Econlib

The Library

Other Sites

 Front Page arrow Titles (by Subject) arrow The Science of Avarice - The Economic Point of View

Return to Title Page for The Economic Point of View

Search this Title:

Also in the Library:

Collection: IHS Studies in Economic Theory
Subject Area: Economics

The Science of Avarice - Israel M. Kirzner, The Economic Point of View [1960]

Edition used:

The Economic Point of View: An Essay in the History of Economic Thought, ed. with an Introduction by Laurence S. Moss (Kansas City: Sheed Andrews McMeel, 1976).

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


The Science of Avarice

As is well known, for a long time it was widely held that economists were able to study human action solely by subjecting themselves to the self-imposed limitation of considering only selfishly inspired behavior. On the strength of this popular opinion, economists came to be pilloried as viciously unrealistic or as having gotten themselves into “an entirely damned state of soul.”1 In a well-known passage the historian Buckle accounts for the difference in tone between Adam Smith’s Theory of Moral Sentiments and his Wealth of Nations by the hypothesis that in the latter Smith assumes only selfish motives, while altruistic motives find a place in the earlier work.2

For many years now, economists have been at pains to disassociate themselves from this view of economic activity. The latter is seen as reflecting all motives, altruistic as well as selfish. This contention, together with the broadening effect it possessed on the scope of economic analysis, is one of the basic undercurrents guiding the development of definitions of economics. At this point it is sufficient to observe that the connection between economics and selfishness was for a long time widely assumed. This assumption served as the foundation for a separate conception of the nature of economics, viz., as the science of the operation of self-interest in human activity.

Of course, much of the stress on selfishness which was ascribed to economists, or which was admitted by economists, did not involve the explicit definition of the subject in these terms. Selfishness was often merely a convenient assumption by means of which the analysis of the data could extract rather definite results. The essential character of economics may have been seen, for example, to concern material goods, and the postulation of selfishness was in such a case only an incidental simplification, made to assist the theorist, of the real economic phenomena. The discussion in the previous chapter, as a case in point, revealed the conception of economic affairs held by the classical economists to have been predominantly bound to a class of objects called “wealth.” How far the classical economists did, in fact, exclude from their consideration all human motives other than self-interest is a matter of controversy that need not detain us here. But to the degree that selfishness was assumed by Smith, Ricardo and their followers, it certainly did not constitute the essence of the phenomena that they undertook to investigate.

Indeed, the possibility of carving out a segment of activity governed by self-interest as a distinct subject of study could offer itself only to economists who recognized the hypothetical character of such an assumption. If a homo oeconomicus endowed with only one aspect of human nature, viz., that of greed, is postulated, then it is possible to see the whole body of economic theory as the extended exposition of the consequences of this greed. The knowledge that real men are actuated by other motives besides greed makes feasible the conceptual isolation of that aspect of human activity from which these other motives have been prescinded. But it is precisely this possibility that was not open to the earlier classical economists. In so far as these writers assumed the impulse to economic activity to arise from selfishness, they considered their assumptions to conform closely to the facts of the real world. “It is,” Ricardo wrote in a well-known passage, “self-interest which regulates all the speculations of trade...” Because they believed the pursuit of wealth to be characterized by self-interest, and because they conceived of economics as studying the phenomena of wealth, the classical writers made use of the concept of selfishness in their analysis. But this selfishness was only incidental to the real object of study. In no way did economics, as they conceived it, revolve exclusively around that aspect of man’s nature inspired by selfishness.

In fact it may fairly be argued that the stress that came to be laid on the hypothetical isolation of self-regarding activity provided the earliest major advance in the conception of the essence of economic affairs over that of the classical economists. The earlier classical writers had set up an objective subject matter for study, viz., wealth. The writers of the 1830’s, outstanding among whom were J. S. Mill and S. Bailey, found themselves rebelling against this position. It was becoming increasingly evident that what economists were investigating was not the objective phenomena of wealth, but rather the wealth-oriented actions of man. This step forward was taken most clearly and influentially in Mill’s essay On the Definition of Political Economy; and on the Method of Investigation Proper to It.3

The popular definition of the subject in terms of the production, distribution, and consumption of wealth provided Mill with a convenient point of departure. But the production of wealth, it is evident, involves a complete range of the sciences, including agriculture, physiology, chemistry, geology, etc., all of which cannot possibly be meant to be included under political economy.4 Nor is Mill satisfied to consider the subject as consisting of the general laws common to the production of all kinds of wealth. “The real distinction between Political Economy and physical science must be sought in something deeper than the nature of the subject matter....” It is to be found in the distinction between “physical and moral science.”

The laws of the production of...wealth are the subject matter both of Political Economy and of almost all the physical sciences. Such, however, of these laws as are purely laws of matter, belong to physical science, and to that exclusively. Such of them as are laws of the human mind and no other, belong to Political Economy, which finally sums up the result of both combined.5

For “the purposes of the philosopher,” Mill presses on with still further refinement and rigor of definition. Political economy does not treat of the whole of man’s nature;

...it is concerned with him solely as a being who desires to possess wealth...It makes entire abstraction of every other human passion or motive; except...aversion to labor, and desire of the present enjoyment of costly indulgences...6

In his final and most carefully formulated definition, the “laws of society” rather than those of wealth are set aside for investigation. Political economy is the science

which traces the laws of such of the phenomena of society as arise from the combined operations of mankind for the production of wealth, in so far as those phenomena are not modified by the pursuit of any other object.7

This conception of the nature of economics is thus closely bound up with the appearance on the literary horizon of that ill-fated creature, the notorious “economic man.”8 Mill sets up a being from whom he abstracts every human passion other than that for the pursuit of wealth. The laws of economics express the consequences of the interplay in society of the activities of economic men. In his Logic, Mill seems even more insistent on defining political economy as the study of the operation of human wealth-seeking activities rather than of the phenomena of wealth itself.9

The construction of a model of a human agent endowed solely with the passion for wealth carried with it, of course, the implication of the paramountcy of self-interest. Not all economists, to be sure, were prepared to exclude altruistic motives. Both Whately and Senior, for example, pointed out that wealth may be sought in order to be used for charitable purposes.10 But the tradition that was initiated by the emergence of homo oeconomicus was certainly responsible for the economists’ continued retention of explicit assumptions concerning the selfish motivation of the activities they investigated. Writers such as Bagehot, Lowe, Cunningham, and Edgeworth, who more or less openly held self-interest to be “the first principle of pure economics,” were simply carrying on the received tradition.11

The elevation of pecuniary self-interest into the carefully selected criterion for distinguishing activity capable of economic analysis marked a significant advance over the earlier classical position. Even granting that economic man was a monstrous caricature, he was yet a being who acted, and it was his actions that were the object of study. The earlier writers had taken wealth as their subject matter; to the economists after the 1830’s wealth was important merely as the object that aroused the particular kind of human behavior in which the economist was interested. Considerable effort has been devoted to the finding of traces of subjectivistic thinking in economics prior to 1870. A fair body of literature during this period has been brought to light in which may be seen the beginning of the reaction against the objective value theories of the classical school.12 It is tempting to see a significant parallel to this reaction against classical objectivism in the shift in outlook on the nature of economics from the conception of it as a science of wealth to the view that regarded it as the study of the man in quest of wealth. To Ricardo, who “stopped at the valuations of the market and did not press through to the valuations of the individual,” political economy was perfectly acceptable when conceived as an investigation into an aspect of the phenomena of wealth, with the relevant factors of human nature relegated completely to the background. To a Bailey or a Senior, whose outlook on value was further advanced, such a view must necessarily seem inadequate.

Yet in spite of the progress represented by the conception of economic activity as motivated essentially by pecuniary self-interest, this view still, of course, bears obvious signs of its close relationship to the earlier definitions of economics as the science of wealth. In fact, economics as the science of avarice is most illuminatingly understood as the link between economics as the science of wealth and the more sophisticated conceptions of the subject that have emerged in recent decades. The concept of wealth involved the postulation of some common quality in the objects constituting wealth—a quality that was generally identified as “material” or as catering to the “lower” needs of man. These objects themselves were the focus of economic attention. By shifting this focus of attention away from wealth itself and towards acting man in his quest for wealth, Mill and Bailey were still obliged to assign a significant role to wealth. And the qualities common to the objects constituting wealth became perhaps even more pivotal to economic analysis, since it was attraction towards these qualities that kindled and conditioned the avarice of economic man.

But the break with the earlier definitions formulated in terms of wealth, however slight it may seem, was enough to point the way to the complete extrusion of that clumsy and misleading concept from economics. Once economics was conceived as involving a certain pattern of behavior, or even a uniquely motivated kind of behavior, then the bonds that attached it to the class of objects constituting wealth could easily be broken. Although it was wealth that was the initial structural unit in the formation of the pattern of behavior of wealth-seeking man, this goal could soon be discarded as scaffolding unnecessary to the completed structure. The behavior of wealth-seeking man was found to be sufficiently distinctive, but at the same time sufficiently universal, in pattern to warrant a separate treatment in its own right. Economics could then be identified, not in terms of wealth, nor even in terms of men-in-quest-of-wealth, but in terms of a unique pattern of human behavior: the getting of the most for the least.

[[1]]J. Ruskin, Unto This Last, Preface, sec. 5, note.

[[2]]H. T. Buckle, History of Civilization (New York, 1871), II, 343. See also W. H. Hutt, Economists and the Public (London, 1936), p. 301, n. 2.

[[3]]Mill's essay was published originally in the October, 1836, number of the London and Westminster Review. The essay had been written several years previously. On this point see J. Bonar, Philosophy and Political Economy (3rd ed.; London, 1922), p. 239; see also Ashley, Introduction to his 1909 edition of J. S. Mill's Principles of Political Economy, p. xvi.

[[4]]J. S. Mill, “On the Definition of Political Economy,” reprinted in Essays on Some Unsettled Questions of Political Economy (1844), p. 127. (All references are to the 1948 reprint by the London School of Economics and Political Science.)

[[5]]Ibid., pp. 129–132.

[[6]]Ibid., p. 137.

[[7]]Ibid., p. 140.

[[8]]The earlier classical economists had used the concept of “economic man” but had not felt the need to define his nature, to state explicitly the degree of abstraction of which he is the product, or even to say whether he exists at all. This is easily understandable. In a science of wealth it is an obvious simplification to take into account only those aspects of human nature that seem to bear most directly on the phenomena of wealth. It is only for a Mill, for whom political economy deals exclusively with the “laws of mind,” that it becomes imperative to demarcate those areas in human nature that pertain specifically to the investigations of political economy. For an analysis of the role of economic man in classical political economy, see A. Fey, Der Homo Oeconomicus in der klassischen Nationalökonomie, und seiner Kritik durch den Historismus (Limberg, 1936).

[[9]]J. S. Mill, System of Logic, Book VI, ch. 9, sec. 3. A position remarkably similar to that of Mill seems to have been taken independently by Samuel Bailey, the author of A Critical Dissertation on the Nature, Measures, and Causes of Value; Chiefly in Reference to the Writings of Mr. Ricardo and His Followers (1825). It is unfortunate that Bailey's other writings, especially his essay On the Science of Political Economy, have received less attention. This essay was published as Discourse IV in S. Bailey, Discourses on Various Subjects Read Before Literary and Philosophical Societies (London, 1852); a footnote on p. 112 declares the essay on political economy to have been written in 1835 (that is, about a year before the publication of Mill's essay). Bailey objects forcefully to the usual definition of the subject in terms of wealth (pp. 107 f.). Like Mill, Bailey is concerned with distinguishing between the technical laws of production (which involve the physical sciences) and the economic laws relevant to political economy. Bailey unequivocally shifted the conception of economics from that of a science of wealth to that of a science of man and, in so doing, seems to have been tempted to create something suspiciously resembling Mill's economic man.

[[10]]R. Whately, Introductory Lectures on Political Economy (4th ed.; London, 1855), p. 16; N. Senior, An Outline of the Science of Political Economy (London, 1938), p. 27; for Senior's view of Mill's economic man, see M. Bowley, Nassau Senior and Classical Political Economy, pp. 61 f.

[[11]]See F. Y. Edgeworth, Papers Relating to Political Economy (London, 1925), I, 173. Edgeworth was aware of Marshall's denial of the necessity of self-interest for economics. See Edgeworth's review of the third edition of Marshall's Principles in Economic Journal, V, 586. On Cunningham, see his “The Perversion of Economic History,” Economic Journal, II, 498. For a fuller discussion of the place of self-interest in neoclassical economics, see W. H. Hutt, Economists and the Public (London, 1936), ch. XIX. See also F. H. Knight, “Professor Parsons on Economic Motivation,” Canadian Journal of Economics and Political Science, 1940, pp. 461 f.

[[12]]See especially M. Bowley, Nassau Senior and Classical Political Economy, ch. II.