History of Economic Analysis part 7 pptx

mix techniques in a manner that differs considerably from what their chosen specialties
might be thought to require—a fact that we must keep in mind if we are to understand
why economics is what it is. In principle, however, it is impossible to divorce any of the
applied fields from the fundamental ones.
But, third, such divorce is also impossible because the applied fields not only apply a
stock of facts and techniques that lies ready for their use in general economics but also
add to it. These fields may accumulate ‘private’ stocks of facts and methods that are of
little or no use outside their boundaries. Beyond this, however, they have repeatedly
developed accumulations of facts and conceptual schemata that should be recorded as
contributions to general economic analysis, even though the appointed wardens of the
latter have sometimes been slow to welcome them. Modern agricultural economics
affords some examples, the fields of transportation and public finance afford others. It
follows that we cannot confine ourselves to the history of ‘general’ economic analysis but
shall have to keep an eye on developments in applied fields as best we can.
History of economic analysis 22
CHAPTER 3
Interlude II: [Contemporaneous
Developments in Other Sciences]
FROM TIME TO TIME, we shall look up from our work in order to view a piece of
intellectual scenery. Slightly less perfunctorily, we shall, for every one of our periods,
register some contemporaneous developments in other sciences (in our sense of the term)
that were relevant or might, for one reason or another, be expected to have been relevant
to the development of our own. What has to be said now about this aspect of our
exposition is so preponderantly concerned with ‘philosophy’ that I might as well have
entitled this chapter: Economics and Philosophy. The rest will be disposed of in the two
paragraphs that follow.
[1. ECONOMICS AND SOCIOLOGY]
After what has been said in the preceding chapter about the paramount importance for
economic analysis of history—and all the sciences and branches of sciences that this term
stands for
1

—and of statistics, it goes without saying that we must try to keep some
contact with them; the reason why this will be done in a fragmentary manner is not that a
more systematic treatment would not be desirable but that such treatment is impossible
within the space at our disposal and within the limits of my own knowledge—and even if
it were possible, it would drown our own story in an unfathomable ocean. Similarly, it
goes without saying that we cannot afford, subject to the same restrictions, to neglect the
developments of sociology. This term we shall use in the narrow sense in which it
denotes a single though far from homogeneous science, namely the general analysis of
social phenomena such as society, group, class, group relations, leadership, and the like.
And we shall use the term in this sense throughout, that is, for developments that antedate
by centuries the introduction of the word. In a wider sense it means the whole of many
1
Amplifying what has been said about this point, I want to point out that all the historical sciences
and branches of sciences that specialization (mainly of philological competence to deal with
particular bodies of material) has produced are to some extent relevant for us even where they do
not treat of specifically economic facts. For instance, the Graeco-Roman civilization is the subject
of research by three clearly distinguishable groups of scholars, namely historians proper,
philologists, and jurists. All three of them deal with many things that do not concern us. But even
when they do so they contribute to the cultural picture of that world which as a whole is not a
matter of indifference to us; and even where they describe military history or the history of the arts,
they use the same techniques that they use in describing economic or social events and institutions,
so that there is no hard and fast frontier at which our interest could be definitely said to stop.
overlapping and unco-ordinated social sciences—which is the term we prefer and which
includes, among other things, our own economics, jurisprudence, hierology, ‘political
science,’ ecology, and descriptive ethics and aesthetics (in the sense of sociology of
moral behavior patterns and of art). In the footnote below the kinds of relations that may
make developments in these and other fields relevant to a history of economic analysis
are illustrated by the example of jurisprudence.
2

The closeness of some of these relations has been recognized by our setting up the
‘fundamental field’ of Economic Sociology in which neither economists nor sociologists
can get very far without treading on one another’s toes. But it does not follow either that
the co-operation between the two groups has actually been particularly close or fertile; or
that either of them would have got along better if there had been more co-operation. As
regards the first point it is the fact that ever since the eighteenth century both groups have
grown steadily apart until by now the modal economist and the modal sociologist know
little and care less about what the other does, each preferring to use, respectively, a
primitive sociology and a primitive economics of his own to accepting one another’s
professional results—a state of things that was and is not improved by mutual
vituperation. As regards the second point it is by no means certain that closer co-
operation, so often clamored for by laymen who expect great things from ‘cross-
fertilization’ with a certainty untroubled by professional competence, would have been an
unmixed blessing. For it could certainly not have brought net gains because there would
have been some loss of that efficiency which is the result of strict or even narrow
specialization. This holds even for the division of economics and of sociology (in the
wider sense) into departments that have developed into what are, to all intents and
2
The science or sciences (in our sense) whose subjects consist of statutory or customary ‘law,’ of
legal practice, and of legal techniques are relevant to a history of economic analysis, first of all,
because, to a considerable extent, economists have been lawyers (or, as we prefer to say, jurists)
who brought to bear the habits of the legal mind upon the analysis of economic phenomena. For
instance, the sociological and economic systems of the scholastic doctors of the sixteenth century
(the literature de jure et justitia) cannot be understood if we do not realize that they were primarily
treatises on the political and economic law of the Catholic Church and that their technique was
derived primarily from the old Roman law as adapted to the conditions of the time. Second, the
legal framework of the economic process, and the shaping influence of either upon the other, are, to
say the least, of considerable importance for economic analysis. Third, the historical roots of the
concept of ‘economic law’ are in the purely legistic concept of ‘natural law’ (see below Part II, ch.
2). Fourth, certain nineteenth-century economists professed to have derived inspiration for a

historical view of the economic process from a school of jurisprudence that called itself the
‘historical school’ and whose emergence and position must be understood more completely than
economists usually do if the elements of truth and error in that view are to be disentangled. I take
the opportunity to add that the sociological analysis of law as a social phenomenon is one thing;
that the study of the techniques of legal practice—the sort of thing that is taught in American law
schools—is quite another thing; and that historical jurisprudence is still another thing: so we must
distinguish at least three different ‘sciences’ of the law that differ in material, tools, and aims and
are cultivated (though there are overlappings) by different groups of workers, and similarly in the
fields of religion, ethics, and aesthetics. Confusion becomes almost excusable under these
circumstances and great battles about principles and ‘methods’ have been fought on issues (e.g., in
the sciences of art) that clear themselves up automatically as soon as it is realized that the
contestants aim at different targets.
History of economic analysis 24
purposes, semi-independent sciences. This is precisely why we prefer to speak of social
sciences rather than to speak of sociology in the wider sense. As an eminent economist
once observed, cross-fertilization might easily result in cross-sterilization. This does not
affect what has been said about the necessity of following up, at least in a fragmentary
fashion, the developments of all the ‘neighboring fields’ in this book. It was only to avoid
a possible misunderstanding that I thought it necessary to write the last sentences.
[2. LOGIC AND PSYCHOLOGY]
For the rest we are particularly interested in logic and psychology. The former claims our
attention because economists have made a not inconsiderable contribution to it but
especially because of their propensity to dogmatize and to quarrel about ‘method’:
economists who enjoy this sport are apt to be influenced by the writings of the logicians
of their time which therefore, though more apparently than really, gain some influence,
legitimate or otherwise, upon our work. As regards psychology, there is the view that
came first to the fore in the eighteenth century, and hence has been sponsored
intermittently, that economics like other social sciences deals with human behavior.
Psychology is really the basis from which any social science must start and in terms of
which all fundamental explanation must run. This view, which has been defended as

strongly as it has been attacked, we shall denote by the term Psychologism. Actually,
however, economists have never allowed their analysis to be influenced by the
professional psychologists of their times, but have always framed for themselves such
assumptions about psychical processes as they thought it desirable to make. On the one
hand, we shall note this fact occasionally with surprise because there exist problems in
economic analysis that might be attacked with advantage by methods worked out by
psychologists. On the other hand, we must avoid a very natural delusion. If we use an
assumption the contents of which seem to belong to a particular field, this does not
necessarily mean that we actually invade that field. For instance, the so-called law of
decreasing returns from land refers to what might be termed a physical fact. But, as has
been pointed out already, this does not mean that in formulating this assumption we are
entering the field of physics. Similarly, when I state the assumption that as I go on eating
successive pieces of bread my desire for further such pieces decreases, I may be said to
be stating a psychic fact. But, in doing so, I am not borrowing anything from professional
psychology, good or bad; I am simply formulating what rightly or wrongly I believe to be
a fact of common experience. If we place ourselves on this standpoint, we shall find that
there is much less of psychology about economic propositions than one might think at
first sight. To speak of psychological laws, such as the Keynesian law of the propensity
to consume, is a flagrant abuse, because this practice suggests justification for our
assumptions, which, in effect, do not exist. Nevertheless, it is necessary to glance
occasionally at the developments in the field of professional psychology, and this
necessity arises, though less often, also with respect to a number of other sciences. For
the moment, we confine ourselves to mentioning biology as an example. There is, or has
been, such a thing as social and economic Darwinism. If we are to appraise this
phenomenon, it is just as well to make sure of what Charles Darwin actually said and of
the methods and materials that induced him to say it.
Interlude II 25
[3. ECONOMICS AND PHILOSOPHY]
Now we turn to the subject of the relations between economics and philosophy. Or, to put
it more precisely, to the question, how far economic analysis has experienced influences

from philosophy.
1
Owing to the many meanings that have been assigned to the word
philosophy, some care is needed in order to avoid confusion.
There is first a meaning for which our question is very easy to answer, or rather, for
which no problem exists. The Greek ‘philosopher,’ who shaded off into the rhetor and
sophist, was simply the man of intellectual pursuits. Taken in this sense, which was
transmitted to the Middle Ages and survived right into the eighteenth century, philosophy
meant the sum total of all scientific knowledge. It was simply the universal science, of
which metaphysics formed a part not less than did physics, and physics not less than
mathematics or any ‘philosophy’ on the nature of society and of the polis. This usage was
bound to maintain itself so long as the stock, both of analytic tools and facts, remained
small enough for one brain to encompass. More or less, this was the case until, very
roughly, the middle of the eighteenth century, when the time of the polyhistors was
definitely over.
2
As we have seen, St. Thomas Aquinas fell in with this use of the word
philosophy, except that he excluded the sacred doctrine which was a science apart. All
the others were ‘philosophical disciplines.’ It is interesting to note that St. Thomas made
no attempt to assign to the former any other prerogative but that of super-mundane
dignity and did not give it any authority over the latter.



1
For reasons that will appear presently, we shall not go into the large literature on this subject any
more than we can help. For the moment, it is sufficient to mention the English standard work,
James Bonar, Philosophy and Political Economy (1st ed., 1893; 3rd ed., 1922).
2
Of these polyhistors, or universal scientists, Gottfried Wilhelm Leibniz (1646–1716) was perhaps

the most famous. His thought ranged from pure mathematics to political economy and back again
to physics and to the metaphysical speculation of his monadology. His views on economics that
have been collected with loving care by W.Roscher are too insignificant to be mentioned again. But
Giambattista Vico (1668–1744) was a sociologist of outstanding importance, and in advertising for
pupils he promised to teach everything that is knowable (tutto lo scibile). And never forget: Adam
Smith wrote—and brilliantly—on the development of astronomy. It is true, of course, that many or
most polyhistors excluded certain specialties from their universal competence. Thus, most of the
great historians were nothing but historians; most of the great physi-







History of economic analysis 26


When we look over those comprehensive systems
3
of science, we cannot fail to make
a discovery of the utmost importance for the problem in hand. Neither Aristotle nor any
of the later polyhistors succeeded in unifying, or even attempted to unify, the various
departments of his teaching and, in particular, to assert in each of them his views on the
‘last causes,’ the ‘ultimate meaning’ of things, and the like. The physical theories of
Aristotle, for instance, are entirely independent of his views on those ‘fundamentals’ and
could, so far as these are concerned, just as well have been different from what they were.
And this is as true of his political sociology (for example, his investigations into the
constitutions of Greek city-states) as it is of his physics. Similarly, Leibniz’ views on
foreign trade have nothing whatever to do with his fundamental vision of the physical and

the moral world and he could, so far as these are concerned, just as well have been a free
trader. Therefore, we had better speak of a compound of sciences rather than a universal
science. This compound broke to pieces as the exigencies of the division of labor asserted
themselves. It was then in the seventeenth and eighteenth centuries that philosophy was
usually divided into natural and moral philosophy, a division that foreshadowed the
German one between Natur—und Geisteswissenschaften.
4
There is another sense of the
word philosophy in which no question arises of its influencing economics. This is the
case if philosophy is conceived of as a science, like any other, that asks certain questions,
uses certain materials, and produces certain results. Examples of the problems that arise,
if we then define philosophy in this sense, would be: what is meant by matter, force,
truth, sense perception, and so on. This conception of philosophy, which ap- peals to
many who are not philosophers, makes philosophy completely neutral as regards any
particular proposition in any other science. It comes near to making philosophy
synonymous with epistemology, the general theory of knowledge.
But a problem, and a very important one, does arise if we define philosophy to mean all
theological and non-theological systems of beliefs (‘speculative systems’) concerning
ultimate truths (realities, causes), ultimate ends (or values), ultimate norms. Ethics and
aesthetics enter into such systems, not as sciences of certain sets of phenomena (behavior
cians were nothing but physicians. The Greek philosophers kept aloof from the utilitarian
(‘banausic’) arts.
3
The reader is warned that the term System—which in fact carries no more a definite meaning than
did its Greek prototype—is used in this book in a variety of different senses which should not be
confused, for instance: a set of more or less co-ordinated principles of political action (e.g. liberal
system, free-trade system); an organized body of doctrine (e.g. the scholastic system, Marshall’s
system); a set of quantities between which certain relations are assumed to exist (e.g. system of
prices); a set of equations expressing such relations (e.g. the Walrasian system).
4

For the sake of brevity we neglected a development that culminated around 1900 and produced
philosophy in a sense that has some affinity with the sense in which philosophy simply means
science in general: namely, the sense that makes philosophy an attempt to construct a consistent
picture of the empirical world from the contributions made by the individual scientists. This
conception will be mentioned in its place, but all that we need to say about it here is that it does not
create any difficulty or problem concerning the relation between philosophy and economics. A
philosophy in this sense evidently does not undertake to restrict the autonomy of any of the
individual sciences.
Interlude II 27
patterns) which they seek to describe (explain) but as normative codes that carry extra-
empirical sanctions.
5
One may well ask whether economics does not also enter in the
sense that a writer’s ‘philosophy’ determines, or is one of the factors which determine,
his economics.
In order to prepare the ground for our answer I shall first mention a few illustrative cases
from the history of other sciences. For any worker whose philosophy includes Christian
belief, research is research into the works of God. For him, the dignity of his vocation
flows from the conviction that his work is revealing a part, however small, of the Divine
order of things. Thus, Newton expressed Christian beliefs in a purely scientific work.
Leibniz went readily from matters of pure physics and mathematics to matters of
theology—he evidently saw no difference of methodological principle between the two,
and theological aspects suggested themselves to his mind with the utmost ease. Leonhard
Euler (1707–83) argued for his ‘method for finding curves that enjoy certain extremal
properties’ on the ground that the world is the work of the most perfect Creator and hence
must be amenable to description in terms of maximum and minimum propositions. James
P.Joule (1818–89), the co-discoverer of the fundamental principle of modern
thermodynamics, the principle of the mechanical equivalent of heat, adduced the
argument that, in the absence of the equivalence between heat and motion, something
(energy) could be lost in the physical universe which it would be contrary to the dignity

of God to assume. The last two instances might even be construed as proving direct
influence of Euler’s and Joule’s beliefs upon their analytic work. Nevertheless nobody
doubts that there was no influence of this kind, that is, (a) that the scientific work of the
four authors mentioned was not deflected from its course by their theological convictions;
(b) that it is compatible with any philosophical positions; and (c) that there would be no
point in trying to explain its methods or results by their philosophical positions. They
simply co-ordinated their methods and results with their live Christian belief as they
would co-ordinate with it everything else they did. They put their scientific work in a
theological garb. But, so far as the content of this work is concerned, the garb was
removable.
I hold that the garb of philosophy is removable also in the case of economics:
economic analysis has not been shaped at any time by the philosophical opinions that
economists happened to have, though it has frequently been vitiated by their political
attitudes. But this thesis, as it stands, is open to so many misinterpretations that we must
now spell it out carefully. The best method of doing so is to state explicitly what it does
not involve.
5
This also applies to materialism in its technical philosophical sense, that is, to the doctrine that has
not changed from the days of Leucippus and Democritus to this day and holds that ‘matter’ is the
ultimate reality and exists independently of experience. I take the opportunity offered by the need
for an illustrative example of the text above to bring home to the reader that the word ‘materialism’
means many things that have nothing to do with the technical meaning just defined. The ‘idealist’
philosophy that turns around the proposition (equally devoid of meaning for me personally) that in
the last analysis reality (or the ‘world’) is ‘spirit’ would have served both purposes equally well: it
would have given an example of philosophy in the sense in which it raises a problem of influence
upon economics; and it would have served as another example of a word of many meanings that are
commonly confused, the word Ideal.
History of economic analysis 28
First, it does not involve ‘scientism’ (see above ch. 2, sec. 3). That is, I am not arguing
that because the philosophical or theological garb is removable from propositions

belonging to the physical sciences, it must therefore also be removable from propositions
belonging to the social sciences. Our examples have been presented merely in order to
illustrate what I mean by saying that the theological or philosophical creeds of a scientific
worker need not exert any definite influence upon his analytic work, but not in order to
establish my thesis. So far as those examples go, it is still an open question whether or
not it also applies to the sciences of human action.
Second, my thesis does not imply of course that human action itself and the psychic
processes associated with it—motives or methods of reasoning, whether political or
economic or of any other type—are uninfluenced by, or uncorrelated with, philosophical
or religious or ethical convictions. It so happens that it is part of my own social
psychology to hold that this correlation is far from perfect—a robber baron may have
professed quite sincerely a creed of meekness and altruism—but this is an entirely
different matter. We are now concerned with the propositions of the sciences of human
behavior about this human behavior and are not questioning that religious or
philosophical elements must indeed enter into any explanations of this behavior whenever
they aim at completeness or realism. And this also applies to the scientific economist’s
‘politics’ and to any advice or recommendation he may tender with a view to influencing
‘policies.’ All that our thesis involves is that it does not apply to his tools and
‘theorems.’
6

Third, my thesis does not involve reliance on general considerations about the logical
autonomy of the economic proposition or theorem from philosophy. This would be still
compatible with the latter’s influences creeping into the procedures of analytic work in a
logically illegitimate manner. It might indeed be made plausible that such propositions, as
that towns frequently developed from meeting places of merchants, do not carry any
particular philosophical connotation; or that such propositions, as that ordinary
significance tests are useless in the case of correlation between time series are valid alike
for the deist and the atheist; or that propositions, such as that increase in the rate of
remuneration of a factor of production may decrease its supply, are compatible with any

philosophy and imposed by none. But I am not asking my readers to put their trust in any
arguments of this kind, however convincing they may seem to some. At the moment I am
not making any attempt to establish my thesis. I am only announcing it and explaining its
meaning. The proof will be supplied in the subsequent Parts, when it will be shown that
even those economists who held very definite philosophical views, such as Locke, Hume,
Quesnay, and above all Marx, were as a matter of fact not influenced by them when
doing their work of analysis.

6
If the reader finds this a difficult distinction to make, I sympathize with him. It is in fact this
relation between an economist’s political preferences and his analysis and the relation of the former
with his philosophy—particularly evident if we extend ‘philosophy’ to include the sum total of a
man’s views on what is ‘fair,’ ‘just,’ ‘desirable,’ and so on—which do prevent most economists
from accepting the argument above, which is after all only simple common sense if correctly
understood.
Interlude II 29
The reason why so much emphasis has been placed upon the thesis that philosophy in
any technical sense of the term is constitutionally unable to influence economic analysis
and actually has not influenced it, is that the opposite thesis is one of the most important
sources of pseudo-explanations of the evolution of economic analysis. These pseudo-
explanations have a strong appeal for many historians of economics who are primarily
interested in philosophical aspects and therefore attach an undue weight to the references
to such aspects which in fact abound in the literature and are not always easy to recognize
for what they are—frills without importance that nevertheless obliterate the filiation of
scientific ideas.
History of economic analysis 30
CHAPTER 4
The Sociology of Economics
WE HAVE ALREADY referred to a department of science that we called the Science of
Sciences (Wissenschaftslehre). This science, starting from logic and to some extent also

from epistemology, treats of the general rules of procedure in use in the other individual
sciences. But there is another science about science which is called the Sociology of
Science (Wissenssoziologie)
1
and treats of science as a social phenomenon. That is, it
analyzes the social factors and processes that produce the specifically scientific type of
activity, condition its rate of development, determine its direction toward certain subjects
rather than other equally possible ones, foster some methods of procedure in preference
to others, set up the social mechanisms that account for success or failure of lines of
research or individual performances, raise or depress the status and influence of scientists
(in our sense) and their work, and so on. Our emphasis upon the fact that the workers in
the fields of tooled knowledge are apt to form distinct vocational groups qualifies
particularly well for conveying to the reader the reasons why, and the extent to which,
science constitutes a proper subject of sociological research. Our interest in this subject is
of course confined, primarily at least, to the topics that may usefully figure in an
introduction to a history of economic analysis. Of these the problem of ideology is by far
the most important and will be dealt with first (1); under a second heading we shall
consider the motive forces of scientific endeavor and the mechanisms of scientific
development (2); and finally we shall discuss some topics concerning the personnel of
science in general and economics in particular (3).
1. IS THE HISTORY OF ECONOMICS A HISTORY OF
IDEOLOGIES?
[(a) Special Nature of ‘Economic Laws.’]
The historical or ‘evolutionary’ nature of the economic process unquestionably limits the
scope of general concepts and of general relations between them (‘economic laws’) that
economists may be able to formulate. There is indeed no sense in denying, a priori, as has
1
[J.A.S. left space for this note but did not write it. In Capitalism, Socialism and Democracy (New
York, 1950), p. 11, he explains the term Sociology of Knowledge as follows: ‘The German word is
Wissenssoziologie, and the best names to mention are those of Max Scheler and Karl Mannheim.

The latter’s article on the subject in the German Dictionary of Sociology (Handwörterbuch der
Soziologie) can serve as an introduction.’]