CHAPTER XXIV ASSUMPTIONS IN ECONOMICS 382. The Economists.-Political economy regards mankind only as related to the production, distribution or consumption of wealth. Social economy regards wealth only as related to the comfort, liberty and progress of mankind. So far as the meaning of words goes, political economy is the science of wealth from the standpoint of capitalism, and social economy is the science of wealth from the standpoint of Socialism. Nevertheless, many who are called politcal economists constantly consider the public welfare. Some who call themselves social economists are among the most active defenders of capitalism. We shall avoid confusion if we ignore any distinctions between economists as to whether they call themselves political or social economists. Even if these terms be used interchangeably, still there are many kinds of economists. The English, also called the Manchester and the classical school, is the oldest and has been the most influential. Adam Smith, Ricardo, Malthus and John Stuart Mill were of this school. The German, modern or historical school, is the other of the two most important of the groups of the political economists. 383. The English School.-The English school ignores the real man who actually exists, and creates an imaginary man, who, it admits, never existed. It calls this creation of its imagination "the economic man, and proceeds to ask what this imaginary man would do under all possible circumstances. They answer their own questions in a manner consistent with the character of their imaginary man, and from these answers they construct their "economic axioms," on which they build their science of economics.1 384. The Historical School.-The historical school does not try to imagine an "economic man" and base a science on the answers which their own straw man may make to their own questions. The English school is based on assumptions. The historical school is based on observations.2 The English school derives its as-sumptions from its "economic man," who is simply an ordinary man stripped of all his qualities save those which are most in demand under capitalism. Its assumptions are the assumptions of capitalism. The 1. "Of every human passion or motive, political economy makes entire abstraction. Love of country, love of honor, love of friends, love of learning, love of art, pity, honor, shame, religion, charity, will never, so far as political economy cares to take account; withstand in the slightest degree or for the shortest time the efforts of the economic man to amass wealth."-Walker: Political Economy, p. 16. "Ricardo's economic assumptions were of his own making."-Toynbee: The Industrial Revolution, p. 11. "Attempts have indeed been made to construct an abstract science with regard to the actions of an ‘economic man,' who is under no ethical influences and who pursues pecuniary gain warily and energetically, but mechanically and selfishly. But they have not been successful, nor even thoroughly carried out, for they have never really treated the economic man as perfectly selfish. No one could be relied on better than the economic man to endure toil and sacrifice with the unselfish desire to make provision for his family; and his normal motives have always been tacitly assumed to include the family affections. But if these motives are included, why not also all other altruistic motives, the action of which is so far uniform in any class at any time and place that it can be reduced to general rule?"-Marshall: Principles of Economics, Vol. I., Preface, p. 8. 2. Ely: Political Economy, p. 16, historical school draws its conclusions from observations. It observes how real men act and the results of their actions in real industry and commerce, but in industry and commerce as carried on under capitalism. 385. "The Dismal Science."-Now, as a matter of fact, if the real man is not so bad a character as the economic man would be if he could really become a living man, it is found, nevertheless, that under the stress of capitalism he acts badly enough, so that the English school, based on the assumptions which underlie capitalism, and the historical school, based on the observation of man's conduct under capitalism, come practically to the same general results. Carlyle's characterization of economics as a "dismal science" will apply with equal force to both schools.3 The English school argues from the character of a 3. "The trade unionists speak with considerable bitterness of political economists, and with some reason. The ordinary teaching of political economy admits as its first definition that wealth is the product of labor; but it seldom tries to point out how the producer should obtain the benefit of his own product. It treats of the manner in which wealth is produced, and postpones or neglects the consideration of the process by which it is distributed, being, it seems, attracted mainly by the agencies under which it is accumulated. Writers have been habituated to estimate wealth as a general does military force, and are more concerned with its concentration than they are with the details of its partition. It is not surprising that this should be the case. Most writers on political economy have been persons in opulent, or at least in easy, circumstances. They have witnessed with profound or interested satisfaction the growth of wealth in the classes to which they belong, or with which they have been familiar or intimate. In their eyes the poverty of industry has been a puzzle, a nuisance, a problem, a social crime. They have every sympathy with the man who wins and saves, no matter how; but they are not very considerate for a man who works. * # * In point of fact, ordinary political economy does not go further than to describe the process and some of the consequences of a state of war. The war is industrial, in which each man is striving to get the better of his neighbor, to beat him in the struggle for existence. Malthus and the elder Mill laid the Darwinian hypothesis before the modern prophet of the physical life of the future and the past began to speculate on natural forces."-Rogers: Work and Wages, pp. 523 * * 25. "Take economics as an example. During the eighteenth century Adam Smith, having carefully observed the conditions which prevailed in Europe, and especially in Great Britain, wrote a book admirably suited to his environment, and the book met with success. Then men man who would do nothing but struggle for more wealth, and the historical school argues from the conduct of a man so placed that he could do nothing but struggle for existence. The one has an abnormal man and the other abnormal conditions, and both arrive at abnormal results.4 386. The Field of Study-But, it is said, human character is of a low order, and all the world is under the reign of capitalism. If it be granted that both the imaginary economic man and the conditions under which real men act are abnormal, whence then the materials for either social or political science, if these cannot be trusted? In the first place, it may be said that we may study real men and not imaginary ones, and if we do, the discovery of the endless changes of social and political forms wrought out with the world's advance will at once lead us beyond this modern, transitory, constantly shifting life under capitalism to the previous, and, from the standpoint of a student looking for social causes, to a more important period of man's existence. If we do this there will be revealed to us the steps by which this capitalism came into existence, as well as the elements within itself which will in the end make its further existence impossible. We shall learn that undertook to erect the principles of that book into a universal law, irrespective of environment. Then others theorized on these commentators and their successors upon them until the most practical of business problems has been lost in a metaphysical fog. "Now men are apt to lecture upon political economy as if it were a dogma, much as the nominalists and realists lectured in mediaeval schools. But a priori theories can avail little in matters which are determined by experiment." Adams: The New Empire, Introduction, pp. xxx., xxxi. * 4. "A few years ago the proposition was made to remove economics from its place in the course of the British Association for the Advancement of Science on the ground that economic science had never shown itself worthy of the name. If we take from political economy first all the truisms and then all the doubtful points our remainder will be a quantity closely approximating zero."-Lunt: Economic Science, pp. 3 * * 5. it is true that the materials for a satisfactory social philosophy of any sort cannot be gathered until men shall first have healthful lives in the midst of healthful surroundings; that our human nature will never be able to reveal unto itself the real nature of its own life until the struggle for existence shall cease to be destructive of individual and social health. 387. May Learn the Next Step.-But while no complete philosophy of the whole of life is possible until the whole of life may be revealed to us, enough is known, and not seriously disputed by reputable scholarship, of our past and of the evolutionary advance of the race to enable the social economist to name the next step to be taken, and to enter into the struggle, by educational and political action, to effectively assist society in taking that next step.5 What the second step will be no one can tell, except by further observation, after the next step has been taken. 388. These limitations which the nature of the case has thrown around the student of social economy should be borne in mind while we inquire into some of the disputes between capitalists and Socialists as related to some of the more fundamental assumptions of economic science. 389. Is Capitalism Natural?-1. The capitalists assume that the wage system is the natural method of production. If they meant by this that it was the natural result of the development of the race at a certain stage of its growth, in the same way that the ancient tribal communism, slavery and serfdom may all of them be said * 5. "But the Socialists were men who had felt intensely and knew something about the hidden springs of human action of which the economists took no account. The influence which they are now exercising on the younger economists in England and Germany is important, and I think for the greater part wholesome, even though the association with fervid philanthropy does perhaps cause tendency to rapid and unscientific thinking."-Marshall: Present Position of Economics, p. 18. some |