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FOREWORD - William Dyer Grampp, Economic Liberalism, vol. 1 The Beginnings 
Economic Liberalism (New York: Random House, 1965). vol. 1 The Beginnings.
Part of: Economic Liberalism, 2 vols.
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STUDIES IN ECONOMICS
consulting editor:William Letwin
massachusetts institute of technology
to the memory of L. W. G.
This book consists of six studies in the history of the idea of economic liberalism—three in the first volume and three in the second volume. That may seem like six studies in ambiguity. “Liberalism” has so many meanings—is such a rich source of controversy and inconclusion—that it has become nearly an un-word or an antiword, one that means nothing or even less. Nevertheless, I want to use it. Although it has been used ambiguously, the idea for which it can be made to stand is not ambiguous. It is a word like those words of ordinary language that the linguistic philosophers say we should use, or if it is not like them it can be made so. It has had a meaning in the past, and the history of that meaning can be studied. The economic aspect of the history is what this book is about. What economic liberalism means today is not the subject of the book. That is an important question, needless to say, but is one on which the reader will have to do his own thinking. There are some suggestions to help him in the concluding study. As a guide to all of them I would put before him what Berkeley offered to the readers of The Principles of Human Knowledge:
Whoever therefore designs to read the following sheets, I entreat him that he would make my words the occasion of his own thinking, and endeavor to attain the same train of thoughts in reading that I had in writing them. By this means it will be easy for him to discover the truth or falsity of what I say. He will be out of all danger of being deceived by my words, and I do not see how he can be led into an error by considering his own naked, undisguised ideas.
I use the words “economic liberalism” to mean the policy that directs a liberal economy, and the words “liberal economy” to mean an economy in which individuals decide what is to be produced, how goods shall be distributed, and by what means production and distribution shall be carried on. Decisions of this kind must be made in some way or other in every kind of economic system, no matter how dictatorial or democratic or how rich or poor. What distinguishes one system from another is whether or not individuals have the ultimate authority to make decisions. Who has the authority is more important than how it is exercised or for what purpose. In a liberal economy, individuals have the authority. They may exercise their authority individually on the market or outside the market, or they may exercise it collectively and voluntarily in either way. They also may exercise their authority through the government by directing it to carry out the decisions they have made. They may go further and delegate to the government the authority to make decisions. What they may not do is to delegate authority in an irrevocable way. They may not turn over to the government, to a voluntary organization, or to another individual the permanent power to make decisions. They must retain the ultimate authority to judge those who act for them.
In a liberal economy the choice of how to make decisions is not necessarily a choice between government and the market and it is not even a choice among different combinations of government and market. Between the two there are many forms of voluntary collective action such as that of cooperatives, philanthropies, nonprofit organizations, limited-profit firms, quasi-public or quasi-private organizations, and unions. In groups of this kind, individuals can change the composition of the national output, the way it is produced, and the way it is distributed.
In the history of economic liberalism, what has been advocated and practiced is a combination of the following three procedures: voluntary individual action on the market, compulsory action through the government, and collective action in voluntary groups. In deciding how these three procedures are to be combined, the critical question usually has been, How much use shall be made of government? The question, in more familiar language, is, What shall be the economic powers of the government?
The question has been answered in different ways by those who have advocated liberalism. But the answers do have a common element. It became apparent in the nineteenth century in Great Britain and it was intimated much earlier. The conclusion to which my studies have brought me is that in a liberal economy the state may do whatever the people want it to do and that it is able to do. Neither the want of the individuals nor the ability of the state is in itself the limit of economic policy. Together they are. The distinction is perhaps obvious. But I have found, during a long period of reading about economic policy, that if the writer had made some obvious distinctions, both he and I would have come to the point with less effort. What a state is able to do, as distinct from what it should do, is something to be learned from positive economics; it is the analysis of means for achieving given ends. What the state should do is a question of ethical values. They once were a part of economics, when economics itself was a branch of moral philosophy. That part is normative economics, and today it still engages the interest of economists even though they attend more to the positive side. Both parts supply the ideas on which economic policy is based. Both have led me to my conclusion about the meaning of economic liberalism—a conclusion that is explained in detail in the chapter “Liberalism in the Great Century.”
It is not a conclusion that will be agreeable to everyone. There will be doubts from my colleagues in the history of ideas, and from general readers who have learned elsewhere that liberalism was quite another thing from what it is made out to be here, and from those to whom liberalism is an issue of policy today and of more than historic interest. All of us become committed to ideas, and ideas, it has been truly said, do rule the world. But the commitment can be a vested interest, and ideas can prevent the world and ourselves from learning more. That is why, when we come across an idea that seems eccentric, we ought to try, as Berkeley advised, “to attain the same train of thoughts in reading” as the author had in writing and in this way “to discover the truth or falsity” of what he says.
What I have written in these two volumes is about one aspect of the idea of freedom. A particular definition of freedom is implied by the meaning I have ascribed to economic liberalism. Freedom, in the meaning given it here, is both the absence of restraint upon action and the ability to act. These studies in economic liberalism are therefore studies in the expression of this meaning of freedom. They explain what freedom, in its economic aspect, has meant to particular groups of writers whose ideas have been notably influential. Some of these writers were economists, but most were not. Economics as a distinct study is only about 200 years old, but ideas about the economic aspect of freedom go back much further. Most of the men whose writings are explained here were philosophers, moralists, historians, politicians, experts in statecraft, and pamphleteers. No one of the six studies describes the idea of economic liberalism in its entirety, because no single group of writers made a complete statement about it. What each group had to say is best understood as a statement of particular aspects of the doctrine. To extend these particulars into a synthetic statement of the doctrine is possible but to attribute the synthesis to all of the groups would be quite wrong. One can, however, make a summary statement of the central idea, and I have done that in the last chapter of Volume II. What is just as interesting is to examine the contributions of particular groups of writers at different periods in the development of the idea.
What follows is a brief commentary on each of the six studies in order that the reader may see the design of the whole.
THE STOIC ORIGINS OF LIBERALISM
It was the contribution of the Stoics to explain how individuals must act in order to make their society free. The important feature of Stoicism is the conception of the free individual as a thinking, responsible, and courageous being. But Stoicism was more than a doctrine of individual morality. Political philosophers have long been interested in it, and here I have tried to show the interest it can have for economists.
THE MERCANTILISTS AS LIBERALS
The ideas of political and economic individualism went into decline in the Middle Ages but were not entirely forgotten. They survived in an attenuated form and regained some of their power toward the end of the period. By 1500 they had become a principal doctrine in England. They did not govern the affairs of state, to be sure, but they were ideas that men talked much about and looked forward to putting into practice. The year 1500 was near the start of the period of the mercantilist writers in England, and they have come down to us as the very opposite of liberalism. That view is wrong. There has been a renewed interest in the mercantilists in the last twenty years or so, but mostly by those who believe the mercantilists were superior to the liberals. This view is yet another expression of the mistaken idea that the two had nothing in common.
The mercantilist writers were more familiar with the mechanics of the market and the affairs of state than have been most writers on economic policy. Some of the mercantilists were in business and government, and most of them wrote about specific problems and measures of policy rather than about the principles underlying policy. They were not responsible for the practices of the mercantilist period, many of which were inconsistent with what the writers believed. Their responsibility was for the liberal ideas the period entertained. But the ideas were influenced by what the writers saw around them and by what they experienced directly. There was a close relationship between what the writers saw and their ideas about how to change it—between economic problems and economic policies. This relationship is what makes the writers continually interesting. They were practitioners of economic policy.
THE ORIGINS OF AMERICAN LIBERALISM
Even more significant as practitioners were the Americans of the constitutional period. The influence of British liberalism was greater in the U. S. at this time than in Britain itself. “The colonies owe to the policy of Europe the education and great views of their active and enterprising founders,” Smith said. That Smith should have said it is appropriate, because he was the most important single influence on the men who wrote and debated the Constitution and first put it into practice. The fact is interesting because ever since the Constitution was ratified we have been debating the economic intention of the men who wrote it. The intention was, I believe, rather like that of Smith, but his intention was different from what it usually is thought to have been.
THE CLASSICAL PSYCHOLOGY OF LIBERALISM
In the writings of Adam Smith and the classical economists the idea of economic liberalism was expressed most amply and with the greatest power, so much so that the idea often is thought to have come into being in the eighteenth century. It did not, but the statement made of it by the classical economists was the most important. For that reason more of this book is about the eighteenth and nineteenth centuries than any other period. What Smith is best known for, although he probably did not want to be, is the belief that self-interest is the principal motive of economic behavior. I have tried to explain just what he meant by self-interest and have taken special care with the exceptions he took to it.
THE POLITICAL IDEAS OF THE CLASSICAL ECONOMISTS
The economic policy of the classical school was made up of its ideas of psychology, positive economics, of political philosophy and of ethics. The policy was not a simple application of the idea of self-interest, which itself was far from being simple. At first sight there seems to be no consistency among the ideas. Indeed there seems to be a fundamental discrepancy between the classicists’ believing in universal economic freedom but not in universal political freedom and in their being advocates of both free trade and political nationalism. But on examination a consistency does emerge. A study of how the classicists related the economic and political aspects of liberalism brings to our notice some features of it that are not apparent from a study of either aspect alone.
LIBERALISM IN THE GREAT CENTURY
The nineteenth century is the notable period in the history of liberalism as a doctrine and practice. That is not to say that liberalism has declined since then. I do not believe it has. But in the nineteenth century its distinctive features became clear and it divided rather sharply into its classic and utilitarian forms. The century was the time of Ricardo and Mill, of the economic supremacy of Great Britain, and the liberal awakening in other countries. It also was the first time that the British government intervened in the economy in a modern way. It usually did so with the approval of the liberal economists. To understand the liberalism of this period we should know something about the particular forms of intervention—the actual practice of policy—in addition to knowing what the ideas of the period were. In other studies I have not described the practice of policy, but in this I have. From a study of the ideas of policy and its practice one can deduce certain principles. I have put the principles together in a summary statement of what liberalism came to mean in the nineteenth century. I take the statement to be its meaning today also. The statement is Part III of the last chapter of the second volume and is entitled “The Meaning of Economic Liberalism.”
Each of the six chapters of the book is meant to be a fairly complete statement of the idea of economic liberalism, or of a major aspect of it, as it was expressed at a particular period in its history. But not every period is included here, and so the book is not a complete history of the idea. It omits much. There is nothing, for example, about liberal ideas in the Middle Ages. Other than a few references, there is nothing about economic liberalism on the Continent. There is nothing about the most conspicuous of all versions of liberalism—that associated with the Manchester School of economics. With the exception of the last, about which I have written another book. I have omitted these periods either because they are not so important as those that are included or because I have nothing to say about them which is sufficiently important or interesting to engage the reader’s attention.
In writing these studies I have had several purposes. One is to present information to those who, like myself, are interested in the development of economics. Most histories of the subejct say something about policy, especially liberal policy, but not in a way that seems to me to do justice to the ideas. I have wanted also to call attention to the ethical and political elements in economic policy and so to help in some way to create interest in political economy as a subject that is complementary to and not competitive with economic analysis. Analysis has become a formidable discipline and intellectually most respectable, but it still is what it always has been—a means of solving problems and not a field of inquiry that is its own justification. To solve problems we need to know more than positive economics. We also must know something about the political values that set the limits to the solutions. Every economist acknowledges this, even to the point of paying his respects to political economy. But much more effort is put into the positive side of economics than into the normative. It is effort of a very high order, and one wishes that some of it would be directed to normative economics.
There is one other purpose to this book—that is to bring to those outside economics some helpful and interesting information about liberal policy. We are, all of us, objects of policy because we are all affected by it. But we may also participate in the making of it. Knowing something about one of the great systems of policy will help us to understand what is happening and what choices are before us. This knowledge will not tell us what to think and do now. But it will tell us what once was thought and done. Whether the ideas described here are relevant today or whether they are only of historical interest is something for the present to decide. In making the decision, it will do well to compare its convictions with those of the past. It will find, I believe, that liberalism in the meaning given to it here has a history that is by no means over.
These studies have occupied me for a long while, and from time to time I have published parts of them as journal articles. This book, however, was planned as a group of studies about a single idea, and each study was written as a chapter of the whole. Some of the chapters were then rewritten and shortened in order to be suitable for journal publication. That is so of the first four chapters; the last two have not appeared before in any form. What is presented here represents my considered view of the subject. It is on some points identical with what it was when the articles were published, while on other points it is rather different. I wish to thank the editor of Ethics (University of Chicago Press) for permission to use in Chapter 1 of Volume I parts of my article entitled “The Moral Hero and the Economic Man” (Vol. LXI, No. 2, Jan. 1951, pp. 136-150); the editor of The Quarterly Journal of Economics (Harvard University Press) for permission to use in Chapter 2 of the same volume parts of my article “The Liberal Elements in English Mercantilism” (Vol. LXVI, No. 4, Nov. 1952, pp. 465-501), and in Chapter 2 of Volume II parts of my article “On the Politics of the Classical Economists” (Vol. LXII, No. 5, Nov. 1948, pp. 714-747); and the editor of The Journal of Political Economy (Chicago) for permission to use in Chapter 1 of Volume II parts of my article “Adam Smith and the Economic Man” (Vol. LVI, No. 4, Aug. 1948, pp. 315-336).
There are many people with whom I have discussed the subject and these studies and to whom I am grateful for what I have learned. I hesitate to name some without naming all of them, and from such a list there probably would be inadvertent omissions. However I must state my indebtedness to two of my teachers, Donald A. Anthony and Frank H. Knight, who interested me in the history of economics and directed my first studies in it. They cannot be held accountable for the ideas I have acquired since leaving them, but I must acknowledge my debt to them for what they have taught me.
NOTE ON THE CONTENTS
This work has had to be divided into two volumes, each of about fifty thousand words in length. In making the division I have tried to group the studies in a way that reflects the chronology of the subject and at the same time brings together those studies that express a common view. The reader may use each volume separately or the two of them together.
The first volume is about the intellectual origins of economic liberalism and the first applications of the idea to particular problems of national policy in England and America. It has the subtitle, “The Beginnings,” and it contains:
The second volume examines liberalism as it was expressed by the classical school of economics. This volume, subtitled “The Classical View,” contains:
The same foreword appears in both volumes because it is, I feel, a rather indispensable preliminary to the studies whether the two volumes are read separately or together. The notes at the end of each volume contain the works cited in it.