Trends of Economic Thinking

Tr finishs of Economic ThinkingThe position of the economist in the ingenious life of our time is unlike that of the practitioners of any other branch of knowledge. Questions for whose solution his special knowledge is germane(predicate) are probably to a greater extent ghostly encountered than questions related to another science. Yet, in large measure, this knowledge is handle and in many respects public opinion even seems to move in a inauspicious direction. Thus the economist appears to be hopeless(prenominal)ly out of tune with his time, giving un functional advice to which his public is not inclined to listen and having no catch upon contemporary events.Why is this? The situation is not without precedent in the tarradiddle of economic thought but it cannisternot be considered as normal, and there is strong reason to believe that it must be the result of a particular historical situation. For the views at present held by the public can clearly be traced to the economi sts of a generation or so ago. So that the fact is, not that the instruction of the economist has no influence at all on the contrary, it may be very powerful. that it takes a broad time to make its influence felt, so that, if there is switch, the newly ideas tend to be swamped by the domination of ideas which, in fact, experience become obsolete. Hence the recurring intellectual isolation of the economist.The task of the relation between the economist and public opinion to daytime resolves itself, therefore, into a question of the causes of the intellectual varys which have conspired to bring about this cleavage. It is this outlet which I have chosen as the main theme of this lectureThe subject is a vast one, but the aspect which I wish chiefly to emphasise is that which the economist must, naturally, be approximately anxious to make clear to the public for example the role played by strictly scientific Progress the growth of our insight into the interdependence of econ omic phenowork forcea in bringing about these changes in his pose to practical problems. At first sight there seem to be wholly both reasons why economistsshould change their attitude towards questions of economic policy either they may find that their knowledge has been inadequate, or their views on the funda rational ethical postulates (upon which, of course, every practical conclusion is based) may under(a)go a change. In either case the role played by science would be clear. besides, in fact, the cause of the capacious historical changes which I am discussing seems to me to be of a more subtle kind. It consists neither of a change in the underlying ethical valuations nor of a refutation of the validity of certain analytical propositions, but sort of in a change of view regarding the relevance of that knowledge for practical problems.It was not a change of ideals nor a change of reasoning but a change of view with regard to the applicability of such reasoning which was re sponsible for the characteristic features of the popular economic science of today. How did this come about? It is a common tenet that, about the middle of last century, perhaps under the influence of companionableistic ideas, the social conscience was enkindle by the existence of human misery which had previously escaped recognition, and it was decided no longer to jut it. Hence the decline of the old political economy which had been blind to these considerations. But, in fact, nothing could be far from the truth. No serious endeavor has ever been make to show that the great liberal economists were any less concerned with the welfare of the poorerclasses of society than were their successors. And I do not think that any such attempt could possibly be successful. The causes of the change must be sought elsewhere. It is probably true that economic compendium has neer been the proceeds of detached intellectual curiosity about the why of social phenomena, but of an intensive urge to reconstruct a world which gives rise to profound dissatisfaction. This is as true of the phylogenesis of economics as of the ontogenesis of probably every economist. As Professor Pigou2 has aptly remarked It is not curio, but the social enthusiasm which revolts from the sordidness of mean streets and the joylessness of withered lives, that is the beginning of economic science.The mere existence of an extremely obscure mechanism which led to some kind of coordination of the independent action of individuals was not sufficient to arouse the scientific curiosity of men. While the movement of the heavenly bodies or the changes in our material surroundings excited our wonder because they were evidently directed by forces which we did not know, mankind remainedand the majority of men still remainunder the erroneous impression that, since all social phenomena are the crossing of our own actions, all that depends upon them is their deliberate object. It was only when, because t he economic system did not accomplish all we wanted, we prevented it from doing what it had been accomplishing, in an attempt to make it obey us in an arbitrary way, that we realized that there was anything to be understood. It was only incidentally, as a by product of the study of such isolated phenomena, that it was gradually realized that many things which had been taken for granted were, in fact, the product of a highly complicated organism which we could only hope to understand by the intense mental effort of systematic inquiry.Indeed, it is probably no exaggeration to say that economics developed mainly as the outcome of the investigating and refutation of successive Utopian proposals if by utopian we mean proposals for the improvement of inapplicable effects of the existing system, based upon a complete disregard of those forces which actually enabled it to work. Now, since economic psycho analysis originated in this way, it was only natural that economists should immediat ely proceed from the investigation of causal interrelationships to the drawing of practical conclusions. In criticising proposals for improvement, they treasure the ethical postulates on which such proposals were based and tried to demonstrate that these were not conducive to the desired end and that, very often, policies of a radically varied nature would bring about the desired result. Such a procedure does not in any way violate the rule, which Professor Robbins4 has so effectively affect upon us, that science by itself can never prove what ought to be done. But if there is agreement on ultimate aims, it is clearly scientific knowledge which decides the best policy for bringing them about. No doubt the economist should always be conscious of this distinction but it would certainly have been nothing but insufferable pedantry if, in discussing practical problems, the economist had always insisted that science by itself proves nothing, when in fact it was only the new gained kno wledge which was decisive in bringing about the change in their attitude towards practical affairs. The attitude of the classical economists to questions of economic policy was the outcome of their scientific conclusions.The presumption against government interference sprang from a colossal range of demonstrations that isolated acts of interference definitely frustrated the attainment of those ends which all accepted as desirable. But the position of the young science which led to conclusions so much in conflict with the result of more primitive reflections was bound to become difficult as soon asfollowing its first swaggering success it became more conscious of its remaining defects. And those who disliked its conclusions were not slow in making the most of all the defects they could find. It was not the practical preoccupations of the economist which were responsible for this result. It is by no means certain that economics would have been less disliked if economists had been mo re careful to distinguish the pure theory from the more utilize parts of their conclusions. It is true that economics was contemptuously dubbed a mere utilitarian science because it did not follow knowledge for its own sake. But nothing would have aroused more resentment than if economists had tried to do so. Even today it is regarded almost as assign of moral depravity if the economist finds anything to marvel at in his science i.e., if he finds an unsuspected order in things which arouses his wonder. And he is bitterly reproached if he does not emphasise, at every stage of his analysis, how much he regrets that his insight into the order of things makes it less smooth to change them whenever we please. The attack on economics sprang rather from a dislike of the application of scientific manners to the investigation of social problems. The existence of a body of reasoning which prevented people from following their first impulsive reactions, and which compelled them to equalis er indirect effects, which could be seen only by exercising the intellect, against intense feeling caused by the direct ceremonial of concrete suffering, then as now, occasioned intense resentment.It was against the validity of such reasoning in general that the delirious revolt was directed. Thus, temporarily, social enthusiasm succeeded in destroying an instrument created to serve it because it had been made impatient by the frequent disappointments which it had occasioned. It is not to be denied that, at this early stage, economists had not yet become quite conscious of the finespun nature of their generalisations. Nor can it be questioned that on some points, such as the theory of value, they proceeded on very unsatisfactory general assumptions. To what extent the actual foundations of the classical system were influenced by the fashionable philosophy of the day has been made clear by the distinguished author of Philosophy and Politi cal Economy. It is clear that anything whi ch justified the treatment of practical problems as something unique, determined only by their own historical development, was bound to be greeted as a welcome relief from the necessity of controlling emotions by difficult reasoning. It was just this advantage which the historical method afforded. Refusing to believe in general laws, the Historical School had the special attraction that its method was constitutionally unable to refute even the wildest of utopias, and was, therefore, not likely to bring the disappointment associated with theoretical analysis. Its emphasis on the unsatisfactory aspects of economic life, rather than upon what was owed to the working of the existing system, and what would be the consequences if we tried directly to control some of the recognised evils, strongly recommended it to all those who had become impatient.For a considerable time, mainly during the last third of the nineteenth century, the cardinal schools which now existed not only employed di fferent methods, but also turned their attention to different problems. The more theoretically minded had to concentrate rather on the revision of the fundamental principles which had been damaged by decades of attack, and had to leave the more applied parts to others who were coming more and more under the influ ence of the historical method. So long, however, as this part of the task was left to men who had previously become acquainted with the general principles of analysisand who were, therefore, immune from the more popular fallacies the fulleffect of this change did not become apparent. The distinguished economist to whose memory this chair8 is dedicated, and with whose long and fruitful career Professor Gregory has made us familiar,9 offers a conspicuous example of the nature of this change. doubting Thomas Tooke could never have become one of the leaders of the free-trade movement in his early years, and remained its lifelong advocate, if he had applied to the problems of in ternational trade the same purely inductive methods which, in his later years, he considered as exclusively decisive in the discussion of monetary problems.As so frequently happens, it was only in the second generation of the new school that the lack of the tools necessary for the interpretation of the intricate phenomena they were busy describing made itself felt. And so it came about that, just at the time when the theorists were most successful in constructing a wholesome analytical basis for their science, the superstructure of more concrete applications which had been left in the hands of the more practical-minded men throw gradually, more discredited than disproved, into oblivion. And, in consequence, many of the palliatives and quack remedies which, in the past, had been rejected because, even judged by the analysis of the classical system, their indirect effects were seen to be obviously more objectionable than their immediate benefits, were introduced by the new generatio n of historical economists, until the reaction was carried to a point at which the futile attempts to redress special grievances by short-sighted State action could hardly have been more numerous if an analytical science of economics had never existed. It is no accident that the return of protectionism which followed the free-trade era of the nineteenth century was the work of men under the influence of this school. It takes a long time to rebuild the structure of a science if one starts by revise the fundamental concepts. And the modern revision of theoretical economics has occupied sufficient time to allow what was at first the heretical view of a number of radical economists. who had tofight what was then the conservatism of the practical men who were still under the influence of economic liberalismto pervade the thought of the public and to establish itself as the peremptory doctrine, not only among advanced social reformers, but even among the most conservative businessmen.