled in a

4 Murphy and Prendergast form and picked a tutor. I picked George Duncan and I remember that George Duncan looked a bit taken aback when I handed him back the form which stated my age as 15. He said well, you are on the young side. But there was nothing to stop you. Anybody could have entered – you could have entered at the age of 5. I:

Did you find this out for yourself?

R:

I think I probably did because I thought is there anything to stop me, and the answer was, there was not. So I must have found that out, I have no idea now how I found it out but I did.

I:

How did you find mixing with 18, 19, 20-year-old students?

R:

I have no recollection that that bothered me at all. I suppose in those days I was a pretty shy individual. I certainly did not get very much into social life. I was not around Trinity much during the evenings although I went to the odd debate and that kind of thing. I lived at home in a fairly quiet sort of environment, but I have no recollection that I had any difficulty in getting on with the people who were in the same year as I was.

I:

You have said in previous interviews that the economics taught in Trinity at that time had a continental rather than Anglo-Saxon flavour. Did that influence your outlook and the way you approached economics?

R:

I suppose it must have had some influence. That was very largely the result of George Duncan’s teaching. I do not know how George Duncan himself had got into this line, but he certainly did not like the Marshall, Pigou, Keynes approach which was what you would have been taught in Cambridge had you gone there at that time. He emphasized in his teaching a lot of Swedish and Austrian elements. To me, there was nothing strange about this. I was there to learn and as far as I was concerned what George Duncan and Joe Johnston taught me was economics.

I:

In your autobiographical essay you say that chance played a big role in your life. This may be seen during your student life. You were taught by George Duncan [former holder of the Whately Chair of Economics at Trinity College]. George Duncan had some idiosyncratic tastes for a lecturer in Britain or Ireland at those times. He encouraged you to read Ohlin. As a result of reading Ohlin, you suddenly start reading Longfield. Do you think you would actually have arrived at Longfield without coming through that particular path?

R:

I think probably not actually, although I did not start reading Longfield all that suddenly. But I might not have been introduced to his economic ideas at all because there was no teaching of the history of economic thought as such in Trinity on the undergraduate course which I took between 1937 and 1941. After I graduated I went to George Duncan and talked to him about the possibility of doing a PhD; he gave me a list of ten or a dozen

Interview with R.D.C. Black 5 subjects on which he thought I could usefully work and said, ‘Here, go away and think about those.’ After I had thought about each of them for a while I went back to him and said, ‘Look, would you mind awfully if I tried working on Longfield rather than any of those?’ He said, ‘No, that is all right, as far as I know nothing substantial has been done on Longfield.’ On the whole that was true; one started with Seligman, who had retrieved Longfield from the obscurity into which his economic writings had fallen from about 1850 onwards and there was not much then until J.G. Smith’s piece in Economica 1935. I went from there really. No, if it had not been for Ohlin’s reference to Longfield’s ideas I do not think I would have zeroed in on them; but I think that chance plays a large part in everybody’s life. I:

You started your PhD in 1941 and received your degree in 1943 when you were still only 21. How did you manage that?

R:

Well, one thing was that, in those days, the regulations allowed you to count the long vacation as a term if you were prepared to work through it. This made it possible to get the necessary six terms in the course of five. I had completed four terms in 1941–2 and the other two terms in 1942–3 and that is why I was able to submit for April 1943. I worked at it all the time which was unusual in Trinity in those days, at least in Social Science fields. I do not know that I burnt an awful lot of midnight oil but I spent just about every day in the library and most of the evening at home working. I met regularly with George Duncan. I would develop a framework of how I was going to do something and write out a draft chapter. He would say, ‘Well, that is all right,’ or perhaps more often he said, ‘That’s all wrong, you will have to have another go,’ and I did and that is how it got done.

I:

Were you able to talk to other people like say George O’Brien or James Meenan about it or was it very much just between George Duncan and yourself?

R:

It was pretty much between George Duncan and myself. I did not really know George O’Brien at all at that stage or indeed James Meenan. At the sort of level that I was at you knew who those people were there but you did not approach them unless you had a specific question. The only person George Duncan suggested I should contact was Ada Longfield who was then alive. I did contact her and she gave me what information she could about Longfield and her knowledge of the Longfield family but she did not know much about Longfield’s political economy and neither did I when I started. It was a matter of going up a very steep learning curve.

I:

Are you still happy to regard Longfield as one of the main precursors of the marginal revolution?

6 Murphy and Prendergast R:

Well, not, I think, as happy as I was at the time I did the thesis. If you compare the sort of work that I was doing and the sort of work Marian Bowley was doing on Nassau Senior, the kind of rediscovery of the early marginalists was in a way much more naive at that stage than it has since become in the light of other research. Now, Marian Bowley, as you know, rather changed and later wrote a piece about the revolution that was not. I do not think I would go as far as Marian did in recanting like that. I still feel that Longfield was striking out on a line of his own. There he was in Trinity on his own. He had got his chair by examination, the examination that Whately had set. He had a course of lectures to give and he had to publish one lecture out of it but the political economy course was not even examinable. There was no reason why he had to strike out a particularly original line. If he had been content to take Adam Smith and Ricardo and repackage them slightly for the audience that he had, that would have been perfectly adequate. He could have got away with very, very little and instead of that he produces this extraordinary reinterpretation of the Ricardian system. I think one of the things which I did not appreciate fully at the time when I wrote the thesis was how well Longfield actually understood the Ricardian system. Somehow or other, he had read Ricardo and grasped exactly what Ricardo had in mind and decided, no it does not work and then he comes out after that and says. ‘Here’s the way I want to go.’ Now, for a trained lawyer who has taken up political economy because there was a chair going and who had no ambitions to be an economist, this was original thinking in a high degree. I have never moved away from that conviction and I certainly would not buy Sam Hollander’s line on this one. Sam and I have argued about this in a friendly fashion for many years and have agreed to disagree but as I see it, Longfield is a conclusive refutation of the notion that it is all in Ricardo.

I:

You have written that D.H. Robertson is one of your role models. Could you elaborate on this?

R:

The first time that I heard Robertson was in January 1947 when I went to what was, I believe, the first meeting of the Association of University Teachers of Economics since the end of the Second World War. It was then a very small simple sort of affair held in Oxford. Robertson gave a paper, the exact title of which I cannot remember, but it was a survey of recent developments in economics – a sort of tour d’horizon. I remember him referring to Von Neumann and Morgenstern as two gentlemen on a distant mountain peak solemnly playing cards. That was probably the first time I had ever heard the theory of games even mentioned and I thought this man has an extraordinary grip on just about everything, monetary theory, value theory, distribution theory, you name it, he just knew what was going on. He used often to say when I heard him in the later years, ‘It is all in

Interview with R.D.C. Black 7 Marshall.’ But it was quite obvious from that paper that he was reading everything that came out and that he was on top of it. The next time I saw Robertson was at the British Association in September 1947 in Dundee. Section F was the economics section. I went along partly because my colleagues Keith Isles and I think Tom Wilson also were going and partly because Duncan Black was giving his paper on the theory of committees and I thought I would like to hear him. Dennis Robertson was the President of section F that year and so he gave a presidential address which was largely concerned with current economic problems which at that time of course were very pressing. That was the time when the dollar crisis was at its height, the lend-lease business had not really started and there was a tremendous amount of sheer economic difficulty. Dennis Robertson gave what seemed to me to be a tremendously impressive address. I remember thinking that this guy is making more sense than I have heard or read for many a long day; he understands things, and can make me understand things that I did not understand until I heard him. Later in the meeting Duncan Black gave his paper on the theory of committees. Dennis Robertson cannot have been all that old at that time, he must have been in his fifties but he was one of those people who had been bald from an early age and he had this sort of large domed head. It was a very nice September afternoon, the sun was shining in and Robertson’s head seemed to sink on his chest. It did not seem as if he was taking any interest at all in what Duncan Black was saying as he worked through the paper. There were a few questions at the end. After these, Robertson looked up and said, ‘I am a child in these matters but it does seem to me that a lot depends on the order in which the motions are put to the committee by the chairman.’ That comment electrified Duncan Black; he admitted it was a point he had not previously thought about, but agreed that what Robertson said was right and subsequently incorporated it into his theory of committees. I:

Do you think Robertson’s comment was due to his capacity for original thought or because he was an experienced committee person?

R:

Well, it was probably a bit of both. He must have been listening to the paper and thinking that does not accord with the way things actually work and he had simply gone straight to the weak point of the paper. I thought, anybody who can listen to a paper on a subject which is new to him and on which he has written nothing and grasp it so completely in the space of a half an hour has a really first class mind. I have never had any reason to change the opinion I formed then. If you look at the correspondence between Robertson and Keynes on monetary theory, particularly on loanable funds and the rate of interest, Robertson’s thinking was always profound. He was always commonsensical. I think he

8 Murphy and Prendergast had understood most of what we associate with Keynes well before Keynes did but he did not have Keynes’s capacity for flicking his ideas at the world. Robertson never did that. Robertson was content to write a paper and give lectures and that sort of thing but he was not only tremendously learned but also tremendously able. I think he is greatly underestimated. I:

I have come across Robertson’s writing on the representative firm. It seems to me that he was one of the few people who grasped the evolutionary aspect of Marshall’s use of the concept but somehow he did not have the impact that he should in that particular debate.

R:

No, he did not, nor did he have it in other debates either. I think he was largely outshone by Keynes in the Cambridge of his day and there was a lot of in-fighting in Cambridge after the appearance of The General Theory. Robertson was not the kind of person who went in for that thing much and consequently he left Cambridge and went to the London School of Economics for some years. He just was not the kind of person that thrived on controversy and academic battles.

I:

Given that you admired Robertson, did he influence your work in any way?

R:

Research-wise, I do not suppose there was a specific influence because Robertson did not concern himself much with the history of economic thought, but in teaching it always seemed to me that you could do a better job by using Robertson rather than Keynes.

I:

Who were the people who would have influenced you in the history of thought. Jacob Viner, you met in the States, did you meet Schumpeter at all?

R:

No, Schumpeter had died just before I went to the States. There were quite a number of people there who I suppose did influence me quite a lot. George Stigler was one of them, and Frank Fetter another. I also used to see Joseph Dorfman quite frequently while I was at Columbia.

I:

What about Earl Hamilton?

R:

Earl Hamilton, yes, though he would have had less real influence because he was not working in the fields I was interested in at the time. At that time he was very much interested in the business of gold supplies. He was much more of an economic historian. Viner had a lot to do with the fact that I met interesting people. I had read Viner’s Studies in the Theory of International Trade. There was a tremendous amount of material in that which I thought was extremely valuable and well done. So when I made up my mind that I wanted to go to the States, I said to the Rockefeller people that I wanted to go and study with Jacob Viner. Viner took me on. He suggested that I stay at Princeton for the first semester and, in the second semester, visit other places that had important collections in the history of economic thought in the areas that interested me. He picked out Columbia,

Interview with R.D.C. Black 9 where the Seligman collection was and that was the first place I went to. He also picked out the Library of Congress and the Chicago libraries which were not confined to the university. Then there was Harvard and Yale. Yale had Henry Wagner’s collection and a lot of manuscripts which were relevant to the kind of work that I was doing. I cannot remember that there was anybody then at Yale itself who was very much interested in the history of economic thought. Fellner had not arrived there at that stage. In Harvard, I met Arthur Cole who gave me a lot of help and had a lot of influence on me. He was actually an economic historian but he was also the librarian of the Kress which was the great collection of history of economic thought. He was an extraordinarily generous kind of individual. He knew that I wanted to get as much done as I could and that I was getting short of time. The Kress was only open from 10 to 5 from Monday to Friday. Arthur Cole had the keys and he used to come down to the rooming house where I was lodging first thing in the morning on a Saturday. He would drive me round to the Kress and unlock it and lock me in. He would come back in the late afternoon and unlock it and take me back again and he would do the same on a Sunday. I:

Was it Viner who developed your interest in the link between economic theory and policy?

R:

No, that had actually started even before the possibility of going to the States came along at all. Bruce Williams had come to Queen’s from Australia, this would have been in 1948 or 1949. I was telling him one day about my work on the Irish economists and saying that it was coming to the end of the line and that I was casting about to think what I might do. Bruce Williams said to me, ‘Why do you not do something about the relationships between economic theory and economic policy, that has always seemed to me to be a subject that has not been much dealt with.’ He was right although there were one or two things that had come out about that time. There was a book which is pretty well forgotten now I think by an Australian called E.R. Walker. It was called From Economic Theory to Policy. I read that and I thought it was interesting but what struck me was that everybody talked about the relations between economic theory and policy in broad general terms. So I thought what you have to do is to try and find a period in which there were some fairly definite changes in policy and some interesting developments in theory and see if they hang together. It struck me that the period from 1775 roughly to 1800 might fit the bill. If you took the period from just before the appearance of the Wealth of Nations up to the Act of Union, you had all these developments about Irish trade. At the same time, people seemed to be picking up Adam Smith very quickly much in the same way as they were picking up Keynes in the 1950s. I thought I will have a go at this. I suppose one thing that influenced

10 Murphy and Prendergast me was that in Queen’s you have this collection of Foster pamphlets – pamphlets which were assembled by John Foster and his son John Leslie Foster when John Foster was the speaker of the old Irish Parliament. It was a good resource, nobody was using it, there was a way to use it and so I tried working on it. I did actually do a paper on theory and policy in Anglo–Irish trade relations 1775 to 1800 which I read to the Statistical Society of Ireland. Looking back on it, it was a damn cheek really to do it because it was not actually in the Statistical Society’s usual focus. At the same time, it was not a very good paper because I had only just started on this material. Around about that time or maybe a bit before that, a man called Norman Buchanan came to Queen’s. At that time Norman, who was quite a well-known American economist, was doing a stint as programme officer with the Rockefeller Foundation. He went round all the people in the Department finding out what each person was doing and whether they were interested in going to the States in order to expand their research. He interviewed me in the course of that but I did not expect anything to come of it. So it was much to my surprise when he actually offered me the chance of going on a scholarship to the States in 1950. In those days that was about as far out a possibility as a voyage to the moon would be now. The States was the other side of the world and there was no possibility of going there without a visa. There was also exchange control. If you went to a bank, they would, after a great deal of trouble, give you £50 worth of dollars but that was all you were ever going to get. Anyway, how were you ever going to get leave of absence? In those days, nobody got leave of absence, it just did not happen. I think I was the first, certainly the first person in the post-war period, to get a year’s leave of absence at Queen’s. Everybody marvelled at the fact that the university had somehow been persuaded to do it. I suppose that was Keith Isles doing. So off I went. Before you got the actual award, you had to submit an outline of what you wanted to do. I thought I would have to do something that the Americans would be interested in so I submitted a scheme to study relations between economic thought and policy in the United States in the nineteenth century on the question of free trade and protection. Why had American protectionism prevailed when free trade was prevailing in Europe? That was the scheme which the Rockefeller Foundation had accepted. When I finally got to Princeton I was scheduled to meet Viner a few days after I had arrived. I went along to his room. He had this very small office which was totally and absolutely jammed with books. There was a sort of rampart of bookshelves between him and the door. When you came in through the door you went round the bookshelves and eventually came into Viner’s view. The first thing he said to me was: ‘Ah, you did that bibliography of writings by members of Trinity College in 1945, didn’t you?’ ‘Well’, he

Interview with R.D.C. Black 11 said, ‘it was not bad but you left out Denis Caulfield Heron, he’s not in it, why isn’t he in it?’ He was right. That was the kind of man Viner was. He seemed to know – well, everything. You could not raise any point in the history of thought or in his own areas of international trade that he would not know. He had this absolutely encyclopaedic knowledge of the whole of the classical economics. Anyway having got his criticism of my bibliography out of the way, Viner went on: ‘What do you want to do this for?’ referring to my outline. ‘Why do you want to do anything about American economics in the nineteenth century. There is nothing worth a damn there – people like Carey and all don’t amount to a hill of beans.’ I said, ‘Well, I was working on relations between thought and policy in connection with Ireland, but I thought in the States it would be appropriate to do something on the American situation.’ ‘Nonsense,’ he said ‘You would be far, far better to go on with classical economics, that is where the interesting stuff is.’ I explained to him that I had put that outline in to the Rockefeller Foundation and that it was on that basis I got the fellowship. I was not sure that they would allow me to spend the year in America working on the classical economists and the Irish question. Viner said, ‘They will if I tell them.’ So he did, and I spent the year in America going round all these collections pulling out all the stuff relating to Ireland. That is where I really learned the trade. Up till then I was no more than an apprentice but Viner showed me what scholarship really was. I:

What about other people you met in the States? Did they provide you with further ideas?

R:

Different angles on classical economics, I suppose. I remember Stigler. One of the first things he said to me was, ‘I’m going to write a paper that will show that Malthus was the greatest bum that ever lived.’ I’m not sure just what that paper ended up as but he also had a mine of information on classical economics and, of course, neoclassical economics as well. Chicago was in many ways the most interesting of the places I went to. Milton Friedman was there, Frank Knight was still there and Earl Hamilton. They were really an interesting bunch of people. I had an awful experience the morning after I arrived in Chicago. Hayek had recently arrived in Chicago and he was with this so-called Committee on Social Thought. On the day that I arrived, Hayek was chairing a viva for a PhD on the history of economic thought and it was suggested to me that I might find it interesting to attend. Now, I was in a bad state at that time because I had not slept for thirty-six hours. You see, I had to meet my travelling expenses out of the not very large grant that Rockefeller gave you and so I economized on the travel as far as I could. Now the cheapest way you could get from New York to Chicago in those days was to go by train. It was cheaper still if you went by coach rather than taking a sleeping berth but it meant that you sat up as we are

12 Murphy and Prendergast sitting now for fifteen hours or so. That is what I did. I should have gone to bed when I arrived in Chicago but instead I went to the viva. I was just about completely stoned out of my mind, not that I had anything to drink, but because I just had not had any sleep. I did my best to stay awake during the viva but towards the end of the proceedings, Hayek suddenly said: ‘We are fortunate to have with us here today Dr Black from the Queen’s University of Belfast, who has come to study here. I wonder what you think, have you any comment to offer us Dr Black?’ Well, I felt I had to say something or other, I do not know what it was but it certainly was not very profound. Still, I recovered from that. It used to be very interesting to listen to Friedman and Hamilton and Frank Knight. I went to Frank Knight’s course in history of economic thought. This was the last time he gave it. He was just finishing it up and I got in for about the last half dozen lectures. At the last lecture somebody asked him for a summing up. He said ‘Well, if you’re asking me is economics today any better than the economics of Adam Smith, I have to tell you I don’t know. But if you are asking me is my economics any better than the economics of Adam Smith the answer is yes, definitely.’ I:

After that, you come back to Ireland and Economic Thought and the Irish Question comes out and then chance plays a role once again, you meet Alf Mac Lochlainn in the National Library, he wants to show you the Cairnes papers and lo and behold you see letters between Cairnes and Jevons and this sets you off on the Jevons trail. Why jevons rather than Cairnes, you could presumably have decided to have a look at Cairnes?

R:

At that stage you see, I had spent a long period of years specifically on classical economics to a large extent in order to do the work on Economic Thought and the Irish Question. From the time I came back in 1951, it took me until 1958 to get Economic Thought and the Irish Question into shape and that had meant many a long day in the National Library and elsewhere before Alf showed me those papers. This did not happen until somewhere around 1959 or 1960. At that stage I felt that I had done all I wanted to do for the time being at least on classical economics. In those days Cairnes was seen very much the last of the classical economists and what I’d read of Cairnes did not lead me to feel that there was an awful lot of stuff there that I was going to get very excited about. That was one thing and the other thing was that I did not want to get myself typecast as an economic historian. I felt that I had written a lot on economic policy and Irish economic policy in particular and if I had gone on with that it would have meant really that in the end I would have been an economic historian and not an economist. No I did not see at that stage that I wanted to go in that direction, I wanted to remain as an economist, good, bad or indifferent and sticking with Jevons seemed to offer that opportunity. Jevons was about neoclassical economics and economic theory and so

Interview with R.D.C. Black 13 working on him was going back into the main stream of economics which was what I wanted to do at that time. I:

If you had realized the work on Jevons was going to involve so much time and so much energy, do you think you would have embarked on it? Initially you get involved because of the Jevons/Cairnes correspondence then you find this huge cache of material and you end up spending about ten to fifteen years on this.

R:

Twenty years.

I:

Twenty.

R:

Well, probably not. I don’t know. Have you seen that book which Don Moggridge produced based on the 1986 Toronto Conference on editorial problems? In the paper that I did for it I quoted from a paper given at a much earlier Toronto conference in which the author laid down a certain number of principles for people who start editing. One of them was start at least 100 years before you actually did. There is no doubt about it, nobody who gets into this editing game properly would ever do it if they realised just exactly what it might involve. The way academic research seems to be going now the premium is on turning material out and getting results and people are inclined to prefer articles to books. That has been the situation in the States for some time now and it makes it difficult for people to get involved in long-term projects like editing. Bill Jaffé, Walras’s editor, is a case in point. I got to know him very well; he was a delightful character and unquestionably a great scholar but Viner told me once that he had spent not a few hours writing letters to the President of North Western University saying: ‘You ought not to terminate this man’s appointment, he is engaged in a great work. He may not have produced anything in the last five years that appears in the journals but something’s going on there that is really important.’ Bill Jaffé never had tenure in the proper sense of the word. He had short-term contract after short-term contract, but he pegged on one way and another for more than thirty years. When his edition of Walras’s work came out, everybody said it was magnificent, unique, nothing like it. There is nothing like it but it was not for any encouragement that he received from the way in which academic life was organized in the States at the time. Unfortunately, that is the model that we have increasingly been following.

I:

You have continually stressed the linkage between economic theory and economic policy. Why do you think this is so important?

R:

Well, eventually it is a key relationship in our discipline. Nowadays I suppose there would be no disagreement among economists about the point that ‘facts without theory are dumb’, but some economists seem happy to confine themselves to a few ‘stylized facts’, or to work with very abstract models. I have never felt at ease with that sort of

14 Murphy and Prendergast approach; to my mind, simplifications and abstractions are undeniably essential for economic analysis, but they must be simplifications of reality, abstractions from reality. Why? Because for just about everyone the economic dimension is a vital one and while they may not be any more aware of that than they are of the fact that they have been talking prose all their lives, they do evolve policies to cope with their economic problems. These are the things which economists talk about – but if their analysis of them becomes too far removed from reality, then surely there must be a real danger that when applied to deal with problems of the everyday world, such analysis may be found wanting and become discredited. I:

Is this the reason why, in your writings, the term ‘sound political economy’ appears to be a term which exposes a very raw nerve for you?

R:

Yes, I think that is fair. As people like Galbraith have emphasized, I think rightly, there is a tendency for economic ideas to become crystallized into a conventional wisdom. Politicians in particular absorb this – get hold of a certain number of theories and then tend to think that any idea which does not fit comfortably within that framework is not ‘sound’. This is where Keynes’s aphorism about ‘madmen in authority being the slaves of some defunct economist’ rings true. Now that occurred for example, in Ireland during the Famine years. The reaction of people in parliament, in the treasury and in positions of power generally was for the most part to think in this blinkered way in terms of conventional political economy and not to feel that they needed to do something urgent to save lives. Just let me read you this comment from Jacob Viner, wise as always: ‘I am struck by the fact that the nineteenth century history of Ireland seems to offer a striking illustration of the possibility that a greater prevalence of uncalculating compassion and sympathy with suffering may at times be a better instrument of reform than the most carefully reasoned weighing of prudential pros and cons in deciding whether immediately-helpful expedients would in the long run do more good than harm.’ Unfortunately it seems to me that today there are still too many examples to hand of conventional economic wisdom being used to design and to justify economic policies which often turn out to do more harm than good. Now, this is where the historian of economic ideas can play a genuinely useful role – because, when you ask questions like ‘how, and to what extent, does economic theory have an influence on economic policy?’ and ‘how, if at all, does economic policy influence economic theory?’, then if you are not content with generalizations or aphorisms, the only usable tools available are the tools of history. After the length of time I have spent trying to work on this I am convinced that there is an influence in both directions, but it has involved, and I think still involves, a very slow seepage of ideas

Interview with R.D.C. Black 15 either way. This process is really very complicated and, in my experience, very difficult to disentangle even in a comparatively short period of history. In addition, those difficulties increase the more recent the period with which you try to deal. Even so, I think that history does teach lessons which are worth learning, but which economists do not always learn. I:

Are you saying that people need a greater appreciation of complexity and that this is perhaps something that a knowledge of history can give them?

R:

Well, I hope so; but you have to be realistic about the possibilities. You can’t reasonably expect people who are filling their days with developing theories or advising on policies to have time and energy left to appreciate all the complexities of history; but what the historian of ideas can do is to study these complex relations and provide others with an interpretation of past successes and failures in the fields of theory and policy in the hope that this may save them from repeating or compounding past mistakes. I think it would be an improvement if economists generally had a better appreciation of the sort of historical context in which ideas have evolved, where they stand now, and the fact that the context is going to change, will be different.

I:

Was this the thinking that led to write your article on Smith’s ideas in historical perspective?

R:

Yes, it was, but there I was approaching from a different angle. I was taking a fixed set of ideas – the ideas which Smith set down in the Wealth of Nations – and trying to show how different generations reacted to them at different times. Tom Wilson handed me that assignment ready made, asking would I write a paper about Smith’s ideas in historical perspective and I said, yes, OK Then I began to think, what is historical perspective? How am I going to get it? There was no way that one could do it year by year all the way from 1776. So I decided on this idea of taking a point twenty-five years, fifty years, seventy-five years and so on from the first publication of Wealth of Nations and looking at what had been written at each of those points of time to see how the perspective changed. How is the way that these people look at it in 1875 different from the way that people looked at it in 1825? In that way it seemed to me that you were using the notion of perspective in a way in which an architect might use it and that it was meaningful to do that in the context of changing ideas. It got me a lot of criticism at that Smith bicentenary conference, especially from Soviet economists. Their point was that the approach I took meant that Marx’s writings on Smith were ignored because, although Marx had said things about Smith in 1869, he had not done so in 1876. There is no doubt that the idea of historical perspective which I was using in the article was strictly limited but it was enough to get people to appreciate the relativity of perspective. I suppose I’ve

16 Murphy and Prendergast always been a bit of a heretic in this respect, I am a bit of a relativist but I would not claim to be a relativist in the fuller sense of the word. I would hope not to be dubbed a relativist because I think that relativism in its extreme takes you into a place where you have no anchors at all. That is the trouble when it is carried to the limit so I would not want to do that. I am not saying that theory does not have a function, I think it does have but it has got to be a function that is seen within that historic context. You could say, I suppose, that my relativism is relative. I think over my lifetime, there has been a tendency in the history of economic thought for the sort of absolutist perspective to become the in thing. That was what Frank Knight meant by what he was said about his economics being better than the economics of Adam Smith. Now if the honest truth were told, I am not awfully sure about that. I do not think it really pays to view the history of economic thought as a progress from error to truth. It certainly is not a straightforward linear progress, much more like a circular movement. A lot of ‘new ideas’ in our field turn out to be old ones refurbished; but there can be gain in that process. If you look back now to a book like Gottfried Haberler’s Prosperity and Depression (1937), which was the text on which George Duncan used to base his teaching to final year undergraduates about the theory of fluctuations, it seems a strange collection of every possible theory of the business cycle, from sunspots through to Keynes’s General Theory. And even though Haberler undertook the formidable task of trying to produce a synthesis from them, Arthur Loveday, in a Preface, described it as ‘tentative and preliminary’ and added that ‘our knowledge of the causes of depression has not yet reached a stage at which measures can be designed to treat them’. Yet even by 1941 Loveday admitted that such pessimism was no longer justified, because of the ‘exceptional advances’ which had been made in both theoretical and policy aspects of business cycle studies. Well, there you can see the first signs of the ‘Keynesian Revolution’ which for many economists – and policymakers – over the next twenty-five years was to provide ‘all ye know and all ye need to know’ about the cause and cure of depression. Since then, of course we have had the monetarist counter-revolution and a few other revolutions as well – all of which might seem to lend support to my view that progress in economics is not a steady movement from error to truth. Even so, and not forgetting all the fuss there was in the 1960s and 1970s about ‘economics in crisis’, I think our subject has gained in the process. One of the encouraging things to me about modern economics is that, on the policy level there is now much more of a consensus, not only between economists but also between the governments they advise about the way in which an economy should be run. The last fifty-five years or so have brought many more ‘exceptional advances’, notably in the statistical information available to economists and the econometric techniques with

Interview with R.D.C. Black 17 which they can handle it. I certainly think that economics has advanced through the aid of quantitative techniques, but I still see a lot of scope for taking more account of the qualifications and limitations which the study of economic history and the history of ideas can serve to bring out. I:

If you had your life all over again, would you do things differently?

R:

Well you know the story about what happened when the genie granted someone his wish that he be allowed to live his life over again. The person made exactly the same mistakes that he made first time round. I do not believe in saying I could do this or that so much better, I am sure I could have done many things much better, the only thing I hope is that you could not say, ‘Well, you could not have done it much worse.’ No, there is no use saying what you would do, if you did it over again. I am just, quite honestly, very grateful that I had the chance that I had. I never thought that I was going to be an academic and I think the forty years that I was in academic life were, in many ways, one of the sunniest periods of academic life, certainly in the twentieth century. I reckon I was just very lucky to get the chance to be a part of it.

2

R.D.C. Black An historiographical and methodological analysis A.W. Coats

A few years ago Terence Hutchison, an acute, wise and exceptionally knowledgeable observer, remarked that the 1990s might appropriately be characterized as ‘the methodological decade’ in economics, given the remarkable outpouring of books and articles on economic methodology and the wide variety of contending views expressed (1992: x). The parallel with historiography is not exact, either in scale or scope. Nevertheless, there is currently a marked growth in the number of articles (but not books) on the historiography of economics, and numerous economists and historians of economics have entered the debates about historical method, viewpoints and approaches.1 Bob Black is not an active controversialist either by temperament or inclination, and he has not participated directly in methodological or historiographical debate.2 Consequently his beliefs and practices as an historian of economics must be teased out of the relevant parts of his substantial and varied body of writings. In doing so, the teaser unfortunately cannot avoid a certain amount of terminological hairsplitting, for Black has not always been bound by the consistency that is said to be the hobgoblin of small minds. For example, in the autobiographical introduction to his volume of selected essays, Economic Theory and Policy in Context (1995), Black described the contents too narrowly as ‘essays in the history of ideas’ (1995: ix). As the word ‘context’ suggests, his work goes well beyond ideas in the abstract, and he would doubtless agree with the anti-postmodernist quip that ‘text without context is pretext’.3 His masterpiece (in both senses of the word) – Economic Thought and the Irish Question 1817–1870 (1960a; hereinafter cited as ETIQ) – is ‘a case study of the relations between economic theory and economic policy’, or, more specifically, an investigation of ‘the influence of classical economic thought’ on the policy of governments (ibid.: xiii, 1; emphases added). Economic policy is not, of course, simply a product of ideas; and there is more to economic ideas than economic theory. This probably explains why ‘thought’ rather than ‘theory’ appears in his 1960 classic, even though (or possibly because) the word is vague and difficult to define. At least Black did not attempt a definition.4

An historiographical and methodological analysis 19 ETIQ is an exhaustive, and to all intents and purposes a definitive, treatment of its subject.5 At the outset Black remarked that earlier works in the field had consisted of broad generalizations rather than detailed examinations of the available evidence, and that there was a dearth of reliable secondary sources on many aspects of Irish history. This had obliged him to include a much fuller account of the circumstances surrounding the making of economic policy than might otherwise have been required. As a result of his successful labours over a nine-year period, the book was hailed as a substantial contribution to Irish history in general, as well as to economic thought in particular (including theory) and economic policy.6 Two other historiographical issues were mentioned in the Introduction to ETIQ: the possibility of a ‘theory of economic policy’, which will not be considered here (as it is too broad and abstract a topic); and ‘the general question of economic relativity’7 or, more specifically, ‘were the doctrines of nineteenth century political economy regarded by their originators and popularisers as having general application, irrespective of time and place, or as being true only in relation to a particular set of institutions and conditions?’ (1960a: 1, 3). As is well known, this was a major bone of contention between some later nineteenth-century English economists and certain members of the German Historical School. However, at least as far as the Irish question was concerned, Black’s conclusion was unequivocal. ‘The majority of writers’, he wrote, ‘undoubtedly regarded the doctrines which had first been developed from English models as having general validity, and were thus led to give advice on policy which was to a large extent inappropriate to Ireland’s condition and requirements’ (ibid.: 240). They also failed to appreciate the difficulties of implementing their ideas, and were slow and reluctant to rethink them in the light of experience. They seriously neglected the social and religious dimensions of the Irish situation, while ‘the superficial similarity in many respects between Irish and British customs and contributions made it natural for many to assume that what was good for Britain must also be good for Ireland’ (ibid.: 247).8 It is perhaps surprising that Black did not explore the relativity question in later years, even though he had described the Irish experience as, potentially at least, a significant test of the issue (1960a: 3). He did, however, express himself somewhat more broadly in an excellent later article on ‘Economic Policy in Ireland and India in the time of J.S. Mill’, where he observed that: It might have been better for both India and Ireland if the historical and comparative approach of thinkers like Sir Henry Maine had been developed earlier and gained more influence in English thought. … It might have been better too if policy-makers in each economy had been interested in examining the facts of what went on in the other and less inclined always to regard English conditions as the norm. (1968: 33)

20 Coats And he concluded by reminding his contemporaries of ‘the relativity of much economic theory and the value of the historical and comparative approach’ (ibid.).9 This is an appropriate point at which to consider Black’s work against the background of recent discussion of the respective spheres of ‘intellectual history’ (IH) and ‘history of economic analysis’ (HEA), two species of historical work that have been said to be ‘strictly non-competing and incommensurable’ (Waterman 1998: 322; see also Hollander 1998; Pullen 1998; Winch 1998). Whereas HEA will be self-explanatory to most readers of this volume, IH is described as a sustained and scholarly attempt to understand the meanings that the texts of past authors had for themselves and for their contemporaries, and which does so in part by locating their texts in their context. (Waterman 1998: 303) IH, it is claimed, is ‘true history’ (ibid.: 304) whereas HEA has been called pseudo-history (ibid.: 312). Be that as it may, Black’s contributions cannot, without gross misrepresentation, be excluded from either category.10 Moreover, it is difficult to see how any thorough study of the history of economic thought and policy in a particular time and place could be otherwise. In addition to his more conventional work in the history of economics, Black has also made invaluable contributions to economic bibliography, most notably with his massive Catalogue of Pamphlets on Economic Subjects (1969), while his superb seven volume edition of Jevons’s Papers and Correspondence 1972–81 is an outstanding achievement in ‘literary scholarship’ (as Black has defined it (1988a: 20)). He has described these two activities as ‘tool making’ (1995: xxvii). In a rare, quasi-historiographical excursion into economic semantics Black published in 1983 a piece d’occasion on the multiple late twentieth-century meanings of the term political economy, as contrasted with the stabilized meaning the term had had in British economic thought prior to 1890. In doing so, he commented on the variety of subdivisions and specialisms in the subject – as Jevons had done, albeit somewhat differently, a century or so earlier (Black 1995: 166, 167, 215) – and cited approvingly Richard Stone’s tripartite classification of economists into the speculative, the active, and the inquisitive. The speculative look at the machine and try to interpret its working from the signals it emits; the active do not like the way it appears to work, and devise improvements; the inquisitive try to take it to bits and see how it actually works. In our century all three types have made and are still making useful contributions to the common task, especially where the lines are kept open. (Black 1983a: 66; citing Stone 1980: 71)

An historiographical and methodological analysis 21 Black is certainly inquisitive; but Stone’s terms speculative and active are less appropriate, for Black is not a speculative thinker and – at least in his writings – is less concerned with the workings of the economic ‘machine’ than with the nature and changing character of economic literature and ideas. Yet his suggestion that recent variants of political economy should be viewed as ‘a group of coexisting research programmes, in the sense of Imre Lakatos’, rather than a paradigm, in Kuhn’s sense of the term, is of methodological interest (1983a: 67). This is one of the few references in Black’s writings to the works of these two philosophers of science, which had, for a time at least, a strong influence on discussion in the methodology of economics. However, Black did not participate in that debate (see also 1995: 196). Black also touched on the general historiography of economics at the beginning of his inaugural lecture, Economic Fashions (1963), where he distinguished between three species of fashions: in economic theory, in method, and in economic policy.11 Economics was a fashion-ridden subject, he remarked: and it is difficult not to feel that economists have been a little prone to overstate the revolutionary character of their discoveries, and to forget the results of previous work when they turn their attention to problems apparently new. (ibid.: 8)12 In the lecture he dealt only with the first type, fashions in economic theory, and contrasted two rival approaches to the development of the ‘science’ – the ‘absolute’ and the ‘relative’.13 Whereas the former emphasized the internal intellectual development of economics ‘as a fairly consistent progress from error to truth … that progress being an intellectual process which is “internal” to the subject itself … the relative approach sees every phase of development of economic ideas as the outcome of contemporary circumstances, every theory as a response to “the needs of the time”’. Although he considered that a good case could be made for and against either approach, Black was not ‘wholly satisfied’ with either of these general views, nor believed either was correct. However, he added that ‘since economic analysis [sic] emerged as a separate and ordered discipline. … Within it the main advances have probably more often come through internal development than as a result of the impact of outside circumstances’ (1963: 1; but for a different emphasis see ibid.: 5). In order to make his or her subject manageable, every historian of economics must necessarily employ some kind of interpretive scheme or approach even if, as is often the case, it is tacit rather than explicit. Such a scheme may be applied to particular historical periods or phases of development, schools and other movements, theories, individuals, or even the entire history of the subject.14 As might be expected from the foregoing, Bob Black has not disclosed his interpretive scheme, or specified his general criteria of selection. Indeed, he may

22 Coats have consciously or unconsciously concealed his more explicit beliefs by avoiding controversy, and by relying heavily on the concept of ‘perspective’, which he evidently considered more historically grounded and less subjective than ‘interpretation’.15 This concept is especially prominent in Black’s Wealth of Nations bicentenary essay on ‘Smith’s Contribution in Historical Perspective’, wherein he reviewed a number of assessments of Adam Smith’s contribution to political economy at three different points in time: in 1826, the golden jubilee of the publication of Smith’s magnum opus; 1876, the centenary; and 1926, the sesquicentenary.16 As he explained at the outset: The very nature of historical perspective makes it difficult to be categorical about the nature of Smith’s contribution … [for] the significance of an event or an idea changes as it is seen from different points in time. (1995: 55) In support of his observation he added: We are all familiar with the illusions which perspective generates. As one writer on the phenomenon has said, ‘Most people have observed that objects diminish in size as they recede farther from the eye, that parallel lines appear to converge, that in general the appearance of objects differs from the reality’. (ibid.) Later in the essay, describing the change from the centennial to the sesquicentennial perspective on the Wealth of Nations he went further, calling it ‘in fact almost a reversal, reminiscent of one of those drawings of hollow squares which when stared at for a time seem to turn inside out’ (ibid.: 69). These analogies are suggestive, but they are also misleading, for they refer to subjective psychological or visual impressions rather than the different temporal perspectives or periods of the kind employed by historians. And, incidentally, if we take Black literally, these perspectives may be ‘illusory’. Nevertheless, Black evidently believes that ‘historical perspective requires a long view’ thereby implying that a short view (i.e. from the present) is somehow less reliable.17 Of course the term ‘perspective’ is fuzzy, though probably less so than ‘interpretation’;18 but at one point Black conceived perspective as collective rather than individual, remarking that: Each period has tended and will tend to see Smith’s contribution in its own way and to evaluate it accordingly. Certainly each one has tended and will tend to see the treatment

An historiographical and methodological analysis 23 of those problems and periods in which it has most interest as constituting the most significant part of Smith’s work. (1995: 75) Waiving the obvious objection that ‘periods’ do not ‘see’, or have evaluations or interests, Black surely did not mean to imply that there was only a single (agreed?) perspective (evaluation or interpretation) for each period? On the contrary, he acknowledged that perspectives are ‘constantly shifting’ (1990a: 16). The choice of period may be arbitrary, based on chronological convenience rather than intellectual content or ‘importance’. Moreover, what are the (agreed?) criteria of significance?19 By contrast with those contemporary postmodernists who imply that there is little or nothing in literary or historical criticism beyond a collection of interpretations, and no generally acceptable way of choosing between them, Black has relied heavily on the resort to ‘the facts’ in choosing between rival theories, interpretations or explanations. For example, as noted earlier, he criticized the early nineteenth-century policy makers’ failure to examine the facts of the situations to which their policies were to be applied (cf. supra pp. 3–4), and subsequendy attacked his fellow economists for ‘clinging to old theories which no longer fit the facts’ (1963:14). At one point – the only one, I believe – he uttered that bête noire of historical interpretation: ‘let the facts speak for themselves’ (1971b: 7). Needless to say, facts do not speak; it is the scholar (theorist or interpreter) who speaks; and with every shift of perspective, or each principle of selection, there will be some new ‘facts’, or old facts that are evaluated differently or perhaps ignored. This is nowadays captured in the familiar dictum that ‘facts are theory-laden’. Some of Black’s references to facts are too casual. For example, Kuhn’s paradigm of scientific revolutions is said to be ‘inadequate to explain all the facts’ (1995: 204; emphasis added); and in a disagreement with Rhead Bowman, Black concluded that he preferred his ‘own account’ which was ‘more untidy, but I hope it is closer to the facts’ (1995: 198). In a rare instance where he considered a controversy in some detail – i.e. that involving the conflicting interpretations of Ricardo by Sraffa, Hollander and others (1995: 37–42) – Black did not withhold his own opinions (which were expressed in mild terms). But in the related issue of Longfield’s analysis mentioned earlier (see note 19) he remarked that Marian Bowley’s reading of the texts was ‘more careful and therefore much closer to the facts than that of Professor Moss’.20 Black’s emphasis on the facts underlay his belief that objectivity was attainable, although he acknowledged that the historian could not avoid making value judgements.21 While recognizing that ‘political economy programmes may abandon the pretence of being value free, they must not abandon the generally accepted standards of science’, he cited a supporting passage from Robert Heilbroner specifying those standards (1983a: 67).22 Earlier in the same essay he warned that political economy ‘may in retreating from the more extreme

24 Coats forms of positivism fall into the opposite dangers of abandoning objectivity and descending into rhetoric and metaphysics’ (ibid.: 66). Given the recent growth of emphasis on rhetoric, and the swelling tide of anti-positivist methodology in the decade and a half since those words were written, it is regrettable that Black did not set out his own beliefs more explicitly. To end on a note of regret or criticism would not only be inappropriate, but also entirely contrary to my intention. My personal regret is that I have been unable on this occasion to provide the full-scale study and evaluation of Black’s work as an historian of economics that it deserves. Members of the older generation of British historians of economics are deeply indebted to Bob Black in many ways that do not show up in our footnotes or other published acknowledgments.23 Black’s consistently high scholarship, and the wide variety of his contributions to his chosen field, are undeniable – whether it be termed the history of economic ideas, thought, analysis, doctrine science, policy or political economy. Yet given his modesty, caution in dealing with abstract or philosophical issues, and reluctance to engage directly in controversy, it is difficult to characterize his work briefly. It is to be hoped that the foregoing analysis is revealing. As this is an inescapably personal as well as a scholarly contribution, I trust that I may be permitted to end with an anecdote. It is exactly forty years ago (1958) that I met Bob, probably for the first time, at the Economic History Society’s annual conference at the then University College, Swansea. In conversation I discovered that he carried with him the completed typescript of his forthcoming book on ETIQ which he generously lent me to read after I had expressed a keen interest in it. My high expectations were abundantly realized. It was a veritable page-turner, and as I had promised to return it the next morning, I did not get to sleep until well into the night. I thought then that it was an outstanding piece of scholarship, and I have subsequently had no occasion to modify my initial judgement.

NOTES 1 It may clarify matters to say that the historiography of economics is ‘the history of the history of economic thought’ (Popescu 1964: 3, in Blaug 1991), whereas methodology is ‘the philosophy of science applied to economies’ (Blaug 1980: xi). 2 Although, as we shall see, he has made a number of specific statements falling within both these fields. 3 At one point Black used the term ‘context’ to refer to other (i.e. non-economic) ideas, rather than to historical conditions in general (1995: xxix). 4 Other terms he has used, more or less interchangeably, are economic analysis and economic science. 5 This does not imply that there has been no progress since 1960 in historical research and understanding of the nineteenth century Irish situation, with respect to economic and demographic

An historiographical and methodological analysis 25 conditions. For a fascinating recent commentary on the historiography of the Famine era see Toibin (1998:17–23). 6 In his autobiographical essay Black emphasized the value he attached to ‘the major part of his work’, namely, ‘using the available tools of primary and secondary sources along with the methods of scholarship to throw fresh light on the history of economic analysis, of economic policy, and of the interrrelations between the two’ (1995: xxvii; also xxviii). He hoped to reach, and perhaps influence, academic economists who were not specialist historians of economics as well as economists employed outside universities in the public and private sectors. 7 The expression ‘economic relativity’ is unusual. It was the title of George O’Brien’s 1942 Presidential Address to the Statistical and Social Inquiry Society of Ireland, an organization of which Black was himself President in 1985–6. In his Presidential address, and in his autobiography, Black paid a warm tribute to O’Brien’s learning, scholarship, and conversational brilliance (Black 1986a; 1995: xiv–xv). 8 Elsewhere, however, Black emphasized the wide differences in the character and development of the British and Irish economies (ibid.: 240). I am indebted to Roger Backhouse for pointing out the difference between the two questions: a) should economic doctrines be regarded as relative to time and place?; and b) did past economists think of their own doctrines as relative or general? As indicated in the text, Black’s answer to the second question was unambiguous, with respect to the subject of his book. He was, however, less definite in answering question a), possibly because of his distaste for general abstract and methodological questions or perhaps, as Backhouse suggests, because he saw himself primarily as an historian rather than an economist, although his Chair was in economics. (For further discussion see note 9; and Black 1986b: 12.) 9 In a hitherto unpublished lecture on ‘Transitions in Political Economy: I, Economic Analysis’, Black commented on the late nineteenth-century debate in British economics about the respective merits and shortcomings of the inductive (historical) and deductive methods (1995: 165–8). He maintained that, although Jevons displayed a considerable and growing respect for the historical method in economics, on methodological issues ‘there was no transition in Jevons’s own ideas: they were carefully thought out and consistently applied’. The revolutionary feature of Jevons’s ideas was his insistence that ‘our science must be mathematical simply because it deals in quantities’ (1995: 166; emphasis in original). For Black’s mild disagreement with Margaret Schabas on Jevons’s ‘overall methodology’ see Black (1995: 179–80, note 3). Earlier, in his Inaugural Lecture, Black had observed that with the development of econometrics, improved statistics, new techniques of computation and ‘this new emphasis on testable theory, the old dispute between “historical” and “deductive” is finally at an end’. However, he cautioned against ‘being too taken up with the latest fashions’ (1963: 9). Black’s caution proved to be justified. The early 1960s were a much more optimistic era in economics than our own. 10 His edition of Mountifort Longfield’s work is undoubtedly HEA (1971a). However, it seems unlikely that Black would have either much interest in, or patience with, the IH/HEA debate, although the leading participants are serious and able scholars.

26 Coats 11 In the published version of his inaugural Black did not refer to Viner’s essay on ‘"Fashion" in Economic Thought’ which had appeared six years earlier in an obscure Princeton publication (Viner 1957, 1991). It is, however, of interest, for Black was both a Princeton alumnus and an admirer of Viner, who contributed a substantial forward to ETIQ. Somewhat like Black, Viner observed that ‘the history of economics as a discipline is to quite a large extent a history of fashion in economic thinking’ (Irwin 1991: 189), but he offered a much more elaborate classification of economic fashions than Black – in terms of geographical areas, objectives, methods, social values and intellectual content. 12 This remark referred specifically to the modern literature of growth economics, but was also intended to be interpreted more generally. The cautious and balanced tone of the remark is characteristic. The expression ‘fashion-ridden’ appears in his 1977 essay on Hawtrey (1995: 152). 13 This distinction became familiar via Mark Blaug’s influential text, Economic Theory in Retrospect (1962 (and subsequent editions): Ch. 1). 14 T.W. Hutchison has shown how varied and numerous have been economists’ interpretations of the history of their discipline (1978: especially Chapters 5, 8, 9, 11). See also Karayiannis (1998). 15 See, for example, Black (1990a: 10). In publishing a book of Readings in the Development of Economic Analysis he said his aim was to put each extract from the originals into ‘its proper context and perspective’ (1971b: 7; emphasis added). 16 He welcomed the opportunity to write the essay because ‘it gave me an opportunity to work with the concept of historical perspective, which I have always considered important but under-utilized in the history of economic ideas’ (1995: xxx). 17 Various other passages in Black’s writings make it difficult to be confident of his view of the relationship between psychological or visual impressions and temporal perspectives – i.e. between the subjective and the objective (reality). He endorsed William Breit’s view that our minds impose order on the sensory data, so that: ‘To a great extent we see what we want to see or what skilful artists and theorists have made us see’ (Breit 1984: 20; quoted in Black 1986b: 10). To this Black added: ‘What the skilful theorists in Economics make us see is their view of the world … But what can be objectively perceived can still be very variously interpreted’ (ibid.; emphasis added). 18 See Bill Gerrard’s well-argued and well-organized paper, ‘Keynes’s General Theory. Interpreting the Interpretations’ (1991) for a vivid demonstration of the variety of possible interpretations of a major economics text. This illustrates the philosophical and methodological complexity (and confusion?) of late twentieth-century economics. Fortunately, as with the present writer, Black’s career developed mainly in philosophically less sophisticated and troubled times. 19 In one instance, referring to Laurence Moss’s interpretation of Mountifort Longfield’s contribution to marginal utility theory, Black remarked: ‘It seems to me that this is another instance where the answer depends on the criteria adopted – in this case the criteria which make a writer into a utility theorist (1995: 44). Presumably this was not an issue that could be settled by reference to ‘the facts’. 20 In case it may have been suggested that Black’s judgements have invariably been overcautious and qualified, see for example his remark that one interpretation of a point in Jevons’s theory was

An historiographical and methodological analysis 27 ‘impossible’, or, again, that there was ‘incontestable evidence’ of Jevons’s commitment to social reform (1995: 171, 187). 21 At the beginning of ETIQ he observed that ‘it is not possible to limit the inquiry to finding strictly factual answers to the questions involved. Some value judgments appear inevitable, and it is preferable that they be openly made.’ The remoteness of the period 1817–70 made it possible to reach ‘a reasonably objective judgement as to the ends of policy and the appropriateness of the means employed to achieve them’ (1960a: 12–13). It is interesting to consider in what ways the degree of temporal proximity between the historian and his subject can affect the making of historical judgements. 22 ‘Like the natural scientist, the economist is expected to keep his journal, recording as best he can his starting points, his successive steps, his final conclusions. He records, with all the honesty and fidelity of which he is capable, not only his data, and his processes of reasoning, but his initial commitments, hopes and disappointments. Since the economist performs few experiments that can be rerun in a laboratory, his results cannot be so easily proved or disproved as those of the natural scientist but they can be equally subject to scrutiny and criticism in the form of expert opinion’ (Heilbroner 1973: 143, quoted in Black 1983a: 67). This passage is surely an apt portrayal, mutatis mutandis, of Black’s own approach as an historian of economics. 23 For example, his contributions to the organization of the first annual British conference on the History of Economic Thought, and to the committee that supervised the research culminating in the publication of R. Paul Sturges’s Economists’ Papers 1750–1950 (1975). As this writer (and no doubt many others) can testify, Bob Black has always been unfailingly conscientious and helpful in response to requests for advice or assistance in scholarly matters.

Part II

History of economic thought as an intellectual discipline

3

History of economic thought as an intellectual discipline1 D.P. O’Brien

INTRODUCTION – THE FOUNDERS The study of the history of economic thought dates back to the early years of the nineteenth century and, in particular, to the work of J.B. Say (1817: xv–lx) and J.R. McCulloch (1824, 1845).2 These two can really be regarded as the founders of the study of the history of economic thought and McCulloch’s work was praised by Schumpeter in his early book (1912: 3). The study of the subject developed rapidly in other countries. In Italy it dates from the 1820s, and a succession of notable Italian writers followed, with the work of Pantaleoni and Einaudi at the end of the nineteenth century particularly noteworthy (Barucci 1983). Both Einaudi and another Italian economist, Cossa, have been cited as not merely precursors but possible influences on the later work of Schumpeter (Barucci 1983: 88; Perlman 1983: 127). In Germany the subject seems to date largely from 1830s; by the 1850s there were systematic histories in German (Schumpeter 1912: 3–5; Cossa 1893: 115–25). Anyone studying the bibliographical details in Cossa’s 1893 book cannot but be impressed by the extent of the literature that had already sprung into existence by the mid-1870s. For practical purposes, then, the study of the history of economic thought is as old as the widespread cultivation of the subject of economics itself. Indeed some of the greatest names in economics have been associated with the study of the history of the subject.

EMINENT PRACTITIONERS The great economists of the last quarter of the nineteenth century, who participated in the development of economics as an academic subject, were all, as Robbins has observed, ‘truly learned in … the scholarship of the subject’ (1952: 1). Jevons’s enthusiasm for the work of his predecessors, from Cantillon onwards, is well known, and he encouraged the history of

32 O’Brien economic thought work of Cossa (Cossa 1893: v). Marshall and Edgeworth were thoroughly well versed in the work of their predecessors; and leading figures in the next generation of economists, notably Keynes, H.L. Moore and Wicksell, all displayed more than a passing interest in the history of economics (Jaffé 1965b: 225). Of course not all of the work of great economists in the history of economic thought was above criticism, to put it mildly. Marshall’s adulation of Ricardo, and corresponding downplaying of the achievement of J.S. Mill, is notorious. Keynes’s work could be described as idiosyncratic at best. Later on the American economist John Commons treated the history of economic thought as an extended prelude to his own work (Coats 1983b: 154), while Wesley Mitchell advanced a version of the history of economics of such extreme relativism (Hirsch 1983) that he was forced to neglect the intellectual development of theoretical work and, stressing its purely passing significance in relation to the kind of statistical work which was his own forte, coupled with a naive ‘scientism’, laid himself open to the charge of measurement without theory (Koopmans 1947). For many of the leading figures in economics during the twentieth century, the history of economic thought was an abiding concern. Indeed for Jacob Viner, economics and the history of economic thought were integral (Winch 1983: 1). Frank Knight taught the history of economic thought through his entire career (Howey 1983: 170), and taught George Stigler (Rima 1983: 272). Despite what might be described as an ‘anti het phase’ (Winch 1962: 193), Paul Samuelson has done distinguished work in the history of economic thought; and other modern leaders with genuine and considered appreciation of the historical literature of the subject include Buchanan, Musgrave, Hicks, Baumol and Friedman. Indeed several of these distinguished figures – Stigler, Samuelson, Buchanan and Hicks, as well as Hayek – have been the recipients of Nobel Prizes. One of these, Stigler, will surely be remembered primarily as an historian of economic thought (though see Mincer and Schmalensee 1983). Subsequent generations, however, have displayed a much greater intellectual narrowness – with the very important exception of Harry Johnson – and the process of narrowing has continued to the point where those interviewed by Klamer (1984) (selected for interview on the grounds that they are current leaders in the subject, moreover) seem, for the most part, to have no interest in the history of the subject at all. This is partly symptomatic of a decline in the subject, as well as being, in all probability, a significant cause.

THE DECLINE IN THE HISTORY OF ECONOMIC THOUGHT As early as 1965 Donald Gordon was reporting a decline in the subject, although it has to be said that he himself regarded this decline as being from a high – even possibly an abnormally

History of economic thought as an intellectual discipline 33 high – level. Viewed from the perspective of the end of this century, the figures reported by Gordon can now only be seen, with regret, as a reflection of a lost world. At that date, 86 per cent of the institutions which he surveyed offered graduate work in the history of economic thought, and in 70 per cent it was required (this was the main case) or chosen by graduate students (Gordon 1965: 120). A huge increase in the size of the profession as measured by AEA membership had been accompanied by a process of increasing specialization (which was to be expected) and marginalization of the history of economic thought (Spengler 1968: 6). The process of decline has continued (De Marchi and Lodewijks 1983). It is perhaps worth considering the details of what happened. First, the history of economic thought became harder and harder to place in journals. In response, specialist journals began to appear, but this perhaps hastened the decline of the history of economic thought in more general journals.3 In Britain this problem seems to be particularly acute; the history of economic thought has very largely disappeared from the leading British journals and academics specializing in the field routinely avoid sending material to such journals, resulting in a possible ‘adverse selection problem’.4 In North America, despite the praiseworthy diversity of the universities, there have been discernible problems (Barber 1998: 182; Hollander 1995: 299–302), though some remain optimistic (Samuels 1996: 59). Anderson and Tollison (1986) have offered the ingenious explanation for decline that history of economic thought work involves difficulty over property rights, resulting in most of the benefits being external rather than captured by the researcher. In the process of decline from the late 1960s onwards, some history of economic thought was pushed out of economics departments into the newly-formed specialist economic history departments. But these economic history departments have themselves now almost entirely disappeared, and have not been reabsorbed into economics departments, but joined up with history departments. The process of decline seems inexorable, at least in Britain and the USA; continental Europe seems to be different (Backhaus 1986). A decade or so ago it seemed to some that perhaps the tide was turning (Coats 1983c, 1987; De Marchi and Lodewijks 1983); but unfortunately, this proved a false dawn. The regime of Research Assessment in British universities has produced particular local problems. The emphasis on journal articles, for which much history of economic thought, requiring work in depth, is ill-suited, has been a considerable handicap to the pursuit of scholarly work; and there are some kinds of work in the history of economic thought, notably in the editorial and biographical field, that seem to be, for practical purposes, ruled out by Research Assessment. Indeed it seems that, without any real public debate, scholarship has been not so much down-graded as eliminated under the RAE regime. Viewing the matter from the perspective of the history of economic thought, this is doubly unfortunate; not only does it prevent the subject being pursued, but it elevates the journal article, which a longer term

34 O’Brien perspective shows to be almost an entirely transient form,5 to a position of complete dominance. Further difficulties for the history of economic thought are posed by the increasing tendency amongst universities in Britain to regard inputs (the obtaining of research grants) rather than (scholarly) output as the test of academic merit. Economic thought comes low in the priorities of grantgiving bodies. Yet there is a very serious case for continuing with the study of the history of economic thought.

THE CASE FOR THE HISTORY OF ECONOMIC THOUGHT The grounds for studying the history of economic thought, and, more particularly, for imparting a knowledge of it to succeeding generations of economists, are numerous. First, as Taylor has pointed out, general truths get lost with the progress of time because they become confused with specific applications in specific times and conditions (Taylor 1955:13). One has only to look at the different messages which succeeding generations have taken from Smith’s great work (Black 1976), and the salutary rediscovery of so much of Smith in later times, to realize the truth of this observation. Moreover, as Stigler has argued ‘time identifies the economists who were worth reading properly. Most of the articles and probably all of them, in the next issue of the professional journal are not worth a careful and costly reading’ (1969a: 221). W.R. Allen has written eloquently of the dangers of relying on the ‘(momentarily) definitive textbooks’. Who are to be the authors of these … ? I shall believe that they have been appointed by the Deity only when they appear to me from out of the mountain mists carrying their opera writ on tablets of stone. Until then, is no one to check up on these seers to make sure that no pearls of any sort from the past are lost? Even those in charge of summarising, improving, and teaching the best (and only the best) thought will occasionally find useful the contemplation of some things written prior to, say, last Thursday. How far back are we allowed to go before entering the realm of ‘history’? Is it really never nothing more than sheer antiquarianism – to be both pitied and scorned – to read the writings of Keynes himself? and Fisher? and Wicksell? and Smith? (1965: 143–4)6 The history of economic thought has a number of other benefits. In particular it is, as Edgeworth said, corrective of one’s estimate of authority and ‘corrective of the narrower prejudices and deceptive associations which are sure to be contracted by those who have been confined to a single school or system’ (1891: 6, 11). It enables the economist to stand back

History of economic thought as an intellectual discipline 35 from the fashions of the day, which can be almost as transient as the latest version of a word processing package, learning the intricacies of which has been instructively compared in usefulness to dodo-sexing. The history of economic thought can act as an antidote to the ‘pap culture’ produced by the expansion of economics and the other social sciences, by planting the subversive suggestion that there may be more to learning than memorizing sections of textbooks. It may have – and one hopes it has – the power to at least moderate that ‘provincialism in time’ of which Lionel Robbins complained (1952: 2); and, just as there is none more blinkered in outlook than the metropolitan sophisticate, so there is none more provincial in time than the devotee of the latest theoretical development. But in any case the history of economic thought should be a basic part of scholarship (Gordon 1965: 125) – and, until recently, it has not been thought necessary to argue that scholarship is an important part of life in a university. The historian of economic thought may well indeed be the interpreter of the past to the profession; but without the specialist interpreter, and without the systematic cultivation of the history of economic thought, it will simply be invented ad hoc, as Terence Hutchison has pointed out (1951: 130). People will insist on referring to past economists, and such references, as one sees increasingly frequently with the decline in specialist study of past economists, are typically inaccurate (Grampp 1965: 134). Loose references to ‘Adam Smith’s conjecture’ as (like Fermat’s Last Theorem (Singh 1997)) waiting centuries for proof by modem mathematicians (in the case of Smith, Arrow and Debreu (cited by Hutchison 1994: 300)) are, in their cavalier style, typical enough of what can be expected in the absence of proper specialist work. Such cavalier references are often associated with those pressing the merits of the latest as the best; the lessons which a study of the history of economic thought provides, from Ricardo’s work onwards, concerning highly generalized theory claiming policy relevance, is clearly at odds with the ‘latest is best’ school. The great economists who studied the history of economic thought have understood this; Viner was as distrustful of theoretical fashion as of ideological enthusiasm (Winch 1983: 6), while Stigler noted that a sense of disengagement from current controversies, after studying previous ones, was inevitable (1969a: 222). At the same time, studying the development of a theory, and the controversies which its development has occasioned, can be a valuable aid to understanding the modern theory, as Stigler himself noted in the case of utility theory (Stigler 1965b: 66; Rima 1983: 274). More generally, the history of economic thought can be of considerable use in the professional training of economists who have to go out into the world with some idea of the weight which theoretical tools bear and of how important particular ideas may be in the broader scheme of things rather than in the latest textbook. Of course the historian of economic thought has to face the fact that both the history of natural science and the flourishing history of medicine are not part of the training of natural scientists and of doctors, and are pursued as academic disciplines in other contexts, such as

36 O’Brien philosophy departments. But this is only a problem if we insist on maintaining that economics is a science. The truth of the matter is that it is apparent, first of all to the historian of economic thought, that it is, as Hicks himself always maintained, a discipline not a science (Hicks 1983: 4, 365–75), and it is characterized by a lack of that linear progress which characterizes natural science pursuits for long periods in their history. As G.B. Richardson has put it: there is no orderly inheritance of ideas; the gains of one generation are frequently jettisoned by the next according to the swing of the doctrinal pendulum … [and] many ideas find their way only belatedly into the corpus of knowledge, having been entirely ignored when first expounded. (1955: 146) The truth of the matter – though it is an unpopular truth with the ‘latest is best’ school – is that the world, and the historical literature of economics, is much too complex for such Whiggishness (Samuels 1974, 1983). In truth, the literature of economics is replete with examples of lost insights. Thus George Stigler, an enthusiastic endorser of neoclassical microeconomics, nevertheless wrote that: The theory of marginal utility was revolutionary in another sense. It led to serious retrogression in important parts of economics, more by neglect than repudiation. The study of the supplies of factors of production other than capital virtually disappeared from economics, and the theory of economic growth vanished. The neat equations of marginal utility and general equilibrium had less to say on these subjects than the Smithian and Ricardian models. (1978: 598)

Indeed the loss was greater than Stigler seems to have appreciated; he was confident that there were no microeconomics to be learned from Marshall (Stigler 1969a: 217), yet, as Brian Loasby (1978) has shown, Marshall’s demand theory was so old-fashioned as to be avantgarde. Again it was Stigler who pointed out that while Adam Smith drew attention, extensively, to the role of self-interest in legislation, twentieth-century economists like Pigou continued to write about a wise, impartial, benevolent state, and it was only with the advent of American writers like Niskannen in the 1960s that the focus of attention shifted and the whole literature on rent-seeking developed (Stigler 1971; 1982: 9). Whole areas of macroeconomics have at times been abandoned, including the business cycle literature which flourished up until the Second World War (O’Brien 1997b), and even economic growth, the staple of economics from Smith to Marshall, disappeared from

History of economic thought as an intellectual discipline 37 consideration under the influence of a ‘Keynesianism’ which – as is painfully evident from the advice given to successive British governments in the 1960s and 1970s – was founded on the belief that inflation of aggregate demand was sufficient to produce real economic growth. These are big examples, but there are smaller, though no less illuminating, ones. For instance, in the field of international trade theory anyone familiar with Heckscher and Ohlin (Flam and Flanders 1991) knows that what they argued is certainly not the same as the socalled Heckscher– Ohlin–Samuelson model, which is really dedicated to a single proposition – that, in general equilibrium, it can be shown that trade with identical technologies can increase welfare in the presence of differing factor endowments. Another example is provided by the history of monopolistic and imperfect competition literature; the mistaken assimilation of the work of E. H. Chamberlin (1933) and Joan Robinson (1933), whose ‘classic’ books are treated as containing the same analysis, is a nice illustration of Harry Johnson’s dictum that a ‘classic’ is a book that everybody has heard of and nobody has read. In the context of that kind of analysis one might also observe that there is a lesson to be learned concerning the kinked demand curve. Endlessly, the invention of this is attributed to Sweezy. In fact it is to be found in Joan Robinson’s Imperfect Competition; but it turns out that it originated in work by Hayes published in 1928 (Spengler 1965). (Those citing Sweezy also systematically ignore the fact that Hall and Hitch, who published in the same year as Sweezy and also employed a kinked demand curve, explicitly acknowledged Chamberlin’s two demand curves (Hall and Hitch 1939: 122), which in turn actually date from the filing of his PhD thesis in 1927.) At an anecdotal level things get even worse. I recently read a paper by a young economist which claimed that economists in the past had paid no attention to the effect of occupation on income distribution. (I suspect that the author had not even heard of John Stuart Mill.) Given the increasing ignorance of economists of past literature, it is far from inconceivable that such a claim could get past journal referees. Walter Eltis has a nice story of battling with fellow examiners in Oxford in the 1960s when self-styled ‘Keynesians’ wished to penalise students who wrote that interest rates rose during inflation (Eltis 1993: xxi). This is doubly ironic. Not only is there a huge literature on precisely this point, but it was dubbed by Keynes himself the ‘Gibson Effect’ after an author of part of the literature (Keynes 1930 vi: 177–86). The truth is probably that most ‘Keynesians’ have not even read the General Theory. But at least the attitude to Keynes is appreciative; Hayek on the other hand has suffered endless denigration by people who have never looked at his work.7 Some knowledge of the history of economic thought is thus highly desirable to prevent not just bad scholarship but also bad economics. But the job which the history of economic thought can do is much wider than this. First, the history of economic thought can be a very good way of teaching theory, as shown successively by Edwin Cannan (1929), Lionel Robbins (1952) and Mark Blaug (1985). (It is also possible to teach the history of economic

38 O’Brien thought through theory, as demonstrated by Viner (1937) and Seligman (1925, 1926).) A recent excellent text on macroeconomics has shown that this approach is far from dead (Snowden et al. 1994). Second, the historian of economic thought has techniques which can be employed in a modern policy context. Terence Hutchison has demonstrated this admirably in Economics and Economic Policy (1968) and Knowledge and Ignorance in Economics (1977). As Stigler has remarked: Professor Hutchison has written two mordant volumes on the treatment of macroeconomic policy by contemporary British economists. They are unattractive tales of unjustifiably dogmatic recommendations, quick changes of direction, and convenient loss of memory. The tales could be matched in other countries. (1978: 598) In this connection we might note a methodological point. As Mark Blaug (1994: 119, 132) has pointed out, the same economists who deplore methodology itself, and make ludicrous claims for the power of, for instance, general equilibrium theory, are also to the fore in making sweeping policy recommendations and claiming, both by implication and explicitly, the ‘authority’ of the subject. The now notorious letter signed by 384 economists in 1982 is a case in point. It is in disentangling the kind of mess that results in these circumstances that history of economic thought techniques have a clear role to play. On a more modest scale, two other examples from macroeconomics of valuable work employing a HET approach might be cited. First, there is the work which Tom Humphrey (1993: 303–12; 1997) has done in articulating Wicksell’s policy rules for price stability – highly relevant when both the Federal Reserve and the Bank of England appear to be followers of Wicksell; and, second, a recent study of the economic thought of Arthur Burns has been able to explain convincingly the apparent paradox that this anti-inflation economist presided over a time of high inflation while a presidential adviser (Hetzel 1998).

APPROACHES TO THE HISTORY OF ECONOMIC THOUGHT Given that there is clearly a case for the cultivation of the study of the history of economic thought, it seems right to ask what kind of history of economic thought we want. Perhaps the easiest way into this is to indicate first of all some approaches which do not seem to me either helpful or likely to advance the case for studies in the history of economic thought. First there is the search for respectable precursors for an idea that somebody wishes to advance. This kind of approach has been quite rightly condemned by Bob Coats (1983b: 148)

History of economic thought as an intellectual discipline 39 as likely to involve either casual or wilful distortion of the historical record. I can myself remember, as a young academic, being asked to provide raw material for such an exercise, preferably finding a precedent in Ricardo; when all I could offer was James Wilson, of whom, it emerged, my interrogator had never heard, interest cooled rapidly. This kind of exercise can broaden out into the creation of spurious alternative ‘traditions’.8 Two examples which spring to mind (or at least spring to my mind) are Sraffian economics, and the enthusiasts for free banking. Involved in such an exercise may be a furious critique of all the other ‘traditions’ in which the underlying aim – to leave the ground clear for the one ‘true’ tradition to flourish – can be hard for the reader to pick up. In general, this kind of exercise does not seem to me helpful. As Terence Hutchison has written:

There is, perhaps, something rather questionable in the sort of intellectual generosity which assumes that Ricardo’s interests and purposes, rightly understood, must certainly have been the same as one’s own, when, after all, Ricardo was as explicit as he could have been that they were distinctly different. (1952: 423)

I am dubious, too, about history of opinion. This may be satisfactory as a starting point for research, and as presented it often contains a good economic history background. But it seems to me only a prelude to analytical work. As Bob Black has written ‘the question remains whether any survey, however exhaustive, of opinions about the workings and effects of a financial mechanism can conclusively support or contradict any theory about them’ (1965: 60; emphasis in original). Then there is the ‘lucky dip’ or ‘cor look at that’ approach, as it might be called. In an age dominated by the requirement to publish journal articles, such an approach can well pay dividends; it provides the basis for a short, and apparently novel, piece and the claims for its novelty made by its author are increasingly unlikely to be constrained by any awareness of the full picture on the part of referees. But as Jaffé has written:

Those who dabble in the history of economics may crow over finding a forgotten book by an obscure economist; … but they rarely have any idea of seeking after original sources, of systematic documentary research, of pursuing elusive evidence of the efficient cause, not the sufficient reason, underlying the emergence of a new theory. The answer to such questions requires patient historical research and disciplined historical judgement, for the exercise of which economists in general are ill prepared. (1965b: 224–5; emphasis in original)

40 O’Brien Then there is the approach which, in its single-minded concentration on textual reading, is redolent of nineteenth-century biblical scholarship (and which may, indeed, as in the work of the late Barry Gordon (Gordon 1989; Ohrenstein and Gordon 1992), involve actual biblical scholarship). Such an approach can result, as Stigler (1981) observed in reviewing Hollander’s Economics of David Ricardo, in a ‘highly personal document’ of a ‘partisan’ nature. The problem essentially becomes one of deciding what weight is to be attached to particular quotations, including, in this particular case, private letters and parliamentary speeches. Stigler’s position was that quotation-selection could distort seriously the record: ‘Why should we allow the hand picked quotation to carry an interpretation when we would reject the hand picked fact as an empirical test of a hypothesis? In fact the two problems are basically the same’ (1965a: 69). Stigler’s solution was that quotations should be tested by their consistency with Ricardo’s model: ‘The test of an interpretation is its consistency with the main analytical conclusions of the system of thought under consideration’ (1965a: 69). Unfortunately, Stigler’s solution is essentially circular – the theoretical structure to which he appeals is not independent of the weight attached to quotations. Thus Hollander, by attaching weight (and indeed emphasis) to sources other than Ricardo’s published opus, has managed to arrive at a fundamentally different interpretation of Ricardo’s theoretical structure. In dealing with problems of this sort it is necessary that there should be a body of scholars actively working in the history of economic thought. Essentially the decision on which is the correct theoretical structure to interpret Ricardo depends upon there being a ‘scientific community’. This is particularly so because the history of economic thought regularly throws up examples of work which most scholars would regard as aberrant. Ronald Meek’s view that the adoption of the marginal utility theory ‘set the seal upon the incorporation of certain important elements of ideological illusion into bourgeois economic theory’ (1957: 13) is by no means an isolated example; and readers of Roll’s venerable textbook encountered a schizophrenic text in which the earlier part was ‘written while Roll was clearly an ardent Marxist, and the latter part, when he clearly was not’ (Perlman 1983: 121). Sometimes the unusual views to some extent cancel out each other, as in the tense exchanges between Samuel Hollander (1973a, 1975) and John Eatwell (1975); but more often this is not the case. Many of the curiosities of Schumpeter’s great History were remarked upon at the time of its publication, by reviewers, but have since become, in some sense, part of the intellectual landscape. In particular Schumpeter’s ‘scientism’ (in praising Walras’s achievement Schumpeter asserted that Walras’s was ‘the only work by an economist that will stand comparison with the achievements of theoretical physics’; it was ‘the outstanding landmark on the road that economics travels towards the status of a rigorous or exact science’ (1954: 827)) and his denigration of Adam Smith and of Alfred Marshall, might have had

History of economic thought as an intellectual discipline 41 considerable influence, perhaps, were there not a community of historians of economic thought who take different views. The denigration of both Smith and Marshall was part and parcel of Schumpeter’s approach to the history of economics; it appeared in his 1912 book, long before the History and it was remarkable for its lack of balance (Schumpeter 1912: 64– 5, 185–6). Indeed it is ironic that Schumpeter criticized Smith for his attitude to ‘political Arithmetic’ despite the lack of attention to econometrics in Schumpeter’s own book, and despite the fact that, as one reviewer observed, Schumpeter’s strengths as an economist were not dissimilar to Smith’s own (Taylor 1955: 17).

THE MAINSTREAM APPROACH In order to provide a balancing role, when faced with aberrant interpretations, it is essential that the history of economic thought is cultivated by economists who are not seeking to advance particular private agendas, but rather to interpret the literature of economics in terms of the mainstream training which an economist both receives and gives. At the heart of this must be Rational Reconstruction. However, this term seems to be susceptible to a variety of interpretations and so it is necessary to indicate the meaning attached here. By ‘Rational Reconstruction’ I mean that the central concern is with the internal logic of a theory. Where there are gaps in the reasoning, the historian of economic thought can legitimately seek to ask what is required to fill the gaps, and what can reasonably be assumed as implicit knowledge on the part of the historical figure being studied. Thus it is reasonable to ask, as Walter Eltis has done, what Quesnay could have assumed about the returns to horse culture and oxen culture respectively (Eltis 1984: 3–21). An historical dimension enters directly via the plausibility of the assumptions made by the original writer. But at the heart of the argument is the theory. This was the approach adopted by Jacob Viner in his Studies in the Theory of International Trade (1937), which has provided a model for so many subsequent historians of economic thought. The approach is essentially critical, rather than relativist, but is fair and not in any sense triumphalist. An approach which concentrated on the theory also characterized Viner’s contemporary Frank Knight. Indeed Knight, having started off, so we are informed, with the intention of pursuing a relativist approach along the lines of the French writer Blanqui (Howey 1983: 172), pursued an ultracritical approach towards Ricardo (Knight 1935). In turn Knight’s pupil George Stigler put theory (though not in any extreme sense) at the centre of his concern. This proved beneficial and illuminating; it was concentration on the theoretical content which led to Stigler’s correct reappraisal of John Stuart Mill as an economic theorist (Stigler 1955). ‘There have been only a tiny handfull of enormously fertile theoretical

42 O’Brien innovators in the history of economics, and Mill has full rights to membership in this regal circle along with Smith, Marshall, and Edgeworth’ (1982: 97). Concentration on the theoretical content becomes all the more important when extravagant claims are made for a certain historical economist as being an important ‘predecessor’. This has been particularly the case with Malthus and other writers concerned with problems of aggregate demand, and Bob Black’s (1967) disentangling of the issues involved demonstrates, without formality, how this can be done. Concentration on theory does not rule out other approaches. In particular the history of analysis is not enough on its own, because policy attitudes are also extremely important. At the same time there is a need for treatment of analysis separate from policy attitudes. The long-standing denigration of the Austrian trade cycle theory, for instance, has little to do with the internal merits of the theory and everything to do with the policy attitudes of Hayek, Robbins and others in the 1930s which, I have argued elsewhere, were based upon a fundamental mistake of fact (O’Brien 1998: 33–5). It is also possible, though I think it requires special skills, to produce a study of the interaction of theory and policy of the kind which Bob Black produced in his Economic Thought and the Irish Question (1960a). To study the two-way interaction between theory and policy is an intriguing research project; but it requires enormous amounts of scholarship and perseverance, and is certainly not something to be undertaken lightly or in the spirit of a ‘quick raid’. A quick raid would not enable us to answer the question of how far theorists and policy makers realized the problems created by uniting a developed and a backward economy, nor enable us to find out how far the economists of the time were prepared to admit that the relative role of the public sector might differ between the English and Irish economies. Such work is very difficult; but when it is done well, as in Bob Black’s study, it can be highly illuminating. Concentration on theory thus does not rule out wider concerns. What it does rule out is a retreat into relativism. As Donald Gordon has reported, relativism frequently gives rise to what can only be described as ‘atrocious economies’ (1965: 127). In its most extreme form relativism does little more than insist that economic theory is a ‘reflection’ of contemporary historical events. The relativist historian of economic thought then sets about examining the historical record to find out which historical events can be selected to explain the theories (Stark 1959). The results can be frankly risible. After discussing one such treatment, in which the diametrically opposed approaches of Mill’s Principles and The Communist Manifesto were both found to be reflecting the historical circumstances of the late 1840s, Terence Hutchison asked sardonically whether it was ‘all done by mirrors?’ (1978: 252). Of course historical circumstances do influence both the questions addressed by economists and the assumptions they make – and it is part of the task of the historian of economics to tease out the implicit assumptions. But after its inception, a theory becomes detached from its historical origins (Sobel 1983: 246; see also Stigler 1972) and undergoes its

History of economic thought as an intellectual discipline 43 own internal development. As Terence Hutchison pointed out in criticizing Wesley Mitchell, a purely relativist approach debars the historian of economic thought from examining the logical development of the theory (1951: 125, 129). So concern with theory is at the core of the history of economic thought. But examination of theory has to be conducted in a sympathetic and scholarly way, taking account not merely of historical circumstances but also of wider intellectual considerations. What sort of qualities does the historian of economic thought require?

QUALITIES (I) THE PARAGONS Any historian of economic thought confronted with the list of qualities attributed, by reviewers of his History, to Schumpeter, could be forgiven for throwing in the towel and pursuing something simple. According to Viner:

this is a history of theory written on the grand scale by an economist who was an original, a powerful, and a versatile theorist on his own account. Schumpeter, moreover, was interested, deeply interested, in apparently the entire range of matters intellectual, was learned beyond the normal capacities of economists, could exercise with facility and with power the whole range of skills which the economic theorist employs: static analysis, dynamic analysis, historical analysis, mathematical and statistical analysis, partial- and general-equilibrium analysis, and so forth without visible end. He was able to deal familiarly with all ages and with the materials of a wide range of disciplines: physics, psychology, history, sociology, mathematics, philosophy, jurisprudence, and perhaps still others. This is a work written in the polymath manner by perhaps the last of the great polymaths. (1954: 894)

Or consider the comments of I.M.D. Little:

Schumpeter’s intellectual range was very remarkable. He comments extensively on, among other subjects, Roman law, theology, political philosophy, ethics, epistemology, aesthetics, the history of science, sociology, psychology, not to mention economic history throughout the ages, and the proper subject of the book. The author index must contain about 1,500 names; and Schumpeter could and did evidently read almost every European language, ancient and modem, though he apologizes for his lack of Russian. He balked at understanding no branch of economics in the wider sense, from history to

44 O’Brien mathematical theory, from statistical theory to the intricacies of Das Kapital. Besides all this, he was himself an original theorist of the first rank not lacking in the ‘vision’ which he rightly claims as essential for anyone who is to advance scientific knowledge. (1955: 91) The result is widely agreed to be a remarkable book, at once inspiring and illuminating, despite a comprehensive list of faults to which various reviewers drew attention. The breadth of Schumpeter’s vision is astonishing; as Frank Knight remarked in reviewing the work: ‘So far from being confined to “economic analysis”, the book is more like a history of western thought from the standpoint of ideas relating to economics’ (1955: 261). While Schumpeter is arguably in a class of his own, other leading scholars have attracted similar descriptions. Thus Donald Walker writes of William Jaffé that, in order to conduct work on Walras: he had to be thoroughly versed in neo-classical economics and to be familiar with modern theoretical developments. He had to know English, French, German, and Italian. He needed a detailed knowledge of the social, political, philosophical, and economic history of the 19th century. He had to travel widely in Europe and have entry into many foreign homes and institutions. (1983a: 19) For mere mortals, these descriptions imply an unattainable standard. However, Stigler’s description of the qualities of Lionel Robbins is more down to earth. Indeed it serves as a very good description of the basic requirements of an historian of economic thought: ‘Lord Robbins unfailingly has shown analytical rigour, thorough and honest scholarship, understanding of alien minds, and unshakeable common sense – a bundle of virtues that few rivals in his craft have approached’ (1970: 425). These are indeed the qualities to be looked for in a historian of economic thought. What sort of intellectual background would help to produce such qualities?

QUALITIES (II) REQUIREMENTS Good work in the history of economic thought is hard. Viner is reported to have believed that it was ‘an arduous and difficult art, calling for unintermitting self-discipline’ (Winch 1983: 11).

History of economic thought as an intellectual discipline 45 My own list of the qualities required would include physical stamina (particularly now that pre-1800 works are no longer available through the inter-library loan system, thus increasing the amount of travel required), which is particularly necessary with editorial work; a retentive memory which serves not only as a filing but as a sorting system; a genuine interest in ideas – where they originated, how they fit together and where they have led; an instinctive interest in the history of the subject; and an unwillingness to take as gospel the ruling fashion. In addition to these personal qualities it is necessary, at least in my view, since I believe analytical history of economic thought is at the core of the discipline, that historians of economic thought should have a mainstream economics training.9 Such training, which forces the economist to cope with modern analytical techniques, is not only valuable in developing analytical skills, but it makes it possible for the historian of economic thought to communicate with economists who are not concerned directly with the subject. Ideally the training of an historian of economic thought should also include some philosophy, some economic history and, if possible, some wider subjects such as law or political history. Although such degrees can still be found in Britain by those who search diligently, they are not heavily subscribed, and are widely believed to offer few employment prospects – although, seeing the ease with which English literature graduates slot into stockbrokers offices, I find this hard to understand. It is, however, certainly true that such a degree might make it difficult to secure a place on a masters programme, thus shutting off one potential source of further training. In practice it is thus necessary for historians of economic thought to be economics graduates, albeit ones prepared to undertake subsequent onjob training. Such on-job training should include a willingness to try to learn some languages other than English. The linguistic skills of economists seem to have deteriorated quite sharply even in the last four decades; and a comparison of work reviewed in mainstream journals in the 1990s with the reviews to be found in journals at the start of the century provides some evidence in support of this. Of course, as in the case of Keynes, there are some questions concerning how far the works in foreign languages were fully understood (O’Brien 1998: 34); but other economists, including Dennis Robertson, reviewed works in French and German, while Robbins fought a long battle to keep a language requirement in the London degree and Hicks has left an account of his learning of Italian (Hicks 1983: 356). The matter of languages is particularly important because translations can be both difficult and unsatisfactory. Schumpeter’s German is widely recognized to have been particularly difficult to translate, both by professional translators and by academics more or less equally fluent in English and German10 (Aris in Schumpeter 1912: 1; E.B. Schumpeter in Schumpeter 1952: xiii). Similarly, the version of Mises’s Socialism (1936), in the excellent translation by Kahane, is pretty much a paraphrase when the text is compared with the author’s Die

46 O’Brien Gemeinwirtschaft (1932). Thus some linguistic investment on the part of the historian of economic thought is highly desirable. But the character of work in the history of economic thought has changed, as anyone comparing Blaug’s Economic Theory in Retrospect and Cossa’s Guide to the Study of Political Economy will see immediately. This change makes it inevitable that there should be greater emphasis on technique. Technique is not optional for historians of economic thought. Mathematical, and indeed econometric, techniques can now be applied to the historical literature and the circumstances of its time with illuminating results. But such investment in technique, while it requires time, does have the benefit of helping the historian of economics to survive and to work in areas other than the history of economic thought as well, as many of the great figures have done in our time, notably Baumol, Samuelson, Stigler, Patinkin and Viner.

QUALITIES (III) THE WIDER INTELLECTUAL CANVAS The philosophical background to economic writing poses particular problems for historians of economic thought. An economist who becomes too immersed in philosophical literature risks becoming separated from his colleagues (Tarascio 1975: 37). Yet to attempt to tell the story without any reference to philosophical issues is to miss important aspects. The historian of economic thought is faced with a choice between getting out of depth and producing a lopsided account. Essentially, historians of economic thought have got to be prepared to take their courage in both hands and to ‘get in over their heads’, just as mathematical economists are occasionally prepared to admit to doing (Klamer 1984: 32–3, 74–6). Philosophy cannot be ignored. Schumpeter’s contention that the philosophical background was so much surplus baggage (1954: 28–32, 780) is contradicted by the content of his own History, with more than half the book occupied by material which he apparently believed to be irrelevant to the history of economic analysis (Viner 1954: 897; Little 1955: 94). Ironically enough, commentators have pointed to deficiencies in Schumpeter’s appreciation of philosophical issues, despite this. Taylor has argued that Schumpeter’s treatment of Plato and Aristotle is defective (1955: 15) while Little has pointed to unsatisfactory aspects of Schumpeter’s treatment of Utilitarianism and of Natural Law (1955: 94–5). It is certainly evident that Schumpeter exhibited a sweeping tendency to see eighteenth-century natural law and medieval natural law as equivalent (Taylor 1955:16). If even an economist so superbly equipped as Schumpeter, and so determined to write a history of economic analysis, ended up producing a work which was neither the history of economic analysis nor a work in which the philosophical issues were thoroughly explored, it is clear that the philosophical background has to be taken seriously.

History of economic thought as an intellectual discipline 47 Schumpeter apparently believed his claim that the philosophical background was superfluous – even making the extraordinary claim that Hegelianism was ‘unessential’ to Marx (1952: ix, 10). But one has only got to look at more balanced treatments to see that this is unsustainable. Bob Black’s essay on Bentham and the nineteenth-century economists is a case in point (Black 1988b). Indeed broader intellectual history can be of great value, as Hayek’s extraordinarily scholarly work on Saint-Simon displayed (O’Brien 1994: 355–8). His material on Marx’s youthful studies – which were far from ‘unessential’ to what Marx finally produced – shows what is to be gained from a patient examination of the philosophical background (Hayek 1941: II, 129, 131, 139, 145; III, 287, 289-92; 1942–4: II, 45). Of course it is true that spreading the intellectual net too widely carries with it particular dangers. In particular the analytical issues can be lost sight of. Indeed there seems to be a connection between this and the kind of extreme relativism exhibited by Wesley Mitchell which, in turn, influenced Spengler (Sobel 1983: 95–9; Spengler 1968).

QUALITIES (IV) PHILOSOPHY OF SCIENCE Despite such dangers, philosophical issues cannot be avoided. Moreover, it seems to me that some sort of background in the philosophy of science is necessary for economists who write on the history of economic thought, at least in a twentieth-century context. It may well be that, as George Stigler (1978) has argued, there are either no revolutions in economics or, if they exist, they are of small importance compared with the cumulative progress of the subject. It may thus be that a Kuhnian approach (Kuhn 1962) is not helpful. At the same time it is worth pointing out that Stigler’s position was based upon a high level of confidence in the standing of microeconomics. He criticized Terence Hutchison’s On Revolutions (1978) for paying too much attention to changes in macroeconomics in support of the idea of revolutions. But in fact the date of Stigler’s criticism is telling – he was arguing, in 1978, on the basis of citation practice, that microeconomics was much more stable in intellectual content. But after that date microeconomics changed radically with the rise to dominance of game theory. Nonetheless, there certainly are severe criticisms to be made of a Kuhnian approach. Yet some framework seems to be required.11 I understand fully that there are real difficulties in identifying Scientific Research Programmes (since few authors agree on precisely the same delineation – see Goodwin 1980) and in agreeing on the content of the Hard Core and so on, if we adopt a Lakatosian approach. But the value of the concept of a Scientific Research Programme can be demonstrated from something written long before the work of Lakatos. For it is precisely the concept of a SRP which is at the heart of Schumpeter’s contention – which is in my view valid, despite the criticisms of Viner and others – that Ricardian economics was a detour.

48 O’Brien QUALITIES (V) ECONOMIC HISTORY That economic history is intermittently linked with the history of economic thought is something which should not need emphasis although with the disappearance of economic history from economics departments and from economic journals, it appears to do so.12 It is clearly necessary to take account of the historical setting in which a theory was formulated, while acknowledging that theories then assume a life of their own. Not all economists accept this; Stigler extrapolated from his (valid) rejection of a ‘Reflections’ approach, of the kind referred to above, to all other ‘environmental influences’, treating these also as merely incidental (1960: 37; 1969b: 336–7). Such a message is of course welcome to many economists because many economists now lack any knowledge of economic history. But, as already indicated, one fundamental question in a rational reconstruction approach (in the sense in which this term is used in this essay) is the realism of assumptions, or at least what assumptions a theorist could reasonably have made – and here some knowledge of economic history is indispensable (cf. Black 1968, 1982). For those historians of economic thought who venture into econometric work, a care for the quality of data (which is more typically displayed by economic historians than it is by economists) is also highly necessary. Economic history is not the history of economic thought but neither is it something which can simply be ignored by the historian of economic thought in the way that Stigler suggested. For some specialized kind of study, such as that of Bob Black on Ireland already referred to, it is completely indispensable.

BIOGRAPHY The subject of what may loosely be called biographical work undertaken by historians of economic thought is worthy of particular discussion, not least because its value has been a matter of controversy between leading historians of economics. Although there have been recent, and outstanding, examples of biographical work relating to Keynes (Skidelsky 1983– 92) and Marshall (Coase 1984, 1990), the writing of full biographies is not something which can any longer be undertaken by someone in full-time employment in a department of economics, and not all the biographies written have been so successful. Rather I am concerned with biographical work of a broader sort and, in particular, with editorial work. Editorial work is extremely hard, although it typically receives little credit. Economists, engaging in the kind of long-run scholarly work which was once associated with universities before the dominance of the journal article, have produced editions of the correspondence of Ricardo, Walras, Jevons, Overstone, and Marshall as well as the huge quarry for scholars provided by the Keynes Collected Writings.

History of economic thought as an intellectual discipline 49 The road of the editor is a hard one. As Bob Black has observed:

Editing … is a form or aspect of literary scholarship; as such, it is a type of intellectual activity about which the great majority of modern economists know little and care less, because they do not see it as relevant to their science. (1988c: 20)

For this reason economists are reluctant editors. As Bob Black again, has put it: ‘an edition of the works and papers of a leading economist is perhaps not so much something which people are likely deliberately and advisedly to decide to do as to have happen to them’ (1988c: 25). The struggles which Jaffé had to undergo to persevere with his Walras edition are wellknown amongst historians of economic thought, though not fully acknowledged in print so far as I know (Hollander 1995: 299); but virtually every editor can recall the difficulties that such perseverance presents. Yet at the end of the day, as a result of Jaffé’s activities, we do understand a lot more about Walras. As Jaffé himself insisted, biography helps us to understand the balance of the artistic creation which is a theoretical structure (Jaffé 1965b: 226). Walras’s Correspondence shows us what was driving him (Walker 1970, 1983a: 44–6). At a more detailed level we learn about Walras’s reluctant embracing of the idea of variable coefficients of production (Walker 1983b: 46–7) and we can see how his relations with Picard and Amstein, and his reliance on Poinsot, explain both the form and limitations of his theory (Jaffé 1965b: 229). Jaffé had himself found much value in the imperfect selection of Marshall’s letters published in the Memorials (Walker 1981: 1013). We now have a full and comprehensive edition of Marshall’s Correspondence (Whitaker 1996) and much that was before unclear is now clear. In particular, as the editor of Marshall’s Correspondence, John Whitaker, has observed ‘we can now see the letters which in the past have been quoted from or referred to, with such telling effect’ (1996, 1: ix). Indeed in some cases we can see that the letters do not exist (O’Brien 1997a: 1864). From Marshall’s Correspondence and Early Economic Writings (Whitaker 1975) we can evaluate Marshall’s later claims to priority and thus gain insight into the process of the Marginal Revolution. For both works throw light on the troubled question of the relation between Marshall’s thought and that of Jevons, and on Marshall’s strange writings on the question of rent and value. The Correspondence also throws light on the sometimes strident attempts to depict Marshall as some kind of politically incorrect ogre. In addition, his letters provide a good deal of information on his relations with his Cambridge contemporaries, especially the elder Keynes, and Foxwell (O’Brien 1997a), and, as Jaffé himself has argued, the whole question of Marshall and the so-called ‘oral tradition’ requires biographical study (1965b: 228).

50 O’Brien There is a particular value in the editing of correspondence. As John Henry Newman argued long ago, the case for letters is that ‘Biographers varnish – they assign motives, they conjecture feelings – they interpret Lord Burleigh’s nods, but contemporary letters are facts’.13 But from biographical work considered more widely we can learn about Jevons’s unusual intellectual background, and in particular his thoroughly scientific one, which certainly helps to explain much about the particular nature both of Jevons’s contribution and of his particular lines of attack on economic problems (Black 1962, 1972b, 1972c, 1972d). Learning about the nature of an intellectual community can also be extremely helpful in understanding the path which particular developments followed (as at Trinity College Dublin) (Black 1945, 1947, 1948) and indeed to understand that though Jevons and Cairnes were very much at odds over marginal utility they were still fellow economists who could discuss other economic issues in a professional way (Black 1960b). Biography can also be a fruitful source of hypothesis. For instance the knowledge provided by the Sraffa edition about the relationship between Ricardo and James Mill provided the background to W.O. Thweatt’s provocative thesis concerning the origins of the idea of comparative advantage (Thweatt 1976, 1979: 14–15; O’Brien 1988: 191–2). Such insights are provided by scholarly work of high quality. It is unfortunate that the professional pressures now faced by economists make this very hard to pursue. For without professional and scholarly biography there will be what might be called ‘ad hoc biography’ – ad hominem arguments based on selected facts culled from places like the Dictionary of National Biography. However, we cannot avoid the fact that one of the century’s leading historians of economics has rejected the idea of biography as being in any way useful or valuable. According to George Stigler biography does not help us to understand economic theory. Science consists of arguments and evidence marshalled by a person and, so Stigler maintains, whether or not these arguments are accepted depends entirely upon the intellectual content and not upon the intellectual environment. According to Stigler ‘biography distorts rather than illuminates the understanding of scientific work’ (1970: 426). It is then rather ironic that it is evident from Stigler’s many asides that he was in fact well acquainted with biographical details. He contradicts Marshall’s claim that J.S. Mill lacked free time to write on economics and he refers confidently to W.T. Thornton and Mill as being friends and colleagues in the East India company (1982: 163). One may ask why, if it was all so useless, he was so effortlessly acquainted with the biographical material. Stigler’s attack upon biographical work (1976) is extremely strong, referring to ‘the Implicit Absurdity, the Hand-Picked Example, the Abhorrence of Evidence’. Yet none of the ‘Hand-Picked Examples’, which Stigler himself uses (and it is ironic that he in turn should resort to hand-picked examples in view of his opinions upon textual exegesis) actually stands up very well to detailed examination. Moreover, specifically in the context of the life of J.S.

History of economic thought as an intellectual discipline 51 Mill which occasioned these strong comments from Stigler, it is not true that Mill’s thought existed in a vacuum independent of, say, Mrs Harriet Taylor, whose influence on Mill’s attitude both to socialism and to women (I mean in an economic sense) is evident to the reader. In any case, as Jaffé has argued, the faulty use of biographical material provides no case for abandoning this source of information (Walker 1983b: 43). The respectful tones in which Stigler, not an habitually respectful reviewer, discussed Sraffa’s Ricardo, indicates that, perhaps in his heart of hearts, he felt the same (Stigler 1953). Stigler would maintain, and in this chapter I have argued that such a view is correct, that analytical considerations and the logical structure of theory must be at the centre of the study of the history of economic thought. But this should not be taken to mean that biographical work, broadly understood, is in any sense redundant.

CONCLUSION There is always room for good new work in the history of economic thought. Although much of Cannan’s work has stood the test of time wonderfully well, the history of economic thought as a subject does not stand still. There have been important changes in the relative importance of different countries as sources of economic literature (Barber 1998: 188) which are largely unexplored. Above all there has been an explosion in the literature of economics. The AEA Index for 1950–4 has 204 pages listing articles, or only slightly over forty per annum; by 1981 the index required two volumes per year and by 1987 the list of articles covers 876 pages for one year. There is also a constant need for new discussion informed by the current concerns and techniques of economists. This means that at least some of the literature is going to get more technical (this does not imply, of course, any lowering of scholarly standards – see Creedy 1986, 1992) – ‘raising the quality of doctrinal history several notches’ as one reviewer has put it (Collard 1992: 334). But this is a process which has been going on for a century, as the reference above to Cossa and Blaug makes clear. It cannot be avoided if historians of economic thought are to continue to communicate with the wider profession. There is, or there should be, room both for the grand sweeping work of the kind at which Schumpeter was so good, and for the waspish short essay which was George Stigler’s forte. Of course we should try to learn from both the strengths and also the defects of what has gone before; most basically we have a duty to be clear rather than bombastic – Schumpeter’s tone has much in common with that of Marx when discussing other economic writers, and there is simply no basis for Schumpeter’s lordly awarding of grades to previous economic writers. The previous literature shows us the competing dangers of arrogance (of which Schumpeter seems to have had more than his fair share) and of ancestor worship (perhaps

52 O’Brien Alfred Marshall’s besetting sin in this context). To put it another way (as Stigler did) there are the twin dangers of hyper criticism and adulation (1969a: 219–20). In warning against the latter, Stigler was able to cite particularly embarrassing pieces on Stalin by Meek and by Lange. But I would argue that both these dangers can be guarded against by the kind of rational reconstruction which I have advocated in this essay. I would suggest that in this context model building pays dividends – not the kind of ‘Ricardo-like’ or ‘Smith-like’ model building which (to be unfair) attempts the Wealth of Nations in three equations, but model building which sticks as closely as possible to the original author’s own model, as I attempted with Thomas Joplin (O’Brien 1993: 256–70). There are serious reservations to be expressed about, in particular, Smithian modelling, as Spengler (1959) has shown; but there are much lesser economists whose work can be modelled more easily, and, even in the case of Smith, a serious attempt to disentangle the intellectual issues does pay dividends. I believe that the history of economic thought as a subject will survive. But it will survive with difficulty. Some aspects of it will survive within the discipline of history, and the modelling and theoretical aspects on which I have laid such stress will, necessarily, be pushed to one side. Some of it will survive really in an underground form, as publication becomes more difficult. There will always be those who are fascinated by the literature of their subject; and those historians of economic thought who have published autobiographical material, notably John Whitaker, have made this clear to a wider world (Whitaker 1998: 12). It will also survive in less desirable forms, of the kind which I have discussed above, such as the creation of spurious alternative traditions. But where history of economic thought has a propagandist element there will always be those who, in the end, will step forward to put the record straight – as Patinkin (1976) did with regard to the claims of the so-called Cambridge Circus, as Mark Blaug (1987) did with regard to the Sraffians and other rather specialized interpretations of classical economics, and, arguably, as Alan Meltzer (1988) did with regard to the so-called ‘Keynesians’ and fiscal fine-tuning. But ‘in the end’, like ‘in the long run’ has a certain resonance for economists – even if it is only the history of economic thought specialists who appreciate that the resonance of the latter phrase comes from the Tract on Monetary Reform (Keynes 1923: 65) not the General Theory – and that resonance is not reassuring. In the long run – in the end – we are all dead; and 1 hope that the starvation of, and pressures on, scholarship, which would have been inconceivable fifteen years ago, and in which so many academics have willingly or unwillingly collaborated, will not result in the death of the history of economic thought. The history of economic thought is actually very hard; it involves a range of qualities which are not common in combination and a degree of dedication – and of ‘long-termism’ – which should be of value to an academic community. If that community creates, as has happened in this and other countries, a situation in which these qualities are not valued, academics – and

History of economic thought as an intellectual discipline 53 the students who might have been educated by those possessing these qualities – will be the poorer, as they have indeed become in recent years.

NOTES 1 I am much indebted to John Creedy, Roger Backhouse and Julia Stapleton, none of whom should be blamed for the contents of this essay. 2 On McCulloch’s extraordinary pioneering work see O’Brien (1995a, 1995b). See also O’Brien (1970: 55). 3 There is an earlier parallel; the emergence of specialist economic history journals resulted in the almost complete disappearance of economic history articles from economic journals. 4 This has a number of aspects. In particular the main journals are denied the best specialist work in the history of economic thought, receiving only a small, and unrepresentative, selection, some of it the product of non-specialists who are perhaps unaware of the journals’ general attitude towards the field, while most of the specialists hold back. 5 In this connection, it is instructive to consider two points. First, it is a common experience that one cannot even give away back numbers of journals, let alone sell them. Second, one can apply and extend the test suggested by George Shackle – looking at the grease marks on bound volumes of journals. It quickly becomes apparent that very few articles are widely consulted. Extending this to pencilled marginalia, one finds very little of this in journals; books in the stack are full of it. I exclude here recent citation practice as being part of the ‘journal game’. 6 As Roger Backhouse has shown, one needs to know the history of economic thought to read a textbook, for what is presented is akin to geological layers of accumulated ideas – as Backhouse argues, economics itself is a historical process (Backhouse 1996). 7 The gradual emergence of the new and splendid edition of Hayek’s works, with volumes edited by W. Bartley, Stephen Kresge and Bruce Caldwell, may help to rectify this situation. 8 On the pressures exerted on the editor of the Keynes edition by competing ‘traditions’ of this sort see Moggridge (1997: 40). 9 I taught international economics (a subject which itself became increasingly technical with the passing of the years) throughout my entire time as an academic, as well as other mainstream subjects. I found this invaluable as analytical, background when dealing with the history of economic thought itself. The history of economic thought was never the majority of my teaching. 10 I can vouch for this from the viewpoint of someone with less fluent German, having translated some of Schumpeter (1908) into English as an exercise. 11 My own experience, in attempting to make sense of microeconomic literature dealing with the firm in the inter-war period (O’Brien 1983a) is that a Lakatosian framework can be extremely helpful. I vividly remember this coming to me on a footbridge high above the River Wear as I struggled in my

54 O’Brien mind to find some order in the inter-war microeconomic literature while walking to the university library. I am here talking about the Lakatosian framework as viewed in O’Brien (1983a and 1983b). For much fascinating material on the later critics of such an approach (and much else) see Backhouse (1997, 1998). 12 It is sad that Hollander reports a ‘deafening silence’ from the economic historians at Toronto when moves were in hand to reduce the importance of the history of economic thought there (1995: 301). 13 I chose this as the motto for the Correspondence of Lord Overstone (O’Brien 1971). For the original see Newman (1970: 442–4). The version quoted is the one given by the editor of the volume in a note as an earlier draft – Newman (1970: 443n).

4

Reflections on the history of economic thought or ‘a trip down memory lane’ Bernard Corry

For my contribution to this celebratory volume for Bob Black I want to offer some general reflections on the history of economic thought.1 For me, and perhaps for Bob, it will be a ‘trip down memory lane’! I want to reflect on the relationship between the history of economic thought (HET) and economics, the problems of teaching the subject and finally the question of how to do research in it. I first taught, or attempted to teach, the history of economic thought in the session 1956–7. Since that time, apart from the odd sabbatical or research fellowship for time off, I have taught the subject in varying guises practically every year – which by my reckoning is forty years before the mast. Presumptuously I have thought that it might be of interest to readers of this volume for me to reflect on these years of endeavour and try to rehearse with you some of the vexed questions surrounding teaching and researching in this area. You may well feel at the end of what I have to say that I am still as muddled as when I first started out on the journey. I have to admit that I initially had very little preparation to teach economic thought; it was not a paper in my undergraduate course at LSE; I did attend Hayek’s lectures on the subject in my first year (1948–9) but found them too esoteric and as I recall he had only arrived at Scaruffi after several lectures when I stopped going. I had hoped to have another attempt the following year but by then Hayek had packed his bags for Chicago. My doctoral work under Robbins was on classical macroeconomics and that was of some use in preparing a course of lectures. I also attended a short course by Terence Hutchison on pre-Smithian thought. So with these memories and a copy of ‘big’ Schumpeter which I had managed to acquire second hand – I was told by the bookshop (Simmonds in the Strand) that it was a review copy from ‘someone at the LSE’ – I set out to teach ‘the history of economic thought’ from classical Greece to Keynes! Since that early juvenile attempt at teaching the history of economic thought I have tried several approaches to its teaching. I have not been completely satisfied with any of them. The problems of teaching the subject cannot of course be made distinct from the problems of researching it nor can either really be separated from the vexed question of the relationship

56 Corry of the history of economics to economics itself. In what follows I shall pose and sketch my answers to three questions:

•

What is or should be the relationship between economics and the history of economic thought?

•

How should the subject be taught?

•

How should it be researched?

This set of questions could readily be amended or added to so as to highlight more clearly the issues at stake. By the history of economic thought I shall mean the whole range of discussions of economic matters and thus include methodological and philosophical deliberations; economic policy; economic analysis; quantitative methods; visionary economics. This is far more discursive and much wider that the Schumpeterian ‘development of economic analysis’ as for example exemplified in Blaug (1997).

THE RELATIONSHIP – IF ANY – OF THE STUDY OF THE HISTORY OF ECONOMIC THOUGHT TO THE STUDY OF ECONOMICS Some years ago I asked the question ‘Should economists abandon HOPE?’ (Corry 1975). More recently the question has been put ‘Should historians of economic thought abandon economics?’ (e.g. Schabas 1992). What is and what ought to be the relationship between economics and the history of economic thought? On the ‘is’ question the answer is now pretty clear; for previous generations of economists a knowledge of the history of the subject was considered more than useful – if not vital. Today most academic economists do not see courses on the history of economic thought as an integral or even useful part of economic studies. They take the standard line that economic studies should be about current theory, its empirical validity and the policy implications thereof, and whilst current theory obviously evolved from past endeavours a knowledge of the past thought is irrelevant to the present. I know that is putting the present situation crudely but it’s not far off the mark. (Not quite proper evidence but a scrutiny over about a year of academic job vacancies in the UK in economics found nothing specifically for HET, not even as an addition to mainstream teaching.) Students also have similar preconceptions – clearly influenced partially if not wholly by their elders and betters and naturally by the market for their labour. Faced with a choice of final year

Reflections on the history of economic thought 57 modules to be picked from, for example, financial economics, the economics of the stock market, further econometrics, environmental economics, labour economics, the economics of the EU, health economics, the economics of law and so on, specialist economics students are not inclined to pick, other than by default, economic thought. Students studying economics along side, say, economic history or politics may still home in to economic thought – they have a better historical perspective which is a clear advantage and often they want to elect for non-technical economics modules. HET specialists have lived with this situation for some time; we live as the poet said ‘on borrowed time’.2 Let us come onto the ‘ought’ question. What ought the relationship to be between economics and the history of economic thought? The strong case for some study of it in the training of economists is composed, in my judgement, of two strands. (I put on one side the case to be made that it is scholarly, a relief from immediatism, is non-technical, etc. although such features should not lightly be dismissed by degree structure committees!) The first strand is as an aid to the understanding of current thought. The argument goes as follows; there are two ways to teach economic theory – analytically (e.g. this is current macroeconomics) or historically3 (e.g. Keynesian economics was criticized by the monetarist who in turn were replaced by the neoclassicists). The case for the latter is that it may enable a better understanding of the sometimes extraordinary propositions of current theory to realize how they have arisen out of past controversies. Of course we could here be involved in an infinite regress but the history here is a limited one to the ‘last’ n years form. A glance at textbooks will show that both the analytic and historical approaches are used, with perhaps the historical type in the ascendency. However persuasive this sort of argument is, it is really about the teaching of current micro and macro theory rather than the involvement of the history of economic thought as a separate discipline.4 The second strand, or ‘widening the economist’s horizon’, is that it is for the good of economists that HET practitioners should remain within the fold. Some doubts about current orthodoxy should always be voiced – doubts about the ‘economics as physics model’, about the socio-politicalclass origins of much ‘objective’ analysis, about other ‘schools’ of thought. Via the history of economic thought at least these points can be aired and students of the subject forced to sit back occasionally and think! Of course you may legitimately argue that these concerns to expose students to heterodox ideas do not require HET per se. But it does seem that in fact it is via HET courses that such ideas are let loose.5 I would like to see the history of economic thought remain a viable option within economics departments, although I suspect that it will soon be totally eradicated. I would further urge that just as I believe that historians of economic thought should remain within economics departments I also believe that they should try to contribute to branches of economics other than just the history of economic thought. This may seem to go against the

58 Corry grain of Smithian division of labour. In the world of specialization it would be considered unreasonable for, say, a labour or development economist, etc., but in order to gain not just the confidence but respect of our colleagues we have to show that we are economists. Often historians of thought adopt a critical attitude to current orthodoxy, faulting its lack of historical perspective or its naive over-enthusiasm for a positivist methodology. This is all very well, but if we were to criticize in a more constructive manner by showing the value of other approaches in the analyses of current economic debates it would be more to the point and moreover would improve our status in the economics profession. It is also argued that by going over past debates the historian of ideas may throw new light on current controversies in economics. But is it really true that going over, for example, the Tinbergen–Keynes debate on the use of statistical procedures in economics helps us understand the current attacks on the ‘economics is econometrics’ view of life?6 Yes, I think it does. There is no harm and indeed positive benefit in realizing that the reasons for the acceptance of a certain economic idea or doctrine may be far more complex than meets the immediate vision. This broad advocacy for HET does derive from a sceptical but constructive attitude towards the current orthodoxy and the specific arguments for doses of HET in mainstream economics degrees probably ultimately derive from this scepticism. The main components here are the recognition of legitimate alternative ‘schools’ of thought and the recognition of alternative views of the way to assess the validity of economic propositions. The two positions are interconnected. Let me briefly expand on this interconnection. Within the economics profession we have groups who do not align themselves to what is usually called ‘mainstream’, ‘orthodox’ economics. They typically have their own study groups, journals and annual national and international conferences. Other characteristics – with exceptions of course – are their frequent cross membership, their distance from orthodox circles and often the location of their members in non-elite departments. Should students of economics be made aware of these fringe elements, barely if at all mentioned in polite, orthodox, circles? How do the orthodox respond to this sort of request? Basically the issues turn on what I, perhaps too loosely, call methodological differences. Here is a standard response from an orthodox economist: OK you say you disagree with me. About what? Let’s take some current problems. Why does Japan have such a large B/P surplus? Why is inequality growing in the USA and the UK? Why is unemployment lower in the USA than Spain? And so on. Now do you have different explanations from us? If so give us your theoretical model and your data set and we will compare explanations using state of the art test procedures. But of course this debate is rarely resolved this way. Often the parties seem to me to speak at cross-purposes to one another. Sometimes there are disputes about test procedures.7 Others

Reflections on the history of economic thought 59 may hold that issues are not and have never been resolved by scientific procedures. Political, social and class values dominate and analogies to the relativism of postmodernism have been increasingly used. Rhetoric analysis, hermeneutics, textual meaning and the like are all now in the ‘unorthodox’ toolkit.8 Should this seething underworld be brought more into the consciousness of students of economics? It would be a formidable undertaking. There are isolated attempts at ‘schools of thought’ or ‘models of political economy’ courses, but it is difficult to assess their success. Perhaps because of the overt condescension bestowed by economists on historians of economic thought it has been suggested that the latter should leave the economists camp and find pastures new9 – for example, in the history of ideas or in social and economic history departments.10 The links with economic history are strong and important work in the history of economic thought has always been undertaken by specialist economic historians (currently in the UK scholars such as Jose Harris, George Peden and Roger Middleton). I also believe that students should have a firmer grasp of economic and social history than is currently the case. But a relocation there would, I think, be a mistake! As I think a transfer to history of ideas departments would be. You might well have a case for saying that this is their logical home and one that would be most congenial to them. They would not be marginalized since economic ideas are a major component of social and political ideas. But is it really the best way forward? It may be the only survival strategy available, but as I have tried to argue it would be a loss to economics.

HOW TO TEACH THE HISTORY OF ECONOMIC THOUGHT There are several methods and I think I have tried all of them. The main ones are:

•

chronology – by name or school;

•

the ‘big books’ approach;

•

by topic;

•

the present in the past;

•

a particular ‘school’ interpretation;

•

a methodological interpretation;

•

historical reconstruction.

In what follows I provide a brief comment on each of these approaches. Whilst it should be clear from the outset that there is a good deal of overlap between them, it is useful as an aid to our thought to pose them initially as separate, distinct ways of handing our material.

60 Corry Chronology By this I mean starting as it were at the beginning – at whatever period you or the syllabus has deemed appropriate and then proceeding timewise through the material. This is an approach favoured by many textbook writers. A standard package might be: classical Greek thought; scholastic economics; mercantilism; physiocracy; classical political economy; Marxism; marginalism; neoclassical; Keynesianism; monetarisn; and as far on as you are allowed in a history of thought course! More recent versions may now include religious economic readings other than Judo–Christian, for example, Muslim, Hindu, Confucian, etc. This approach tends to merge into more detailed treatment of specific writers once we approach the classical period so we may get in the English-speaking world separate accounts of Cantillon, Smith, Malthus, Ricardo, J.S. Mill (perhaps), Jevons, Marshall, Keynes; we may perhaps also throw in separate treatments of Walras, Menger, Pareto. Usually this form of approach is fairly uncritical – ‘This is what the physiocrats thought’ – but it often includes an implicit continuous improvement model of economic thinking of the form ‘today’s thought is better than that of yesterday’.11 On the whole it seems to be the approach that students typically prefer and this preference is enhanced if they have had basic courses in social and political theory and in economic history, although this is a rarity nowadays.

The big books approach This is really a variant of chronology and is easily combined with it. On its own it is not now commonly employed but it was the mode of instruction for the compulsory paper at the LSE when I went there to teach in 1958–9. It was the mode favoured by Lionel Robbins. As I recall the books were: The Wealth of Nations; Ricardo’s Principles; Wicksell’s Interest and Prices – although this was deleted because students had difficulty in acquiring copies of it – and Marshall’s Principles. The great advantage of this approach was the depth work that it enabled, but it did involve considerable knowledge and a firm grasp of current theory because the seminar work always attempted to link the historical ideas with what students were learning in their theory courses. At the time there were few accessible major studies of the writers involved and this created apparent teaching difficulties. St Clair (1957) had just appeared and students found it a godsend. But there were no clear accounts of Smith, Wicksell or Marshall. ‘Read the originals’ is an admirable war cry but does not always make your course quorate!

Teaching by topics Let me explain this approach by reference to twentieth-century thought; this is the way I have taught a module on Marshall to Keynes. As headings we might have: the theory of market

Reflections on the history of economic thought 61 structures – Marshallian competition and monopoly; monopolistic and imperfect competition; oligopoly and game theory; contestable markets etc.; theory of consumer behaviour running through cardinalism, ordinalism, revealed preference, etc; welfare economics; cardinalism; paretian welfare; compensation tests; Scitovsky tests etc. Students find this most enlightening, especially if they are economics majors and they have often remarked to me that the sessions are good revisions for their ‘economics’ papers. This method does of course fit very snugly into our earlier observations about the possible relationships between economics and HET. The problem with this approach is basically the other side of the coin to its advantages; it invariably tends to be a study of the development of orthodox economics and, whilst this may well enhance students’ understanding of current economics from an orthodox perspective, it does nothing much to engender any critical accounts of orthodox reasoning nor does it suggest alternative paradigms. Another way of teaching via the topic approach – and one that I have tried to use for seminar topics and coursework projects – is to concentrate on policy debates.12 Thus we might have the great recoinage; post-Napoleonic war depression policies; the corn law debates; bimetallism; return to gold after 1918; reparations; the great depression; trade versus aid policies; the poverty trap, etc. There is much to be said for this approach. It shows (hopefully) economics in action, it exemplifies the political issues in economic policy debates and the socio-political values implicit in much ‘straight’ economics. But it is difficult for students to grasp at one go theory, policy and historical events. It may come more into its own as we enter into the realms of modularisation so that a specific policy episode can easily become a module or semester’s worth.

The present in the past By this approach I mean those fairly conscious attempts to highlight past contributions because they are seen as ‘forerunners’ of present day agreed wisdom. Those with the slightest hint of an increment become worthy forerunners of marginalism; in Keynes ascendancy times anyone who even whispered ‘output’ fluctuations is put in the course. The problem here is that as current fashions change so does the evaluation of past contributions. (To take but one example, the writings of Pigou or Hayek so derided in Keynesian histories of economic thought have now moved back into centre stage with the dominance of real business cycle theory.) This type of approach is allied to a hypercritical assessment of past contributions not in line with or at least showing even the vaguest hint of current orthodoxy and in some cases a vigorous struggle to force reinterpretations of past economists work into the current

62 Corry paradigm. As a teaching strategy it does however fit into the attempt to elucidate current economic theory by showing the ‘rationally reconstructed’ steps by which it evolved.

A ‘school’ interpretation of the development of economics Of course this way of teaching the history of economic thought may simply be looking at the past in terms of current orthodoxy but I mean something rather different here. I refer to explicit attempts to deliver our story within the framework of a ‘non-orthodox’ school of economic thought. Some obvious examples that come to mind are Marxist, Austrian, neoKeynesian, institutional, evolutionary, feminist, religious, etc. The approach as a teaching device has several clear advantages; foremost it appears to clear a path through the multitude of debates, confusions, advances, retreats and muddles, that make up the history of economic inquiry. It gives a specious way of handling the opposition and deflects accusations of class, sexual, colour and religious bias. More seriously such an approach will give the student at least a nodding acquaintance with what some of us regard as important contributors to economic inquiry. To take but one example, in a casual search through current micro and macro course books widely used I find no reference to the ideas of Michal Kalecki, whereas any neo-Keynesian text would contain more than a passing reference (see, for example, Arestis 1992). It is not just the odd student or two that will confess after the degree ceremony to a lack of belief in what they were taught and express the wish that they could have heard some alternative or opposing views about the workings and evaluation of the economic machine. The debate about the alternative schools approach is just another feature of the teaching of ‘current’ economics and the often mulled over question of the place of the teaching of unorthodox economics in standard undergraduate and graduate courses in economics. I will not here add any more to this particular can of worms.13 What may be useful as a corrective to the broad blanket of orthodoxy is some course on alternative schools of thought. But problems arise as soon as one puts the idea forward. It probably requires team teaching which is (alleged) to be notoriously inefficient and more importantly from my limited experience it may produce a student who has neither the confidence and mastery of orthodoxy required, for example, for a ‘good’ graduate school or a coherent knowledge of feasible alternatives that are usable in economic debate or practice.

The approach via methodology14 Does economic inquiry follow a pattern of development that is discernible when we look back? Or is it just a mass (mess) of ideas? This question or rather our way of answering it

Reflections on the history of economic thought 63 depends on a whole set of other questions and our responses to these questions may well colour our teaching. By teaching via a methodology I mean that we attempt to impose a pattern by using a methodology or philosophy of the development of economics or at least that part of economics that used to be called ‘positive economics’. Basically this comes down to some version or other of the methodology of science and we can take our pick from, among others: positivism – in which I guess I include Popper and Lakatos; Kuhnianism; Wissensociologie–

Mannheim;

Marx;

pragmatism;

relativism;

hermeneutics;

postmodernism and so on and so forth. (Personally I have always begun my HET courses with a few lectures on methodological issues. I have found that students respond well to Kuhnian revolutionary theory even though scholars keep upsetting the apple cart by continual examples of its failure to fit the facts!)

Historical reconstruction I have left this approach to last not because it is the least important but because what it actually means in practice is not too clear. Broadly it means that we should attempt to reconstruct the actual historical context within which economic inquiry took place rather than attempt a ‘rational reconstruction’. Thus in looking at any particular idea or episode we should make students aware of factors such as the then existing structure of production, the extent of banking and credit mechanisms, the existing socio-political ideas and so on. This approach sounds eminently reasonable and now claims wide support.15 Its difficulty as a teaching approach is twofold. First, which is perhaps a weak excuse, is the shear weight of historical knowledge required of students. Second, it can degenerate into a type of relativism of the ‘each theory was OK for its time’ sort! Critical faculties tend to disappear and scientific progress is barely mentioned.

RESEARCHING THE HISTORY OF ECONOMIC THOUGHT Research in the history of economic thought is booming and as I have already mentioned shows, at least in the UK, a very different face from the decline in its teaching. There are now several specialist journals where practitioners can place their work instead of fighting for a place in the sun in ‘economics’ journals.16 There have been several attempts over the years to set out an agenda for researching the history of economic thought (for a recent example, see Deane 1990). Some have been highly critical of existing practise (e.g. Coats 1969); others have adopted a ‘let many flowers bloom’ attitude. Actual practice can, I think, be usefully classified as follows (note that our schemata follows closely the teaching matrix):

64 Corry

•

archaeological approach (scholarship);

•

forerunners of the present;

•

‘analytic’ historical studies;

•

historical perspective studies;

•

the sociology of economics.

The archaeological approach By this I mean the sort of work that hunts for the as yet undiscovered past. This may take the form of the discovery of unknown specific writers – ‘a fifteenth-century pioneer of the application of chaos theory to economics’; or other texts which have not before been published – manuscript, book, pamphlet, minutes, semi-official or government inquiries, letters, etc. Along with this we also have the search for first statement approach of, for example, the multiplier, Nash equilibrium, the quantity theory, social costs, to take a few examples. Perhaps doing such work we ignore Edwin Cannan’s dictum: those who care for such trifling matters recognize three degrees of precedence in respect of the formulation of new economic doctrine. First there is the discoverer; second, the anticipator of the discoverer; and third the discoverer of the anticipator of the discoverer. (Cannan 1897: 278) However, this type of research is harmless and is often of great utility in, for example, revealing the extent of contemporary dissent about a particular government policy. I would include in this the ‘collected’ works efforts of scholars. These monumental collections, from the pioneering Sraffa-Dobb-Ricardo17 and now extending more widely, have been an enormous stimulus to research in the history of economic thought and the editorial teams deserve more than a side plaque in the HET/economists hall of fame. But rightly or wrongly it is not the sort of work that is going to make the economist at large rethink her ideas. It is a question of how this new material is used.

Forerunners of the present Here we look at the current stock of economic knowledge and trace its ancestry; this is not quite the same endeavour as the first statement of approach but it does try to suggest that new ideas add to their validity by having a respectable linneage.18 For example we may look for rational expectations in Marshall or even before or hunt out early statements of supply side economics. This type of research has its uses beyond its scholarship function, although that

Reflections on the history of economic thought 65 must never be discounted. Looking at past statements of currently accepted theoretical propositions or estimating techniques, for example, leads to the question of why these early statements were not successfully adopted at the time. Hence we are led into the question of the mechanism by which economic ideas are propagated. Perhaps under this heading there is also research of the type that seeks to alter the agreed interpretation of past thought by arguing that it is more in tune with current (correct!) thinking than past commentators have realized. Thus, to take an obvious example, it has been cogently argued (although much disputed!) that Smith and Ricardo should be thought of in the general equilibrium tradition (see Hollander 1973b, 1979). Of course it is true that our evaluation of the importance of past contributions to economic thinking will be influenced by our understanding and acceptance of the present state of economics, but the ‘forced’ model does seem to rely rather too much on the well-known method of selective quotation and word play.

‘Analytic’ history By this I mean ‘internal’ histories of economics, that is studies that trace the development of economic theory as a (scientific) process of the modification of ideas via the critical judgements and comments of other economists. External events such as current events or the social or class background of the actors involved are thought to play a negligible part in this sort of account. This type of work – exemplified par excellence by the early editions of Blaug’s famous text19 – has great attractions. It is coherent and does appeal to current economists20 who basically see their own research endeavours as internal responses to the existing body of work. The concentration on the development of theory is important because it places the historical work firmly as economics. Cournot’s model of duopoly is discussed as a piece of economic reasoning and not evidence of the nature of his early upbringing. Analytic history as I call it may not of course be from a current orthodox perspective, thus we may have Austrian or Marxist or feminist oriented research in the history of economic thought written from their own respective positions. The possible weakness of this sort of research is the other side of the coin to its strength. If in fact the propagation and acceptance of particular theories of paradigms has been (largely) influenced by external events then our internal reconstructions will be far from the true story and will give a misleading picture of progress in economic understanding.21 I return to this matter below.

Historical perspective studies By these I mean studies that try to emphasis the historical circumstances under which a piece of economic reasoning was produced and place them along side the ‘internal’ analytic

66 Corry account. This may include such factors as institutional background or politico-religious ideas. Thus ‘Physiocracy can only be understood within the context of eighteenth-century French agriculture’ or ‘the opposition to public works in the 1930s in the UK can only be understood in the context of the lack of any feasible blueprints for such schemes’ and so on! There is much to be said for this outlook. An historical reconstruction may be much more insightful than a rational reconstruction. Often historians of thought naively write as though the economic structure was time invariant. To take some examples: the question of the exogeneity of money is clearly not invariant to the financial structure. Models that assume low or high international factor mobility may be appropriate or not depending on the actual structure at the time of writing. Concern with the corn wage is not so daft as it seems to students today if we remember its importance in working-class diets in the late and early nineteenth centuries. As I pointed out earlier when discussing the ‘historical’ approach to teaching the history of economic thought, the incipient danger with this approach is the slide into relativism. Now some of you may believe that this is not a slide but the true recognition of the status of economic inquiry. I cannot myself take this step but the growing trend towards ‘pluralism’ in economics does have attractions. But do we really wish to say that all past explanations of economic phenomena have equal validity given the historical circumstances? If not what are the validation criteria?

The ‘sociology’ of economics This heading is an even bigger rag-bag than the others! By it I mean research that concentrates entirely – or almost – on external factors to explain the development of economic reasoning. The explanations brought into focus may be biographical material, ‘Keynes, androgyny and effective demand’, ‘Marshall’s trauma in Bermondsey and consumer surplus’, etc. Or it may be the influence of political beliefs on economic ideas, especially in the policy realm. Historians of economic thought have made it absolutely clear that often the thinking of economists may be explained by reference to the socio-historic background to their lives. This is not of course to adjudicate necessarily on the validity of their ideas. Background may be important to explain why, for example, X explained labour market discrimination in a certain way, but this is not the same thing as a scientific validation of the idea. Now some of you may have reached the methodological stage where you think it impossible to divorce the genesis of an idea from its validity. If there is no agreed method of resolving disputes between say, new classicists and post-Keynesians, then we are in a pretty pickle! I still remain just within the old-fashioned Popperian camp. I believe that it is possible to state and test economic propositions in a scientific (falsifiable) manner or show that what is being argued

Reflections on the history of economic thought 67 is not ‘scientific’ and I combine this with the belief in a strong role for historians of economic thought to continually make economists aware of theory and policy smuggled in under the wing of scientific objectivity but in fact a facade for (unconsciously) strongly held sociopolitical views. The watchword should always be ‘be critical’.

CONCLUSION I have tried to argue, perhaps somewhat half-heartedly, that the history of economic thought should remain a subject taught within economics departments. I recognize that this is a highrisk strategy because market choice may just drive it out of existence there. It might therefore be a survival strategy for its practitioners to align themselves with history, philosophy and politics departments. They clearly should have strong connections with these other disciplines, but a move out of economics would be a great pity and economics would be the loser. On teaching the subject, so much will depend on students’ backgrounds, the length of the available course and so on. Some minimal original text familiarity is I think vital so that knowledge is not just acquired from ‘books about books about books …’. But one thing that I have always tried to emphasize to students is that ‘just because you are studying the history of economic thought it does not mean that you can forget your economics’. Other than that the message is let many flowers bloom. On the research front, as I have already highlighted, the subject is almost bursting at the seams. Specialist journals now exist that would have been unthinkable thirty years ago. Many countries now have their own history of economic thought societies with all the paraphernalia of membership lists, conferences, newsletters and the web. Much recent research has concentrated on what I have called the sociology of economics approach. This may have been a necessary corrective to too much internal historical studies but should not be overdone and the economics content reduced to a minimum in favour of the juicy details of cross-dressing and early childhood deprivation – fascinating as we find these studies. If we wish to remain within the economists’ camp our research must focus on the economics of our objects of study.

NOTES 1 There is, needless to say, a considerable literature on the ‘concept’ of the history of economic thought. I have referenced some of this literature in the bibliography.

68 Corry 2 It is ironic, as HET teachers well know, that this drying up of the teaching of economic thought seems to have coincided with a veritable outburst of research interest in the subject. Several specialist journals now exist to complement the pioneering efforts of the History of Political Economy, and scholarly monographs, collected editions of the great and general histories of economic thought appear ad nouseum from the press. Some, but by no means all, of this may be part of the ‘publish or perish’ life in academe today. 3 This point was put to me many years ago when I was teaching at the LSE by Kelvin Lancaster. 4 As a personal piece of reminiscing, when at the LSE in the early 1960s a revision of the degree structure was going on, the history of economic thought was abolished as a compulsory subject – much to Lionel Robbins dismay – and the development of economic analysis was substituted on the grounds that I have indicated. It did not remain long as a compulsory paper! 5 It may be argued that some of the major worries about the practice of economics could be raised in courses on the methodology/philosophy of economics. Possibly, but such courses, along with HET courses, seem to have disappeared from most degree structures and moreover writings of some of the key names in such courses – Popper, Kuhn, Lakatos – were devoid of reference to not merely economics but the social sciences. Hence students found it difficult, in my experience, to relate these works to the development of economics even though valiant attempts have been made to use such models to explain the history of economic ideas. 6 For a recent reworking of this episode see Leeson (1998). 7 A very good example is given by Tony Lawson’s strictures of the use of standard econometric procedures; see Lawson (1996). 8 For a useful guide here see Henderson, Dudley-Evans and Backhouse (1993). 9 As Schabas put it ‘Hopefully with time, historians of economics will no longer worry about the approval of economists’ (1992: 200). 10 This position has been argued most strongly by Schabas (1992). 11 If you like the concept this is a ‘Whig’ history! 12 I was initially inspired to teach this way when I read Bob Black’s famous study of the Irish question (Black 1960a ). Unfortunately at the time there were very few other policy studies although now they are a plenty. 13 The recently formed Association for Heterodox Economics is an attempt to even the balance here. 14 I assume here that methodological disputations do have some value although I sometimes feel after reading yet another exposition that Stigler’s dictum was right. He wrote ‘Methodological controversy has never had a marginal product (of scientific progress) above zero’ (Stigler 1963: 63). 15 As I understand it Mark Blaug has now moved camp – from rational to historical (see Blaug 1997). 16 It is not obvious that the setting up of specialist economic thought journals has been an unambiguous gain although it has of course led to a vastly increased volume of published material in this area. Many years ago, before the foundation of the History of Political Economy (1969), Mark Blaug and I

Reflections on the history of economic thought 69 thought of setting up such a journal. We wrote to some major journal editors for their views. The weight of opinion was rather against our plan. They argued, first, that no important article in the history of economic thought had been turned down by them and second that a specialist journal would make the typical economist even more ignorant of the history of the subject than they were then! 17 Not forgetting Bob Black’s wonderful edition of the Jevons’ papers 1973–81). 18 Keynes of course famously, and perhaps with his tongue slightly in his cheek, suggested his own ancestry (Keynes 1973: ch. 23). 19 Economic Theory in Retrospect (1962 and subsequent editions). As I have already noted, this latest edition of Blaug’s justifiably famous book shows a much greater attachment to the benefits of historical reconstruction than the earlier editions. 20 My own experience is that the typical seminar paper that I hear (and understand, which is not always the case!) rarely or never has reference to methodological (I exclude here technical test procedures) or philosophical matters. When the occasional paper is on such a topic it is met with boredom and/or the shaking of heads. I make no comment on this fact. 21 If I may take an example from my own work, I have argued (Corry 1995) that the acceptance of the natural rate approach was as much a reflection of the influence of politics on economics as economics on politics.

Part III

Perspectives on Adam Smith

5

‘A very amusing book about old times’1 Donald Winch

My title records Walter Bagehot’s summary verdict on the Wealth of Nations in 1876, the centenary year. It plainly tells us as much about Bagehot’s conversational tone when addressing his audience as it does about Adam Smith’s reputation at that time.2 Nor is it difficult to understand Bagehot’s reasons for announcing that the Wealth of Nations was now more an object of historical curiosity than a contribution to modern understanding. As a guide to enlightened economic policies the science to which this work had given rise had proved more influential than a sceptical Smith had been prepared to hope. Paradoxes in Smith’s time, ideas that continued to perplex benighted foreigners, were now commonplaces on his native heath – if southern Britain can be so considered. The main battles being over, it was time to pay homage to the most important of the early generals in a campaign which had been triumphant in bringing free trade as well as the principles of sound government finance and monetary practice to Britain. As Bagehot said with some pride: ‘No other form of political philosophy has ever had one thousandth part of the influence on us; its teachings have settled down into the common sense of the nation, and have become irreversible.’3 Complacent, chauvinistic, even condescending though some of Bagehot’s judgements may sound, they mark an interesting juncture in the long history of Smith’s changing role in the national imagination. In what follows I want to examine some features of that role during the next three post-centenary decades. For this purpose Bagehot provides an interesting prism and point of entry, not simply for what he has to say about Smith, but because his intervention was made during that difficult phase in the history of economics which has been described as a ‘confusing interregnum’.4 As is well known, the centenary of the Wealth of Nations provided the occasion for a renewal of exchanges in a long Anglo-Irish Methodenstreit that had begun a decade earlier and lasted into the early years of the twentieth century, eventuating in the creation of economics and economic history as separate academic entitities.5 Bagehot wanted to make his own contribution to this debate quite independently of the Smith centenary.6 In common with others who joined this debate, however, he found the event too

74 Winch good an opportunity to be missed for public rehearsal of fundamental methodological issues alongside discussion of Smith’s legacy and achievements. As far as the latter was concerned, Bagehot’s intervention marks the beginning of attempts to confront Smith’s authorial personality without undue piety, and to treat the Wealth of Nations in conjunction with his other writings from an historical rather than doctrinal or policy perspective. The journalistic fluency, even flippancy, Bagehot brought to this task was the other side of the historical distance he assumed was now possible – a distance not available to those less contented, or even more contented than he proved to be, with the status quo. Bagehot certainly recognized the scope of Smith’s original enterprise: ‘Scarcely any philosopher has imagined a vaster dream.’ This had been lost sight of since Dugald Stewart’s early appraisal of Smith’s intellectual ambitions, especially during the first decades of the century when attention was focused exclusively on the Wealth of Nations. Employing the new mid-Victorian language, Bagehot drew attention to the ‘great scheme of evolution’ which underpinned the entire plan, a scheme that comprehended ‘the origins and progress of all the sciences, the laws, the politics, and all the other aids and forces’ which showed ‘how, from being a savage, man rose to be a Scotchman’ (CW: III, 91 ).7 As this last, by-now tired, witticism indicates, Bagehot was addressing an English audience and deploying the amused irony, even cynicism, that was his hallmark as an author. For him, speaking as a man of the world, with experience of banking and journalism, Smith was ‘an awkward Scotch professor, apparently choked with books and absorbed in abstractions’, whose only charms were a ‘lumbering bonhomie’. He was the kind of absent-minded and silent man who excelled as a lecturer but was the most unlikely candidate to become the author of anything as down to earth as the Wealth of Nations, or to take a practical part in public life, as he subsequently did as a Commissioner of Customs. Yet somehow Smith had conjured ‘an enduring particular result’ from his ‘comprehensive and diffused ambition’, investigating ‘the progress of opulence as part of the growth and progress of all things’. Bagehot’s speculations about Smith’s personality were based on the factual evidence provided by Stewart (‘one of the most detestable of biographers’ in Bagehot’s opinion), suitably enlivened and foreshortened in the interests of entertaining his readers.8 He doubted whether Smith’s lectures on belles lettres and the moral faculties were of ‘much intrinsic merit’, and his opinion of the Theory of Moral Sentiments was that the Victorian reader would find ‘little to interest him in this celebrated [but ‘rather pompous’] book’. He characterized it as belonging to the intuitive or Scottish moral sense opposition to Utilitarianism, and thought its arguments were based on ‘an obvious confusion of two familiar sentiments’ that could be disposed of as follows: ‘We often sympathise where we cannot approve, and approve where we cannot sympathise.’ Smith’s attempt to save this theory required ‘a little epicycle’ in the form of the ‘impartial spectator’, an unconvincing fiction because ‘if he sympathises he is not

‘A very amusing book about old times’ 75 impartial, and if he is impartial he does not sympathise’ (CW: III, 96). Speaking perhaps as someone for whom Darwin’s theory of natural selection had actually confirmed his religious beliefs and who had shown considerable interest in Roman Catholicism at one stage in his life, Bagehot thought that Smith was exactly the kind of indifferent Christian that Calvinism produces, with the ‘complacent optimism’ of the eighteenth century supplying an alternative creed that fell short of Hume’s outright irreligion.9 The chief merit of Smith’s first book was that it earned him his tutorship to the Duke of Buccleuch and thereby delivered him from the longueurs of teaching. It also enabled him to travel in France where he met the économistes and added the problems of that powerful yet troubled monarchy to the knowledge of the practical world he had gleaned in Glasgow. Compared with the work on moral philosophy, Smith’s second book had the merit of being ‘entirely plain and manly’, superior in this respect to anything written by Hume, who lacked Smith’s advantages in studying at Oxford. It embodied a mixture of theory and common sense, strikingly illustrated with curious observations, and exactly calculated ‘to put certain broad conclusions into the minds of hard-headed men, which are all which they need know, and all which they for the most part will ever care for’ (CW: III, 10). Smith, one might say, was economics for businessmen, Ricardo, Bagehot’s preferred author, was for the connoisseur. Henry Buckle might be thought to have anticipated Bagehot in placing Smith within a broader philosophical context, and to have done so with more gravitas. After all, Buckle had dealt with the ‘Scotch Intellect’ at length in his mammoth and inappropriately titled History of Civilization in England in 1857–61. The Wealth of Nations was treated there together with the Theory of Moral Sentiments, and since Buckle described the former work as ‘probably the most important book which has ever been written’ (1857–61, I: 194 and III: 315), he can hardly be accused of taking a parochial view of Smith’s claims on posterity. But Buckle commanded none of Bagehot’s first-hand authority when dealing with political economy. Moreover, in regarding both of Smith’s works as examples of the virtues of adopting a deductive approach to human affairs, with selfishness as the central axiom of the economic work and sympathy providing the basis for the deductions in moral philosophy, Smith was assimilated into Buckle’s rationalist–materialist version of the history of progress.10 It made Buckle an easy target for more sophisticated late Victorian commentators, including Bagehot, who by comparing Smith’s speculations on the theme of progress with ‘the dream of the late Mr.Buckle’ consigned them both to an eighteenth-century world in retreat (CW: III, 86).11 Readers of Bagehot’s Physics and Politics (1872) would also have known that it began with an inversion of ‘Mr Buckle’s idea that material forces have been the main-springs of progress, and moral causes secondary’.12

76 Winch Bagehot was fully aware of the unsatisfactory state of affairs in political economy when he wrote his appreciation of Smith. Indeed, the related essay on ‘the postulates of English political economy’ is now best known for its statement that the science lies ‘dead in the public mind’; that ‘new modes of investigation’ of foreign provenance were proving more attractive to a younger generation no longer in thrall to Smith, Ricardo, Austin and Bentham – an interesting attribution of philosophical lineage in its own right. For ‘no theory, economic or political, can now be both insular and secure; foreign thoughts come soon and trouble us; there will always be doubt here as to what is only believed here’ (CW: XI, 224). Bagehot’s death in 1877 prevented him from finishing his Economic Studies or making any further contribution to the debate on the future of political economy. He had completed his version of its history from Smith to Malthus and Ricardo, but he did not to finish the chapter on John Stuart Mill – though his position on Mill can be assembled indirectly from other sources. It was a story that differed considerably from those later told by opponents of the Ricardian legacy, with the headline conclusion being that Smith, Ricardo and Mill belonged to the first division, while poor Malthus could only manage the second, essentially on grounds of his methodological deficiencies.13 Bagehot’s defence of this orthodox lineage was based on the view that the necessary abstractions of the science were applicable only to the causes at work in ‘a society of grownup competitive commerce such as we have in England’ (CW: XI, 235). The simplifications or abstractions from motives other than those operative in such societies were necessary because neither the ‘all-case’ nor ‘single-case’ inductive methods were capable of yielding scientific results, as he believed the examples of Newton in astronomy, Lyell in geology and Darwin in biology showed. He refused to call these alternative methods ‘historical’, a term he found ambiguous: when rightly conceived this method was not in conflict with the use of abstraction. Bagehot conceded, however, that English exponents of the science had been too abstract; that they had ‘not been as fertile as they should have been in verifying it’. Although he believed that other societies would follow England (or, more precisely, the Englishspeaking nations) in becoming grown-up commercial societies, he entered the conventional orthodox disclaimer: considered as a science, political economy did not profess to prove ‘this growing world to be a good world – far less to be the best’, as some unnamed foreign antisocialist authors were contending. In this respect he was following John Elliot Cairnes’s reinforcement of Mill’s distinction between science and art, as expounded in 1870 at University College, London, Bagehot’s alma mater, when rigidly distinguishing between political economy and laissez-faire policies.14 Bagehot concluded that if the aims of the science were understood in this way ‘we shall then find that our Political Economy is not a questionable thing of unlimited extent, but a most certain and useful thing of limited extent’ (CW: XI, 238).

‘A very amusing book about old times’ 77 Viewed within a context later dominated by more radical critics of the orthodox dispensation, whether of the mathematical Jevons–Walras stamp or of the historical and sociological variety, Bagehot’s defence of the postulates of the science in their established form places him where he often sought to place himself in his political writings, namely on the conservative wing of a liberal (indeed, Liberal) position. It is worth noting, however, another of his opinions that was fully understood by his contemporaries, but does not feature prominently in twentieth-century accounts of the Methodenstreit. In an earlier work on A Universal Money (1868), Bagehot had given a clear indication of his priorities: The greatest want of our present political economy in England is that someone should do for it what Sir Henry Maine has done so well for ‘ancient law’. We want someone to connect our theoretical account of the origins of things with the real origin. Our theory is right enough; our notion of what is best to be done is correct, but our notions of the way practices began and customs grew up are often erroneous enough. (CW: XI, 58)

When writing the entry for Bagehot in his Dictionary of Political Economy, Robert Inglis Palgrave, his successor as editor of The Economist, emphasized this feature of Bagehot’s position: ‘No economical writer shows clearer consciousness of the enormous difference between the present conditions of European commerce and the conditions of life and industry among our rude forefathers; or, at the present day, among barbarous nations.’15 Why then do we not associate Bagehot with the historicist position – with, for example, the critique of political economy pursued by another follower of Maine, T.E. Cliffe Leslie? Two reasons can be given for this. First, of course, unlike Leslie, Bagehot stood by the deductive version of the science. Second, his most prolonged attempt to emulate Maine was contained in Physics and Politics, where the passage from a patriarchal ‘pre-economic age’ to modern society dwells more on the vicissitudes of national character than we expect of an exercise in economic history, economic anthropology or historical sociology. The finale to this work issues in the ‘age of discussion’ rather than in the complexities of Manchester manufacturing or the City of London.16 The nearest Bagehot came to carrying out his programme can be found in the chapter on ‘The Growth of Capital’ in his Economic Studies, where he uses the ethnological work of Lubbock and Peschel, supplemented by Galton on the domestication of animals, to underline the contrast between modern and primitive forms of accumulation. In this respect Bagehot was actually closer to a conservative like Maine than Leslie proved to be, if only because Maine regretted that his own work on India, a status-oriented society, was being used to attack the legitimacy of political economy as a guide to societies, like Britain, governed by contract.17 As Palgrave tactfully pointed out:

78 Winch [Bagehot] was one of the first economists in England to recognize the importance of the idea of development (which to him meant Darwinism) for social and economic theories; yet in most cases he is more careful to dwell on the contrast between the old and the new than to show how the one passed into the other or how the phenomena of the one shed light on the phenomena of the other. (1894: I, 80) Relativism with respect to pre-economic societies provided a way of protecting and reinforcing absolutist standards with regard to one’s own society.18 Bagehot did not speak at the centenary dinner organized by the Political Economy Club. He had published some of his views not long before the dinner and made other arrangements to ensure that further opinions would appear in print afterwards.19 In one way or another, however, those who did speak fully confirmed his diagnosis of the parlous state of English political economy. Robert Lowe’s opening speech was a diehard celebration of Smith as the architect who showed ‘the power of raising Political Economy to the dignity of a deductive science’, the only one of the moral sciences to be so raised, despite the noble efforts of Bentham and James Mill ‘to raise politics to a like eminence’.20 Lowe struck a glancing blow at what ‘it is the barbarous jargon of the day to call Sociology’, and indirectly confirmed what Bagehot had said about the decline of interest in political economy. He looked forward to no new discoveries: ‘the great work has been done.’ In much the same spirit, F.H. Norman disputed his friend Bagehot’s restriction of the sphere of political economy to grown-up commercial societies by maintaining that its truths were ‘unattackable’: ‘they are true now and will be true to all time.’21 It was left to the Belgian philosopher-economist, Emile de Laveleye, to remind his English audience that the part of the science concerned with production of riches having been completed, as was amply confirmed by the spectacular statistics relating to English prosperity, the second task of the science, ‘la repartition de la richesse’, remained to be tackled. He drew attention to those troublesome foreign influences about which Bagehot had spoken: the Kathedersozialisten, the ‘historical’ or ‘realist’ school in Germany, with its disciples in Italy, France and England. He described them as anxious to extend the scope of the science by dealing with ‘les rapports de l’économie politique avec la morale, avec l’idée du juste, avec le droit, avec la religion, avec l’histoire, et la attachant a l’ensemble de la science sociale’. The proprieties of the occasion were maintained, however, by de Laveleye’s emollient conclusion that

les deux écoles invoquent également l’autorité d’Adam Smith et, avec raison, d’apres moi, car son ouvrage immmortel est un example si parfait et si fécond en conséquences

‘A very amusing book about old times’ 79 utiles de l’alliance des deux méthodes scientifiques – la méthode déductive et la méthode inductive.22

J.E. Thorold Rogers’ reply to Lowe was less conciliatory: ‘There is … nothing more significant than the difference of the process by which Adam Smith collected his inferences, and that by which his followers or commentators have arrived at theirs.’ Smith avoided hypotheses and concentrated on the historical record, as Rogers, the latest editor of the Wealth of Nations, thought he could show on the basis of his verification of Smith’s sources, the first editor to do so (Rogers 1869). This confirmed his judgement that Smith was an inductive philosopher ‘to be looked on, not as the speculative Bacon, but as the practical Bacon of Economical science’.23 Rogers had published his edition in 1869, at the end of his controversial and unrenewed six-year spell as Drummond Professor of Political Economy at Oxford.24 It marks another small milestone in the history of Smith scholarship for the reason he claimed. Although he was more restrained than two previous editors, Wakefield and McCulloch, had been in their editions, which contained running commentaries on Smith’s doctrinal merits and demerits, Rogers too had laced the preface to his edition, as he did his after-dinner speech, with robust opinions on contemporary methodological and political controversies. Most of the fallacies into which Smith’s followers had fallen were attributed to ‘purely abstract speculation’, where Ricardo’s theory of rent was the main culprit. This meant that ‘Smith is far more frequently in the right than his critics are’, with any remaining blemishes being attributable either to the rudimentary evidence at his disposal, or (on the subject of value) to ‘his exaggerated sympathy with the economical theories of his French friends and teachers’.25 As a friend himself, indeed the brother-in-law of Cobden, Rogers was able to offer a palm leaf to the opposition by saying that critics and admirers could still unite in praising Smith’s contribution to the cause of free trade.26 For this reason alone, despite his own historical investigations and support for the inductive position, he was later deemed by more thoroughgoing advocates of the historical method to have exaggerated his divergences from orthodoxy.27 The extent to which any proposition in political economy, and the policy conclusions to which it might point, was history- or culture-bound – the main concession later critics, including Leslie, gratefully accepted from Bagehot – was a double-edged weapon with which they could both arm and wound themselves. Lowe and other deductive dogmatists adopted impregnable positions behind absolutist walls, and Bagehot could rest content with his own Whig history of the discipline by treating Smith as an historical curiosity on the assumption that what was still serviceable in the Wealth of Nations had been preserved in the more advanced work of his successors. Their opponents, on the other hand, were obliged to give reasons why some parts of Smith’s legacy were still of contemporary relevance, while others

80 Winch had to be excused or condemned on grounds of changing circumstances or erroneous philosophical underpinnings. Their task was not an impossible one, but it required more effort to assemble the relevant evidence. When this fell short of the mark, neither the historical reconstruction nor the contemporary support derived from it carried conviction. Where such efforts were merely polemical or suggestive, Smith’s authority became that of mere icon or stalking horse, a practice with which late twentieth-century students of Smith have had to become reacquainted. Leslie provides the best illustration of this problem. Few could fault his pertinacity in resurrecting Smith’s original enterprise in order to invoke Smith’s authority in support of his intellectual and political commitments, despite recognizing its ambivalent or flawed qualities.28 The Chair he occupied at Queen’s College, Belfast united political economy with jurisprudence, a combination that approximates to two of the duties attached to Smith’s Chair in Glasgow. Like Smith, too, he emphasized the subordinate role of political economy within ‘a science of the legislator’, bringing Smith into closer relation with Kameralwissenschaft as depicted in the work of Roscher and the German historical school.29 Stewart’s account of the role of ‘conjectural history’ in Smith’s work, therefore, allowed Leslie to conceive of a way in which he could effect his own reconciliation of Maine’s historical programme with an inductive form of political economy.30 What had been for Bagehot some quaint eighteenthcentury speculations of a rationalistic kind on the theme of social progress became for Leslie a neglected insight into the chief problem now facing political economy. The historical themes of Book III of the Wealth of Nations, one could say, were being promoted over those chapters in Book I that centred on prices, rents, wages and profits as determined by market equilibrating processes. Contrary to the interpretations of Buckle and Lowe, Leslie offered a ‘true history of human ideas’ in political economy by showing that ‘self-ishness was not the fundamental principle of Adam Smith’s theory’. Smith’s conclusions were not deduced from an assumption of universal economic man; his method was ‘in a large measure inductive’. Nevertheless, Leslie still had to locate that ‘vein of unsound a priori speculation’ in Smith that allowed the opposition to claim legitimate descent.31 The origins of Smith’s mistake could be traced – and in being traced neutralized – to the influence of the ‘Code of Nature’ idea of the Greeks, embellished by the Roman lawyers and bolstered in the eighteenth century by a combination of natural theology and the arguments of those political philosophers who reasoned on the basis of ‘an assumed state of nature’. Thus, although Smith’s ‘economic system was part of a complete system of social, or, as he called it, moral philosophy’, the system combined two opposed methods of reasoning: an a priori method based on the pre-existence of an harmonious Code of Nature, and the inductive or sociological method which Leslie, following Maine, traced to Montesquieu. Hence the divided legacy which allowed Ricardo

‘A very amusing book about old times’ 81 to claim allegiance to Smith by disregarding what had now, since Maine’s writings on natural law, been shown to be erroneous. Smith’s references to the ‘invisible hand’ and the emphasis on the harmony produced by unintended consequences in both of his major works had produced the dogmatic nineteenth-century laissez-faire position of which Lowe was now the best or worst example. Fortunately, there was that other inductive strand derived from Smith’s ‘philosophical love of truth, and of interrogating nature itself in its real phenomena’. It was adopted by the followers of Montesquieu in Scotland who formed ‘a new school of political and jural philosophy’, instanced by Kames, Millar and Dalrymple.32 Though lacking the sophisticated examples of induction associated with nineteenth-century natural science and the historical investigations of Maine, Smith had curbed the tendency to ignore or minimize the frictions and forces disturbing equilibrium by acknowledging that competition had not eliminated the inequalities produced by differential bargaining power and pernicious policies and institutions. Equilibrating forces were confined to primitive economies and to ‘an almost stationary condition of industry and neighbourhood trade, in which few changes in the mode of production or the channels of trade took place’, where this too could be explained by the fact that these changes in modern industry were at a rudimentary stage when Smith wrote. Two admirers of Maine then, Leslie and Bagehot, reached diametrically-opposed conclusions on the basis of evidence about modern economies which they interpreted differently. Whereas for Leslie the indeterminacy of wages and profits that accompanied the increasingly heterogeneous development of modern industry was leading away from the abstract method, for Bagehot it was making it the only method appropriate to the modern science. Leslie was also partially responsible for giving the Methodenstreit its large Irish dimension by combining criticism of orthodox political economy with advocacy of land tenure reform in Ireland.33 Indeed, in any attempt to give a causal account, Irish preoccupations would probably be given priority, with Lowe, once more, providing a convenient target. Lowe had opposed any attempt to replace private property in land and market regulation of rents by a system guaranteeing occupiers’ rights, with rents being fixed by legislation. He did so on the grounds that political economy knew no national boundaries: scientific laws applicable to England were equally applicable to Ireland.34 In any proper treatment of the Irish dimension, however, Cairnes would also have to be brought into the reckoning, despite the fact that he and Leslie were personally antagonistic and took different sides in the Methodenstreit.35 As the example of Cairnes shows, it was possible to believe that Irish problems required different solutions without seeking to rescue Smith from the Ricardians, and without espousing historical methods, as Leslie and his Irish friend and ally, John Kells Ingram, were to do. After Leslie’s death, it was Ingram who took a leading part in the offensive, partly through his

82 Winch influential advocacy of the Comtist strategy for incorporating political economy within a historical version of sociology, partly through his relativistic history of political economy designed to underpin historicist conclusions.36 As noted already, Bagehot’s approach to the history, or rather perhaps, biography of political economy was Whiggish and absolutist in its preferences. It was also conservative in its implications for future development. Although there had been demonstrable intellectual advances in the science since the Wealth of Nations, he was not prepared to endorse the newer mathematical and marginalist theories associated with the names of Jevons and Walras, despite his admiration for Jevons’s work as an applied economist.37 Bagehot must have felt he was occupying a satisfying middle position at the centenary dinner. The article he wrote for The Economist after the event did not mention its discordant features.38 He had reservations about Lowe’s a prioristic fundamentalism, but could not endorse the attempts of Rogers and Leslie to treat Ricardo as an aberrant post-Smithian development. Standing in the solid middle of this dispute probably accounts for the historical tolerance towards Smith he managed to achieve, limited as it was by his desire to be entertaining. It permitted him a little more generosity than many of Smith’s earlier orthodox followers had shown, but did not allow him to follow Leslie and others, for whom resurrecting Smith’s methods and conclusions had considerable contemporary significance. Although John Stuart Mill has only been mentioned in passing so far, his presence during the Smith celebrations was comparable to the ghost of Banquo; he had died three years earlier, having dominated political economy for the previous two decades.39 Although they adhered to different aspects of his legacy, he was still an active presence in the thoughts of Leslie and Bagehot. Mill had joined Leslie in reproving Lowe for his dogmatic invocation of the laws of political economy during the debates in parliament on the Irish land question; and he did so again, implicitly, in his review welcoming Leslie’s Land Systems and Industrial Economy of Ireland, England, and Continental Countries (1870).40 For this reason Leslie counted himself indebted to Mill as well as Maine, while recognizing, after Mill’s death at least, that the influence of Mill’s Benthamite upbringing continued to separate them.41 This would have troubled Bagehot less. Unlike Leslie, he never became part of Mill’s intimate circle, though they probably met at the Political Economy Club, to which Bagehot had been elected in 1864. It was also one of Bagehot’s boasts that in political economy he was ‘the last man of the ante-Mill period’, by which he meant that he differed from all those who viewed the science through Mill’s eyes only, his own reading having begun with Ricardo, who died three years before Bagehot’s birth.42 The fact that University College was an advanced centre as far as these modern subjects were concerned lends some support to this boast. It certainly gave Bagehot the confidence to write a supremely self-assured review of Mill’s Principles in 1848 at the age of 22, the year of his graduation.43 Being ante-Mill then reflects

‘A very amusing book about old times’ 83 Bagehot’s self-understanding, though, as his review shows, it did not imply being anti-Mill. He was alert to all, and appreciative of many of Mill’s innovations within the Ricardian framework, and devoted a good deal of his space to Mill’s specific concerns with peasant proprietorship, the Irish land issue and the future prospects of the labouring classes. Mill could hardly have complained about the laudatory conclusion of the review, namely that his book had earned him the right to stand beside Smith and Ricardo by combining the virtues of both. A quarter of a century later, when other differences in their respective political positions had had time to manifest themselves, Bagehot continued to recognize the importance of Mill’s contribution to political economy and public life more generally.44 In other respects, however, Bagehot clearly saw himself as Leslie did, namely as being post-Mill, more closely attuned to newer intellectual currents, particularly those associated with Maine and Darwin, that had been inadequately appreciated and absorbed by Mill. This may underlie the hint in his obituary of Mill that the ‘monarchical’ influence he had exercised had been detrimental to political economy, and his further remark that Mill had ‘widened the old political economy either too much or not enough’ (CW: XI, 237, 394). In other words, Mill had diluted some of the force of Ricardo without encompassing all that needed to be covered in any (post-Maine) theory dealing with both primitive and advanced economies. The generational differences here underlie a divergence in attitude towards Smith which Bob Black noted when he said that the first two generations of commentators on Smith ‘were much more willing to point out what they considered to be mistakes in Smith and to offer corrections’ (see Wilson and Skinner 1976: 44). Some fifty years before the centenary, when James Mill first took up his son’s education, one of his main objects was to make him ‘apply to Smith’s more superficial view of political economy, the superior lights of Ricardo, and detect what was fallacious in Smith’s arguments, or erroneous in any of his conclusions’.45 Although Mill took the Wealth of Nations as his model when composing his own Principles of Political Economy in 1848, by showing how in practice the principles of the science were ‘inseparably intertwined with many other branches of social philosophy’, he saw no need to revise the opinions on which he had been reared: ‘The “Wealth of Nations” is in many parts obsolete, and in all, imperfect.’46 In this respect at least, and despite some radical departures from his mentors, Mill remained faithful to the improvements in the abstract principles of the science made by Ricardo and others since 1776. That he had been willing to abandon such methods when applied to the science of politics in Book VI of his Logic in 1843 merely underlines the importance he attached to their continued applicability to political economy, however much practical ‘applications to social philosophy’ may have been his main interest when writing the Principles (see Collini 1983: 127–59). Nor was Mill interested in, or even well-informed about, Smith’s ‘social philosophy’, where this seems to have connoted for him theories of progress. Here too Smith had become

84 Winch obsolete as a result of advances made by a variety of French thinkers which included St Simon, Comte and Tocqueville. The ‘positivist’ qualities of the Scottish school had featured in his correspondence with Comte, but recognition that his father was ‘le dernier survivant de cette grande école’ could account for Mill’s partialsightedness on this subject.47 The period of Oedipal struggle during which he had been most enthusiastic about Continental influences had taken the form of regarding his father and Bentham as ‘critical’ eighteenth-century figures in need of replacement or supplementation by the more ‘organic’ conceptions of social change he associated with ‘the reaction of the nineteenth century’ against the eighteenth century.48 Moreover, although Mill showed an interest in many kinds of history, including those associated with the work of Comte, Buckle, Tocqueville, Michelet, Guizot and Maine, it has to be said that the history of economic thought was not one of them.49 He could support Leslie’s studies of the Irish land question without wishing to follow his example in seeking to rewrite that particular branch of the ‘history of human ideas’. Nor, if he had done so, would he have brought Bagehot’s gift for ironic biography to the task. The reason why Mill’s ghost cast such a long shadow over the 1876 proceedings is well known: he was the source of much of the confusion on matters of theory, policy and method that marked the interregnum. Jevons, famously, reacted strongly against Mill’s monarchical influence and complacency on the question of value. In his final years, however, Mill left a divided legacy that was unconnected with the new mathematical approach that Jevons was to pioneer. Indeed, it was almost as divided as the one imputed to Smith by Rogers, Leslie and Ingram. The division was between those who continued to uphold what they regarded as the orthodox Ricardian dispensation, as restated by Mill, and those who were in revolt against a deductive approach which they linked with James Mill, Ricardo and, with some justification, with Mill himself. The nature of the division can be indicated briefly by mentioning four names, all of them with close personal connections with Mill and each of them having good claim to represent part of his inheritance: Cairnes and Henry Fawcett, on the orthodox or loyalist wing, and William Thornton and Leslie on the critical or heretical wing.50 Mill’s part in bringing political economy into disrepute, or, in reverse, in giving heart to its historicist critics, was, of course, connected with his over-generous recognition, first announced to the public in his review of William Thornton’s On Labour in 1869, that the wage-fund doctrine had to be abandoned. Later historians have concurred with Henry Sidgwick in dating the end of the ‘halcyon days’ of the science from the appearance of this review.51 Alongside Jevons’s Theory of Political Economy, therefore, Sidgwick cited the article by a ‘thoughtful and independent writer’, Leslie, on ‘The Political Economy of Adam Smith’ as portents of the decline in what has come to be known as classical political economy. In this respect Leslie was more significant as an indication of one future line of development in economic thinking than Bagehot proved to be – the line that resulted in more

‘A very amusing book about old times’ 85 attention being paid to historical and institutional factors by economists and economic historians alike. When the outcome of earlier methodological disputes was reviewed by Sidgwick in the 1890s, Bagehot was credited with suggesting ‘an attractive modus vivendi’ between the extremes of deductivism and the historical school. Unfortunately, his proposals were no longer capable of supporting life. Any genuinely pre-economic society could just as well be called ‘prehistoric’, and any society that could boast a history of some kind had already reached a stage when the concepts of deductive economics had become relevant. Against the ‘aggressive’ historicists, Sidgwick made the shrewd observation that the harder they pressed the distinction between their own work on earlier ages and that of economists on present-day societies, the more they were conceding the independence of modern economics and the irrelevance of their own historical work to advanced communities.52 Here was a prime case of the sword proving double-edged, and here too was the uneasy basis for peaceful collaboration that eventually prevailed. It meant accepting less than Leslie and others hoped to achieve, a fully historicized and inductive version of economics. John Neville Keynes, whose judicious survey of the entire debate in his Scope and Method of Political Economy, along with Alfred Marshall’s Principles of Economics, increasingly set the tone on these subjects, considered it unwise on Bagehot’s part to have restricted the scope of the science by use of the ‘economic man’ assumption. He also cited Maine against him in denying that it had any purchase on less advanced or pre-economic societies (see Keynes 1890, 1917). While his work on the money market in Lombard Street retained its reputation, therefore, Economic Studies fared less well. Marshall was clearly embarrassed by having to make good his promise to Bagehot’s widow to write an introduction to a new edition of a work he thought was thoroughly outdated.53 Among other differences, as he was to reveal in his own Principles, Bagehot certainly did not reflect his own views on method or the founding father. Whether the Wealth of Nations was merely an amusing book about old times, or an insightful approach based on the methods that were most appropriate to contemporary conditions, the centenary was a fortuitous occasion for rehearsing issues that would undoubtedly have been rehearsed without this excuse. Looking back to the centenary from the 1890s, it was easier to notice, as Keynes did, that Smith had nothing to say about the right method to use in political economy. Surely it was obvious that he employed both methods, and that in this respect Leslie and others had been wrong to stress only the inductive side. This was Marshall’s conclusion too, and it consorted well with his stress on the moderation and good sense, as well as fundamental continuities, that had characterized the English tradition of political economy from the outset. However much he may have begun his own theoretical work by transforming the arithmetical and verbal formulations of Ricardo and Mill on value into mathematics, he claimed that his appreciation of Smith’s achievement had grown with

86 Winch acquaintance. With the confidence that came from believing he had once more placed the science on the right lines, he could exercise generosity towards founding fathers and past contributors without seeking biblical support in Smith or being unduly critical about his theoretical shortcomings. Admirers of Smith could hardly quarrel with Marshall’s considered verdict, namely that Smith was singly responsible for taking ‘the greatest step that economics has ever taken’ towards becoming a science (Marshall 1961: I, 756–7). As he confided to L.L. Price, one of the period’s new historians of economics, the more he compared Smith with predecessors and successors:

the more I worshipped him. It was his balance, his sense of proportion, his power of seeing the many in the one and the one in the many, his skill in using analysis to interpret history and history to correct analysis … that seemed to mark him out as unique; very much as similar qualities have more recently given a similar position to Darwin.54

No praise from Marshall could be higher: Smith was everything Marshall hoped to be himself. Another by-product of the Methodenstreit, in addition to the separate development of economics and economic history, was the beginnings of a serious interest in the history of economic thought. This is obvious in the case of the English historicists, following their German exemplars, for whom a relativizing form of such history was an adjunct of their attempt to undermine the universalist claims of the orthodox versions of the science. Hence too, of course, Marshall’s attempts to reappropriate the history of economics for his own purposes by advancing a carefully reconstructed Whig interpretation of the past. As Denis O’Brien has shown, Marshall was driven to employ some peculiarly strained and excessively generous interpretations of his English predecessors in his effort to show how closely, if sometimes rather vaguely, they approximated to his own ideas (Whitaker 1990: 127–63). As in the case of Leslie earlier, there were still those who sought less eirenic messages in Smith’s texts. Marshall’s colleague, H.S. Foxwell, the leading economic bibliomaniac of his period (or any period for that matter), not only planned an edition of the Wealth of Nations, but detected dark hints of ‘socialist yeast’ lurking in Smith’s treatment of the labour theory of value.55 John Shield Nicholson, a disillusioned ex-pupil of Marshall, carried through what Foxwell had failed to complete, and also enlisted an ‘intensely nationalist’ Smith, together with Smith’s scheme of imperial union, in support of his case for closer imperial federation during the disputes that followed from the tariff reform campaign at the turn of the century.56 With more discrimination and over a longer period, however, it was the economic historians who continued to find inspiration and example in Smith. Instead of being a battlefield

‘A very amusing book about old times’ 87 between economists and economic historians, he offered an umbrella under which both tribes could shelter.’57 The 1890s were also remarkable for seeing the first signs of a significant revival of scholarly interest in Smith’s life and writings, as can be judged from the publication of three works during this decade: James Bonar’s Library of Adam Smith (1894), which carried further Rogers’s identification of Smith’s sources in his published writings; John Rae’s Life of Adam Smith (1895), the first thorough modern biography since Stewart’s memoir; and Edwin Cannan’s edition of newly-discovered student notes on Smith’s Lectures on Justice, Police, Revenue and Arms (1896). Some years later, in 1904, Cannan produced the first variorum edition of the Wealth of Nations, showing remarkable restraint in not attempting to point out Smith’s numerous doctrinal deficiencies in the manner of his own lectures at the London School of Economics.58 In this way British scholars regained some of the scholarly initiative that had been surrendered, through neglect, to Germany.59 These publications enabled more detailed work to be undertaken on the stages of development from Smith’s lectures to his published writings, showing how the various parts of his enterprise were interrelated. One of the most important conclusions drawn from the Lectures on Jurisprudence, for example, was the support it gave to Smith’s own claims to originality as far as the ‘system of natural liberty’ was concerned. This had the further result of undermining those scholars who stressed Smith’s dependence on Turgot and other French sources. It also helped to refute those German scholars who had contrasted the idealism of the Theory of Moral Sentiments with the materialism of the Wealth of Nations by attributing the latter to the influence of French thinkers on Smith after his visit to France in the 1760s. Das Adam Smith Problem, in this form at least, could be eliminated, and the connections between moral philosophy and political economy considered more closely, as James Bonar did in Philosophy and Political Economy (1893), making him the most suitable person to write the article on Smith for Palgrave’s Dictionary. Bagehot had said that ‘no real English gentleman, in his secret soul was ever sorry for the death of a political economist: he is much more likely to be sorry for his life’.60 In Smith’s case the sorrow persisted until the centenary of his death in 1790 was reached and Rae had completed his biography. Before and after this work had appeared more popular treatments were given to Smith in series celebrating Famous Scots, Great Writers and, less appropriately, English Men of Letters.61 More significantly perhaps, this breathless survey of fin de siècle developments can be concluded with a reference to the most ambitious attempt to record the national memory on a grand scale, Leslie Stephen’s Dictionary of National Biography (1882– 91). Stephen, the college friend and biographer of Fawcett, belonged squarely to the generation of Cambridge students who had acquired their knowledge of political economy in the 1860s from Mill. Stephen, however, not only shared many of the late nineteenth-century

88 Winch enthusiasms for Comte and Darwin, but by virtue of his two-volume History of English Thought in the Eighteenth Century (1876), followed by his three-volume study of The English Utilitarians (1900), had become one of the most knowledgeable British intellectual historians of his day. By taking on the task of writing the article on Smith himself, as well as those on Malthus and Ricardo, he became another interesting prism, perhaps for consideration on another occasion. Bob Black ended his 1976 survey with some reflections on the enduring qualities of Smith’s work, and he did so by echoing Burke’s bold claim with respect to the Theory of Moral Sentiments that Smith’s theory was founded on ‘the nature of man’ rather than on accidental consonances and dissonances created by the shifting priorities and opinions of later generations. If I have concentrated more on the latter that is due to my emphasis on historiography, an art form that is irredeemably relativist, though not necessarily to a fully postmodernist extent. In conclusion, however, I too would like to inject a small dose of cautious intertemporal absolutism. We are, of course, no different from the authors considered here: the questions we ask of Smith and our judgements on the answers we obtain reflect our interests and sympathies, often largely depending on the modern academic tribe to which we belong – the economists, jurisprudentialists, moral philosophers or historians, economic, intellectual and cultural. Does this mean that we are simply substituting our fashions for those of an earlier generation of interpreters? Aside from the possibilities of discovering new factual or textual evidence, a rare but not unknown occurrence in Smith’s case, can we ever be confident that we bring more to the study of Smith than yet more distance in time? The answer to the first of these questions, of course, is that we cannot avoid the pressures of our own fashions and preoccupations. Nevertheless, risking hubris, I would like to think that it is the peculiar duty of intellectual historians to patrol the boundary between historical and analytical (or merely fashionable) reconstruction, pointing out where the latter are masquerading as the former. If that is possible, the answer to the second question is that distance in time ought to allow us to supplement analytical perspectives by recourse to historical ones. Without pretending to survey the entire century of post-1890s Smith scholarship, here are a few brief comments on themes raised by the authors considered above. If anything, we have become more appreciative of Smith’s vast dream, its interconnections, seamless or otherwise. Even economist-scholars have now begun to follow Jacob Viner’s sesquicentennial assessment by taking the Theory of Moral Sentiments on board before writing about the Wealth of Nations.62 We do not characterize Smith’s moral philosophy in Buckle’s manner, nor do we dismiss it with Bagehot’s bluff confidence. We stand to learn from the attention it has received in recent decades from philosophers and others interested in the formation of moral codes and theories of justice. When dealing with the

‘A very amusing book about old times’ 89 Scottish background, our categories have become more discriminating. We do not make the mistake of lumping Smith and Hume together as part of some ‘Scottish school’ of moral sense intuitionists, or as exponents of a materialist-cum-rationalist version of ‘conjectural history’. Nor are such terms as ‘harmonious Code of Nature’ or ‘complacent optimism’ so common as descriptions of Smith’s general outlook. It is more common to take seriously the realistic debit account side of Smith’s balance sheet of gains and losses associated with commercial society and the division of labour. With the discovery of yet another set of student notes on the Lectures on Jurisprudence more support can be given to Leslie’s instinct in stressing the subordinate character of political economy within what he called a ‘jural’ scheme. Unlike Leslie, however, we are not as dismissive of the natural law tradition as he was, largely because we are not under the influence of Maine and do not think it was a purely a prioristic way of thinking, incompatible with seeking historical and empirical verification. We are more appreciative of the complexities of explanations in terms of unintended consequences and therefore do not treat the ‘invisible hand’ mentality as a straightforward endorsement of laissez-faire. We may even recognize those cases where the invisible hand delivers an unintended outcome that is not beneficial and hence needs the attentions of the legislator to minimize if not eliminate it. I have some personal sympathy with Leslie’s attempt to show that ‘economic man’ assumptions are not characteristic of the psychology employed in the Wealth of Nations. This may support his desire to separate Smith from his immediate followers, though not on the grounds he chose, namely a stark contrast between induction and deduction.63 For related reasons, Bagehot’s suggestion that Smith was the insouciant creator of the separate science that became political economy when properly mapped by Ricardo has some merit, though he spoiled it by overlaying the conclusion with a Whig historiography re-establishing continuities, treating Smith as some kind of absent-minded proto-Benthamite, a utilitarian in everything but name.64 There were times during the third quarter of the twentieth century when Smith was once more enlisted for biblical support in a Manichaean struggle between free-market individualism and collectivist intervention and planning. They have left no permanent mark on our understanding of Smith, and may have stimulated others to articulate the inherent difficulties of translating Smith into a late twentieth-century setting. For late nineteenthcentury commentators the stakes were raised by confluence between beliefs in personal selfreliance and new ideas derived from the theory of natural selection, with a mixture of confidence and anxiety being produced by Britain’s recently-acquired dominance as an economic and imperial power, and the uncertainties created by the democratic trend of her constitutional arrangements. Added to this were positivistic conceptions of science that made the battle for the scientific soul of political economy more urgent then than it was in Smith’s

90 Winch time or has become in ours, though for different reasons, some of them connected with disillusionment. We might notice, as Keynes did, that Smith did not justify his methodology as inductive or deductive, but we would be more appreciative of what he has to say about ‘systems’ (in the essay on the history of astronomy, with its disturbing aesthetic dimension) and the dangers of acting upon them (in the Theory of Moral Sentiments, and implicitly throughout the Wealth of Nations). Having the lectures on rhetoric and belles lettres to hand, as Victorians did not, we might credit Smith with more self-consciousness and less fumbling common sense by noting what he says about different modes of discourse. Having lost some of our confidence in positivistic versions of science, we may be more appreciative of the ‘linguistic turn’ his work took. This could be evidence of our own fashions in such matters, but the connections with humane learning generally, with philosophy and science in its interchangeable eighteenth-century sense, rather than science in its nineteenth- and twentieth-century forms, could be precisely what justifies Burke’s claims on his behalf and our enduring interest.

NOTES 1 In 1976, when many historians of economics were on bicentennial duties, Bob Black wrote ‘Smith’s Contribution in Historical Perspective’ for the Glasgow celebrations, later published in Wilson and Skinner (1976: 42–63). On that occasion Denis O’Brien and I followed in Bob’s footsteps with our comments. This then is another example of following Bob’s example, as many of us would like to have been able to do more successfully over the years. I should also like to record my thanks to Denis O’Brien and Jeffrey Lipkes for pointing out some mistakes in an earlier version. 2 W. Bagehot, ‘Adam Smith as a Person’, Fortnightly Review, July 1876, later reprinted in Biographical Studies edited by R. H. Hutton (1880), and now in N. St John-Stevas (ed.) The Collected Works of Walter Bagehot (hereafter CW) (III, 84–112). Bagehot had begun writing the essays that were published posthumously as Economic Studies in 1875; they were edited by R.H. Hutton and appeared first in 1879 with a second edition in 1888, now in CW (XI, 221–394). The first two parts on ‘The Postulates of English Political Economy’ were published in the Fortnightly Review, February and May 1876, before the centenary dinner held by the Political Economy Club on 31 May. Bagehot also wrote a shorter article on Smith entitled ‘The Centenary of The Wealth of Nations’ in The Economist, 3 June 1876; see the letters to John Morley, editor of the Fortnightly in CW (XIII, 665, 672–3), and for the article itself CW (III, 113–19). Finally, he also wrote a chapter for Economic Studies entitled ‘Adam Smith and our Modern Economy’ for inclusion alongside the chapters on Ricardo and Malthus (CW: XI, 298–328). 3 CW (XI, 222) and repeated with different wording on p. 280.

‘A very amusing book about old times’ 91 4 See Hutchison (1978: 59). Hutchison’s earlier treatment of this episode retains its classic status (1953: ch. 1). 5 There is now a large body of work on this subject; see, for example, Collini (1983), Maloney (1985), Koot (1987), Kadish (1989) and Coleman (1987). 6 See letter to J. Morley, November 1875 in CW (XIII, 672). 7 Bagehot could claim to have written extensively on the Scottish mind; he compared Smith with Macaulay and Thomas Chalmers as Scots, and wrote on the Scottish education of the group who might be called Smith’s grandchildren in ‘The First Edinburgh Reviewers’ (CW: I, 309–41). 8 For example, Bagehot recounted that Smith’s commissionership was a sinecure, but that it prevented him from studying or writing anything during the last fourteen years of his life. Neither of these statements is true, as the extensive revisions to the Theory of Moral Sentiments shows. Even a friend and admirer such as Robert Giffen doubted if Bagehot’s sketch of Smith was ‘adequate’ (see CW: XI, 212). One of Smith’s most dedicated twentieth-century biographers, W.R. Scott, believed that Bagehot’s design was more praiseworthy than his execution, adding that ‘there was no reason to introduce very many errors, perhaps the more dangerous through the brilliancy of the style by which they were expressed’; see ‘Studies Relating to Adam Smith during the Last Fifty Years’, Proceedings of the British Academy, 26, 1940: 251. 9 For Bagehot’s religious beliefs see the account given by his friend, R.H. Hutton, as reprinted in CW (XV, 83–133). 10 In any history of Smith scholarship, therefore, Buckle is chiefly infamous for provoking consideration of Das Adam Smith Problem among German scholars as a result of its mischaracterization of Smith’s method; see the editors’ comments on this in the Glasgow edition of Theory of Moral Sentiments, edited by D.D. Raphael and A.L. Macfie (1976: 20–3). 11 For a broader survey of Buckle’s critics see St Aubyn (1958: ch. 6). 12 See Physics and Politics as reprinted in CW (VII, 22–3). 13 The flavour of the conclusion concerning Malthus is conveyed by the following statement:

Malthus had not the practical sagacity for the treatment of Political Economy in a concrete way, or the mastery of abstract ideas necessary to deal with it in what we should now call a scientific way. He tried a bad mixture of both. There is a mist of speculation over his facts, and a vapour of fact over his ideas. (CW: XI, 339) 14 See Cairnes (‘Political Economy and Laissez-Faire’, 1873b: 232–64). The lecture also anticipates Bagehot’s remarks on the Englishness of the science and the current state of neglect into which it had fallen. Cairnes had sent Bagehot a copy of his last book, Some Leading Principles of Political Economy Newly Expounded, 1874; (see CW: XIII, 653–4). Bagehot’s obituary of Cairnes endorsed

92 Winch his Character and Logical Method of Political Economy (1875) as the best statement of the issue available (see CW: XI, 401–3). 15 Palgrave also wrote an obituary of Bagehot, as did another friend, Robert Giffen, who was the intended author of the article for Palgrave’s Dictionary rather than the editor (see CW: XV, 46–8, 64– 8). 16 On this see Giffen’s comments in CW (XI, 210–11; XV, 31–3). 17 See Maine, Village-Communities in the East and West, 4th edn, 1881, pp. 191–7; and more especially ‘The Effects of Observation of India on Modern European Thought’, a lecture given in 1875 which is included in the above edition (223–33). On this see also Collini (1983: 249–57). 18 This conclusion is supported with a good deal more finesse than this summary remark suggests in Burrow (1966). Burrow has also written incisively on the influence of Maine on Bagehot and viceversa in Diamond (1991: 55–69). 19 See the correspondence cited in note 2 above. 20 Political Economy Club; Revised Report of the Proceedings of the Dinner of 31 May 1876, held in Celebration of the Hundredth Year of the Publication of the ‘Wealth of Nations’, Right Hon W. E. Gladstone in the Chair (1876: 8). When sustaining the attack after the dinner, Lowe argued that Smith himself had failed in the Theory of Moral Sentiments because the deductive method worked best in economics. As he said: ‘place a man’s ear within the ring of pounds, shillings and pence, and his conduct can be counted on to the greatest nicety’ (1878: 864). 21 Ibid.: 26. 22 Ibid.: 31. 23 Ibid.: 33. 24 On Rogers’s political stance and the controversy it aroused at Oxford see De Marchi (1976). 25 See Preface to his edition of the Wealth of Nations, p. xlii. 26 The following remark might well have come from an anti-Corn Law league publication: ‘[Smith’s] work is international, and has formed an effective protest against those shams of a sordid self-interest, which mask itself under the name of Patriotism’; see ibid., p. xli. 27 The verdict of W.J. Ashley in his article on Rogers in Palgrave’s Dictionary of Political Economy . 28 Strictly speaking, Leslie’s campaign was not so much a new one as a renewal of earlier attempts to appeal to Smith against Ricardo. This was a feature of Malthus’s case against his friend, as well as that of Richard Jones. The tactic was also employed by a number of ‘conservative’ and protectionist writers, notably Archibald Alison, who found Smith’s approach more congenial during the first four decades of the nineteenth century. On the latter topic see Gambles (1998, 1999). 29 See ‘The History of German Political Economy’ in Essays in Moral and Political Philosophy (1879), reissued in part as Essays in Political Economy edited by J. K. Ingram and C. F. Bastable (1888: 87), with some new essays and some old ones omitted. The former work contains Leslie’s obituary of

‘A very amusing book about old times’ 93 Bagehot in which he claimed that Bagehot’s limitations on the scope of the deductive science made him an ally in his own attack on orthodoxy. I am grateful to Jeffrey Lipkes for pointing this out. 30 For example, having reviewed the components of Smith’s teaching, he concluded ‘that his conception of the true scope and method of jurisprudence agreed with his conception of the true scope and method of economic inquiry’ (ibid.: 15). 31 See ‘The Political Economy of Adam Smith’ in Essays in Political Economy,: 23. See also the uses made of Smith in ‘On the Philosophical Method of Political Economy’, ‘Political Economy and Sociology’, and ‘The Known and the Unknown in the Economic World’. 32 Ibid.: 31–2. 33 The Irish dimension is dealt with in Koot (1975). He acknowledges, of course, that Bob Black had drawn attention to heterodox and inductive strains in Irish political economy much earlier (Black 1945, 1948). The second of these articles also deals with Leslie. On the political and institutional dimensions of political economy in Ireland see Boylan and Foley (1992). 34 See Parliamentary Debates, 12 March 1868: 1483–1503. On the wider background to this issue see Black (1960a: 51–71). 35 For Cairnes’s role in this see Boylan and Foley (1985: 96–119). 36 See his Section F address at the British Association on ‘The Present Position and Prospects of Political Economy’ in 1878, as reprinted in Harte (1962: 41–72) and Ingram, A History of Political Economy, 1888, 2nd edn, 1907. The parts dealing with Smith are heavily indebted to Leslie’s interpretation, allowing Ingram to defend Smith from German charges against Smithianismus (see pp. 82–110). 37 Bagehot supported Jevons in his successful application for the Cobden Chair at Owens College, Manchester; see letter to Jevons, 10 March 1866 in CW (XIII, 606–8). In his Economic Studies, however, he cited Jevons and Walras as examples of ‘new doctrines’ that were even less concrete and ‘unlike life in business’ than the old ones (see CW: XI, 234). 38 See CW (III, 113–19). The dispute was mentioned in other journalistic treatments of the event; see (anon) Pall Mall Gazette, 30 May 1876 reprinted along with other articles, including Bagehot’s, in Political Economy Club; Revised Proceeding. 39 On the appeal and reputation of Mill’s Principles see De Marchi (1974). 40 See Parliamentary Debates, 12 March 1868: 1516–32, now included in Collected Works of John Stuart Mill, vol. XXVIII. For Mill’s review of Leslie see Mill (V, 671–85). Mill’s involvement and influence on Irish land questions features heavily in Black (1960a) and has now given rise to a large literature; see the introduction to Mill’s Collected Works (XXVIII) and Kinzer (1984). 41 See obituary article in Leslie (1888: 54–9). 42 See the extract from his obituary of Mill in CW (XI, 394). For the obituary as a whole see CW (III, 555–9). 43 For the review see CW (XI, 157–94) and letters to W.C. Roscoe and R.H. Hutton on the subject in CW (XII, 279–82, 292–7).

94 Winch 44 In politics, Bagehot did not share Mill’s radicalism. His English Constitution was partially written in correction of Mill’s failure to appreciate the significance of the Cabinet in his Representative Government. Nevertheless, when Mill stood as a candidate for Westminster in 1865 Bagehot said that he would vote for him despite his reservations on such ‘advanced Liberal’ views as female suffrage, rejection of the ballot and representation of minorities; see CW (III, 541–6). Bagehot also disagreed with Mill’s solutions to Irish problems (see ibid.: 547–53). 45 Autobiography, in Collected Works (I, 31). 46 Preface to Principles of Political Economy, with some of their Applications to Social Philosophy, 1848 as reprinted in Collected Works (II, xcii). 47 See letters to Comte, 28 January 1843 and 5 October 1844 in Collected Works (XIII, 565–8, 636–9) and for comment on Mill’s blindness see Collini (1983: 132–3). 48 See Autobiography, in Collected Works (I, 133, 169–71). 49 ‘A History of Political Economy is not a kind of book much wanted on its own account, but it would afford an opportunity for interesting discussions of all the contested points, and for placing them in the strong light which results from the comparison of conflicting opinions and from a study of their origins and filiation. Though, therefore, it is a work I should hardly suggest to anyone, yet if any competent political economist with a talent for philosophical controversy feels spontaneously prompted to undertake it, the result is likely to be useful and interesting to those who care for the subject.’ See letter to Fawcett, 4 December 1863, in Collected Works (XV, 907). 50 Perhaps it is necessary to stress that I am not referring to another problem in the interpretative literature that can be traced back to Schumpeter. I am not speaking about Mill’s ‘half-way house’, where this describes his imputed intermediate stance on those issues later codifed as part of the transition from ‘classical’ to ‘neoclassical’ thinking. None of the disciples of Mill mentioned in the text were marginalists. On this I have benefitted from reading an interesting study of Mill’s late disciples, divided between ‘loyalists’ and ‘heretics’, by Lipkes (1999). 51 See Sidgwick (1887: 4). The essays by Terence Hutchison mentioned in note 4 above were early statements of the modern view. 52 See his article on ‘Political Economy’ in Palgrave’s Dictionary (III, 135–6). 53 See letters to Keynes, 10 and 27 August 1889 in Whitaker (1996: I, 294, 298). 54 See letter to Price, 19 August 1892 in Whitaker (1996: II, 80–81). 55 See his introduction to Anton Menger’s The Right to the Whole Produce of Labour (1899: xxviii, xl– xli). 56 See his edition of the Wealth of Nations (1884) and A Project of Empire; A Critical Study of the Economics of Imperialism, with Special Reference to the Ideas of Adam Smith (1909). See Maloney (1985: 75–90) for a rare modern appreciation of Nicholson. 57 The umbrella image was actually used by J. H. Clapham in his inaugural lecture at Cambridge in 1929; see Harte (1971: 67). But George Unwin had proclaimed in 1908 that ‘Adam Smith was the

‘A very amusing book about old times’ 95 first great economic historian, and I do not scruple to add that to my mind he is still the greatest’ (ibid.: 39). This fondness persisted in the work of T. S. Ashton and figures in Donald Coleman’s book on History and the Economic Past as a standard according to which a large number of Smith’s successors as economic historians are found wanting. 58 These lectures were published in Cannan (1929). 59 My concern here has been with the position of Smith in the national imagination: hence the lack of reference to the large German literature on Smith during the last quarter of the nineteenth century. As the bibliographies attached to late nineteenth-century treatments of Smith show, however, there was an acute awareness of the German literature. 60 Speaking of the death of Francis Horner in ‘The First Edinburgh Reviewers’ (CW: I, 324) 61 See J.A. Farrer, Adam Smith (1881); R B. Haldane, Life of Adam Smith (1887); H.C. Macpherson, Adam Smith (1899); and F.W. Hirst, Adam Smith (1904). 62 ‘Adam Smith and Laissez-Faire’ in Adam Smith, 1776–1926 (1928) as reprinted in his The Long View and the Short (1958: 213–45). 63 For an indication of my grounds for distinguishing Smith from his successors, classical and neoclassical, see Winch (1997). 64 It would have been better if he had stuck with his recognition that:

Nothing could be more unjust to a great writer than to judge of him by a standard which he did not expect, and to blame his best book for not being what he never thought of making it, especially when, except for him, we should never have imagined the standard, or conceived the possibility of the book being that which we now blame it for not being. (Bagehot, CW: XI, p. 326)

6

Adam Smith An historical perspective on The Wealth of Nations1 Andrew S. Skinner

INTRODUCTION In 1976 Bob Black delivered a lecture on the subject of ‘Smith’s Contribution in Historical Perspective’. The lecture was delivered on the occasion of the bicentenary conference held in Glasgow, and published in the same year. Black recalled that his brief was to review the ways in which Smith as an economist had been evaluated at various points in history, making the valid, but disturbing, point, that economists had tended to see Smith in the light generated by their own current preoccupations, in terms of both policy and analysis (Black 1976: 62). The two pillars of Smith’s success may be represented by his contribution to economic analysis and the advocacy of free trade. Richard Teichgraeber has noted in this connection that there is ‘no evidence to suggest that many people explored his arguments with great care before the first two decades of the nineteenth century’ (Teichgraeber 1987: 339). In this context, Murray Rothbard recently complained that ‘Smith’s work was the reverse of coherent and systematic’ to such an extent that his successors were set the task of forging a ‘coherent’ account ‘out of the Smithian muddle’ (1995: 437). Salim Rashid offers an interesting comment in the same vein (1998). But Black’s judicious conclusion is the more perceptive, suggesting that for Smith’s early nineteenth-century successors, the WN was viewed ‘not so much a classical monument to be inspected, but as a structure to be examined and improved where necessary’ (1976: 44). Black quoted Lord Robbins to this effect: There is a vast extent of analysis and prescription which the generation of Malthus and Ricardo more or less take for granted, the essential work having been done by Hume and Smith; and a great deal of what they do themselves is to be regarded, not as a series of propositions thought out in a void, but rather as an attempt to correct and improve propositions and explanations which are already to be found in the Wealth of Nations. (Black 1976: 44; Robbins 1958: 233)

Adam Smith 97 Among those who ‘inspected’ the system we must number Dugald Stewart who was profoundly to influence pupils such as Francis Horner, James Mill and J.R. McCulloch (Winch 1994: 101–3; Rothbard 1995: 478–81). Mill and McCulloch were to widen the circle through contacts with Malthus, Ricardo and J.B. Say. These familiar contributors to a new classical edifice passed over without significant comment Smith’s preoccupation with a macroeconomic system wherein all magnitudes were dated – the style of period analysis which Smith had inherited from the Physiocrats, to whom he owed much (Skinner 1996, 1999). But they did accept many of Smith’s judgements with regard to the efficacy of the allocative mechanism, the role of money and the assumption that acts of saving would typically be transformed into acts of investment. Equally the authors of the new orthodoxy were able to identify important criticisms of specific areas of analysis, such as the theories of value, interest, rent and population; criticisms which resulted in models of the economy which represented it in terms of a series of (short-run) self-regulating mechanisms and of a theory of growth; a theory which W.J. Baumol (and others) were able to translate into mathematical terms (Baumol 1962). But if Smith’s successors found merit in the great ‘principia’, the deficiencies which were identified in the treatment of particular topics led to a rising tide of criticism. Interestingly, one focal point of criticism was macroeconomic in character, in that Malthus, Lauderdale and Sismondi all drew attention to the importance of the distribution of income as it affected consumption and savings and thus the performance of the economy. The theme was continued in J.S. Mill’s troubled Essays on Some Unsettled Questions of Political Economy (1844, Collected Works). As Donald Winch has noted, Mill believed that ‘The Wealth of Nations is in many parts obsolete, and in all, imperfect’ (see Chapter 5 above). Later in the century, the main preoccupation was with the analytics of Book I. Black records Bagehot’s opinion that:

Although … Adam Smith had the merit of teaching the world that the exchangeable value of commodities is proportioned to the cost of their production, his analysis of that cost was so very defective as to throw that part of Political Economy into great confusion for many years, and as quite to prevent his teaching being used as an authority upon it now. (Black 1976: 55)

Even more remarkable to modern eyes was the assessment offered by Edwin Cannan, Smith’s distinguished editor, who noted that:

98 Skinner Very little of Adam Smith’s scheme of economics has been left standing by subsequent inquirers. No one now holds his theory of value, his account of capital is seen to be hopelessly confused, and his theory of distribution is explained as an ill-assorted union between his own theory of prices and the Physiocrats fanciful Economic Table. (Black 1976: 57; Cannan 1926: 123; see O’Brien 1999)

The theme was repeated by Paul Douglas in his paper on Smith’s theory of value and distribution, delivered on the occasion of the Chicago conference in 1926:

the contributions of Adam Smith to the theory of value and distribution were not great, and in commemorating the publication of the Wealth of Nations it might be seen to be the path of wisdom to pass these topics by in discreet silence and to reserve discussion instead for those subjects, such as the division of labour, where his realistic talents enabled him to appear at a better advantage. (quoted in Black 1976: 58; Douglas 1927: 77; Rashid 1998: 31, 36)

In commenting upon this assessment, Black made the interesting point that ‘the lack of emphasis on growth in the thinking of 1926 can perhaps be explained in terms of the dominance of the neo-classical approach at that time’ (1976: 61). The deficiency was only made good in the aftermath of Professor Myint’s pioneering work in the 1940s (ibid.: 61).

SYSTEM Why then should a modern student of political economy (now reduced, even in Glasgow, to ‘economics’) trouble to add, or be recommended to add, Adam Smith to an expanded syllabus and reading list, however philosophically circumscribed? The answer may lie in Smith’s concern with system in the sense that he (and many others at the time) often sought to provide a coherent and all-embracing account of the phenomena to be studied. Even in the context of the WN there were contemporaries who, while not uncritical of the treatment of individual topics, nonetheless understood the overall analytical strategy. Hugh Blair, Professor of Rhetoric in Edinburgh, observed for example that ‘Your arrangement is excellent. One chapter paves the way for another; and your System gradually erects itself'’ (Corr., letter 151, dated 3 April 1776). Governor Pownall, one of Smith’s most trenchant critics, nonetheless recognized that the WN constitutes ‘an INSTITUTE OF THE PRINCIPIA of those laws of motion, by which the operations of the community are directed and regulated, and by which they should be

Adam Smith 99 examined’ (1776, Corr.: 354). Dugald Stewart, writing in his Memoir delivered before the Royal Society of Edinburgh in 1793, considered that: it may be doubted, with respect to Mr Smith’s Inquiry, if there exists any book beyond the circle of the mathematical and physical sciences, which is at once so agreeable in its arrangement to the rules of a sound logic, and so accessible to the examination of ordinary readers. (Stewart 1980, IV: 22) These are compliments which Smith would have appreciated, conscious as he was of the value of systems which connect together ‘in the fancy those different movements and effects which are already in reality performed’ (Astronomy IV: 19) and of the ‘beauty of a systematical arrangement of different observations connected by a few common principles’ (WN: V.i.f.25). Smith might have been less satisfied with Stewart’s final assessment: The skill and comprehensiveness of mind displayed in his arrangement, can be judged of by those alone who have compared it with that adopted by his immediate predecessors. And, perhaps, in point of utility, the labour he has employed in connecting and methodising their scattered ideas, is not less valuable than the results of his own original speculations. (Stewart 1980, IV: 27) The point was echoed by Schumpeter who, despite his critical assessment of ‘A Smith’, still regarded the WN as the ‘peak success of this period’. He added, ‘though the Wealth of Nations contained no really novel ideas, and though it cannot rank with Newton’s Principia or Darwin’s Origin as an intellectual achievement, it is a great performance all the same and fully deserved its success’ (Schumpeter 1954: 185). Having dismissed Smith’s contribution to the theories of value and distribution, Blaug also concluded that: In appraising Adam Smith, or any other economist, we ought always to remember that brilliance in handling purely economic concepts is a very different thing from a firm grasp of the essential logic of economic relationships. Superior technique does not imply superior insight and vice-versa. Judged by standards of analytical competence, Smith is not the greatest of eighteenth century economists. But for an acute insight into the nature of the economic process, it would be difficult to find Smith’s equal. (Blaug 1962: 57)

100 Skinner But there is another aspect to this concept of ‘system’, duly noted by Black, in adverting to the fact that the Theory of Moral Sentiments and the Wealth of Nations should be ‘seen afresh as two parts of one system’ (1976.: 62), thus reminding at least one of the bicentennial congregations of Smith’s wider purpose, while noting that Cliffe Leslie had been among the first to appreciate the point in the previous century (ibid.: 53). Seen in retrospect, Leslie’s position is hardly surprising. Olivier Robert (University of Paris I) has drawn my attention to the fact that Leslie urged economists to adopt an historical, inductive and synthetic method and that he was convinced of the indissoluble nature of the connection between the moral, intellectual, legal and economic phases of social progress. Indeed in a paper delivered to the 1999 ESHET conference, Robert argued that there was a distinctive English Historical School whose main figures included Leslie and J.K. Ingram, William Ashley, William Cunningham, Frederick Harrision and Arnold Toynbee (see Coats 1954; Koot 1975, 1987). Ethics, jurisprudence and economics were certainly subjects which Smith treated as the separate but interrelated parts of a system of the moral or social sciences. The point was clearly made in the concluding sentences of the first edition of TMS and repeated in the advertisement of the sixth edition which was published thirty-one years later. We also have the advantage of knowing that Smith taught his students in a particular order: ethics, jurisprudence and economics. It may well be that he encouraged his students to view aspects of the human predicament through three distinct lenses – with the ultimate object of persuading them to view that predicament through all three lenses at the same time.

ETHICS Smith’s Theory of Moral Sentiments, based on the second part of his lecture course, is a work on ethics which addresses the two main questions confronting the philosopher: first, how and by what means are moral judgements formed, and, second, wherein does virtue consist? But there are additional dimensions to the work to which attention should be directed, namely Smith’s demonstration of the point that social order involves a balance of opposed forces, and his account of the manner in which men erect barriers against their own self-interested passions; a basic precondition if economic performance is to be sustained. Smith’s argument, like that of his great friend David Hume, places a good deal of emphasis on ‘sympathy’ (akin to the modern psychological concept of empathy) by which he means ‘fellow-feeling’, that sentiment which expresses our interest in the situation of other people. This kind of ‘sympathy’ can be instinctive, as, for example, when we contemplate an expression of joy or sorrow; a reaction which may later cause the observer to inquire into the

Adam Smith 101 circumstances of the person judged with a view to understanding the emotion which he expresses. Thus sympathy arises not ‘so much from the view of the passion, as from that of the situation which excites it’. It is this which leads the spectator to form a judgement as to the propriety or impropriety of an expression or feeling, where such qualities are found to consist in the ‘suitableness or unsuitableness, in the proportion or disproportion which the affection seems to bear to the cause or object which excites it’ (TMS: I.ii.3.6). It followed for Smith that where the spectator of another man’s conduct seeks to form an opinion as to its propriety, he must ‘bring home to himself’ both the circumstances and the ‘affections’ of the person judged. In short, the spectator of another man’s conduct must try to visualize how he would feel and act under the circumstances prevailing. It was Smith’s contention that any judgement as to the propriety of an action or reaction must involve some effort of the imagination, in that when ‘we judge … of any affection as proportioned or disproportioned to the cause which excites it, it is scarce possible that we should make use of any other rule or canon but the correspondent affection in ourselves’ (TMS: I.i.3.9). At the same time, Smith recognized that since we have no ‘immediate experience of what other men feel’, it follows that an action which is considered appropriate by the spectator must involve some restraint on the part of the agent (TMS: I.i.4). Smith went on to suggest that the degree to which the spectator can visualize the feelings of the person judged of may involve the virtue of sensibility, while the extent to which the person judged is capable of moderating the expression of his feeling may involve that of self-command (TMS: I.i.5). It was Smith’s opinion that men would tend to practise both virtues since ‘nothing pleases us more than to observe in other men a fellow feeling with all the emotions of our own breast’. In particular it is suggested that we are impelled to self-restraint, since: ‘Nature, when she formed man for society, endowed him with an original desire to please, and an original aversion to offend his brethren’ (TMS: III.2.6). Yet important as this general disposition may be as a source of social control, Smith drew attention to the fact that it was unlikely to be sufficient, for two main reasons. The first problem to be confronted relates to the basic mechanisms by virtue of which judgements are formed, and specifically to the role of the spectator, who must be at once well informed and impartial if the judgement made is to be accurate. To begin with, our knowledge must be imperfect with regard, for example, to the motives which prompt an action taken by another person. Smith solved this problem by developing the argument that the way in which we judge our own conduct must be similar to that in which we judge others, in that in so doing we ‘suppose ourselves the spectators of our own behaviour’. It will be apparent that the ideal or imagined spectator of our conduct always can be supplied with all the information which would be needed to frame an accurate judgement (TMS: III.i.6).

102 Skinner The second aspect of the problem arises from the fact that man is presented by Smith as an active, self-regarding being. Interestingly enough, Smith often develops this theme within the context of broadly ‘economic’ aspirations, while reminding the reader that self-interested activities have a ‘social’ reference. He observed that:

it is chiefly from this regard to the sentiments of mankind, that we pursue riches and avoid poverty. For to what purpose is all the toil and bustle of this world? What is the end of avarice and ambition, of the pursuit of wealth, of power, and pre-eminence? (ibid.)

Perhaps with his old teacher Francis Hutcheson in mind, Smith positively warmed to his subject in remarking that a person appears ‘mean-spirited’ who does not pursue ‘the most extraordinary and important objects of self-interest’ with ‘some degree of earnestness’, in referring to those great objects of which the loss or acquisition ‘quite changes the rank of the person’ (TMS: III.6.7). The basic problem which arises in the present context is that we may upon particular occasions fail to judge our own actions with the required degree of impartiality, even where we have the necessary information. As Smith put it, ‘When we are about to act, the eagerness of passion will seldom allow us to consider what we are doing, with the candour of an indifferent person’ (TMS: III.4.3). The argument would thus seem to suggest that there will be many occasions on which men are unlikely to be able to form accurate judgements with respect to their own activities, and that they would therefore be unlikely to impose upon themselves the kind of restraint which the ‘inhabitant within the breast’ would normally recommend. Smith’s solution to the problem thus raised involves no principle in addition to those already considered. He suggests that our capacity to form judgements in particular cases permits us to frame general rules (including those of justice) by a process of induction – thus formally admitting reason to the discussion of morality (TMS: III.4.8).

JURISPRUDENCE The argument which illustrates the way in which we judge on particular occasions is important in the sense that it explains the origin and something of the nature of general rules of conduct, including those of justice. This suggests that Smith rejected the rationalist approach to ethical questions, while implying that general rules of behaviour must be related to the experience of what, on particular occasions, is thought to be appropriate. This in turn

Adam Smith 103 raises the possibility that since experience may vary, then so too will the content of general rules – a position which is explored to a limited extent in the Theory of Moral Sentiments where Smith considers the influence of custom and fashion on moral judgement. The theme was continued in the Lectures on Jurisprudence where Smith considered the relationship between environment and law. As John Millar recalled when commenting on this part of Smith’s lecture course:

Upon this subject he followed the plan that seems to be suggested by Montesquieu; endeavouring to trace the gradual progress of jurisprudence, both public and private, from the rudest to the most refined ages and to point out the effect of those arts which contribute to subsistence, and to the accumulation of property, in producing correspondent improvements or alterations in law and government. (Stewart 1980, I: 19)

The association of Montesquieu with economic forces and with the dynamic processes of change through time may be somewhat overdrawn, but is, as Millar suggested, very much a feature of Smith’s thought. It was in this connection that he made use of four types of economic organization, or modes of earning subsistence, the now famous stages of ‘hunting, pasturage, farming, and commerce’ (LJB, 149). These stages are deployed in the discussion of ‘public jurisprudence’ where Smith was concerned with broad questions of constitutional law, and in the discussion of private law where the lecturer addressed man’s rights as a member of a family and as an individual. As McCormick has pointed out, the approach is a fruitful one which:

brings sharply to our attention the way in which laws and legal institutions are an inherent part of the economy of a society and must be understood and explained as such if we wish to proceed beyond purely formal and structural analysis of legal systems considered in the abstract. (McCormick 1982)

On the other hand, an argument which seems to emphasize the importance of environment and change does raise the question as to the extent to which Smith was justified in describing jurisprudence as ‘that science which enquires into the general principles which ought to run through and be the foundation of the laws of all nations’ (TMS: VII.iv.37). Haakonssen has recently drawn attention to the normative element in Smith’s thought; to his emphasis on natural rights (such as life and liberty) which are so basic ‘that they can be taken as universal’

104 Skinner (1981: 148). More striking still is Haakonssen’s thesis that for Smith jurisprudence was to be seen ‘as a critical tool rather than a set of positive doctrines’; a critical tool used by the ‘spectator’ to subject rules of behaviour to the tests of impartiality, coherence and consistency (1982: Ch. 6). The proper understanding of environment gains new significance if this interpretation is accepted, and may further explain Smith’s preoccupation with the origin and nature of the present (socio-political) establishments in Europe (WN: Bk III). The nations which over-ran the Western Empire were represented by Smith as having been at exactly the state of development which had been attained by the early inhabitants of Greece. Primitive peoples whose military power was of the awesome proportions appropriate to the stage of pasture were thus shown to have come in contact with a much more sophisticated society, but one whose power was already on the decline. The result, as Smith duly noted, was the destruction of civilization as then known, but also the creation of an environment from which a higher form of European civilization was ultimately to emerge. Smith’s explanation of this general trend begins with the fact that the primitive tribes which over-ran the empire had already attained a relatively advanced form of the pasturage economy, with some idea of agriculture and of property in land. He argued therefore that they would naturally use existing institutions in their new situation and that in particular their first act would be a division of the conquered territories. In this way the argument moves from a developed version of one economic stage to a primitive version of another; from the stage of pasture to that of ‘agriculture’. Under the circumstances outlined, property in land becomes the source of power and distinction, with each estate forming a separate principality, featuring a high degree of dependence of those who own the means of subsistence on those who own property. This is essentially the allodial version of the stage of agriculture, and was followed by the feudal, featuring, inter alia, complex tactical alliances between the lesser and more powerful magnates, and between the latter group and the monarch. Smith argued that these changes took place from about the ninth to the eleventh centuries, and that by imposing some limitations on the free enterprise of the proprietors contributed thereby to a more orderly form of government. Yet the problem presented by the military capacity of the great proprietors, and the relative weakness of kings, remained and was to lead, according to Smith’s account, to a still further development, which should be of interest to the political economist. The policy in question was the encouragement given by kings to cities as a means of acquiring increased revenues and a countervailing power to that wielded by the proprietors; a policy which featured the grant of significant powers of self-government. It was a political act, but one with economic consequences in that the creation of self-governing units established an important claim and an essential precondition for economic growth, namely justice and personal security. Such cities as were located near the means of transportation

Adam Smith 105 were thus in a position to grow rapidly through trade and manufacture, thus increasing in absolute terms at least the financial capacity of the crown. In particular Smith emphasized that the great proprietors, when faced for the first time with a means of spending their surpluses would tend to accelerate their own decline; partly through the dismissal of retainers, and partly through the substitution of cash for the service relationship, which had prevailed between those who owned the means of subsistence and those who worked the soil. As Smith put it when summarizing his most complete statement of the argument:

A revolution of the greatest importance to the publick happiness, was in this manner brought about by two different orders of people, who had not the least intention to serve the publick. To gratify the most childish vanity was the sole motive of the great proprietors. The merchants and artificers, much less ridiculous, acted merely from a view to their own interest, and in pursuit of their own pedlar principle of turning a penny wherever a penny was to be got. Neither of them had either knowledge or foresight of that great revolution which the folly of the one and the industry of the other, was gradually bringing about. (WN: III.iv.17)

THE GREAT REVOLUTION The features of the ‘great revolution’, and the reasons for these features being of interest to the student of political economy, were, for Smith, quite clear. First, Smith suggests in effect that the economic structure which is consistent with the fourth stage (of commerce) is not to be regarded as a model (although it may be modelled) but as a structure with a history. The historical process suggests the emergence of an economic system with interdependent sectors of activity wherein all goods, services and factors command a price. Second, he argued that this new structure would feature new forms of activity and sources of wealth; a development which would bring with it a shift in the balance of economic and therefore of political power. The point owed much to David Hume, as Smith acknowledged. Hume wrote that in England

the lower house is the support of our popular government, and all the world acknowledges, that it owed its chief influence and consideration to the encrease of commerce, which threw such a balance into the hands of the commons. (1985: 277–8)

106 Skinner Third, Smith confirmed that in the case described there must be a major change in the pattern of dependence and subordination as compared to the feudal period. Since all goods and services command a price, it follows that while the farmer, tradesman or artificer must depend upon his customers, ‘though in some measure obliged to them all … he is not absolutely dependent upon any one of them’ (WN: III.iv.12). Finally, it is suggested that the type of institutional structure outlined will be associated with what Hume described as a particular set of ‘customs and manners’. The link here is once again with the analysis of the TMS and man’s desire for social approbation. For Smith, ‘Power and riches appear … then to be, what they are, enormous and operose machines contrived to produce a few trifling conveniences to the body, consisting of springs the most nice and delicate’ (TMS: IV.1.8). But Smith continued to emphasize that the pursuit of wealth is related not only to the desire to acquire the means of purchasing ‘utilities’ but also to the need for status: From whence, then, arises that emulation which runs through all the different ranks of men, and what are the advantages which we propose by that great purpose of human life which we call bettering our condition? To be observed, to be attended to, to be taken notice of … are all the advantages which we can propose to derive from it. (TMS: I.iii.2.1) Smith also suggested that in the modern economy, men tend to admire not only those who have the capacity to enjoy the trappings of wealth, but also the qualities which contribute to that end. Smith recognized that the pursuit of wealth and ‘place’ was a basic human drive which would involve sacrifices which are likely to be supported by the approval of the spectator. The ‘habits of economy, industry, discretion, attention and application of thought, are generally supposed to be cultivated from self-interested motives, and at the same time are apprehended to be very praiseworthy qualities, which deserve the esteem and approbation of everybody’ (TMS: IV.2.8). Smith developed this theme in a passage which was added to the TMS in 1790: In the steadiness of his industry and frugality, in his steadily sacrificing the ease and enjoyment of the present moment for the probable expectation of the still greater ease and enjoyment of a more distant but more lasting period of time, the prudent man is always both supported and rewarded by the entire approbation of the impartial spectator. (TMS: VI.1.11) But such values are specific to a particular type of culture; Nicholas Phillipson has argued that Adam Smith is best understood as a writer who was offering a response to matters of

Adam Smith 107 contemporary relevance, in presenting him as ‘a practical moralist who thought that his account of the principles of morals and social organisation would be of use to responsiblyminded men of middling rank, living in a modern, commercial society’. Indeed Dr Phillipson has gone so far as to suggest that Smith’s ethical theory ‘is redundant outside the context of a commercial society with a complex division of labour’ (Phillipson 1983: 179, 182; Dwyer 1987). Professor Pocock concluded that: A crucial step in the emergence of Scottish social theory is, of course, that elusive phenomenon, the advent of the four-stages of history. The progression from hunter to shepherd to farmer to merchant offered not only an account of increasing plenty, but a series of stages of increasing division of labour, bringing about in their turn an increasingly complex organisation of both society and personality. (1983: 242) Pocock associated these trends with the emergence of what has been described by others as a ‘bourgeois’ ideology. While the implications of this argument will be elaborated upon below, it is appropriate to note in this place that Smith’s treatment of the ‘economic man’ is more complex than many modern accounts. Both the pursuit of wealth and the deployment of it in purchasing utilities are subject to the scrutiny of our fellows and should be compatible with respect for the rights of others and for the rules of propriety – as defined by the spectator. Smith’s celebration of the prudent man provides one of the major hinges linking the TMS and the WN.

A CONCEPTUAL MODEL If the Theory of Moral Sentiment provides an account of the way in which men erect barriers against their own passions, thus meeting a basic precondition for economic activity, it also provided an account of the psychological judgements on which that activity depends. The historical argument on the other hand explains the origin and nature of the modern state and provides the reader with the means of understanding the essential nature of the exchange economy. For Smith: … the great commerce of every civilised society, is that carried on between the inhabitants of the town and those of the country . . . The gains of both are mutual and reciprocal, and the division of labour is in this, as in all other cases, advantageous to all the different persons employed in the various occupations into which it is subdivided. (WN: III.i.1)

108 Skinner The concept of an economy involving a flow of goods and services, and the appreciation of the importance of intersectoral dependencies, were familiar in the eighteenth century. Such themes are dominant features of the work done, for example, by Sir James Steuart and David Hume. But what is distinctive about Smith’s work, at least as compared to his Scottish contemporaries, is the emphasis given to the importance of three distinct factors of production (land, labour, capital) and to the three categories of return (rent, wages, profit) which correspond to them. What is distinctive to the modern eye is the way in which Smith deployed these concepts in providing an account of the flow of goods and services between the sectors involved and between the different socio-economic groups (proprietors of land, capitalists and wage-labour). The approach is also of interest in that Smith, following the lead of the French Economists, worked in terms of period analysis – the year was typically chosen – so that the working of the economy is examined within a significant time dimension as well as over a series of time periods. Both versions of the argument emphasize the importance of capital, both fixed and circulating. Taking the economic system as a whole, Smith suggested that the total stock of society could be divided into three categories. There is, first, that part of the total stock which is reserved for immediate consumption, and which is held by all consumers (capitalists, labour, and proprietors) reflecting purchases made in previous time periods. The characteristic feature of this part of the total stock is that it affords no revenue to its possessors since it consists ‘in the stock of food, cloaths, household furniture, etc, which have been purchased by their proper consumers, but which are not yet entirely consumed’ (WN: II.i.12). Second, there is that part of the total stock which may be described as ‘fixed capital’ and which will be distributed between the various groups in society. This part of the stock, Smith suggested, is composed of the ‘useful machines’ purchased in preceding periods but currently held by the undertakers engaged in manufacture, the quantity of useful buildings and of ‘improved land’ in the possession of the ‘capitalist’ farmers and the proprietors, together with the ‘acquired and useful abilities’ of all the inhabitants (WN: II.i.13–17), that is, human capital. Third, there is that part of the total stock which may be described as ‘circulating capital’ and which again has several components, these being: 1. 2.

The quantity of money necessary to carry on the process of circulation. The stock of provisions and other agricultural products that are available for sale during the current period, but are still in the hands of either the farmers or merchants.

3.

The stock of raw materials and work in process, held by merchants, undertakers or those capitalists engaged in the agricultural sector (including mining), etc.

Adam Smith 109 4.

The stock of manufactured goods (consumption and investment goods) created during the previous period, but remaining in the hands of undertakers and merchants at the beginning of the period examined (WN: II.i.19–22).

The logic of the process can be best represented by separating the activities involved much in the manner of the physiocratic model with which Smith was familiar. Let us suppose that, at the beginning of the time period in question, the major capitalist groups possess the total net receipts earned from the sale of products in the previous period, and that the undertakers engaged in agriculture open by transmitting the total rent due to the proprietors of land for the current use of that factor. The income thus provided will enable the proprietors to make the necessary purchases of consumption (and investment) goods in the current period, thus contributing to reduce the stocks of such goods with which the undertakers and merchants began the period. Second, let us assume that the undertakers engaged in both sectors, together with the merchant groups, transmit to wage labour the content of the wages fund, thus providing this socio-economic class with an income that can be used in the current period. It is worth noting in this connection that the capitalist groups transmit a fund to wage labour which form a part of their savings, providing by this means an income that is available for current consumption. Third, the undertakers engaged in agriculture and manufactures will make purchases of consumption and investment goods from each other, through the medium of retail and wholesale merchants, thus generating a series of expenditures linking the two major sectors. Finally, the process of circulation may be seen to be completed by the purchases made by individual undertakers within their own sectors. Once again, these purchases will include consumption and investment goods, thus contributing still further to reduce the stocks of commodities that were available for sale when the period under examination began, and which formed part of the circulating capital of the society in question. Looked at in this way, the ‘circular flow’ could be seen to involve purchases that take goods from the circulating capital of society, which are in turn matched by a continuous process of replacement by virtue of current production of materials and finished goods – where both types of production require the use of the fixed and circulating capitals of individual entrepreneurs, while generating the income flows needed to purchase commodities (and services). Smith elaborated on the argument. The expenditure of the consumers of particular commodities in effect replaces the outlays of those who retail them, just as the capital of the retailers replaces, together with its profits, that of the wholesale merchant from whom he purchases goods, thereby enabling him to continue in business (WN: II.v.9). In turn, the capital of the wholesale merchant replaces, together with their profits, the capital of the farmers and manufacturers from whom he purchases the rude and manufactured product which he deals in, and thereby

110 Skinner enables them to continue their respective trades (WN: II.v.10). At the same time, part of the capital of the master manufacturer is

employed as a fixed capital in the instruments of his trade, and replaces, together with its profits, that of some other artificer of whom he purchases them. Part of his circulating capital is employed in purchasing materials, and replaces, with their profits, the capitals of the farmers and miners of whom he purchases them. But a great part of it is always, either annually, or in a much shorter period, distributed among the different workmen whom he employs. (WN: II.i.11)

The farmers perform a similar function with regard to the manufacturing sector. This complex view of the working of the system is further complicated by the fact that Smith’s model of ‘conceptualized reality’ also employs a dual-circulation framework, involving cash transactions at the level of the household and credit at the level of the firm. It was this perspective which led Smith to advocate some degree of regulation of the rate of interest and of the banking trade (see, for example, Skinner 1996: Ch. 8; Zallio 1990). As an aside, it is worth recalling that Jeremy Bentham objected to Smith’s arguments regarding the regulation of the rate of interest on the ground that it was inconsistent with his general position (Corr, App. C). Dugald Stewart concurred (Stewart 1980, IV: 28.n.J).

A CONCEPTUAL SYSTEM The ‘conceptual’ model which Smith had in mind when writing the Wealth of Nations is instructive and also helps to illustrate the series of separate, but interrelated problems, which economists must address if they are to attain the end which Smith proposed, namely an understanding of the full range of problems which have to be encountered. Smith in fact addressed a series of areas of analysis which began with the problem of value, before proceeding to the discussion of the determinants of price, the allocation of resources between competing uses and, finally, an analysis of the forces which determine the distribution of income in any one time period and over time. The analysis offered in the first book enabled Smith to proceed directly to the treatment of macroeconomic issues and especially to a theory of growth which provides one of the dominant features of the work as a whole (Skinner 1996: Ch. 7). The idea of a single, allembracing conceptual system, whose parts should be mutually consistent is not an ideal which is so easily attainable in an age where the division of labour has significantly increased

Adam Smith 111 the quantity of science through specialization. But Smith becomes even more informative when we map the content of the ‘conceptual (analytical) system’ against a model of the economy, which is essentially descriptive. Perhaps the most significant feature of Smith’s vision of the ‘economic process’, to use Blaug’s phrase, lies in the fact that it has a significant time dimension. For example, in dealing with the problem of value in exchange, Smith, following Hutcheson, made due allowance for the fact that the process involves judgements with regard to the utility of the commodities to be received, and the disutility involved in creating the commodities to be exchanged. In the manner of his predecessors, Smith was aware of the distinction between utility (and disutility) anticipated and realized and, therefore, of the process of adjustment which would take place through time. Jeffrey Young has recently emphasized that the process of exchange may itself be a source of pleasure (utility) (1997: 61). In an argument which bears upon the analysis of the TMS, Smith also noted that choices made by the ‘rational’ individual may be constrained by the reaction of the spectator of his conduct – a much more complex situation than that which more modern approaches may suggest. Smith makes much of the point in his discussion of Mandeville’s ‘licentious’ doctrine that private vices are public benefits, in suggesting that the gratification of desire is perfectly consistent with observance of the rules of propriety as defined by the ‘spectator’, that is, by an external agency. In an interesting variant on this theme, Etzioni has noted the need to recognize ‘at least two irreducible sources of valuation or utility; pleasure and morality’. He added that modern utility theory ‘does not recognize the distinct standing of morality as a major, distinct, source of valuations and hence as an explanation of behaviour’ before going on to suggest that his own ‘deontological multi-utility model’ is closer to Smith than other modern approaches (Etzioni 1988: 21–4). Smith’s theory of price, which allows for a wide range of changes in taste, is also distinctive in that it allows for competition among and between buyers and sellers, while presenting the allocative mechanism as one which involves simultaneous and inter-related adjustments in both factor and commodity markets; a perspective pursued in Hay et al. (1996). As befits a writer who was concerned to address the problems of change and adjustment, Smith’s position was also distinctive in that he was not directly concerned with the problem of equilibrium. For him the ‘natural’ (supply) price was:

as it were, the central price, to which the prices of all commodities are continually gravitating … whatever may be the obstacles which hinder them from settling in this center of repose and continuance, they are constantly tending towards it. (WN: I.vii.15)

112 Skinner Schumpeter remarked in this connection that: ‘The rudimentary equilibrium theory of Chapter 7, by far the best piece of economic theory turned out by A. Smith, in fact points towards Say and, through the latter’s work, to Walras’ (1954: 189; c.f. Jaffé 1984; Piel 1999; Blaug 1999; Hutchison 1999). The picture was further refined in the sense that Smith introduced into this discussion the doctrine of ‘net advantages’ (WN: I.x.a.1). This technical area is familiar to labour economists, but in Smith’s case it becomes even more interesting in the sense that it provides a further link with the TMS, and with the discussion of constrained choice. It was Smith’s contention that men would only be prepared to embark on professions which attracted the disapprobation of the spectator if they could be suitably compensated (Skinner 1996: 155) in terms of monetary reward. Smith introduced a further dimension to the discussion in referring to differential rates of return in the different employments of capital, where he paid particular attention to the problems of social attitudes, risk and labour. Smith noted that resources could be continuously switched between different uses, as befits a system in movement. As Turgot put it, in passages which may have influenced Smith (Groenwegen 1969):

In a word, as soon as the profits arising from an employment of money, whatever it may be, increase or diminish, capitals either turn in its direction and are withdrawn from other employments, or are withdrawn from it and turn in the direction of other employments. (Meek 1973: 172)

But perhaps the most intriguing feature of the macroeconomic model is to be found in the way in which it was specified. As noted earlier, Smith argued that incomes are generated as a result of productive activity, thus making it possible for commodities to be withdrawn from the ‘circulating’ capital of society. As he pointed out, the consumption goods withdrawn from the existing stock may be used up in the present period, or added to the stock reserved for immediate consumption, or used to replace more durable goods which had reached the end of their lives in the current period. In a similar manner, undertakers and merchants may add to their stocks of materials, or to their holdings of fixed capital while replacing the plant which had reached the end of its operational life. It is equally obvious that undertakers and merchants may add to, or reduce, their inventories in ways which will reflect the changing patterns of demand for consumption and investment goods, and their past and current levels of production. Smith’s emphasis upon the point that different ‘goods’ have different life-cycles means that the pattern of purchase and replacement may vary continuously as the economy moves through different time periods, and in ways which reflect the various age profiles of particular products as well as the pattern of demand for them. If Smith’s model of the ‘circular flow’ is

Adam Smith 113 to be seen as a spiral, rather than a circle, it soon becomes evident that this spiral is likely to expand (and contract) through time at variable rates. It is perhaps this total vision of the complex working of the economy that led Mark Blaug to comment on Smith’s sophisticated grasp of the economic process and to distinguish this from his contribution to particular areas of economic analysis (Blaug 1962: 57; c.f. Jensen 1984; Jeck 1994; Randive 1984). Taking the model(s) as a whole, it is not difficult to see why Smith’s successors could find, in his writings, the building blocks of a classical orthodoxy, both static and dynamic (O’Brien 1975). Nor is it difficult to see why critics of the orthodoxy could find materials which formed the basis of an alternative tradition.

GOVERNMENT: POLICY AND CONSTRAINT Having assessed the content and the implications of Smith’s economic analysis, with its attendant emphasis on the role of the individual, Lord Robbins concluded that Smith’s advocacy of economic freedom ‘rested on a two-fold basis; a belief in the desirability of freedom of choice for the consumer, and belief in the effectiveness, in meeting this choice, of freedom on the part of the producer’ (Robbins 1952: 12). While it is doubtful if many of those who attended the dinner given by the Political Economy Club in 1876 (chaired by Gladstone) fully understood the analytical sophistication of Smith’s work, there was general agreement regarding the doctrine of free trade. Black recorded that Robert Lowe celebrated the message of ‘this simple Glasgow professor’, while William Newmarch ‘took Lowe’s point about the future of Political Economy a stage further’ by predicting that:

there will be what may be called a large negative development of Political Economy tending to produce an important and beneficial effect; and that is, such a development of Political Economy as will reduce the functions of government within a smaller and smaller compass. (Black 1976: 50–1)

One hundred years later, on the occasion of the 1976 celebrations in Glasgow, George Stigler made a related point in claiming, not without humour that ‘Adam Smith was alive and well and living in Chicago’. But in the years after 1926 there was another view of Smith’s position which was profoundly influenced by Jacob Viner’s truly seminal paper, ‘Adam Smith and laisser-faire’ (1927). Viner concluded that:

114 Skinner Adam Smith was not a doctrinaire advocate of laisser-faire. He saw a wide and elastic range of activity for government, and he was prepared to extend it even further if government, by improving its standard of competence, honesty and public spirit, showed itself entitled to wider responsibilities. (1927: 154)

This passage reminds us of Smith’s newly topical preoccupation with what he took to be the baleful influence of mercantile and manufacturing interests, but also of further links with the analysis of the origin and nature of the exchange economy. It may be recalled that Smith associated the fourth economic stage with the advent of freedom in the ‘present sense of the term’: that is, with the elimination of the relation of direct dependence which had been a characteristic of the feudal/agrarian period. Politically, the significant and associated development appeared to be the diffusion of power consequent on the emergence of new forms of wealth, which, at least in the particular circumstances of England, had been reflected in the increased significance of the House of Commons and in the emergence of a situation where liberty was secured ‘by an assembly of the representatives of the people, who claim the sole right of imposing taxes’ (WN: IV.vii.b.51). Smith was far from equating political with personal liberty, nor did he suggest that absolutism was incompatible with the fourth economic stage. But what he did seem to recognize was that ‘free governments’, especially of the kind which had been confirmed by the English Revolution Settlement, now operated within a relatively sensitive political and economic environment. A number of points may be offered by way of illustration. First, it is interesting to note how often Smith referred to the constraints presented by the ‘confirmed habits and prejudices’ of people, and to the necessity of adjusting legislation to what ‘the interest, prejudices, and temper of the times would admit of’ (WN: IV.v.b.53). Second, Smith drew attention to the fact that the government itself was a complex instrument. In this connection Smith felt that the management of parliament through the distribution of offices was ‘a necessary feature of the British mixed government’ (WN: IV.vii.c.69); a point which is in turn linked to the fact that the pursuit of office was itself a ‘dazzling object of ambition’; a competitive game with as its object the attainment of ‘the great prizes which sometimes come from the wheel of the great state lottery of British politicks’ (WN: IV.vii.c.75). This point leads on to another which was greatly emphasized by Smith, namely that the same economic forces which had served to elevate the House of Commons to a superior degree of influence had also served to make it an important focal point for sectional interests. It is recognized in the Wealth of Nations that the landed, monied, manufacturing and mercantile groups all constitute special interests which could impinge on the working of

Adam Smith 115 government. Smith referred frequently to their ‘clamorous importunity’, and in speaking of the growth of monopoly pointed out that government policy ‘has so much increased the number of some particular tribes of them, that, like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature’ (WN: IV.ii.43; c.f. I.xi.p.10). Important as the role of government may be, Smith was clearly aware of the pressures operating upon an imperfect instrument, operating in an imperfect environment.

CONCLUSION Adam Smith came to be regarded as the ‘founding father’ (Rothbard 1995: 435; Rashid 1998: 140) of the discipline of political economy. If this was indeed the classical perception of Smith, then the results were to prove unfortunate, not least because the history of the subject was seen to date from 1776. Rothbard has claimed that Smith was believed ‘to have created the science of political economy, de novo’ (1995: 435). Donald Winch quotes an important passage from J.B. Say, a committed disciple, to the effect that: ‘whenever the Inquiry into the Wealth of Nations is perused with the attention it so well merits, it will be perceived that until the epoch of its publication, the science of political economy did not exist’ (Winch 1994: 103). Scant wonder that Dupont de Nemours, who edited Quesnay’s works under the significant title of Physiocratie (1767), should have been moved to protest: This idea that occurs to you to reject us, and which you do not hide well, my dear Say, does not do away with the fact that you are through the branch of Smith a grandson of Quesnay, a nephew of the great Turgot. (quoted in Winch 1994: 103) The perspective generated real problems. Hutchison has argued that ‘the losses and exclusions which ensued after 1776, with the subsequent transformation of the subject and the rise to dominance of the English classical orthodoxy were immense’ (1988: 370). One such loss was the Physiocratic concept of the ‘circular flow’ (to which Smith owed much). The use of the historical or institutional method was a further loss and so too was the concern (shared by Hume and Steuart) with structural unemployment and the model of primitive accumulation. In addition, the classical orthodoxy showed little interest in the problems presented by differential rates of growth in the context of international trade.

116 Skinner Ironically, the new orthodoxy also made it possible to think of economics as a discipline quite separate from ethics and jurisprudence, thus obscuring Smith’s true purpose. In referring to the way in which Smith organized his ‘system of social science’, Hutchison has observed, in a telling passage, that Smith was led as if by an Invisible Hand to promote an end which was no part of this original intention, that of ‘establishing political economy as a separate autonomous discipline’ (1988: 355). A.L. Macfie made a related point in observing that: ‘It is a paradox of history that the analytics of Book I, in which Smith took his own line, should have eclipsed the philosophical and historical methods in which he so revelled, and which showed his Scots character’ (1967: 21). In concluding his lecture of 1976, Black returned to the theme of Smith’s wider system. Many economists today are disenchanted about the prospects and results of economic growth, and many are likewise dubious or defensive about the long-vaunted idea of economics as a science, positive and value free. It is little wonder that such authors can find fresh interest in a system of thought which placed economic problems firmly in the context of ethics and jurisprudence and which was informed throughout by a concept of justice. This may well prove to be the aspect of Smith’s ideas which the next generation of economists will see as vital. (1976: 62) In the same year, but on the opposite side of the Atlantic, Eli Ginzberg made a related point: I hope that the bicentennial celebrations of the Wealth of Nations will impress those now entering upon the study of economics that Smith’s broad-scale historical, comparative, and institutional approach is more apposite to the present and the future than the narrow pre-occupations of the applied mathematicians who continue to dominate the subject. (1979: 36) Hopefully, Bob Black may be proved correct with regard to the incoming generations of economists. Historians do not have to repeat the errors of our contemporaries or predecessors, but do urgently need to find ways of persuading our colleagues, and through them our students that there are, as Winch suggests, valuable lessons to be learned from books about old times.

NOTE 1 I am indebted to Tony Brewer, Mark Blaug, Denis O’Brien, Donald Winch and the editors of this volume for their comments.

Adam Smith 117 AUTHORITIES References to Smith’s Works correspond to the usages of the Glasgow Edition (Oxford: OUP, 1976–83). The Theory of Moral Sentiments, D.D. Raphael and A.L. Macfie (eds) (1976) (TMS). The Wealth of Nations, R.H. Campbell, A.S. Skinner and W.B. Todd (eds) (1976) (WN). Essays on Philosophical Subjects, D.D. Raphael and A.S. Skinner (general eds) (1980); including the essays on Astronomy and the Imitative Arts. Correspondence of Adam Smith, E.C. Mossner and I.S. Ross (eds) (1977) (Corr.). Lectures on Jurisprudence, R.L. Meek, D.D. Raphael, P.G. Stein (eds) (1978) (LJA, LJB). Lectures on Rhetoric and Belle Lettres, J.C. Bryce (ed.) (1983) (LRBL).

7

The Wealth of Nations censored Early translations in Spain1 Pedro Schwartz

In 1777, barely one year after publication of The Wealth of Nations in Great Britain, the Crown Counsel of the Council of Castille, Count Pedro Rodríguez de Campomanes, was sent a translation of the passages on the Poor Laws of England in Book I of Smith’s great work, by the Reverend Father Geddes. Geddes was thereupon commissioned to embark on a full translation but his effort was soon abandoned as a result of a renewed wave of Inquisitorial zeal. The first part of this paper shows that this promising translation was never finished and that none of it reached the press. Attention then turns to the next incident in the tale of the Spanish translations of The Wealth of Nations. The Spanish Inquisitors solemnly condemned and banned a French translation of Smith’s work by Citizen Blavet, which had come over the Pyrenees clandestinely. Next comes a rather surprising twist in the story. Thanks to the protection of the then Prime Minister Prince Godoy, a Spanish translation of Condorcet’s Compendium, by Martinez de Irujo appeared in Madrid in 1792, apparently without examination by, or permission from, the Inquisition. This may have been possible because Adam Smith was never mentioned by name by the translator Irujo, but was referred throughout as ‘the Author’. The first full and quite faithful translation appeared in Valladolid in 1794, after careful vetting by the Royal Academy of History and the Holy Office of the Inquisition. It was the work of the publicist and diplomat José Alonso Ortiz. Prince Godoy was again material in getting this work over the hurdles, which makes one take a kinder view than usual of this rakish minister of King Carlos IV. This translation is examined in detail here, since both the excisions in the text and the footnotes by Alonso Ortiz are revealing of economic and political opinion in Spain just before French invasion in 1808. Under this garb, The Wealth of Nations circulated quite widely in the Spanish-speaking world. But this eventful and promising launch of Smith’s classic text did not come to much: the delicate plant of Spanish economics, which had flowered vigorously in the late eighteenth century, withered under the hot blast of the Peninsular War.

The Wealth of Nations censored 119 HOT FROM THE PRESS Our story then begins in 1777. At that time Don Pedro Rodriguez de Campomanes (1723– 1803) was Crown Counsel of the Royal Supreme Council of Castille and, as such, one of the top servants of the Bourbon king Carlos III, and one of the chief advisers of his government in matters economic. In fact, he was considered one of the most powerful men in the kingdom (Llombart 1992; De Castro 1996). Amongst his many other good works, Campomanes was a patron of the Scottish College in Valladolid, a seminary in which young Scottish Catholics were trained to become missionaries of the true faith among the Calvinists and Presbyterians of their native land. Documents contained in the Campomanes Archives indicate that the Rector of this college, the Reverend Father Juan Geddes (1735–99)2 felt very much in debt to Campomanes for the generous support he gave that establishment. The Campomanes Archives also contain several passages from The Wealth of Nations which the Crown Counsel may have asked him to translate. Thus among the papers of Campomanes we find a manuscript document titled ‘Record of the Laws of England, enacted since the end of the Sixteenth Century with the objective that each parish (as far as possible) provides for its paupers. Taken from the Treatise by Mr. Adam Smith on the causes and nature of The Wealth of Nations, Vol. I. B.I. ch.10; 170 et seqq.’ Since this manuscript is bound in a volume of documents all dated 1777 or earlier, it is reaonable to assume that it also dates from that same year. If this is correct, the promptness is remarkable: the information about Smith’s opinions on the poor laws reached one of the most important magistrates of the Spanish Crown not much more than one year after the publication in English. The practical nature of Geddes’s short translation should be noted. It is a Spanish version of a summary by Smith of the English regulations on poor relief, to be found in the chapter entitled, Of Wages & Profit in the different Employments of Labour & Stock’ (Glasgow Edn. vol.1, I.xiii). Geddes was translating for a politician who we know was engaged in research comparing the different methods used to deal with the poor in other European nations. The management of the destitute poor was a question of utmost importance in Spain after the grave disturbances of 1766 known as the ‘Esquilache Riots’, in which the beggars of Madrid had played an important part. Indeed, all the other documents bound in this volume refer to inhouse and outdoor poor relief. Among other letters from Geddes in the Campomanes Archives, there is one dated in Valladolid 25 April 1778. After announcing his forthcoming trip to Madrid, he wrote:

120 Schwartz I shall not therefore abandon the translation of this book: ‘On the Nature and Causes of the Wealth of Nations’: I will continue it here or elsewhere, while I remain in good health, obeying Your Grace unless you decide to entrust the work to another who could perform the task better and in less time. I have already translated several chapters, and I believe the book to be a worthy one: I am convinced that it will greatly please Your Excellency as its author has carefully observed the affairs of men: he has noted down their advances and their setbacks; their successes and their errors in agriculture, in crafts, in commerce, and in the management of both private and public Incomes: his observations seem to me to be correct; the conclusions he draws are very clear, and the rules he lays down are wellfounded and useful. I shall endeavour to make it intelligible for Your Excellency in Spanish; what is more, I shall do so with great pleasure; because I do it out of a desire to serve a person whom I respect and love.

In the same Archives seventy-five pages of manuscript are to be found under the following title: Inquiry/ into the nature and causes/ of the/ Wealth of Nations./ By Adam Smith Doctor of Laws,/ and Member of the Royal Society of Lon-/don, former Professor of Moral/ Philosophy at the University of Glas-/gow.

Unfortunately, Geddes only managed to translate five chapters of the first Book of Smith’s work, stopping just before the sixth, ‘Of the component parts of the price of commodities’. He did not finish his work, which is a pity since what he managed to translate was well done. It is possible that Geddes’s failure to complete the work was related to the meeting of the Inquisitors in Madrid in November 1778 when sentence was passed on Pablo de Olavide (1725–1803). The accused was formally excommunicated as a heretic and, on repenting there and then, was reconciled with the Church but ordered to be detained in a monastery at the pleasure of the Ecclesiastical Court. Some forty patrons, associates and friends of Olavide, among them, Campomanes, Jovellanos and Cabarrús had been asked to witness the ‘autillo de fe’. The fearful ceremony must have caused great dismay among those men since, one of the charges against Olavide was that he read and discussed forbidden books. It is likely that Olavide was no more than a scapegoat for his more powerful patrons, such as Campomanes, whom the inquisitors dared not tackle directly. Geddes was succeeded in the post of Rector of the College by Reverend Alexander Cameron. Among the letters Cameron wrote to Campomanes there is one dated in Valladolid 14 September 1785, where one may read:

The Wealth of Nations censored 121 Mr. Adam Smith does me the great honour of using me to send Your Excellency a copy of his work on the Inquiry into the nature and causes of the Wealth of Nations: a small gift which the wise and scholarly author wishes to bestow on Your Grace.

That must have been a copy of the third edition of The Wealth of Nations, published 20 November 1784. Unfortunately, the book inscribed by Adam Smith for Campomanes is nowhere to be found.

THE INQUISITION AND THE TRANSLATION OF THE WEALTH OF NATIONS Some twenty years ago, Dr Javier Lasarte published an article titled ‘Adam Smith before the Inquisition and the Academy of History’ which explained some of the obstacles faced by the students of Smith’s ideas in Spain (Lasarte 1976). In 1791 the Inquisition opened ‘Proceedings against the work of Mr. Smith entitled Recherches sur la nature et les causes de la richesse des Nations, in 2 volumes, printed in London 1788’, no doubt one of the editions of the translation by Blavet.3 The date of the proceedings by the Inquisition is to be noted. In the year 1791 the French Revolution had gone a long way towards destroying the institutions of the Ancien Régime and the governmental and religious authorities in Spain were concerned to control the diffusion of ideas which encouraged revolutionary fervour. All books coming from France were very carefully examined. Lasarte suggests that Smith’s book was reported because it came over the border from France and it was suspected that London was not the real place of publication. It was read by the inspectors Elizalde and Irigoyen, following the report of its importation by Inquisitorial Commissioner at Pamplona Larrumbe. Miguel de Elizalde, Inquisitorial Qualifier in Logroño, called for ‘the prohibition of the entire work, by which the Republic of Letters and the industry of the Nation would risk very little in my opinion’. Smith’s defence of usury struck him as ‘scandalous, false and antievangelical’:

And even … realising that in certain countries the interest on money is forbidden, he intends to refute this with the frivolous reasoning that, since something can be done with money everywhere, one must pay something for its use anywhere.

122 Schwartz How quickly the censor dismisses the principle of opportunity cost! He also thought Smith’s criticism of the Spanish and Portuguese colonization was ‘slanderous and utterly offensive’, especially the weight Smith put on ‘the sacrilegious thirst for gold’ to explain the subjugation of the indigenous peoples rather than the ‘pious intention to convert them to Christianity’. Politics also made an appearance in his condemnation: ‘He gives the honourable titles of hard-working and respectable author to the Marquis de Mirabeau, which in no way suit him, being as he is one of the most furious sponsors of the National Assembly of France’. As a result of this opinion, the Papal Inquisitors Against Heretic Wickedness and Apostasy enacted the decree of prohibition of 4 March 1792 against the following book:

The work titled Recherches sur la nature et les causes de la richesse des Nations, traduit de l’Anglois de Mr Smith, printed in London 1789, in two volumes, in 8o major. Its reading is forbidden because, by means of an insidious and obscure style, it promotes religious toleration and is inductive to naturalism.4

The much better known translation by Roucher is not the version condemned by the Inquisition.5 Neither is it the Compendium by the Marquis of Condorcet (1748–94), which, as we shall see, Martínez de Irujo was about to translate into Spanish in 1792.

CONDORCET’S ‘COMPENDIUM’ TRANSLATED BY MARTÍNEZ DE IRUJO Carlos Fernando Martínez de Irujo, Marquis de Casa Irujo (1763–1824), was a Spanish diplomat born in Washington who enjoyed the protection of Godoy, the favourite and prime minister of King Carlos IV. In 1792, without prior Inquisitorial censorship so far as we know, he managed to publish the following book: Compendio de la obra inglesa intitulada Riqueza de las Naciones, hecho por el marqués de Condorcet, y traducido al castellano con varias adiciones del original, don Cárlos Martinez de Irujo, Oficial de la primera Secretaría de Estado. Por Orden superior. Madrid: en la Imprenta real. MDCCXCII.6 This was a translation of the Summary written by Condorcet for the Bibliothèque de l’homme publique.7 Godoy boasted, in the exile of his later years, of having been an enlightened patron of the arts and sciences when he enjoyed the favour of King Carlos IV (1748–88, 1808–19) and Queen María Luisa. Whatever we may think of Godoy’s truthfulness in his memoirs, there seems to be no doubt that he made the publication of the translations by Casa Irujo and Alonso Ortiz possible.8

The Wealth of Nations censored 123 Even with the Royal Favourite’s protection a dose of cunning was in order. Irujo’s wish to appease the Inquisition can be seen in the ‘Preliminary Discourse of the Translator’.

It is a shame, truly [says Irujo], that the Author has tried at times to make improper applications of his theories, but though this indiscretion could deprive us of the treasures that it [The Wealth of Nations] contains, the compendium which we offer has all the advantages without those disadvantages.

Even more remarkable is that in his entire translation of Cordorcet’s compendium, Irujo never once mentioned the name of Adam Smith. He did not hide the fact that the abridged work was called ‘The Wealth of Nations’, nor did he conceal the name of the Marquis de Condorcet. But every time Condorcet said ‘Smith’, and he mentioned the name many times, the Spaniard wrote ‘the Author’.9 In his preface, Irujo encapsulated the spirit in which Cordorcet saw Smith’s work. The Wealth of Nations was a book of instructions for a prince or a ruler, as it were, a compendium of prescriptions for the better administration of the public economy: ‘Political economy is the architectonic hand which must direct the great work of public prosperity’ (x), said Irujo. Smith’s individualist economic philosophy is conspicuous by its absence. The Compendium, both in its French and Spanish versions, is especially disappointing from an analytic point of view. The preoccupation with conciseness may explain this lack of interest in theoretical questions, which is surprising in a mathematician of Cordorcet’s calibre. He summarized the chapters on price and value into only two pages. Those of us who have read and reread Smith’s words on natural price and market price are left very dissatisfied by the brief, confused lines which Irujo accurately translated:

In order to investigate diligently the principles that determine, or settle the exchange value, we must try to demonstrate. Firstly the real measure of this value, or rather, the effective price of all commodities. Lastly the variety of circumstances which cause these different parts to rise and fall from their ordinary level, sometimes together, sometimes separately: that is, the causes that sometimes alter the sales price [and] prevent the accidental value from being the same as the effective one. We will not follow the Author in the application of these different propositions, as it is necessary to read the original work, and perhaps reading it only once would not be sufficient for those who wish to understand them fully. (pp. 22–3)

124 Schwartz This is not, to say the least, very informative about Smith’s analysis of price. To Irujo’s credit, it must be said be said that the Spaniard did not change Condorcet’s neutral passage about usury, a delicate subject in Catholic Spain. Condorcet had written coldly, and Irujo translated: ‘The Author then speaks about usury, and argues that no law exists that can reduce the interest rate by one point below that which it generally maintained in the period in which this law was promulgated’ (p. 122). Apart from covering up Smith’s name, Irujo made only three important changes in his translation. The first has been pointed out by Dr Ernest Lluch. Irujo translated directly from Smith’s English the digression about the Bank of Amsterdam (WN, IV.iii.b) which Condorcet had left out. Irujo must have thought this digression would interest the Spanish reader, since the Banco de San Carlos, the predecessor of the Bank of Spain, had just been founded in 1782. The second change is the omission of various remarks of Codorcet’s on the Catholic clergy (pp. 80–6, Volume III of the Bibliothèque). Finally, the third change is an addition to a summary by Condorcet of Smith’s argument for free trade. Condorcet had written: ‘Is it not obvious that each individual … can judge better than the statesman … the type of industry that offers the probability of the highest profits on his capital?’ To this Irujo added:

This reflection might be accurate in an enlightened country where individuals generally know the most profitable use for their money; but there are other countries where the capitalists need the Government to lead them, so as to speak, by the hand, so that they activate their funds. (p. 169)

This sort of comment was to be typical of most Spanish authors who studied The Wealth of Nations.

THE FULL TRANSLATION BY JOSÉ ALONSO ORTIZ In 1794, the following book appeared, whose title I translate into English:

ENQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS. A work written by Adam Smith, Doctor in Law, and Member of the Royal Society of London and Edinburgh; Commissioner of the Royal Treasury of Scotland: and Professor of Moral Philosophy in the University of Glasgow. Translated into Spanish by the licentiate Josef Alonso Ortiz, with various Notes & Illustrations related to Spain … In Valladolid: In the office of the Widow and Sons of Santander. MDCCXCIV10

The Wealth of Nations censored 125 The translation was preceded by a dedication ‘To his Excellency Señor Don Manuel Godoy … Duke of la Alcudia, First Class Grandee of Spain: Gentleman-in-waiting to H.M. …’. It is quite clear who patronised the translation of this contentious work.

Your Grace, moved by an active desire to spread the most solid ideas of civil economy throughout the Nation, so that they help and facilitate the beneficient intentions of H.M. concerning the prosperity of his Subjects, did not hesitate in giving his authority …

José Alonso Ortiz y Rojo (1755–1815) became an accomplished diplomat whose years in the service of the king abroad were preceded by a long period as a translator and publicist (Schwartz and Marugán 1999: n. 14). Born in 1755 in the city of Granada, to Francisco Alonso and Cipriana Rojo, he studied at the Sacro Monte College in Granada and subsequently at the University of Granada where he graduated in theology. In 1788 he obtained the degree of Bachelor in Civil Law and taught this subject in that university. After the pupilage in Chambers and the required examinations, he was called to the bar at the Royal Chancery of Valladolid. At this time he began the literary period of his life. He translated, from English into Spanish, MacPherson’s Ossian poems, Pierre Joseph d’Orleans’s History of the Revolutions of England, and Albany Butler’s Lives of Saints as well as the latter’s book about Catholic festivals and ceremonies. In 1794 he published the translation of The Wealth of Nations and two years later a most interesting Essay on Paper Money.11 In 1795, the then Treasury Minister, Diego María de Gardoqui (1735–98), commissioned him to write a summary of the commercial legislation in Europe, which he finished but which was never published. When Gardoqui left the Ministry in 1797 and was appointed Spanish Ambassador to Piedmont, he asked Alonso Ortiz to come to Turin. Thus, Alonso Ortiz started a new life as a diplomat. On Gardoqui’s unexpected death, he stayed on as chargé d’affaires, but had to close the Embassy when Piedmont was annexed by France. Alonso Ortiz took papers and chattel to the Embassy in Paris and returned to Madrid, where he spent three miserable years waiting for a new appointment. Finally, in 1803, he became Consul in Algiers. When in 1808 Bonaparte placed his brother Joseph on the Spanish throne, Alonso Ortiz threw in his lot with Fernando VII and the patriotic cause. The Supreme Central Junta opposed to the French rewarded him with the Consulate General in London, a post he held until his death in 1815. Described by his superiors as a ‘successful and able’ diplomat, he had completely forgotten his literary zeal, apart from when he listed his merits to the government to ask for a decoration. He died unmarried and left an illegitimate daughter.

126 Schwartz CENSORSHIP OF ALONSO’S MANUSCRIPT As Dr Lasarte has noted, at the beginning of 1793 and with the translation still unfinished, Ortiz asked the Council of Castille for permission to print the first volume of his translation of The Wealth of Nations (Lasarte 1976: Sections VII to XII). This seems to have been a ploy to get clearance before the Inquisition intervened. He wrote to the Council justifying its publication by pointing out that the work had been accepted by the rest of the nations of Europe and that it could bring great benefits to Spain, where it had not been translated.12 The Council passed the volumes to the Royal Academy of History for a report. Academician Reverend José Banquieri, a friend of Godoy’s according to Lasarte, was the rapporteur of the committee of three set up to examine the work. Banquieri suggested some corrections of style, and proposed changes to avoid anything opposed ‘to the dogmas of our Holy Religion, good morals and healthy politics’. In his report, Banquieri regretted Smith’s failure to distinguish between moderate, useful wealth and excessive, harmful wealth. He objected to the phrase where Smith talks about the ‘lewd eagerness of the beautiful sex’ and censured the Scotsman for limiting the reasons for joining the army to love of adventure and search of fortune. He proposed omitting six paragraphs on the policy of Europe concerning education and was scandalized by the passages on the effect of pious foundations for the education of the clergy on the social standing of that calling. Finally he congratulated Alonso Ortiz for omitting everything recommending the education of youth in the maxims of religious tolerance (in reality, he is referring to the section V.i.g., about the religious education of ‘people of all ages’). In conclusion, he said, he asked for these small changes ‘so that this translation can be published in Spain without the remotest risk of being banned, and so that the great benefit its repeated and careful perusal could afford the Nation be not lost’. Alonso Ortiz did not neglect the Inquisition for all that. Lasarte tells us about a daring manoeuvre by Ortiz in February 1793. Just before Banquieri had issued his opinion in March, Ortiz asked the Inquisition to inform the Royal Academy of History that the total banning of the French translation of The Wealth of Nations, which we now know was by Blavet, should be no barrier to the publication of his translation, as he, Alonso Ortiz, had purged it of everything that might favour ‘religious toleration, so that the translation is cleansed of all that might induce an error or a relaxation of religious or moral matters’.13 The Holy Office did nothing until it received the manuscript translation. At that point, it sent the text to a Friar Tomás Muñoz de San Vicente, ‘so that, in the company of another clergyman to his satisfaction, he might see in the shortest possible time if it is expunged of the mistakes that were found in the prohibited version’. The only objectionable point the qualifier found was the distinction between ‘licit’ and ‘illicit’ usury which Alonso Ortiz had introduced into the translation. Friar Tomás felt that the joining of the word ‘usury’ with the

The Wealth of Nations censored 127 adjective ‘licit’ was against Catholic doctrine. With this small pentimento, the way was finally clear.

THE WEALTH OF NATIONS IN SPANISH The translation of The Wealth of Nations came out in 1794 in Valladolid, where Alonso Ortiz practised law. He preceded it with a note titled ‘The Translator’, where he began by separating the study ‘of Religious and Moral Interest’, the matter of the sublime sciences; from that dealing ‘with purely civil matters’, the object of Political Economy. He goes on to name various Spaniards who ‘illustrated the subject matter with their superior lights, managing to banish many foolish prejudices’: Sancho de Moncada, Ulloa, Alvarez de Osorio, Martinez de la Mata, Navarrete, Bernardo Ward. However, Alonso Ortiz finds that:

they did not apply to the subject a scientific method, a general system … ; they did not come to treat it as a true Science, that is to say, they did not lay down a basis of elementary principles before going to the particulars so as to show effects of their real causes.

Alonso Ortiz then correctly gave an outline of the biography of Adam Smith, but went on to give 1775 as the date of the first edition of Wealth of Nations, when it was, in fact, 1776. He proceeded to say that Smith ‘made additions in 1783 and 1784’: in reality, the second edition was published in 1778 with some changes; in 1784 he produced a supplement of ‘Additions and Corrections’, as well as the third edition. Alonso used the eighth edition, that of 1789, for his translation. He then made some comments about the special vocabulary that economists use, no doubt irked by the remarks on style of the Royal Academy of History.

The structure of his language [he says of Smith] is more that of an elementary author who wishes to demonstrate starting from principles, rather than that of a Writer who tries to persuade through elegance: hence he uses terms and expressions that might be called professional, without worrying so much about the purity of his language, as making himself clearly understood.

Alonso Ortiz added that, as in all sciences, ‘not only is there a specific jargon, as it were, for each discipline, but certain points cannot be expressed without these technical phrases’. To make things easier, he warned

128 Schwartz in certain things specific to Great Britain, to France, or to other countries, I thought it useful to add some marginal notes on what in those cases I found special to Spain, so that the reader might be able to apply the general rules to the country in which he lives.

Finally, he said that he had omitted some very few details, ‘either because they are absolutely irrelevant to our nation, or because they are not in keeping with the Holy Religion which we profess, protesting candidly that, once removed, they make no difference to the fundamentals of the work’. Sometimes, where he disagrees with Smith’s ideas, he adds a footnote. Following suggestions of the censors, he omitted an important and lengthy section on religious education. He also included a number of explanatory notes on coins, weights and measures. But, on the whole, the translation is faithful and elegant.

ECONOMIC ANALYSIS, IN PARTICULAR ON MONEY AND BANKS The translator of a work like The Wealth of Nations must show some economic accumen. Indeed Alonso Ortiz did show an instinct for economics. Thus, in a footnote he explains that:

throughout the work, public market should be understood to mean that great theatre of transaction, exchange, purchase and sale that all the nations of the world, or all the individuals of each nation, make up. (Vol. I, 94 [I.vii.81])14

Likewise, commenting on the importance of the expression ‘effective demand’, he notes that:

This expression should be borne in mind, as it comes up at each stage of this work’s argument; perhaps there is no other expression which is more vigorous or which explains all of its meaning in so few words. (Vol. I, 94 [I.vii.8])

There is not much else remarkable in the part on the theory of value. Only when we move on to monetary questions does his economic mind really shine through. As I said, two years after publication of his translation of The Wealth of Nations, Alonso Ortiz published an Essay on Paper Money. In that work, Alonso showed that he had

The Wealth of Nations censored 129 learnt from Smith the effect of the quantity of money on prices and the repercussions of excessive issue of paper money on its value. However, he did not quite take in the importance of Smith’s insistence on full and immediate convertibility for avoiding inflation. He thought public confidence in this currency could be sustained by the setting up of a fund of coin and bullion for its eventual withdrawal. From his Essay on Paper Money, it is clear that in this regard Ortiz’s mistakes seem to be mainly due to a misunderstanding of Smith’s famous metaphor of ‘the channels of circulation’, which Ortiz interpreted as meaning that there could be no over-issue, as long as some silver coin remained in the country. In his translation, Alonso Ortiz anticipates some of the arguments of his Essay when he comments, in a footnote to Book II, ch. ii, that the value of the ‘vales reales’, the interest bearing paper money issued by the Spanish Treasury in the third quarter of the eighteenth century, ‘depends on the confidence that the public bestows in these funds’; and he adds that such confidence would increase if

banishing the obsolete concern that only gold and silver can be used as valid instruments of trade, … this chapter’s doctrine be borne in mind, in which the Author has poured all that can be wished for a thorough education in this matter. (Vol. II, 30 [II. ii.27])

Even more important is the ‘Appendix on the Spanish National Bank of San Carlos, established in the court of Madrid’, placed at the end of the ‘Digression concerning Banks of Deposit, particularly concerning that of Amsterdam in Smith’s treatise. Alonso Ortiz there briefly describes the setting up of the Banco de San Carlos and its initial commitment to three ends: (i) the conversion to cash and cancellation of the ‘vales reales’, as well as the issuing of bank notes; (ii) the monopoly of the export of silver and official payments abroad; and (iii) the supply of munitions, rations and uniforms to the Spanish army and navy. He then deals with the Bank’s crisis in 1790. For this, he does not blame the Bank’s directors in so far as the government did not pay the military supplies. But he does blame it for the irregularities at the Cadiz Branch, for the excessive loans against the security of its own shares, and for the purchase of French debt and shares. He mentions no names, especially not that of Count of Cabarrús, who was still in prison awaiting trial. In general, the Appendix shows that its author was very well-informed about the Bank’s affairs and about financial matters generally (Vol. II, 352–91). There are however, examples of analytical mistakes in Alonso Ortiz’s footnotes. He makes repeated mistakes on the matter of the incidence of taxation. Thus, he thinks that a land tax

130 Schwartz will always be shifted to the tenant (Vol. IV, 224–5 [V.ii.e.9]); likewise, that a house tax will always have to be paid by the tenant (Vol. IV, 230 [V.ii.e.20]).

MATTERS OF ECONOMIC HISTORY Alonso Ortiz’s footnotes where he brings examples from Spanish history are excellent. For example, there is a long and most instructive footnote on the pieces cut per ingot and the alloy fineness of Spanish coins (Vol. I, 68–70 [I.v.30–31]). When Adam Smith digresses on the price of silver, Alonso Ortiz adds a ‘Table of the prices … of wheat, and of barley in the land of Castille’ between 1685 and 1787; and also a conversion into Spanish currency of the wheat prices in the United Kingdom given by Adam Smith. Alonso Ortiz adds a ‘Report on the legal maximum prices of wheat and barley prices in Spain from the Reign of Alfonso the Wise’, that is to say, from 1350 until corn prices were freed in 1765 (by the intercession of Campomanes, earlier and more successfully than by Turgot). His historical references concerning taxes are especially numerous and detailed.15 Thus, in a long footnote appended to the passage where Smith criticizes sales taxes and quotes the Spanish economist Gerónymo de Uztáriz (1670–1732) on the ‘alcavala’, Alonso goes into the history of this tax and mentions the opinions of several local authors who agree in considering the tax harmful. But Alonso Ortiz disagrees with Smith and joins with the writers of the previous century, Diego Saavedra Fajardo (1584–1648), and Father Juan de Mariana (1536– 1625), in arguing that ‘the defect is not in the tax, but in the causes which diminish the ability of the Taxpayers’ to pay. The proof, he adds, is that, when, without removing the sales tax, ‘the obstacles that the Monopoly of Seville and Cadiz had placed on Trade [with the Indies] were lifted, … and despite the Sales Taxes, that trade flourished’ (Vol. IV, 334–9 [V.ii.k.67]).

REGARDING RELIGION The translator had had to face both civil and religious censors, and this is reflected in the translation. Adam Smith ended his argument on the benefits of education for the common people with the following sentence: In free countries, where the safety of governments depends so much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously concerning it.

The Wealth of Nations censored 131 Alonso Ortiz translated thus: the people, if they have been well instructed, are ‘always more prepared not to violate ignorantly and hastily the wise maxims of a Government. All these advantages and many more invariably follow from the principles of a good education’ (Vol. IV, 169 [end of V.i.f.61]). More revealing is the excision of the section where Adam Smith wrote of ‘the institutions for the instruction of people of all ages … chiefly those for religious instruction’. Smith there began by quoting Machiavelli in his statement that in Catholic countries only monks and poor parish priests keep up the spirit of devotion, while the great dignitaries of the Church rarely bother to teach the people. Later he differed from Hume, ‘the most illustrious philosopher and historian of the present age’, who explained the need for the state to protect a religion to avoid the emulation of fanatic sects. Smith applied his characteristic analysis: provided those sects were sufficiently numerous, and each of them consequently too small to disturb the public tranquillity, the excessive zeal of each one for its particular tenets could not well be productive of any very hurtful effects, but, on the contrary, of several good ones: and if the government was perfectly decided both to let them all alone, and to oblige them all to let alone one another, there is little danger that they would not of their own accord subdivide themselves fast enough, so as to become sufficiently numerous. Alonso understandably omitted the twenty-five pages concerned from Chapter 1 of Book V.

THE CONTENTIOUS QUESTION OF USURY The contortions of the translator to stay within the bounds of orthodoxy are particularly noticeable in relation to the doctrine concerning usury. By the time Alonso Ortiz wrote charging interest had become accepted. In fact the king paid interest on his ‘vales reales’ or treasury notes; and in the world of business discounting bills and lending on mortgages were common. The Church and public opinion still condemned ‘usury’, by which was meant excessive interest charged. Smith was describing generally accepted behaviour, especially when he argued for a maximum rate fixed by law. For this reason the Spaniard draws a distinction between usury and interest. In a footnote he commented on the Castillian law regarding usury: we are not dealing with lucrative usury, generally known by the generic term ‘usury’, prohibited as illicit under the laws of all countries … but with the usury that is called compensative, or commercial interest on money or profits. … Under a different heading

132 Schwartz comes the 6 per cent interest that the craftsman or the artisan are allowed to charge for delay in the payment for their work … since this is rather a kind of punitive usury. (Vol. I, 147–9 [I.ix.5]) Later he returns repeatedly to the same distinction, but perhaps the most revealing passage is one (143 [II.iv.14]) in which he changes Smith’s text as follows: instead of writing ‘in the countries where interest is permitted’, he changes the text to, ‘in the countries in which interest is permitted in certain cases, such as in Spain (2) … ’. Footnote (2) explains yet again what is meant by ‘Interest, or licit usury, the rate of which is fixed by law.’

FOR KING AND COUNTRY Declarations of respect for Carlos III and of loyalty to Carlos IV abound.16 He also has many expressions of patriotism. Thus, when Adam Smith explains in [I.x.b.30] that young men answer the call to arms in the hope of advancement and fortune, despite the low probability of attaining them. Alonso Ortiz footnotes:

that the proposed objective of young men who enlist for a new war is preferment, honours and distinction which may never occur … is a proposition that instances the Author’s contention, that in chance ventures and in business ventures it is very common to disregard danger and the misfortune of the many and to dwell on the success of the few: but if this is to be understood universally, then this is entirely false. … In all these cases and in many others, there is at work, not so much a premeditated end of promotions and military honours, as a temperament and a generosity of spirit, aroused by universal excitement, which lead not so much to the overlooking of risk as to the scorning of danger. (Vol. I, 183–4)

Alonso Ortiz’s arguments are not worthless, if one observes the effect of religion, patriotism and honour on soldiers in a war, and the author of The Theory of Moral Sentiments would have understood these remarks. Equally, where Adam Smith emphasizes the need to do away with regulations on where the poor can settle, Alonso Ortiz comments:

We have none of these imprudent regulations in Spain, where the Government, being more favourable to the legitimate freedom of its citizens, allows all its subjects,

The Wealth of Nations censored 133 irrespective of their position or status, to live in the Province, City, Town or Parish which best conforms to their means of earning a livelihood, and that of their families. (Vol. I, 243 [I.x.c.55])

In another passionate footnote, he rejected Smith’s assertion that the conquest of the Indies was nothing other than the result of a project to discover gold and silver mines, which in any case was more successful than the same attempts in the East Indies (Vol. III, 131–4 [IV.vii.b.21]).17

FOREIGN TRADE Like other students of Adam Smith in Spain, Alonso Ortiz was willing to accept his doctrine on nearly all points except those referring to free trade. He was ready to contradict Smith in defence of high tariffs against foreign manufactured goods: ‘these high taxes are essential for the encouragement of National Industry: and to compensate for the same taxes by foreign Nations’ (Vol. I, 222 [I.x.c.25]). And like so many later European and North American authors, Ortiz put forward the flawed infant industry argument in a long footnote. Import restrictions are acceptable for:

a country whose decline demands a general encouragement of all its industry, and severally of each of its branches; and in these circumstances its restoration appears impossible while there is, as in fact is the case, a competitive advantage for foreign industry; since the latter will continuously send in its better and cheaper manufactures: the wealth of foreigners will steadily increase; and, for the same reason, National Industry will steadily decrease. (Vol. II, 290–1 [IV.ii.3])

Where Adam Smith states his trust in the ability of undertakers to find the best placing for their investments without government interference, Alonso Ortiz adds a long footnote:

this inclination may become useless for lack of outside stimuli. … The vigour and spirit which encourages it is very different from a natural tendency, as it largely depends on outside causes, such as statutes and regulations protecting it against a foreign monopoly. … It is true that there are some articles in which nature itself gives an advantage, … but it is no less true that even these articles cannot flourish without the help and encouragement of laws that restrict, or widen the domestic or the foreign market. …

134 Schwartz Undoubtedly, the most appropriate situation for the industry is the privilege of an exclusive market, at least for some time, and until national industry reaches the same competitive level as foreign industry. (Vol. II, 299–300 [IV.ii.14])

He is not even convinced by the argument of the absurdity of growing grapes in Scotland behind a protective wall: Alonso Ortiz claims that it is unfair to conclude that all regulations on trade are unsuitable from this extreme case (Vol. II, 301 [IV.ii.15]). ‘All this free trade is advantageous when it does not positively hinder domestic industry’s progress in a backward country’ (Vol. III, 17 [IV.iii.c.14]). On page 298 of volume II, Ortiz held that the duties placed on imported manufactured goods by mercantile nations were justified if they were charged ‘to encourage domestic industry; or to retaliate for the charges made by certain States on the commodities of other Nations; to be lifted only for reasons of reciprocity; or to favour one’s own National merchandise’ ([IV.ix.20]). Here are all the platitudes for protectionism, including the mistaken argument of reciprocity. The only part that would have been acceptable to Smith would have been compensating exporters for internal levies.

LAISSEZ-FAIRE IN EDUCATION Alonso Ortiz is thus not a natural proponent of free trade. He also feels unable to support Smith’s arguments with regard to education, and the latter’s sarcastic irony leaves him cold. This is clear in the long footnote about Smith’s proposal that university teachers’ fees should be paid for by their own students; and again in the remark that, if teachers receive a fixed salary, they will become lazy or will use most of their time for their own ends. Adam Smith himself had suffered the system of fixed salaries at Oxford University, where ‘the greater part of the publick professors have, for these years, given up even the pretence of teaching’; and when he was professor at Glasgow University, he received direct payment from the students. Alonso Ortiz admits that ‘the Author’s mode of thinking on this point is quite wise, justified and in keeping with experience’. But he puts forward various arguments against Smith’s. The first is that the number of teachers is too small for there to be true competition (a static argument); second, that teachers would have to locate at a great distance from each other for fear of not attracting students (as if silversmiths and tailors did not try to attract more customers precisely by grouping themselves together in one street); third, that the pupils and their parents would have to choose the nearest teacher instead of the best (a repetition of the mistaken argument that competition would necessarily worsen quality); and (thinking that competition raises prices) ‘above all that making education expensive for Youth would be the

The Wealth of Nations censored 135 maxim most contrary to all humanity, and to all political reason’ (Vol. IV, 118–22 [V.i.f.7]). Where Adam Smith remarked that fencing and dancing, like ‘those parts of education … for the teaching of which there are no publick institutions, are generally the best taught’, Alonso Ortiz rather lamely argues in reply that, ‘the easiest and most entertaining parts of those branches of education attract the youth more strongly to their schools’ (Vol. IV, 128 [V.i.f.16]).

OTHER OBSTACLES TO A FREE MARKET It should not be concluded from these illiberal remarks that the translator was completely against the removal of obstacles to economic freedom. Alonso Ortiz, in keeping with the policies enacted by the ministers during the reign of King Carlos IV, declared himself against the guilds, against the Mesta (the powerful merino guild) and in favour of opening all ports of the Spanish Peninsula to trade with the Indies. Thus, he stated that the associations to protect widows and orphans should be watched, as they might hide guild activity (Vol. I, 224 [I.x.c.29]). Also, in various footnotes, he appealed to Adam Smith to argue that an excessive development of the merino industry under government protection at the expense of agriculture was a return to primitive modes of production (Vol. I, 385–91 [I.xi.1.2]); he criticized measures taken against grain wholesalers (Vol. III, 79–81 [IV.v.b.27]); and he expressed admiration for the reforms instigated by Campomanes, whereby all the subjects of the Spanish Crown in the Peninsula had been allowed to trade with the Indies, a privilege previously limited to Castillians. Rather than shipping being organized in convoys, single boats could ply their trade from all ports in Spain. ‘Since the glorious reign of Carlos III’, he concluded, ‘everything has improved.’

NAPOLEON MORE DESTRUCTIVE THAN THE INQUISITION It is an indication of the vigour of economic inquiry in Spain in the second half of the eighteenth century that in 1777, a little more than a year after the publication of The Wealth of Nations, one of the Crown’s more powerful ministers used passages from Smith’s text in a report on Poor Laws in Europe. Count Campomanes, ‘an energetic minister’, then commissioned a full translation but unfortunately the prosecution and conviction of one of his aides by the Holy Office for reading and spreading forbidden books seems to have counselled caution and put an end to this effort. Indeed the Inquisition immediately seized,

136 Schwartz and condemned in no uncertain terms, a French translation of The Wealth of Nations by Blavet, which had been smuggled over the Pyrenees. Spain had to wait until 1792 before Condorcet’s Compendium of Smith’s work appeared in a translation by the young diplomat Martinez de Irujo. This was thanks to the protection of Prime Minister Godoy and may have been helped by the fact that Irujo never once mentioned Smith’s name in his translation. Finally in 1794 a full translation appeared of The Wealth of Nations by Jose Alonso Ortiz, a publicist in the service of the Spanish Treasury and later a diplomat who ended his career in London. This translation was vetted and censored by the Royal Academy of History and by the Holy Office of the Inquisition, but again with the help of Prime Minister Godoy it finally saw the light. A detailed examination of the first complete translation of The Wealth of Nations into Spanish leaves one quite impressed. The text was cut as suggested by the censors and at times was accompanied by vexatious footnotes. But on the whole Alonso Ortiz was accurate and the general availability of such a treatise would have helped to relaunch Spanish economics on the path of theoretical progress, if the French invasion and the Peninsular war had not intervened. A detailed study of Spanish economists influenced by Adam Smith, which we must leave for another occasion, seems to back this suggestion that foreign invasion and civil war may have nipped the promise of scientific progress in the bud.

NOTES 1 A first version of this chapter was read to the ‘1991 Conference on the History of Spanish Economic Thought’ in Saragossa. A Spanish version has appeared in vol. IV of El pensamiento económico español en los últimos diez siglos, E. Fuentes Quintana (ed.), Economía y Economistas Españoles, Barcelona, 2000. This chapter tries to bring together the results of studies such as Robert Sydney Smith’s ‘The Wealth of Nations in Spain & Hispanic America, 1780–1830’ (1957); Javier Lasarte’s ‘Adam Smith before the Inquisition and the Academy of History’ (1976); and the forthcoming paper by Luis Perdices Blas, ‘La Riqueza de las Naciones y los economistas españoles’, in E. Fuentes Quintana (2000). 2 In the Glasgow edition of the Correspondence of Adam Smith there is one mention of Geddes. The editors Mossner and Ross refer to a certain ‘John Geddes (1735–99), Roman Catholic bishop: educ. Scottish College in Rome; Superior of Scalan 1762–7, of the Semple College in Spain 1770–9; Coadjutor of the Scottish Lowlands with the title of bishop of Morocco 1779–97; published a life of St. Margaret, Queen of Scotland and an essay against duelling’. On Campomanes, see Llombart (1992) and Concepción de Castro (1996).

The Wealth of Nations censored 137 3 This is first French version of The Wealth of Nations by Citizen Blavet first published in 1779–80. I have seen a later revised edition of 1800. Another translation by Roucher, of which more below, is better known. Blavet states in the foreword of his 1800 edition that he had done it for his personal use and in full knowledge of the many mistakes which it contained due to his ‘small knowledge of the science of economies’. He gave it to M. Ameilhan to read, who, without his permission, published it in the Journal de l’Agriculture, des Arts et du Commerce, from January 1779 to December 1780. That publication in serial form was reprinted by Yverdun, with even more mistakes than before, in six small volumes and later with yet more mistakes in 1788 in Paris by Duplain, in two volumes. I imagine the London version investigated by the Inquisition is a reprinted pirated copy of Duplain’s version, though I have found no trace of it in the British Library (Facarello 1991a: 28, n. 17). 4 See the texts of the different censors, including those of the Royal Academy of History about Alonso Ortiz, in the appendix of Lasarte’s article (1976: 69–127). Despite the Inquisition’s anathema against the first French translation of The Wealth of Nations, number 260 of the newspaper Espíritu de los mejores diarios que se publican en Europa, dated 22 November 1790, included a review published in Paris of the second French translation by Roucher. 5 The translation by J.A. Roucher (1745–1794) was titled: Recherches sur la nature et les causes de la richesse des nations, traduites de l’anglais de M. Smith, sur la quatrième édition, par M. Roucher, et suivies d’un volume de notes par M. le Marquis de Condorcet (four volumes, Buisson, Paris, 1790– 1). Condorcet’s volume of footnotes was apparently never published. (Facarello 1991b: 46, n. 16.); or perhaps Condorcet decided to turn this volume of notes into a précis or Compendium. Blavet had this to say of Roucher’s translation: ‘Ce que le libraire Buisson nous a donné à Paris en 1790, pour une traduction de Smith, par Roucher, n’est pas et ne pouvais pas en être une. Roucher ne savait pas l’anglais, et il est impossible de traduire un auteur dont on n’entend pas la langue. Ce n’est qu’un travestissement de la mienne qu’il avait toujours sur sa table, excepté dans les additions qui ne s’y trouvèrent point, parceque je l’avais faite sur la première traduction anglaise.’ 6 The Compendio was reprinted in 1803 and in 1814 (Lluch 1989). 7 Bibliothèque de l’homme publique ou analyse raisonnée des principaux ouvrages françois et étranger sur la Politique en général, la Légisation, les Finances, la Police, l’Agriculture, & le Commerce en particulier, & sur le Droit naturel et publique. Par M. le Marquis de Condorcet, M. de Peysonel,…; M. le Chapelier. A Paris, chez Buisson, Libraire, Hôtel de Coetlosquet, rue HauteFeuille, No. 20. 1790; in six volumes. In these volumes, summaries of the works of Aristotle, Bodin, Sully, Machiavelli, Hume, Locke, Plato, Bacon and many other authors appear. The summary of Books I to III of The Wealth of Nations are in Volume III of the Bibliothèque, pp. 108–216; and Books IV and V in Volume IV, pp. 3–115. 8 See Cuenta dada de su vida politica por Manuel Godoy, Príncipe de la Paz; ó sean Memorias Críticas y Apologéticas para la historia del Señor D. Carlos IV de Borbon, vol. II, Madrid, 1836. Chapter XLI, ‘Del espíritu, carácter y direccion interior del gobierno durante el tiempo en que me hallé á la cabeza

138 Schwartz como primer ministro’. On pp. 193 et seqq. There is an abundant catalogue of writings related to ‘The science of political economy’ which the Favourite claims to have helped in publishing, ‘many at the government’s expense or with the government’s help’: The first two in the list are The Wealth of Nations translated by Ortiz and the Political & Economic Discourses by David Hume. 9 As Lluch (1989) has pointed out, it is interesting that Irujo does not consider Condorcet’s name dangerous, despite the latter’s Avis aux espagnols, published precisely in 1792. 10 INVESTIGACION/ DE LA NATURALEZA/ Y CAUSAS/ DE LA/ RIQUEZA DE LAS NACIONES./ Obra escrita en Inglés por Adam Smith, Doctor en Leyes,/ é Individuo de la Real Sociedad de Londres y Edimburgo/ Comisario de la Real Hacienda de Escocia: y Profesor/ de Filosofía Moral en la Universidad/ de Glasgow./ La traduce al Castellano el Lic. D.Josef Alonso Ortiz,/ con varias Notas é Ilustraciones relativas a España,…/ En Valladolid: En la oficina de la Viuda é Hijos de Santander./Año de MDCCXCIV. 11 Ensayo económico sobre el sistema de la moneda-papel: y sobre el crédito público. Se escribía contra algunas preocupaciones vulgares por don Joseph Alonso Ortiz. Imprenta Real. Madrid, 1796. Republished as edited by P. Schwartz in Schwartz and Marugan 1999. 12 Lasarte (1976: 40): Archivo Histórico Nacional, Consejos, leg. no. 5,559, exp.64. 13 Lasarte (1976: 106) AHN, Inquisición, leg. 4,484., exp.13. 14 14 The page reference is to the Spanish translation, and the reference in square brackets to the Glasgow edition. 15 He mentions the difficulties in taxing returns to capital with a single tax of the kind proposed in the earlier part of the century and backs his doubts with the opinions of past Spanish economists such as Zabala y Auñón, and Martín de Loynaz. (Vol. IV, pp. 235–6 [V.ii.f.7]). He recalls these writers’ criticisms of poll taxes in Spain. (Vol. IV, pp. 273–4 [V.ii.j.5]). When Smith writes about taxes on basic consumer goods, Ortiz gives details of all Spanish consumer taxes, Servicio de Millones, Rentas Provinciales, Alcabalas, Cientos and Quarto de Fiel Medidor; as well as of the failure of an attempted income tax, the tax on Frutos Civiles (Vol. IV, pp. 284–7 [V.ii.k.10]). 16 One of the many examples of Alonso Ortiz’s monarchism is the footnote in which he highlights the wisdom of the Spanish kings in granting exclusive privileges to very few trading companies. But then he goes on to note the problems faced by the Real Compañía de Filipinas (Vol. IV, pp.106–8 [V.i.e.30]). 17 See also a footnote that emphasizes Spain’s qualities in relation to foreign trade when Smith talks about England’s merits in this regard (Vol. II, p. 242 [III.iv.20]).

Part IV

Jevons, Gossen and Shadwell

8

The Jevonian revolution re-appraised Margaret Schabas

I take this occasion to honour Professor Black for his invaluable contributions to our scholarship on William Stanley Jevons (1835–82). Not only did he meticulously compile and edit many of Jevons’s papers and letters, but he has also provided us with numerous essays on the man, his life and contributions. Many of these also addressed Jevons’s place within the intellectual community of mid-Victorian England, starting with Jevons’s rapport with John Elliott Cairnes (Black 1960b). Later studies linked Jevons to Jeremy Bentham, Augustus De Morgan, John Stuart Mill and Alfred Marshall, among others. One recent publication outlines Jevons’s pedagogical efforts at Owens College and University College London (Black 1993). No other scholar has written as much on Jevons, or done as much to help us understand the half century of economic thought and policy that ran from Mill to Marshall. Jevons is most often studied as part of the so-called Marginal Revolution, a rubric which Professor Black has been hesitant to endorse. In his view, the new ideas that Jevons helped to launch took hold over such a long period of time that the label of a revolution is in this sense a ‘misnomer’ (Black 1971c: 10). He does accept, however, that Jevons helped to bring about a ‘fundamental reconstruction’ in economic theory (Black 1972d: 365). Moreover, ‘to say that there was no sudden revolution is not to say that there was no revolution at all’ (Black 1995: 196). This took the form of a shift from macroeconomic issues to microeconomics, to an emphasis on behavioural assumptions, to the recognition of the need for subdisciplines and, above all, to the application of mathematical tools. Jevons was ‘a transitional figure between the classical and neoclassical theorists’ (Black 1995: 178), and thus offers a glimpse into those fundamental changes that did eventually come to pass. I do not wish to quibble with the temporal dimension of the shift from classical to neoclassical economics. Historians have found the label ‘The Copernican Revolution’ extremely helpful since the early nineteenth century, yet no one disputes the fact that the main idea of a heliocentric system took over fifty years to become the orthodoxy. The ‘Scientific Revolution’ covered an even greater timespan, by most reckonings, from Copernicus’s De

142 Schabas Revolutionibus of 1543 to Newton’s Principia of 1687. So I think the label of a revolution is quite appropriate in this case, and that to complain that it was not as rapid as say the Russian Revolution is to miss the point (Black 1972d: 364). Moreover, I would date it as commencing in 1871, not 1862 as Black has done. Most radical scientists issued a sketch or brief overview of their ideas prior to their major tome, but the pattern among historians of science is to date the watershed from the full-length text, since it was most widely read. I would also insist that Jevons helped to unleash such profound changes in economic theory that it is worth retaining the term ‘revolution’ as a helpful reminder of that rupture. The rate at which this transpired was also less than fifty years. Taking his Theory of Political Economy (1871) as the landmark text, it really only took about twenty years, with Marshall’s Principles of Economics (1890 [1961]), to fortify the new approach. William Ashley, arguably the most historically perceptive economist of his time, remarked in his 1907 address to the British Association for the Advancement of Science (BAAS) that ‘among the diverse lines of thought which converged upon the old orthodoxy for its destruction in 1870–80, that represented by Jevons has for the time had the widest influence’ (Smyth 1962: 232). I think his observation has withstood the test of time. The phrase ‘Jevonian Revolution’ appears to have been coined by Maurice Dobb, and certainly reinforced by the work of Terence Hutchison (Dobb 1973; Hutchison 1978). Dobb pointed to two important theoretical shifts: from costs and production to utility and consumption, and from the assumption that distribution came about prior to exchange to the view that the pricing mechanism simultaneously determined the distribution of factor returns. But to make his point Dobb ranged far beyond Jevons, to Carl Menger, Friedrich von Wieser and Eugen von Böhm-Bawerk. Hutchison, on the other hand, focused much more on the situation in Britain, and stressed the sudden and rapid collapse of the old order during the 1860s. His four pillars of the classical theory toppled down in the span of about ten years and, once the debris was cleared away, the new edifice was erected in about the same amount of time. The idea of a Jevonian Revolution, in distinction to a Marginal Revolution, owes much to William Jaffé’s seminal article on the de-homogenization of Jevons, Léon Walras and Carl Menger (Jaffé 1976). Jaffé promoted the view that what transpired in Britain was quite distinct from that on the Continent. Menger was not favourably disposed toward the mathematization of the discipline, and Walras did not influence mainstream economics until well after the revolution had run its course. I for one have come to believe that the Jevonian Revolution was more profound and far-reaching than was thought even twenty years ago, notwithstanding the fact that we speak of the Walrasian system rather than the Jevonian. For it was Jevons’s campaign to transform the subject that matters, much more than the specific

The Jevonian revolution re-appraised 143 content. His efforts to win a following, with Edgeworth and Wicksteed most notably, but also, in a roundabout way, with Marshall, Walras and Irving Fisher, are what made the difference.1 The term ‘Jevonian Revolution’ also seems appropriate in light of the strong anglophone concentration of neoclassical economists. While there are many exceptions, the doctrine clearly has its epicentre in the United States. And it superseded a theory that had been mostly cultivated in Britain. Indeed, the work of Continental economists during the nineteenth century could hardly hold a candle to the strong concentration of British economists. JeanBaptiste Say was perhaps the most important of the French economists before Walras, but his influence was greater in America than in Britain. Karl Marx undoubtedly stands out as the leading German economist of the last century, yet his influence was only felt as that century drew to a close. And the Austrians have remained a group onto themselves, with some American followers.2 Nineteenth-century economic theory was most shaped by T.R. Malthus, Ricardo, Mill, Jevons and Marshall. It is difficult to make these sorts of remarks, for fear of being anglocentric, but I would also want to underscore the fact that when it comes to the mathematical and physical sciences, the Germans outshone everyone else in terms of productivity. The French scientists had their heyday in the eighteenth century, and the Italians a century before that. To claim that a particular branch of knowledge was concentrated among one region is not to be committed to a theory of national superiority as much as to acknowledge the importance of shifting social and political factors.3 To come back to nineteenth-century British economists, it was not simply a matter of four or five great theorists. As Schumpeter recognized long ago, there was a remarkably large group of second tier political economists (Schumpeter 1954: 757). In addition to the aforementioned names, consider John Ramsey McCulloch, Thomas Tooke, Nassau Senior, Samuel Bailey, Robert Torrens, Mountifort Longfield, William Whewell, J.E. Cairnes, Henry Fawcett, Walter Bagehot, Philip Henry Wicksteed, Francis Ysidro Edgeworth, J.M. Keynes and H.S. Foxwell. Nor did these individuals work in isolation. It is fair to say that through correspondence, the press and public gatherings (e.g. the Political Economy Club), a fullfledged community of economists had emerged over the last century. Moreover, British economics experienced on-going steps toward professionalization, starting with some professorships in the subject in the first half of the last century. Political economy was also recognized by scientific societies, notably the British Association for the Advancement of Science, the Royal Society and regional statistical societies (see Henderson 1996). Although a specialized scholarly journal of economics did not appear until 1891 with the Economic Journal (under the auspices of the newly-formed British Economic Association), several popular periodicals served as forums for circulating economic debates from the early part of the century, such as the Westminster Review. Popular books about

144 Schabas economic principles and finance sold in the tens of thousands, notably by Jane Marcet, Richard Whately and Harriet Martineau. The plain truth was that any learned individual in Britain at the time would readily brush up against economic ideas and debates. This argument has been made countless times about Darwin for example, though he much preferred to retreat to his country estate and study orchids and beetles. So let us confine our focus here to Britain, and take up the question whether or not Jevons’s work constituted a rupture on the scale of an intellectual revolution. Black, while acknowledging that Jevons brought about much that was new, nonetheless puts more weight on the gradual path by which this came to pass. Others, Samuel Hollander most notably, have argued that the classical economists were actually more neoclassical than we have realized: ‘the economics of Ricardo and J.S. Mill comprises in its essentials an exchange system consistent with the marginalist elaborations. Its cost price analysis is pre-eminently an analysis of the allocation of scarce resources, proceeding in terms of general equilibrium’ (Hollander 1987: 428). With all due respect to Professor Hollander, I am much more inclined to press the differences, and to see the classical economists in the context of their own time. Of course there is some continuity between the classical economists and the early neoclassicists. Both Ricardo and Jevons were interested in understanding the principles that governed prices, and to come to terms with the presence of poverty. But there is no mention in either of a theory of general equilibrium. Indeed, Ricardo’s analysis is highly dynamic, sweeping over long periods of time. Furthermore, so much had changed in that period that it would be hard not to believe that there had been some reason to reorient economic theory. The English economy in 1817 was still primarily agrarian; by 1870, it had become the workshop of the world. By 1870, its landscape was marred by a dense lattice of railways; telegraph cables reached even the remote corners of the British Empire. Britain had begun to educate the lower classes to a much greater extent, and to accept them into the democratic order. Much headway had been made in the area of public health, both with sanitation systems and inoculation programmes. London was a metropolis without precedent. Disposable income had at least doubled since 1800, and access to consumer goods had changed considerably with the rise of urban shopping in place of the village fair. One might argue that economic theory did little to capture these changes, that it is difficult to establish firm links between, say, the shift of emphasis in economic theory toward consumer sovereignty (a feature even Hollander accepts) and the rise of disposable income. Historians of economics generally shy away from such efforts; even in the obvious cases of Smith and the Industrial Revolution or Keynes and the Great Depression, there is a dearth of scholarship. Michael White (1982) has argued that Jevons’s involvement with the railroad

The Jevonian revolution re-appraised 145 controversy in Australia prompted his first and most significant insights on economic theory. Sandra Peart (1990,1996) has documented Jevons’s many contributions to economic policies and social welfare more generally, and argued that it was infused with Utilitarian thinking. But the influence appears to have gone in this latter case from theory to real world application, not the other way round. In my view, there are many other examples in Jevons that manifest new developments in the economy. His novel definition of a market, as bounded by access to the relevant information, may well owe much to his personal experience of a new ‘age of information’. Note that he dissented from the idea that a market must be located spatially. It is possible to have a market with no fixed address, as long as its members know the prices. As Jevons observed: ‘the common expression Money Market denotes no locality: it is applied to the aggregate of those bankers, capitalists, and other traders who lend or borrow money, and who constantly exchange information concerning the course of business’ (Jevons 1879a: 85). A market is defined by the set of information, and the more access to information, the more perfect the market:

Each broker strives to gain the best knowledge of the conditions of supply and demand, and the earliest intimation of any change. He is in communication with as many other traders as possible, in order to have the widest range of information, and the greatest chance of making suitable exchanges. (Jevons 1879a: 86–7)

It does not strike me as far-fetched that such a conceptual leap could only come in an age where information was moving rapidly with the aid of steam and electricity. The first telegraph cable was laid in 1851 and the next fifteen years saw the spread of cables to the far reaches of the world, mostly under British auspices (see Hunt 1997: 316). Jevons wrote several brief papers on the subject, starting in 1867.4 In 1878 he corresponded with one of his Danish supporters, Harald Westergaard, on the subject of Madsen’s law, which maintained that there was a direct proportion between the volume of international trade and the number of international telegraphs. While Westergaard criticized Madsen quite strongly, both used Jevons as an authority (Black 1977a: IV, 244). In short, Jevons was well versed on the advent of new techniques for the transmission of information, and this may well have prompted his novel definition of a market. His more abstract conception of a market might also have reinforced his ‘law of indifference’ whereby there is but one price for a given article at any point in time (Jevons 1879a: 91). It also gave credibility to the proposed mathematical manipulation whereby one goes from a stylized market of two persons to one of many.

146 Schabas This is but one example of the way in which the Jevonian theory was a window of his time. There are many others. For example, Jevons proposed that labourers could determine their consumption of leisure time, a fact that would have been unthinkable in 1817. His subjective definition of capital meant that virtually everyone was engaged in its exchange (see Schabas 1990: 51). In his Theory of Political Economy, Jevons discussed at length how much capital is owned by individual workers, in the form of their clothing, their cutlery and so forth (see Jevons 1957: 259-65). And in the Manchester City News (1866), Jevons proposed that workers enter into capitalist enterprises: ‘I hope to see the time when workmen will be to a great extent their own capitalists’ (Black 1973–81: III, 138). Such a remark had much more plausibility in the 1860s than it did in the time of Robert Owen. Jevons also repudiated the dictates of the agrarian harvest that had kept classical theory in shackles for so long. Industry, he insisted, is in constant flux, and the wages fund doctrine an absurdity (Jevons 1957: xlv, 93). The point is that the changes in the British economy were so many and numerous that it strains credulity to suggest that the economic picture given by Jevons and by Ricardo were one and the same. Ian Steedman has recently argued that Jevons got himself so tied up in knots over his commitment to the utility theory of value that he never delivered the goods. His supposedly new theory of value and distribution was still full of vestiges from the classical theory – the theory of rent, supply and demand, and population. But more egregiously, we do not find a ‘logically watertight’ theory of marginal productivity (Steedman 1997: 62). Hence, we can not take Jevons’s Theory of Political Economy as a contribution to the marginal revolution. To me, this is beside the point. The same charge might have been made against Galileo, whose Two New Sciences advanced a kinematics without an underlying dynamics, and proposed the idea of inertial motion but alas made it curvilinear rather than rectilinear. Galileo did not reach the same closure as Newton several decades later on. But the brilliance of Galileo’s breakthroughs, the mapping of physical motion onto geometrical diagrams, the use of thought experiments and the construction of the telescope, are all so remarkable that it would be hard to make a case that Galileo’s work was anything but groundbreaking (see Drake 1978). Professor Black has recently made the same point: Jevons has often been criticized for failing to fill this gap [a marginalist theory of distribution] … [but] such criticisms are to some extent beside the point, for in The Theory of Political Economy Jevons did not really set out to present a theory of distribution at all. (Black 1995: 172) Contemporary economists see general equilibrium theory as the touchstone of neoclassical economics, but for Jevons, who definitely set out to topple the old theory and replace it with

The Jevonian revolution re-appraised 147 the new, the focus was on mathematics and the utility theory of value. While he used the concept of an equilibrium in his analysis of exchange, he emphasized that the true image of an economy is one of constant flux: ‘the real condition of industry is one of perpetual motion and change’ (Jevons 1957: 93). That his theory, once scrutinized, is fundamentally inconsistent and incoherent, appears to discredit his efforts. The same charges, however, could be levelled at the Arrow-Debreu theory, where one finds all sorts of puzzling and unwarranted assumptions about rationality, time, causation, etc.5 More generally, this is true of all scientific theories, and in that sense is to be expected. This does not mean that one simply tolerates inconsistencies and unfounded derivations. But Jevons’s efforts to grapple directly with some of these, and to see the need to work through foundational issues about utility, for example, might be deemed as valuable as any efforts to prove that fixed point theorems obtain. Moreover, Jevons had so many original ideas that even if they fail to add up to a consistent theory of general equilibrium, the cumulative effect is nonetheless inspirational. Jevons was also remarkably gifted in the natural sciences. Recently, Jevons’s photograph has graced the pages of Scientific American for his contributions to fluid dynamics. Raymond Schmidt, a physicist, discovered seminal work by Jevons on the formation of ‘salt fingers’, done in the 1850s while he served as an assayer for the Australian mint. This phenomenon was subsequently studied by Lord Rayleigh and his laboratory assistant and sister-in-law Eleanor Sidgwick, but was then ignored until a much fuller analysis was put forth in the 1950s.6 Jevons also built one of the first logic machines, a prototype for the computer, and helped advance the role of probabilistic thinking in scientific method. Jevons also contributed papers on biology, meteorology and statistics. Numerous historians of economics have pointed to Jevons’s pathbreaking work on index numbers and business cycles (see Aldrich 1987 and Morgan 1990). He also found ways to introduce geometrical representations into economics, including his felicitous ‘labour curve’ which illustrates the point at which the marginal disutility of the work equals the marginal utility of the product (Jevons 1957: 173). He also addressed the problem of dimensionality and recognized the role of time and uncertainty in economic deliberation. In my previous work I have focused on the methodological significance of the Jevonian Revolution. Inspired by new developments in formal logic (George Boole and Augustus De Morgan) and by new views in the philosophy of science (John Herschel, William Whewell and John Stuart Mill), Jevons cultivated a distinct epistemology which greatly deepened his conviction in the mathematical nature of economic theory. As one of the first ‘logicists’, Jevons took the mind to operate in accordance with the laws of logic and basic algebra; in doing economic calculations it followed the same tracks. Ergo, economics was a mathematical science at its very roots. Our deliberations in the marketplace are quantitative

148 Schabas and thus in essence mathematical. Indeed, because we oscillate between infinitesimal amounts at the margin, our minds are rigged to do the calculus on a quotidian basis. This was Jevons’s linchpin so to speak. To Professor Black, Jevons’s insistence that economics must be mathematics was the ‘most novel, indeed revolutionary, aspect of Jevons’s views on the method of economies’ (Black 1995: 166). The fact that he could list numerous precursors in the second edition of his Theory of Political Economy does not detract from this point, contrary to what Steedman (1997) has recently argued. However many others had peppered their economics with geometry or algebra, what Jevons did was develop an extensive argument for why mathematics must be used. Furthermore, that he did not use mathematics with the same sophistication as later economists does not alter the fact that from 1871 on, economics became a mathematical science. There is much more to this story. Most impressive, in my view, was Jevons’s novel approach to economic agency and its links to our mental machinery, all of which helped give birth to our modern image of homo economicus. On this, Jevons was greatly indebted to Bentham’s utility calculus. As Black has put it, ‘Jevons was a thoroughgoing Benthamite’ (Black 1995: 241), far more than Malthus or Mill. What remains something of a mystery, however, is why Jevons was the first to inject Bentham’s calculus into economic theory. Both Stigler (1965a) and Dobb (1973) posed the question long ago, but did not offer much by way of explanation. We find additional attempts to solve the puzzle in the work of subsequent scholars, notably Neil De Marchi (1972), Michael White (1994), R.D.C. Black (1995) and Sandra Peart (1996). Black points to Jevons’s Unitarian background and education at University College London. Given Jevons’s personal circumstances, ‘it would have been surprising if Jevons had not been influenced towards Utilitarianism’ (Black 1972b: 124). But this does not explain why Jevons was the first to Benthamize economic theory. John Stuart Mill seems like an obvious candidate, given his youthful associations with Bentham. But in the decades during which he wrote on political economy – the 1830s and 1840s – he was highly critical of Bentham. In an anonymous judgement of 1833 Mill wrote:

As an analyst of human nature (the faculty in which above all it is necessary that an ethical philosopher should excel) I cannot rank Mr. Bentham very high. … By the promulgation of such views of human nature … I conceive Mr. Bentham’s writings to have done and to be doing very serious evil. (Mill 1833: 12–15)

Bentham was later attacked for not recognizing the spiritual dimension of human nature, and he thus came out rather badly in his comparison to Samuel Taylor Coleridge (Mill 1838). While Mill claimed that he was a steadfast utilitarian, he only began to paint Bentham in a

The Jevonian revolution re-appraised 149 favourable light in the 1850s and 60s, first with his defence against an attack by Whewell (1852) and then with his celebrated essay ‘Utilitarianism’ (1861).7 Mill, however, always opposed Bentham on the question of the ethical neutrality of pleasures. Poetry for Mill was superior to pushpin, and should be granted more weight in any social reform. Jevons explicitly went back to ‘the dry old Bentham’ on this issue, at least in the realm of economics (Jevons 1879a: 286). His efforts to promote consumer sovereignty meant that it was up to the individual to deem what most provided satisfaction. As Peart (1996) has pointed out, Jevons recognized that people are not always fully rational in their actions, and that they often do things that only increase future pain, such as the excessive consumption of gin. But when it comes to that final degree of utility, and its manifestation in exchange ratios, we must take the situation at the moment. One factor that might account for why Jevons but not Mill embraced Bentham was the emergence of a metrological culture in mid-Victorian Britain. Simon Schaffer’s aptly entitled essay, ‘Accurate Measurement is an English Science’, examines the intensification of measurements in English culture during the 1860s to 1880s, just the time of Jevons. Jevons’s Principles of Science, while not cited by Schaffer, is clearly a case in point. Measurement is extolled throughout, and one of the more original sections is Book Three, entitled Methods of Measurement. Given his longlasting and sophisticated knowledge of science, Jevons was easily drawn to the ration-alistic and quantitative bent of Bentham. Marshall too had an early appreciation for Bentham even though he grasped more than Jevons that economic agency could not be a simple tale of pleasure and pain. Professor Black has noted that Marshall covered Bentham in his youthful lectures on moral philosophy, and quotes Mitchell’s rendition of Marshall ‘that Bentham had more influence on economics than any other non-economist, his contribution being the stress laid on measurement’ (Black 1995: 244). So it may have been Bentham’s amenability to measurement per se that partly helped to rekindle an interest in his ideas among Jevons and Marshall. Mill, it is fair to say, was not emersed in a scientific milieu; his orientation was literary rather than mathematical. His work at the East India Company, and political dealings, kept him at arm’s length from the sort of associations, particularly statistical, that Jevons was to embrace. True, Mill liked botany, but that was hardly a science for precise measurement. William Whewell seems like a more likely candidate. He wrote on economics and mathematics, and even combined the two (see Henderson 1996). Why didn’t he see that Bentham’s calculus opened the door to mathematical analysis in an otherwise literary field? Perhaps he did, but Bentham was at the opposite pole politically, and thus the last person Whewell would have aligned himself with. A similar account could be made for Nassau Senior. Although he acknowledged the importance of utility in the determination of price, his conservative politics would not allow him truck with the radical reformers. Nor was Bentham accepted among the Ricardian socialists, since his individual egoism was at odds with the

150 Schabas strong communitarian and egalitarian sentiments of that group. The period before and during Mill’s reign as an economist (1848 to 1871) did not find many adherents to Utilitarianism, particularly among political economists.8 One factor that may explain why Bentham’s entree came with Jevons in the 1860s and 1870s, rather than with Whewell or Senior in the 1830s or Mill in the 1840s, was the revived interest in the science of the mind as it was then called. In another paper, I have traced the importance of psychological inquiry, first for Mill, and then for Jevons, Edgeworth and Marshall (Schabas 1997). Mill took Alexander Bain’s The Senses and the Intellect (1855) as the work that rekindled a study of the mind among British intellectuals. Jevons was also enamoured with Bain, although he voiced concerns about Bain’s assimilation of Mill’s logic. But the psychological works proper came out unscathed: ‘In Professor Bain’s own proper writings, there is a vigour and logical consistency of thought for which it is impossible not to feel the greatest respect’ (Jevons 1890: 241). Early unpublished manuscripts disclose Marshall’s youthful infatuation with Bain and psychology more generally, and Edgeworth was overtly inspired by the work of the German psycho-physiologists, Theodor Fechner and Hermann von Helmholtz (see Schabas 1997). Indeed, Victorian economics was one of the few periods in the history of economic theory when psychology was cast in a good light. Behavioral assumptions always pervade economic theory, but only briefly have economists turned to contemporary psychologists and shown appreciation for their ideas.9 Professor Black has also recognized the importance of the psychological turn in Jevons’s work, and the relative absence of this among his classical predecessors, at least when it came to economic theory. Black points to the specific education that Jevons experienced at University College London. It gave him a secular and scientific set of values that would have made it easier to accept a sterile approach to the human mind. His courses introduced him to the work of Bentham and Bain, as well as the more established associationist psychologists, David Hume and David Hartley. But from a broader perspective, the psychological turn taken by Jevons seems most indebted to the Darwinian revolution, which had far-reaching consequences not only for biology and geology, but also for theology, ethics and psychology. I have suggested elsewhere that even in the case of Alfred Marshall, who later in life maintained that the mecca for the economist was biology and not physics, there is little evidence of biological thinking having a direct influence on economic theory (Schabas 1994). I stand by that claim, and endorse the one put forward by Philip Mirowski (with numerous qualifications) that the paradigm economists wished to emulate was that of physics, not biology (Mirowski 1989). Nevertheless, the movement marked by Spencer and Darwin, as Professor Black has rightly noted, left an imprint in an indirect way (Black 1995: 245–7). It provided Jevons with a grounding in naturalistic psychology which, at least in the hands of Spencer, meshed well with the Utilitarian programme.

The Jevonian revolution re-appraised 151 In his Principles of Science (1874a), Jevons waxed enthusiastically about the theory of evolution as put forth by Spencer and Darwin. While noting that the idea of evolution left as many questions unanswered as it had answered, if not more, he nonetheless maintained that he regarded ‘the theories of evolution and natural selection in their main features as two of the most probable hypotheses ever proposed’ (Jevons 1877: 762). He granted the possibility that all living forms may well have descended from a single protoplasm (ibid.: 764) and that even complex organs such as the eye could be produced by evolutionary mechanisms. Spencer, under the influence of Jean-Baptiste Lamarck and Charles Lyell, had already formulated evolutionary ideas in the early 1850s, before Darwin released his much-polished Origin of Species (1859). But Spencer’s immense popularity was largely due to the intellectual bomb that Darwin had dropped. As Robert Richards has noted, the fact that no one seems to take Spencer seriously today, though at the time he was put on a pedestal higher than Mill or F.H. Bradley, has much to do with the fact that he was wedded to Social Darwinism, and thus tainted by that odious set of views. As Professor Black has noted, Jevons tended to bestow more praise on Spencer than on Darwin, possibly because it was Spencer and not Darwin who cultivated Utilitarianism. Jevons’s high regard for Spencer commenced early on; he sent Spencer a copy of his Pure Logic and used the favourable reply as a testimonial for his appointment at Owens College in 1866. Spencer also nominated Jevons for membership in the Athenaeum Club, in 1879, suggesting that they had forged an acquaintance over the ensuing years. Although Jevons was not always in agreement with Spencer on the details of his doctrine, he shared with Spencer the belief that nature was intrinsically good, that there was progress toward a happier state. Darwin, by contrast, was consistently anti-teleological, a view that set him apart from his contemporaries. Spencer had also written extensively on psychology and ethics, and had even, in the late 1840s, worked as managing editor for the Economist. It was at this point, partly under the influence of co-editor Thomas Hodgskin, that Spencer adumbrated a scheme for utopian socialism. Later in life he was to become aligned with conservative forces, as a leading exponent of laissez-faire views, but the utopian vision still persevered. His all-embracing philosophy promoted the idea that we were developing, along with the solar system and the earth’s crust, toward a state of perfection. Drawing upon recent investigations in physiology, such as those by W.B. Carpenter, Spencer added mental evolution to his grand synthesis. Spencer forged a brand of Utilitarianism that was all his own. Drawing on the work of Immanuel Kant and William Whewell, he endorsed the view that we are born with the mental categories by which we make sense of the external world. There are necessary laws of the mind and of nature, although it is through experience that we grope toward the later. But our moral sense is imprinted much more deeply, and does not require rational calculation, only instinct.

152 Schabas On this point, Jevons was in explicit agreement with Spencer, contra Bentham and Mill. Bentham had not taken into account the innate feelings that define our species. It was Spencer who recognized the existence of an evolving ‘moral sense’ and thus provided the ‘right’ picture of humankind. Mill had only begun to grasp the importance of Darwin in the last decade of his life, and thus had not injected an evolutionary perspective into his image of human nature. ‘Mill discarded the admirable Benthamist analysis, but failed to introduce the true Evolutionist principles. … It is to Herbert Spencer we must look for a more truthful philosophy of morals than was possible before his time’ (Jevons 1879a: 291). Mill had portrayed nature as something man must combat; it was replete with daily torment, and offered nothing by way of moral instruction. Man must arrive at his own (artificial) moral principles, and use his ingenuity to tame nature into submission (see Schabas 1995). Darwin, from a different perspective, had portrayed nature as vicious, as ‘red in tooth and claw’. Layers of competition called for daily vigilence against predators. But Darwin had focused more on the group than on the individual and, for that reason among others, the Utilitarian programme did not mesh well with his ideas. Individual pleasure counted for nothing in his schema. As Richards has observed, for Darwin:

moral action was not motivated by self-interest nor calculated to achieve the greatest amount of pleasure. Altruistic behavior stemmed from an immediate instinct and was guided by social habits. Its goal was not the general happiness but ‘the general good of the community’. (Richards 1987: 218)

For Spencer, our moral sense was inherited at the individual level, and subject to gradual evolution via Lamarckian mechanisms. On this point, Spencer differed markedly from Darwin (Richards 1987: 212). Moreover, ‘there exists a primordial connection between pleasure-giving acts and continuance or increase of life, and, by implication, between paingiving acts and decrease or loss of life’ (Spencer 1879: 97). For Spencer, the pleasure–pain calculus was at one with the agendas of nature. Jevons may also have been drawn to Spencer because he viewed nature as benign if not benevolent. For Jevons was highly critical of Mill’s take on nature. As he wrote in his essay Utilitarianism, ‘the word nature may be Mill’s key to a profound philosophy; but I rather think it is the key to many of his fallacies’ (Jevons 1879a: 288). Jevons’s Principles of Science gives the impression that nature is still replete with mysteries but that there is a providential path to follow, a view he shared with Spencer. As Jevons wrote at the very end of that work: ‘Let us be faithful to our scientific method, and investigate also those instincts of the human mind by which man is led to work as if the approval of a Higher Being were the aim of life’ (Jevons 1877: 769). Mill and Darwin were too secular, too open-ended for Jevons.

The Jevonian revolution re-appraised 153 In conclusion, I have here attempted to reinforce the view that a Jevonian Revolution transpired in the last few decades of the nineteenth century, at least among anglophone economists. Professor Black has at various times been equivocal about the matter, but certainly emphasized the novel directions taken by Jevons, partly under the influence of Bentham, Bain and Spencer on Jevons. The fundamental reconstruction that Jevons initiated was not just with respect to mathematical methods and the utility theory of value. He cultivated a new understanding of economic agency, moulded by appeals to Bain’s psychology and Spencer’s evolutionary biology. This in turn helps us to see why Bentham alone did not suffice for the transformation associated with the work of William Stanley Jevons.

NOTES 1 I develop this interpretation in Schabas 1990 (chs 6–8). Mirowski (1989) has also argued that Menger be treated apart from Jevons and Walras. 2 Of course there are many more that I have not named here. For the French, A.A. Cournot and for the Germans, Friedrich List stand out. Nevertheless, they and the majority of economists in the period that spanned the last century were apprised of the leading British writers, whether they agreed with them or not. 3 Joseph Ben-David once conjectured that an underlying factor in the shift of the epicentre of scientific activity from Italy and Britain to France to Germany over the course of three centuries might be the lack of alternative opportunities for gifted young men in the political arena (see Ben-David 1971: chs 5–6). 4 His Theory of Political Economy also makes references to the advent of telegraphy (see Jevons 1957: 164, 272). 5 For a good critique of the neoclassical theory, see Hausman (1992). 6 Eleanor Sidgwick was married to Henry Sidgwick, the leading exponent of utilitarian ethics in late Victorian England, and a follower of Jevons. Her notebooks reveal that they had repeated the experiments first undertaken by Jevons in 1880, but not published the results until a year after Jevons died (see Schmitt 1995: 73). 7 Alan Ryan considers Mill’s defence of utilitarianism against Whewell to be a better exposition of the theory than the celebrated essay he later issued on the subject (see Ryan 1974: 95). 8 Stephan Collini has remarked of Utilitarianism ‘that historians have tended to speak in exaggerated terms of its impact on political discourse and political action in mid-nineteenth century England’ (Collini 1991: 175). 9 Michael White (1994) has addressed the role of Richard Jennings, Bain and Carpenter, in guiding Jevons toward a new theory of economic agency.

9

Jevons and Gossen John K. Whitaker

In 1878, well after publishing his self-proclaimed revolutionary Theory of Political Economy (1871), William Stanley Jevons learned of an obscure earlier book on similar lines by Hermann Heinrich Gossen (1854). Although taken aback, Jevons acknowledged handsomely in the preface to the second edition of his work (1879b: 34) that ‘Gossen has completely anticipated me as regards the general principles and method of the theory of Economics’. While chagrined at the loss of his claim to priority with regard to the ideas associated with the new concept of marginal utility, Jevons found consolation in the opportunity of ‘making that understood and valued which has been so sadly neglected’ (1879b: 36–7). He also took the fact of the coincident discoveries, together with the cognate work of Jules Dupuit and Léon Walras, as establishing the ‘great probability, not to say approximate certainty’ of the new ideas (1879b: 38). The basic facts of this episode are well known, yet the details have received surprisingly little attention. In particular, the validity of Jevons’s conviction that he and Gossen had travelled independently along virtually identical paths has remained largely unexamined. It is evident that Jevons, who lacked German, had only a superficial acquaintance with Gossen’s book and, in any case, the obscure and idiosyncratic nature of that work would have provided a further obstacle to understanding. Fortunately, with the publication of Jevons’s Papers and Correspondence (Black 1972a, 1973–81) and of a well-articulated English translation of Gossen (Gossen 1983), barriers which long hampered full treatment of the episode have been removed. The obvious starting point for a detailed analysis of the episode is Robert Adamson’s initial discovery of Gossen’s book and Jevons’s reaction to it. After that the validity of Jevons’s interpretation of Gossen’s ideas needs to be considered. It will be argued that Jevons misinterpreted Gossen’s purpose in significant ways and remained ignorant of important aspects of his thought. This failure reflected not just the serious barriers preventing understanding but also the attenuation after 1871 of Jevons’s concern with issues of pure economic theory. The parallel reaction of Walras to the rediscovery of Gossen’s book provides an interesting contrast.

Jevons and Gossen 155 DISCOVERY AND AFTERMATH The key figure in the rediscovery of Gossen’s forgotten book is Robert Adamson (1852– 1902). Although a distinguished figure in his own right, Adamson appeared only fleetingly upon the economists’ stage, so that some biographical background seems called for.1 Born in Edinburgh, and Jevons’s junior by almost seventeen years, Adamson was a distinguished student of philosophy at Edinburgh University, entering at age 14 and graduating at age 19 with several scholarships permitting further study. After a stay in Heidelberg, where he began his ‘acquaintance with German literature and philosophy which afterwards became so intimate and comprehensive’ (Jones 1902: 431), he returned to Edinburgh as assistant to the philosophy professors. He also joined the editorial staff of the Encyclopedia Britannica, providing many articles for the ninth edition. It is recorded that:

he contributed a large number of articles on subjects of general literature, and in the third volume began a series of important philosophical articles. The article on Francis Bacon … first gave public proof of Adamson’s power as a philosophical critic and historian. There followed biographies of Hume, Kant, Fichte, and Schelling, and the very learned article on Logic. (Sorley 1920: 16)

The last item is described as ‘without a rival in English for conciseness of statement and erudition’ (Jones 1902: 432). Much later, Adamson was to write a lucid introduction for the posthumous republication of a collection of Jevons’s logical writings (Jevons 1890: v–xxiii). In 1876, when Jevons left Manchester, Adamson, still only 24, was elected his successor at Owens College, being made Professor of Political Economy, Mental and Moral Science. He and Jevons shared an interest in logic, but there is nothing to indicate that they had been acquainted before 1876. Nor is there anything suggesting that Adamson had been interested in economics or familiar with its literature prior to his appointment to teach this subject. In those days, teachers at the recently founded local colleges were expected to cover a daunting range of subjects, while – despite Jevons’s eminence in the subject – political economy survived at Owens in only a fringe status.2 In any case, Adamson seems to have taken seriously his commitment to this new subject, going well beyond acquiring the perfunctory knowledge of it necessary to meet his undemanding teaching obligations. We find him writing to Jevons on substantive issues of economics, displaying a keen critical intelligence.3 He also seems to have made a special effort to master the continental literature on the subject. Already in October 1876, as he

156 Whitaker prepared to start teaching the new subject, he was bringing Thünen’s work to the attention of Jevons, who remarked to Walras that ‘It seems to be very scientific, but I have not read it yet.’4 In December 1878 Adamson was familiar with some of the nascent continental literature on business cycles (Black 1977a: 300–1), while in April 1879 he seemed to have greater familiarity than Jevons with works of Cournot and Rau (Black 1977b: 55). But the most remarkable result was to come from Adamson’s perusal of a treatise on the history of economics (Kautz 1858–60) written in German by an obscure Hungarian adherent of the older German historical school. Here Adamson found a brief allusion to Gossen’s book. As he told Jevons in a letter of 14 August 1878, ‘Some time ago I was attracted by a notice of it in a German History of P.E. The historian said the author, Gossen, tried to work out mathematically a theory of pleasure and pain’ (Black 1977a: 267). Jevons in recounting this in 1879 converted ‘some time ago’ to ‘some years since’ (1879b: 31). Now it is possible that Adamson’s interest in a book offering ‘a theory of pleasure and pain’ was sparked by his philosophical interests well before he turned to economics, although it would seem odd for him to have taken up Kautz’s book at such a stage of thought. In any case, his interest was distinctly aroused. As his letter to Jevons continues:

I advertised for the book but failed to get a copy. A month ago I saw it advertised secondhand in Germany, ordered it, and have just received it. I will give you a brief sketch of the first portion, and I think you will acknowledge it is very remarkable. (Black 1977a: 267–8)

In this way Jevons learnt of the existence and character of Gossen’s book. Adamson’s detailed description of it, considered in the following section, was sufficient to persuade Jevons that he had been largely pre-empted by Gossen and that the claims of the Theory of Political Economy to objective originality had been substantially compromised. As he wrote to his brother on 21 August 1878: ‘Within the last few days I have had rather a disagreeable incident in the discovery by Adamson of Owens College, of an unknown German book, by a man called Gossen, containing a theory of political economy apparently much like mine’ (Black 1977a: 272). He informed several economist correspondents, including Walras, about the discovery, telling Herbert S. Foxwell that Gossen’s book ‘in a remarkable manner anticipates the principal results of Walras and me’.5 Walras’s reaction will be considered later. Jevons told Walras on 15 September 1878 that ‘Adamson is going to prepare me an abstract of the book’ (Black 1977a: 282), but this does not seem to have materialized. For the description of Gossen’s book in the May 1879 preface to the second edition of the Theory of Political Economy (Jevons 1879b: 32–4) remains an obvious sentence-by-sentence

Jevons and Gossen 157 paraphrase of Adamson’s initial description of the book. Indeed, writing on 27 April 1879 about the new edition Adamson regretted ‘that it should have been out of my power to offer you any assistance, even in regard to Gossen’s book’ (Black 1977b: 55). On 6 May, seeing a proof of the new preface and perhaps not realizing how closely it paraphrased his own earlier words, he judged that ‘the account of Gossen’s book is as good as could be given without entering a minute analysis of it’ (Black 1977b: 60). Stressing his own lack of ability to read German, Jevons attributed the description of Gossen’s work in the new preface to a report from Adamson, amplifying this to ‘what Professor Adamson has written or read to me’ and modestly demoting his own contribution to ‘an examination of the diagrams and symbolic parts of the work’ (1879b: 32, 34). He had discovered a copy of Gossen in the British Museum (1879b: 36) or perhaps had taken up Adamson’s offer of a loan of the book (Black 1977a: 269). In any case, it is clear that Jevons’s knowledge of Gossen’s book was limited and his opinions on it refracted through Adamson’s and largely second hand.

JEVONS’S PERCEPTION OF GOSSEN’S CONTRIBUTION The description of Gossen’s book provided by Jevons (1879b: 32–4) focused on the earlier, more theoretical portions. Here – as already indicated – he paraphrased Adamson’s initial account (Black 1977a: 268–9) sentence by sentence, but with one significant omission. Jevons’s description of Gossen’s theoretical arguments can be summarized in the following twelve points, listed in the order in which Jevons treats them.

1. The mathematical treatment of economics is the only sound one. 2. Economics analyzes the procedures by which individuals and society maximize pleasure ‘with the minimum of painful effort’. 3. The ‘natural law of pleasure’ runs ‘somewhat as follows: Increase of the same kind of consumption yields pleasure continuously diminishing up to the point of satiety’. 4. The conditions are analyzed for maximizing total pleasure ‘from one or more objects’. 5. Gossen’s ‘werth’ can be translated (in Adamson’s opinion) as ‘utility’ and its quantity measures pleasure attained. 6. Objects can give pleasure directly, or in necessary conjunction with other objects, or indirectly by acting as means of producing objects of the first two kinds. 7. Utility is a relation between an object and a person, not an absolute or intrinsic quality of the object.

158 Whitaker 8. The ‘derivative laws’ of utility are stated: the incremental utility from successive portions of the same pleasure-giving object diminishes steadily and vanishes at the point of satiety. 9. The ‘practical conclusion’ of 8 is that ‘each person should so distribute his resources as to render the final increments of each pleasure-giving commodity of equal utility for him’. 10. If objects of pleasure are produced by labour, the pains of the required labour must be subtracted from the pleasure due to the product: hence, labour should be extended to the point where the incremental utility of the product equals the incremental pain of the labour. 11. Barter is given a ‘complicated geometric representation’. It can lead to ‘an immense increase of utility’ and should terminate when for each individual ‘the utilities of the portions next to be given and received are equal’. 12. The theory of rent is investigated in a most general manner. On the basis of this summarization, Jevons concluded quite unequivocally that: it is quite apparent that Gossen has completely anticipated me as regards the general principles and method of the theory of Economics. So far as I can gather, his treatment of the fundamental theory is even more general than what I was able to scheme out. (1879b: 34) His main criticism – apparently not borrowed from Adamson but resulting from his own ‘examination of the diagrams and symbolic parts of the work’ – was that Gossen had arbitrarily assumed quadratic utility functions ‘so that his curves of [marginal] utility are generally taken as straight lines’ even though ‘the functions of economic science are seldom or never really linear’ (1879b: 35). Jevons also followed Adamson in treating dismissively the later and more applied portions of Gossen’s book: ‘the work concludes with somewhat vague social speculations, which, in Professor Adamson’s opinion, are of inferior merit compared with the earlier portions of the treatise’ (1879b: 34).6 Finally, he claimed that Gossen ‘does not seem really to reach the equations of exchange’ as Jevons himself had developed them, and that ‘the theory of capital and interest is wanting’ (1879b: 35). The one significant point on which Jevons failed to follow Adamson’s initial synopsis occurs in connection with point 3 above. Adamson had recorded the existence of a second law of pleasure, ‘that a repeated enjoyment yields diminishing satisfaction, and on occasion of its repetition gives less pleasure than when first experienced’ (Black 1977a: 268). This is just one indication that significant aspects of Gossen’s thought – in this case the choice of time patterns of consumption – had remained closed to Jevons or unexamined by him.7

Jevons and Gossen 159 It would, of course, be absurd to deny the remarkable formal parallels between the technical arguments of the two, especially under point 10 where their diagramatic representations virtually coincide. Jevons’s account of Gossen’s book was designed to spotlight these formal parallels. In effect Gossen had been reclad in Jevonian dress, but the formal parallels masked important substantive differences.

WHAT JEVONS MIGHT HAVE SEEN Jevons implicitly assumed that the innate drives and aptitudes of humans led them to maximize utility, given the constraints they faced. For him utility maximization was an idealized description of actual behaviour: a positive assumption, not a normative prescription. This was far from the case for Gossen who saw individuals as often failing to achieve, or even perceive, the goal of lifetime utility maximization. This failure is made strikingly clear in the first phase of his discussion, where he considers only the allocation of time among various freely-available pleasures. He illustrates with the sad fate of Louis the Fifteenth of France.

His retainers and courtesans, by dissipating the resources of an entire nation, succeeded in arranging the life of his court in such a fashion that everything that could have produced pleasure … was offered to him almost without interruption. The closer this aim was approximated, the more the total life pleasure was reduced for the pitiable Louis … even Madame Pompadour, who would not shy away from the most unnatural diversion so long as it promised to give some pleasure to Louis, did not succeed in driving away the most deadly boredom. (Gossen 1983: 14) Gossen’s conception is that the utility enjoyed over time depends complexly on the temporal pattern of consumption of any pleasure (1983: 5–27). Over an interval of sustained consumption of a single pleasure the palate jades, as it were, and the utility generated by extending the period of enjoyment soon wanes to zero. But the palate recovers after a period of abstention from the pleasure, the more so the longer the abstention period. Gossen is easily able to show that with ample time and a freely available pleasure there is a particular sequence of alternating intervals of enjoyment and abstention yielding maximum lifetime utility.8 If many such free pleasures coexist it may be necessary to restrict the total time allocated to each in order for lifetime utility to be maximized. The rule for this, Gossen asserts, is that the portion of lifetime allocated to each pleasure should be so curtailed that a small increase in

160 Whitaker the time allocated to any pleasure would yield the same addition to lifetime utility (1983: 14). However, problems lurk below the surface of this superficially appealing proposition. It implies that the time intervals scheduled for the enjoyment of, or regeneration of desire for, the different available pleasures must be so integrated that only one pleasure is ever scheduled for enjoyment at any time. For, if pleasures could all be enjoyed simultaneously, the addition of one pleasure would not limit the time available for another or affect its optimal time pattern of enjoyment. As Georgescu-Roegen emphasizes (1983: 80–90) the complexity of the resulting time-scheduling problem goes far beyond anything Gossen could have hoped to formalize. Moreover, the complexity would be increased even further if either the pleasurableness of, or the regeneration of desire for, one pleasure was affected by the experiencing of other pleasures. Unable to develop the time-allocation question further, Gossen proceeded next to the obvious consideration that, unlike the case of poor Louis the Fifteenth, time is for most people not the only resource requiring careful husbanding in order to maximize lifetime pleasure. Thus, most individuals must ‘act upon the external world with the intent of giving it that form that alone can produce the desired [pleasurable] effects’ (Gossen 1983: 28). This leads to a consideration of the production and consumption of commodities by an isolated individual, the production requiring the disutility of onerous effort. In this phase of Gossen’s treatment (1983: 40–53), the lifetime dimension of utility maximization becomes obscured and a remarkable formal parallel does emerge to Jevons’s subsequent treatment of the same issues (1871: 162–80). But this parallelism should not be allowed to obscure the fundamental differences in the underlying perspectives of the two authors, or the considerable divergences emerging as they turned from the situation of the isolated individual to consider economic interactions between individuals. Each of these matters will now be taken up in turn. As already indicated, Gossen did not believe that individuals maximized utility instinctively and unconsciously despite their strong egoistic drives. Instead, he regarded an individual’s adoption of the goal of lifetime utility maximization as the result of a conscious and explicit commitment. Moreover, he saw the successful implementation of this goal as requiring continuing arduous intellectual effort for which individuals needed training as well as exhortation. The early portions of his book are thus designed as a kind of self-help manual for would-be utility maximizers. As with most self-help writings, there are exhortations about the importance of adopting the pertinent goals, allied with detailed instructions on how to attain them. The rather tedious lengths to which Gossen goes in working through simple numerical examples, based on linear marginal utility or disutility functions, can largely be accounted for by this educational aim. He was well aware that linearity was unlikely to apply generally, but anxious not to lose his envisaged audience by undue complexity or mathematical oversophistication, even making an (unfulfilled) promise to set himself up as a public instructor (1983: cxlviii–ix).

Jevons and Gossen 161 But, when regarded as a whole, the book has much wider aims. It is nothing less than a normative blueprint for an ideal society which will be brought into being if individuals adopt appropriate rules for living, while society adopts appropriate policies and institutions. The peculiarity is that in expounding these goals Gossen represents himself as a mere messenger conveying the Deity’s intentions for mankind. In the ideal society, individuals will have full knowledge of the laws of both pleasure and nature established by the Deity. The laws of pleasure enjoin lifetime utility maximization while knowledge of the laws of nature allows the external world to be fully bent to this utility maximizing end:

the Creator, by establishing the force that produces in man the ineradicable and unceasing desire to reach this end has made absolutely sure that man will reach this end once he himself has recognized the path that will lead him to it. … As He has forever and immutably predetermined the paths of the planets by the laws of gravitation, He has predetermined for all eternity and invariably for all men the pattern of their social existence by the laws governing their power of enjoyment. (Gossen 1983: 5; emphasis added)

In the ideal society, all individuals will strive consciously and rationally to maximize their own lifetime utility regardless of others, while free markets, free trade and social institutions designed to promote the equality and personal development of both sexes will harness selfishness to the benefit of all, so that ‘every individual concerned exclusively with his own personal welfare must bend his efforts to the benefit of all men in a manner that is best for the welfare of all mankind’ (Gossen 1983: 5; original italicized). Establishment of this ideal society is obviously a matter of extended personal and social development. During the transitional process, caution in resorting to untrammeled individual action is called for if excesses are to be avoided. Conformity to socially established modes of behaviour is enjoined, together with thoughtful and cautious experimentation in lifestyle by those sufficiently mature to be economically independent (Gossen 1983: 150, 166). Social pressures will constrain most individuals to copy the behaviour patterns of their socioeconomic peers, but minor experiments will be tolerated. Variations which do succeed in raising the experimenter’s utility will gradually be copied by other members of the peer group and will eventually alter the normal pattern of behaviour in the group. Over time, the members of the group might gradually evolve towards what is in effect utility maximizing behaviour by a kind of Darwinian selection process working on rules of behaviour, but only if the environment within which the group operates does not change rapidly and the situations of group members are not too dissimilar. The ubiquity of self-conscious, rational and fullyinformed lifetime utility maximization will await the wider change to ideal social conditions. It hardly needs to be emphasized how different all this is from the implicit assumptions

162 Whitaker underlying Jevons’s treatment of the utility maximizing individual, assumptions still prevalent in much modern economics. Besides urging the divinely intended nature of the ideal state, Gossen wished to demonstrate its social optimality. Going beyond what was later termed Pareto optimality, he claimed that the ‘positive program for laisser-faire’ embodied in the social institutions of this state, when allied with individual lifetime-utility maximization, would yield the greatest possible utility for each individual. This claim seems flawed, unless the situations and preferences of all individuals are identical.9 But in any case, his attempt to elucidate the social implications of utility-maximizing individual economic interactions within the supposed free-market framework led him to a remarkable analysis of the process of price determination in multiple competitive markets, in which he foreshadowed the later treatment of Walras, and to highly original treatments of the determinants of land rent, saving and capital accumulation. But it is hardly feasible to enter here into a detailed account of these developments, or into a comparison with Jevons’s somewhat fragmentary treatment of corresponding topics. Jevons had observed correctly that his ‘equations of exchange’ and his theory of capital and interest had not been anticipated by Gossen who had, however, treated the theory of rent ‘in a most general manner’ (1879b: 34–5). It could be argued that Jevons’s ‘equations of exchange’ were in fact implicit in Gossen’s treatment of competitive equilibrium, but in any case by 1878 anything that Jevons might have learned from studying Gossen on exchange had been superseded by Walras’s work. On the other hand, a careful study of Gossen’s very general integrated treatment of rent, saving, investment and interest could have opened up significant new perspectives. Jevons was unable or unwilling to follow up the leads offered here, but so were the subsequent commentators on Gossen. His contributions on these topics still remain unappreciated and largely unknown.10

WALRAS AND GOSSEN On learning from Jevons in September 1878 of the existence and character of Gossen’s book, Walras immediately made plans to obtain a copy, to study it with a colleague proficient in both mathematics and German, and then to publish an article about Gossen (Black 1977a: 289– 90). He set in train an energetic search for the book, recalling that: While inquiring about the book with the publishers, I also addressed myself to various public libraries. Finally, Mr. Halm, librarian in Munich, sent it to Mr. Charles Secrétan, his son-in-law and my colleague and friend. Together with him I read it with much attention during the first weeks of 1879, and made a complete translation. (Walras 1885: 477)11

Jevons and Gossen 163 Having thus digested Gossan’s ‘remarkable’ book, Walras intimated a desire that he and Jevons should discuss it in detail when time permitted (Black 1977b: 20–1). This was never to be. Walras, who had looked to Jevons as an ally in the battle to promulgate the new mathematical approach to economics, was finding him less than enthusiastic. Jevons’s second edition was to prove a severe disappointment. Rightly or wrongly, Walras had expected a detailed treatment, with translations, of the major works of the new movement, including his own, and found Jevons’s new preface (Jevons 1879b) quite inadequate.12 His criticisms were ‘un peu brutale’. Read me and read Gossen, he chided, with the same care and attention as I have given to your work and criticize frankly (Black 1977b: 94–7). The truth, of course, was that Jevons could hardly be said to have read Gossen at all. It is not even clear that he had grappled seriously with Walras’s work.13 Meanwhile, Walras had been seeking biographical information about Gossen, eventually making contact with a nephew, Hermann Kortum, who filled the biographical void considerably, permitting completion of Walras’s planned article on Gossen. The publication of this was delayed for several years and it finally appeared only in 1885 (Walras 1885). This article gave Walras’s considered judgement on ‘one of the most remarkable economists who have ever lived’ (1885: 474). Using his own conceptual framework he saw the first part of Gossen’s book as dealing with ‘pure economics’ and the second part with ‘applied economics’. On the latter he disagreed with the opinions of Adamson and Jevons:

No epithet seems to me less fitting than the word ‘vague’ in connection with the ‘principles of industry’ which Gossen bases on his ‘laws of exchange’. His theories of money, credit, and property are perfectly lucid and precise. (Walras 1885: 482)

He was particularly interested in Gossen’s proposals for land nationalization, which he had indeed discussed in print considerably earlier (Walras 1881). As to the first ‘pure theory’ portion of Gossen’s book, Walras was mainly concerned to show that his own ideas had been by no means anticipated. Rather than Gossen’s ideas being expounded sympathetically and on their own terms, they served mainly as a foil whose limitations and shortcomings illumined Walras’s superior achievement. He conceded readily and without examination that ‘Gossen and Mr. Jevons have found, before me, the mathematical expression of utility, and have formulated the condition of maximum utility in the exchange, by an individual, of one good for another. This is indisputable’ (Walras 1885: 478). But he then demonstrated to his own satisfaction that although Jevons and Gossen ‘have snatched from me the priority concerning the point of departure of all pure economics, they have most tactfully left me almost entirely in the possession of all further conclusions’ (1885:

164 Whitaker 482). The consequence was that Walras, obsessed by his own theoretical vision and claims to originality, failed to present a rounded and well-balanced account of Gossen’s thought. He made two specific charges. First, Gossen had confounded the conditions for a competitive equilibrium and a utilitarian maximum.14 Second, Gossen and also Jevons had considered only production conditions which:

mirror the organization of production on Robinson Crusoe’s island; also, perhaps, production in isolation or under primitive conditions. This is not how production is carried on – I shall not say under our own socio-economic conditions, but under the abstract and ideal socio-economic conditions on which pure economics is based. (Walras 1885: 480)

Here Walras clearly sets the rules of the game he then claims to win.

A SUMMING UP Jevons and Walras both failed to accept Gossen on his own terms, although agreeing in the award of great merit to him for his pioneering analysis of utility maximization. Their failures arose in quite different and contrasting ways, however. Jevons, deterred by his lack of German, was largely content to rely on Adamson’s views and made only limited efforts to obtain firsthand knowledge of the book as a whole. Walras, whose German, although imperfect, was certainly better than Jevons’s, studied the book closely and arranged for a full translation to be made. Yet, even with this in hand, his intense attachment to his own views led him to perceive Gossen from a slanted perspective. For different reasons Jevons and Walras both tended to interpret Gossen through the filter of their own strongly held views rather than interpreting him on his own terms. Gossen’s book is bombastic and idiosyncratic, yet it has a coherence and vision of its own which is obscured by representing it as aimed at the same goals as those of Jevons and Walras. To some degree it was a precursor, or even preemptor, of ideas fundamental to both authors, but it was also more than – or at least different from – that, albeit not without flaws. This is not to imply that the development of economic thought would have been affected significantly had the two obtained and disseminated a clearer conception of Gossen’s ideas and purposes. Each intellectual epoch captures only what it can readily absorb. The contrast between Walras’s energetic pursuit of Gossen and Jevons’s rather feeble interest in him is striking and not entirely attributable to the differing heights of the language

Jevons and Gossen 165 barriers they faced. Jevons could doubtless have arranged for a translation had this seemed sufficiently important.15 Adamson was too stressed to undertake the task, but an intriguing alternative possibility is suggested by the appearance in the September 1879 issue of the Journal of the [Royal] Statistical Society of an unsigned book note on Gossen (Hooper 1879). Incited by the discussion of Gossen’s ideas in Jevons’s recent preface (Jevons 1879b) this note was subsequently attributed to ‘Hooper’ (Jevons 1888: 281). It translated well-chosen key passages from Gossen. The most likely author would seem to be Wynnard Hooper (1853– 1930), a recent Cambridge graduate and sometime student of Alfred Marshall, who had become a Fellow of the Statistical Society in 1878, in which year he joined the staff of The Statist under Robert Giffen. It seems possible that he was acquainted with Jevons and might have been willing to serve as his Secrétan if urged.16 But this was not to be. Instead, Jevons cut his losses with little ado and conceded that his youthful ambition to found a new economic theory had been crushingly forestalled by Gossen from the outset. The striking contrast between Jevons’s apparent reluctance to explore Gossen’s ideas and the vigor with which he subsequently researched Cantillon17 perhaps calls for explanation. Possibly he was awaiting the results of Walras’s promised researches into Gossen, or possibly he shrank from discovering by detailed examination exactly how far Gossen had anticipated him.18 But a more likely explanation is that his interest in questions of economic theory had already dwindled. Given the prominence that his Theory of Political Economy has assumed in the history of economic thought it is easily forgotten that economic theory was not a major intellectual preoccupation for Jevons. He had written the book speedily under the perceived threat of being scooped by Fleeming Jenkin but reacted thereafter mainly to points raised by others, showing little inclination to initiate new theoretical enquiries. After completing his major Principles of Science (Jevons 1874a) he did indeed focus increasingly on economics. But as his lecture ‘The Future of Political Economy’ (Jevons 1876) claimed, and as his subsequent efforts demonstrated, the areas of greatest concern to him had become the analysis of money and business cycles and the study of desirable deviations from laissez faire in socioeconomic policy. He certainly recognized the importance of a core of pure theory but by 1876 saw the new approach he had helped foster as already winning the day and as energetically led by Walras whose importunities were becoming awkward. He seems to have concluded that further refinement and development were better left to others.19 There was, however, a marked rise during Jevons’s last decade in his interest in the bibliography and history of economic thought, as Foxwell was to remark (Jevons 1884: xix–xx). This new line of interest is amply manifested in later writings, (Jevons 1879b, 1905), and Jevons’s study of Cantillon is best viewed as an aspect of this new line of interest, providing in Foxwell’s words ‘evidence of what he could have done as a historian’ (1884: xx). Had Jevons lived longer he would

166 Whitaker perhaps have been able in time to place Gossen also in a dispassionate historical perspective, but that was precluded by his death in 1882. The discovery of Gossen’s work may have discouraged Jevons and reinforced the already present drift of his interests away from pure theory. His limited, almost lackadaisical, reaction to the discovery contrasts strongly with that of Walras, for whom economic theory was a lifetime preoccupation, even obsession. Walras’s messianic belief in his own leadership role drove him to grapple with Gossen’s book and narrow, so far as possible, its impact upon his own claims to priority. Thus, while Jevons conceded perhaps too much and too readily to Gossen, Walras conceded no more, perhaps less, than was Gossen’s clear due. Even without Adamson’s discovery of Gossen’s book, sooner or later it would have been rediscovered and its merits recognized – although not necessarily within Jevons’s all too brief lifetime. Yet this discovery, and Adamson’s recognition of its significance, entitle him to a small niche in the economists’ pantheon despite his apparent lack of any published contribution to economic literature. It may be of interest in closing to follow his subsequent career. He remained at Manchester until 1893 but handed over the teaching of political economy to the Irish lawyer-economist J.E.C. Munro in 1882, concentrating thereafter on philosophical teaching and inquiry. In 1893 he moved to the Chair of Logic at Aberdeen and then in 1895 to the Chair of Logic and Rhetoric at Glasgow. He promised to be ‘the greatest historian of philosophy in our language’ (Jones 1902: 432), but death cut short his career in 1902 at the age of fifty.

NOTES 1 For biographical information on Adamson see Jones (1902) and Sorley (1920). 2 See Tribe (1993) for details of economic teaching at Owens in this period, including (p. 97) some details of Adamson’s teaching. See also Black (1993). 3 For communications from Adamson to Jevons on interest theory, sunspots, business cycles and Mill’s distribution theory, see Black (1977a: 226–8, 230–1, 299–301; 1977b: 60–2). Jevons (1879b: 49) acknowledged in print Adamson’s suggestions on the last topic. 4 Black (1977a: 183). Adamson had apparently mentioned the French translation of Thünen, more accessible to Jevons than the German original. 5 Black (1977a: 278). See also correspondence with T.E. Cliffe Leslie, Nicolaas G. Pierson, and Walras (ibid.: 272–3, 279–82, 289–90). Black’s conjecture that a puzzling letter extract (reproduced as 281n.1) informed Johan d’Aulnis of the discovery seems highly plausible. 6 Adamson had written in his initial account of Gossen that ‘Towards the latter part of the work … he seems to get rather mystical, but I speak from very insufficient knowledge as yet’ (Black 1977a: 269).

Jevons and Gossen 167 7 A consequential omission occurs in Jevons’s paraphrasing of Adamson in point 4 which elides the latter’s observation (Black 1977a: 268) that Gossen ‘points out that the time of enjoyment varies continuously’. In fact, Jevons’s points 3 and 4 and his points 8 and 9, which seem puzzlingly similar, confound two quite distinct phases of Gossen’s exposition: see the next section. 8 Gossen recognizes throughout that enjoyment of the more refined pleasures might be enhanced by experience and persistent application. He regards the conscious refinement of taste as an integral aspect of lifetime-utility maximization; see, for example, Gossen (1983: 8, 25–7, 154–6). 9 Despite the strong egalitarianism of Gossen’s ideal state, it hardly guarantees such identically, his aim being equality of opportunity, not of outcome. His ‘error’ has been discussed extensively: see for example Jaffé (1977) and Van Daal (1993). 10 For modern discussion of Gossen’s theories see Kauder (1965), GeorgescuRoegen (1983), Niehans (1987), Krelle and Recktenwald (1987), and Van Daal (1995, 1996). Stark (1953) provides the most extensive discussion of Gossen’s social views, while Van Daal (1995) emphasizes the role played by custom in the transition to the ideal state. 11 Walras initially hoped to publish rapidly this French translation of Gossen, undertaken primarily by Secrétan (Black 1977b: 21; Jaffé 1965a: I 616, 628, II 49). It appeared in print only after more than a century, however (Gossen 1995). 12 For the pertinent correspondence see Black (1977a: 259–63, 270–71, 281–2, 289–90; Black 1977b: 20–23). 13 Jevons had obviously devoted some attention to Walras’s theories in connection with their 1874–5 correspondence on priority claims (Black 1977a: 36–41, 45–50, 63–9, 84–6, 102–4) and in preparation for the address on ‘The Progress of the Mathematical Theory of Political Economy’ (Jevons 1874b). But there is little or no indication of subsequent attention to Walras’s theoretical ideas. 14 See Walras (1885: 478–9 and note 9 above). 15 The commercial viability of publishing a translation of Gossen might well have appeared dubious in contrast to the translation of Cossa’s ‘Guide’ (1880) in which Jevons was involved and to which he contributed a preface. 16 Hooper, son of a well-known military historian, had taken both Classical and Moral Science Triposes at Cambridge, graduating in 1875. He went on to serve for many years as City editor of The Times. Especially during the 1880s, he was active in the Statistical Society, publishing several papers in its journal. Georgescu-Roegen (1983: 56) identifies Hooper as G.D Hooper, presumably Reverend George Downes Hooper, a virtually inactive Fellow of the Society since 1874, but no justification is given and the identification seems improbable. 17 See Jevons (1881) and Black (1977b: 118–32). Admittedly the language barrier was lower in Cantillon’s case and perhaps by 1881 Jevons was less burdened by other tasks. 18 The last point is due to Antoin Murphy.

168 Whitaker 19 The preface to the second edition of Jevons’s Theory (Jevons 1879b) has a valedictory tone, although it offers, for others to pursue, an intriguing brief sketch of distribution theory on opportunity cost lines (44–9), an approach soon to be popularized by the Austrian school. The text of the new edition incorporated few changes, the most prominent – the treatment of dimensions – being largely imported from Jevons (1874a). The published fragments of his unfinished treatise (Jevons 1905) fail to suggest that significant theoretical development was envisaged.

10 John Emilius Lancelot Shadwell on value and wages Ian Steedman

In the final paragraph of his The Theory of Political Economy (1871), Jevons asserted that, ‘There are valuable suggestions towards the improvement of the science contained in the works of such writers as Senior, Banfield, Cairnes, Jennings and Hearn’, as in those of certain ‘foreign authors’. In his second edition, of 1879, Jevons revised his final paragraph somewhat; Banfield and Jennings were dropped from the list of English language authors, which was now supplemented with the names of Macleod, Cliffe Leslie and Shadwell. These last two were recommended in a more specific manner in the Preface to the Second Edition:

One of the first to treat the subject [of the theory of wages] from the right point of view was Mr Cliffe Leslie, in an article [of July 1868]. Some years afterwards Mr J.L. Shadwell independently worked out the theory of wages which he has fully expounded in his admirable System of Political Economy [1877]. (Jevons 1879b)

Jevons also corresponded with Shadwell. On the 17 October 1872 he wrote from Manchester and thanked Shadwell for the fact that, ‘More than six months ago you did me the favour to send me some critical remarks upon my Theory of Political Economy’ (Black 1973– 81: III, 253) – since TPE was only published in October 1871, Shadwell had lost little time in commenting on it not later than March 1872. A few weeks later (5 December 1872) Jevons again wrote from Manchester to thank Shadwell for having sent a ‘copy of the Westminster Review [1872] containing your article on the Theory of Wages’ (Black 1973–81: III, 254) Each of these letters is of some length, entering into substantive discussion of economics, in addition to conveying Jevons’s thanks. The two men must have remained in contact, for only two months before his death Jevons wrote in a letter to Palgrave (13 June 1882) that, ‘I do not understand the US silver certificates but John L. Shadwell who has studied the subject tells me that …’ (Black 1973–81: V, 194).

170 Steedman Shadwell was not a leading economic theorist, it need hardly be said, but was certainly a fluent and perceptive author who could make a favourable impression on Jevons. In his Guide to the Study of Political Economy (English edition 1880, with Preface by Jevons), Cossa observed that, ‘Among contemporary English economists, J.E. Cairnes (died 1875) stands foremost … We must pass over those of less note, as Scrope, Eisdell, Hearn, Musgrave, Shadwell’ (1880: 179). Here by contrast – but implying no criticism of Cossa – we shall consider Shadwell’s contributions to the theories of value and of wages, made in his Westminster Review article (1872) and in two books on political economy (1877, 1880). (Shadwell’s third, 1885, volume on the subject is only of pamphlet length and, as its title suggests, value and wages are not its central concerns.) With respect to the theory of wages in particular, Shadwell illustrates (as does Jevons) that the struggle to reach what may now seem a quite simple theory – the marginal productivity theory – was, indeed, just that: a struggle. The ease of achieving a theory and the ease of understanding that theory once achieved are two quite different things.

A BIOGRAPHICAL SKETCH John Emilius Lancelot Shadwell was a grandson of Sir Lancelot Shadwell (1779–1850), the last Vice-Chancellor of England. Of the Vice-Chancellor’s many children, the second son – John Emilius Shadwell (1809–43) – was to become the father of our J.E.L. Shadwell. John Emilius was educated at Eton and Cambridge and ordained (at Durham) as priest in 1834. He served as curate at Gateshead, 1833–5, and it was presumably in this period that he met his future wife, Emma Donna Cookson, of Meldon Park, Northumberland. They married in August 1836, after he had become rector of All Saints, Southampton in May 1835, and had one daughter and three sons, J.E.L. Shadwell being the youngest son. The Reverend John Emilius Shadwell remained rector of All Saints until his early death at the age of 33, in 1843; he had lived at East Street in Southampton before moving to Bitterne only a few months before his death. He was buried at All Saints on Monday 6 March 1843 when J.E.L. Shadwell was less than 3 months old. (A son aged 2 years and 6 months had been buried there about a year earlier and Emma Donna was to be buried there, on 5 September 1860, when she died aged 49.) According to the report of the funeral which was carried in the Hampshire Advertiser of 11 March 1843, the Reverend Shadwell had been a generous and well-loved rector. J.E.L. Shadwell was born on 15 December 1842 and baptised at All Saints on 13 March 1843 – just one week after his father’s burial there. From 1856 to 1861 he attended Shrewsbury School, where he rose to be Head of School, that is, academically top of the Sixth, in 1859, 1860 and 1861. He became an Exhibitioner and Junior Student at Christ Church,

John Emilius Lancelot Shadwell 171 Oxford, in 1861 and was notably successful there as a student of classics, obtaining first class honours (1863 and 1865) and two further scholarships (1864 and 1865). In 1865 Shadwell was elected, after an examination, to a Senior Studentship; he resigned from that (lay) Studentship in 1887. On 11 November 1865 Shadwell became a student at Lincoln’s Inn and he was called to the Bar there on 7 June 1869. From 1870 to 1872 he had chambers at 3 Old Square, Lincoln’s Inn and was described in the Law Lists as an equity draftsman and conveyancer. (The former term implies that he specialized in drafting pleadings in the Court of Chancery.) No chambers address is given after 1872 (did Shadwell then cease to practise at the Bar?), but his name is listed until 1919, the year of his death. It may be noted here that the famous critic of the wages fund theory Francis David Longe was also a barrister, called to the Bar in 1858. He had graduated four years previously from Oriel College, Oxford, where Charles Lancelot Shadwell, a cousin of J.E.L. Shadwell, was to become a Fellow in 1864. Nassau Senior, Mountifort Longfield and Cliffe Leslie too were barristers as well as economists; indeed Nassau Senior was, like Shadwell, a conveyancer and Chancery barrister. In his major historical study of ‘freedom of contract’, Atiyah has argued that British lawyers were much influenced by classical political economy but lost contact with the ‘new’ post-1870 economics. He writes: Many of the classical economists wrote extensively in areas outside economics; some of them were actually trained as lawyers, or had acquired a legal qualification; and conversely, a man going into the learned profession of the law was expected to cultivate some knowledge of the moral sciences. The close relationship between law, economics, and the social sciences generally was particularly strong in the first forty years of the nineteenth century; thereafter it waned and by 1870 was largely at an end. (1979: 293)

More specifically, he writes that from about 1870 economics, becoming more academic, was increasingly divorced from other social sciences and that, ‘The lawyers, in particular, ceased to have any significant contact with, or understanding of, the new economies’ of Jevons and Marshall (1979: 602). Thus ‘by the 1870s this association of lawyers and economists was rapidly disappearing. So far as the practising legal profession was concerned, the two disciplines went in very different directions as classical political economy gave way to neoclassical economies’ (1979: 666). It is not of course to dispute Atiyah’s general thesis to point out that, as we are about to see, Shadwell was a clear exception to Atiyah’s rule, being a barrister who went out of his way to understand the new economics – though it may be noted that F.Y. Edgeworth too was called to the Bar, by the Inner Temple in 1877; he never practised, however.

172 Steedman Shadwell did not devote his energies exclusively to the law during the years 1870–2. Student records at University College London (a short walk away from Lincoln’s Inn) show that in both 1869–70 and 1870–1 Shadwell attended two political economy courses, paying one guinea per course; he took no other courses. (These records give his address, in both years, as 21 Nottingham Place, which is close to the corner of Marylebone and Baker Street.) Unfortunately, in the judgement of H. Hale-Bellot at least (1929: 131), although the professors of political economy were J.E. Cairnes, L.H. Courtney and W.S. Jevons, ‘none of them managed to put very much spirit into the department’. Be that as it may, the UCL Calendars for 1870–1 and 1871–2 indicate that in each of the academic years 1869–70 and 1870–1 Professor J.E. Cairnes gave two courses of twelve lectures each; the latter Calendar states that ‘the order of topics will, in general, be that followed in Mill’s Principles of Political Economy’. Those same Calendars also record that Shadwell was awarded the ‘Prize for Political Economy’ in Cairnes’s course (1869–70) and the corresponding ‘Senior Class Prize’ (1870–1). Within a few months of receiving this second prize in economics, Shadwell had achieved his first publication in the field (though his first publications were even earlier; see bibliography). Unfortunately we know nothing of Shadwell’s life during the period in which he published his three books on political economy but it is known that in 1886 he was living near Melksham, Wiltshire (which is not far from Bath) and that from 1886–1907 he was a member of the Governing Body of Shrewsbury School. In 1901–8 and 1910–12 he was listed by the Post Office as having an address in Bath. And that is, indeed, where he died on 3 December 1919. (The Somerset county records refer to a Shadwell, in 1745, and to a Shadewell, in 1822, both in connection with Bath.) Our Shadwell was buried at the Abbey Cemetery, the Rector of the Abbey officiating; the grave inscription reads, ‘In loving memory of John E.L. Shadwell. Admired for his learning, Beloved for his goodness, Revered for his stainless honour. Died Dec. 1919 in his 79th year.’ Those attending the funeral included a nephew, two great nephews, a great niece, two cousins and a godson but no closer relatives; there is no reason to suppose, in fact, that Shadwell ever married. His will of 27 June 1912, with a single codicil of 9 June 1915 (Probate, London, 9 March 1920) provided for certain friends, nephews, etc., and left just under £14,200 (some £220,000 perhaps in today’s terms) to be administered by the Public Trustee. It is not known why Shadwell had recourse to this relatively unusual – and then quite new – procedure.

A THEORY OF WAGES As was noted above, on 5 December 1872 Jevons wrote to Shadwell thanking him for having sent a copy of his Westminster Review article ‘A Theory of Wages.’

John Emilius Lancelot Shadwell 173 ‘I have now read it more than once, and carefully considered it,’ Jevons wrote, ‘and so far as I can pretend to judge, I think you have put forth the truth very clearly and soundly. I feel sure that the general proposition which you put forth, that wages are ultimately governed by efficiency of labour, will some day or other be recognised as true, and though Mr Hearn, myself, and perhaps some previous writers, have had some notions to the same effect, yet I think that you have stated the truth more roundly and fully.’ (Black 1973–81: III, 254–5)

After making some more detailed remarks (see below), Jevons continued, ‘May I express a wish that you will not rest contented with having printed so concise an essay on the subject, but will develop your views more fully?’ (p. 255) What had Shadwell achieved in his 1872 article to elicit this ‘flattering reaction’ (Whitaker 1975: 179, note 4) from Jevons? Shadwell begins by praising Thornton’s ‘attack on the theory of supply and demand’. (Jevons, in his 1871 Preface, had referred to ‘the unquestionable truth of the laws of supply and demand’ (1970: 43).) Yet while Thornton had ‘cleared the way for a new theory’ he had not provided one and Shadwell hopes to do so ‘in relation to the rate of wages’ (1872: 184). First, though, he offers some critical remarks on earlier theories, referring by name to Turgot, Smith, Ricardo, Malthus and Senior (pp. 184–6). To Senior is attributed ‘the current theory’ that:

the rate of wages … is said to depend on the ratio between the wages fund and population … it is this [theory] which Mr Thornton (in his work on labour) has attacked by utterly denying that there is such a thing as a fund destined to the payment of wages, and asserting that employers have no particular desire to devote any definite proportion of their capital to that object. (Shadwell 1872: 186)

(At this point Shadwell has inserted a footnote saying that, ‘Since writing the above, I have received from Mr Francis D. Longe a copy of his pamphlet … which was first published in 1866, and in which he demonstrated the unsatisfactory character of the theory in question, even more conclusively than Mr Thornton, and quite independently of him.’) Shadwell then challenges the defence of the wages fund which asserts that, ‘though employers have no personal desire’ to spend their capital in any given proportions, they are nevertheless forced to do so by the technical facts, there being (in modern terms) fixed input–coefficients. He responds by accepting completely the alleged technical facts but insisting that knowledge of them, together with knowledge of the prices of all non-labour inputs, will not enable one to infer the rate of wages, not even if one knows, in addition, the total capital available. Why

174 Steedman should the employer spend all that he could spend on wages if he can obtain the required labour for less, Shadwell asks pointedly (pp. 186–7). Since ‘Mr Thornton … gives it as his opinion that [wages] are determined by competition, that there is no law regulating competition, and, consequently, none regulating wages’, Shadwell draws the gloomy conclusion concerning the theory of wages that, ‘after a century has elapsed, during which many of the greatest minds in Europe have been occupied in investigating the subject … nothing is known’ (p. 187). Before offering his own (partial) remedy, Shadwell carefully delimits his objective. He will only seek ‘to account for the great differences between the rates of wages prevailing in different countries, or at different times’, in effect taking relative wages, in a given country or at a given time, to be exogenously determined (‘accordingly as the work is more or less agreeable’) (p. 187; on p. 188 it is said that the ‘proportion between the rates of wages prevailing in different employments … has been well explained by Adam Smith and others’). He explicitly eschews any attempt to explain, for example, why the cab fare from Harley Street to Piccadilly may be less than that from Piccadilly to Harley Street (p. 187). This reticence on Shadwell’s part provoked Jevons, in his letter of 5 December 1872, into saying that I should dissent from … your adoption of a general average of wages. … In my Theory I have attempted to show that everyone who works for pay will ultimately be paid according to what he contributes to the general industry. I think that … you will readily see that this follows from your own theory. It is a convenient simplification of the subject to pass over this question of the difference of wages; but you so far detract from the consistency and value of your theory. (Black 1973–81: III, 255) Jevons goes on immediately to express the wish, quoted above, that Shadwell ‘will develop [his] views more fully’. ‘The problem, therefore, is reduced to this: Why do labourers in general receive more of a given commodity in one age or country than in another?’ (Shadwell 1872: 187). For Shadwell the answer naturally suggests itself; – because less labour is required to produce that commodity. Thus, if on the worst land in cultivation in America the labour of one man can produce twenty quarters of wheat, and on the worst land cultivated in England only ten quarters, wages will, ceteris paribus, be higher in America than in England. (p. 187) Shadwell goes on immediately to say that the American wage rate will not be ‘twice as high’ as the English one but this is because he is thinking of wage rates as bundles of various

John Emilius Lancelot Shadwell 175 commodities, not just wheat; when his numerical example is worked through it is indeed found to imply that the real wheat wage rate is ‘twice as high’ in America. Shadwell is thus definitely asserting that real ‘wheat’ wage rates are proportional to ‘wheat’ marginal products of labour. But notice that (i) this is not equivalent to saying that the real wage rates are equal to the marginal products and (ii) that the concept of ‘marginal product of labour’ at work here is that of the product of labour working on the worst land, an ‘extensive’ and not an ‘intensive’ concept of marginal product, perhaps, but certainly not the purist’s concept involving variable proportions of homogeneous inputs. As for the former query – whether real wage rates equal or are merely proportional to marginal products – Shadwell goes on to consider ‘the constant complaint of [Australian] employers … that their labourers desert them in order to set up farming on their own account’ (p. 188). He takes the obvious conclusion to be that ‘employers are obliged to offer such wages as will give the labourer the same, or nearly the same, quantity of food, clothing and other necessities and luxuries, as he could produce for himself’ (p. 188). Shadwell is, then, asserting equality (and not mere proportionality) of the real wage rate to labour’s marginal product. (Here and at other points he refers to the product of ‘the average labour’ of one man for one year but it is reasonably clear that he means the ‘average-value’ of labour’s marginal product.) Further evidence that Shadwell is thinking in marginal terms comes, interestingly enough, from his assertions of a ‘labour theory of value’. We read, for example, that if ‘a farm-labourer could produce nine quarters of wheat in a year, and a working shoemaker can produce ninety pairs of shoes, then one quarter would exchange for ten pairs of shoes’ (p. 189; see also his nail-making example, p. 194). But it would be quite wrong to interpret this in ‘average labour cost’ terms, since four pages later Shadwell remarks that, ‘The price of wheat is determined by the cost of its production in the least favourable circumstances’ (p. 193). He suggests moreover

that although the same quantity of labour exerted throughout the country now produces a much greater quantity of corn than formerly, nevertheless that portion of it which determines its price is raised with the same, or nearly the same, amount of labour. (p. 193)

Whatever the merits of Shadwell’s empirical claim, it is quite clear that his ‘labour theory of value’ is couched in terms of marginal labour costs. A little later still (p. 197), Shadwell writes: ‘Although no economist has, so far as I am aware*, explained the variations of wages by saying that they depend on the efficiency of labour, I am yet able to cite high authorities in support of this theory.’ The * refers to the following footnote:

176 Steedman Since writing this, I have been much gratified to find the principle recognised by Mr Jevons, in his Theory of Political Economy … where he quotes a passage from Mr Hearn’s Plutology, in which it is also admitted; but this latter work I have not yet met with. But Shadwell’s claim in the text is that his theory of wages is an extension, to all states of society, of the principle laid down by Adam Smith, as prevailing in primitive times, with the slight modification, that the rate of wages is determined by the efficiency of labour in the least favourable circumstances in which it is exerted. (p. 197; emphasis added) Whether Shadwell’s words ‘the slight modification’ were ironic or naive we cannot say but his immediately following words are pointed. Adam Smith could not give it this extension, because the theory of rent had not in his time been explained. Had this been done, he would doubtless have said that the farmlabourer receives as much corn as he could produce on the worst land in cultivation. (ibid.) It would not seem to require a very ‘generous’ reading of this passage to take it to mean that wages and rents are determined by the same – marginal – principle. Less clear is why Shadwell should have written that Smith would ‘doubtless’ have enunciated a marginal productivity wage theory, if familiar with the theory of rent, although he (Shadwell) does regard it as ‘singular’ that Ricardo did not present such a theory of wages (p. 197). (This does not prevent him from describing Ricardo as ‘the greatest and clearest thinker who has ever investigated economic science,’ (p. 200); what did Jevons make of that, one might wonder? We may also notice here, without pursuing the matter, that Shadwell appears to be less positive about Malthusian population theory than was Jevons (pp. 201–3). In part, this is because he takes there to be decreasing costs in manufacturing, via increased division of labour (pp. 194, 195), so that ‘as society advances labourers must acquire a greater command over many important articles, although they live in utter defiance of Malthusian principles’ (p. 203).) Whilst wages and rents have been referred to above, no mention has yet been made of profits – and indeed Shadwell says little about them. In a numerical example concerning Yorkshire and Dorsetshire farmers it is clearly implied that the profit rate in Dorset is 8 1\2 per cent (p. 190) and it is said that ‘there is no reason to suppose that the farmer’s profit is

John Emilius Lancelot Shadwell 177 higher’ in Dorset than in Yorkshire (p. 191). (It is these same two counties to which Fawcett refers (1883: 150–3) in his discussion of differential wages.) More generally, Shadwell suggests some pages later that ‘no sufficient proof has yet been given, that the rate of profit is really different in different ages or countries … at all events the variations are too slight to have much effect upon prices’ (p. 196). (It is not clear that this justifies Whitaker’s assertion (1975: 179, note 4) that ‘Shadwell took the rate of interest to be given’. No more clearly justified is his description of Shadwell’s wage theory as being ‘closely-related’ (ibid.) to an early theory of Marshall’s involving a fixed average product.) Shadwell does nevertheless make it plain that he sees profits as compensation for the saving required to provide capital goods (e.g., pp. 190, 196). No one could sensibly claim that Shadwell’s 1872 paper presents a marginal productivity theory of the wage rate with the simple clarity of a formal theory based on varying proportions of homogeneous labour and other homogeneous inputs. But as I have remarked elsewhere (1997: 60), Jevons’s account in the Theory of Political Economy ‘is in fact very far from perspicuous (as the reader is invited to check)’. And as was noted in the same place, Jevons’s clearest statement was perhaps in his second edition Preface where he said that wages and rents are governed by the same formal laws – just as Shadwell’s clearest claim to a marginal productivity theory of wages perhaps lies in his forthright linking of wage theory to rent theory (see above). It can sensibly be claimed that Shadwell, in 1872, had a pretty good grasp of the marginal productivity distribution principle with respect to real wages (and rents).

A SYSTEM OF POLITICAL ECONOMY Shadwell’s first book on political economy (1877) was reviewed in The Academy and the reviewer suggested that, ‘The subjects on which he lays chief stress, and which his book is mainly designed to expound, are value and wages. He aims at establishing a law of value from which a universal law of wages may be deduced’ (The Academy, March 1877: XI, 219). Although the volume is a large one (625 pages plus an index of ten further pages), being arranged in four main books (on Production, Distribution, Exchange and Taxation, following J.S. Mill) and thus covering a wide field, the reviewer’s observation is to the point. In his Preface, dated January 1877 and still referring to his 1869–71 address of 21 Nottingham Place, Shadwell himself writes:

I commenced studying POLITICAL ECONOMY at the time when the publication of Mr Thornton’s work on Labour had just given so rude a shock to the common belief that the science, so far as it deals with the subjects of Value and Wages, was complete. (p. iii)

178 Steedman After stating that he has ‘found reason to be dissatisfied’ with the approaches of both Thornton and J.E. Cairnes, ‘whose lectures I had the privilege … of attending’, he continues:

I now wish to lay before the public my theories of Value and Wages, which I believed to be new when I adopted them, but in which I have since found that I have been forestalled in the former case by Adam Smith and Mr Cazenove, and in the latter by Mr Jevons. (p. iii)

We shall thus focus on ‘Book II – Distribution’ which, its title notwithstanding, treats both of value and of distribution. And it takes them in that order – on the first page of that Book Shadwell not only makes fun of Mill’s notorious ‘happily there is nothing in the laws of value which remains … to clear up’, but says directly that he must ‘depart’ from Mill’s arrangement of the materials of political economy by treating of value before distribution is considered. In Shadwell’s judgement, ‘it is just because Mill … deferred the explanation of value that he has been unable to explain the causes on which the rate of wages depends’ (p. 89). It will be recalled that in his letter welcoming Shadwell’s Westminster Review article, Jevons had expressed the wish that Shadwell would ‘not rest contented with having printed so concise an essay on the subject, but [would] develop [his] views more fully’. It is thus noteworthy that in the Preface to his A System of Political Economy Shadwell writes: I have thought that [my] theories [of Value and Wages] would be likely to receive more attention if worked into a System of Political Economy, and I have, therefore, in the following pages, discussed most of the questions commonly dealt with in treatises on the science. (p. iii)

Whatever the soundness of Shadwell’s judgement in this regard, this remark helps to justify our focus on value and distribution (especially wage) theory, that is, on what is, as already noted, one book in a volume containing four main books and over 600 pages. Before turning to our (and Shadwell’s) main topic(s), however, we may take note of a few elements from Shadwell’s two chapter ‘INTRODUCTION’ and from his five chapter ‘Book I – PRODUCTION’. Shadwell’s first chapter is devoted largely to countering some objections – ‘popular, moral and scientific’ – to the science of political economy, a term to which he here offers no objection (but see his much later remark at p. 535). (Interestingly, far less space, proportionally, is devoted to methodological and procedural matters in the large System than in the popular Political Economy for the People of three years later.) Shadwell insists on what

John Emilius Lancelot Shadwell 179 has more recently been called the positive/normative distinction and says that political economy is concerned exclusively with explanation and prediction. ‘Political Economy cannot, indeed, dictate to rulers what they ought to do, but it can show them what the effect of their acts will be’ (p. 1). After considering a number of specific objections to political economy, Shadwell suggests that there is a general one ‘which in reality lies at the root of all the hostility which is evinced towards the science’ (p. 7). ‘Comte, Mr Ruskin, Mr Carlyle and a host of less eminent persons … object to Political Economy, because [they] regard it as bound-up with the doctrine of Laissez-Faire.’ Whilst asserting that ‘strictly speaking’ there is no necessary connection between the science and the policy in question (pp. 7–8), Shadwell claims that:

it must be admitted, that the tendency of scientific inquiry is to show more and more convincingly that Laissez-Faire is the best maxim for governments to adopt when they desire to see the material comfort of their subjects increased. (p. 8)

He had already noted that a government need not treat that desire as overriding all other considerations. To what extent, then, was Shadwell a Liberal? Notwithstanding the ‘positive’ cast of his work and his insistence that moralists and governments, not political economists as such, must determine ethical and policy issues, he drops some fairly broad hints. It is suggested that government should not regulate who may practise medicine or the law and that it is wrong to exclude either women or Dissenters from the legal profession (pp. 45–6). Reference is made to the Spanish government’s ‘foolish attempt to suppress the insurrection in Cuba, in which no true friend of Spain could wish it to succeed’ (p. 50; at p. 613 the war in Navarre is also mentioned) and it is revealed that Irish Home Rule has Shadwell’s ‘warmest sympathy’ while, correspondingly, Gladstone is sharply criticized in this regard (pp. 62–4). While ‘it is not the province of Political Economy to defend the arrangements which may be made in different states of society for distributing the produce of the labour of the people’ (pp. 198–8; similarly at p. 185), Shadwell asserts – even while criticizing Bastiat’s falling rate of profit theory – that ‘no theory which can receive the sanction of science can in any way affect the truth of his great principle, that “tous les interêts légitimes sont harmoniques”’ (p. 185). This does not prevent him from referring to ‘the social difficulty of the present age; the reconciliation of the interests of capital and labour’ (p. 244) and to ‘the establishment of cooperative societies, by means of which the workmen hope to free themselves from the tyranny to which they consider that they have been exposed’ (p. 247). Like many others at the time, Shadwell expresses (cautious) optimism concerning the role of cooperation and, more especially, ‘industrial partnership’ (pp. 243–50). But the context for this is that ‘all

180 Steedman interference on the part of Government, with the object of causing capital to be employed in undertakings where it would not be directed by private enterprise, are either superfluous or injurious’ (p. 61). Shadwell’s second chapter, although entitled ‘History of Political Economy’, is really no more than a brief prolegomenon designed to ease the reader’s path to the theories of value and of wages. Adam Smith, for example, is said to have ‘pointed out that commodities have a natural value which depends on their cost of production, and towards which their market value is always approximating’, the former dependence being a ‘long run’ one (p. 15). However, the ‘greatest work ever contributed to the science was Ricardo’s Principles of Political Economy and Taxation’ in which Ricardo extended Smith’s theory of natural value (p. 16). The principle that exchange values are proportional to the labour used in production holds in all states, not just the simple state, of society provided that we ‘reckon the labour which is indirectly as well as that directly applied’ (p. 16). Ricardo

admitted that the relative value of two things, which had required equal quantities of labour to produce, was affected by the longer or shorter time during which the capitalist had to wait for his recompense, but he denied that rent had any effect upon value. (p. 17)

More important for Shadwell, though, is Ricardo’s recognition that the value of a commodity ‘depended on the labour employed in the least favourable circumstances’ (p. 17), which prepares the reader for Shadwell’s marginal labour cost theory of value. ‘This theory of natural value is now recognised as one of the fundamental principles of the science, and those who refuse to adopt it are shut out from the comprehension of the more involved Economic problems’ (p. 17; would Jevons have agreed?). With respect to Longe, Thornton and the wage fund theory, Shadwell’s emphasis is perhaps rather different here from that found in his 1872 article. Now it is Thornton’s independence of Longe, rather than vice versa, that is stressed and Thornton’s work of 1869 is said to be ‘superior to Mr Longe’s pamphlet, from a scientific point of view, for it attacks the whole theory of supply and demand [in the sense which Mill has given to those terms], which Mr Longe accepts’ (p. 19). But

Mr Thornton has not offered any explanation either of market value or of wages. I shall endeavour, in the following work to contribute something to a more correct explanation of the subject of value, and more particularly of wages; but it will first be necessary to devote a few chapters to the subject of production. (p. 20)

John Emilius Lancelot Shadwell 181 We need not dwell long on Shadwell’s five chapters in Book I, dealing with ‘Wealth, Labour, Capital, Population and Land’ respectively. After stressing that wealth does not consist of money, Shadwell makes it clear that the

fundamental proposition on which I shall base most of my arguments, is that every one desires to obtain wealth by the least possible amount of labour. This is an induction from experience, which … can hardly be disputed. (p. 23)

Some ten pages are devoted to the division of labour, with many references to Smith and to Babbage. More distinctive, however, is Shadwell’s discussion of capital, which is along decidedly Jevonian lines; indeed he explicitly cites Jevons as ‘the thinker whose views it is the object of the present chapter [Chapter III – Capital] to explain and illustrate’ (p. 55). Even more specifically, that chapter opens by accepting Jevons’s definition of capital as consisting ‘merely in the aggregate of those commodities which are required for sustaining labourers of every kind or class engaged in work’ (p. 47; see Jevons 1970: 226; see also Shadwell 1877: 27, 28, 141–2). In fact Shadwell is inclined to simplify the Jevonian approach yet further and to restrict the ‘term capital to denote simply food’; it is thus unsurprising that he ‘follow[s] Mr Jevons in altogether rejecting the expression “fixed capital”, and in saying not that a railway is fixed capital, but that capital has been [fixed] or invested in it’ (p. 48). Shadwell infers that an increase in ‘the national capital … can only result from the extension of agriculture to soils previously untilled, or from improvements in the mode of cultivation’ (p. 49). (Given his strictures on the wage fund theory, it is odd that Shadwell does not add ‘or from reductions in the food consumption of non-workers.’) And the conclusion is also drawn that neither machinery-breaking nor milder forms of worker-imposed restrictions on working practices can increase total employment, for such restriction ‘in no way increases the stock of food in the country, and therefore cannot cause more labourers to be maintained’ (p. 52).

BOOK II – DISTRIBUTION The first five chapters of Book II deal with Value (Chapter I), the Cause of Value (II), Wages (III), Profit (IV) and Rent (V) respectively; there is also a Chapter VI, ‘Recent Fall in the Value of Gold,’ to which we shall not need to refer again, and a Chapter VII, ‘Trades’ Unions and Co-operation’. Chapter I opens with the words, ‘The subject of value is of so much importance in Political Economy that it may be considered as constituting the very essence of the science’ (p. 89). This does not, perhaps, fully prepare the reader for the fact that this

182 Steedman chapter is effectively a single, sustained argument in favour of labour-commanded as the best measure of value. Shadwell does not use the actual term labour-commanded but there can be no doubt as to his meaning: ‘Adam Smith has pointed out a simple and obvious [universal measure of value] for us to adopt, viz., the length of time which a man will labour in order to obtain any given commodity’ (p. 91; see also pp. 260, 517). ‘And it is in this sense that [the term value] will always be employed in the present work’ (p. 93). According to Shadwell, only ‘Mr John Cazenove’ has ‘followed Adam Smith in this respect’ (p. 93; see also p. 95; and see p. 99 where Malthus’s use of labour as the measure is acknowledged). It is recognized that since ‘the rate of wages is not the same for all labourers’ and since ‘the rates which prevail in other employments (do not) always bear the same proportion to that which is paid to common labourers’ there is, in principle, a problem in knowing which wage rate to use as the measure (p. 92). In practice, however, Shadwell is content to use that of the ‘common-labourers’ since they ‘are so large a class’. Adam Smith, Cazenove (and himself!) aside, Shadwell sees all ‘Economists’ as attempting to reach a concept of value by extending the everyday concept of price to arrive at the idea of a

power of purchasing commodities in general. Unfortunately, this extension can only be effected by depriving the word of all meaning … The power of gold to purchase silver is a definite idea, and so is its power to purchase copper; but the power of gold to purchase silver and copper means nothing at all. (p. 93)

(The idea of a composite-commodity standard appears to elude Shadwell, as does – not surprisingly in 1877 – that of an index number approach to the problem of ‘averaging’ different percentage price changes over time (p. 94).) Yet, secure in his own choice of the labour-commanded measure of value, Shadwell vigorously rejects Jevons’s ‘solution’ of simply abandoning the term value altogether and substituting

the phrase ‘ratio of exchange’ [since] this is tantamount to giving up the problem as insoluble, an act of despair which no student of science can willingly submit to. … Political Economy has no right to give up the problem and to tell [Mankind] that the word means nothing. (pp. 94–5)

(Shadwell may have admired Jevons but was certainly no mere acolyte!) For Shadwell, labour is not to be treated as a commodity (‘material articles [and] labour’ do not fall ‘in the same category’) and (simple) labour is clearly the measure of value to be adopted.

John Emilius Lancelot Shadwell 183 We need not follow Shadwell’s long discussion (pp. 96–104) of Malthus and Ricardo on value but it may be noted that, his criticisms of them notwithstanding, Shadwell has ‘no intention whatever of impugning in any way their claim to be considered as great masters of the science’ (pp. 96–7). Indeed he recalls here his earlier expression of ‘regret for the foolish calumnies with which [Malthus] has been assailed’ (p. 97; see also p. 66) and says of Ricardo that he ‘has been so absurdly attacked by men who were unworthy to mend his pens’ (p. 97). Shadwell writes that ‘every innovation in the science must partake more or less of the character of a revolt against Ricardo. While taking part in such a revolt, I [salute] his immortal work’ (p. 97). Even if Shadwell is in revolt against Ricardo, and gives his ‘opinion of the merits and defects of Ricardo’ (p. 99) his approach might be thought more judicious than that of Jevons. Having settled in Chapter I what is to be meant by ‘value’, i.e. common labourcommanded, Shadwell moves on in Chapter II to consider the ‘Cause of Value’. He writes: To explain why a given commodity has a given value is to answer the question; – why does its possession enable its owner to command the labour of others for so many days? – or, which is the same thing, – Why is it necessary for the labourer to spend so many days’ wages in order to procure the commodity in question? Thus value and wages are the same phenomenon seen from two different points of view, and the answer which naturally suggests itself to both questions is – Because it has required just so many days’ labour to produce the commodity. This is, with some necessary qualifications, the explanation which I have to offer. (p. 105) Unfortunately this lucid passage leads straight into the assertions that ‘an article … which it has taken six days to produce, would always exchange for six days’ labour’ and that ‘two things which are produced with equal quantities of labour will exchange for each other, since each will exchange for the same quantity of labour’ (p. 105). However, Shadwell does proceed immediately to stress that there are ‘circumstances which surround, and, in some measure, obscure the working of the abstract law which has been enunciated above’ (p. 106). First, one must reckon in all the labour required, not just the immediate and most obvious labour involved. Second, profit must be considered: ‘The law, therefore, may be more correctly expressed by saying that the value of a commodity is determined by the amount [sic] of labour and abstinence which are required to produce it’ (p. 106). Third, different units of wheat, for example, may be produced under different conditions and yet have the same value – and it is not the average conditions that determine value. ‘The law, therefore, may be rendered still more correct by saying that the value of a commodity depends on the labour and abstinence which are necessary to produce it in the least favourable circumstances’ (p. 107).

184 Steedman Any expositional infelicity aside, then, it might seem that Shadwell is on the verge of enunciating a fairly developed ‘marginal’ theory of labour-commanded value, allowing for indirect labour use, positive profits and variable production conditions. But his ‘hyperJevonian’ view of capital now stands in his way. The last passage quoted above runs on: ‘The amount of abstinence is in proportion to the amount of the capital, which again is in proportion to the amount of labour employed, so that … the value increases in proportion to the labour employed’ (p. 107). It seems that, in an obvious modern notation: (pj/w) = (1+r) / (Lj/Qj) And certainly Shadwell’s examples on pp. 108–9 appear to involve: (pi/pj) = (Li/Qi) / (Lj/Qj) or even pj = w(Lj/Qj) Did he, somewhat in the spirit of Ricardo, recognize the objections of principle to a (marginal) labour theory of value but, for practical purposes, treat the profit element as negligible? The matter is complicated by an obscure (to the present writer) passage in which Shadwell states that if the rate of profit were ever to vary it would be necessary still further to qualify the law of value. Capital and labour must then be assumed to be two separate agents working independently of each other, and the value of a commodity may be said to be equal to the labour employed in producing it, the capital being altogether left out of the account. (p. 110; see also p. 141) We are obliged to leave the interpretation of this passage to the reader. (On an anachronistic note, it may be remarked that, in an obvious notation, one of the first order conditions for the maximization of: pjQj (Lj,X1j,…,Xnj) − (1+r) (wLj+p1X1j+…+pnXnj) is, of course: pj (Qj/Lj) = (1+r) w which ‘is’ the formula attributed to Shadwell above.)

John Emilius Lancelot Shadwell 185 How will (labour-commanded) values tend to change over time? Shadwell not only expects those of manufactured items to fall, as the division of labour is extended, but presents the interesting (cumulative causation) argument that every ‘improvement in manufactures tends to produce other improvements’ as a lower price expands demand, which permits further division of labour and thus even lower costs and hence prices (p. 112). By contrast, of course, the products of the ‘extractive’ industries will tend to rise in value (pp. 113–17). Yet the claim is made that: while manufactured commodities tend to fall in value as society advances, and raw produce in general tends to rise, the value of the staple food of the people, though it varies from year to year, tends always to remain stationary when the seasons are equally favourable. (p. 120) The background to this claim is Shadwell’s insistence that any (net) population increase will follow – and never precede – an increase in food production. Why then, he asks, would farmers ever ‘resort to poorer soils, while richer ones are to be had?’ (p. 120). If poor land is taken into cultivation this is not because population has increased but because ‘some discovery has been made’ which now renders the poor land equally profitable; any population increase will be the effect and not the cause of increased food output (p. 120). (We are not clear why Shadwell takes it to follow that the real food wage/the (labour-commanded) value of food are stationary.) In Shadwell’s theory, ‘As the value of a commodity always in the long run conforms to its cost of production, all attempts of a government to regulate the value or price of any article must be either superfluous or injurious’ (p. 121). What concerns us at this point is not the laissez-faire policy message but the fact that Shadwell does take the long-run/short-run distinction seriously. Some pages earlier he had noted that while a sudden increase of the demand for any particular kind of manufactured goods has commonly for its first effect an increase of their costs … a permanent increase of the demand tends rather to diminish the cost of production, and, consequently, the value. (p. 112) It is no surprise then that Shadwell eventually asks, ‘what is the law to which the actual market value of an article conforms?’ And he responds immediately: ‘to this question I am unable to give any answer’ (p. 123). While he presents a quite definite theory of long-run cost of production and value, Shadwell sees no basis for explaining or predicting the magnitudes of short-run ‘market values’. (He does, of course, see them as tending towards the long-run values.)

186 Steedman As, however, other Economists have suggested various modes of explaining them, I must examine their theories, and state the reasons which prevent me from accepting any of them. They may be classified as the theories of supply and demand, of utility, and of competition. (p. 124) We need not dally over Shadwell’s discussion of supply and demand (as defined by Smith, J.S. Mill or Cairnes (pp. 124–7)), or of competition (Thornton (pp. 131–2)). But we should stay to consider his remarks on the utility theory. A theory has been propounded by Mr Jevons, and has received the support of several Economists, both in this country and on the continent, the object of which is to explain all variations of value by referring them to variations in the utility of the article. (p. 128; Walras and Hearn are referred to at pp. 534–5.) After explaining the concept of diminishing ‘degrees of utility’ Shadwell notes that he ‘cannot find that this theory explains anything which has not been already explained by Ricardo’ (p. 128). Shadwell’s objection that proportionality of prices to ‘final degrees of utility’ does not ‘explain’ anything (when there is not a further, long-run, proportionality to cost of production) would seem to be a methodological one: as there is no way of measuring the utility of commodities except by their purchasing power, the theory does not point out anything upon which their exchange value depends, it simply tells us that two things of equal utility will exchange for each other, and the fact that they do so exchange is the sole proof of their possessing equal utility. (pp. 128–9) To rephrase this as ‘Mr Jevons’s theory is inherently untestable’ would be to put words into Shadwell’s mouth – but that would seem to be his meaning. He reiterates the point two pages later. Mr Jevons’ theory … seeks to explain the fact of an exchange by something which is inferred from the exchange itself; and, although he seems to attach more importance to it than to the many valuable suggestions which his work contains, I am compelled to reject it as telling us no more than that people give for commodities as much as they think they are worth. (p. 131) The knife is then twisted.

John Emilius Lancelot Shadwell 187 In his paper on the Mathematical Theory of Political Economy, read before the Statistical Society of Manchester, 11 November 1874, Mr Jevons, after referring to the support which his theory has received from Dutch and other foreign Economists … frankly admits that it has not made any material addition to economic science. … I can only say that neither his arguments nor those of M. Walras, who has independently arrived at a precisely similar theory, are strong enough to lead me to expect that it will throw any material light on the extremely complex phenomena of market value. (p. 131)

We may admire the generosity of Jevons who, in his 1879 Preface, referred favourably to Shadwell’s ‘admirable System of Political Economy’ (1970: 68). The upshot, for Shadwell, is that ‘all the theories [of market value] which I have met with appear to me to be truisms’ and, since he cannot himself ‘satisfactorily account for the phenomena of market value, I am forced to leave them unexplained’ (p. 132). Once commodities have been produced ‘and no others can be made like them, the fluctuations of their value cannot be predicted’ (p. 132). In turning now to ‘Chapter III – Wages’ it may be most instructive to focus first on Shadwell’s central point and only then to consider various secondary matters, even though they are in fact interwoven throughout the chapter. The central point in question is that the real wage rate (treated as uniform for the moment) is found to be determined by the efficiency of labour.

A labourer earns one gramme [of gold] in a day when it would take him a day to extract one gramme from a mine; and the rate of wages depends on the efficiency of labour. The same holds true of all other commodities as well as gold; [whether it be wages] measured in corn [or wages] measured in coals. (p. 133)

That the relevant quantities of labour are ‘marginal’ ones, even if that term is not used by Shadwell, is soon made explicit: ‘Wages, when measured in raw produce, depend on the cost of raising it in the worst circumstances’ (p. 135). Given what has already been said in Chapter II on the causes of value, it follows of course that ‘as society advances’ the real wage rate tends to rise in terms of manufactures but to fall in terms of raw produce (p. 134). As was mentioned previously, Shadwell does not seek to settle issues involving what we refer to as index number problems – he writes that ‘these questions … appear to me to be too vague to admit of a satisfactory answer’ (p. 134). Rather, he writes:

188 Steedman When I say … that wages have a tendency to rise as society advances, I mean that the labourers can obtain all the commodities which they could in the earlier stages of society, and many others in addition. (p. 135) (This is a time-series equivalent of his Westminster Review approach to comparing American and English real wages.) Referring to his earlier (1872) presentation of his wage theory, Shadwell remarks that it was written before I was aware that a precisely similar theory had been previously put forward by Mr Jevons in his Theory of Political Economy. … The theory … has the support of the able writer just referred to. (p. 136) In his judgement, that theory, based on the efficiency of labour will suffice to explain all cases except a few which cannot be explained at all, and my theory is deducible from the fundamental principle of human nature, on which all economic reasoning is based … value and wages are the same phenomenon, seen from two different points of view, and must receive the same explanation. (p. 145) Shadwell concludes the chapter on a confident note by saying that an examination of various empirical data confirms the general principle that the reward of labour is proportioned to its efficiency, though this reward does not always take the form of money, but may consist in public esteem or the internal satisfaction enjoyed by the labourer himself. (p. 156) (With respect to public esteem and internal satisfaction rewards, might not the reader of Shadwell’s animadversion concerning Jevons’s utility theory of exchange ratios be heard muttering ‘tu quoque’?) We may return now to some of the secondary matters arising in Chapter III. We note first (with a forward reference to Chapter IV) that Shadwell refers to a farmer having ‘to content himself with the ordinary rate of profit’ (p. 136) and says more generally that ‘I have … assumed the rate of the capitalist’s profit to be stationary’ (p. 137; see earlier and later

John Emilius Lancelot Shadwell 189 references to Whitaker 1975: 179, note 4). In discussing the wage theories of other authors Shadwell suggests that the theory of Ricardo and that of Mr [Thorold] Rogers are applicable to the rate of remuneration which is given to slaves … neither theory is sufficient to account for the ordinary rate of wages received by free labourers. (p. 141)

The wages fund theory is of course rejected – with references to J.S. Mill, Senior, Longe, Thornton and Cairnes – but it is noteworthy that Shadwell is even more firm than Jevons in this regard. Referring to Jevons’s own ‘temporary application of the wage-fund theory’ (Jevons 1970: 257), Shadwell observes:

I must confess myself unable to follow this reasoning, or to understand how [the formula ‘wage rate = wage fund/number of labourers’] can explain the rate of [particular] wages any more than a similar statement can explain the average rate of wages prevailing in the country. (p. 144) Turning to the need ‘to explain the causes of the different rates of wages which prevail in different employments’ (p. 145), as Jevons had urged him to do, Shadwell does not do as Jevons perhaps had wished – i.e. focus on differential marginal productivities of labour – but, rather, discusses at some length Adam Smith’s ‘five circumstances’ causing wage differences (pp. 145–54); speaking somewhat crudely we might assign them largely to the ‘supply’ side of the labour market relation rather than to the marginal productivity based ‘demand’ side. Shadwell’s ‘marginal productivity of labour’ theory of the wage rate – the ‘efficiency of labour’ theory as he called it – was not a perfect prolepsis of that implicit in Debreu’s Theory of Value! While Shadwell can certainly be said to have a theory of the real wage rate, it is far less clear – whether from ‘Chapter IV – Profit’ or elsewhere – that he has any theory, adequate or otherwise, of the rate of profit. He is quite clear that much income often referred to as profit should be seen as transfer earnings (p. 156), as ‘wages of superintendence, and what may be called insurance against risk’ (p. 157) and so on. He also distinguishes clearly between ‘the rate of profit’ and ‘the rate of interest’ paid on money loans to which Book III, Chapter IX is devoted (p. 158). (Note the implications of this, and of some later remarks, for Whitaker’s statement, quoted above, that ‘Shadwell took the rate of interest to be given’.) What then determines the rate of profit?

190 Steedman Mr Jevons suggests a more satisfactory explanation [than Mill’s] viz.: that profit is obtained because the assistance of capital renders labour more productive. [Now] the saving of capital implies the exercise of abstinence … profit is obtained because capital is productive, and, at the same time, abstinence from the enjoyment of capital is irksome. (pp. 158–9)

As a qualitative statement of why profit is positive this could, presumably, be broadly accepted by many later ‘marginal’ theorists. Yet whereas, with respect to ‘market value’, Shadwell is dismissive of (qualitative) theories which say why market value may be above (or below) natural value, without being able to say just what the market value will be – he finds himself in just such a position concerning the rate of profit! He supposes that:

If it had once become usual for capitalists to receive 5 per cent, profit, then a discovery [increasing agricultural productivity] would not raise the rate of profit, but would diminish the value of corn or of other produce … the rate of profit would remain stationary. (pp.159–60)

But no clear account – to tell truth, no account – is given of why 5 per cent, or whatever, has become usual. Recalling his earlier argument that agricultural capitalists cannot be obliged to extend their operations if that would involve their submitting to a lower rate of profit, Shadwell writes: ‘the rate of profit is stationary in agriculture, and, consequently, in all other trades; and … whatever rate be established in an early stage of society, it must remain the same throughout its subsequent development’ (p. 165). Clearly, even if this argument be internally correct, it does nothing to explain the level of the rate of profit (as opposed to its constancy over time). Some other elements in Chapter IV are more rewarding. Shadwell explains how constancy of the rate of profit does not mean ‘that the capitalists would gain nothing’ from agricultural improvement, since ‘the absolute amount of corn received by the capitalists would be increased’ (p. 160). And the ‘tendency to uniformity in the rate of profit on all investments’ (p. 162) is discussed well. Adam Smith’s account of apparent non-uniformities is endorsed and it is explained how ‘uniformity of profits would be brought about, either by the abandonment of the less successful undertakings, or by corresponding alterations in the prices of the shares’ (p. 163; the Chancery Court barrister is well aware of the role of ‘Joint Stock Companies’). More ambitiously, Shadwell expresses ‘with diffidence the opinion that the rate of profit is the same in all countries’ (p. 174), whilst recognizing that he cannot

John Emilius Lancelot Shadwell 191 illustrate this from available data. In support of this opinion he refers to the large volume of international investment (p. 174; this is exemplified at p. 179 by ‘English money invested in railway and other companies’ in the United States) and offers an ingenious argument. If goods are transported between, say, England and France, by both English and French shipping companies, he argues, they will have to earn equal rates of profit. And the ‘rate of profit being the same with the shipowners of both countries, it must be the same in all other trades’ (p. 175). This tendency will break down only if one country’s shippers can completely drive out the other country’s (p. 175). Shadwell recognizes, nevertheless, that many ‘Economists … believe that different rates of profit prevail in different countries’ and takes the ‘chief reason’ for this to be ‘the fact that the rates of interest vary considerably’ (p. 175). Shadwell counters that ‘interest is not a correct measure of profit’ (p. 175) and offers various reasons why, for example, ‘the prevalence of a high rate of interest by no means proves a high rate of profit’ (p. 177), before returning to the claim that ‘the competition of different nations in maritime commerce, in railway construction, and in banking, is always tending to produce uniformity [of the profit rate] in those trades, and, consequently, in all others’ (p. 180). Such a claim is naturally easiest to defend when ‘it is open to everyone to enter any trade which he chooses’ and Shadwell recognizes that:

when a few individuals, or companies, or a government, enjoy a monopoly of one trade, they may obtain much more than the average profit on the capital invested. After a large sum has been spent in establishing a business, it is frequently found that the receipts increase more rapidly than the expenses, and that, therefore, the net profit would go on continually increasing, if competition, or the fear of competition, did not compel the proprietors to reduce their prices, and so transfer the benefit to the public. (p. 183; the examples of a telegraph line and of the Post Office are used to illustrate the point, pp. 183–4.)

Little need be said concerning the relatively brief ‘Chapter V – Rent’. It is noted that the ‘true explanation was first given by Dr. Anderson in 1777’ (p. 188) and that ‘even if all soils were equally fertile, their geographical position would still give rise to differences among them’ (p. 189) from which rents would result. More fundamentally, Shadwell considers the objection made to the Anderson–Ricardo theory of rent ‘that there is, in fact, no land which does not yield a rent’ (p. 193). It is urged first that many farms will contain both good and bad land and will only appear to be paying the same, positive rent for each hectare (pp. 193–4; Shadwell employs French units of measurement throughout, p. iv). Then Shadwell comes to the main point – and close, perhaps, to offering an account of the ‘intensive’ margin.

192 Steedman But even if it were true that there was no land which did not pay rent, there would still remain the fact that all capital employed in agriculture is not equally productive … some of the capital which [a farmer] expends in improving his land to the highest pitch brings him in no more than the ordinary profit. To render the theory still more accurate, we must say that rent is paid wherever agricultural capital is employed in any other than the least favourable circumstances. (p. 194)

We may conclude our consideration of Shadwell’s theory of value and wages in A System of Political Economy by turning to ‘Chapter VII – Trades’ Unions and Co-operation’ since, as Shadwell points out, the theory of wages is closely connected to the much debated question whether ‘these combinations among the workmen which are known by the general name of trades’ unions’ (p. 227) can cause wages to rise. Indeed ‘the question is of such importance, and its solution is so necessary to a right understanding of the laws which govern wages, that it deserves an examination on its own account’ (p. 227). Of course,

the economic question is not whether unions are in some cases a part of the machinery employed in adjusting the rate of wages, but whether the unions have any power to raise wages above the rate at which they would be fixed by the competition of masters and men if there were no combination on the part of the latter. (p. 232)

Having established to his own satisfaction ‘that facts, when carefully and impartially collected, by no means establish the ability of trades’ unions to raise wages above their normal level’, Shadwell proceeds to ‘the discussion of the theoretic question on economic principles’ (p. 234). Although Shadwell’s own conclusion will be that unions cannot raise wages, he first rejects two arguments for that conclusion. The wages fund argument is, predictably, found wanting (p. 235) and he also dismisses the claim that ‘unions cannot alter the rate of wages because this is determined by the demand for, and the supply of, labour’: Shadwell finds it ‘difficult to discover any other meaning in this phrase than that wages are determined by an agreement between employers and employed’ (p. 236; Mr Brassey is referred to). For Shadwell, the key question is ‘whether the power of trades’ unions to raise wages is consistent with [the] theory [that wages are determined by the efficiency of labour]’ (p. 237). Reckoning wages ‘in the article which the labourers produce’ (p. 237), Shadwell argues that since

John Emilius Lancelot Shadwell 193 a combination [of labourers] does nothing to increase the total product … there is … no method by which the labourers can obtain more, except a reduction of the farmer’s profit. But what power have they to compel the farmer to submit to this reduction? (p. 237–8)

Answering that they have no such power wherever the farming capitalist can transfer to some other industry (and, more ambitiously, that they would have no such power even if there were a single, worldwide, all-industry combination since no capitalist can be compelled to save or to invest), Shadwell naturally concludes that a combination cannot raise the wage rate (p. 238). He then considers the suggestion that, at an unchanged rate of profit, one particular group of workers might be able to gain at the expense of other workers. (More specifically, he discusses Thornton’s claim that ‘mechanics engaged in the building trade’ (p. 239) had done just that.) Shadwell, however, denies this possibility, arguing that if building trade wages were higher than is ‘sufficient to compensate its disadvantages when compared with other trades’ then new labourers would be attracted from other trades and that their ‘competition would enable the employers to obtain the necessary number of hands at the old rate’ (p. 239). Shadwell thus concludes: ‘I am unable to admit that trades’ unions have any power to raise wages, except at those conjunctures when a rise would take place without their intervention’ (p. 240). Like Jevons, Shadwell does not conclude that trades’ unions have no function at all – ‘this would be a very illogical inference’ (p. 242). He agrees with ‘Mr Fawcett’s opinion, that an union may sometimes obtain a rise somewhat earlier than it would otherwise be accorded’ (p. 240; but only by ‘a week or a fortnight’). ‘But of far greater importance … is the power which they possess to regulate the hours of labour, and the mode in which the work shall be carried on’ (p. 242) and favourable attention is also drawn to ‘their charitable functions’ (p. 243). Shadwell also accepts that the formation of larger, more centralized unions may prevent ‘many ill-advised strikes’ (p. 242). Rather like Jevons, then, Shadwell attributes various useful functions to combinations of labourers, even while denying that they can significantly affect wages.

POLITICAL ECONOMY FOR THE PEOPLE This more ‘popular’ work is described on the title page as being Reprinted from the ‘Labour News’ suggesting, presumably, that it first appeared in instalments, in serial form. While it contains chapters on Production (Chapter I), Population (II), Trades Unions (V), CoOperation (VI), Currency and Banking (VII), Free Trade and Protection (VIII) and Taxation (IX), we shall have to restrict our attention to the chapters on Value and on Distribution (III

194 Steedman and IV). Unsurprisingly, they mirror closely the more extended, corresponding chapters of the System of only three years previously. The ‘popular’ nature of the volume is reflected in the fact that, while well written, it contains no notes, references or index and only very seldom names an economist, let alone a work of political economy. The copy in the John Rylands Library, Manchester belongs to the Jevons Collection and indeed carries the handwritten inscription ‘W. Stanley Jevons Hampstead Heath 1880 from the author’. Unfortunately, there seem to be no annotations by Jevons (or anyone else). Before turning to Shadwell’s discussion of value and of distribution, however, we may usefully notice some of his scattered ‘methodological’ observations (in a ‘popular’ work it must be recalled). The ‘object of science [is] to explain facts’ (p. 2) and, more specifically, ‘Political economists … explain, by reference to the principles of human nature, why such and such results have happened, and must happen again in similar circumstances’ (p. 3). (See also, ‘Economists … base their opinion [of Free Trade and of Protection] on the principles of human nature – from which the tendency of each system may be inferred’, p. 127.) As to its subject matter, ‘Political Economy explains the conduct of men when engaged in the pursuit of wealth’ (p. 4) and does so by regarding ‘men as acting in accordance with what they suppose to be their interest’ (p. 30). The ‘facts’ to be explained must be understood appropriately, however, ‘Political Economy deals with general facts: and general facts, although not so precise, are yet quite as true as particular facts’ (p. 46); for example, political economy can explain why ‘gold would be more valuable than coal’ but not why a particular producer makes a mistake and becomes bankrupt. Shadwell writes:

there are two distinct forces at work regulating the value of every article. … One consists of the various qualities which make the possession of an article desirable, while the other embraces all the circumstances which make its possession difficult of attainment. For the sake of brevity, we may say … utility and difficulty. (p. 41) Yet, as in the System, Shadwell has very little to say about utility – in part, perhaps, because the ‘varieties of individual taste are so infinite that it would be impossible to account for them all’ (p. 40). As he says in his section on Demand and Supply (pp. 48–51), in which it is clearly recognized that ‘market value’ can differ considerably from ‘natural value’ (related to cost of production), ‘it is impossible to predict what the price of a particular article will be when there is nothing but individual fancy, or necessity, to determine it’ (p. 51). By contrast, a complete section is devoted to Cost of Production (pp. 44–8) and (natural) value. Before that, however, Shadwell both recommends ‘the use of labour as a measure of value’ and considers the objection ‘that all labour is not of the same kind’ (p. 43). But this is not an indication that he

John Emilius Lancelot Shadwell 195 has come to share Jevons’s concern over relative wages. To the contrary: ‘This objection is … of little consequence’ (p. 43) because if we find that ‘farm labourers earn twice as much gold in Australia as in England’, we should find exactly the same ‘if we made the comparison between the wages of carpenters or of other artisans’ (p. 44). In other words, Shadwell takes wage relativities to be the same in both countries, so that it is irrelevant that labour is heterogeneous; it seems that Jevons’s 1872 complaint had still not moved Shadwell. (A full section of the following chapter on Distribution is devoted to ‘Wages in Different Employments’, pp. 56–9.) For Shadwell the central proposition in value theory continues to be that, ‘In ordinary circumstances the value of an article depends on the cost of its production’ (p. 44). And while labour ‘is not the sole element in the sacrifice which production entails… there is also what has been called the abstinence of the capitalist, whose saving furnishes the means of carrying on the labour’ (pp. 44–5), ‘as a general rule, the part of the sacrifice represented by abstinence forms so small a proportion of the whole, that we may, without practical inconvenience, treat cost of production as consisting entirely of labour’ (p. 45). Somewhat like Ricardo, then, Shadwell adopts an ‘approximate/empirical’ labour theory of value; see our earlier remarks on the System. Also reminiscent of Ricardo is Shadwell’s distinction between ‘manufactures’ and ‘farming and mining’ with respect to the relevant meaning of labour cost. For the former, ‘the average cost of production may be taken to regulate the average value of the article produced’ (p. 47). But the price of corn, for example, ‘will be determined … by the cost of raising it on the worst land which supplies the market’ (p. 47). (Shadwell had made this same distinction earlier, at pp. 23–4, albeit in the stronger form, as in the System, that manufactures ‘may generally be expected’ to exhibit increasing – and not just constant – returns.) Shadwell’s ‘labour theory of value’ is thus a marginal labour cost theory of value. (And it may be recalled that such a ‘theory’ is consistent with modern micro theory. In any costminimizing firm, marginal cost is equal to the wage rate times (L/Q) in an obvious notation. For competitive industries, therefore, price is equal to marginal labour cost – and, of course, to ‘marginal-every-other-type-of-input’ cost!) Shadwell does notice the difficulty raised by joint production (he uses the example of ‘pearls and mother-of-pearl’, p. 48) but says nothing very precise about its solution. Chapter IV, ‘Distribution’, yields no great surprises. Now accepting the simplifying assumption that ‘wages consist of one article alone’ (p. 52), Shadwell again responds to the question of what determines the wage rate by saying that, ‘The answer which naturally suggests itself’ (pp. 53–4) is that it is the product of labour. Australian farmers and golddiggers in Victoria are again invoked to explain the principle. However, the real wheat wage rate in America is now said to be thrice that in England and not merely twice as great. It is made very clear now that, ‘An article which has taken six months to produce will not

196 Steedman exchange for six month’s labour, but for as much more as will’ remunerate ‘the abstinence of the capitalist’ (p. 55). Shadwell insists, however, that ‘the rate of profit being tolerably uniform, and constituting – in almost all cases – a small proportion of the return, the amount received by the labourers may be considered as varying in proportion to the efficiency of their labour’ (p. 55). Later, in the chapter on Trades Unions, Shadwell again draws the conclusion that ‘the formation of unions does not enable their members to extort higher wages from their employers’ (pp. 88–9). (Like Jevons, Shadwell again presents unions as having other – and desirable – functions, for example, preventing dangerous working practices, limiting overtime and assisting labour mobility (pp. 89–91).) As noted above, Shadwell includes a section on ‘Wages in Different Employments’. But this does not amount to Shadwell’s taking up the 1872 challenge by Jevons but rather to an exposition of Smithian ideas. Wage differentials are said to be influenced by the ‘uncertainty of obtaining regular employment’ (p. 57), by the ‘comparative disagreeableness of the work itself’ (p. 56) and by the ‘difficulty of learning how to perform’ the work (p. 56). In relation to this last influence, Shadwell points out that the difference between a bricklayer’s wages and those of a building labourer ‘may be regarded as – in a certain sense – the interest on the capital invested by the apprentice, or by his parents, in acquiring a knowledge of the business. Without some such return, capital would not be invested in this way’ (p. 57). (Shadwell goes on to explain that barristers’ fees thus only ‘seem to be exorbitant’!) In the section on Profit, Shadwell not only reiterates that ‘abstinence is rewarded by profit’ but, more interestingly, makes the Jevons-like observation that the ‘amount of the sacrifice involved in abstinence varies according to the amount of the capital and to the length of time for which abstinence is practised. Profit is, accordingly, said to be so much per cent per annum’ (p. 59). Since ‘the whole product of industry is divided between capitalists and labourers’ (presumably ‘no rent’ production is referred to), it ‘appears that the interests of the two classes are opposed to each other’ (p. 59). (On p. 8 Shadwell had already referred to ‘the conflict between the interests of capitalists, as such, and labourers as such’.) But Shadwell offers little by way of elucidation. After noting that ‘what is commonly called … profit includes compensation for three distinct sacrifices – labour of superintendence, risk, and abstinence’ (p. 61), Shadwell points out that the long-run tendency to a uniformity of return refers only to this last. More interestingly, he explains that in ‘the case of joint-stock companies … alterations in the price of their shares’ tend to yield such uniformity (pp. 63–4). As for rent, Shadwell writes that, unlike wages and profit, ‘rent is not the reward of any sacrifice’ (p. 64) and he then explains well how variable conditions of production and a uniform price of corn combine to give rise to rent, in the face of uniform rates of wages and profits. This theory of rent, he notes, ‘is called after the name of its most brilliant expounder – Ricardo’ (p. 66).

John Emilius Lancelot Shadwell 197 CONCLUSION In his Westminster Review article (1872), in his treatise A System of Political Economy (1877) and in his popular book Political Economy for the People (1880), Shadwell consistently presented a ‘marginal’ long-run theory of value, of wages and of rents. If that theory was essentially of the ‘extensive’ rather than the ‘intensive margin’ variety, and if it had little or nothing to say on the determination of the rate of profit, Shadwell’s work certainly merited the respect accorded it by Jevons – whose own contributions, it should be recalled, were sometimes of a highly suggestive rather than a definitive nature.

KNOWN PUBLICATIONS OF J.E.L. SHADWELL (1969) ‘Cruise of the Merlin’, Temple Bar, December. (with R.S. Wright) (1870) Golden Treasury of Greek Prose, Oxford: Clarendon Press. (1872) ‘A Theory of Wages’, Westminster Review [XCVII, no. CXCI] – New Series XLI, no. I, Jan.: 184– 203. (1877) A System of Political Economy, London: Trubner (reprinted from the Labour News). (trans.) (1880 and 1882) Heroes of History and Legend, from the German of A.W. Grube, London: Griffith and Farrau (from the second part of Grube’s Characterbilder aus der Geschichte und Sage, 1877). (1885) The Depression of Trade, London: Central Offices of the Liberty and Property Defence League.

ACKNOWLEDGEMENT A large number of people, including R.D.C. Black, I. Gough, M. Jones, A. Maunder, C. Rogers, M. White and A.B. Winnett, have given invaluable help in connection with the biographical section of this paper; to all of them, named and unnamed, I give my thanks, as I do to C. Wilson and to the editors.

Part V

Into the archives

11 Brotherhood at arms The Cairnes–Leslie controversy Tadhg Foley and Tom Boylan

Writing about the latter part of his life, Francis E. Mineka and Dwight N. Lindsay, the editors of The Later Letters of John Stuart Mill 1849–1873, stated that among the new correspondents of Mill, John Elliot Cairnes ‘became perhaps the one most highly valued’. Mill saw their exchanges as constituting a ‘philosophic correspondence’ between two who shared a ‘brotherhood in arms’.1 It is not well known, however, that Cairnes’s relationship with his fellow Irishman and political economist, Cliffe Leslie, was far less cordial. The basis of this fractured relationship and the ensuing acrimonious correspondence remains one of the more curious and neglected aspects of the professional interaction between the two outstanding Irish political economists of their day. The spectrum of possible explanations which shaped this hostile relationship could arguably have ranged from substantive differences in their approach to political economy or differing ideological commitments, to the banality of professional jealousy with all its insidious ramifications. Arbitrating between the range of possible explanations presents a formidable challenge of interpretation, given the available textual evidence. Our aim on this occasion is not to argue for any specific explanation. It is in fact a more modest endeavour: to track the relationship between Cairnes and Leslie by reproducing what seems to remain of the correspondence conducted between them in the years 1862–3. Rather than engaging in a highly speculative undertaking, our preferred strategy has been to facilitate the reader’s own interpretative conclusions based on a careful presentation of the extant correspondence between Cairnes and Leslie along with ancillary material germane to this correspondence. In the Cairnes papers in the National Library of Ireland (MS 8955) there are three letters from Leslie to Cairnes, all dated June 1863 and copies of five letters written by Cairnes to Leslie, dated variously 1862 and 1863. There are various references to Leslie throughout Cairnes’s correspondence, but we will concentrate especially on Cairnes’s very valuable and revealing letters to his friend William Nesbitt when his relationship with Leslie was at its most intensely hostile. We have also used the important letters from Leslie to John Kells Ingram which are held in the Public Record Office of Northern Ireland (D 2808/43/1–64).

202 Foley and Boylan John Elliot Cairnes was born in Castlebellingham, Co. Louth in 1823 into a brewing family. He was educated at Trinity College Dublin, receiving his BA in 1848 and MA in 1854. He was called to the bar in 1857 but never seriously practised. He competed successfully for the Whately Professorship of Political Economy at Trinity College Dublin in 1859 and he held it for the regulation five years. In 1859 he was appointed Professor of Jurisprudence and Political Economy at Queen’s College Galway, while still a Whately Professor. In 1865 he moved to London but retained his Galway chair until 1870. Meanwhile, in 1866, he was appointed Professor of Political Economy at University College London, a position he held until 1872 when bad health forced him to resign. He died in London in 1875. His principal publications were: The Character and Logical Method of Political Economy (1857; 2nd edn, 1875); The Slave Power, Its Character, Career, and Probable Designs: Being an Attempt to Explain the Real Issues Involved in the American Contest (1862; 2nd edn, 1863); Political Essays (1873a); Essays in Political Economy: Theoretical and Applied (1873b); and Some Leading Principles of Political Economy, Newly Expounded (1874). Thomas Edward Cliffe Leslie was born in Co. Wexford in 1825, 1826 or 1827, according to various authorities. Though at least two years younger than Cairnes, and a fellow Junior Freshman in 1842–3, he graduated from Trinity College Dublin in 1847, a year ahead of him. In 1851 Leslie took the degree of LLB; in 1850 he was called to the Irish bar and in 1857 to the English bar. He was appointed Professor of Jurisprudence and Political Economy at Queen’s College Belfast in 1853, a position he held until his death in 1882. His principal publications were: The Military Systems of Europe Economically Considered (1856); Land Systems and Industrial Economy of England, Ireland and Continental Countries (1870); Essays in Political and Moral Philosophy (1879); the second revised edition of this work was entitled Essays in Political Economy (1888). As Gerard M. Koot remarks, Leslie was ‘particularly unhappy’ about Cairnes’s neglect of his writings (1987: 44). In a letter to an unidentified economist, Leslie complained assertively, though with a certain pathos, that

Mr. Cairnes was careful throughout his economic career to draw no attention to my views, and never to name them; but I believe I was, and am, the exponent of the ideas and tendencies of a new generation of economists already numerous on the Continent, whom no silence on the part of the followers of Ricardo can prevent getting the ear of the public. (Anonymous 1883: 494)

This anonymous, and generally admiring and judicious, reviewer of Leslie in the Westminster Review sharply contrasted Cairnes with Leslie on the basis of their methodologies. It was ‘the characteristic of Leslie’s mind that he could only see facts, and

The Cairnes–Leslie controversy 203 could not grasp the general principles which underlay them’; in this respect ‘he furnished a remarkable contrast to his countryman, Cairnes’. According to the reviewer,

Both of them devoted themselves with great zeal and industry to the study of economical questions. Both collected facts and figures with great care and trouble, and both brought keen intellects to the task of evolving theories out of the materials which they had collected. But while Cairnes could at once disentangle a general principle from a confused mass of facts, Leslie seemed able to see nothing but the conflict between facts and an abstract theory. Both of them devoted some time to investigating the effects of recent gold discoveries on wages and prices, and the difference between their methods of treating the subject is very remarkable. (ibid.: 478–9)

On the question of gold, as indeed in other questions, Cairnes ‘placed in the clearest possible light the working of a general principle which lay concealed under a multitude of seemingly contradictory facts’ whereas Leslie ‘seemed to delight in putting forward awkward facts, and in trying to convince his readers that he had thereby overthrown a theory’ (ibid.: 480). The author saw Cairnes’s The Slave Power ‘as affording convincing proof that strict adherence to the deductive method’ was ‘in no way incompatible with the careful collection and intelligent study of facts’ (ibid.: 495), and regretted that Leslie had ‘wasted so much energy in denouncing as opponents those who were really labouring in concert with him for the attainment of the same end’ (ibid.: 496). James McMullen Rigg, in his Dictionary of National Biography entry on Leslie, attributed the ‘fragmentary nature’ of Leslie’s work ‘partly to a natural preponderance of the critical over the constructive faculty’. To some extent Cairnes saw his opposition to Leslie as based on a defence of ‘theory’ against empiricist and commonsense notions of practicality. Cairnes commented on E.A. Freeman’s The Growth of the English Constitution from the Earliest Times (1872) as follows:

The grand point insisted on in the first two chapters is the high credit due to Englishmen from the fact that their Constitution has been a growth, that nothing has been done in deference to theory. If sometimes a remedy has been sought for a practical evil Englishmen have been careful never to look beyond the particular evil. How unlike Frenchmen, always recasting their Constitution in conformity with some abstract theory! Now is it not vexatious to find an able man like Freeman lending his authority to the diffusion of such rubbish, and doing his utmost to strengthen the particular mental perversities that stand most in the way of all progressive improvement?2

204 Foley and Boylan Clearly the methodological differences between Cairnes and Leslie were particularly significant, though they can be exaggerated. Indeed Cairnes, in much of his applied economics, could be seen as powerfully combining theory with history, despite his methodological commitment to deductivism. And the counterposing of Leslie’s heterodoxy with Cairnes’s orthodoxy, as in Koot’s excellent study, English Historical Economics, 1870– 1926 (1987), does a serious injustice to Cairnes’s quite radical later views. The animus between Cairnes and Leslie went far beyond methodological differences. There was an acute and sustained professional rivalry between these two powerful but very different intellects. In 1859 personal relations between Cairnes and Leslie seem to have been reasonably satisfactory. Cairnes was engaged in what he called a ‘canvass’ for the Professorship of Jurisprudence and Political Economy at Queen’s College Galway and he asked his close friend, William Nesbitt, then Professor of the Greek Language at Galway (their wives were sisters), if he knew of ‘any influence that could be brought to bear on Henry or Kane’. ‘I have’, he added, ‘written to Leslie, asking him if he wd have any objection to write to the former’.3 Henry was the Rev. P. Shuldam Henry, President Queen’s College Belfast and Kane was Sir Robert Kane, President of Queen’s College Cork. Cairnes was successful in his application for the Galway chair. In deciding what books to use for his courses, Cairnes wrote to Nesbitt that he had, ‘in the first instance’, consulted Leslie who put him

entirely upon a false tack, and led me to purchase books which are only fit for gilding. He sent me a number of his Examination papers the other day, which are really a curiosity. Nothing short of clairvoyance wd enable a man to answer the half of his questions, not to mention that most of them wd require an essay for itself. E. G. one question is. Give a general account of the present state of the English law? [sic]4

Cairnes wrote to Nesbitt in July 1861 informing him that the three Professors of Jurisprudence and Political Economy at the Queen’s Colleges, himself, Leslie and Richard Horner Mills at Cork, had been made honorary members of the Political Economy Club. According to the letter, Leslie claimed to have suggested the idea to John Stuart Mill:

By the by, the P. E. professors of the Q’s Colleges have been made honorary members of the Pol. Economy Club. Leslie has sent me this information. In reply to my question as to what occasioned this, he writes – ‘I think the admission of the Q. C. Professors to the Pol. Economy Club arose in the sense of being occasioned rather than caused through my suggestion; but Mill carried it out the moment it was presented to his mind’.5

The Cairnes–Leslie controversy 205 But by January 1862 there was a serious worsening in their relationship. Leslie had written an article on income tax for the Westminster Review in which he referred favourably to a letter by Cairnes on the same topic in the Economist. According to Cairnes, Leslie wanted the editor of the Westminster to forward a proof of the article, so that Cairnes could give his views on it to the editor, and, once it was published, Cairnes could write to the Economist to draw attention to it. This Cairnes declined to do. Leslie’s letter appears not to have survived. The following is the relevant section of Cairnes’s letter to Nesbitt:

My relations with Leslie have at length reached a point at which a breach seems inevitable. I told you when you were with me that he had written to me today that he had referred in complimentary terms to a letter of mine on the Income tax in his Westminster article on that subject, and that he had desired Chapman to send me a proof of the article.6 This extraordinary politeness was explained in a subsequent letter in which he intimated that he expected me to write to Chapman my opinion of his article, and also that as soon as the Review appeared, I shd call attention to it in the Economist. I thought this was rather too curt, and determined I wd not comply at least with the latter portion of his request. I think I need not point out to you the unfairness of such a requirement. Accordingly I wrote to him, & declined to do so, but in the handsomest terms I could command. Well he was desperately enraged and wrote me a letter full of indignation & wounded pride, undisguised in the last degree. Of this I took no notice, hoping that in time he wd cool and wd see the reasonableness of my conduct. Well he has cooled, but only to become insolent. In a letter which I had from him this morning, and which is a perfect model for arrogance, egotism and spite, he winds up by telling me that he is ‘not disposed to keep one leg in Ireland longer than he can help, & that no one in Ireland has any rivalry to apprehend from him.’ Now I think when matters reach this pass, it is vain to endeavour to keep on terms with a man, so I have written him a letter which I think will make [him] see the true state of the case between us. I will shew it to you when we meet. Now is it not too bad that a man who wishes to live peaceably will not be let alone?7

On the following day, Cairnes replied to Leslie, saying that no proof of Leslie’s article was forwarded to him. It seems clear from the letter that professional rivalry was responsible for the ill-feeling between the two political economists, and certainly this is the construction which Cairnes sees Leslie as putting on his own unwillingness to comply with Leslie’s request. Cairnes denied that he was motivated by the ‘paltriest jealousy’. The following is the full text of Cairnes’s letter:

206 Foley and Boylan Stameen8 Jan 2 1862 My dear Leslie, I thought I had told you that it was a Blue Book on the Income Tax which had been left for you at my rooms in College. It is now at my house in Mount St., and I shall be happy to have it sent for you to any place in Dublin you may wish. No proof of your Westminster article has been sent to me, and, as you do not think it necessary that I should write to Chapman on that subject, I shall not mind doing so. With regard to the remark with which you conclude your letter, that ‘no one in Ireland has any rivalry to apprehend from you’, it seems to me that this can have but one meaning. It must refer to my refusal to comply with a recent request of yours and you must intend to intimate that you regard that refusal as prompted by the apprehension of doing injury to my own prospects by contributing to your rising reputation – an apprehension for which you are considerate enough to tell me, there are no grounds. Now if this be your meaning, and if it be not I can see no meaning in your remark, I would ask you to consider if you can discover no other motive by which I might have been activated in declining the part you assigned to me than the unflattering one you have suggested. I would ask you also to consider whether what you have known of me makes it probable that I would shrink from performing a simple office of friendship from the paltriest jealousy. Further I would beg you to reflect if your position and plans in life, so far as you have disclosed them to me, are such as to justify you in supposing that I live in constant apprehension of being overshadowed by your success. And, lastly, supposing you cannot answer these questions in a sense honourable to me, whether it is worth your while to continue to live on terms of friendship with a man of whom you think so meanly. Yours very truly J. E. Cairnes T. E. C. Leslie Esq.9 On 5 January 1862 Cairnes again wrote to Nesbitt: Will you kindly read the enclosed correspondence which I have had with Leslie, and tell you [sic, properly, ‘me’] what you wd advise me to do, or whether you wd advise me do anything. What occurs to me as best is to write him such a note as I enclose, but I have deferred doing so till I know your opinion upon the matter.10

The Cairnes–Leslie controversy 207 It is quite possible that the ‘note’ referred to in this letter is the following unsigned and undated draft in Cairnes’s hand in the National Library of Ireland collection: Dear Sir Although the needlessly offensive language of your last letter might well absolve me from continuing this correspondence, yet, as you have frequently manifested a friendly disposition toward me, and on one occasion shewed a strong wish to serve me, I am unwilling that our intercourse should be thus broken off; and I am at least resolved that if all communication is henceforward to cease between us, this shall not happen, until I have made an effort to remove some misapprehensions on material points under which you at present labour. The letter of mine which has given you such umbrage was not unkindly meant; and the words which you suppose to have been used in disparaging allusion to your position and prospects were not so intended. The letter was indeed written under strong feelings of indignation; but I suppose that you also would feel indignant if you believed yourself to be the object of unworthy suspicion. It was not however, the less written with an anxious desire to point out to you, in a manner as little offensive as the case admitted, the extreme unreasonableness of your suspicions, in the hope that you wd discard them, and do justice to yourself and me by disavowing them. With regard to the passage to which you take exception, you appear to find a particular impropriety in a supposed allusion on my part to your ‘prospects’, – an allusion which you are pleased to characterize as ‘impertinent’. Now whether this would under the circumstances be ‘impertinent’ or not, I am not concerned to inquire, since no such allusion was made by me. The word ‘prospects’, does not occur in my letter. The expression which I used was ‘plans in life (so far as you have disclosed them to me)’ and this expression was so limited expressly to avoid the appearance of presumption in pretending to any knowledge of your plans beyond that which I actually possessed, and was I must affirm, strictly pertinent to the topic in hand – a topic which had been started by yourself. As you have completely misconceived the point of this passage, I will add that your position and plans so far as you have made them known to me, have always appeared to me to be at least quite as promising as my own, and I can well believe may easily be far more so; although nothing of which I know of them wd warrant you in supposing that I lived in apprehension of being thwarted by your success, – a supposition which appeared to me to be implied in your remark. I am quite willing, however, to admit that the justification of my letter must rest upon the reasonableness of the construction which I put upon the observation of yours to which it was an answer. Now I submit that that construction was a reasonable one. I

208 Foley and Boylan submit that no one, having in view the matter of our previous correspondence wd have referred your remark to anything else than that to which I referred it. That it was intended to refer to something you had told me in a letter more than six months ago, which had never been mentioned previously to that occasion, and had never been referred to since, is what I do not think I was bound to observe, more particularly when there was an occurrence at hand to which it had obvious application. I do not, in saying this mean for a moment to doubt this explanation you have given of your observation; although I must remark that that explanation is by no means incompatible with my view of its meaning – a view, which I observe you have not disclaimed, and until you have done so I shall not be inclined to believe that I have misunderstood the point of your remark.11 Leslie’s reply or replies do not seem to have survived. On 13 January 1862, Cairnes wrote to Leslie in the following terms: 74 Lower Mount St 13 Jan. 1862 Dear Sir, I am obliged to you for your disclaimer of the offensive imputation. With respect to the word ‘prospects’, if you have my letter before you and find that I have used it, I must of course suppose that I have been mistaken. On any evidence short of this, however, I cannot admit that I have written any thing else than what I intended to write – ‘plans in life’. My own memory is quite distinct on the point, and is confirmed by a copy which I kept of my letter, which was made by another person. I regret you should think that I have been wanting in the offices of friendship. With respect to your observation that ‘I have appeared to you generally far from careful to avoid expressions which might give offence or annoyance’, I can only say that, on recalling as far as I can our past intercourse, I am quite unable to imagine the grounds on which you have made it. The expression, which you cite in illustration of your censure does not, I submit, support it. What I said was in substance this – that I thought a letter from me to the Economist praising an article in which I myself was praised might be regarded as a ‘retort courteous’. In saying this I meant neither more nor less than my words actually conveyed. I still think that such a letter would by the public be regarded in this light. This, together with the other reasons which I stated at the time formed the real grounds with me for declining your request. If they have given you offence I am sorry for it: I did not mean to give you offence, quite the contrary; but, if this happened, I cannot see that I am responsible for it.

The Cairnes–Leslie controversy 209 In conclusion let me say that I am exceedingly sorry that this difference has occurred between us. It appears to have arisen from a misunderstanding, but in the course of the correspondence which it has occasioned you have expressed yourself in terms of such deep dissatisfaction with my conduct in matters in which I cannot see that I am to blame, that I can scarcely hope to be restored to my former footing in your regard. Let me, however, assure you that I take leave of the subject without the least feeling of exasperation, & that I entertain toward you none but kindly sentiments.12 According to a letter Cairnes wrote to Nesbitt on 15 February 1862, Leslie had again written to Cairnes, asking him yet again for his opinion on the article on income tax: Can you imagine Leslie’s having written to me, after all that occurred, asking again for my opinion on his Westminster article, and not merely my opinion generally but particular criticisms with a view to assist him in another article he has it in contemplation to write on the same subject. No man I think was ever so complimented by another! He is positively the most unaccountable fellow I have ever had any dealings with.13

On 8 August 1862, Cairnes wrote to Nesbitt saying that Leslie had sent him a hostile review from the Morning Post of his recently published book, The Slave Power. He had had ‘several communications’ from Leslie of late, who was now becoming ‘more intolerable than ever’. The following is the relevant section of the letter:

Since I last wrote, Leslie sent me a notice which appeared in the Morning Post, which is abusive and scandalously unfair. For example the writer describes my book as ‘recapitulating arguments which have been familiar to us for nearly a century to prove that freedom is the birth right of man’ … ‘that the Northerners are risking all that is valuable in the cause of human freedom’. … Then I am represented as ‘treating with contempt’ the claim of the slaveholders for ‘compensation’, and as ‘disdaining to answer the inquiry of the slaves themselves how they are to be provided for when emancipated’. And a number of expressions and some whole sentences of weak declamation are given in inverted commas as if from my book, which are not mine at all. I mean, however, to give this criticism with the rest, but I shall take the liberty of interpolating in brackets brief denials of the misstatements. I have had several communications from Leslie lately, who is becoming more intolerable than ever. It was a great mistake not to have quarrelled with him when I had the chance, for I perceive it will come to this in the end. He has got on the staff of the Saturday Review, and writes to me appraising me of each contribution, and requiring an

210 Foley and Boylan opinion on each. Nor is it the Saturday Review merely, he writes also for the Exchange. This morning I received two numbers of the latter periodical with articles which I was to read. I have read them, and they are absolutely worthless – not an idea in them that is not trite as the pavement. Now I can understand men writing such articles – ‘poor beasties maun live’14 – but why they should visit on their friends witnessing their wretched shifts for existence is beyond my comprehension. But it is not merely the perusal and praise of his trash that is required of me – this I could bear ‘well, very well’ – in his last letter he breaks new ground, and coolly proposes – having in view an article on Heron’s ‘ruin’ paper – that I should collect the facts for him, state the arguments, and point out ‘what in Herons paper I think most absurd’.[15 ] Will you kindly tell me how you wd treat a proposal of this kind?16 Cairnes’s The Slave Power was published in 1862 and Leslie reviewed it for Macmillan’s Magazine under the pseudonym ‘By a Professor of Political Economy’, though the bound volume of the periodical identified Leslie as the obvious author.17 In a postscript to a letter to Nesbitt, Cairnes remarked: ‘Have you seen Leslie’s performance in the Macmillan: it is I think the most pretentious and least meritorious of any thing of his which I have yet seen’.18 Leslie wrote to Cairnes on 1 June 1863 asking him for a copy of one of his papers which had appeared in the Journal of the Dublin Statistical Society in January 1859.19 The following is the full text of the letter: Union Club 1 June 63

My dear Cairnes, I feel that it is not of character with our bad relations to address you with such familiarity, & I only do so because the last studiously offensive letter from you began in that form. I could not venture or desire to write to you again unless on business, or as a matter of duty, & it is in the latter way I now do so. I have to speak on the gold question next Friday; I am asked to write an article for one of the Quarterlies if I can do so within the next fortnight. Under these circumstances I have not time to make any roundabout attempts to get your paper in the Dublin Statistical Journal of Jan 1859, and I wish to represent fairly what you may have there put forward. Not knowing any other way of getting the paper, as I am not a member of the society & have no correspondent in Dublin who is, I venture to request that you will procure me, as a person engaged in the

The Cairnes–Leslie controversy 211 discussion of an Economic Subject, a copy; if you cannot get me one for myself perhaps you can lend me one. I am Yours faithfully T E C Leslie20 The following day Cairnes wrote to Leslie saying that he had sent him a copy of the Journal of the Dublin Statistical Society and denied that his previous letter was ‘studiously offensive’, ‘offensive’, maybe, but not ‘studiously’ offensive. As Leslie had stated that he could not write to Cairnes on matters other than business or duty, Cairnes felt constrained to point out that he was not the Secretary of the Statistical Society. In this he was strictly correct, as he had held that office from 1857 to 1862. The following is the full text of the letter: Dublin 2 June 1863 Dear Leslie, I send the D.S. Journal by this post. I regret you should have thought my last letter ‘studiously offensive’. Whether it was offensive or not I will not pretend to say: whether it was justifiable or not, however, I should be quite content to leave to the decision of any impartial man who would take the trouble to read the previous correspondence. This much I can positively affirm that it was not ‘studiously’ offensive. Had I been anxious to offend, I should only have had to copy the tone and terms of which you had given me so many examples. I have long felt that our ideas as to what was due by friends to each other did not coincide; and that a less intimate relation would be more suited to the facts of the case. I should have preferred that this had been felt on both sides and acted on without being stated, but as you have chosen to state it, there is no need that it should be longer concealed. I remain Yours truly J.E. Cairnes As you say that you ‘could not desire to write to me unless on business, or as a matter of duty’, it is right that I should mention, that I am not secretary to the Statistical Society.21 The following day Leslie replied to Cairnes, thanking him for the Journal, and reiterating that he wished his letters to be considered as private:

212 Foley and Boylan Union Club 3 June 1863 Dear Sir, I beg to thank you for the Statistical Journal. I think you ought to have allowed me to send the stamps. Although I was ignorant of your resignation of the secretaryship of the society in question, I shd still in knowledge of the fact have presumed to write to you in default of anyone else, for I considered that it was my duty to treat the subject as fairly & fully as I could, & I imagined that you would feel it to be your duty to give me assistance such as requested as an Economist, though not as a friend. In a former letter I told you that I desired my letters to be considered private. Yet you speak of ‘any one who will take the trouble to read the correspondence’ as being at liberty to do so. I can only say that I have not shown your letters to any third person, that I have not preserved them, that I explained that the omission of marking ‘private’ on my letters was accidental, but that I wished them to be considered so. If you do not think they are so, it will be only one of many differences between us as to what is due to the footing on which we corresponded – I am glad that you cannot accuse me of unfriendly acts, whatever construction you put on my words, & I am fully satisfied to be badly thought of by you, as I know that your opinion in that matter widely differs from that of those who know me much better. I remain Faithfully yours T.E.C. Leslie22 The next day, 4 June 1863, Leslie again wrote to Cairnes. In the previous letter Leslie had accepted the copy of the Journal as a gift, though he thought that Cairnes should have allowed him to pay the postage. Now, on second thoughts, he felt that he should be under no compliment to Cairnes and should pay for the journal as well as for the postage. He asked Cairnes, as a gentleman, to destroy any of his letters which he had preserved: Lincoln’s Inn 4 June [1863] Dear Sir, On a second consideration I think you will allow that I ought not to accept a present of the Statistical Journal from you, especially as you have been careful to inform me that you are not the person I shd have applied to for a copy, & consequently that you should permit me to reimburse you for the price of the journal with postage.

The Cairnes–Leslie controversy 213 I must further add that I think I have a right to request that as a gentleman you will at the request of the writer destroy any letters of mine which you have preserved. They were not intended for publication in any sense whatever; they were make no doubt, from my usual habit with regard to private correspondence, hastily written; & they were not written under the knowledge that the sentiments you now avow had been ‘long felt’ & that I was writing to a person unable to put anything but the most unfavourable construction upon any unguarded expression. For any such expression which you think discourteous and unprovoked I beg to tender my apology. Having done so much, I think you will feel that I am entitled to the assurance that my letters are destroyed, as yours to me have been. I have the honour to subscribe myself faithfully yours T E C Leslie J.E. Cairnes Esq23 On 2 June 1863 Cairnes wrote to Nesbitt, having just read Leslie’s latest publication, an article on utilitarianism in Macmillan’s Magazine.24 Cairnes is far more generous in his assessment of Leslie here than he is anywhere else, though he still does not allow that Leslie has advanced the argument to any extent, pinpointing what he sees as Leslie’s characteristic methodological weakness in excelling at ‘negative criticism’ but failing hopelessly in positive ‘speculation’. The following is the relevant section of the letter to Nesbitt:

I have just read Leslie’s essay, which appears to me to give more evidence of thought than anything which I have yet seen from him: in composition also I think the present essay indicates an advance. You will be amused at the pertinacity with which he opens again in the old trail of Buckle – I thought the scent by this time wd be cold. As to the merits of the general argument, on which you will see he opposes Mill, – although I think he puts some pertinent questions and has touched some of the most difficult – I will not say vulnerable – points of the utilitarian theory – he seems to me to leave the question where it was. The weakness of his case discloses itself the moment he turns from negative criticism to speculation, and in the concluding paragraph he falls into a stupid petitio principii – as where he says that ‘moral progress’ is itself the ultimate test – ie of ‘moral progress’.25

A week later Cairnes again wrote to Nesbitt, this time from Aix les Bains, to explain the formal nature of the salutation between himself and Leslie at the Political Economy Club the

214 Foley and Boylan previous month. As we have seen, Cairnes and Leslie exchanged studiously glacial letters between 1 and 4 June 1863 inclusively, centring on the matter of the January 1859 issue of the Journal of the Dublin Statistical Society. At the 5 June 1863 meeting of the Political Economy Club, Leslie addressed the question, ‘Has the Discovery of New Gold Mines made any change in the conditions of International Trade?’26 Cairnes was present on the occasion and he explained that a ‘more than usually insolent’ letter from Leslie a few days previously was responsible for the excess of formality. Cairnes was far from satisfied with Leslie’s presentation, claiming that his argument had first appeared in an article in the Edinburgh Review some twenty years previously. It was attributed to the political economist Nassau William Senior, who was present at the meeting, but who did not lay claim to the idea on this occasion. The following is the relevant section of Cairnes’s letter to Nesbitt:

You will probably have heard something of my proceedings through a letter of mine to Eliza which I told her to send on. I thought you might be interested with what I said of the meeting of the Political Economy Club. One passage in my letter you will probably not understand – that in which I mention the formal salute exchanged between Leslie & myself. In explanation of this I should tell you that a few days previously I had received from him, while in Dublin, a letter couched in terms more than usually insolent. The occasion of this communication was his wish to obtain the number of the Statistical Journal containing my paper on gold; and in asking for this, he implied that he only applied to me because it was the most convenient mode of attaining his end. After my last ‘studiously offensive letter’, he could ‘not desire to write to me, unless on business or as a matter of duty’. I made up my mind that it was time to have an end to this kind of thing, and accordingly countered heavily, and with, I think, some effect. Hence the formal meeting at the Pol Econ. Club. You will perhaps like to hear something more of the meeting than I ventured upon to Eliza. The indistinctness of the question was complained of on all sides, and Leslie’s attempts to clear it up only brought out more clearly its aimlessness. What he sought to establish was that international values were no longer governed by any principles different from those which govern domestic values; but his argument, so far as there was any argument in what he said, connected the alleged change, not with the gold discoveries, but with the progress of free trade: the gold discoveries wd seem to have been introduced solely for picturesque effect. His argument was a reproduction of one which I think I told you was advanced in an article which appeared some twenty years ago in the Edinburgh Review, and was attributed to Senior. Senior was present on this occasion, but, if the [?] was his, he seemed now to have no mind to claim it. From this on the debate was desultory and unsatisfactory, but towards the end, as I mentioned in my letter to E, became extremely animated, and almost boisterous through Hancock’s discussion.27

The Cairnes–Leslie controversy 215 As Cairnes was in Aix les Bains, Leslie’s letters of 3 and 4 June did not reach him until much later. On 16 June 1863 he wrote to Leslie saying he would destroy such of his letters as he had preserved, though he felt under no obligation to do so. We should be grateful that Cairnes was not altogether honourable in the matter, for he did not fully keep his promise. However, if Cairnes is to be believed, Leslie had written him ‘a great many letters’ in the previous yearand-a-half and these he may well have destroyed. Cairnes refused payment for the journal, saying he had received it gratis from the Dublin Statistical Society. The following is the full text of the letter: Aix les Bains Savoie 16 June 1863 Dear Sir, I wish to avoid all recrimination, and shall therefore confine myself to the remarks which your letters of the 3rd and 4th June (which have just reached me) seem to me imperatively to require. I shall destroy, as you wish it, such of your letters to me as I have preserved, on my return to Ireland, but I wish to say that I do not recognize any right upon your part to make this demand, nor do I feel that I am under any obligation in morality or in courtesy to accede to it. You remind me that you explained that the omission of marking ‘private’ on your letters was accidental, and you appear to consider this explanation is precluding me under all circumstances from showing any letter of yours to a third person. Allow me to say that I did not so understand your remark (the previous terms of which I do not now remember); nor, had I so understood it, should I have recognized your right to impose upon me any such conditions. Whenever I had reason to believe, either from your statement to this effect or from the contents, that your communication was intended as private, I treated it as such; but I entirely deny that a great many letters which I received from you within the last year and half could by any fair construction be brought within this description: they were for the most part concerned with literary topics, they related frequently to matters purely personal to me – as my opinions on the merits of various publications, and they were frequently expressed in language which I felt to be exceedingly offensive. Where that last was the case I generally submitted the letter to the judgement of a friend before replying to it. If you fail to perceive that I was justified in this course, then I must subscribe to your remark that this is but ‘one of many differences between us as to what is due to the footing in which we corresponded’.

216 Foley and Boylan I cannot accept payment for the Statistical Journal, which I received gratuitously from the Statistical Society. If therefore you are unwilling to incur the obligation of receiving it through my hands, I must ask you to return it to my house in Dublin. My reason for informing you that I am not secretary to the Statistical Society was assigned in my letter. So I will now repeat it. You had stated that you ‘could have no desire to write to me unless on business or as a matter of duty’, and, as I am unwilling to entrap you into a correspondence, I thought it [?] to myself to explain that with reference to matters connected with the Statistical Society neither of these reasons applied. I remain Yours truly J.E. Cairnes28 In his letter to Nesbitt on 6 July 1863, Cairnes expressed his ‘horror’ at finding Leslie in the company when he dined with Mill: I dined with Mill on Sunday, and, to my horror, found Leslie of the company: however we shook hands frigidly, and observed mutually the ordinary courtesies. The rest of the company consisted of Bain – the same I suppose whom Drysdale worshipped – and Miss Taylor (Mill’s daughter in law). … The evening was not as pleasant as I expected – a result which I attributed to Leslie’s pertinacity in forcing the conversation into the channels of his own recent studies, apparently for no purpose but that of self exhibition. He is not so rapid, but perhaps a still more incessant talker than Reichel. I have been asked to dine there on next Sunday again, when I trust I shall be more fortunate in my company.29

The following day, 7 July 1863, Cairnes wrote to Eliza, his wife, telling her the same sad tale:

The party at Mill’s was scarcely as agreeable as I expected, principally owing to the presence of Leslie who, to my horror, on entering the room, I found among the company. I dine there, however, again on Sunday next, when I expect to be more favoured.30

A year later, in a letter to his wife, on 2 July 1864, Cairnes wrote that on the previous day he had been at the Political Economy Club:

Mill was there, and sat next me: Fawcett was on the other side: Leslie opposite. With the latter I only exchanged a courteous bow. Mill at once – before I had been five minutes in

The Cairnes–Leslie controversy 217 his company – invited me to dine with him on Sunday to meet Grote – there is an honour! also Thornton, a man of some distinction and very pleasing manners whom I met also at the club.31 On 3 January 1865 Cairnes again discussed Leslie in a letter to Nesbitt, quoting from a letter which he had received from Thornton: By way of comfort to you for Leslie’s insolence I must quote a passage from a letter lately received from Thornton. Referring to that ‘young, but not altogether unknown economist’ (to borrow his own modest description) Thornton says:- ‘It is not always easy to see what he is driving at, and most assuredly he does not succeed in driving his heterogeneous team of truisms and fallacies, gratuitous assumptions, and astonishing misconceptions, to any intelligible conclusion’. That I think is rather neat. I see he continues to write in the Economist under the misnomer of ‘a Political Economist’. He has now taken Jevons in hand, but I think not with more success than he dealt with me.32 In a letter to Eliza, on 22 February 1865, Cairnes commented on the lines in Oliver Goldsmith’s The Deserted Village: Proud swells the tide with loads of freighted ore But mark our gains: this wealth is but a name. According to Cairnes, Goldsmith here showed himself to have been a true economist (unlike Leslie), for he touches in this passage upon one of the deepest principles in economic science: The philosophy of gold discoveries is stated there far more truly, – I need not say with greater felicity, – than in anything that has been written on the subject by say Leslie or Newmarch. So, Goldsmith and I wd have got on remarkably well.33 On 18 May 1865 Cairnes wrote to Nesbitt saying that he had attended Jevons’s paper on the gold question at the London Statistical Society. With a certain self-satisfied air he was able to relate that ‘Leslie was not there, nor were his speculations referred to’.34 In 1867 Cairnes had to undergo a severe operation which, however, provided him with only temporary relief. He feared that he might have to resign his professorship at University College London but, in the event, he took sick leave and Leslie substituted for him for the academic year 1867–8. Mill strongly urged Cairnes not to resign, stating (apparently without irony) that

218 Foley and Boylan our friend Leslie is ready and desirous to take the duty as your locum tenens, and if you are willing to go on with a substitute for another year and to recommend Leslie as that substitute, there can, I think, be no doubt that the arrangement would be accepted. The inestimable chance would then remain of your being able to take the duties; and Leslie is, next to you, by far the fittest person I know to fill the place, among those who would take it.35

Cairnes replied to Mill on 26 July informing him that he did not contemplate resigning immediately and also, presumably, telling Mill about the state of his relationship with Leslie. A few days later Mill wrote to Cairnes as follows:

In regard to Leslie, I am very sorry to hear that his recent relations with you have not been cordial. No one has expressed himself more feelingly than he has done about your illness. I am certain that if he were allowed to supply your place, he would feel that he was not only not conferring, but receiving a favour, and one of great value to himself, as a means of making himself better known. He will be, I am sure, very thankful for your willingness to bear testimony to his fitness, which he scrupled to ask you to do, because, as he said, you might possibly have some other person in view whom you might prefer to him. I will say nothing to him until I hear again from you.36

The following day, Mill wrote to his friend George Grote saying that Cairnes expressed the opinion that Leslie ‘would be a very proper substitute’. He had written to Cairnes and he felt the reply would bring ‘a formal recommendation of Leslie’, if it had not been ‘already sent to the Secretary’ of University College London.37 In his letter to Cairnes of 1 August 1867, Mill reiterated that Leslie desired the arrangement ‘on his own account’, and had not ‘the smallest idea of conferring a favour, but would feel, on the contrary, that he was receiving one by your recommendation’.38 A few days later, in a letter to Courtney, Cairnes remarked with reference to Leslie: ‘I dare say you may have gathered that I had no particular admiration or liking for him’.39 In 1872 poor health forced Cairnes to resign from the Professorship of Political Economy at University College London – he had resigned his Galway chair two years earlier. Leslie was very anxious to succeed Cairnes and he was strongly supported by Mill. John Morley, the editor of the Fortnightly Review, was a surprise candidate, and he sought a testimonial from Mill who told him that he had already given his backing to Leslie, ‘who has very strong claims to this particular Professorship’,40 and to whom it would be ‘likely to be of pecuniary importance’.41 On 15 May 1872, Mill again wrote to Cairnes, saying that his loss to the

The Cairnes–Leslie controversy 219 University College professorship would be ‘severely felt’, regardless of who succeeded him. Cairnes supported the candidacy of his friend Leonard Courtney and Mill stated pointedly to Cairnes that ‘You know better than I Mr Courtney’s special qualifications in Political Economy’. Mill was in no doubt about the merits of the respective applicants, concluding that

Of all the candidates Leslie seems to me to have much the strongest claims in reference to this special subject; & I should rejoice if he were successful, because I esteem and value him, and because I know no one on whom a little worldly success would have a more beneficial effect.42

In a letter to George Croom Robertson, Mill thanked him for his ‘friendly attention’ to his recommendation for the vacant Professorship of Political Economy. Leslie, he said, ‘has been very successful as a teacher’ and he gave a further reason why he should be appointed. He had heard, he said, that it was very likely that the ‘Irish Professorships’ would cease to be subsidized by the government, ‘which would probably lead to his having to resign the one he holds’.43 Cairnes had written to Mill to tell him that he had supported Courtney with reluctance because of Mill’s strong support for Leslie. Courtney was successful and clearly, as Mill observed, Cairnes’s support was of great value to him. In his reply to Cairnes, Mill regretted that Leslie was not chosen, but he acknowledged that his friend’s opinion of Courtney’s qualifications for the position was entitled to ‘great weight’ and had ‘no doubt much helped his election’. He concluded gallantly, if unconvincingly, ‘if it is not to be Mr Leslie, I prefer it to be Mr Courtney’.44 Cairnes had supported Courtney, then a Fellow of St John’s College, Cambridge, for the Whately Professorship of Political Economy at Trinity College Dublin in 1861. He was, in Cairnes’s opinion, a man of ‘original, powerful, & accomplished mind’, though his views were in ‘many respects, and in some important respects, erroneous’.45 However, Arthur Houston was placed first by Isaac Butt, Mountifort Longfield and William Neilson Hancock and was appointed to the chair, which he held until 1866. Later Courtney asked Cairnes to support his application for the Professorship of Political Economy at Cambridge, as did his main opponent, Henry Fawcett, whom he declined, but who was appointed to the post. Leslie himself refers several times to Cairnes in his (mostly undated) letters to John Kells Ingram preserved in the Public Record Office of Northern Ireland. Quite a number of these letters relate to the publication, in 1879, of Leslie’s Essays in Political and Moral Philosophy in the Dublin University Press Series, of which Ingram was the Secretary of the Committee. When considering appending to his book, for promotional purposes, laudatory comments on his work from various authorities, Leslie made the following remark about a sharp practice on behalf of, and presumably condoned by, his rival:

220 Foley and Boylan At the end of Cairnes’s ‘Some [Leading] Principles of Pol. Economy Newly Expounded’ you will see that following references to his, & to other works, Macmillan has put eulogistic quotations. Indeed he has altered the expression of the Athenaeum ‘one of the ablest living economists’ into ‘The ablest’.46 In another letter to Ingram, Leslie took exception to a remark by an American political economist that Cairnes was ‘the British economist most in sympathy with Continental economists, when he was the one least so, & in truth wholly ignorant of everything abroad but some common French books’. Leslie then added that the key words applied to Cairnes had in fact been applied to himself by Sir Henry Maine in an article in the Pall Mall Gazette. This, he concluded, the author saw and ‘confounded, having not much acquaintance with the controversy between Cairnes and myself’.47 In another letter to Ingram, Leslie again referred to the fact that Cairnes had never drawn attention to his work in public, in his view a studious neglect engaged in for methodological and doctrinal reasons: You may have noticed that Cairnes never would allude to me, even when giving a string of names of economists. This he did hoping to suppress me & all opposition to his dogmatism. Next to Ricardo I look on him as the man who has done most to obstruct the progress of philosophy in relation to society, by bolstering up a false method of investigation as well as false doctrines.48 In 1878 Ingram delivered his famous address on political economy to the British Association and Leslie helped to publicize it by, among other things, distributing copies to influential people. He suggested that Ingram send a copy to Frank Hill, the editor of the Daily News. It might, suggested Leslie, ‘lead him to think the matter over’, though ‘he has been governed in his economics by Cairnes, Fawcett, & the old principles of the Liberal Party’. Both, he claimed, ‘carefully "cultivated" the newspaper press’,49 a phrase he again used with reference to Cairnes a short time later in another letter to Ingram. Publication in the important periodicals was vital to the making of academic reputations in the nineteenth century and Leslie felt that Cairnes enjoyed privileged access to them. He complained to Mill about his problems and Mill, in turn, introduced him to Henry Reeve, editor of the Edinburgh Review and to John Chapman, editor of the Westminster Review.50 In spite of all the opposition he faced, or imagined he faced, especially in England, he still felt that he had had some measure of acceptance: So that my ill repute among the orthodox for heresy & schism has not had all the results that might have been expected, considering how strong the old political economy has

The Cairnes–Leslie controversy 221 been among the official classes, & at the universities, where Cairnes for a short term was almost supreme through the exertions of Fawcett & Courtney, & his own careful cultivating the London newspaper Press.51 And there was, it appears, further good news from the Continent. Emile de Laveleye wrote to Leslie from Rome informing him that the Italian economists placed Maine and himself ‘at the head of modern English writers on the philosophy of society’. Meanwhile, lecturers in Cambridge had requested Leslie to republish his essays in a collected form, so they could recommend the volume for the Moral Science Tripos.52 Despite the demand for his essays in that university, Leslie had a low opinion of the state of economic studies at Cambridge. He commented in a letter to Ingram that Fawcett, ‘finding that he could not be king himself over political economy, resolved to be a king-maker & crowned Cairnes’. Fawcett ‘hoped thereby to establish a buttress against assaults on his own wretched old system of economics, & indeed his hope was not frustrated’. But Leslie, nevertheless, concluded the letter on an optimistic note: ‘But I receive constantly proofs that the structure is giving way’.53 There is a nice irony in the fact that, according to himself, Leslie had refused to continue writing for the Saturday Review partly because of a quarrel which involved Cairnes. The Review had a ‘grudge’ against Cairnes and ‘therefore would not publish an article (at first accepted with high commendation) in which I praised an article of C. in the Edinburgh’.54 However, though Leslie was solicitous, almost to the point of obsession, about his reputation and influence, and suspicious even to paranoia, he displayed on occasion a generosity of spirit which certainly was absent from Cairnes’s attitude towards Leslie. Leslie reviewed, critically but not unappreciatively, two of Cairnes’s books, The Slave Power55 and Some Leading Principles of Political Economy.56 But it is in his obituary for Cairnes that Leslie’s magnanimity (or hypocrisy) is most manifest. It was published in the Academy shortly after Cairnes’s death and it was reprinted in his Essays.57 Despite the classical injunction de mortuis nihil nisi bonum and the generic demands of the obituary as a literary form, after all that was said and done, Leslie’s leave-taking of his old enemy seems little short of heroic. To conclude, the doctrinal and methodological differences between the two outstanding Irish political economists, John Elliot Cairnes and Thomas Edward Cliffe Leslie, were certainly substantial but scarcely explain the generally spiteful and malicious relationship between them. Both had very different approaches to their discipline: Cairnes operated in terms of structures and systems, while Leslie was an outstanding exemplar of what would now be called the deconstructive mode. Both had impressive claims to being the leading political economist of their time at the death of John Stuart Mill. Both, in their different ways, saw themselves in apostolic succession to Mill (once Cairnes merely wanted to be Boswell to

222 Foley and Boylan Mill’s Johnson). But clearly, in life, Cairnes had been much closer to Mill who saw him as the person most qualified and most able to continue his life’s work.58 Leslie resented the fact that Cairnes succeeded to a metropolitan chair while he languished in what he saw as provincial obscurity. He was unhappy with Cairnes’s easy access to the main periodicals and newspapers of the day and with his intellectual influence both in the universities and more generally. And he was deeply jealous of Cairnes’s intimate relationship with John Stuart Mill himself.

APPENDIX

Obituary of John Elliot Cairnes By Cliffe Leslie (The Academy, 17 July 1875) Professor Cairnes has been laid to rest with extraordinary honour. No other author’s death in our time, save Mr. Mill’s, has called forth so strong and general an expression of feeling; and Mr. Mill had been a leader of a philosophical school for a generation, and for several years a distinguished and active member of Parliament, while Mr. Cairnes had resided in England only for a few years, during the greater number of which he was the victim of a cruel malady which secluded him from the world and deprived him latterly even of the use of his pen. It is but thirteen years since Professor Cairnes, then holding a chair of Political Economy in Ireland, and known only to a few of the more studious economists in England, suddenly attained a wide celebrity by the publication, at the most critical moment in the American civil war, of The Slave Power; one of the most masterly essays in the literature of political controversy, and, even now that American slavery is extinct, one of the most instructive and interesting treatises which students either of politics or of economics can find in the English language. The progress of economic science, and the changes in the views of economists, of which there are indications all over Europe, may disturb some of the conclusions of Mr. Cairnes’s other works, but The Slave Power will ever defy criticism; and no serious answer was attempted to be made to it, even when the war was at its height, and when the Southern States had the sympathy and support of some of the most powerful organs of the English press. The practical object for which The Slave Power was published has been triumphantly accomplished, but it had also a philosophical purpose which gives it a permanent value as an economic classic, for its subject was originally selected by Mr. Cairnes for a course of lectures ‘to show that the course of history is largely determined by economic causes.’ The skill and ability with which this purpose was carried into effect will, we believe, make future economists regret more and more as their science advances that Mr. Cairnes did not in his subsequent works develop another side of the relation between history and political economy,

The Cairnes–Leslie controversy 223 namely, the connexion between the whole social history of a country and its economic condition as one of the phases of the entire movement, and not as the result of a single principle or desire. Before the publication of The Slave Power, two essays in Fraser’s Magazine, ‘towards the Solution of the Gold Question,’ had attracted the attention of economists in this country, especially Mr. Mill, to Mr. Cairnes’s remarkable talent for deductive reasoning and exposition in economics. We think for our own part, and we have reason to believe that such was subsequently Mr Mill’s view, that in his practical conclusion Mr. Cairnes took insufficient account of the influence on prices of the acquisition by France, Germany, and other continental countries of the power of production and communication by steam, contemporaneously with the diffusion of the new gold; but those who dissent from the proposition that prices have risen more since the discovery of the new gold mines in England than in any continental country, will nevertheless find nothing to dispute in the principles which Mr. Cairnes applied with consummate skill to the solution of the problem. The causes which have raised prices on the continent so greatly above their former low level are causes of the same order with those whose operation Mr. Cairnes discussed in relation to England. Although an invalid, impeded in every physical movement by the malady from which he suffered, Mr. Cairnes took an active, though sometimes an unseen, part in the discussion of all the chief political controversies in this country during the last ten years, especially the Irish land question and Irish University education; and to him more than to any other single person it is due that University education in Ireland is not now under the control of an Ultramontane hierarchy, and that some of the chief subjects of historical and philosophical study have not been banished from the University of Dublin and the Queen’s Colleges. Last year, although then no longer able to write with his own hand, Mr. Cairnes published his Leading Principles of Political Economy Newly Expounded, a work which ought to be regarded, even by those who dissent most from some of its principles, as an important contribution to economic science. To state with the greatest possible clearness and force the reasons for espousing one side of a scientific controversy, is to render one of the best services to those who seek to know all that can be said on both sides. And if any position which Mr. Cairnes takes up is unsuccessfully maintained, the student may feel assured that if literary and dialectical skill could have defended it, it would be impregnable. The second edition of Mr. Cairnes’s Logical Method of Political Economy, which has recently been published, and which we hope on a future occasion to review, ought in like manner to be welcomed by those economists who incline to the inductive or historical method, not only for the intellectual interest, which the reasoning of a powerful mind must always excite, but also as a masterly exposition of the deductive method, and a complete presentation of all that can be said for it or got out of it.

224 Foley and Boylan We have no words to express our admiration of the heroic fortitude and public spirit without which no amount of intellectual power would have enabled Mr. Cairnes, under sufferings of the most prostrating kind, to maintain so high a place in the philosophical and political history of his time as that which is assigned to him by universal consent. His moral as well as his intellectual qualities won for him the reputation which has now become historical.

NOTES 1 Mineka and Lindsay (1972: xxxviii). See Mill to Cairnes, 12 December 1864 and Mill to Cairnes, 24 June 1862 (II: 975, 785). We are extremely grateful to Ms Fiona Bateman, Department of English, NUI, Galway, for her invaluable help in preparing this chapter. We also wish to acknowledge the distinguished pioneering research of Professor R. D. Collison Black in Irish political economy and to pay tribute both to his exemplary scholarship and to his exceptional generosity towards colleagues in the field. 2 Cairnes to Mill, cited Mill, Later Letters (Mineka and Lindsay 1972: IV, 1903, footnote). 3 Cairnes to Nesbitt, 16 October 1859, National Library of Ireland (NLI), Cairnes Papers, MS 8941 (2). 4 Cairnes to Nesbitt, 27 March 1860, NLI, Cairnes Papers, MS 8941 (3). 5 Cairnes to Nesbitt, July 1861, NLI, Cairnes Papers, MS 8941 (5). Both Cairnes and Leslie were elected honorary members of the Political Economy Club in 1862. See Mill to Cairnes, 20 January 1862, Mill to Fawcett, 6 March 1862, and Mill to Cairnes, 21 July 1862 (Mineka and Lindsay 1972, II: 767, 778, 787). 6 The article in question is Leslie (1862). Cairnes had written two letters to the Economist; ‘The Double Income Tax’, Economist (6 April 1861: 371), and the one to which Leslie referred, ‘The Cause of the Inequalities in the Pressure of the Income Tax’, Economist (4 May 1861: 481–3). John Chapman was the editor of the Westminster Review. 7 Cairnes to Nesbitt, 1 January 1862, NLI, Cairnes Papers, MS 8941 (6). 8 Stameen was the Cairnes family seat at Drogheda, Co. Louth; it is now the Boyne Valley Hotel. Cairnes’s own house at this time was at 74 Lower Mount Street, Dublin. 9 Cairnes to Leslie, 2 January 1862, NLI, Cairnes Papers, MS 8855. 10 Cairnes to Nesbitt, 5 January 1862, NLI, Cairnes Papers, MS 8941 (6). 11 Cairnes to Leslie, undated draft [January 1862], NLI, Cairnes Papers, MS 8955. 12 Cairnes to Leslie, 13 January 1862, NLI, Cairnes Papers, MS 8855. 13 Cairnes to Nesbitt, 15 February 1862, NLI, Cairnes Papers, MS 8941 (6). 14 The word ‘maun’ means ‘must’. 15 Denis Caulfield Heron (1824–81), Professor of Jurisprudence and Political Economy at Queen’s College Galway from its opening in 1849 until 1859. Heron (1862) argued that there was a continuing decline in the condition of Ireland attributable to the land system. Randal McDonnell and Leslie’s friend, John Kells Ingram, and the ubiquitous William Neilson Hancock, took up the ‘ruin’ issue in later papers but Heron returned to defend his thesis in his lecture ‘Ireland in 1864’ (Heron 1864).

The Cairnes–Leslie controversy 225 16 Cairnes to Nesbitt, 8 August 1862, NLI, Cairnes Papers, MS 8941 (6). 17 Leslie (1863a). This review was reprinted in Leslie (1879: 51–61) and in the second edition of this collection (Leslie 1888: 9–20). 18 Cairnes to Nesbitt [2 January 1863], NLI, Cairnes Papers, MS 8941 (7). 19 Cairnes (1859), delivered to the British Association, September 1858 and reprinted in Cairnes (1873b: 53–76). 20 Leslie to Cairnes, 1 June 1863, NLI, Cairnes Papers, MS 8855. 21 Cairnes to Leslie, 2 June 1863, NLI, Cairnes Papers, MS 8855. 22 Leslie to Cairnes, 3 June 1863, NLI, Cairnes Papers, MS 8855. 23 Leslie to Cairnes, 4 June [1863], NLI, Cairnes Papers, MS 8855. 24 Leslie (1863b), reprinted in Leslie (1879: 36–50). 25 Cairnes to Nesbitt, 2 June 1863, NLI, Cairnes Papers, MS 8941 (7). The term petitio principii means a fallacy in logic in which a conclusion is taken for granted in the premises. It is also known as ‘begging the question’. 26 See Mineka and Lindsay (1972, II: 857, footnote). 27 Cairnes to Nesbitt, 9 June 1863, NLI, Cairnes Papers, MS 8941 (7). Hancock is William Neilson Hancock (1820–88), the holder of the Whately chair of Political Economy at Trinity College Dublin (1846–51) and the first Professor of Jurisprudence and Political Economy at Queen’s College Belfast (1849–53) and the immediate predecessor of Leslie in that office. 28 Cairnes to Leslie, 16 June 1863, NLI, Cairnes Papers, MS 8855. 29 Cairnes to Nesbitt, 6 July 1863, NLI, Cairnes Papers, MS 8941 (8). Alexander Bain was a Scottish author of works on psychology and logic. Drysdale was probably George R. Drysdale (1825–1904), a physician and author of The Elements of Social Science (1854), or possibly his brother, Charles Robert Drysdale (1829–1907), also a physician who wrote on medical and social issues. Helen Taylor (1831–1907) was Mill’s stepdaughter, not his daughter-in-law. Reichel is most likely Charles Parsons Reichel, Professor of Latin at Queen’s College Belfast. 30 Cairnes to Eliza Cairnes, 7 July 1863, NLI, Cairnes Papers, MS 8940 (8). 31 Cairnes to Eliza Cairnes, 2 July 1864, NLI, Cairnes Papers, MS 8940 (9). Henry Fawcett (1833–84), a friend of Cairnes, had become Professor of Political Economy at Cambridge the previous year, later becoming an MP and Postmaster General. George Grote (1794–1871) was a banker, MP, and historian of Greece. William Thomas Thornton (1813–80), political economist and employee of the East India Co., was a long-time friend of Mill. 32 Cairnes to Nesbitt, 3 January 1865, NLI, Cairnes Papers, MS 8941 (12). William Stanley Jevons (1835–82), political economist, logician, and the author of The Theory of Political Economy (1871). 33 Cairnes to Eliza Cairnes, 22 February 1865, NLI, Cairnes Papers, MS 8940 (10). Cairnes’s memory is faulty here: the second line of the excerpt from The Deserted Village should read: ‘Yet count our gains. This wealth is but a name’. William Newmarch (1820–82) was a political economist and statistician. 34 Cairnes to Nesbitt, 18 May 1865, NLI, Cairnes Papers, MS 8941 (11). 35 Mill to Cairnes, 23 July 1867, Mineka and Lindsay (1972, III: 1293–4). 36 Ibid., Mill to Cairnes, 30 July 1867 (pp. 1295–6).

226 Foley and Boylan 37 Ibid., Mill to Grote, 31 July 1867 (p. 1297). 38 Ibid., Mill to Cairnes, 1 August 1867 (pp. 1297–8). 39 Cairnes to Courtney, 4 August 1867, London School of Economics, Courtney Collection, vol. I. 40 Mill to Morley, 1 May 1872, Mineka and Lindsay (1972, IV: 1889). 41 Ibid., Mill to Morley, 11 May 1872 (IV: 1892). 42 Ibid., Mill to Cairnes, 15 May 1872 (IV: 1895). 43 Ibid., Mill to Robertson, 23 May 1872 (pp. 1899–1900). George Croom Robertson (1842–92) was Professor of Mental Philosophy and Logic at University College London. 44 Ibid., Mill to Cairnes, 2 August 1872 (IV: 1903). 45 Cairnes to Nesbitt, 22 June 1861, NLI, Cairnes Papers, MS 8941 (5). 46 Leslie to Ingram, 25 January [1879], Public Record Office of Northern Ireland (PRONI), Ingram Papers, MS D2808/43/19. 47 Leslie to Ingram, undated, PRONI, Ingram Papers, MS D2808/43/26. 48 Leslie to Ingram, 20 October [1878?], PRONI, Ingram Papers, MS D 2808/43/32. 49 Leslie to Ingram, 20 October [1878], PRONI, Ingram Papers, MS D2808/43/34. See Ingram (1876– 9), Appendix. 50 See Leslie’s letters to Mill in the Mill Collection at Johns Hopkins University, cited by Koot (1987: 45 and 222, note 67). For the Reeve introduction, see Mill to Reeve, 1 May 1861, Mineka and Lindsay (1972, II: 725–6); for the Chapman introduction, see ibid., Mill to Chapman, 18 May 1861 (II: 727). 51 Leslie to Ingram, 21 November [1878], PRONI, Ingram Papers, MS D2808/43/35. 52 Leslie to Ingram, 24 December [1878], PRONI, Ingram Papers, MS D2808/43/40. 53 Leslie to Ingram, undated, PRONI, Ingram Papers, MS D2808/43/42. 54 Leslie to Ingram, undated, PRONI, Ingram Papers, MS D2808/43/47. 55 Leslie (1863a: 269–76), reprinted in Leslie (1879: 51–61) and in the second edition of this collection (Leslie 1888: 9–20). 56 ‘“Some Leading Principles of Political Economy Newly Expounded”, by Professor Cairnes’, Academy, 27 June 1874, reprinted in Leslie (1879: 179–91 and 1888: 41–53). 57 ‘Professor Cairnes’, Academy, 17 July 1875, reprinted in Leslie (1879: 248–50) and Leslie (1888: 60– 2). This obituary is reproduced as an Appendix to this article. 58 Although Leslie lived most of his professional life in London and Cairnes did not move there until 1866, Cairnes was obviously personally closer to Mill than was Leslie. In terms of correspondence, there are only twelve letters from Mill to Leslie extant, while there are ninety-two extant letters from Mill to Cairnes.

12 The famine, the New York Irish and their bank1 Cormac Ó Gráda

INTRODUCTION Economists and economic historians sometimes assume that the poor don’t save, or don’t save much.2 Controversies about the trade-off between economic ‘justice’ and economic growth turn, in part at least, on this assumption. Social reformers, though, have long sought to make the poor save. The early savings bank movement is an important part of the story. That movement can be traced back to the bank set up by Reverend Henry Duncan in the Scottish village of Ruthwell in Dumfriesshire in 1810. In the following decades hundreds of savings banks were established throughout the United Kingdom. Ireland’s first savings bank dates from just a few years later, and by 1830 there were eighty-one. Still, the charitable savings bank movement was far more successful in Britain than in Ireland, where the famine and a series of highly-publicized frauds impeded its progress (Pratt 1845; Porter 1849; Black 1960a: 152–3; O’Shea 1989).3 The savings bank idea spread quickly to the United States, where both Boston’s Provident Institution for Savings and Philadelphia’s Saving Fund Society were founded in 1816. New York obtained its first mutual savings bank three years later. The Emigrant Industrial Savings Bank, the focus of this chapter, was one of a score of such banks set up in New York State before the Civil War. Most authorities agree that these banks were founded and operated for a time on a strong philanthropic motive. Banks usually began by operating on a part-time basis with volunteer help, but gradually became more professionalized. They were managed by trustees seeking to encourage the habit of saving and industry among the poor: hence the common appellation, ‘trustee savings bank’. Trustees were prohibited from using depositors’ money personally other than to defray expenses, and were strictly limited in the range of assets they could invest in. Lending was constrained to government, state, or city securities, incorporated banks, and mortgages on real estate valued at twice the amount of the loan. Savings banks were also obliged to keep their books open for inspection by the relevant public

228 Ó Gráda officials and to produce an annual report to the relevant legislature. Yet by operating on a very tight margin between borrowing and lending rates, the banks managed to offer both high interest and liquidity to their customers. Their relatively high interest payments attracted many depositors who were by no means poor. The banks sometimes sought to discourage these by paying better rates on smaller deposits, by imposing maximum deposits and even by scrutinizing accounts from time to time and ordering money to be returned to wealthier depositors. In the United Kingdom, in the early decades, savings banks restricted individual savers to £30 annually and £150 in total. Yet though savers with deposits of less than £20 accounted for half of all United Kingdom savings bank accounts in the early decades, they made up only 10–12 per cent of the total deposited. In pre-famine Ireland savings banks catered disproportionately for the artisan and the lower middle class. Thus in Thurles, County Tipperary, in the 1840s farmers accounted for 56 per cent of all depositors reporting an occupation and labourers (a more numerous group in the community) only 29 per cent. In Ireland as a whole, in November 1846, accounts holding over £20 – or more than twice a farm labourer’s annual income – accounted for 56 per cent of all accounts and 88 per cent of all deposits (Pratt 1845; Kniffin 1918: 12; Payne and Davis 1956: 32–5; Fishlow 1961; O’Shea 1989: 102; Thom’s 1849: 194). In New York by 1860 there was one savings bank account per four people (Olmstead 1976: 4). At the outset these banks were allowed to invest only in government and local state bonds, but that stipulation was gradually relaxed (Sherman 1934: 70–5). In 1831–2 the Poughkeepsie Savings Bank and the Brooklyn Savings Bank were the first to be granted legal permission to lend on bond and property mortgages. Such lending would dominate later. For good economic histories of the early savings banks see Payne and Davis (1956) on Baltimore and Olmstead (1976) on New York City. The Emigrant Industrial Savings Bank was chartered in April 1850. It began to accept deposits in a rented two-storey, iron-fronted premises on Chambers Street4 on 30 September 1850. Most of its customers were Irish immigrants. Much of the credit for its creation must go to John Hughes, the able and energetic Catholic bishop (later archbishop) of New York. It was Hughes who prevailed on a group of eighteen merchants and other prominent citizens, most of them Irish-born, to organize a safe deposit institution for immigrants, and to encourage the saving habit among them. For a community mostly new to urban life and to savings institutions, Hughes’s leading role probably gave the new institution much-needed credibility. Chambers Street was a central location; the bank’s opening hours in its early years – 5 to 7 p.m. Monday to Saturday – reflected both client needs and demands on trustees’ time. The founding board included Fanning C. Tucker, who was president of the Leather Manufacturers Bank, which held the Emigrant Savings Bank’s cash; Gregory Dillon, an exofficio Commissioner of Emigration since 1847, and first president of the Bank; and the

The famine, the New York Irish and their bank 229 prominent merchants Joseph Stuart, Andrew Carrigan and Felix Ingoldsby. Becoming the trustee of a savings bank was a fashionable form of philanthropy at the time (compare Orcutt 1934: 20–1). Unlike many savings banks in nineteenth-century Ireland and Britain the Emigrant Industrial Savings Bank (EISB) was never threatened by corruption or mismanagement. The EISB was an outgrowth of the Irish Emigrant Society, which had been founded by Irish immigrants in 1840, also at the behest of Bishop Hughes, and had built up a considerable bill business in sending emigrant remittances back to Ireland during the 1840s (Murphy 1983). Until 1865 the Bank’s chief officers – president, vice-presidents and secretary – were unpaid. At the outset its depositors were mainly Irish, but as it expanded it became a more cosmopolitan institution. By the mid-1850s German immigrants and Irish-Americans accounted for about one-tenth of the accounts. By the early twentieth century ‘every nation on earth [was] represented among its depositors’, and some of the bank’s clerks, tellers and guards were chosen for their linguistic as well as their other skills (Manning 1917: 181). Tables 12.1 and 12.2 (overleaf) give a sense of the bank’s expansion. Growth in the twentieth century was more significant than in the nineteenth (again compare Payne and Davis 1956: 139), and the EISB did not open its second banking office until 1925. The early records reflect the legal constraints faced by the savings banks movement. The bank was prohibited by charter from investing its money other than in bonds or in mortgages worth double the amount lent. At a meeting on 19 January 18515 the board protested:

In consequence of the great abundance of capital and the very limited amount of those stocks for sale and their consequently increased price in the market, it has been found quite impossible to realize an interest exceeding four per cent per annum. It is believed that a much wider range of investment can be safely confided to savings banks. … The Bank for Savings is authorized to invest in the stocks of any of the states of the Union (Act of 29 March 1830) and are in the practice of loaning money on it and upon property worth one third more than the amount of the mortgage – no loss, it is stated, has ever occurred from the use of these powers and this board is desirous that the same powers be confided to them. They are also of opinion that perfectly safe investments can be made in a certain class of the bonds of rail road companies of this state – they are readily taken up by the most cautious private capitalists.

The EISB’s predicament is reflected in its first investment – a loan returnable on demand to W. & J. O’Brien at the modest rate of 4 per cent on the security of United States and New York State stock. This loan was called in on 8 February and replaced by one made

230 Ó Gráda Table 12.1 The growth of the Emigrant Savings Bank Year

Deposited($)

Withdrawn($)

1850 1855 1865 1875 1885 1895 1905 1915

39,665 703,481 4,038,134 4,750,156 9,871,608 15,206,832 25,977,716 33,205,884

4,766 548,003 3,413,994 4,659,492 8,809,468 12,831,344 18,819,473 29,247,777

Due depositors($) 34,899 977,932 4,876,941 13,784,399 30,124,245 49,649,731 85,096,972 148,557,398

Dividends

Accounts open

35 44,088 215,721 726,842 943,011 1,767,479 3,028,826 5,468,276

265 4,291 16,076 28,551 57,161 80,562 109,785 165,572

Source: Manning (1917:187)

Table 12.2 The bank’s first ten years Year

Accounts

Deposited($)

1851 1852 1853 1854 1855 1856 1857 1858 1859 1860 1861

265 1,098 2,183 3,661 3,691 4,291 5,461 5,698 6,686 8,487 10,096

34,899 186,313 455,310 813,996 822,453 1,001,233 1,302,791 1,348,730 1,628,755 2,172,873 2,627,542

Source: Olmstead (1976: 159)

to De Launay, Iselin and Clark on demand at 5 per cent. At the end of February 1851 the EISB’s assets were as follows: Account

De Launay et al. Jacob Little @ 4% New York City stock 7% Two loans on bond and mortgage at 6% Two loans do. at 7% Cash deposited in Leather Manufacturers Bank Total

Sum ($)

20,000.00 10,000.00 1,804.68 10,000.00 4,500.00 2,909.69 50,414.37

Soon most of the bank’s assets would realise about 7 per cent, allowing it to pay savers 6 per cent.

The famine, the New York Irish and their bank 231 The amateurish ethos of the Bank in its early years is reflected in a letter to board members in May 1858 pleading with them to attend, as business was increasing, and some meetings had to be abandoned for the want of a quorum. As the bank grew, professionalization was inevitable, and at a meeting in January 1865 it was resolved that in fixing salary levels,

each one of the officers, with the exception of the porter, shall immediately devote their leisure time to become accomplished accountants, by taking lessons and instructions from competent persons, with the view of enabling them to fulfill the duties of others in case of temporary absence, and to be entitled to promotion in case of vacancy.

The high interest offered by the savings banks inevitably attracted customers who had little in common with the ‘industrious poor’ envisaged by the founders. Some banks sought to discriminate against such depositors, but in the case of the EISB such discrimination was never a feature. In August and September 1852 substantial depositors included Americanborn John Charles Cooley, an apprentice who deposited $1,150; Catherine Lyons, no occupation, $700; Rev. James Mackay of Ogdensburgh, $1,200; Rev. Patrick Prendergast of Carbondale, Pennsylvania, $1,400; William Caffrey, a Long Island boarding-house owner, $772; Sarah Lehman, London-born wife of Israel Lehman, $2,200. These were substantial sums, and note that some of the addresses were quite a distance from Chamber Street.6 However, the records of the EISB show that such depositors were atypical of EISB account-holders in its early years. Those records offer rich pickings for both historians of Irish-America and historians of banking and saving behaviour. Our focus here will be on the EISB in its early years. A preliminary canvass suggests that people with proletarian, bluecollar occupations were very much to the fore among both male and female account holders (see Table 12.3). One-quarter (fifty-one) of the first 200 or so (204) men to open accounts declared themselves to be in unskilled labouring jobs. Many more were in jobs requiring little skill or literacy. On the other hand, literate occupations such as clerk and clergyman, and selfemployed or capitalist occupations also featured strongly. Among women the proportion in menial jobs was greater: forty-eight out of ninety-four were in domestic service and another nineteen in clothes making jobs. As the number of accounts grew, the savers became more representative of the community. By 1860 the EISB had 10,000 depositors, or about one in twenty of an Irish-born population of over 200,000 in New York and Brooklyn, but a much higher proportion of those in the age-groups supplying most of the savers. The riches of the EISB archive are only now being tapped. A limitless quarry for genealogists, it probably also constitutes the single most important source available anywhere on the socio-economic history of the New York Irish after the famine. Test Book No. 1 shows, for example, that Bridget White, the bank’s first depositor, was the wife of a

232 Ó Gráda Table 12.3 Occupations of the early Irish account holders Women Domestic, cook, chambermaid Dressmaker, seamstress, milliner, tailoress, vest maker Nurse Farmer’s wife Lady, no occupation Washerwoman, ironer Dealer, pedlar Store worker Factory worker Porter house owner, boarding house keeper Furniture store owner Gaiter fitter Waiter

48 19 4 1 3 7 5 1 1 2 1 1 1

Men Labourer, porter Book-keeper, clerk Dealer, grocer, pedlar Carpenter, cabinet maker Publican, cookhouse or hotel keeper Plasterer, mason, bricklayer Shoemaker Clergyman Gardener, clothing business, farmer Machinist, morocco dresser, smith

51 17 16 19 14 10 9 8 4 of each 3 of each

2 each of the following: Combmaker, cooper, cigarmaker, bookseller, hatter, sexton, carriage-maker 1 each of the following: Teacher, founder, pressman, ropemaker, parasol maker, sailmaker, marble sawyer, 'in telegraph office', barber, money collector, miller, rectifier, perfumer, moulding business, coffee roaster, musical instrument maker, cook, chandler, upholsterer, weaver, printer, print cutter, spinner/carder, policeman

tailor living on Henry Street in New York’s Seventh Ward. Born near Mountmellick in Queen’s County (Laois), she had arrived from Ireland nine years earlier on the ‘Fairfield’ out of Liverpool. Her father still lived in Ireland, but her mother was no longer living. She had four brothers (whose names are given), three of them living in the United States, and three sisters. This is typical. The deposit account ledgers give individual savings histories. From the late 1850s onwards the age of the account holder is also recorded. One issue on which the records throw interesting light is the regional pattern of emigration before and after the Great Irish Famine. The famine is likely to have produced a radical shift in the county and provincial origins of Irish emigrants to the United States. Hard data on this are lacking, though. Official emigration statistics begin only in 1849, and in any case are an

The famine, the New York Irish and their bank 233 Table 12.4 Emigrants and population by region

Leinster Munster Ulster Connacht Mayo-Galway-Clare-Kerry

Percentage of emigrants pre-1846 1846–52

Percentage of population, 1841

30 20 35 15 7

24 29 29 17 15

29 37 20 14 15

Source: New York Public Library, Emigrant Savings Bank Archive (II, 1). Based on all those emigrating before the end of 1852 who had opened an account by the end of June 1854.

unreliable guide for a few decades after then. Passenger lists provide only very partial data on county origin. The issue of origin is an important one, however, because the variation in the roles of excess mortality and emigration across counties and provinces has a big bearing on our understanding of the famine. The estimates of net county outflows during the 1840s derived by Ó Gráda and O’Rourke (1997) hinge on admittedly debatable assumptions about the degree of under-reporting of deaths in the 1851 census; alternatively, estimates of regional variation in excess mortality hinge on estimates of emigration during the 1840s. Hence the importance of other sources which shed some light on regional origins. One such source is the records of the EISB. As already noted in the early 1850s most of the bank’s depositors were Irish, and most were recent immigrants. However, a considerable number of those attracted by the new bank were older Irish people who had been in the US for a decade or more, and they also included a sprinkling of German, British and French immigrants, and of native Americans. Test Book No. 1 provides the name and date (sometimes only the year, but usually the precise date and name of the ship) of arrival of many thousands of Irish-born account holders. Table 12.4, based on an analysis of over 4,000 names, highlights the difference in the origins of those arriving and staying in New York before the famine and those arriving from 1846 on. Before the famine Ulster and Leinster were over-represented and Munster and Connacht (particularly Galway, Roscommon and Mayo) under-represented. The numbers imply that the New York Irish were disproportionately from the east and north of Ireland before the famine. Pre-famine Sligo and Leitrim had also provided a higher number of account holders than might have been suspected: if Sligo is excluded from the reckoning, the number of account holders from the rest of Connacht more than trebled during the famine, though admittedly from a very small base. The poor contributions before 1846 of counties like Clare, Kerry and Mayo, which were devastated by the famine, are also noteworthy. Table 12.4 thus corroborates the claim that before the famine wealthier counties in the north and east

234 Ó Gráda Table 12.5 The provincial origins of parishioners and EISB depositors Province

Transfiguration Church (%)

EISB (%)

Leinster Munster Ulster Connacht Total

235 (16.1) 606 (41.6) 149 (10.2) 467 (32.1) 1,457

72 (15.3) 238 (50.5) 35 (7.4) 126 (26.7) 471

of Ireland supplied most of the transatlantic emigration from Ireland (compare Adams 1932: 158–60). Finally, some features of the shifting distribution are worth noting. Munster which, though relatively poor, had been greatly under-represented relative to their population before the famine, was over-represented during the famine. The same could not be said for Connacht, though the increased representation of four west-coast counties – Mayo, Galway, Clare, Kerry – is also noteworthy. For emigration to have been a truly effective solution during the famine, however, even more out-migration from the poorer counties would have been needed. The marriage registers of the Church of the Transfiguration of Our Lord, located in the part of Lower Manhattan as the EISB, offer corroborative evidence on regional origins. Table 12.5 compares the regional origins of Irish-born brides and grooms for the 1853–60 period with those of EISB account holders living in New York’s Sixth Ward (on which more below) in the 1850s. The province-by-province match is quite good.

FLEEING FROM FAMINE: THE NEW YORK IRISH7 The interaction between the EISB and those living in its immediate neighbourhood is of particular interest. The bank was located next to the greatest concentration of poor Irish immigrants in North America. Moreover, during the bank’s early years, emigration out of Ireland reached an all-time high. That emigration was in large part a product of the Great Famine; indeed the Irish famine is often described as having exacted a toll of 1 million lives and 1 million emigrants. Yet describing the cost of the famine in such terms risks hiding the sense in which, paradoxically perhaps, the migrants – or at least those among them who sailed for the United States – were the fortunate ones. They were certainly victims of the famine, but most of them were also people of some means, because the cost of the passage required some accumulated savings or other assets that could be converted into ready cash. During the winter of 1846–7 the head of the Board of Works in Dublin referred to the ‘great delusion’ about emigration. It was not the poorest who were about to leave, he complained, but ‘all the small

The famine, the New York Irish and their bank 235 farmers [who are] hoarding all the money they can procure in order to make a stock for the spring, when they intend to bolt, leaving the landlords in the lurch’. Such claims were common.8 Reliable data on net migration flows by region during the famine are lacking, but modern estimates of the variation in excess mortality and migration rates across counties are consistent with such impressionistic evidence. In the hierarchy of suffering the poorest of the poor emigrated to the next world; those who emigrated to the New World had the resources to escape (Ó Gráda 1999: ch. 3). Because emigration failed to target those at greatest risk of death, it was an inefficient form of disaster relief. Yet without the emigration option, famine mortality would surely have been even higher. It is unlikely, though not inconceivable, that the absence of distant outlets for emigration would have increased mortality by more than the number of frustrated would-be emigrants. A more plausible outcome would be the deaths of a fraction of those forced to remain. In addition, some migration would have been diverted to the already crowded cities of the United Kingdom. As matters stood, famine immigration placed considerable strains on the cities of Dublin and Liverpool, for example, and much of the excess mortality in Dublin was due to it. Most of the huge increase between 1841 and 1851 in the number of Irish-born living in Britain – from 417,000 to 727,000 – happened in the wake of the potato failure. Many of the Irish who fled from famine died in Britain in 1847, prompting middle-class sympathy at first and, soon, widespread fear and resentment. English vital statistics are consistent with a ‘famine effect’ in the late 1840s (Neal 1995, 1996). In sum, the impact of the Irish migration to Great Britain was bad as matters stood; in the absence of the safety valve of emigration to North America, it would have been much worse. New York was the main port of entry into North America for Irish famine emigrants. As the city’s population grew rapidly during the 1850s, so did its number of Irish-born. By the mid-1850s greater New York contained almost as many Irish-born people as Dublin. Most of those who entered there during or just after the famine did so on their own money. The New York route cost more than the Canadian alternative, but it was safer and offered better prospects of employment on arrival. Nevertheless, Irish immigrants using the New York route in mid-century were much less successful than those arriving there from Germany or Great Britain. One important reason, as Joseph Ferrie notes, must have been their greater poverty on arrival, though the non-transferability of skills acquired in Ireland and discrimination in the markets for skilled labour may also have played a role. Ferrie’s research confirms the accuracy of contemporary advice to would-be immigrants not to stay long in New York and, indeed, most of the new arrivals seem not to have stayed for long (Ferrie 1997: 108–9; Mooney 1851: 83–4, 93–4). One guide to would-be immigrants painted the following picture of employment prospects in New York:

236 Ó Gráda [T]hey are generally employed in buildings, either as masons, bricklayers, plasterers, carpenters, or as helpers and hodmen; they are found portering on the quays, repairing, cleaning, and watching the city; sawing wood, carrying packages; serving as waiters, hostlers, barkeepers in the hotels and boarding-houses, eating-houses, and provision shops; owning or driving carts, cabs, hackney coaches or omnibuses; working as hostlers, trafficking in the vegetable and fruit markets; carrying newspapers, dealing in paper, owning small fishing or ferry boats; at work in the tailoring ‘sweating shops’, in the printing offices, foundries; digging foundations or blasting rocks up town, mending the streets, digging sewers, and laying water or gas pipes for the corporation or other companies; plying on the river as firemen or boatmen, in the thousand canal and steam boats that flit too and fro on the Hudson and ‘East River’; attending the merchants’ auctions in Pearl Street, and buying an odd damaged bargain in a small way, which is peddled at a good retail profit in the suburban districts of the city; having a fruit and temperance stand in the summer season in a recess of the street, &c. &c. (Mooney 1851: 84–5)

Given the lowly nature of such employment prospects it may seem ironical that, as noted above, most of those who travelled to New York needed to be people of some means. Presumably the poorest of them were people whose passage from Ireland to America had been financed or subsidised by landed proprietors and by the government, most of whom had occupied smallholdings no longer viable after the failure of the potato. From a landlord perspective their removal meant a lower tax burden and estate rationalization. The architect of the most ambitious of these schemes reported that other estates, ‘where no assistance is given, retain their paupers whilst all the respectable Tenants are moving off’, while his own scheme resulted in the departure of ‘none but abject Paupers’ (Lyne 1992: 86). Migrants either formally transplanted by their landlords through emigration schemes or assisted by rent rebates accounted for only a small minority of famine emigrants, perhaps 40,000 or 50,000 of the half million or so who crossed the Atlantic because of the famine (Fitzpatrick 1989). But suppose more of the really poor had been helped in the same way? How different would the character of the flow have been? A partial answer is offered by an analysis of the Irish community of New York’s Sixth Ward in the 1850s. Many of the Irish living in the ‘Bloody Old Sixth’, located in lower Manhattan, east of Broadway and north of City Hall, in these years had formerly been smallholders on the estates of the third marquis of Lansdowne in south Kerry or of Lord Palmerston and Sir Robert Gore-Booth in Sligo. These landlords had paid their passages for them. As a result most of the Kerrymen and Kerrywomen who settled in the Sixth Ward had been born in a small, impoverished Irish-speaking area in south Kerry, while the majority of the Sligo immigrants

The famine, the New York Irish and their bank 237 had lived on or near that county’s north-west coast. That the Kerry emigrants arrived in a destitute state is borne out by several contemporary press accounts. One described tenants and their families ‘without a penny of money … mak[ing] their way on foot from Kenmare to Cork … from whence their passages were paid to Liverpool, and thence to New York’. Another stated that the US Commissioners of Immigration had charged the carrier of one shipload of Kenmare emigrants $25 per head, the cost of their maintenance out of public funds in New York (Lyne 1992: 104–5). Arriving in New York together was likely to induce former neighbours to stick together initially in the US. It may also be the case that the poverty trap which prevented more of their compatriots from leaving Ireland prevented some of these inhabitants of the Sixth Ward from moving beyond it. The Irish immigrants who remained in New York were numerous and some met with considerable success, yet they were a residual population. In Joseph Ferrie’s sample of antebellum immigrants, which links passenger lists and manuscript census data, less than one-fifth of the Irish who arrived in the port of New York between 1840 and 1850 remained there on census day in 1850 (Ferrie 1997: 44–5). Charles Dickens’ American Notes for General Circulation (1842), local journalist George Foster’s New York By Gas Light (1850) and other reports in a similar vein conjured up an image of the mainly working-class Sixth Ward as a virtual no-go slum area. To the evangelical missionaries who sought to reform its inhabitants in the 1850s, the Five Points was ‘a synonym for ignorance the most entire, for misery the most abject, for crime of the darkest dye, for degradation so deep that human nature cannot sink below it’ (‘Ladies of the Mission’ 1854: 34). But the ‘new social history’ has generated a revisionist response on the Sixth Ward. Carol Groneman Pernicone’s University of Rochester dissertation contrasts the gap between the negative contemporary assessments of Dickens and others and the picture gained from an investigation of contemporary census data. Her main source, the New York city census of 1855, implied the presence of strong family ties among the Irish immigrants, as reflected in the high percentage of co-resident teenage children. It also indicated the dominance of nuclear family households, augmented, perhaps, by a boarder or two. The census also confirmed the unskilled character of the Irish labour force. Prefamine immigrants were more skilled than recent arrivals but there was a negative association between skills and age (see Table 12.6). This curious outcome is presumably a reflection of selection bias in migration out of the Sixth Ward. In 1855 Irishwomen specialized in the sewing and dressmaking trades (25.7 per cent of the total), in domestic service (36.3 per cent) and in taking boarders (31.9 per cent) (Groneman Pernicone 1973: 155, Table V–2). Groneman Pernicone’s research offers a useful corrective to earlier accounts, but is probably marred somewhat by undue reliance on the 1855 census,

238 Ó Gráda Table 12.6 Age and male skills in the Sixth Ward Age

15–19

20–9

30–9

40–9

50+

Unskilled (%) Pre-famine Post-famine

31.4 39.5

25.8 56.6

40.2 54.6

43.9 64.3

51.6 73.4

Skilled (%) Pre-famine Post-famine

55.7 52.3

51.0 33.7

37.0 33.6

29.7 23.1

28.3 16.0

Other (%) Pre-famine Post-famine

12.9 8.2

23.2 9.6

22.8 11.7

26.4 12.5

20.1 10.6

Source: Derived from Groneman Pernicone (1973: 116, Table IV–13).

an imperfect enumeration which was most likely to miss the more marginal and unattached elements in the population (Ernst 1994). An even more revisionist gloss on the Sixth Ward Irish is offered by a recent archaeological survey of one of its most impoverished corners near the Five Points. In this federally funded exercise in ‘the archaeology of domestic trash’, the Irish struggle for stability and even a modicum of respectability is revealed in the ‘pretty things’ they left behind. This study goes much farther than Groneman Pernicone in its critique of the earlier sensationalist literature, and even exaggeratedly refers to the Five Points as a ‘mythic slum’ (Yamin 1997). The registers of the Transfiguration Church report the ages and addresses of most brides and grooms, and their place of birth, in the 1850s. The records highlight not only a tendency for Irishmen to marry Irish-women, but the remarkable strength of regional or local networks within the Irish community. Most marriages involved couples from the same or neighbouring counties in Ireland, particularly so for well-represented counties such as Sligo and Kerry. More than two-thirds of men reported as born in those counties married women from the same county, and most marriages involved couples from the same corner of the same county.9 Remarkably, in about one marriage in every four grooms and brides-to-be gave the same address to the church clerk. This is hardly evidence of cohabitation, however; even if practised, cohabitation would certainly have been concealed from the local clergy.10 A more plausible explanation is that it reflects the tendency of immigrants from the same region in Ireland to live cheek by jowl in tenement housing. Certain addresses recur again and again in the records. For instance, thirteen men, mostly with different surnames and mostly from County Cork, married out of 5 Mulberry Street in the 1850s. The twelve men who married out of 22 Mulberry Street had come from a range of Irish counties but those living in 20 Mulberry Street were mainly Sligo people, while between 1853 and 1856 three men with different

The famine, the New York Irish and their bank 239 surnames, but all from Rahamlish in county Sligo, married out of 10 Franklin Street. Number 31 Baxter Street supplied eight grooms, all from Kerry or west Cork, and five of them married women giving the same address. Finally, how does the socio-economic profile reflected in the 1855 census and the Transfiguration Church registers square with that reflected in the EISB records? It turns out that although only a small minority of Sixth Ward inhabitants held accounts in the EISB, the occupational profile of Sixth Ward account holders in the 1850s reflected the social mix of the population rather well. Comparing the profile of Sixth Ward Irish male account holders with the results of Groneman Pernicone’s analysis of the Sixth Ward Irish as a whole implies some bias among the account holders towards a residual ‘other’ category containing sales and clerical workers, petty entrepreneurs, storekeepers and white collar workers. This is to be expected. Still, the Sixth Ward savers were mainly unskilled workers and petty traders. Included among 563 savers identified as Sixth Ward addressees were eighty-nine labourers, thirty-six domestic servants, twenty-four washerwomen, nineteen porters, thirteen fruit dealers, twelve seamstresses, twelve pedlars, eighteen tailors, nine junk dealers, and one teacher. Martin Hogan from Limerick described himself as a ‘fireman in Sweeny’s saloon’, while John O’Donoghue from Longford was a ‘barkeeper at John Dempsey’s’. John Shea of Tuosist distributed handbills, Jeremiah Daly of the same parish sold matches and Bridget Gilmartin from Rahamlish picked hair. It is interesting to find such people using the Emigrant Savings Bank.11 These profiles of the Lower Manhattan Irish in the 1850s prompt a few comments on the role of assisted migration during the famine. R.D.C. Black has shown that publicly-funded emigration schemes had commanded the support of a majority of economists since the 1820s (Black 1960a: ch. 7). Only a few such schemes had come to fruition, however, and landlordassisted schemes were also few. The total number of paupers ‘shovelled out’ by Lansdowne, Palmerston and Gore-Boothe in the wake of the famine, though not known with precision, did not exceed more than a few thousand.12 The large numbers of men and women from Kerry and Sligo in the EISB and Transfiguration Church records indicate that many of those who emigrated to New York stayed there in the 1850s. The 1855 census data suggest that there were few success stories among them in terms of skills acquisition. Taken together these bits of information suggest that an increase in the share of assisted emigrants would have reduced the geographical and occupational mobility of the Irish as a group. Further assisted emigration would have made the record of the Irish seem even worse than in the outcome of Ferrie’s analysis, which shows them faring poorly relative to British and German immigrants in the 1840s and 1850s (Ferrie 1997: 203–4).

240 Ó Gráda A comprehensive history of assisted emigration during the famine remains to be written. Some schemes, such as Major Mahon’s in Strokestown, ended in disaster and earned lasting notoriety. Others were efficiently managed; the crown-financed emigration from Ballykilcline, next to Strokestown, seems to have been a model of its kind.13 The assisted emigration of over 3,000 people from the Lansdowne estate in south Kerry in 1850–1 or so was the most ambitious scheme of all. By economizing on maintenance and concentrating the emigration on the low season, the organizer of the Lansdowne scheme, William Steuart Trench, kept its cost down to a modest £10,000 or so. Trench and his employer were criticized at the time, not unfairly, for their stinginess (Lyne 1992). Yet surely the broader implication of the profiles painted by the statistical sources described above is that further schemes, properly timed and more humanely managed, would have been a viable form of famine relief. The possibilities must be kept in proportion. First, none of these sources captures conditions in the New York Irish slums at their worst. Heather Griggs notes that very few of the individuals recorded in the marriage registers were included in the censuses of 1855 or 1860, highlighting ‘the necessity for using other primary sources to supplement census data’ (Griggs 1996: 37).14 The ‘Ladies of the Mission’ exaggerated the depravity and violence of the slum-dwellers, but the census commissioners almost certainly erred in the other direction by failing to include the most marginal inhabitants. Second, assisting people to emigrate in 1847–8 would not have eliminated the need for other kinds of public relief during the winter and spring of 1846 and 1847. Nor, third, could the very young and the very old have travelled; neither could heavily pregnant women or the mothers of very young children. Fourth, the absorptive capacity of New World and particularly its cities was limited; in the late 1840s the total population of North America was not much more than 20 million, and only 10 per cent of the total lived in towns and cities. Fifth, the capacity of the passenger trade in 1847 was already sorely stretched and probably subject to rising costs at the margin. Moreover, a significant increase in immigration from Ireland would undoubtedly have prompted increases in mortality in US cities as they did in Liverpool and Glasgow. Further immigration would have intensified anti-Irish feeling, already at an all-time high; in the New York mayoral election of 1854 the anti-immigrant Know Nothing Party candidate, James Barker, obtained about 31 per cent of the popular vote and came second in a four-way race. In the same year Know Nothing candidates won the mayoralties of Boston, Philadelphia, Chicago and San Francisco. Electoral support for the Know Nothings did not last, but at its peak it far exceeded that for even the most successful anti-immigrant movements today. Such considerations mean that mass migration was no panacea. Nevertheless, the assisted migration of, say, 100,000 Irish famine victims in 1847–8 would have almost certainly have saved many more lives in Ireland itself. An outlay of public money

The famine, the New York Irish and their bank 241 of, say, £1 million (about 0.2 per cent of UK national income or 2 per cent of public spending) would have easily covered the cost of such a scheme.

SAVING IN THE SIXTH WARD Banking archives containing information on customer accounts are few.15 Exceptionally, the EISB deposit account ledgers contain complete details of all customer transactions in the early decades. Our focus here is on the 1850s. Movements in the numbers of accounts opened and closed between 1851 and 1863, the number of deposits and drafts, and the sums involved are described in Figures 12.1 to 12.3. Besides highlighting the early growth of the EISB and the panics that beset it (in 1854, 1857 and at the beginning of the Civil War), they suggest the strong seasonality also apparent in Figure 12.4, where indexes of deposits and drafts by month (adjusting for month length) for the 1851–63 period are shown. Drafts were subject to much more seasonality than deposits, with two major peaks in January and July. Deposits also peaked in July, though much less spectacularly. The number of accounts opened and closed also varied somewhat seasonally (Figure 12.5). We still lack a full understanding of these patterns, but the striking bi-annual peaks in withdrawals are a reflection of a form of ‘coupon-clipping’: a significant number of depositors regularly withdrew interest payments due without touching the principal. It is worth noting that the seasonal pattern of withdrawals from the Philadelphia Saving Fund Society studied by George Alter, Claudia Goldin and Elyse Rotella (henceforth Alter et al. 1994: 761) was quite different (see Figure 12.6). How different EISB savers were in other respects remains to be seen. Meanwhile, a preliminary look at the savings habits of depositors in the Sixth Ward suggests some interesting features that should repay further study. First, most customers seem not to have used the bank to accumulate substantial savings. In thirty-four of 100 accounts opened in the bank’s early years (1850–5) the last withdrawal was smaller than the original deposit, while in another twelve the sum withdrawn was the same as that deposited. In a further ten cases the advantage was $10 or less. Thus the image of account holders accumulating nest eggs which they then withdrew as they made an investment in situ or as they moved to another place is not typical in this case. One hundred and ninety-eight of 597 accounts opened between 1850 and 1854 and still open towards the end of 1854 had accumulated negative sums between opening and December 1854, 158 had added $0–$9.99, 133 had added $10– $49.99, had added $50–$99.99, 65 had added $100–199.99, and only 57 sums of $200 or more. Only two savers, a German-born essence maker and an Irish-born bread seller, had

242 Ó Gráda

Figure 12.1 Accounts opened and closed, 1851–63.

Figure 12.2 Deposits and withdrawals, 1851–63.

The famine, the New York Irish and their bank 243

Figure 12.3 Amounts ($) deposited and withdrawn, 1851–63.

Figure 12.4 Emigrant Savings Bank, deposits and withdrawals per month. Note: Based on monthly data for years 1851–63.

244 Ó Gráda

Figure 12.5 Emigrant Savings Bank, accounts opened and closed per month. Note: Based on monthly data for years 1851–63.

Figure 12.6 Monthly withdrawals, New York and Philadelphia. Note: Based on monthly data for years 1851–63.

The famine, the New York Irish and their bank 245 Table 12.7 Sums accumulated in accounts opened 1851–4 Sum accumulated ($) Negative 0–9.99 10–49.99 50–99.99 100–199.99 200 + Total

Women (%)

Men (%)

30 (17) 54 (31) 52 (30) 18 (10) 14 (8) 4 (2) 172

76 (18) 106 (25) 81 (19) 60 (14) 51 (12) 53 (12) 427

Women (%)

Men (%)

Table 12.8 Opening deposits First Deposit ($) 0–9.9 10–49.9 50–99.9 100–199.9 200–499.9 500 + Total Average

7 (4) 66 (38) 49 (29) 26 (15) 21 (12) 3 (2) 172 92.3

7 (2) 107 (25) 109 (25) 98 (23) 80 (19) 24 (5) 425 149.4

accumulated savings of over $1,000 when they closed their accounts. Nor,in contrast with the Philadelphia Saving Fund Society, does our preliminary canvas reveal that women savers were more likely to accumulate nest eggs than men. Further analysis of the same 594 accounts is shown in Table 12.7. Should the EISB be characterized as a true, typical ‘savings bank’, or did other savings banks at the time also serve more of a ‘current account’ function than previously suspected? Further analysis and comparisons should provide a better understanding of why and how the poor saved. Table 12.8 describes the sizes of opening deposits in the early years. On average women deposited less than men; 71 per cent of women’s opening deposits were less than $100, but only 52 per cent of men’s. The averages by origin were: Ulster $131, Munster $123, Leinster $118, Connacht $91, non-Irish $141, though these averages were subject to wide variation. Most accounts were held for a year or two, though a preliminary canvass suggests that many customers who closed their accounts re-opened them later. Some account-holders behaved in true Smilesian fashion, making small and frequent deposits, and allowing them to accumulate. Others made substantial and frequent deposits and withdrawals, never allowing more than a small balance to remain at Chambers Street. Compare the case of Ann Murphy who, inexplicably, withdrew the $85 she had deposited on 9 August 1854 a day later, and that of Mary Kelly, a washerwoman, who deposited $140 in February 1855 and withdrew $500

246 Ó Gráda Table 12.9 Opening deposits by Irish women savers, 1850–1 Amount ($)

Number

Amount ($)

Number

0–10 11–20 21–30 31–50 51–75 76–100

40 48 56 78 44 55

101–200 201–300 301–400 401–500 501–600

45 13 8 12 6

Number

415

Note: These accounts were among the first 2,000 opened at the Emigrant Savings Bank.

Table 12.10 Age of first-time depositors, 1862 Age

Number

Age

Number

Less than 20 20–4 25–9 30–4 35–9

17 25 57 91 63

40–4 45–9 50–4 55–9 60+

60 34 32 18 10

in May 1869, after making many withdrawals and deposits in the bank. Overall, though, our preliminary analysis replicates Alter et al.’s finding for Philadelphia in 1850 of accounts opened as ‘relatively large in size, brief in duration, and inactive’ (Alter et al. 1994: 764). An analysis of the sums deposited by those opening accounts implies that several had already acquired the saving habit before the creation of the EISB. Table 12.9 summarizes the situation for women among the first 1,000 account holders. Women savers accounted for about one saver in five. The median sum deposited was just short of $50, not an insignificant sum (about one-third of a male labourer’s annual income in 1850). About one-third of the deposits were under $30 (compare Alter et al. 1994: 738), and the highest was $600. Table 12.10 describes the age distribution of first-time depositors in 1862, and shows that first-time depositors were most likely to have been in their thirties (the median here was 35 years). Only one in ten was under 25, and about two-thirds of first-time depositors were aged between their mid-twenties and their mid-forties. In Philadelphia account holders were considerably younger: well over a quarter of recently opened accounts in 1850 were held by people under 25 (compare Alter et al. 1994: 745–6). The predominance of immigrants in the Emigrant Savings Bank probably accounts for the difference.

The famine, the New York Irish and their bank 247 CONCLUSION At the outset we noted that the savings bank movement had made only limited progress in Ireland before the Great Famine. Nevertheless, in the early stages of the famine, editorials in The Times and Morning Chronicle linked the savings banks and the developing disaster, highlighting reports from Ireland of increases in savings banks deposits as evidence of ‘successful swindling’ or welfare fraud on the part of the Irish people. In Killarney rumours that the local savings bank was about to fail allegedly induced workhouse inmates to escape in hopes of reclaiming their deposits (O’Rourke 1902: 214–5; Smyth 1844–9: III, 29). Such depictions of Irish ‘character’ fed on the kind of anti-social behaviour that invariably accompanies catastrophes such as the Great Famine. But they hide two more important truths. First, though the savings banks had managed to harness substantial savings in Ireland – their trustees had nearly £3 million invested in the national debt in 1846 – most of those at greatest risk during the famine are unlikely to have held accounts in them. Most account-holders in savings banks lived in the towns and the cities; the province of Connacht, poorest, least urbanized, and worst affected by the famine, accounted for 17 per cent of the population but only 5 per cent of savings in savings banks. Second, both aggregate data and individual case studies suggest that the economic shock caused by the famine dealt a serious blow to Ireland’s savings banks. Between 1845 and 1849 aggregate deposits fell from nearly £2.9 million to £1.2 million, and the number of depositors from 95,348 to 44,919. On the eve of the famine, Great Britain contained nearly eight times as many savings banks as Ireland, yet of the fortyfour savings banks in the United Kingdom that ceased business between 1844 and 1852, twenty-four were Irish (O’Shea 1989; Ó Gráda 1999: ch. 4; Thom’s 1850: 195; Thom’s 1851: 264; BPP 1852a, 1852b). The famine which halved Ireland’s savings banking sector also contributed to the rapid growth of the Emigrant Industrial Savings Bank. Indeed, some of those who opened accounts in Chambers Street in the 1850s had almost certainly closed their accounts in some Irish savings bank before travelling. Such connections should not be pressed too far: as noted, most of the Emigrant’s early account holders were recent immigrants from the rural, less commercialized regions of Ireland. Yet the early history of the Emigrant offers testimony of the adaptability of emigrant Irish, even the very poorest among them, and their eagerness to better themselves.

NOTES 1 I am grateful to Mr Donald Kelly, Vice-President, for access to the Emigrant Savings Bank archives at head office on 41st Street, to Tyler Anbinder, Marion Casey and Heather Griggs for sharing their

248 Ó Gráda knowledge of New York history with me, and to Máire Ní Chiosáin, Des Norton and Renee Prendergast for comments on an earlier draft. Most of the primary material referred to here is held in Room 238 of the New York Public Library. Some of this chapter describes the beginnings of a project on which I am engaged with Eugene N. White of Rutgers University. 2 See, for example, Boyer (1997: 65–8), and the sources cited there. 3 Black (1969) is an indispensable source on the pamphlet literature on the provision of saving and credit facilities for the Irish poor. 4 The property belonged to John Milhau, one of the original trustees. The contract was for a rent of $2,100 annually, with an option to purchase for $30,000. The Emigrant Savings Bank bought the property from Milhau in 1852. 5 Board minutes (held in ESB head office, 5 East 42nd Street, NY). I am grateful to Donald Kelly, vicepresident, for allowing me to consult this and related material. 6 Ernst (1994: 133) refers to one deposit of $10,000 in 1856, which I have so far been unable to locate. 7 This section contains material also published in different form in Ó Gráda (1999: ch. 3). 8 Citations are provided in Ó Gráda (1999: ch. 3). 9 Ten of the fifteen grooms from Tuosist married women from the same parish, and three more women from the neighbouring parishes of Bunnawn and Kenmare. Eleven of the twenty-nine grooms from Rahamlish married women from the same parish, and another four married women from neighbouring Drumcliff. 10 The rules of canon law seem to have been enforced, if not too harshly. About one couple in eleven had to produce a baptismal certificate or certificates, but several couples were also given dispensations for consanguinity or a mixed marriage. 11 I am grateful to Heather Griggs for a copy of this data base. 12 As distinct from those assisted through rent rebates or sums granted in return for giving up their holdings. 13 On Strokestown and Ballykilcline compare Campbell (1994), Scally (1995) and Harris (1996). 14 Griggs’s archaeological research concentrated particularly on a block of tenement houses in the Sixth Ward. 15 The kind of information described here does not exist for British (or Irish) savings banks in this period (compare Johnson 1985: 98).

Part VI

Abstraction and relativity

13 The political economy of Edmund Burke Renee Prendergast

Here lies our good Edmund, whose genius was such, We scarcely can praise it or blame it too much; Who, born for the universe, narrowed his mind and to party gave up what was meant for mankind; though fraught with all learning, yet straining his throat to persuade Tommy Townshend to give him a vote; Who, too deep for his hearers, still went on refining, And thought of convincing while they thought of dining; Though equal to all things, for all things unfit; Too nice for a statesman, too proud for a wit, For a patriot too cool, for a drudge disobedient, And too fond of the right to pursue the expedient. In short, ’twas his fate, unemployed or in place, Sir, To eat mutton cold, and cut blocks with a razor. (Oliver Goldsmith 1774, cited in Kramnick 1974: 130–1) Oliver Goldsmith’s pen portrait of his fellow countryman portrays Burke as a man of many contradictions. If anything, these contradictions intensified in the later years of Burke’s life. The advocate of the American colonists became the scourge of revolution in France. The critic of the age of economists and calculators claimed that the laws of commerce were laws of nature and hence laws of God. The champion of aristocracy reminded one of the most powerful of their number that all their progenitors were thieves. Commenting on Burke’s manifold contradictions, Kramnick (1977: 190–1) has suggested that it is no exaggeration to say that Burke led two quite different lives: one as the self-deprecating and dutiful servant of his betters; the other taking pride in and defending his own ambition and achievements. In this respect, Burke was the embodiment of the eighteenth-century bourgeoisie who despised the idleness and privileges of men of rank while at the same time envying their wealth and power.

252 Prendergast For all Burke’s contradictions, there is a remarkable coherence in his work. The review of Burke’s political economy presented below establishes that Burke’s grand theme in economics as much as in politics is his rejection of constructivistic rationalism. He championed free trade and natural liberty. He added to it an opposition to economic intervention based primarily on the issue of information. Laws and institutions that had evolved over generations embodied, Burke argued, a level of implicit knowledge not available to legislators. Burke wrote no systematic treatise in political economy. His views on economic matters were typically presented in the context of a particular problem. Burke lived his life as a parliamentarian who had to make his way. He represented different interests at different times. His genius as represented by Goldsmith was to harness philosophy to specific advocacy. The approach adopted in this chapter is broadly speaking that of a chronological review which follows the specifics of Burke’s parliamentary career and the resulting geographical preoccupations: from those of Bristol merchants to the Americas, from India to the French revolution and the domestic consequences of war. The temporal and geographical context thus provided is important precisely because of Burke’s view that policy conclusions should be based on the facts of a situation and not deduced from abstract models. There is a brief biographical introduction outlining the salient features of Burke’s life and work. A final section summarizes Burke’s achievements in political economy and considers the influence of his work.

BIOGRAPHY Edmund Burke was born in Dublin in 1729. His mother Mary Nagle was a Catholic whose family controlled some lands and mercantile interests in County Cork. Burke’s father, Richard, a lawyer, was also a Catholic but he conformed to the established church possibly for professional reasons. Burke spent part of his childhood with his Co. Cork relatives but, from the age of 12, he attended a Quaker boarding school near Dublin. Afterwards, he attended Trinity College where he took his BA in January 1748. In 1750, he went to London to study law at the Middle Temple. The law was not to his liking and he engaged instead in a variety of literary pursuits. These bore fruit in the late 1750s when Burke published two books. The first, A Vindication of Natural Society (1756) was a satirical work whose purpose was to show the dangers of the application of abstract theory to politics. The second, A Philosophical Enquiry into the Origin of our Ideas of the Sublime and Beautiful (1757) was a treatise on aesthetics. It met with immediate success and brought Burke to the attention of literary and artistic circles including such luminaries as Goldsmith, Reynolds, Garrick, Johnson and Sheridan. In 1757, Burke married Jane Nugent, the daughter of a Catholic

The political economy of Edmund Burke 253 physician. His consequent need for a regular income led Burke to contract with his publisher for the production of a review of history, politics and literature, for an annual payment of £100. The first issue of the Annual Register appeared in 1759. Burke relinquished the editorship in 1776 but maintained an interest in the publication. Burke’s career in politics began when, in 1759, he became private secretary to William Hamilton, whom he accompanied to Dublin in 1761 when Hamilton became chief secretary to the Lord Lieutenant of Ireland. Following a break with Hamilton in 1765, Burke was taken on as private secretary by Charles Wentworth, Marquess of Rockingham and leader of what was known as the Rockingham Whigs. Burke entered the House of Commons in 1766 as the nominee for a rotten borough. By 1775, however, his reputation was sufficient to enable him to win him the important Bristol seat. Despite his loss of the Bristol nomination in 1780, Burke continued as an MP in the House of Commons until 1794, three years before his death. Burke’s parliamentary career can be divided into three broad periods. In the first, which lasted until 1783 and culminated in his brief occupancy of post of Paymaster General, his main interests were American policy and Economical Reform. In the second period, which lasted roughly until the outbreak of the French Revolution, Burke’s major preoccupation was the activities of the East India Company and his efforts to secure the impeachment of Warren Hastings, the Governor General of Bengal. Burke’s final years were devoted to a sustained attack on the French Revolution. While Burke’s denunciation of the French Revolution was consistent with the reformist positions he had embraced and set out in various works during his long political career, it came as a surprise to his Whig associates and led to charges of inconsistency.

BURKE’S ECONOMICS Adam Smith is reputed to have said in 1779 that Burke is the ‘only man I ever knew who thinks on economic subjects exactly as I do, without any previous communication having passed between us’ (Bisset 1800: II, 429).1 Whatever Smith’s assessment may have been, it is clear that Burke himself thought that his work in the field of political economy had considerable merit. Defending his record as a parliamentarian towards the end of his life in ‘A Letter to a Noble Lord’, Burke wrote:

If I had not deemed it of some value, I should not have made political economy an object of my humble studies, from my very early youth to near the end of my service in parliament. … Great and learned men thought my studies were not wholly thrown away, and deigned to communicate with me now and then on some particulars of their

254 Prendergast immortal works. Something of these studies may appear incidentally in some of the earliest things I published. The house has been witness to their effect, and has profited from them more or less, for above eight and twenty years. (McDowell 1991, IX: 159–60)

EARLY WORKS Burke’s reference to ‘one of the earliest things I published’ in the above may refer to his earliest work, A Vindication of Natural Society. In the Vindication, which drew on Bernard Mandeville’s satire, Fable of the Bees, Burke sought to argue that ‘artificial society’ was clearly irrational and men would be better off in a state of nature. This Burke did not believe. His argument was a reductio ad absurdum directed against Lord Bolingbroke’s rationalist critique of religion. It was intended to show that the arguments which Bolingbroke employed against religion might be employed with equal success for the subversion of government. This latter Burke regarded as simply unthinkable. For all his intended irony, the Vindication indicates that Burke’s support for the exiting social order was always tempered by a keen appreciation of its flaws. He wrote:

The most obvious division of society is into rich and poor. The whole business of the poor is to administer to the idleness, folly and luxury of the rich; and that of the rich, in return, is to find the best methods of confirming the slavery and increasing the burdens of the poor. (Works 1855, I: 41–2)

Burke went on to describe some of the forms of drudgery and hardship to which the poor were subject. He noted that the ignorance which resulted from drudgery was often cited as the reason why the poor had to continue their life of servitude. He also cast doubt on the real benefits that the rich derived as a result of the form of social organization. As we shall see, Burke returned to the theme of the relationship between the rich and poor towards the end of his life with different ends in view. Meanwhile, the grand theme of the Vindication, the fallibility of human reason, became a central one for Burke and he developed it in a variety of ways in nearly all his subsequent writings. Burke’s developing interests in political economy are represented much more fully in his Observations on a Late State of the Nation (1769). Described by Lock (1998: 259) as Burke’s first substantial political pamphlet, this work was both a defence of the Rockingham Whig administration and a reply to a pamphlet by William Knox. Knox’s pamphlet on the present

The political economy of Edmund Burke 255 state of the nation presented a gloomy picture of national decline which was attributed to the reversal of policies pursed by the previous administration. Burke attempted to refute Knox’s arguments using economic statistics from various sources. In some cases, the quality of the arguments and statistics are difficult to judge. In others, such as his analysis of French public finances, the argument is clearly sound and the judgement remarkably prescient. According to Burke, such was the extent of the deficit in the French public finances that anyone considering the affairs of that country with ‘any degree of attention or information … must hourly look for some extraordinary convulsion in that whole system; the effect of which on France and even on all Europe, it is difficult to conjecture’ (Writings 1981, II: 151). Apart from its wealth of empirical material, the Observations also contains some arguments indicative of Burke’s emerging economic vision. Thus, in the course of disputing a claim that British manufacturing was emigrating to France, Burke developed an argument for natural liberty which was to be amplified in his subsequent work:

A trade sometimes seems to perish when it only assumes a different form. Thus the coarsest woollens were formerly exported in great quantities to Russia. The Russians now supply themselves with these goods. But the export thither of fine cloths has increased in proportion as the other has declined. Possibly some parts of the kingdom may have felt something like a languor in business. Objects like trade and manufacture, which the very attempt to confine would certainly destroy, frequently change their place; and thereby, far from being lost are often improved. (Writings 1981, II: 139)

The Observations contains several warnings about the dangers and difficulties associated with radical change which were to become the leitmotif of Burke’s oeuvre. One of these warnings is stated in an economic context and brings out Burke’s concern that policy conclusions should be based on the facts of a situation and not abstract models.

Whoever goes about to reason on any part of the policy of this country with regard to America, upon … mere abstract principles … will be liable to the greatest errors imaginable. The object is wholly new in the world. It is singular; it is grown up to this magnitude and importance within the memory of man; nothing in history is parallel to it. All reasonings about it that are likely to be at all solid, must be drawn from its actual circumstances. (Writings 1981, II: 193–4)

256 Prendergast AMERICA AND IRELAND – NATURAL LIBERTY AND FREE TRADE Arguments in favour of natural liberty and free trade feature strongly in Burke’s writings and speeches on both the American colonies and Ireland. In his ‘Speech on American Taxation’, 1774, Burke complained of the late George Grenville’s excessive belief in the power and wisdom of human legislation (O’Brien 1992: 137–44). He conceived, Burke argued, ‘and many conceived along with him, that the flourishing trade of this country was greatly owing to law and institution, and not quite so much to liberty’. The importance of liberty rather than legislation in facilitating economic development was again emphasized in a speech delivered on 22 March 1775. The colonies, Burke argued,

in general owe little or nothing to any care of ours … and that they are not squeezed into this happy form by the constraints of watchful and suspicious government, but that, through a wise and salutary neglect, a generous nature has been suffered to take her own way to perfection. (Speech on Conciliation with the Colonies, Writings 1996, III: 118)

For Burke liberty and free trade were by no means some sort of absolute ideal. In his speech on American taxation, he pointed out that British policy towards American trade was, from the beginning, wholly restrictive. America, however, had two major compensations. The first of these was access to British capital. The second was that she had, except the commercial constraint, ‘every characteristic mark of a free people in all her internal concerns’. This whole state of commercial servitude and civil liberty, taken together, was certainly not perfect freedom but ‘comparing it with the ordinary circumstances of human nature, it was a happy and a liberal condition’. It was in his view the attempt to couple the monopoly on trade with the imposition of taxation which gave rise to the revolt of the colonists. ‘To join together the restraints of an universal internal and external monopoly, with an universal internal and external taxation, is an unnatural union; perfect, uncompensated slavery.’ Burke’s most complete defence of the benefits of free trade is to be found in two letters to his Bristol constituents in which he defended his support for the liberalization of Irish trade. In the first letter, written on 23 April 1778 and addressed to the Society of Merchants Adventurers of Bristol, Burke wrote:

to say that Ireland interferes with us, and therefore must be checked, is, in my opinion, a very mistaken, and a very dangerous principle. I must beg leave to repeat … that Ireland is a country, in the same climate, and of the same natural qualities and productions, with this; and has consequently no other means of growing wealthy in herself, or, in other

The political economy of Edmund Burke 257 words, of being useful to us, but by doing the very same thing which we do, for the same purposes. (Writings 1991, IX: 509) The second of Burke’s letters to his Bristol constituents was dated 2 May 1778. There, Burke emphasized that trade was not a limited thing and had the potential to benefit all parties.

I know, that it is too natural for us to see our own certain ruin, in the possible prosperity of other people. It is hard to persuade us, that every thing which is got by another is not taken from ourselves. … Ireland has never made a single step in its progress towards prosperity, in which you have not had a share and perhaps the greatest Share in the Benefit. … But believe me, if Ireland is beneficial to you, it is so, not from the parts in which it is restrained; but from those in which it is left free, but not unrivalled. The greater its freedom, the greater must be your advantage. If you should lose in one way, you will gain in twenty. (Writings 1991, IX: 517) In making a case for freer trade between Britain and Ireland, it is noteworthy that Burke did not make use of the kinds of argument for free trade developed by Smith in the Wealth of Nations which emphasized the prudence of buying from the cheapest source. Such arguments would have been unlikely to win the support of the Bristol merchants for the cause of free trade. Burke’s instinct that a case could be made out for free trade between broadly similar countries was a good one but he does not seem to have fully realized that, in these circumstances, the pattern of trade would reflect the self-reinforcing virtuous circles set in motion by the vagaries of history (Krugman 1994: 234). In Ireland’s case, these vagaries were such that by the time of the Act of Union, Britain acquired substantial advantages in many areas of industry.

INDIA During his early years in parliament, Burke seems to have gone along with the Rockingham Whig view which opposed government interference in the affairs of the East India Company. The position may not have been entirely disinterested, since the Burkes stood to gain from the speculations of Edmund’s friend Will Burke in East India Stock (Mahoney 1960: 37–44). Burke’s change of heart towards the East India Company was gradual but eventually total. By 1783 when he was a member of the Fox/North administration, he drafted a bill, ‘Fox’s East

258 Prendergast India Bill’, which provided for the punishment of abuses, the observance of Indian rights and customs, and much stricter control from London (O’Brien 1992: Part IV). Burke’s speech in support of the Bill was an indictment of the effects of Company rule in India. The East India Company, he declared, was not the first conqueror of India but it was the first conqueror which succeeded in totally impoverishing the country.

The several irruptions of Arabs, Tartars, and Persians, into India were, for the greater part, ferocious, bloody and wasteful in the extreme. … But the Asiastic conquerors very soon abated their ferocity, because they made the conquered country their own. They rose or fell with the rise or fall of the territory they lived in. … If hoards were made by violence and tyranny, they were still domestic hoards; and domestic profusion, or the rapine of a more powerful and prodigal hand, restored them to the people. With many disorders, and with few political checks upon power, Nature had still fair play; the sources of acquisition were not dried up; and therefore the trade, the manufactures and the commerce of the country flourished But under English government all this order is reversed. … The natives scarcely know what it is to see the grey head of an Englishman. Young men (boys almost) govern here, without society, and without sympathy with the natives… . Animated with all the avarice of age, and the impetuosity of youth, they roll in one after another; wave after wave; and there is nothing before the eyes of the natives but an endless, hopeless prospect of new flights of birds of prey and passage, with appetites continually renewing for a food that is continually wasting. Every rupee of profit made by an Englishman is lost forever to India. With us there are no retributory superstitions, by which a foundation of charity compensates, through ages, for the poor, for the rapine and injustice of a day. With us no pride erects stately monuments which repair the mischiefs which pride has produced, and which adorn a country out of its own spoils. England has erected no churches, no hospitals, no palaces, no schools; England has built no bridges, made no roads, cut no navigations, dug out no reservoirs… . Were we to be driven out of India today, nothing would remain, to tell that it had been possessed, during the inglorious period of our domination, by anything better than the ouran-outang or the tiger. (Speech on Fox’s India Bill, Writings 1981, V: 401–2)

In the same speech, Burke also attacked the East India Company for failing in its duties as a commercial trust. He accused it of being indifferent as to the prices it paid for produce; of being lax in driving bargains, of allowing excessive profits on contracts, of allowing its servants to divert dealing to their own benefit, of slack accounting, of failure to manage cash flow. The East India Company no longer functioned as a normal company. ‘If the active, ruling part of the company … were persons who held their stock as a means of their

The political economy of Edmund Burke 259 subsistence’ they ‘would not easily have left their trade as a spoil to the avarice of those who received their wages.’ As things stood, the East India stock was not bought for its dividends but for qualifications.

The vote is not to protect the stock but the stock is bought to acquire the vote; and the end of the vote is to cover and support, against justice, some man of power who has made an obnoxious fortune in India; or to maintain in power those who are actually employing it in the acquisition of such a fortune. (ibid.)

Although carried in the Common’s, Fox’s India Bill was defeated in the Lords and used as an opportunity by the King to dismiss the Fox/North administration. Undeterred, Burke continued his crusade and this eventually led to the Impeachment of Warren Hastings, Governor General of Bengal in the House of Commons in 1787 and afterwards to his trial at the bar of the House of Lords. Burke’s argument that the activites of the East India Company were detrimental to development and to the welfare of India’s population rests in part on his claim that its status as a monopoly buyer meant that it could fix prices at levels which did not favour the producer. Burke’s remedy in this case was to allow the natives to partake in trade on an equal basis with Europeans, although true to form, he cautioned that this reform ought to be introduced gradually. Burke also stressed the need to place the East India Company on proper commercial footing but at the same time recognized that, even before the company acquired territories and raised revenues from them, it was hampered in its commercial operations by regulations which closed the British market to key products (Canavan 1995: 126–8). In addition, as indicated above, Burke pointed to the failure to invest in economic and social infrastructure as well as the failure to transfer surplus by means of charitable institutions. Despite the vehemence with which these failings were castigated, there was no suggestion that they could be redressed by means of some form of taxation or restrainst on surplus being transferred abroad. To be fair to Burke, he may have seen his proposals for native participation in trade and the return of native government as more proper remedies. It should be noted, however, that, when in 1773, the North administration sought to introduce a tax on absentee landlords in Ireland, the proposal was defeated as a result of a campaign by Lord Rockingham and other prominent absentee proprietors in which Burke played an important role (Black 1960a: 83–4; Lock 1998: 345–8). As Lock (1998: 346) points out, Burke’s arguments in this case appear strained and sophistical and, indeed, Burke himself admitted in a letter to Rockingham that the tax had ‘a superficial appearance of equity’ (Correspondence 1958–78, II: 465–6).

260 Prendergast ECONOMICAL REFORM In his Thoughts on the Causes of the Present Discontents (1770), Burke had identified ‘the influence of the crown’ as the principal threat to Britain’s balanced constitution. In particular, he saw the civil list as a major source of political corruption which enabled the King to buy influence in parliament and thus subvert the delicate balance embodied in the British constitution (Reitan 1985: 129–30). Economical reform for Burke was thus political reform but, although the purpose was political, the reforms proposed by Burke in his 1780 bill were justified on purely economic grounds. Thus, he proposed that the Board of Trade and plantations be abolished on the ground that that it fulfilled no useful function (Writings 1996, III: 535). Burke placed a good deal of emphasis on the need to insure that the apparatus was fitted to the object and that work was carried out by people of proper skill. Thus the Board of Works was to be put in the hands of ‘a real builder’. The mint should be seen for what it was – a manufacture and ‘ought to be undertaken upon the principles of a manufacture; that is, for the best and cheapest execution, by a contract upon proper securities, and under proper regulations’. In the case of the artillery, likewise, Burke proposed ‘to execute by contract, what by contract can be executed; and to bring, as much as possible, all estimates to be previously approved, and finally paid for by the treasury’.

Thus by following the course of nature, and not the purposes of politics, or the accumulated patch-work of occasional accommodation, this vast expensive department may be methodised; its services proportioned to its necessities, and its payments subject to the inspection of the superior minister of finance; (‘Speech on Economical Reform’, Writings 1996, III: 517–18)

Burke was conscious of the need to economize on governance costs. As he put it, a

complex, operose office of account and control is, in itself, and even if members of parliament had nothing to do with it, the most prodigal of all things. The most audacious robberies, or the most subtle frauds, would never venture on such a waste, as an over careful, detailed guard against them would infallibly produce. In all dealings, Burke argued, the principles of economy required three things: (i) undertaking by the great; (ii) engaging with persons of skill; and (iii) engaging with persons who have an immediate and direct interest in the proper execution of the business. Elaborating on the first of these points, Burke argued that a general contract was the best way of organizing things which were great in general amount but minute in the component

The political economy of Edmund Burke 261 parts. No dealing was exempt from fraud but by a contract on a matter certain, you were at least certain as to the utmost extent of any fraud. On the third point, Burke suggested that the interest of the contractor in the satisfactory execution of the business could be secured by means of short contracts. Finally, Burke was in favour of selling off forest rights as well as minute and dispersed possessions in landed estate. The latter, he argued, were of a nature more proper for private management than public administration, fitter for the care of a frugal land steward than an office of the state.

FRANCE On reading a copy of Burke’s Reflections on the Revolution in France, Thomas Jefferson is reputed to have said ‘The Revolution in France does not astonish me so much as the revolution of Mr Burke’ (Writings 1989, VIII: 13). It is easy to sympathize with Jefferson’s position. The man who just a few years earlier laboured to prevent the British constitutional monarchy from extending its influence at the expense of parliament now became the defender of the French monarchy against the revolution. Nonetheless, one can discern continuity with Burke’s earlier work, in particular, his contempt for metaphysical speculation, his emphasis on the circumstances of time and place, his acknowledgement of the complexity of society and hence the need to tread carefully in matters of reform. Emphasis on circumstances of time and place is brought out very clearly in the course of the following discussion of liberty. Liberty, Burke argued, was not an abstract thing. I cannot, he wrote,

give praise or blame to anything which relates to human actions, or human concerns, on a simple view of the object, as it stands stripped of every relation, in all the nakedness and solitude of metaphysical abstraction. Circumstances … give in reality to every political principle its distinguishing colour, and discriminating effect. The circumstances are what renders every civil and political scheme beneficial or noxious to mankind. (Writings 1989, VIII: 58)

Burke was not against change per se. A state, he wrote, without the means of some change is without means of its conservation. Change, however, had to be approached cautiously. Reform was an experimental science not the product of deductive reasoning. Long observation was often required before the full consequences of an action could be discovered.

262 Prendergast The science of constructing a commonwealth, or renovating it, or reforming it, is, like every other experimental science, not to be taught a priori. Nor is it a short experience that can instruct us in that practical science; because the real effects of moral causes are not always immediate; but that which in the first instance is prejudicial may be excellent in its remoter operation; and its excellence may arise from the ill effects it produces at the beginning. The reverse also happens; and very plausible schemes, with very pleasing commencements, have often shameful and lamentable conclusions. … The science of government being therefore so practical in itself, and intended for such practical purposes, a matter which requires … even more experience than any person can gain in his whole life, however sagacious and observing he may be, it is with infinite caution that any man ought to venture upon pulling down an edifice which has answered in any tolerable degree for ages the common purposes of society, or on building it up again, without having models and patterns of approved utility before his eyes. (ibid.: 111–12)

Given that social structures required the experience of many ages before they could be brought to any tolerable perfection (Mandeville 1924, II: 187), Burke was concerned ‘lest the temporary possessors and liferenters’ in society should act as if they were the entire masters and commit waste on the inheritance, by destroying at their pleasure the whole original fabric of their society ‘unmindful of what they have received from their ancestors, or of what is due to their posterity’ (Writings 1989, VIII: 145). Such attempts to build society anew were in Burke ‘s view disastrous and he likened them to attempting to set up a trade without capital (ibid.: 86). The best known passage in the whole of the Reflections is that in which Burke pronounces: ‘But the age of chivalry is gone – That of sophisters, oeconomists, and calculators, has succeeded; and the glory of Europe is extinguished for ever.’ Burke elaborated:

But now all is be changed. All the pleasing illusions which made power gentle, and obedience liberal, which harmonised the different shades of life, and which, by a bland assimilation, incorporated into politics the sentiments which beautify and soften private society, are to be dissolved by this new conquering empire of light and reason. All the decent drapery of life is to be rudely torn off. […] Nothing is left which engages the affections on the part of the commonwealth. On the principles of this mechanic philosophy, our institutions can never be embodied … in persons; so as to create in us love, veneration, admiration, or attachment. But that sort of

The political economy of Edmund Burke 263 reason that banishes the affections is incapable of filling their place. These public affections, combined with manners, are required sometimes as supplements, sometimes as correctives, always as aids to law. (Writings 1989, VIII: 128–9) The view that something more than an appreciation of its utility was necessary for the support and preservation of social institutions was by no means unique to Burke. Machiavelli had referred to the invention of morality by politicians as a means of obtaining the obedience of the multitude while Spinoza had attributed the same role to religion (Mandeville 1924, I: 46–7). While Mandeville took a similar view of the function of morality, he stressed that human wisdom was the child of time rather than invented on particular occasions as the need arose. As Winch (1996: 166–85) has pointed out, although Adam Smith would not have shared Burke’s historical account of chivalry nor his reservations about a world constructed on commercial foundations, he agreed with Burke in stressing the need to take established interests into account. Like Burke, he opposed notions of fundamental natural rights as well as notions of an original social contract and took the view that both deference and utility had a role to play in the preservation of social institutions. In more recent times, in his work Capitalism, Socialism and Democracy, Schumpeter argued that capitalism would fail as a system not because of its economic failures but because of its political failures especially its tendency to destroy the protecting strata in bourgeois society. Schumpeter argued that the rationalist and unheroic bourgeoisie were unsuitable for political leadership. They lacked the ‘mystic glamour’ which is ‘what counts in the ruling of men’:

The stock exchange is a poor substitute for the Holy Grail. We have seen that the industrialist and merchant, as far as they are entrepreneurs, also fill a function of leadership. But economic leadership of this type does not readily expand, like the mediaeval Lord’s military leadership, into the leadership of nations. On the contrary, the ledger and the cost calculation absorb and confine. (Schumpeter 1979: 137)

There is another aspect of Burke’s concern about the ‘age of economists and calculators’ which merits our attention. This relates to the alleged short-termism of the bourgeoisie in contrast with the long view of the aristocracy. Mandeville had argued that when the public spirit had left a nation, everybody was ‘for turning a penny and short bargains’. Instead of planting oaks that required 150 years before they are fit to be cut down, they built houses of a design that could last no more than twelve to fourteen years. In Mandeville’s view, it was ‘the business of the public to supply the defects of society’. For this purpose, he argued, example

264 Prendergast was more effective than precept, hence, the legislature ought to ‘resolve upon some great undertakings … and convince the world that they did nothing without an anxious regard to their latest posterity’. This, Mandeville claimed, would fix or at least help to settle the volatile spirit of the kingdom and ‘put us in mind that we were not born for ourselves only’ (Mandeville 1924, I: 320–21). In Burke’s scheme of things, the task of taking the long view was assigned to the aristocracy rather than the ‘public’. As he wrote in a letter to the Duke of Richmond in 1772:

Persons of your state of life ought to have long views. You people of great families and hereditary trusts and fortunes are not like such as I am … we are but annual plants that perish with our season and leave no sort of traces behind us. You, if you are what you ought to, are the great Oaks that shade a country and perpetuate your benefits from Generation to Generation. (Correspondence 1958–78, II: 377)

This beneficent view of the contribution of the aristocracy was not widely shared by Burke’s contemporaries. The alternative view put forward by Smith was that, by preventing land from becoming an object of commerce, the laws of primogeniture and entail were an obstacle to its efficient use and hence a fetter on development (Winch 1996: 181). It is by no means clear that Burke would have objected to this aspect of Smith’s critique. In his own defence of largescale landed property, he contrasted the ‘vigorous and active principle’ of ability with property which was ‘sluggish, inert and timid’ and consequently never safe from the invasions of ability unless it was predominant in the representation. Property had to be represented in ‘great masses of accumulation’ and ‘out of all possibility of danger’. In such conditions, it formed a natural rampart about the lesser properties in all their graduations (Writings, VIII: 102). It is also worth noting that in his Tracts Relating to Popery Laws, thought to have been written in the 1760s but published posthumously, Burke had argued that restrictions on Catholic ownership of property discouraged industry devoted to the improvement of land. The desire of acquisition Burke argued was ‘always a passion of long views’. ‘Allow a man but a temporary possession … and you immediately and infallibly turn him to temporary enjoyments’ (Writings 1991, IX: 476–7). It was noted earlier that Burke employed a ‘circuit of commerce’ argument at various points in his oeuvre. He employed it critically in his very first published work A Vindication. He employed it in his speech on the East India Bill to support his argument that British occupation was leading to underdevelopment in contrast with previous occupations. In the Reflections, the argument is used to suggest that the confiscation of ecclesiastical lands could not be justified on economic grounds. Thus Burke wrote:

The political economy of Edmund Burke 265 In every prosperous community something more is produced that goes to the immediate support of the producer. This surplus forms the income of the landed capitalist. It will be spent by a proprietor who does not labour. But this idleness is itself the spring of labour; this repose the spur to industry. The only concern of the state is, that the capital taken in rent from the land, should be returned again to the industry from whence it came … (Writings 1989, VIII: 209)

A careful legislator before engaging in confiscation of property would try to ensure that purchasers of the confiscated property would operate so as to yield some advantage over the old possessors which in the case of monastic properties were monks.

The monks are lazy. Be it so. Suppose them no otherwise employed than singing in the choir. They are as usefully employed as those who neither sing nor say. As usefully even as those who sing upon the stage. They are as usefully employed as if they worked from dawn to dark in the innumerable, servile, degrading, unseemly, unmanly, and often most unwelcome and pestiferous occupations, to which by social economy so many wretches are inevitably doomed. (ibid.: 209–10)

Having thus established that there was no motive for change because the advantages of the possessors were on a par with the advantages of the purchasers of confiscated properties, Burke argued that the ecclesiastical possessors should be regarded as having the advantage. This was because they spent their surplus on great and permanent establishments rather than on the momentary receptacles of transient luxury. The emphasis on the circuit of commerce and the belief that expenditure on durable goods was preferable to that on perishable goods might lead one to conclude that Burke lacked a concept of the accumulation of capital not to mention a coherent theory of economic growth. Winch (1996: 216) is of the opinion that this emphasis is strategic and he rightly draws attention to Burke’s brief discussion of accumulation in his Third Letter on a Regicide Peace. In that letter, Burke noted that under the system of expenditure taxes in force in Britain, taxes rarely fell on the lower classes or on those who ‘voluntarily subject themselves to the harsh discipline of rigid necessity’. However, the moment ‘men cease to augment the common stock, the moment they no longer enrich it by their industry or self-denial, their luxury or even their ease are obliged to pay contribution to the public; not because they are vicious principles but because they are unproductive’ (Writings 1991, IX: 348–9). The letter also contains a defence of interest as well as an argument against government interference in setting the rate.

266 Prendergast The desire of accumulation, Burke argued, was a means without which the service of the monied men to the state could not exist. ‘The love of lucre’ was ‘the grand cause of prosperity to all states’ and it was for the statesman to employ it as he found it (ibid.: 347). Burke cautioned against any short-sighted interference to lower the rate of interest.

The value of money must be judged like everything else from its rate at market. To force that market, or any market, is of all things the most dangerous. For a small temporary benefit, the spring of all public credit might be relaxed for ever. (ibid.: 346–7)

THOUGHTS AND DETAILS ON SCARCITY Britain went to war with France in 1793 as part of a cross-European alliance. The allies expected an easy victory but initially, at least, it was the French who were victorious. The combination of the war and a series of poor harvests in Britain gave rise to corn shortages and to high prices. A select committee was set up to collect evidence and propose remedies for the shortages. As a result of its findings, efforts were made to encourage the substitution of other foodstuffs for wheat and the use of wheat in starch making and distilleries was discontinued. As in previous shortage situations, an extensive pamphlet literature appeared in which the scarcity was explained and remedies proposed. According to Barnes (1930: 78), the reasons most commonly assigned included bad crops, increasing population, heavy burdens on agricultural produce, speculation of corn dealers, incompetent tillage, insufficient protection for agriculture, engrossing of small farms, war, and increased consumption of the army and navy. The remedies suggested were: (i) to make peace; (ii) to extend governmental control; (iii) to return the country to the self-sufficiency she enjoyed prior to 1765; (iv) to adopt temporary measures during the crisis; and (v) to enforce common law against speculators. Burke set out his views on the appropriate response to the scarcity in a letter to Pitt written in 1795. This, together with three fragments from a letter to Arthur Young, was published posthumously in 1800 as Thoughts and Details of Scarcity. It is the most economic of all Burke’s writings and one of the most controversial. The opening paragraph sums up Burke’s position.

Of all things, an indiscreet tampering with the trade of provisions is the most dangerous, and it is always worst in the time when men are most disposed to it: – that is, in the time of scarcity. (Writings 1991, IX: 120)

The political economy of Edmund Burke 267 It was not in the power of government to provide for people in their necessities. The people maintain them, and not they the people (ibid.: 120). The labouring people were poor because they were numerous. The number of rich was so extremely small that even if a distribution was made of what they consume in a year, it would not ‘give a bit of bread and cheese for one night’s supper to those who labour’ (ibid.: 121). On the whole, in any case, every thing returns, deducting some very trifling commission and discount, to the place from whence it arose (ibid.). Burke objected strongly to the use of the term ‘the labouring poor’. This term poor had originally been used for those who could not labour: the sick and infirm, for orphans and the aged. Burke objected to its application to ‘those who must labour or the world cannot exist’ because to do so was to trifle with the condition of mankind.2 Compassion should be shown in action, not in political canting language. As in his earliest work, Burke’s position here is that the poverty of working people is an inherent aspect of the economic system. The position, however, is by no means innocuous. As Black (1960a: 91–8) has shown, the view that relief should not be extended to the able-bodied was commonplace among the classical economists in the early nineteenth century and was an important factor in their opposition to systems of poor relief which would give the able-bodied a right to public assistance. Burke was of the opinion that, despite the present scarcity, the poor consumed more and better food than they had fifty or sixty years ago. While he accepted that wages did not fluctuate in line with the price of corn, Burke was of the opinion that, over the long period, wages had increased in line with the nominal price of provisions. Burke objected strongly to any proposals to adjust wages in proportion to the price of corn. It was better to leave all dealing, ‘in which there is no force or fraud, collusion or combination, entirely to the persons mutually concerned in the matter contracted for’ than to put it into the hands of those who have only a remote interest in and little or no knowledge of the subject. The business of the state was not to dictate contracts but to enforce them. Burke denied that there was any inherent conflict of interest between farmers and labourers. It was, he claimed, ‘absolutely impossible that their free contracts can be onerous to either party’.3

It is the interest of the farmer that his work should be done with effect and celerity; and that cannot be, unless the labourer is well fed, and otherwise found with such necessaries of animal life, according to its habitudes, as may keep the body in full force, and the mind gay and cheerful. (Writings 1991, IX: 125)

268 Prendergast On the other hand, if the farmer ceased to have his capital returned to him with a profit, it was impossible that he should continue to employ the labourer at the same wage level. Thus it was in the labourers’ interest as well as the farmer’s that the farmer should make an adequate profit from his business. Labour must be subject to the laws and principles of trade. When a commodity was brought to market, it was the necessity of the purchaser not that of the vendor which raised the price. In fact, the extreme want of the seller had the effect of lowering prices rather than increasing them. On this way of viewing things the ‘impossibility of the subsistence of a man, who carries his labour to a market, is totally beside the question’. If farmers were obliged to pay wages above the market level, there were two possible results. Either the farmer would be put out of business or the price of the product of labour would have to be raised in proportion. In the latter case, the labourer would be no better off than before. In the former case, ‘the very destruction of agriculture itself is to be apprehended’ (ibid.: 127). Fixing the price of corn rather than that of labour would have effects no less damaging. Certain of the Pope’s territories were obliged to furnish Rome and the granaries of his holiness at a certain price. This preserved quiet among the poor and idle but the quiet of the city was purchased by the ruin of the country and the ultimate wretchedness of both (ibid.: 136). Burke then posed the question:

But what if the rate of hire to the labourer comes far short of his necessary subsistence, and the calamity of the time is so great as to threaten actual famine? Is the poor labourer then to be abandoned to the flinty heart and gripping hand of base self-interest? (ibid.: 28)

To this rhetorical question, Burke relied: ‘Whenever it happens that a man can claim nothing according to the rules of commerce, and the principles of justice, he passes out of that department, and comes within the jurisdiction of mercy.’ Charity to the poor was the duty of all Christians but the ‘manner, mode, time, choice of objects, and proportion, are left to private discretion’ (ibid.: 129). Puffendorf and other causists had labelled it a duty of imperfect obligation but, in doing so, in Burke’s opinion they had not denominated it quite properly. In interpreting Burke’s argument, it is important to bear in mind that, for him, duties are not voluntary. As he argued in An Appeal from the New to the Old Whigs:

Men without their choice derive benefits from that association [civil society]; without their choice they are subjected to duties in consequence of these benefits; and without

The political economy of Edmund Burke 269 their choice they enter into a virtual obligation as binding as any that is actual. Look through the whole of life and the whole system of duties. Much the strongest moral obligations are such as were never the results of our option. (Works 1855, III: 78–9)

Burke continued: Men come in that manner into a community with the social state of their parents, endowed with all the benefits, loaded with all the duties, of their situation. If the social ties and ligaments, spun out of these physical relations which are the elements of the commonwealth, in most cases begin, and always continue, independently of our will; so, without any stipulation on our own part, are we bound by that relation called our country, which comprehends … ‘the charities of all’. (ibid.: 80)

Burke’s arguments against government intervention in the market should thus be seen in the context of a wider social framework in which the rules of morality apply. It is also worth noting that Burke’s argument that there are no circumstances in which a government ought to intervene in Thoughts and Details on Scarcity is at odds with arguments he made twelve years earlier in his speech on Fox’s East India Bill. There, Burke castigated Warren Hastings for his failure to take appropriate action for the relief of famine.

The case of general famine is known to relax the severity even of the most rigorous government. Mr Hastings does not deny or show the least doubt of the fact. … With regard to the urgent and instant necessity, from the failure of crops, he says, ‘that perhaps expedients may be found for affording a gradual relief from the burthen of which he so heavily complains, and it shall be my endeavour to seek them out;’ … Here, Sir, is much heat and passion; but no more consideration of the distress of the country from a failure of the means of subsistence …than if they were the most contemptible of all trifles. (Writings 1981, V: 405–6)

While the view taken in this instance may well be an example of inconsistency born of political opportunism, it also necessary to bear in mind that part of Burke’s indictment of British India was its destruction of the preexisting civil society and its failure to construct a new one.4 In this situation, the jurisdiction of mercy could not be relied upon. Hence, it could be argued the onus would be on the state to correct the failure of the market.

270 Prendergast It should be noted, in terms of legacy, Burke’s emphasis on the obligations of private charity legacy did not have happy consequences, at least as far predicament of Ireland in the nineteenth century was concerned. As Black (1960a: 93–9) has shown, one of the arguments deployed against the introduction of an adequate system of poor relief was that it ‘would weaken the motives of benevolence and private charity’. It is true that the argument in this case is different from Burke’s but it has the same essential ingredients. One outstanding feature of the Thoughts and Details is the emphasis placed on the amount of information required for effective intervention in the market and on the fact that such information is not likely to be available to those likely to be entrusted with any such intervention. Thus, Burke suggested that those who would intervene in contracts between private persons ‘confide more in their abilities than is fit, and suppose them capable of more than any natural abilities, fed with no other than the provender furnished by their own private speculations, can accomplish’ (Works 1991, IX: 124). The market was the means by which consumer and producer learned each others wants and settled price. ‘Those who wish the destruction of that balance, and would fain by arbitrary regulation decree, that defective production should not be compensated for by encreased price, directly lay their axe to the root of production itself’ (ibid.: 133).

CONCLUDING REMARKS Burke was a competent economist in the sense that he was able to employ economic statistics and reasoning in the course of political and economic debate in the House of Commons and beyond. He was a fairly consistent advocate of free trade and, no less than Adam Smith, he emphasized the importance of economic liberty. He had a good understanding of the circular flow of economic life and was able to exploit this understanding creatively. His letters on the Regicide Peace indicate that he also had an understanding of the importance of accumulation for economic growth. What distinguishes Burke, however, is not his economics narrowly understood but his political economy broadly conceived. This involved a vision of society as a complex organic whole with continuity in time. It involved the conception of the economy and economic life as being embedded in a wider social framework. It involved a rejection of metaphysical abstraction and an insistence on the uniqueness or singularity of situations and events. While Burke is studied primarily as a political thinker, his influence on political economy is of considerable significance. He was the major influence on the economic philosophy of Romanticism especially as it developed in the German States (Briefs 1941; Schenk 1966; Whiton 1993). His stress on historical continuity and tradition as well as his critique of the

The political economy of Edmund Burke 271 French Revolution were important influences on Hegel although, contrary to Burke’s view, these considerations led Hegel to argue for a new constitution based on reason (Beiser 1993). Burke’s emphasis on singularity and his opposition to abstract theorizing were carried forward by the German historical school (Spiegel 1971; Hayek 1967) while the modern Austrian school stresses both his opposition to ‘constructivist rationalism’ and his emphasis on unforeseen consequences (Hayek 1967). Lastly, as indicated above, Schumpeter, whose views on innovation are in opposition to Burke’s gradualism, shares with Burke a vision of economic life embedded in a wider social system. In a footnote towards the end of Volume I of Capital, Marx refers to Edmund Burke as a sycophant and vulgar bourgeois who always sold himself on the best market. Marx, however, allowed that Burke differed from his successors in one thing – talent. Apart from a heavy dose of vitriol, Marx’s assessment is not out of tune with that contained in the poem by Goldsmith, Burke’s contemporary and fellow countryman, with which this chapter opened. In a century of pamphleteers and apologists, Burke became the supreme advocate. His parliamentary vocation was to represent specific interest. Its practice may sometimes have been demeaning, but Burke’s transcendent talent was revealed in the way he theorized the status of the specific. Burke was far too able to be unaware of the shortcomings of the commercial system of his day. At the same time, he sensed that mere negative criticism was not enough. As a political economist, Burke contributed to a new awareness of the historic complexity of societies and institutions and hence the role of information (or lack of it) in defining the scope of the subject.

NOTES 1 Cited in Ross (1995: 355). For a recent discussion of the evidence relating to Bisset’s comment, see Canavan (1995: 116–17). 2 On the issue of the labouring poor, see also Burke’s ‘Third Letter on a Regicide Peace’ (Writings, IX: 355–6). 3 In this context, Burke’s comment that ‘compulsion destroys the freedom of a bargain’ and that ‘the advantage of both is lost by the confusion of things in their nature utterly unsociable’ is worth noting. See Burke’s ‘Third Letter on a Regicide Peace’ (Writings, IX: 347). 4 There is an excellent discussion of Burke’s attitude to government intervention and his views on the role of the charity in Gibbons (1996).

14 Menger’s organic view of institutions Charles Hickson

INTRODUCTION The primary aim of this chapter is to clarify Menger’s view of jurisprudence. Of necessity, such an analysis must proceed within the framework of Menger’s overall organic theory of institutions, which is based on his concept of spontaneous methodological individualism. Methodological individualism postulates that efficient social institutions can only arise as the unintended consequence of purposeful individual action, which in turn is motivated by the desire for utility maximization. Consistent with methodological individualism, Menger believed that efficient legal systems are a product of both the psychological needs of the community as well as its specific objective constraints. He was generally sceptical of legal systems promulgated by the state, or of systems developed by professional jurists in the service of the state, as such systems would be unlikely to reflect the real self-interests of that community. Above all Menger was disparaging of any state-imposed legal system based on foreign principles. Uncharacteristically, Menger was prepared to admit that statutory law could be efficient providing it was promulgated by a representative legislature and was not ideologically inspired. Such an admission appears to be a retreat from his social theory. Below it is argued that Menger’s difficulty in applying his organic theory to jurisprudence was due to the fact that he was faced with overwhelming evidence pointing toward a predominance of stateinspired law. Paradoxically, it will be shown that legal systems based on individual rights only arose through the influence of state-inspired codes, which worked to undermine older and more traditional customary systems that were based on hierarchical clan and family social structures. The aim of this chapter is to seek a better understanding of Menger’s work on jurisprudence and in particular to throw light on his equivocation in applying his organic theory fully to law. The organization of the chapter is as follows. The first section presents an outline of Menger’s theoretical contribution to utility theory. This is followed by an outline of his organic theory

Menger’s organic view of institutions 273 of institutions, which includes a discussion of methodological individualism. The following section contrasts Menger’s position with other theories of jurisprudence. Of particular interest is a comparison between Menger’s views and those of the Historical School of Jurists, which included scholars such as Burke and Savigny. However, Menger’s views are also compared with those of the Positivist School, which included utilitarian scholars such as Bentham and Jherling. Finally Menger’s organic theory is compared to the actual historical evolution of European legal systems where, it is argued, Menger’s organic concept of law only fits roughly the case of the merchant law.

MENGER’S ORGANIC THEORY OF INSTITUTIONS Menger’s contribution to value theory Menger is best known for his pioneering work on utility theory and as the father of the Austrian School.1 In the typical textbook on the history of economic thought, Menger is credited alongside Stanley Jevons and Leon Walras with laying the foundations for the modern view that the value of a commodity is fundamentally determined by subjective factors and only second by its cost of production. Menger had developed a similar utility theory to the other two authors though at the time he was apparently ignorant of their contributions.2 All three works argued that total utility was a function of the quantity of goods consumed and exhibited diminishing marginal utility (Menger 1950: 30–5). The latter realization also led all three authors to the equimarginal principle, which is necessary to achieve equilibrium. But because Menger applied the less sophisticated technique of proof by arithmetical example rather than by the calculus method, his Principles compares unfavourably with either the Elements or the Political Economy in terms of modelling sophistication (Landreth 1976: 208).3,4 Nevertheless, any comparison made at the level of modelling technique between Menger on the one hand and Jevons and Walras on the other is at best superficial. Their different attitudes to mathematical modelling in fact signifies a much deeper difference in regard to their method of inquiry into social phenomena. For example, both Jevons and Walras were heavily influenced by the methodology of nineteenth-century physical science and mathematics which were both at that time growing in esteem and influence (Landreth 1976: 193–6). They not only adopted the techniques of Newtonian physics, but also its static conceptual framework. For example, both men built their theoretical system deductively in the sense of deriving propositions from prior simplifying assumptions. They also saw the use of mathematics as integral to their overall theoretical structure.

274 Hickson In contrast to Jevons and Walras, Menger viewed economic phenomena as an organic process. In this process, individuals were regarded as interested only in utility maximization, but this was seen as occurring through social co-operation which in turn requires a set of rules and institutions. Menger believed that an institutional structure would arise as a consequence of individuals acting in their own narrow self-interest. Thus his conceptual institutional structure would be created both unintentionally and spontaneously. Menger believed that this type of organic institutional framework would also generate positive externalities by reducing the cost of economic co-operation and as such it would be efficient. Finally he believed that a progressive series of efficient institutional structures would be created at each historical stage through a trial and error process, leading ultimately to the adoption of the most efficient institutional structure. Though Menger’s idea of the evolution of rules and institutions ruled out the possibility of any hierarchically imposed institutional structure being efficient, it led him to the realization of the central role played by economic institutions in the distribution of scarce resources. Thus a full understanding of Menger’s value theory requires that it is placed in the context of his theory of institutions, which is the subject of our next section.

Menger’s methodological heritage and his theory of institutions Menger’s organic approach to institutions was developed through his opposition to the leaders of the German Historical School, with whom he shared a common academic environment. Despite his many important methodological differences with leaders of the Historical School such as Von Stein and Roscher, like them Menger was strongly influenced by the Hegelian tradition.5 A central idea of Hegelianism is the belief that, while natural phenomena evolve according to absolute laws, the evolution of social phenomena follows an organic process determined by men, and is therefore more complex (Berlozheimer 1929: 225). Hegel believed that culture, including all social institutions, reflects an unfolding of the human spirit. He postulated that the more primitive the society, the more individuals would be motivated by a purely subjective and non-moral will, which in economic terms would be associated with narrow rationality. However, as social, consciousness develops, the will of individuals becomes increasingly more moral or objective, meaning that they increasingly come to accept themselves as part of society (Berlozheimer 1929: 204–6). In an economic sense this implies that they would became increasingly altruistic. As this process allows a society to develop increasingly complex institutions, each society was believed to exhibit an inherent self-development moving towards establishing an optimal set of institutions from a moral standpoint.

Menger’s organic view of institutions 275 Building on this Hegelian heritage, members of the first generation of the German Historical School including Eichorn, Roscher and Von Stein took the view that their primary role was to discover through empirical study the evolutionary laws of social phenomena. In opposition to the English classical economists, they denied the possibility of being able to develop deductively theorems or laws that could predict the behaviour of individuals regardless of their cultural or historical context (Haney 1957: 537–9). They argued that the study of social phenomena like that of natural phenomena required an empirically based approach. Moreover, such phenomena could only be understood within the context of their own specific social environment. On this basis, they argued that economics was an historical science, implying that the correct method of inquiry into social phenomena was through careful and exhaustive observation of past cultures and institutions on the basis of which they hoped to discover hidden social laws (Milford 1990: 220). In contrast to the Historical School, Menger had a two-fold approach to social inquiry. First, he postulated that ideal or exact types, which may not actually exist, could only be discovered through theoretical inquiry. Second, he postulated that empirical inquiry could only lead to the discovery of real or empirical types, which he believed had the weakness of always being associated with a particular social context and therefore no universally valid laws could be drawn. He called this method realistic empiricism. To stress this point he took up Hume’s argument against induction which simply states that no causality can be implied simply because one may observe that C always follows or coexists with A and B (Menger 1963: 57). Menger believed that empirical study was useful only insofar as it served economic theory. This, he thought, could be best accomplished if it were used for the purpose of strict classification of the essential characteristics of particular institutions. Specifically, Menger advocated an inductive cognitive process whereby the researcher formed a hierarchy of terms from which it was possible to identify common elements. Once identified these common elements were in turn associated with the essential characteristics of an ideal type. Menger referred to this process as depicting only the simplest situations first before attempting to analyse those that are more complex. Interestingly this approach is similar to the ‘anatomical’ approach used by Aristotle in developing, for example, both his political theory of the ideal state and his theory of natural law.6 Like Aristotle, Menger sought to identify the elements making up, for example, an institution. Also like Aristotle he then determined which elements were essential on the basis of whether they were universally observed. It follows therefore that Menger’s empirical method suffered from the same defect as that of Aristotle’s in that it rested crucially on how a particular institution was partitioned and labelled into its constituent parts. Since any classification adopted is unlikely to be the only possible one, there will be alternative classifications which could be the basis for a number of competing theories. For

276 Hickson this reason, both men’s empirical methodology has been described as insufficiently ‘scientific’ (Hutchison 1973: 19).7 Menger’s concept of methodological individualism led him into sharp disagreement with members of the Historical School, who generally had accepted Hegel’s theory of social consciousness. In contrast, Menger believed that social organisms were the result of individual human effort driven on by self-interest and directed by rational thought (1963: 131). Yet Menger emphatically denied that in their ideal form social organisms or institutions are by conscious design, arguing instead that organic institutions are generated by the unintended actions of rational individuals; a mechanical process through which individuals expressed their collective will through pursuing their own welfare maximization (Menger 1963: 131–8). Rationality in this context is in the weaker sense of action and not in the stronger sense of method.8 Menger’s use of the term ‘mechanical process’ related back to his belief that human nature is biologically determined and, as such, is invariant across different cultures and not subject to substantial change. In this regard, his organic theory is in sharp disagreement with the Hegelian views of the Historical School. However, Menger conceded that individuals in differing societies were subject to different constraints, particularly in terms of variations in taste and more importantly in terms of knowledge. The latter implies that individuals could evolve towards an efficient set of institutions only through a process of learning by experience. Yet it is not particularly clear what learning process he had in mind in the sense of what generated improved institutional innovation. The evolution of monetary exchange is perhaps Menger’s most famous example of a social institution generated by purposeful human action. Menger argued that the essential properties of money stem from its role as a medium of exchange, which reduced transaction costs by eliminating the need for a double coincidence of wants under barter. Yet for Menger it was of secondary importance that this function had its historical origin in salt in North Africa or cattle in Europe; both of which preceded precious metals and coinage as the most traded commodities in their respective societies (Menger 1963: 264). For Menger, the essential issue is that all of these societies would eventually adopt a system of full-bodied coinage because this is the most efficient institutional form. Thus Menger’s ideal form of money would be some unique commodity with the most appropriate properties that reduced the cost of exchange through its basic role as a medium of exchange. In modern language monetary exchange is said to generate positive network externalities (White 1999: 93–4). The medium of exchange then led naturally to money having a comparative advantage as a store of value and a unit of account (Menger 1984: 1–5). Modern Austrian monetary theorists argue that by extension Menger’s theory can be applied to explain first the adoption of token money and then paper money (White 1999: 2–

Menger’s organic view of institutions 277 5). Yet this view may be misleading because of the traditional role of government in issuing token or paper money. Moreover, even though Menger considered token money in his definition of money, he strangely omitted including private paper money, and such an omission is more startling because the use of bank money dramatically increased during the 1870s. Menger criticized Savigny because he believed that he had mistaken form for content when he argued that the value of money was determined by fiat. In contrast Menger believed that the only legitimate role of government was to underwrite what had been created organically. However, by arguing this Menger was unable to explain why historically governments have typically enjoyed a monopoly of coinage issue, or why they uniformly introduced fiat money systems during the latter half of the nineteenth century. Thus Menger’s monetary theory ignored alternative monetary supply mechanisms, particularly fiat monetary systems, with the consequence that he also ignored their potential welfare improving qualities.

Menger’s organic theory and the classical economists Menger called the whole process described above purposeful human action. He was aware that it separated him methodologically from the views of Adam Smith and the classicists whom he criticized for being inspired by the views of the French and English Enlightenment. This, he believed, allowed them to have a one-sided pragmatic view, which he defined as having too strong a faith in deliberate concerted action, leading them also to undervalue traditional institutions (Menger 1963: 172). Thus for Menger the classical economists, like the members of Historical School, were also biased toward over-reform. Nevertheless, like Smith and the classicists, as well as his contemporary neoclassical innovators, Menger ignored the effects on social welfare of negative externalities such as those derived from rent-seeking behaviour. The recognition of the need to reduce costs associated with moral hazard and adverse selection form the basis for modern institutional theory as reflected in the work of Coase, Williamson and Hart. Their approach, unlike Menger’s, recognizes the need to restrain individual behaviour through, for example, the coercive force of law and more generally through hierarchical forms of institutions that are designed to raise the cost of individual behaviour which lowers the welfare of the group. Significantly, hierarchical institutions, including those of modern democracies, are not incompatible with Menger’s idea of institutions shaped by the consent of individuals. Menger might have more easily become aware of the problems which opportunistic behaviour posed for economic exchange and other forms of social co-operation had he been more willing to draw lessons from biology. He might even have come to recognize the role played in nature by parasites and predators, who succeed through the involuntary exchange

278 Hickson of resources in their favour.9 Menger, however, explicitly rejected the use of biological analogy, arguing that the only legitimate analogy between his organic theory and natural organisms was that both were unintended products of historical development (Menger 1963: 131–2). Menger went further than this and denied the legitimacy of importing any natural science methodology, including mathematical logic, into the study of social science. He believed that applying any natural science analogy only acted to further distance economic analysis from the properties of the economic or social phenomenon in question.10 Menger’s failure to recognize problems associated with potential rent-seeking behaviour by individuals precluded any possibility of expanding his organic theory through developing a theory of property rights as Bentham had previously done in support of his legal theory. Such a framework would have enabled Menger to develop his version of utility theory, which pertains to individual welfare maximization, into a theory of jurisprudence capable of generating social welfare maximization. In the absence of some such mechanism, Menger’s contributions to jurisprudence were never fully convincing especially since his theory was at variance with the important facts of its evolution.

MENGER’S ORGANIC THEORY APPLIED TO JURISPRUDENCE THEORY Overview This section looks at Menger’s organic theory as applied to jurisprudence. First, Menger’s views on legal systems are considered in the context of the doctrinal legal debates occurring in Germany throughout the nineteenth century. It is apparent from his contributions on jurisprudence that the debate between the Germanists and the Romanists leading up to the adoption of the new Civil Code in Germany was an important motivating factor for Menger. The second subsection sketches the broad evolutionary legal trend. This shows a persistent shift away from organic law, which Menger clearly identified most closely with traditional customary law. It was perhaps his recognition of this trend that forced Menger to concede the possibility that positive law could be efficient even though such a concession weakened his claim that only organic law was optimal. The third subsection compares Menger’s organic theory with the evolution of merchant law. Here we see that, at least up to recent times, the history of such law fits Menger’s theory reasonably well. The last subsection contrasts Menger’s organic theory with ancient customary law, where it is argued that such law was neither spontaneous nor individualistic but instead based on principles that recognized strong hierarchical kinship and clan groups that derived their political power predominately through

Menger’s organic view of institutions 279 inalienable landed property. Such societies typically evolved under weak kings. Ancient customary law was thus characterized by weak central monarchies. Indeed the rise of strong monarchies is highly correlated with the introduction of legal systems based on the recognition of individual rights and responsibilities. Thus it is perhaps more than a little surprising that Menger was not more sympathetic to state-inspired law. At this juncture it may be helpful to outline three basic types of legal systems which can be characterized with respect to their sensitivity to social customs and by their ability to flexibly incorporate new customs through judicial discretions. The least sensitive and flexible is codified law, which is the product of abstract legal principles generally based on notions of natural law. Codified law is therefore designed to give courts and judges little discretionary power, implying that the only way the law can adapt to new customs is through adaptation of the code itself. More sensitive and more flexible is judge-made law, which allows for an evolution of principles through case law. Generally such principles can be traced back to an original compilation of laws based on traditional practices such as the Twelve Tables in Roman law or the books compiled under Henry II in England. However, judge-made law adapts to new customs through the device of legal fiction whereby new law is formulated by appealing to precedent, and only later is it accepted that new principles have been created. Yet both because it is originally built on existing custom and because it adapts, though conservatively, to meet changing customs it is more flexible and more sensitive than codified law. More sensitive yet is customary law, which can be broadly defined as the recognition and adoption of legal principles by the community on the basis of what is revealed as normal practice.

Menger and the German jurisprudence debate Consistent with his organic theory, Menger argued that an ideal legal institution could only emerge through the expressed agreement of all the members of the society (1963: 229). However, as Menger knew, historically law was generally the product of a powerful state elite, which either promulgated law directly through a code, or indirectly through an esoteric jurist elite. As stated above, Menger was slightly more sympathetic towards the latter because it claimed to originate from a compilation of written customary laws, but as can be seen from the case of English common law, in actuality, judge-made law was influenced by equity principles as well.11 Menger regarded all law emanating from the state as ‘objective’ in order to contrast it with his idea of organic law, which is built on ‘subjective’ value. Menger’s writings on jurisprudence seem in large part to be motivated by his desire to participate in the legal debates occurring in Germany over the nature of a new legal code. The main protagonists in this debate were the Germanists, who as their name implies, wished to

280 Hickson incorporate many of the older Germanic customs into the new Imperial code and the Romanists who alternatively hoped that the new code would be predominantly based on Roman law principles. However, it is important to note that the above debate was in many ways a continuation of an earlier one, which had occurred immediately after the Napoleonic War. This earlier debate was concerned about which legal principles should replace the Napoleonic Code in the newly-liberated German states. On one side was the German Historical School of Law, which was led by Savigny. It argued against a national code of any kind and proposed instead an organic legal system (Smith 1927: 114). In contrast, the Philosophical School, which was led by Thibaut, argued more conventionally for a national code based on Roman law principles which, they argued, was more scientific and thus superior.12 In economic terms Thibaut’s view is akin to a Coasian property right view which postulates that a well-defined property right system is sufficient to guarantee an efficient system. In contrast Savigny believed that any code would be unable to keep up with custom and would on this account be inefficient. Savigny and the other traditionalists such as Eichorn and Jacob Grimm, argued that legal institutions were organic. However, by this they simply meant that since traditional legal institutions had worked in the past, they should be defended against faddish innovation. Thus their defence was similar to that employed earlier by Burke. He had argued against utilitarian inspired reforms in England on the basis that any reform, regardless of how well intended, might not fully understand the subtle existing relationships between groups already reflected in existing institutions. As one would expect, Menger was more sympathetic to Savigny. However. Savigny did not believe that customary law could arise without the need of some state authority because he believed in the principle of opinio necessitatis.13 As a consequence, Savigny opted, like Burke, for judge-made law, which could more credibly extend existing law into new areas through the device of legal fiction. Furthermore Savigny accepted as valid the infection of German law by Romanesque principles during the fifteenth and sixteenth centuries, because through the course of time such law had become absorbed into the customs of the people. For both positions he was severely criticized by Menger, though Menger failed to explain why Romanesque law had been adopted (1963: 177). Though Menger realized his organic theory of law differed from that of the Historical School of Jurists, he was nonetheless sympathetic to them because like him they opposed any over propensity for legal reform (Menger 1963: 180). On the other hand, Menger was much less sympathetic to the views of pragmatic legal scholars such as Jhering and Gerber which were inspired by the English Utilitarian School even though they argued for legal reform solely on the basis of social welfare criteria. Jhering in fact believed that the value of any future law should be measured by its effect on the overall social utility and not on national

Menger’s organic view of institutions 281 considerations (Smith 1927:125). Menger in contrast was sceptical about the general efficiency of statutory law even if such law issued from a democratic legislature (Menger 1963: 179–80). The following subsection briefly outlines the trend toward codified law, which came with the introduction of strong centralized monarchies. As stated above, Menger conceded that sometimes such law could be efficient. One could speculate that this concession by Menger was made because of his realization that customary law had historically been widely rejected.

Organic law verses objective law This subsection contrasts Menger’s organic theory with the overwhelming evidence of a long-term trend in European legal history towards state-inspired legal systems. As Menger had not developed a theory of property rights, he arguably would have been unable to successfully demonstrate that such a trend was perverse in any case. Furthermore the absence of any empirical support for his organic theory precluded Menger from using his empirical methodology, which might explain why his contribution to the theory of jurisprudence lacks the richness characterizing his monetary theory. Menger specifically believed that the predominance of statue law, or law made by a stateauthorized legal elite, was attributable to the ability of the state to coerce its citizens into conforming to its imposed legal monopoly. Such coercion, he believed, could either occur through foreign domination or through the usurpation of power by a group of strong-men (Menger 1963: 227–30).14 Menger’s conclusion in regard to statute law derives directly from his organic theory. Yet his negative view of such law was perhaps reinforced by the observation that beginning as early as the fifteenth and sixteenth centuries, codified law was associated with the rise of absolute monarchies. Moreover, for the most part, early codification was accomplished by adopting Roman law, and its ‘reception’ led to widespread dissent, particularly in Germany. Furthermore, the codification trend accelerated during the Enlightenment era of the eighteenth century with the widespread adoption of Romanesque inspired codes such as the Code Napoleon and Prussian Code of Frederick the Great which were also universally based on the Justinian version of Roman law. As one might expect, Menger strongly disapproved of the codification trend because it was imposed and also because it was foreign in origin and therefore even more non-organic (1963: 230). Menger was also well aware that local laws had been heavily influenced by the will of strong monarchies working through a legal elite from the earliest times. For example, the first Germanic tribes to succumb to statute law based on foreign principles were those, such as the Goths, Lombards and Franks, that had conquered territories containing many former Romans. Each of the above tribes were originally made up of loose confederations living

282 Hickson nearest the frontier, but they were encouraged to delegate increased power to a new type of militaristic leader, who was called a dux, in order to become a more formidable military force. At first the conquering Germans kept their own tribal legal customs, but generally allowed their subjects to continue using Roman vulgar law. Eventually, however, the German conquerors also adopted Romanesque inspired codes. The first such code, known as the Visigothic Theodoric code, was promulgated as early as the fifth century and applied to Goths and that code was followed soon after by another statute, known as the Codex Euricanus, which applied also to Romans. Eventually, during the mid-seventh century a new territorially based code, applying to all his subjects, was promulgated by the Visigothic king, Recesvind (Kunkel 1966: 148–9; Watson 1985: 84). The Visigothic inclination towards Roman-influenced statute law was eventually copied by other Germanic kingships, the best known examples of which are the Frankish Salic law and the Burgundian fifth century Gundobada code (Watson 1985: 85). Moreover this trend continued with the adoption in the seventh century of the Lombardic Rotheric Code and the Pactus of the Alamanni. Traces of Roman influence are even evident in the eighth-century compilations of customary law of the Lex Baiuwariorum of the Swabians and the Saxon Mirror and even in the judicial process adopted by the English common law system. However, as one would expect, Romanesque codes were more successful in southern Europe where Roman legal traditions maintained more influence. The pattern sketched above clearly indicates a preference by the merging Germanic kingdoms, particularly in southern Europe, in favour of statutory Romanesque law over their own tribal law. Menger saw the tendency toward codified law as generated by the desire by rulers for increased power (1963: 228–9). Savigny and other legal scholars argued more convincingly that Romanesque state law arose because Germanic customary law, which was based on family ownership of land-property, was wholly inappropriate to meet the new commercial opportunities presented to the new multicultural states (Kunkel 1966: 148–50). In other words, each new state dominated by German overlords quickly adopted the legal code of their subjects because it fitted the needs of trade better. This hypothesis is supported by the fact that the period of early codification was also one of increased economic activity as is evidenced by corresponding growth in both cities and trade. The era following the formative period noted above was no less innovative in terms of changes in the basic institutions of the various polities of western Europe. This is particularly so in regard to property rights, thus the period also serves as a good test for Menger’s organic theory. Yet changes in medieval property rights were generated not through spontaneous methodological individualism, but from above and most likely were in response to evolving defence needs as well as trade opportunities. Consistent with this view, property right evolution followed different paths depending on whether the property in question was urban

Menger’s organic view of institutions 283 or rural and whether it was in the form of land or in tradable goods. Medieval urban commerce was regulated in guild administered cities, but city property rights and obligations rested on the individual. However the city, if it was not powerful enough to become independent, was typically obligated to provide military assistance to the local lord or king (Hickson and Thompson 1991). International commercial transactions were covered by the merchant law and are discussed in the next subsection, but next rural property rights history is examined. It appears that as early as the sixth century, the new German kings of western Europe allocated land to individual followers rather than to kinship groups as was the German custom (Reynolds 1994: 75–6; 181–3). Furthermore, as early as the eighth century the customary hold of heirs on land-property, which prevented its alienation under German tribal law, was weakened in both Gaul and in the Lombard kingdom property.15 Such observations are consistent with a growing influence among the German ruling elite of Romanesque ideas of property. While at first land grants were allocated by the king free of obligation, by the eighth century landed property was increasingly transformed into feudal tenure, and when wholesale conversion to feudal tenancy occurred during the Carolingian period, the process was completed (Reynolds 1994: 4–6).16 Feudal tenancy conditioned property ownership on the fulfilment by the fief holder of a benefice, which was typically in the form of military service but could alternatively be in form of, for example, religious services as in the case of the church. From Menger’s perspective, feudal law had various appealing characteristics not least of which is the fact that it was based on individual property rights. Feudal jurisprudence had also adopted customary law characteristics such as trial by a jury of one’s peers, which at least during its formative period, as in the case of the English doomsmen, also declared the law. Yet the feudal system also evolved unappealing characteristics. In the late ninth century after the disintegration of centralized monarchies, which is exemplified by the collapse of the Carolingian Empire, feudal tenancy obligations effectively devolved to local lords, who subsequently earned considerable revenue from them. It was in this period that feudal institutions, including its courts, acquired their hierarchical characteristics. Thus in legal disputes concerning fiefs, vassals were restricted from appealing to higher courts, consequently they became subject to increased and more exacting obligations by local lords. With the appearance of academically trained lawyers drawn from the Roman law schools at Bologna and Montpellier in feudal courts during the twelfth century, local lords were able to extract yet more obligations from vassals (Reynolds 1994: 260–6).17 Also under the influence of these lawyers, feudal law became progressively dominated by abstract legal principles and consequently lost much of its early customary character (Reynolds 1994: 215–40).

284 Hickson Local feudal law declined with the resurgence of strong centralized monarchies in the eleventh century under which codified or judge-made law was introduced (Reynolds 1994: 76–320). As one would expect, such codes reaffirmed a monarch’s feudal rights, but they also extended the rights of the less powerful against the barons. For example under the edict of the Emperor Conrad II, vassals were to be protected in imperial courts against unjust eviction (Reynolds 1994: 199–201). However, as one would also expect, central codification was most successful in England where the king was traditionally stronger and consequently more able to enforce his common law through the use of circuit judges and local sheriffs. Thus under Henry II feudal law was seriously undermined by the assize on the mort d’ancestor and the assize on disseisin. Both acted to prevent arbitrary dismissals of sitting tenants by local lords without a hearing in the royal court, and were designed to reduce the power of the barons over their vassals. This process continued under Edward I, through yet another assize that allowed for the first time feudal land to be held as surety for debt obligations. Unlike the common law system as developed in England, continental codes only acted as subsidiary law and consequently local feudal law was more preserved there. In addition continental codes came increasingly under the influence of scholars such as the Glossitors and the Pandectists who were trained in the principles of the Justinian code, but who nonetheless lacked pragmatic experience of forging law based on actual legal cases. But despite this shortcoming, such scholars by the late Middle Ages had effectively supplanted traditional local jurists such as the Schoffen in Germany.18 In a similar way, Roman trained jurists were instrumental in implementing Romanesque legal systems also in France, Scotland and the western Slavic countries.19 Only England resisted the temptation to adopt Roman law, but if its laws were Germanic, its legal process was inspired by that of the Roman magisterial system (Kunkel 1966: 78–80). Interestingly, Menger seems to have been more sympathetic to the evolution of English Common Law partly because it can trace its origin back to the collection of customary laws. Burke, as noted by Menger, was a great defender of English common law because he believed it had grown organically on the basis of precedent. He thus resisted radical attempts to replace it by utilitarian inspired statute law, which at the time was being advocated by Jeremy Bentham and other Positivist School members such as Austin (Cotterrell 1989: 53–4). Nevertheless, Menger did not completely approve of English Common Law because he believed it was not fully customary, but rather the preserve of a monopolistic legal elite centred at the Inns of the Court. The above trend toward codification prompted Menger to complain that customary law could only exist as long as central state power was weak. In fact he believed that the state’s coercive force was so strong that it was impossible to discover how organic legal institutions had actually originated. This did not prevent Menger from offering his own speculative views

Menger’s organic view of institutions 285 on the evolution of organic law. First would come conviction among individuals of the need to control despotism through rules of action and these rules would become fixed in the minds of individuals. Eventually individuals would recognize the benefits of adhering to the law in the concrete case and not at the discretion of the individual. At this stage the society could evolve a national law out of a set of moral principles. Menger also believed that a feeling of solidarity would emerge among people sharing a common cultural identity in the form of kinship, language and religion. This in turn would eventually generate an awareness of the need to create a higher national unity and with it also create a national law (Menger 1963: 227). Through such a process, Menger believed ideal national law could arise which would live in the mind of the population. He also believed that through such a process, the coercive power associated with organic law could be understood (Menger 1963: 226–7). To summarize this section, Menger identified correctly the universal role of the state in imposing objective law either through the imposition of a legal code based on Romanesque legal principles or less objectionably through judge-made law. Yet he also recognized the potential problem associated with a legal system based on an esoteric jurist class. However, we also saw that state codes had eliminated the hierarchical feudal legal system and had replaced it with one based on individual property rights. In the next section we will examine the merchant law.

Merchant law as an example of organic law During the Middle Ages travelling merchants were allowed to administer their own commerce with little interference from kings or feudal barons. Part of this structure was the merchant law, which can trace its origins to the seventh century BC Lex Rhodes, but may in fact have Babylonian origins (Bewes 1923: 1–11). Essentially, the lex mercatoria was a set of rules and procedures that specified the rights and obligations of individual merchants while engaging in the exchange of goods at the large medieval trading fairs such as those in Champagne and Winchester. It was also applied in any commercial city adhering to the code. Thus the merchant law was organic in the sense that it was adopted voluntarily by trading centres. It first reappeared in Europe in the twelfth century under various titles such as the Oleron code or the Barcelona sea-law.20 While each city or fair added its own local peculiarities to the overall pattern, the merchant law everywhere appeared customary in nature. Though the merchant law was influenced by Romanesque legal principles through the Canon law, regardless of location disputes were resolved before an elected tribunal of merchants who ruled on the principle of customary practice and not on the basis of abstract legal principles (Bewes 1923: 2–27). Correspondingly professional lawyers rarely argued before its courts.

286 Hickson From the above it would appear that the merchant law serves as a good example for Menger’s idea of a spontaneous legal system.21 Menger doesn’t mention the merchant law specifically; however, it was perhaps what he had in mind when he asserted that one could only find customary law in areas vacated by the state (Menger 1963: 230). Indeed the merchant law ended first in England during the Elizabethan England where under Lord Chief Justice Coke the common law courts extended its monopoly by limiting the jurisdiction of the merchant courts. The system however lived on in guild administered cities until the early eighteenth century. On the European mainland the system survived longer. In France for example guild administered cities managed to maintain vestiges of the merchant law until Colbert’s legal reforms. And while German merchant courts felt the pressure of an expanding Romanesque legal system from the fifteenth century onwards, traces of the system survived in the imperial free cities until the early nineteenth century.

Menger and ancient customary law This subsection examines Menger’s view that organic law was characteristic of the legal systems of ancient civilizations. In what follows Menger’s view is specifically contrasted with evidence predominately drawn from the customary legal systems of the early Germans and Romans. In the early history of both cultures, individual property rights were conditional and indeed subsumed within the kinship group. Also significantly, ancient systems were typically under the influence of legal experts. For both types of reason, it is questionable whether the customary jurisprudence system of either case provides a convincing example of spontaneous methodological individualism. There is every indication that Menger was familiar with Savigny’s work on early legal systems, but little evidence that he was in any way familiar with the equally important works of Jhering or Maine, both of whom were his contemporaries. From the above authors’ works on comparative early legal systems, it is known that before the Germans made contact with Rome, they had been organized in tight kinship groups upon which all their law was based. For example, most of the land was owned communally by a kinship group. The head of the group was both responsible for allocating property to its individual members and for representing them in popular assemblies called things, within which conflicts between the kinship groups over points of law were generally resolved. The things were presided over by a king to lend them credibility (Smith 1927: 291), but the assemblies declared law by popular vote, and significantly were directed in doing so by law-speakers. The law-speakers’ declarations were authoritative and their authority stemmed from their extensive knowledge of case law history from which they derived general principles (Smith 1927: 291).

Menger’s organic view of institutions 287 Under early Germanic law, there was little distinction made between public and private law. Thus acts against persons or property in violation of declared law could only be redressed through pressure exerted by the aggrieved individual’s kinship group on the kinship group of the offending party, implying that kinships were collectively responsible for the actions of their members. Compensation, as for example in the case of murder, which was called wergild, was typically fixed according a victim’s rank within his kinship group. On the other hand disputes within the kinship group were resolved internally.22 Much later, with the advent of stronger monarchies, the judicial decisions of the things were recorded, and became known as the Leges of the various Germanic tribes and the Dooms of the Anglo-Saxons. As Menger recognised, once codified, the system became more susceptible to manipulation by monarchs through the rulings of hired legal experts who also typically biased the evolution of law codes to favour their own profession. Turning next to examine the early evolution of Roman jurisprudence, we can note that as early as the mid-fifth century BC, traditional customary law was inscribed in the Twelve Tables. Significantly the creation of the Twelve Tables was one of the concessions made to the plebeians by the patrician order in order to quell dissent. The plebeians had correctly associated unwritten laws administered by patricians as generating an unfair and arbitrary judicial system (Jolowicz 1932: 10–11). As the system evolved in the early Republic, legal disputes were argued before a magistrate, but decided by an iudex. Iudices, who were not legal experts but chosen on the basis of rank and wealth, functioned like a traditional English common law jury in that they merely declared innocence or guilt. In contrast, the question to be put before the iudex was in a form of words moulded by the magistrate during a pre-trial hearing.23 Early Roman law was also based on the family, which was treated in law as a kind of corporation. Only the head of the family had legal status allowing him to engage in contracts and other forms of property exchange. The head enjoyed a lifelong authority over all members of his household but his power, which known as patria potestas, also obligated him for all debts and obligations incurred by other members (Maine 1986: v). Strict inheritance laws severely restricted the ability of the household head to alienate property and guaranteed immediate family heirs a fixed fraction of the family estate. In the eventuality of no existing immediate heirs, an estate would default to any existing agnatic relatives and in the eventuality of no agnatic relatives it would default to cognatic relatives.24 Such inheritance rules suggest older property laws based on kinship, a view which is also supported by the fact that in the early Republic the senate’s primary function was to resolve interpatrician family disputes. The legal system described above, which is called the ius civile, applied only to Romans and allies covered by a commercial treaty. Though changes in the ius civile were always

288 Hickson constrained by what was written down in the Twelve Tables, the system managed to evolve effectively into new legal actions by way of the formulas of the praetors. It was also the custom for the decisions of the preceding praetor to be confirmed through an edict of his successor. By way of such legal fiction new laws were created that, for example, as early as the third century BC, weakened the patria potestas by allowing fathers to free their sons from their control (Kunkel 1966: 30). Correspondingly the obligation of the family head toward family members was also eventually relaxed. Particularly under the edicts of the praetors, property became easier to alienate to meet the new opportunities presented by increased commerce. Thus the edicts acted as a substitute for legislation, but more fundamental change came through legislation. For example, the lex Poetelia de nexis (326 BC) abolished debt bondage and the lex Aquilia de damno (326 BC) developed the law of delict to property (Kunkel 1966: 30). The Romans also developed a different legal code for foreigners, which was known as the ius gentium which was administered by the pergrinus praetor as distinct from the urban praetor who administered the ius civile. As the ius gentium was only loosely based on the Twelve Tables, the praetor could more easily direct the code toward the recognition of individual property rights thereby facilitating commerce. Consequently, under the Principate the ius gentuim became the preferred system even by Roman citizens when engaging in commercial transactions. The popularity of the ius gentium continued under the Empire and indeed any advantage of citizenship enjoyed under the ius civile was effectively nullified when under the Emperor Caracalla in 212 AD citizenship was extended to all the Empire’s inhabitants (Kunkel 1966: 59). During the late Republic and early Principate period, praetors were increasingly appointed on the basis of their knowledge of law, and the praetors increasingly relied on a body of case law opinions and arguments compiled by legal scholars such as Paulus and Ulpianus (Kunkel 1966: 101–5). Furthermore, in this period Roman law became increasingly dominated by a legal elite that was influenced by equity principles based on Greek notions of humanism (Maine 1986: vii–xi). Thus from Menger’s perspective any admirable evolutionary qualities possessed by Roman law would have been eroded. In any event any organic quality possessed by Roman law was fundamentally undermined from the time of Hadrian by a plethora of Imperial edicts that superseded the old law. This section concludes by briefly discussing two more examples, the first of which is that of the Irish Brehon law, which was also rooted in a hierarchical clan system operating under weak kings. Under the Brehon law individuals only had legal rights as members of their clan and kinship groups. Both were held collectively accountable for any personal injury or damage, including delict, inflicted by one of their number on an individual belonging to another kinship group. Fines, called erics in the case of murder, were fixed according to the

Menger’s organic view of institutions 289 family status of the relative rather than that of the victim as under German tribal law. As in the German case, the local clan king attended the court, but the Brehon judges decided disputes according to a body of case law that they had compiled, and these were written down in the early Christian period. In addition, lesser orders of Brehon served as advocates and the whole Brehon profession received training in case law from special, though competing, schools (Kelly 1995: 53–4). Next consider the case of early Greek law, which, similar to German law, began with the holding of popular clan assemblies that were designed to resolve inter-kin disputes. The above system changed soon after the introduction of the polis during the ninth to eighth centuries BC. By the mid-seventh century, many cities had written law as well as lawgivers called thesmotheai, who recorded the law for use in later cases. From the earliest times the archons ruled on cases in pre-trial hearings, but could in some instances decide cases on their own authority, but typically law was declared by popular vote in assemblies, made up of representatives from the demes or clans. Significantly, the resolution of such disputes in these assemblies were under the direction of legal experts.25 In addition litigants often employed professional advocates to plead their case. Consistently, early Greek law also assigned collective responsibility to a deme. The deme also enjoyed legal jurisdiction over its own members. This system persisted until the era of the despots who introduced codes, the most infamous of which is that of Draco in 620 BC, while the most renowned is that of Solon who was a later Athenian archon.26 Regardless of their authorship, all the codes sought to undermine the power of the demes in favour of law based on individual rights and responsibilities, a process that was only completed during the Hellenic period. From the above examples of early customary law systems, a clear pattern emerges, indicating that legal principles under such systems were developed on the basis of experience drawn from precedent. Significantly, in all cases the development of these principles was placed in the hands of a specialist jurist class who developed guiding principles from case law. Also in all the cases noted above, decisions were made credible by the active involvement of either the king or some other coercive authority such as the Roman senate. In all the early cases the law was based on clan and kinship group and redress only was effective if backed by force by the clan and kinship group of the aggrieved party. Thus the individual’s interests were subsumed within his kinship group and clan. For this reason early customary legal systems do not fit well into Menger’s organic concept of law.

290 Hickson CONCLUSION The last section of this chapter clearly demonstrates that, with the exception of merchant law, Menger’s organic theory is incompatible with actual legal system evolution because such systems had to be structured in order to facilitate the need for common defence of property. As the central state got stronger, it could more easily reduce inter-clan and inter-kinship predatory tendencies, implying that centralization of political power may have been efficient and not inefficient, as Menger believed. Consequently state law could develop in a way that would more easily facilitate freer transfer of property. The rise and decline of feudal law also fits this pattern. Consistently, as moveables are less expropriable than land-property, the merchant law was more naturally allowed to evolve in the form of facilitating trade and remained free of a jurist class until the rise of competing mercantilist nation states in the early modern era. Thus knowledge of general legal history should make us question Menger’s claim that spontaneous methodological individualism and organic law can serve as a general theory for institutional evolution. This is in accord with the conclusion arrived at earlier in this chapter, which identified the weakness in the organic theory as resulting from Menger’s failure to recognize the importance of public goods and rent seeking behaviour, which prevented him from developing a theory of property rights. Without a property right theory, his organic legal theory could only be tautological at best. Finally, despite Menger’s recognition of opportunistic behaviour by lawyers and strongmen, one can attribute Menger’s inability to recognize the importance of rent seeking and predatory behaviour in institutional evolution to his refusal to embody lessons drawn from biology. Thus his evolutionary theory remained rooted in idealism, which in the final analysis can be attributed to his Hegelian roots.

NOTES 1 Typical in the works of the most notable members of the Austrian School such as Bohm Bawerk from the first generation, and Hayek, Kirzner and Von Mises from the next, is the view that efficient social institutions can only arise in an environment of laissez faire. In contrast to the above, Wieser, who was most responsible for systemizing Menger’s price theory, believed in a mixed economy. 2 Menger published his utility theory in 1871 in a work entitled the Principles of Economics just a few months after Jevons published his version in a work entitled The Theory of Political Economy and Walras followed a few years later with a work entitled The Elements of Pure Economics. 3 Menger’s analysis suffered from the defect that supply curves were assumed fixed, and, like Jevons, he also failed to develop his marginal utility theory into a demand schedule. Instead Menger

Menger’s organic view of institutions 291 erroneously argued that the value of a good increased in accordance with its proximity to final consumption. 4 For a fuller critical discussion on Jevons’s contribution to value theory see R.D.C. Black’s Economic Theory and Policy in Context (1995), as well as his ‘Introduction’ to Jevons’s Political Economy (Black 1971c). For a fuller discussion on Walras’s contribution see Blaug’s Economic Theory in Retrospect (1962). 5 There were nevertheless some important differences among the members of the Historical School. For example, Von Stein believed that the study of history would reveal its Hegelian-type laws as nature unfolded itself. Bucker believed, as did Menger, that the study of history leads to a theory of evolution while the study of classical economics leads to theory of economics. Schaffe, in contrast, used the analogy between the body politic and an organism. Finally Schmoller believed that a theory of political economy was only possible through the concrete study of history. 6 Aristotle seems to be applying the principle of the golden mean when he argued that what is natural is that which is commonly observed across states. He also argued that it is natural because it is reasonable. His arguments were later used by the Roman Stoics to argue for the ius gentium over the more traditional ius civile. Aristotelian influence on Menger is also evident in his three-step approach of induction, deduction followed by policy prescription (Alter 1990: 107). 7 Aristotle had used the technique of analysing the function of an animal’s parts in order to determine the nature of the animal, hence the term ‘anatomical’. However, his analytical method, which generally relied on a particular classification of the parts, was first criticized during the Middle Ages by the more scientific Nominalists such as Ockham who argued that any particular phenomenon could be classified as long as it was consistent with a particular hypothesis. The Nominalists’ criticism of Aristotle thus allowed for the possibility of competing hypotheses. 8 Hirshleifler in his Price Theory text defines rational behaviour by method as action selected by logical thought and rational behaviour by action as any action that achieves the desired result. Thus in Williamson’s classification system, Menger’s methodological individual is defined as only weakly rational (Williamson 1985: 35–7). 9 In contrast to Menger’s approach, there is a long-standing tradition of applying biological-inspired ideas of institutional evolution beginning with Alchian. He postulated that initial institutional change came through random occurrence, but the survival of such a firm depended on it being more profitable. Thus Alchian’s approach is Darwinian in spirit even though he admits the possibility of later imitation of initial success. Nelson and Winter later adopted a more Lamarckian evolutionary approach by allowing their firms to develop through a process of imitation and learning. In models of modern evolutionary game theory, such as those of Levine and Fudenberg, Samuelson and Weibull, depending on the context, both learning and non-learning processes are generated. Generally in the former, some individuals are assumed to have higher-payoff-strategies, which enable them to progressively dominate in succeeding periods. In the learning models the same population of individuals is assumed to survive but dominated initial strategies are competed out of the population. However, impressively, Weibull has adopted a model combining both. In their forthcoming book,

292 Hickson Thompson and Hickson apply an evolutionary game theory model in order to explain how vital institutions evolve. Their approach recognizes the fundamental role played by predatory and parasitic behaviour in the survival process (Thompson and Hickson 2000: ch.1). 10 In a personal letter to Walras, Menger objected strongly to the way he had dissolved his economic analysis within a mathematical system of logic (Alter 1990: 67). 11 Equity law, primarily through early church influence, was in large part based on natural justice principles, which can be traced back to Aristotle. 12 For a fuller discussion see Munroe Smith’s A General View of European Legal History. 13 Briefly explained, opinio necessitatis denies that customary law can arise if an old law is remembered because any new law would have to be based on a new practice having no basis in existing law. The opinio necessitatis also denied the possibility of any new law arising even when the old law was forgotten because the new practice arising had no validity in this case either, since when a new custom was first practised there was no law (Watson 1985: 46). 14 From a modern theoretical view, it would not be rational for a leader to impose an inefficient legal system on a polity because he is the residual claimant to any rents that can be extracted from it. 15 Feudal law is said to combine the Germanic idea of commitatus (brotherhood) with the Roman idea of beneficium (obligation). 16 The transformation to feudal property relations appears to have had Lombard origins (Reynolds 1994: 4–6). 17 During the early centuries following the collapse of the Carolingians, local lords unsuccessfully attempted to prevent the dilution of fiefs by requiring that any land transfer from a fief, particularly land bequests to the church, needed their prior permission. They argued that any alienation of land from a fief reduced the ability of the vassal to fulfil his military obligations. Significantly, Canon law always opposed the principle of non-alienation of land if for no other reason than the Church wanted the right to accept bequests from feudal tenants. 18 The Glossitors originated in Bologna during the eleventh century with the purpose of better understanding the Codex and Digest, which were the two main sources of the Justinian Code. The Pandectists took a more active approach in that they worked to have the code adopted in various countries. As part of this effort they worked to adapt the Code to better suit the needs of emerging state governments. 19 Russian law was already heavily influenced by the Justinian code through Byzantine influence (Wigmore 1928: ch.3). 20 In the fourteenth century the merchant law became known as the Consulato del Mare and, under the name of the laws of Wisby, it was adopted by the Hanseatic cities. 21 The merchant tribunals always moved to resolve contract disputes as swiftly as possible. This characteristic gave them the name in England of piepowder courts (Bewes 1923: 10). 22 The weight of evidence in law-things was also based on kinship. For example litigants’ testimony was typically supported by the oaths of his family members and in the absence of such oaths a defendant may have had to undergo trial by ordeal. Also significantly, disputes between kinship groups were

Menger’s organic view of institutions 293 often settled by combat of arms. Generally in such cases each disputing family chose from within their ranks a champion much in the same way as described in Njal’s Saga. 23 The plaintiff was required to use the exact words contained in the twelve tables when filing his complaint with the magistrate, hence the system was known as the formulary one. Significantly a magistrate held the rank of consul and hence was appointed by the senate. 24 Agnatic relatives were those related through the male line, while cognatic relatives were those descended through the female line. 25 However, later the Greek courts resorted to ballots to decide the outcome of a trial. 26 Draco’s law code imposed for the first time the death penalty for murder, where before punishment was left as a private matter between the demes. He also introduced a penalty of bondage for failure to pay debts. Solon amended the death penalty but distinguished between manslaughter and murder by stealth. His penalty for the latter was reduced to exile. He also abolished debt-bondage.

15 Canons of monetary orthodoxy and John Law Antoin E. Murphy

Time present and time past Are both perhaps present in time future, And time future contained in time past. (T.S. Eliot, Four Quartets 1943) The absolutist approach to the history of economic thought has been interpreted as one in which the subject is regarded ‘as a steady progression from error to truth’ (Blaug 1962: 2). It is deemed by some commentators as superior to the relativist approach which interprets a theory in the context of its time and location. Absolutism, the search for truth, the stripping away of imperfections in a theory and its presentation in the context of ‘correct’ modern equivalents, is conceived to be a higher form of intellectual endeavour for the historian of economic thought. Relativism is equated with antiquarianism by the absolutists. The presentation of these approaches in terms of polar opposites is a risky operation, for while the absolutist approach appears to be conceived in a timeless context it is itself a relativist approach. The theory of the past is assessed relative to the theory of today. But, tomorrow, today’s theory may become outmoded. There may be a paradigm shift. The fashionable paradigm of today may become tomorrow’s discarded paradigm. When this happens the current absolutist model has become the rejected model of yesterday. The danger of the absolutist approach is that it selects what is correct in the context of the current accepted model. It provides canons of orthodoxy but when these canons are found to be inadequate or incorrect, the interpretations of absolutist reasoning may have discarded a collection of economic ideas which are relevant to the new model. The problem in economics and indeed in other sciences is how one can be sure that the current model is the correct one. While historians of economic thought argue as to the respective merits and demerits of absolutism and relativism, there has been a surreptitious absolutist approach running through

Canons of monetary orthodoxy and John Law 295 economic theory over the centuries. This approach is to present the perceived ‘correct’ model and to show the fallacies of other writers who did not understand this particular model. Adam Smith attacked Thomas Mun; Keynes was extremely critical of Jean Baptiste Say; numerous economists have attacked Keynes over the last three decades. But even before Mun and Say were attacked there was an earlier example of public excoriation of an economist. This was the case of the John Law (1671–1729). In this chapter it is intended to show the way in which the absolutist approach belittled, trivialized and condemned John Law’s approach to monetary policy. This dismissive bravura had secondary complications in that because of the condemnation of Law few economists actually looked at his economic writings. Many economists were only too ready to present Law and/or his policies for public ridicule. There was in fact an ambiguous duality in the approach of most economists when it came to addressing Law and his theories. Some were prepared to accept that he was a genius, but to condemn his supposed moral turpitude and fraudulent behaviour. Others were prepared to exonerate him from the latter charges but to condemn him for the excesses of his policies. Why was there this rejection of Law by the economics profession? One obvious reason was that Law was deemed to have a flawed character. In London of the 1690s, when more seriousminded people were attempting to solve the problems of the national debt, Law was philandering his way through society gaining the sobriquets of Jessamy (a corruption of Jasmine, implying a fop or a dandy) John and Beau Law. At a time when the Bank of England was established Law was meeting a fellow beau, Edmund Wilson, to duel with him in Bloomsbury Square. Law killed Wilson and was convicted of murder. To avoid the gallows Law had to escape from prison. How can one include a swordsman and murderer in the pantheon of great economists? To add to this doubtful curriculum vitae Law was also identified as a gambler. The perception of Law the gambler is an incorrect one. At the gaming tables in France and Italy Law acted more as a bookmaker than a gambler (Murphy 1997: 35–44). That said, he has been traditionally caricatured as a gambler and economists do not like gambling because of its apparent irrationality. Furthermore the gambling link was identified with his policy-making. Law was held to be someone who gambled and failed with the French economy. The profession needs to have its heroes – people such as Smith, Ricardo and Walras – who may be retrospectively admired. It does not wish to be reminded of ‘gamblers’ who produced economic failures like the Mississippi System.1 There is another and deeper reason for the denigration of Law by economists. It is that Law was deemed to be economically incorrect. His approach ran counter to one of the strongest canons of monetary orthodoxy that prevailed through the eighteenth, nineteenth and early part of the twentieth centuries. This canon was the belief that money had to be intrinsically

296 Murphy valuable. Schumpeter, following on from G.F. Knapp, used the term metallism to describe this canon, defining it as the ‘the principle that the monetary unit “should” be kept firmly linked to, and freely interchangeable with, a given quantity of some commodity’ (Schumpeter 1954: 288). Schumpeter stressed the extent to which metallism dominated monetary theory: ‘Whatever may be its shortcomings, this theory, though never unchallenged, prevailed substantially to the end of the nineteenth century and even beyond. It is the basis of the bulk of all analytic work in the field of money’ (Schumpeter 1954: 63). A sub-canon stemming from metallism was the viewpoint that interference in the metallic/ monetary system through financial innovation was inherently dangerous. It was dangerous because it offered transactors alternatives to metallic money to be used as media of exchange. Thus, Law, who believed in creating a specie-less monetary system and who was convinced of the need for financial innovation in certain circumstances, was condemned by the metallists because his views ran counter to the monetary orthodoxy of the eighteenth, nineteenth and early twentieth centuries. The sustained opposition to Law over the last three centuries shows the way in which economists can get it wrong because the particular canon on which they based their judgement was not sustainable over the longer term. In this instance it was a canon – the necessity for money to be intrinsically valuable – which became more and more outdated as the world economy evolved. Who would argue today for a return to a global gold standard? Even now, writing in 1999, the Bank of England has decided to sell its gold reserves. Yet, those who argued that gold was an inappropriate standard for the monetary system in the years up to the First World War were regarded as outside the orthodox stream of economic theory. Analysis of the opposition to Law provides a fascinating account of the extent to which metallism was a firmly embedded canon of economic orthodoxy. The opposition to and misunderstanding of Law may be classified under two headings which were mutually reinforcing: (i) popular satirical attacks directed at the madness of financial speculation; and (ii) critical economic assessments. In this chapter most attention will be devoted to the economic assessments, but, the accounts of the first grouping were also highly important in fashioning the ideas of the economic writers. In turn the ideas of economists as to Law’s economic incorrectness reinforced the viewpoints of the popularizers that Law was a legitimate target for their satire.

POPULAR SATIRICAL ATTACKS AGAINST LAW Amongst the popular satirical attacks on Law there were three important sources which fashioned attitudes hostile to him. These were: (i) the Dutch satirists and engravers who

Canons of monetary orthodoxy and John Law 297 lampooned the financial speculation of 1720 in Het Groote Tafereel der Dwaasheid (The Great Mirror of Folly); (ii) Montesquieu’s allegorical critique in the Persian Letters; and (iii) Charles Mackay’s Memoirs of Extraordinary Popular Delusions and the Madness of Crowds. Het Groote Tafereel der Dwaasheid represents an extraordinarily powerful piece of iconography on the financial speculation of 1720, most notably that of the Mississippi System in Paris. This folio has fascinated successive generations of bibliographers in that ‘no two specimens, even of approximately the same actual issue date, are exactly the same’ (Cole 1949: 1). It comprises a number of short plays, twenty-seven poems, and a collection of prints ranging from forty-seven to seventy-four in number. It appears to have been first published in 1721. Such was its popularity that it continued to be re-issued up to 1780. It was a type of eighteenth-century bestseller, reissued and put on booksellers’ shelves whenever there were further periods of speculative activity. Its allegorical prints were designed to show the folly and madness of the speculation of 1720. Law was savagely lampooned in these prints with hot air and financial bubbles emanating from every orifice of his body. Mrs Malaprop would have been delighted to be vindicated by the number of allegories on the Mississippi. Numerous allegorical engravings on the Mississippi System were accompanied by even more numerous printed allegories. The most notable of these was by Montesquieu in his colourful allegory of Law in letter 142 of the Persian Letters. Once again the hot air theme dominated. The Scotsman was portrayed as learning the art of banking, ‘the secret of catching the wind in balloons’ from his father Aeolus ‘god of the winds’ and then encouraging French people to abandon worthless metal (gold and silver) in favour of the banking balloons. To Montesquieu paper money and credit were as valueless as air and advocates of such systems deserved to be derided for their attempts to remove metallic money from the economic system. These two powerful works, backed up numerous satirical prints and critical pamphlets, fashioned eighteenth-century attitudes in associating folly and madness with any mention of Law’s name. However, the high point of this association was not reached until the nineteenth century through the publication of Charles Mackay’s book Memoirs of Extraordinary Popular Delusions and the Madness of Crowds. This work was first published in 1841. It was frequently reprinted in the nineteenth and the twentieth centuries. Charles Mackay set out to show how delusions could be popularized and suddenly grab the attention of the public, spreading like a contagion through a country. He discussed the delusions of alchemists, fortune tellers, astrologers, magnetizers, witches, the King of Bavaria who apparently ordered all civilians wearing moustaches to be arrested and shaved, and so on. He highlighted the Dutch tulip mania of the 1630s. But the prime candidate for attack in this ‘pot boiler’ encyclopedia of madness and manias was John Law. Significantly, the first chapter of the book was devoted to ‘Money Mania – The Mississippi System’.

298 Murphy Mackay explained how Law inveigled his way into the Regent’s circle and persuaded him to permit the establishment of the General Bank: ‘The Regent appears to have been utterly astonished at his success, and gradually to have conceived the idea that paper, which could so aid a metallic currency, could entirely supersede it. Upon this fundamental error he afterwards acted’ (Mackay: 11). To Mackay the fundamental error in Law’s System producing the money mania was the belief that a metallic money system could be replaced by a paper money system. Metallic money was sacrosanct in his set of values. Mackay was not alone in expressing this viewpoint. It had been, was and would continue to be a canon of orthodox economic thinking. Anyone who advocated the substitution of a paper money for metallic money was in contravention of the orthodox canon and fit to have the adjective ‘mad’ associated with his name.

CRITICAL ECONOMIC ASSESSMENTS OF LAW The lineage of this economic orthodoxy, and, by implication the opposition to Law, was a long and impressive one. It started with contemporaries of Law most notably Richard Cantillon and Joseph Pâris-Duverney. It would continue via a number of notable eighteenth-century economic theorists, Turgot, Galiani, Hume and Smith. Ironically, one would have imagined that the assignats experiment during the French Revolution, so closely modelled on many of Law’s ideas in Money and Trade, might have produced some respite in the opposition to Law. This was not to be the case, for both the supporters and opponents of the assignats attacked Law. The overexpansion of the French assignats and the ensuing hyper-inflation reinforced economists in their opposition to paper money. The denigration of Law continued via the comments of nineteenth-century writers such as Marx, Courcelle-Seneuil, MacLeod and Marshall. Even as late as 1938 Charles Rist was dismissing Law as a ‘monetary utopian’ because of his anti-metallist stance. Cantillon’s Essai sur la nature du commerce en général (1755), most likely written sometime between 1728–30, was an intellectual rebuttal of Law’s System even though it contained no specific mention of Law or the Mississippi System. Fortunately for the future of economics, Cantillon’s antagonism to Law, probably provoked by the latter’s threat to imprison the Irishman in the Bastille in 1720 if he did not leave France immediately, inspired him to construct his model of the way the economy works. Behind Cantillon’s search for a model of the economy was his desire to know how much money was required in the economy. Cantillon brilliantly analysed the circular flow of income – an analysis that was so formative in producing Quesnay’s Tableau Economique – in order to determine the demand for money

Canons of monetary orthodoxy and John Law 299 in the economy. However, it was a model based on metallic money. Cantillon excluded banknotes and bills of exchange from his definition of money. To him they could only speed up the velocity of circulation of money. He was against financial innovation, believing that it overexpanded the financial circuit relative to the real economy’s circuit, thereby creating the potential for an explosion in the financial bubble that it created. In his final paragraph he indicted without naming Law:

It is then undoubted that a Bank with the complicity of a Minister is able to raise and support the price of public stock and to lower the rate of interest in the State at the pleasure of this Minister when the steps are taken discreetly, and thus pay off the State debt. But these refinements which open the door to making large fortunes are rarely carried out for the sole advantage of the State, and those who take part in them are generally corrupted. The excess banknotes, made and issued on these occasions, do not upset the circulation, because being used for the buying and selling of stock they do not serve for household expenses and are not changed into silver. But if some panic or unforeseen crisis drove the holders to demand silver from the Bank the bomb would burst and it would be seen that these are dangerous operations. (Cantillon 1931 [1755]: 323)

Joseph Pâris-Duverney was also against financial innovation. His opposition arose because of his role as a financier in the Ancien Régime. Effectively Law’s financial innovation would have made the financiers redundant. Through their tax farming and lending to the French crown the financiers exacted sizeable economic rents. Law’s alternative system would have deprived them of these economic rents. Along with his brothers, who were also successful financiers, Pâris-Duverney had a vested interest in ensuring that Law did not succeed and opposed Law with vehemence during the System to the point of encouraging the Regent, Philippe duc d’Orléans, to imprison Law in May 1720. On the collapse of Law’s System it was the Pâris brothers who were given the task of restoring the old system and supervising a retrospective tax (the Visa) on the rich Mississippians. Later, during the late 1730s, Pâris-Duverney had a vested interest in ensuring that Du Tot’s sympathetic treatment of Law in the Réflexions politiques sur les finances et le commerce (1738) was countered so that there was no lingering legacy extolling Law and his System. His book, Examen du livre intitulé Réflexions politiques sur les finances et le commerce (1740), partially if not wholly ghost written by a specially selected literary specialist, François Deschamps, was drafted to counter Du Tot’s enthusiastic endorsement of most of Law’s policies.

300 Murphy Du Tot was a mysterious individual. His Christian name is not known, though it is likely that it was either Pierre or Nicolas. It is now known that he worked as the deputy treasurer of Law’s Banque Royale in 1720. He had been enormously impressed by Law’s System and became an apologist for it in the Réflexions and the many unpublished manuscripts that he wrote. The Réflexions had in part been written to challenge some of the themes raised by JeanFrançois Melon on the efficacy of changes in the domestic exchange rate in the Essai politique sur le commerce (1734). Though Du Tot differed with Melon on the benefits of debasing the coinage, both writers were admirers of Law. Melon, a secretary to both Law and the Regent at various stages in his career, strongly favoured credit creating banks. Though never mentioning Law by name in the Essai, he provided a short allegory on Law, a type of counter-allegory to that of Montesquieu. He fictionalized how a wise Brahmin had married Aurekno, Prince of Formosans (the Regent) to his daughter the beautiful Panima (Law). Panima wrote ‘several magic words’ and created a huge citadel (the System) which transformed the economy of Formosa (France). Melon related how:

There was on Formosa an ancient type of magic embedded in words on animal skins and this magic was extremely expensive to most of its inhabitants. Panima did not respect it sufficiently and wanted to destroy it and put her own in its place. (1736: 306)

The old magic was the financial system based on the high interest ‘rentes’, the contracts for which were drawn up on parchment (animal skins), which Law wanted to replace with his own magic, namely the shares of the Mississippi Company. However, when Law started this policy he was attacked by the System’s enemies. Melon added that these attacks would have been unsuccessful if Law had not contributed to his own downfall:

when drunk by her own dazzling success she [Panima] madly indulged in all her fantasies and there was nothing left except a tissue of dangerous imprudences which made her odious to all the nation. Aurenko believed that the maintenance of his authority required divorcing and banishing her. (1736: 307)

Melon also hinted at the fact that the Regent wanted to invite Law back to France, ‘perhaps smitten by her beauty he would even have recalled Panima, whose imprudences he hoped to control when death …’ (1736: 307). The allusion here was to the Regent’s death in 1723

Canons of monetary orthodoxy and John Law 301 which prevented Law’s return from London to Paris. Melon seems to have acted as an intermediary between Law and the Regent in discussing his possible return. Du Tot’s account of Law’s period in office was a great deal more laudatory about Law. Readers of the English translation of Du Tot’s book will be surprised by this, for most of the sections dealing with Law and the Mississippi System were selectively excised from this edition! In the French edition Du Tot remarked that posterity would scarcely believe that such was the success of Law that trade flourished under a purely paper monetary system. PârisDuverney rejected this view. To Pâris-Duverney Law’s biggest mistake was his desire to move France to an a-metallic system: ‘Mr. Law fell into the biggest of all errors when he wished to suppress among us the use of gold and silver money’ (Pâris-Duverney 1740, I: 190). In fairness to Pâris-Duverney, he was prepared to allow that a certain amount of credit money could be beneficial to the economy. However, he did not accept that the non-metallic money creation should have been anywhere near Du Tot’s suggested target of 1,200 million livres – the estimated specie money supply in France at the start of 1720. Pâris-Duverney’s book was published in 1740 and had a considerable success in impressing the educated reading public on the danger of Law’s proposals. The French lineage of opposition to Law would continue. This immediate opposition was to come from two very young economic writers who would have a considerable role to play in the development of economics in the eighteenth century. On 7 April 1749, in his priory at the Sorbonne, the young Abbé de Brucourt wrote a ‘Lettre sur le Papier-Monnaie’ to the Abbé de Cicé. The 22-year-old abbé, later to become famous as Anne-Robert-Jacques Turgot, had decided to attack Law’s ideas on money. Having read the Abbé Terrasson’s three letters on Law’s System, written between March and May 1720, Turgot took considerable exception to them. He felt Terrasson was just repeating Law’s views and in attacking Terrasson he believed that he was directly attacking Law. Turgot showed, even more so than Pâris-Duverney, that he was very much in the metallist camp, observing ‘that it is absolutely impossible that the King substitutes paper for the use of gold and silver’. Turgot believed that the creation and expansion of a paper money would only increase prices and that ultimately the King, if adopting a paper money, would be forced to continue to increase it in order to maintain his share of the national income which he wanted to appropriate through the creation of such money. Writing around the same time as Turgot was criticizing Law, the equally young Ferdinando Galiani also felt the need to criticize Law’s System in Della Moneta. This book was first published in 1751 when Galiani was just 23 years old, suggesting that he was a precocious talent. Galiani was impressed by Law’s abilities. He described him as ‘a man of the rarest and most remarkable genius’ (1977 [1751]: 242) confirming this plaudit later by the superlative when

302 Murphy he referred to Law as an ‘outstanding genius’ (1977: 318). Acknowledgement of Law’s genius did not, however, prevent vilification of Law’s character. He condemned Law as ‘a man without virtue or religion’ who duped the duc d’Orléans by furnishing two systems: ‘One was filled with many useful suggestions; this is the one he described to the duke and to all of France. The other was destined solely to satisfy his own greed’ (1977: 242). Galiani’s approach personifies the duality of images presented by many writers on Law with terms such as genius and visionary grafted together with thief and charlatan. Galiani adapted a high moral stance in condemning Law’s greed. However, at the same time he acknowledged that Law’s System was ‘one of the strangest creations of the human intellect’ (1977: 242). Galiani’s acknowledged the need to supplement the money supply in France because the country was suffering from an acute shortage of money when Louis XIV died in 1715.

France could no longer have been restored with industry and peace because, without money, her industries were no longer active. As a result, enriching her with paper money which cost nothing in terms of goods, but which provided a means of reactivating and sustaining manufacturing, was the same as restoring all of the orders of the artisans to them. Only then would there be enough tranquility and time to revive the state. This was the usefulness and beauty of Law’s system. (1977: 243)

Having admitted the necessity of creating some new form of money, Galiani then lowered the quality of his analysis by attacking Law rather than evaluating the System that he created. Law was derided because he ‘could not be contented unless he had his own wealth and enormous acquisitions’ (1977: 244). In order to enrich himself further Law had created ‘a trading company full of shams and visions’ (1977: 244). Galiani focused attention on Law making over 40 million livres ‘almost all in cash or in noble and royal landed estates’ (1977: 245). Galiani’s assessment of the rise and fall of Law’s Mississippi System was excessively concentrated on depicting the alleged personal vices of Law instead of careful analysis of Law’s System and the reasons for its failure. His writing shows that he did not understand the System, that he had a very superficial judgement of the Regent, who was certainly not a weak man ready to be duped by Law, and that ultimately his criticism of the System was reduced to an ad hominem attack on Law rather than a critical evaluation of the System’s failure. Shortly after the publication of Cantillon’s Essai sur la nature du commerce en général François Véron de Forbonnais produced an assessment of the financial management of France from 1595 to 1721 in the Recherches et considérations sur les finances de France depuis l’année jusqu’à l'année 1721 (1758). This was a serious attempt by Forbonnais to

Canons of monetary orthodoxy and John Law 303 evaluate Law and the System. While not a supporter of Law, Forbonnais concluded that one of the most dangerous legacies of the System was the opposition it created in the popular mind to the word ‘system’ and to those who suggested new innovations. David Hume and Adam Smith, fellow countrymen of Law, both continued in the tradition of providing ambiguous portraits of Law. Hume, though not mentioning Law by name, clearly referred to him as ‘the daring projector with visionary schemes’ and ‘the doctor’ who destroyed France during the Regency:

it is not altogether improbable, that, when the nation becomes heartily sick of their debts, and is cruelly oppressed by them, some daring projector may arise with visionary schemes for their discharge. And as public credit will begin, by that time, to be a little frail, the least touch will destroy it, as happened in France during the regency; and in this manner it will die of the doctor. (Hume 1970 [1752]: 102–3)

However, Hume, frequently presented as one of the founding fathers of monetarism – Milton Friedman has alluded to Hume as such – was quite prepared to allow for moderate expansions in the money supply to stimulate the economy in the short run. The authority he quoted on this, in the essay ‘Of Money’, was none other than Du Tot, Law’s faithful follower, when referring to the way in which expansions in the money supply had stimulated output initially rather than price increases. Hume, though suspicious of some of the facts that Du Tot advanced on other occasions, acccepted the latter’s conclusion that ‘the general observation that the augmenting of the money in France does not at first proportionably augment the prices, is certainly just’ (1970: 39). Contrastingly to Hume, Sir James Steuart was prepared to investigate in depth Law’s System. Steuart, who like Law and Hume was born in Edinburgh, devoted over fifty quarto pages to the System in An Inquiry into the Principles of Political Economy (1767). Steuart had every reason to find common cause with John Law in that like the latter he was concerned with the problems of unemployment and under-utilization of resources and believed that there were monetary solutions to solving such problems. He wanted to analyse Law’s macroeconomic experiment in France which he described as ‘the golden dream in which the French nation, and a great part of Europe was plunged, for the short space of 506 days’ (1767, II: 243). Steuart read selectively about the System consulting some of the key arrêts of 1719 and 1720 and analysing the works of Savary, Melon and Du Tot. He did not, however, consult Pâris-Duverney or Forbonnais. Though only analysing authors who were sympathetic to

304 Murphy Law, Steuart nevertheless was very critical of Melon and Du Tot, believing that they confused rather than clarified many of the issues: The jargon of such men [Melon and Du Tot] certainly contributed a great deal to darken the understandings of the ministry at this time, and to make them believe that the affairs of money were infinitely more obscure and more difficult to be understood than they really are. (1767, II: 245) Four pages earlier he had singled Du Tot out for explicit criticism with respect to his views on credit: ‘how lame the author’s [Du Tot] ideas were concerning the principles of paper credit and of circulation’ (1767, II: 241). Steuart was quick to exonerate both Law and the Regent from any charges of fraudulent behaviour: I shall offer but one argument more to prove that the Duke of Orleans, and Law, could have no premeditated design of defrauding the public, by these wonderful operations; which is, that admitting the contrary, would be allowing them an infinite superiority of understanding over all the rest of Europe. Until the bubble burst, no body could know where it was to end: everything appeared very extraordinary indeed; and the fatal catastrophe might have been expected from the greatness of the undertaking merely. But if there had been any roguery in the plan itself, it must have appeared palpable long before because the whole of the operations in which only it could consist were public. Under these circumstances, to say there was knavery, is to say that all the world were absolute blockheads, except the Regent and John Law: and to that opinion I never can subscribe. (1767, II: 264) He felt that the reputation of both men ‘had been grossly calumniated’ by many authors, but Steuart wanted to write about Law and his System not so much to vindicate Law ‘as to prove that an ill concerted system of credit may bring ruin on a nation’. From an intellectual viewpoint there were many similarities between Law and Steuart. Both men were concerned about unemployment and underutilization of resources. Neither were prepared to accept that the price mechanism could bring about full employment, rather it was necessary to have the state intervene in order to achieve this state of affairs. Both were impressed by the evolution of banks into the area of credit creation and both believed that increasing the money supply was an appropriate method for boosting the economy to full

Canons of monetary orthodoxy and John Law 305 employment. Neither believed that money had to be intrinsically valuable, but rather that there was considerable scope for the banking system to create new types of money. Steuart made an important distinction between means of payment money and medium of exchange money. In the case of means of payment money, where payment and exchange take place simultaneously, it is required because of the absence of information about the creditworthiness of a buyer of goods. Medium of exchange money, which permits a time gap to emerge between payment and exchange, emerges when the seller has reliable information about the creditworthiness of the buyer. In the former instance specie money may be required; in the latter a wider range of monetary instruments emerge to facilitate the exchange process. Steuart wrote on this: ‘The use of money is to keep the reckoning between parties, who are solvendo; the use of specie or coin is to avoid the inconvenience of giving credit to persons who perhaps may not be so’ (1767, II: 214). If specie money was only vital for payments purposes where information was lacking, and if such payments formed only a small subset of all the transactions required in a monetary economy, then the potential was great to create alternative non specie monetary instruments. Steuart moved away from the idea of intrinsically valuable specie money to the assets backed concept of money: Those [nations] who can circulate their lands, their houses, their manufactures, nay their personal service, even their hours, might produce an encouragement for industry far beyond what could be done by metals only … it appears that there is no impossibility for a people to throw the whole intrinsic value of their country into circulation. All may be cut into paper, as it were, or stamped upon copper, tin, or iron, and made to pass current as an adequate equivalent for the produce of industry. (1767, I: 366) This opened up wider vistas for the conceptualization of money. Steuart used the term ‘melting down money’ on a number of occasions but this was not a reference to the processes of silver and gold extraction. The metaphorical closeness of this term to the production process of specie was probably deliberate for Steuart wanted to show the plasticity of assets such as land, property, government debt and so on, that could be ‘melted down’ to constitute backing for bank money. Steuart fully understood that the crucial issue for bank money was appropriate backing: let the bank paper exceed the quantity of coin in the proportion of a thousand to one, yet still it is perfectly good and sufficient, providing the bank be possessed of an equivalent value in any species of good property. (1767, II: 246)

306 Murphy Here he was ultra critical of Du Tot, Melon and Savary who, according to him, believed that as long as the paper money issued equalled the estimated specie money in circulation there was no cause for alarm.

Had, indeed, the French nation perceived upon what bottom the security for the paper stood during the year 1719, perhaps the credit of the bank might have been rendered precarious; but neither saw it or sought after it: and the men of speculation were all of the opinion, that as long as there were no more paper issued by the bank than there was coin in the kingdom, there could be no harm done. Of this any person who has read Dutot, de Melon, Savarie and others, will be perfectly satisfied. And I desire no further proof of the total ignorance of the French in matters of this kind, than to find them agreeing that bank paper is always good providing there be coin in the nation to realize it, although that coin be not the property of the bank. On the contrary, it is very evident, from what has been said, that although there should be a thousand times more coin in a country than the bank paper, still that bank paper must be a mere delusion, and, in fact, of no value whatsoever, except so far as the bank is possessed of the value of it in one species of property or another. (1767, II: 245–6)

The above quotation shows that Steuart was quite dismissive of the French writers’ belief in the need to have the paper money in issue equal to the specie money in circulation. Du Tot and the others were criticized because: (i) there was no link between the two types of money; and (ii) their failure to understand the importance of asset backing for money. Significantly, Steuart did not not criticize Law on these issues. In moving away from specie money to an assets backed paper money Steuart showed himself to be very much in Law’s camp. However, his close identification with Law’s monetary vision was very much the exception in the eighteenth century and within nine years of the publication of An Inquiry into the Principles of Political Economy his ideas were very quickly pushed aside by the publication of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations. Sir James Steuart’s Lawian hiatus aside, Adam Smith continued in the economists’ tradition of expressing Law’s ideas in terms of an ambiguous duality. He referred to the Mississippi scheme as ‘the most extravagant project both of banking and stock-jobbing that, perhaps, the world ever saw’ (1976a: 317). Smith remarked that it was based on ‘The idea of multiplying paper to almost any extent’ (1976a: 317). To him Law’s ideas in Money and Trade were ‘splendid but visionary’, adding that they had ‘in part, contributed to that excess of banking which has been complained of both in Scotland and in other places’ (1976a: 317).

Canons of monetary orthodoxy and John Law 307 Splendid but visionary. Splendid is clear enough. Smith, normally so parsimonious in his praise, obviously felt that Law had produced some exceptional ideas in Money and Trade; ideas, such as the water and diamonds paradox which he borrowed without acknowledgement from Law. But what Smith giveth he taketh away. Splendid is qualified by visionary. Visionary had dangerous connotations. Law himself knew this when he wrote to the Regent protesting that he was not a visionary (‘je ne suis pas un visionnaire’). In Boyer’s Dictionnaire Royal, François-Anglois, et Anglois-François (1727) ‘visionnaire’ was defined as ‘a fanciful man or woman, a fanatick’. In Littré’s French dictionary (1877) ‘visionnaire’ implied someone with ideas that were ‘mad, extravagant and chimerical’. The term was used in English during the eighteenth century in the sense of someone ‘given to fanciful and unpractical views; speculative, dreamy’ (The Shorter Oxford English Dictionary 1970: 2363). While in the twentieth century visionary now carries positive connotations of prescience and charisma, this was not the case in the eighteenth century when it was associated with speculative or unstable ideas. Smith’s equivocation with respect to Law was symptomatic of his treatment of money. He differed from Hume in regarding money as ‘the great wheel of circulation’ (1976a: 291). Hume accorded it a less significant role, using the metaphor of the oil that lubricated the wheels of trade: ‘It is none of the wheels of trade: It is the oil which renders the motion of the wheels more smooth and easy’ (1752: 41). Smith was not a convinced metallist. He saw clear benefits arising from the substitution of paper money for specie: ‘The substitution of paper in the room of gold or silver money, replaces a very expensive instrument of commerce with one much less costly, and sometimes equally convenient. Circulation comes to be carried on by a new wheel, which it costs less both to erect and to maintain than the old one’ (1976a: 292). He showed how this substitution could increase the capital stock of the economy when the redundant specie was used to purchase capital goods from abroad.

When, therefore by the substitution of paper, the gold and silver necessary for circulation is reduced to, perhaps a fifth part of the former quantity, if the value of the other fourfifths be added to the funds which are destined for the maintenance of industry, it must make a very considerable addition to the quantity of that industry, and consequently to the value of the annual produce of land and labour. (1976a: 296–7)

Changing his metaphor, when equating the use of specie money to that of highways and paper money to what we now call airways, Smith showed the benefits of using paper money.

308 Murphy The judicious operations of banking, by providing, if I may be allowed so violent a metaphor, a sort of waggon-way through the air; enable the country to convert, as it were, a great part of its highways into good pastures and corn fields, and thereby to increase very considerably the annual produce of its land and labour. (1976a: 321)

But in moving into the airways Smith was not totally assured of the security of such a system. His equivocation with respect to paper money returned and he raised the spectre of a collapse of the paper money system. The commerce and industry of the country, however, it must be acknowledged, though they may be somewhat augmented, cannot be altogether so secure, when they are thus, as it were, suspended upon the Daedalian wings of paper money, as when they travel about upon the solid ground of gold and silver. Over and above the accidents to which they are exposed from the unskilfulness of the conductors of this paper money, they are liable to several others, from which no prudence or skill of those conductors can guard them. (1976a: 321)

Ultimately, while Smith was prepared to allow for a certain amount of paper money circulation he still saw specie as fundamental to the system. There had to be a relationship between paper money and specie:

The whole paper money of every kind which can easily circulate in any country never can exceed the value of gold and silver, of which it supplies the place, or which (the commerce being supposed the same) would circulate there, if there were no paper money. (1976a: 300)

The ‘Daedalian wings of paper money’ were soon to fly too close to the sun in France in the 1790s through the issue of the assignats. The French revolutionaries when issuing the assignats for the first time in 1790, a system almost replicating that advocated by Law in the Essay on a Land Bank (1704) and in Money and Trade (1705), had an opportunity to re-assess Law’s actions. Instead the opponents of the assignats raised the spectre of Law as a warning against them. One such opponent, the abbé Maury, castigating Law as ‘a charlatan’, melodramatically brandished in front of the Assembly some of the banknotes of Law’s System:

Canons of monetary orthodoxy and John Law 309 Alas I am holding in my trembling hands some of Law’s notes. … It is with pain that I look at these notes, instruments of so much crime. I can still see them covered with the tears and blood of our ancestors. (Archives Parliamentaires, vol. 19, 28 September 1790)

At the same time the proponents of the assignats dismissed any association between Law’s paper money and the assignats. Barnave, who favoured the assignats, dismissed the link between Law’s money and the assignats:

Concerning Law’s paper you know its background: based on the pretended profits of a chimerical bank it had no other solidity than that of the mad opinion of the moment. Increased without measure or calculation it had been raised to 5 billion without taking into consideration the shares of the bank … while Law’s paper was mortgaged on the Mississippi’s phantoms, our’s is not but based on the very real property of the former clergy which belongs to us. (AP, vol. 19, 27 September 1790: 305)

Law, denigrated by both sides, was the most frequently quoted economic writer during the heated revolutionary debates of the Assembly in 1790. The nineteenth-century French economic writers, with the legacy of two failed monetary experiments – those of Law and the assignats – firmly etched on their psyches, took a very strong line against paper money and financial innovation. Terms such as paper money and financial innovation were anathema to these writers. To them the monetary system had to be grounded on intrinsically valuable metallic money. The leading early nineteenth-century theorist, Jean Baptiste Say, was clearly a metallist at heart and strongly favoured the status quo: ‘The precious metals are so well adapted for the purposes of money, as to have gained a preference almost universal; and, as no other material has so many recommendations, no change in this particular is desirable’ (1827: 203). Say’s viewpoint was undoubtedly fashioned by the failure of the assignats. To him making paper money legal tender was an act ‘indeed, an exertion, not of legitimate, but of arbitrary authority, being a deterioration of the national money in the extreme degree’ (1827: 230). Unlike Galiani, Say was not prepared to condemn Law who ‘had just ideas respecting money’ and who had been ‘unjustly charged with the whole blame of the calamities resulting from the scheme that bears his name’. Say blamed the Regent for taking the management of the Royal Bank into his own hands and abolishing the convertibility of banknotes into specie. Though exonerating Law, Say still held that the breakdown in convertibility, the de-coupling of paper money from a monetary equivalent, was root cause for the failure of Law’s System.

310 Murphy Between 1826 and 1854 there was a flurry of French interest in Law with five important books published on him. These were by Thiers (1858), the brothers Emile and Isaac Pereire (1834), Jobez (1848), Cochut (1853) and Levasseur (1854). By far the most important of these was Emile Levasseur’s Recherches Historiques sur le Système de Law. Levasseur attempted to bring together a wide range of different historical sources to produce a proper analysis of Law’s System. Levasseur was gentle in his assessment of Law remarking that ‘if Law was too absolute in his ideas and too violent in his methods, he was at least motivated by the desire to do good, was resolute in his principles which he believed to be true and honest in his conduct’ (1854: 327). Levasseur maintained that Law had committed grave errors in believing that an expansion of the money supply increased wealth and that ‘all types of substance were suitable for money: it was because of this that he made money out of paper and circulated by means of shares or banknotes more than 10 billion’ (1854: 325). Law’s System was built on a ‘false principle’ which arose from his misunderstanding of the role of gold:

If Law had understood that trade is only based on the exchange of value against other values, and that gold itself only serves as money because it is a commodity, he would not have been tempted to substitute paper for metals a paper which had no price. (1854: 325)

So once again Law was condemned for not understanding that money had to be intrinsically valuable. Later nineteenth-century writers in France were more hostile to Law. Courcelle-Seneuil, writing in the influential Nouveau Dictionnaire d’Economie Politique, likened Law’s System to a dream in A Thousand and One Nights.

His theory of paper money ressembled a dream in A Thousand and One Nights and the System was nothing other than the application of this theory. After this great failure, which confirms so well the teachings of our science, the relative demonstration of the sterility of paper money and stock jobbing is complete. (Courcelle-Seneuil 1892: 128)

The metallist orthodoxy had a different evolution in post-Smithian Britain than in France. Actual monetary experiences, it is believed, were the root cause of this difference. In France, as has been shown, Law’s System and, later, the assignats produced a very strong reaction against paper money and reinforced the belief in metallic money. In Britain the collapse of the

Canons of monetary orthodoxy and John Law 311 South Sea Company did not bring in its wake the collapse of the Bank of England. Banking, for the most part, escaped the problems of the trading and ‘bubble’ companies. Banks in Great Britain, more particularly in Scotland, continued to innovate so that Smith, writing in 1776, could be very laudatory of the Scottish banking system. These developments modified the metallist stance by English writers. Smith’s work shows these modifications. Inflationary problems during the suspension of the convertibility of the Bank of England’s notes produced a deepening of the metallist stance by the hard line bullionist writers such as Ricardo. Had the Bank of England over-issued banknotes at a time when their convertibility into metallic money was prohibited? Could the rise in prices and the high price of bullion be explained by an over-issue of banknotes? The debate on these issues encapsulated under the term the bullionist controversy helped to provide one of the most brilliant nineteenth-century works on monetary economics, Henry Thornton’s An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1939 [1802]). Thornton was sufficiently interested in Law’s System to read and quote some of the arrêts on the System, most notably those of 5 March and 21 May 1720, when showing the way in which an excessive expansion of paper money could ‘render the exchange unfavourable’ (1939: 250–1). He studied the history of the System and linked its success in raising output to Hume’s analysis of how an increase in money affords ‘temporary encouragement’ to industry (1939: 238–9). But Thornton, while prepared to accept that an increase in paper money could temporarily boost economic activity, was not prepared to accept the long-term consequences of such an increase. He expressed his concern that the velocity of circulation of paper money would rise so rapidly as to create a vast gap between the new monetary demand and newly created output in the economy. Thornton believed that paper money had a very high velocity of circulation with each holder ridding himself of paper money as quickly as possible. Here Thornton exaggerated when supposing that an increase of £35 million in paper money, under the assumption of constant prices, had the potential to generate expenditure of £2 to £3 billion (1939: 240). He provided no proof, but nevertheless used this exaggeration to conclude that this type of monetary pressure would exert very undesirable consequences on the price level. In his Parliamentary speech on 7 May 1811, Thornton assured the House of Commons that it was quite improper to draw any parallels between directors of the beleagured Bank of England and John Law:

Undoubtedly the name of Mr. Law, and that of the present Directors of the Bank, ought not to be mentioned on the same day, if the general nature of the two establishments, or the comparative character of the persons presiding over them, were the only subject for consideration. (1939: 341)

312 Murphy While Law may have fascinated Thornton, this founding member of the Clapham Sect appears to have believed that the Scotsman was a morally dubious character. Henry Dunning MacLeod reached the apogee of anti-Law sentiment in British writings in The Theory of Credit when coining the term Lawism and warning the public against its consequences. MacLeod was a highly influential contributor to monetary writings in the second half of the nineteenth century, publishing a range of books on money, banking and credit. He was fascinated by paper money experiments, contributing the articles ‘Banking in France’ and the ‘Assignats’ to Palgrave’s Dictionary of Political Economy. He felt that Law’s policies had to be specifically branded as ‘Lawism’ and fulminated against. Despite this MacLeod also equivocated about Law, regarding him as a consummate financier. We must, however, be careful to be just to Law. From his having been associated with a very terrible catastrophe, his name has acquired a very evil odor. He is too often regarded as a mere charlatan and swindler, like the rogues who got up the South Sea Bubble scheme. Such ideas, however, are entirely erroneous. Law was the most consummate financier of his age. (1897, II: 883) Having described Law’s System in France, he reiterated his viewpoint that Law was an exceptional figure: few persons have any idea of him other than as a lunatic schemer and rogue, who brought about in France as great a catastrophe as the South Sea Bubble. This, however, is quite erroneous and unjust. Law’s writings on banking and credit are perfectly sound, and he showed a far greater knowledge of the subject than most modern economists do: and so long as he confined his operations to pure banking he was magnificently successful. (1897, II: 885) So how could ‘the most consummate financier of his age’, and a writer with more knowledge on banking and credit than even most nineteenth-century economists, go wrong? There was, according to MacLeod, a flaw in Law’s approach in that he wanted to issue paper money excessively thereby breaking its link with specie. He defined Lawism in the following way: The essence of Lawism, as we designate the scheme, is to base paper money upon some other article of value than money: not redeemable in specie: but which shall at the same time maintain an equality in value with specie: and with paper credit redeemable in specie (1897, II: 886)

Canons of monetary orthodoxy and John Law 313 Law was not the ‘original deviser’ or the sole practitioner of Lawism. MacLeod maintained that three varieties of Lawism had been attempted through: (i) the issuing of paper money upon the security of land; (ii) the issuing of paper money based upon the discount of mercantile bills; and (iii) the issuing of paper currency on public securities or public debts. He cited as examples of failures in the first category of Lawism, Law’s banking scheme in France, the Ayr Bank collapse in Scotland during June 1772, the Assignats experiment in France, and problems with the Bank of Norway in the 1820s. As an example of the failure of the second category MacLeod cited the consequences of over-issue of bills during the Restriction Act in Great Britain and quoted enthusiastically from the Bullion Committee Report of 1810 on the dangers of over-issuing private bills. He maintained that the Bank of England was the first exponent of the third form of Lawism, that of issuing paper currency based on government securities. He reminded his readers: When therefore some persons may be inclined to sneer at Law, and anathematise all his works, let them remember that the Bank of England was founded on one form of Lawism, before Law had ever been heard of, and still continues to be so. (1897, II: 907) MacLeod was a deep conservative in monetary matters. He argued against governments and states issuing paper money because ‘they can never resist the temptation to issue it in boundless quantities, so that it soon begins to depreciate: they have no power to redeem it: and the depreciation is incurable’ (1897, II: 1105). He was hostile to the Bank of England because of its monopoly powers and felt the ideal banking system was the Scottish one where an effective branch network system collected surplus funds from agricultural areas to lend to manufacturers in the urban areas. But MacLeod, while prepared to see the benefits of Scottish branch banking and the overdraft system that it had created, was nonetheless a metallist, more specifically a monometallist at heart. To his way of thinking there had to be a relationship between money and gold. He was not prepared to cut money off from gold. Law eschewed such an approach so MacLeod, even though he had a certain admiration for Law, had to attack him. A more balanced note was struck by J. Shield Nicholson in 1888 when he wrote: Having regard to the circumstances of the time, to the rudimentary condition of monetary science, and to the want of national experience in credit transactions, he displayed both wonderful originality and wonderful soundness. … But in spite of this catastrophe [the collapse of the Mississippi System] John Law may have been an excellent financier, just as Napoleon was a great soldier in spite of Waterloo. (1903: 168)

314 Murphy Two of Cambridge’s great economists had little time for Law. Alfred Marshall, having similar difficulties to David Hume and Adam Smith in assessing Law, ultimately summarized him as ‘that reckless, and unbalanced but most fascinating genius’ (1923: 41), while John Maynard Keynes, though briefly referring to Law in A Treatise on Money (1930, I: 15), studiously avoided any mention of him when looking for antecedents of his approach in The General Theory of Employment, Interest and Money. This omission is surprising given that Law’s System had many parallels to that of Keynes. It may be surmized that Keynes avoided listing Law as one of his precursors because Law’s System had failed and Keynes did not wish to have failures linked to his proposed policies. Notwithstanding Keynes’s omission, Law’s name was still in vogue during the 1930s. This was in large part due to the work of Paul Harsin in compiling a three volume collection of Law’s writings which were published in 1934. Though it has been shown that two of the longest papers in this collection were not written by Law, Harsin’s work, nevertheless, gave academics the opportunity to analyse a far wider range of writings than those published by de Sénovert (1790). Furthermore Harsin in his commentaries on Law showed that he was sympathetic to the Scotsman and suspicious as to how previous economists had formed their judgement of him:

His ultimate failure brought him the curse of his contemporaries and the condemnation, often mistaken, of generations of economists. For many of the latter it is believed that ignorance or bad faith were instrumental in forming such a judgement. Nevertheless the most serious studies devoted to him nearly always acknowledged a thought of genius presiding over grandiose conceptions, a tactical verve and a very rare director’s skill linked, unfortunately, to excessive executive haste and a relative indifference as to the methods to employ. (Harsin 1928: 188–9)

Harsin’s assessment did not prevent other contemporary economists from attacking Law. The times were propitious in that the 1930s produced what would prove to be the final debate on the merits of the gold standard. Writing in 1938, Charles Rist embedded Law in the title of his book Histoire des doctrines relatives au crédit et à la monnaie depuis John Law jusqu’à nos jours. Rist did not select Law because of any high regard for him. Rather it was the opposite. Law, a ‘financial magician’ was the original ‘utopian monetarist’ who had dangerous ideas on the nature of money. Rist firmly believed in the merits of the gold standard remarking that: ‘None of the monetary systems, known up to now … has got by without precious metals, this ultima ratio, of trade’ (Rist 1938: 45). He believed that Law was at the fountain-head of the anti-metallists:

Canons of monetary orthodoxy and John Law 315 All the arguments that the open or covert advocates of obligatory paper money have produced since, all the sophistry that they have used to dissuade a public, branded by them as retrograde or fetishistic, from demanding a desirable metal rather than a simple circulating credit, are to be found in Law’s writings … (Rist 1938: 35)

War financing, exchange control regulations, the establishment of the International Monetary Fund and the rise of Keynesianism provided further nails in the gold standard’s coffin. Ironically, it was the continued French fascination in gold as epitomized by General de Gaulle’s insistence in converting France’s surplus dollars into gold that finally forced the United States to abandon the last vestiges of the gold standard in 1971. With gold removed from the world’s monetary system, was Law to be vindicated? In 1977 Edgar Faure attempted to present a more balanced account of the System in La Banqueroute de Law. However, while Faure understood Law’s anti-metallist stance, he confused another modernist aspect of Law’s policies, that of his debt management policy. Faure divided the System into two phases. The first phase, according to Faure, produced the wise plan (‘le plan sage’), while the second phase, representing all that happened from September 1719 onwards, has been deemed the mad plan (‘le plan fou’). This categorization suggests that Faure had an insufficient appreciation of Law’s writings. In these writings it is quite clear that Law believed that debt management, which Faure links with the mad plan, was as necessary as monetary policy in France in 1719. Amongst the famous economist commentators on Law, Joseph Schumpeter is almost unique in that he is unstinting in his praise of Law. For Schumpeter there is no equivocation about Law:

John Law (1671–1729) I have always felt is in a class by himself … He worked out the economics of his projects with a brilliance and, yes, profundity, which places him in the front ranks of monetary theorists of all time. (1954: 295)

This is a remarkable assessment from Schumpeter, who was not noted for extolling many of the pre-Walrasian economists. Unfortunately, Schumpeter – like Law a minister of finance for a short six-month period – died before completing this section of A History of Economic Analysis. He left no explanation as to why he considered Law in ‘the front ranks of monetary theorists of all time’. Schumpeter’s assessment serves to act as a sharp contrast to the judgements of Turgot, Hume, Smith, Marx and Marshall.

316 Murphy CONCLUSION This chapter has concentrated on showing how economists attacked John Law because of his rejection of the canon of monetary orthodoxy that money had to be intrinsically valuable. Law had explicitly stated that money is the value by which goods are exchanged and not for which goods are exchanged. His rejection of metallism marginalized him from mainstream economic orthodoxy. His failure as a policymaker deepened the marginalization. Law was only useful as a caricature, a charlatan-cum-magician, the type of man whose sleight of hand young apprentice economists should be warned against. He was not a theorist to be studied and it is striking how few of the great economist commentators appear to have studied his work in depth. In 1971 with the disappearance of the last vestige of the gold standard one might have sensed that it was time to rehabilitate Law the theorist at least. Metallism as a canon of monetary orthodoxy had been finally spiked. Its spiking raises other issues, issues which Law had also been prepared to discuss. Problems arise with respect to the definition of money, the direction of causation between money and income and the role of the state and the Central Bank in the monetary process. Once metallic money is replaced by paper money and credit the question arises as to what is money. Faced with a wide range of financial instruments, where does one draw the demarcation line between money and other financial assets? Central Banks have found this an increasingly difficult problem as financial innovation produces an ever-expanding array of financial assets. Definitions range from base money, to narrow money, to broad money and to general liquidity classifications. Law realized the difficulty and was prepared to include certain types of shares – those of the Bank of England and the trading companies – in his wider definition of the money supply. He was prepared to accept that if a financial asset has a readily identifiable monetary value at a point of time through a stock market quotation and a transactor is prepared to accept it in payment of a debt then such an asset may be included in the broad money supply. Law’s equating of shares with money was ultimately to prove his undoing when he monetized the shares of the Mississippi Company at 9,000 livres each, thereby over-expanding the financial sector relative to the real sector of the economy. This chapter has challenged the absolutist approach to the interpretation of John Law. It has shown the way in which John Law challenged the former canon of economic orthodoxy that money had to be intrinsically valuable. However, for nigh on three centuries this viewpoint was rejected by most economists and Law relegated to anecdotal footnotes on the folly of using paper money. Ultimately, Law’s vision proved to be the more relevant. It could of course be argued that the advocates of metallism were correct in the context of their time. The monetary system was not ready for the seismic shift that the adoption of a paper

Canons of monetary orthodoxy and John Law 317 money would involve. It was better to stay with a system which worked rather than replace it with one which could be subjected to the whims of monarchical or governmental excesses. This is of course the relativist argument that theories and policies should be examined in the context of the time that they were applied ‘sub specie temporis’ rather than by judging their universal validity through time. Alternatively, in analysing the current monetary structure we may be termed relativists in that we are suggesting that the modern environment is particularly appropriate for a nonmetallic monetary system. The monetary structure has groped its way out of metallism towards a fiduciary credit system. For most this has been a technological progress from error (money needs to be fully backed by metallic reserves) or partial error (money needs to be partially backed by metallic reserves), towards truth (money requires no metallic backing). The complexities of the modern economy cannot be underpinned by a metallic monetary base. Relativism and absolutism coincide, at least for the moment. However, using this prism of monetary progress to analyse the underpinnings of past monetary theories the extent to which the absolutism of writers such as Hume, Turgot, Smith and Ricardo was based on untenable foundations becomes increasingly evident.

NOTE 1 For an analysis of the Law’s Mississippi System see Faure (1977) and Murphy (1986, 1997).

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Index

absolutism xvi, 21, 294, 316, 317 abstraction/abstract principles xiv, xvi, xvii, 13 accumulation 265–6 Adams, W.F. 234 Adamson, R. 154–7, 158, 165 agriculture 104 Allen, W.R. 34 Alonso Ortiz, J. 118, 122, 124–35 Alter, G. 241, 246 American colonies, Burke on 256 ‘analytic’ history 57, 65 Anderson, G.M. 33 archeological approach 64 archival material xv–xvi, 201–26 aristocracy 263, 264 Aristotle 275, 291n Arrow-Debreu theory 147 Ashley, W. 100, 142 Atiyah, P.S. 171 Backhouse, R. 54n Bagehot, W. 73–88, 79, 81, 82–3, 85, 89, 97, 143 Bailey, S. 143 Bain, A. 150, 153 Bank of England 296, 310 banks 129, see also savings bank movement Banquieri, J. 126 Barber, W.J. 33, 51 Barker, J. 240 Barnes, D.G. 266 barter 158, 276 Baumol, W.J. 97 Bentham, J. 110, 148–9, 150, 152, 153, 273, 284 Berlozheimer, F. 274 Bewes, W.A. 285, 286

big books approach 60 biographical work 48–51 biological analogy 277–8, 291–2n biology, evolutionary 150–1, 152, 153 Bisset, R. 253 Black, D. 7 Black, R.D.C. xiii–xiv, xvi–xvii, 3–27, 39, 47, 98, 149; on economic relativity xiv, xvi, xvii, 15–16, 19–20, 21; on economic theory–policy relationship 13– 14, 18, 42; on editing 49; on facts 13, 23; and historical perspective 15–16, 22–3; on Jevons xiii, 50, 141, 144, 145, 146, 148, 150, 156; on poor relief 267, 270; on Adam Smith 34, 83, 88, 96, 97, 99– 100, 116; Economic Fashions 21; Economic Thought and the Irish Question xiii, xvi, 12, 18–19, 227, 239, 267, 270 Blair, H. 98 Blaug, M. 38, 53, 99, 112, 113, 294 Blavet, Citizen 118 Bîhm-Bawerk, E. 142 Bolingbroke, Lord 254 Bonar, J. 87 Boole, G. 147 Bowley, M. 5–6, 23 Bowman, R. 23 Boylan, T. xv–xvi, 201–26 Bradley, F.H. 151 British Association for the Advancement of Science 143 Buchanan, N. 10, 32 Buckle, H. 75 Burke, E. xvi, 251–71, 273, 280, 284; on accumulation 265–6; on American colonies 256; on aristocracy 263, 264; on change 255, 261–2; on the circuit of commerce 264–5; on duty 268–9;on economical reform 260–1; on free trade

Index 256–7; and India 257–9; on Ireland 256– 7; on liberty 252, 255, 256, 261; on the poor 254, 267, 268; on property 264–5; Reflections on the Revolution in France 261–6; Thoughts and Details on Scarcity 266–70; A Vindication of Natural Society 252, 254; Observations on a Late State of the Nation 254–5 Burns, A. 38 business cycles 16, 37, 61 Butt, I. 219 Cairnes, J.E. xv–xvi, 12, 50, 76, 81, 84, 141, 143, 170, 172, 201–26 Cameron, A. 120–1 Campomanes, P.R de 119, 135 Canavan, F. 259 Cannan, E. 38, 64, 87, 97–8 Cantillon, R. 165, 298–9 capital 108; circulating 108–9; fixed 108, 181; human 108; Jevonian definition of 146, 181 Carpenter, W.B. 151 Carrigan, A. 229 Cazenove, J. 182 censorship xv, 118–38 Chamberlin, E.H. 37 Chapman, J. 220 charity 268, 269, 270 choice, freedom of 113 chronological approach 60 classical economics 11, 12, 275, 277–8 Coase, R.H. 49, 277 Coats, A.W. xiv, 18–27, 32, 33, 39 Cochut, P.A. 309 Cole, A. 9, 297 Collard, D. 52 Collini, S. 84 committees, theory of 7 Commons, J. 32 comparative approach xiv, 20 competition: imperfect 37; monopolistic 37 competitive equilibrium 162, 164 Comte, A. 84 Condorcet, Marquis de 122–4, 135 consumption 97, 109 content of economic theory xiv co-operation 179, 192–3 Corry, B. xiv, 55–69 Cossa, L. 31, 170 Cotterrell, R. 284 Courcelle-Seneuil, J.G. 310

343

Courtney, L. 219 Cunningham, W. 100 Darwin, C. 144, 150–1, 152 Davis, L.E. 228, 229 De Castro, C. 119 deductive economics 77, 78, 84, 85 de Laveleye, E. 78–9 De Marchi, N. 33, 148 De Morgan, A. 141, 147 Deschamps, F. 299 Dickens, C. 237 Dillon, G. 228 disaster relief, emigration as form of 235 distribution, theory of xv, 146, 178, 181– 93, 195–6 Dobb, M. 142, 148 Dorfman, J. 8 Douglas, P. 98 Draco 289 Duncan, G. 4, 5, 16 Duncan, H. 227 Dupont de Nemours, P.-S. 115 Dupuit, J. 154 Du Tot 299–301, 303, 304, 305, 306 duty 268–9 East India Company 253, 257–9 Eatwell, J. 41 economic agency 148, 149, 153 economic analysis, history of (HEA) 20 economic history 33, 48 economics, relationship to history of economic thought 56–9 Edgeworth, F.Y. 31, 34–5, 142–3, 150, 171 editorial work 13, 49–50 education 134 Eichorn 275, 280 Einaudi, L. 31 Elizalde, M. de 121 Eltis, W. 37, 41 Emigrant Industrial Savings Bank (EISB) xvi, 227, 228–32, 233, 234, 239, 241–6, 247 emigration, Irish famine xvi, 231–41, 247 empiricism, realistic 275 equilibrium 111–12; competitive 162, 164; general equilibrium theory 144, 146–7 equimarginal principle 273 ethics, Smithian 100–2, 116 Etzioni, A. 111 evolutionary theory 150–1, 152, 153

344

Index

exchange: equations of 162; monetary 276–7; ratio of 182 exchange economy 107–10 factors of production 108 facts 13, 23 Fajardo, D.S. 130 famine, Ireland xvi, 14, 231–41, 247 fashion 21 Faure, E. 315 Fawcett, H. 84, 143, 176, 219, 221 Fechner, T. 150 Ferrie, J. 235, 237, 239 Fetter, F. 8 feudalism 104, 283–4, 290 financial innovation, and the monetary system 296, 299, 309 Fisher, I. 143 Foley, T. xv–xvi, 201–26 Forbonais, F.V. de 302, 303 forerunners 61–2, 64–5 Foster, G. 237 Foster, J. 9 Foxwell, H.S. 86–7, 143, 156, 165 free trade 113, 132–5, 252, 256–7 Freeman, E.A. 203 French Revolution, Burke on 253, 261–6 Friedman, M. 11, 303 Galiani, F. 298, 301–2 Galileo 146 Gardoqui, D.M. de 125 Geddes, J. 119–20 general equilibrium, theory of 144, 146–7 Georgescu-Roegen, N. 160 Gerber (legal scholar) 280 Ginzberg, E. 116 Glossitors 284 Godoy, Prince 118, 122, 135 gold standard 296, 314–15 Goldsmith, O. 217, 251 Gordon, B. 40 Gordon, D.G. 32–3, 35, 42 Gossen, H.H. xv, 154–68 government 16, 113–15; intervention 252, 269, 270; and issue of money 277 Grampp, W.D. 35 Great Britain, savings bank movement 227, 228, 247 The Great Mirror of Folly 297 Grenville, G. 256

Grese, O. 100 Griggs, H. 240 Grimm, J. 280 Groneman Pernicone, C. 237–8 Het Groote Tafereel der Dwaasheid 297 Grote, G. 218 growth, theory of 37, 97, 110 Haakonssen, K. 103–4 Haberler, G. 16 Hale-Bellot, H. 172 Hall, R.L. 37 Hamilton, E. 8, 11 Hamilton, W. 253 Hancock, W.N. 219 Haney, L. 275 Harrison, F. 100 Harsin, P. 314 Hartley, D. 150 Hastings, W. 253, 259, 269 Hayek, F.A. 11–12, 32, 38, 47, 271 Hayes 37 Heckscher, E.F. 37 Hegel, G.W.F. 270, 274 Heilbroner, R. 23–4 Helmholtz, H. von 150 Henry, P.S. 204 Heron, D.C. 224n Herschel, J. 147 Hicks, J. 32, 36, 45 Hickson, C. xvi, 272–93 Hill, F. 220 historical approach xiv, 57, 63 historical perspective 15–16, 22–3, 65–6 historical reconstruction 63 historiography 18–19, 21 history, economic 33, 48 history of economic thought, as intellectual discipline xiv, 31–69 Hitch, C.J. 37 Hodgskin, T. 151 Hollander, S. 6, 20, 33, 40, 41, 49, 144 Hooper, W. 165 Horner, F. 97 Houston, A. 219 Howey, R.S. 32, 42 Hughes, J. 228, 229 Hume, D. 105, 106, 108, 130, 150, 298, 303 Humphrey, T. 38 Hunt, B. 145 Hutchison, T.W. 18, 35, 38, 39, 43, 47, 112, 115, 116, 142, 276

Index imperfect competition 37 income: distribution of 97, see also profits; rent; wages India 257–9, 269 individualism, methodological 272, 276, 290 inductive economics 79–80, 85, 86 inflation 37, 38, 311 Ingoldsby, F. 229 Ingram, J.K. xv, 82, 100, 201, 219, 220, 221 Inquisition, and The Wealth of Nations 121– 2, 135 institutions: Burke on preservation of 262– 3; economic theory and xiv; organic theory of xvi, 272–93 intellectual history 20 international trade theory 37 investment 97 Ireland 14, 256–7; Brehon law 288–9; famine emigration xvi, 231–41,247; land tenure reform 81, 82; savings banks 228, 247 Irish Emigrant Society 229 Irujo, C.F.M. de 118, 122–4 Jaffé, W. 13, 32, 39–40, 44, 49, 51, 112, 142 Jefferson, T. 261 Jevons, W.S. xiii, xv, 12–13, 20, 31, 50, 82, 84, 85, 141–53, 154–68, 169; definition of capital 146, 181; and economic agency 148; and mathematical nature of economic theory 147–8; and theory of value 146–7, 178, 182, 186, 187, 273; and theory of wages 172–3, 174, 176, 178 Jhering, R. von 273, 280–1, 286 Jobez, A. 309 Johnson, H. 32, 37 Jones, H. 155 Joplin, T. 52 jurisprudence xvi, 102–7, 116, 272, 278–90 Justinian code 281, 284, 292n Kahane, J. 46 Kane, Sir R. 204 Kant, I. 151 Kelly, F. 289 Keynes, J.M. 7, 14, 32, 37, 49, 53, 143, 295, 313–14 Keynes, J.N. 85

345

Keynesianism 37 Klamer, A. 32, 46 Knapp, G.F. 295 Kniffen, W.H. 228, 229 Knight, F. 11, 12, 16, 32, 42, 44 Know Nothing Party 240 Knox, W. 254–5 Koot, G.M. 202, 204 Kramnick, I. 251 Krugman, P. 257 Kuhn, T.S. 21, 23, 47 Kunkel, W. 282, 284, 288 labour 108; efficiency of 187, 188, 189, 192; marginal product of 175 laisser-faire 89, 113–14, 179 Lakatos, I. 21 Lamarck, J.-B. 151 land: as factor of production 108; property in 104; tenure 81, 82, see also property rights Landreth, H. 273 Lasarte, J. 121, 125, 126 Lauderdale, J.M. 97 Laveleye, E. de 221 law: codified 279, 281, 284–5; customary 278–9, 280, 285, 286–9, 290; English common 279, 282, 284; in feudal society 283–4, 290; German 279–81, 281–2, 286–7; Greek 289; Irish Brehon 288–9; judge-made 279, 280, 284, 285; merchant 278, 285–6, 290; natural 80, 81, 89, 275, 279; objective 279, 281–5; organic 278, 279, 281–9; Roman 280, 281, 282, 284, 285, 287–8; statute 281–2, 284, see also jurisprudence Law, John xvi, 294–317 legal profession 171 Leslie, T.E. Cliffe xv–xvi, 77, 79, 80–2, 84, 85, 86, 89, 100, 169, 171, 201–26 Levasseur, E. 309–10 liberty 87, 252, 255, 256, 261 Lindsay, D.N. 201 linguistics skills 45–6 Little, I.M.D. 43–4, 46–7 Llombart, V. 119 Lluch, E. 124 Lock, F.P. 254, 259 logic, formal 147 Longe, F.D. 171, 173, 180 Longfield, M. xiii, 5, 6, 23, 143, 171, 219, M.4 Loveday, A. 16

346

Index

Lowe, R. 78, 79, 81, 82, 113 Lyell, C. 151 Lyne, G.J. 236, 237, 240 McCormack, D.M. 103 McCulloch, J.R. 31, 97, 143 McDowell, R.B. 254 Macfie, A.L. 116 Machiavelli, N. 263 Mackay, C. 297–8 Macleod, H.D. 311–13 macroeconomics 37, 97, 110–13 Madsen’s law 145 Mahoney, T.H.D. 257 Maine, Sir H. 77, 80, 89, 220, 286, 287, 288 mainstream economics xiv, 41–3, 58 Malthus, T. 42, 76, 91n, 97, 143, 176, 183 Mandeville, B. 254, 262, 263–4 Manning, J.H. 229 Marcet, J. 144 marginal product of labour 175 marginal productivity theory of wages 170, 177, 189 Marginal Revolution 5–6, 50, 141, 146 Mariana, J. de 130 market, Jevonian definition of 145 Marshall, A. 31, 36, 41, 49, 50, 85, 86, 141, 142, 143, 149, 150, 313 Martineau, H. 144 Martínez de Irujo, C.F. 118, 122–4, 135 Marugán, F.F. 125 Marx, K. 15, 47, 143, 271 mathematics, and economic theory 147–8, 149, 273 Maury, Abbé 308 Meek, R.L. 40, 112 Melon, J.-F. 300, 303, 305 Meltzer, A. 53 Menger, C. xvi, 142, 272–93 metallism 295–6, 298, 301, 309, 310–11, 315, 316–17 Methodenstreit 77, 81–2, 86 methodological individualism 272, 276, 290 methodology, teaching via a 62–3 metrology 149 microeconomics 36–7, 47, 141 Milford, K. 275 Mill, J.S. xvi, 32, 43, 51, 76, 82, 83–5, 97, 141, 143, 144, 147; and Bentham 148–9, 152; and Cairnes–Leslie controversy 201, 204, 217–19, 221–2, 223; as theorist 42; and value theory 178

Mill, James 50, 83, 84, 97 Millar, J. 103 Mills, R. Horner 204 Mineka, F.E. 201 Mirowski, P. 150 Mises, L. 46 Mississippi System 297, 298, 299, 300, 301, 302, 303, 306, 309–10, 311 Mitchell, W. 32, 47 Moggridge, D. 13 monetarism 303 monetary exchange 276–7 monetary policy 294–317 money 97, 128–9, 276–7; assets backed 305, 306; intrinsic value of 295–6, 304, 315; means of payment 304; medium of exchange 304–5; metallic versus paper 296–317 monopolistic competition 37 Montesquieu 81, 103, 297 Mooney, T. 235–6 Moore, H.L. 32 moral judgement 100–2 morality 263 Morley, J. 218 Mun, T. 295 Murphy, A.E. xiii–xvii, 294–317 Murphy, M. 229 Myint, H. 98 natural law 80, 81, 89, 279 natural liberty 87, 252, 255, 256, 261 nature 151–2 Neal, F. 235 Nesbitt, W. xv, 201, 204, 205, 206, 209– 11, 213, 214–15, 216, 217 net advantages, doctrine of 112 New York, Irish famine immigrants 231– 41, 247 Newman, J.H. 50 Newmarch, W. 113 Nicholson, J.S. 87, 313 Nominalists 291n Norman, F.H. 78 O Gráda, C. xvi, 227–48 O’Brien, C.C. 256, 258 O’Brien, D.P. xiv, 31–54, 86, 98, 113 Ohlin, B.G. 37 Olavide, P. de 120 Olmstead, A.L. 228 opinion, history of 39

Index opportunistic behaviour 277–8 organic theory of institutions xvi, 272–93 O’Rourke, J. 247 orthodox economics xvi, 58 O’Shea, J. 227, 228, 247 Palgrave, R.I. 77, 78 Pandectists 284 Pantaleoni 31 paradigms, theories of 65 Pâris-Duverney, J. 298, 299, 301, 303 Patinkin, D. 53 Payne, P.L. 228, 229 Peart, S. 145, 148, 149 Pereire, E. and I. 309 period analysis, Smithian 97, 108 Perlman, M. 31, 40 perspective, historical 15–16, 22–3, 65–6 Philadephia Saving Fund Society 227, 241, 244, 245, 246 Phillipson, N. 106–7 philosophy 46–7; of science 47–8 physiocratic model 109 Piel, J. 112 pleasure and pain, theory of 156, 157–8, 159–60, 161 Pocock, J. 107 policy: government 16, 113–15, 252; interaction with theory 13–14, 18, 42 political economy 177–81, 193–6 poor and poor relief 119, 254, 267, 268, 270 population theory, Malthusian 176 Porter, W.H. 227 positivism 63, 159 Pownall, Governor 98 Pratt, J.T. 227, 228, 229 precursors 39 Prendergast, R. xiii–xvii, 251–71 Price, L.L. 86 prices 111, 182, see also inflation profits 176–7, 189–91, 196 property rights 33, 278, 280, 282–4, 286, 287, 290 proprietors 104, 105, 108 psychology 150, 153 purchasing power 182 Queen’s University, Belfast xiii, 9, 10 Quesnay, F. 299 Rae, J. 87, 88

347

Rashid, S. 96, 98, 115 rational reconstruction xiv, 52, 62 Reitan, E.A. 260 relativism/relativity xiv, xvi, xvii, 15–16, 19–20, 21, 42–3, 294, 316–17 religion 130–1, 254, 263 rent, theory of 176, 177, 191, 196 rent-seeking 37, 278 research 55–6, 63–7 Research Assessment 33–4 Reynolds, S. 283, 284 Ricardo, D. 6, 23, 32, 50, 75, 81–3 passim, 84, 97, 143, 144, 176, 180, 183, 188, 195 Richards, R. 151, 152 Richardson, G.B. 36 Rima, I.H. 32, 35 Rist, C. 298, 314 Robbins, L. 31, 35, 38, 44, 45, 96, 113 Robertson, D.H. 6–8, 45 Robertson, G.C. 219 Robinson, J. 37 Rockingham, Charles Wentworth, Marquess of 253, 259 Rogers, J.E. Thorold 79, 82 Romanticism 270 Roscher, W.G.F. 274, 275 Rothbard, M. 96, 97, 115 Royal Society 143 St Simon 84 Samuels, W.J. 33, 36 Samuelson, P. 32 Savary, C.E.M. 303, 305 Savigny, F.K. von 273, 277, 280, 286 savings 97, 109 savings bank movement 227–32, 241–6, 247 Say, J.B. 31, 97, 115, 143, 295, 309 Schabas, M. xv, 141–53 Schmidt, R. 147 scholarship xiv, 31–2, 64 ‘schools’ approach to teaching 62 Schumpeter, J.A. 31, 41, 43–4, 46–7, 52, 99, 112, 143, 263, 271, 295–6, 315 Schwartz, P. xv, 118–38 science, philosophy of 47–8 self-interest 36, 102 Senior, N. 143, 149–50, 171, 173, 214 Shadwell, J.E.L. xv, 169–97 Sidgwick, E. 147 Sidgwick, H. 85 Sismondi, J.C.L.S. de 97

348

Index

Skinner, A.S. xv, 83, 96–116 Smith, A. xiv–xv, 9, 34, 36, 41, 73–90 passim, 176, 182, 190, 263, 264, 277, 295, 303; on Edmund Burke 253; on ethics 100–2, 116; and free trade 113, 132–5, 257; on jurisprudence 102–7, 116; on monetary policy 306–8, 310; theory of natural value 180; concern with system 98–100; Theory of Moral Sentiments 74, 75, 88, 100–2, 106; Wealth of Nations xv, 73, 74, 75, 79, 80, 96–116, 118–38, 257, 306–8 Smith, M. 281, 286, 287 Smyth, G.L. 247 Smyth, R.L. 142 Sobel, I. 43, 47 ‘sociology’ of economics 66–7 Solon 289 Sorley, W.R. 155 South Sea Company 310 Spain, Wealth of Nations in xv, 118–38 Spencer, H. 150, 151–2, 153 Spengler, J.J. 33, 37, 47, 52 Spinoza, B. de 263 status 106 Steedman, I. xv, 146, 148, 169–97 Stephen, L. 88 Steuart, Sir J. 108, 303–6 Stewart, D. 74, 80, 97, 99, 110 Stigler, G. 8, 11, 32, 34, 35, 36–7, 38, 40, 44, 47, 48, 52, 113, 148; on biography 43, 50–1; on theory 42 Stone, R. 20 Stuart, J. 229 supply and demand, theory of 173, 180 ‘sympathy’, Smithian 100–1 Tarascio, V. 46 Taylor, O.H. 34, 41, 46, 47 teaching 55–6, 59–63, 67 technique 46 Teichgraeber, R. 96 Terrasson, AbbÇ 301 textual reading 40 theory 41–3; interaction with policy 13– 14, 18, 42 Thibaut, J. 280 Thiers, A. 309 Thom’s Irish Almanac and Official Directory 228, 247 Thornton, H. 311 Thornton, W.T. 51, 84, 173, 174, 180, 217 Thweatt, W.O. 50

time; and utility maximization 159–60; see also chronological approach Tocqueville, A. de 84 Tollison, R.D. 33 Tooke, T. 143 toolmaking xv, 20 Torrens, R. 143 Toynbee, A. 100 trades unions 192–3, 195–6 training, economics 45–6 Transfiguration Church, New York 234, 239 Trench, W.S. 240 Trinity College, Dublin xiii, xvi, 4–6 Tucker, F.C. 228 Turgot, A.-R.-J. 112, 298, 301 usury 131 Utilitarianism 148–50, 151–2 utility 35, 36, 111, 157–8, 263, 273–4 utility maximization xv, 159–62, 163–4, 272, 274 utility theory of value 146, 147, 153, 186 utopian socialism 151 value 181–7, 194–5; exchange 180, 186; labour theory of 175, 182–5, 194, 195; marginal theory of xv, 170, 175, 184, 195, 196–7; market 185, 187, 190, 194; Menger’s contribution to theory of 273– 4; natural 180, 194; utility theory of 146, 147, 153, 186 Viner, J. 8, 10–11, 14, 26n, 32, 35, 38, 41, 43, 45, 46, 89, 113–14 virtue 100, 101 Von Stein, G. 274, 275 wage-fund theory 85, 189 wages, theory of 169, 170, 172–7, 187–9, 192–3, 194, 195, 196; marginal productivity of labour theory 170, 177, 189 Walker, D. 44, 49, 51 Walker, E.R. 9 Walras, L. xv, 13, 41, 49, 82, 142, 143, 154, 156, 162–4, 166, 273 Waterman, A.M.C. 20 Watson, A. 282 wealth, pursuit of 106, 181 Westergaard, H. 145 Whately Chair 3, 4 Whately, R. 144

Index Whewell, W. 143, 147, 149, 151 Whitaker, J. xv, 49–50, 52, 86, 154–68 White, L. 276 White, M. 144–5, 148 Wicksell, K. 32, 38 Wicksteed, P.H. 143 Wieser, F. von 142 Williams, B. 9 Williamson, O. 277 Wilson, T. 83 Winch, D. xiv, 20, 32, 35, 45, 73–95, 97, 115, 263, 264, 265 Young, J. 111

349