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.

Fair use statement:

This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section of the individual titles, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.

Front Page > Reading Lists > Ian Dunois’ Free Market foundations

Ian Dunois’ Free Market foundations

This List Is By:

Ian Dunois

George Mason University

Economics student at GMU

Print this List

Print List (titles and citations)

Print Anthology (full texts)

Israel M. Kirzner, The Economic Point of View [1960]
Ludwig von Mises, Liberalism: The Classical Tradition (LF ed.) [1962]
Ludwig von Mises, Bureaucracy [1944]
H.B. Acton, The Illusion of the Epoch: Marxism-Leninism as a Philosophical Creed [1955]
Friedrich August von Hayek, “The Use of Knowledge in Society” [1945]

Back to Top
1: Israel M. Kirzner, The Economic Point of View [1960]

Israel M. Kirzner, 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).

Accessed from oll.libertyfund.org/title/304 on 2008-03-05

This work is copyrighted by the Institute for Humane Studies, George Mason University, Fairfax, Virginia, and is put online with their permission.

B'EZRAS HASHEM TO OUR PARENTS

Foreword

The inauguration of a systematic science of economics, an achievement of the social philosophy of the Enlightenment that also begot the doctrine of popular sovereignty, was a challenge to the powers that be. Economics shows that there prevails in the succession and interdependence of the market phenomena an inescapable regularity that man must take into full account if he wants to attain ends aimed at. Even the most mighty government, operating with the utmost severity, cannot succeed in endeavors that are contrary to what has been called “economic law.” It is obvious why despotic rulers as well as leaders of revolutionary masses disliked such doctrines. For them economics was the “dismal science” and they fought it indefatigably.

However, it was not the hostility of governments and powerful political parties that fomented the protracted discussions about the epistemological character and the logical method of economics in which the very existence and significance of this branch of knowledge were again and again questioned. What generated these debates was the vagueness that the early economists evinced in defining the field of their studies. It would be absurd to blame them for this want of clearness. They had sufficient reasons for concentrating upon those problems which they were trying to deal with and for neglecting others. What had stimulated their inquiry was definite issues of contemporary political controversies. Their great accomplishment was the discovery of the uniform order prevailing in the emergence of events previously considered chaotic. Only the later generations of economists were puzzled with the epistemological problems involved.

Doctor Kirzner’s book provides a historical account of all the solutions suggested in this debate. It is a very valuable contribution to the history of ideas, describing the march of economics from a science of wealth to a science of human action. The author does not, in the fashion adopted by some recent histories of economic doctrines, indulge in value judgments and paradoxical observations. He prefers to follow the sober methods of the best historians of economic theories, Böhm-Bawerk and Edwin Cannan. Every economist—and for that matter everybody interested in problems of general epistemology—will read with great profit Doctor Kirzner’s analyses, especially his treatment of the famous discussion between Benedetto Croce and Vilfredo Pareto or the critical examination of the ideas of Max Weber and Lionel Robbins.

Essays on the history of economic thought are to be appreciated not only purely as history. No less important is the fact that they enable us to re-examine the present state of economic theory in the light of all attempts earlier generations made for their solution. In comparing our point of view with past achievements and errors we may either detect flaws in our own theories or find new and better reasons for their confirmation. Doctor Kirzner’s thoughtful essay is a real aid in such a re-examination and in this consists its great value.

LUDWIG VON MISES

Introduction to the Second Edition

The first edition of Israel M. Kirzner’s The Economic Point of View was published in 1960. In the meantime, the dogmatic brand of positivism that advocated the banishment of all references to mental states from scientific explanations and their replacement by the “data of the senses” has been discredited. In addition, many contemporary philosophers concede the inherent rationality of human action, that is, man’s capability of freely choosing among alternatives (as well as creatively discovering what these alternatives are); and further the indeterminateness of individual behavior on the basis of what has gone before. Yet despite these important concessions to the subjectivist position regarding methodological precepts consistent with sound scientific investigation, the full import of the teachings of Ludwig von Mises in Human Action and of Frank H. Knight in On the History and Method of Economics about the subjective character of economic phenomena either has not been fully digested by practicing economists or else has been received with great hostility by those anxious to submit their models to statistical testing.

As Kirzner’s study makes clear, the subject matter of economics is human action, and a concern with the abstract character of action is what defines the economic point of view. Human action in contrast to, say, reflexive action is action directed toward goals and purposes. Furthermore, while such action often results in the measurable displacement of real world objects, the significance of such displacements cannot be adequately understood by merely correlating (or regressing) one displacement with (on) another. Economic explanations must either explicitly or implicitly make reference to individual purposes and plans; otherwise they ignore a realm of experience as real as the world of things. While modem philosophers of science often insist that to explain an event is to show that it is an instance of a scientific law, Kirzner would add this proviso: the general law must itself be explicable in terms of the purposes and plans of acting individuals. According to Kirzner, the entire science of economics is a subset of the broader (but less developed) discipline that Mises termed “praxeology,” or the science of human action.

It took two hundred years for economists to discover that the subject matter of their discipline was none other than the structure of human action itself. Much of Kirzner’s study is a historical survey of the various attempts economists have made to define the scope of their discipline. According to Kirzner, significant progress in this area began only in the second quarter of this century when Lionel Robbins, Mises, and Knight instituted a shift from a “search for a department of human affairs to which the adjective ‘economic’ applies, to a search for the appropriate aspect of affairs to which economic concepts are of relevance.” Kirzner’s study is controversial when he declares that, by insisting on the subjectivity of their discipline, Mises and Knight produced an advanced and more perfect understanding of what in fact constitutes economic knowledge.

Modern economists are generally quite comfortable with some variant of Robbins’s definition of economics as a discipline concerned with the allocation of scarce means among alternative ends where the means themselves are capable of a variety of applications. What they are apparently less willing to do is go beyond Robbins and insist, after Mises, that the science must be founded on an analysis of the subjective categories of human action because these categories provide the only firm grounding for economic laws. Modern economists tend to consider economic laws useful, not because they are consistent with our understanding of human action, but because they help organize large bodies of business and government data. Often economists act as if the only importance of economic theory is the ease and elegance with which it helps shuffle and reshuffle large bodies of statistical data (an unfortunate consequence of the novelty and increased availability of high-speed computers).

In recent years the problem or ‘grounding aggregate relationships on microeconomic foundations has attracted some attention among economists. This concern is certainly in the spirit of the program Mises and other members of the subjective school advocated many years ago. But it is also important to realize that aggregate relationships are themselves worthless if the statistical data on which they are based distort the underlying reality they are supposed to represent.

Consider, for example, the notion of “cost” and how it is often misnamed by economists. The cost of a specific action to a decision maker is the next best opportunity he gives up when he chooses that course of action over all others. The cost of a certain action is always related to another course of action that has not been taken. But if the other course of action has not been taken, then there is no record of it in the market. Thus, at best, what economists call the “cost of production,” or the money outlay of a firm in producing an object, may represent the value of the next best application of these resources to the other market participants; but whether or not these expenses also measure the opportunity cost forgone by the firm’s decision maker is another question. A firm may be making a money rate of return of 20 percent on its financial investment at one point in time and be quite satisfied. At another point in time a money return of 22 percent may not be enough to keep that firm in the industry if it discovers an opportunity for making greater profits still. Clearly the connection between recorded, or accounting, costs and those costs that influence human choice may be so tenuous that statistical laws founded on the former will reveal very little about human action itself.

In the last decade or so applied economics has become synonymous with trying to change the behavior or specific values of statistical aggregates. The important question of how these statistics are at all related to the qualitative choices made by acting individuals is treated as if it were unworthy of serious scholarly investigation or as if it were something better left to government accountants. Thus, where once the goal of a sound monetary policy was to guarantee a stable and secure currency, the modern concern is that of “stabilizing prices,” which frequently means no more than keeping the consumer price index constant at some base-period value or else permitting departures from that base value according to some definite and predictable rule. Often a government policy designed to contribute to the fullest utilization of resources becomes bogged down to the point of an obsession with the behavior of the Bureau of Labor Statistics’ estimate of unemployment. The fact that time spent unemployed may be used for an entirely different purpose in 1975 from that used in 1933 does not seem to bother many economists.

If, however, one considers the most important task of applied economics to be the discovery of the type of institutional structure that provides for the greatest coordination of individual plans and efforts, then the subjective character of the discipline is brought to the forefront. Here the goal of science is to aid men not in maximizing or minimizing some statistical average, but in eliminating or lessening the frustrations that occur when the plans of one individual come into conflict with those of another: For example, it is not the physical existence of capital on which the prosperity of society’s members depends but rather the position these goods play in the plans of acting individuals. One need not go so far as some members of the subjectivist school and argue that statistical investigations are of absolutely no value in the derivation of economic laws. It is sufficient to insist that the meaning of such measurements be constantly checked against the underlying human plans and purposes that they allegedly represent.

Thus at the very heart of the science of economics is the idea that capital goods, consumer goads, costs of production, and the like take on economic significance, not because of their physical characteristics or the procedures of tax accounting, but because of the meaning their individual owners attach to them in the course of pursuing their ends. It is my hope that this new edition of Kirzner’s study of The Economic Point of View will reacquaint economists with the subjective basis of their science and help to engender a more critical attitude toward modern-day research methods.

LAURENCE S. MOSS
- Charlottesville, Virginia
October 1975

Author’s Preface

The present essay is an attempt to explore with some thoroughness an extremely narrow area within the field of the history of economic thought. Although this area is narrow, it merits a scrutiny quite out of proportion to its extension, relating as it does to fundamental ideas around which the entire corpus of economic thought has revolved for some two centuries. It remains as true today as ever before that the direction taken by economic theory is in large measure determined by the “point of view” adopted by the economist as his special perspective. It is in this connection that the present study seeks to make its contribution, by setting up the problem in its proper context as a chapter in the history of ideas.

The nature of the subject matter, in this instance, has made thoroughness in its exploration a matter of extreme difficulty, exhaustiveness a sheer impossibility. In general my aim has been to provide a careful survey of the literature relevant to each of the ideas treated, while resolutely refusing to succumb to those imperious temptations which would have turned my book into an annotated bibliography. This has frequently moved me to refrain from mentioning works of considerable importance in order to avoid fruitless repetition of ideas already cited from other sources. Despite the self-restraint exercised in this regard, I have felt it wise to relegate all notes and references to the end of the book, in order to make for a smoother account in the body of the work.

My exploration of the subject dealt with in this book began several years ago while writing my doctoral dissertation under Professor Mises. Much of the material gathered in my work on that project has provided a useful foundation for the broader investigation undertaken in preparation for the present volume. Grateful appreciation is here accorded for the assistance which enabled me to pursue my researches at that time, first as Volker Fellow, and then as an Earhart Fellow, at New York University.

My intellectual debt to the unique contributions made by Professor Mises to the epistemological problems discussed in my book is, I believe, sufficiently evident throughout the work itself. Here I take particular pleasure in recording the friendly patience and warm encouragement which he has shown me unstintingly throughout the project, as well as the inspiration which I have derived from his own enthusiasm and penetrating integrity of thought, as unfolded in countless discussions, both privately and in seminar.

I have benefited on numerous occasions from highly valuable discussions on various aspects of the study with my colleagues in the Department of Economics, School of Commerce, New York University. I am, in addition, particularly grateful to Dean T. L. Norton and Professor T. J. Anderson, Chairman of the Department, for making special arrangements to lighten my teaching duties during a part of the time spent in research on this project, as well as for their constant encouragement during its completion. Valuable assistance in connection with questions of style and clarity of expression has been gratefully received from Dr. Arthur Goddard. Responsibility for the shortcomings of the work is, of course, undividedly my own.

I have, finally, the pleasant if somewhat difficult task of acknowledging my wife’s contribution, both tangible and intangible, to the emergence of the volume. My indebtedness in this regard (as well as the difficulty of its expression) is the deeper for the peculiar circumstance that the altogether indispensable nature of this contribution is itself in large measure to be ascribed to conditions rendering it at the same time exceptionally meritorious.

ISRAEL M. KIRZNER
- New York, N. Y.
March, 1960

Acknowledgments

The author gratefully acknowledges his indebtedness to the courtesy of the following institutions, associations, and publishers:

The American Economic Association (for permission to quote from their publications, including the Survey of Contemporary Economics, 1949); George Allen and Unwin Ltd. (for permission to quote from N. Senior, Outline of Political Economy, and J. Bentham, Economic Writings, edited by Stark); Jonathan Cape Limited (for permission to quote from L. Mises, Socialism, and L. Robbins, The Economic Causes of War); Columbia University Press (for permission to quote from E.R.A. Seligman, Economic Interpretation of History, 1902, and from Political Science Quarterly, 1901); the editorial Board of Economica (for permission to quote from Economics, 1933, 1941); the editor of the Economic Record and the Melbourne University Press (for permission to quote from the Economic Record, No. 61, November, 1955); The Free Press (for permission to quote from Max Weber on the Methodology of the Social Sciences); Harper and Brothers (for permission to quote from F. H. Knight, The Ethics of Competition); Harvard University Press (for permission to quote from the Quarterly Journal of Economics and from H. Myint, Theories of Welfare Economics, 1948); William Hodge and Co. Ltd. (for permission to quote from Max Weber, Theories of Social and Economic Organization); Howard Allen, Inc. (for permission to quote from K. Boulding, The Skills of the Economist); Richard D. Irwin, Inc. (for permission to quote from T. Scitovsky, Welfare and Competition); Kelley and Millman, Inc. (for permission to quote from W. Mitchell, The Backward Art of Spending Money); Alfred A. Knopf, Inc. (for permission to quote from S. Patten, Essays in Economic Theory, edited by R Tug well); Longmans, Green and Co., Ltd. (for permission to quote from R Hawtrey, The Economic Problem); The Macmillan Company, New York (for permission to quote from L. Haney, History of Economic Thought, 1949, F.S.C. Northrop, Logic of the Sciences andHumanities, 1949, A. Marshall, Principles of Economics, 1920); Macmillan and Co. Ltd., London (for permission to quote from Economic Journal, International Economic Papers, and works by Croce, Hutchinson, Jevons, Macfie, Marshall, Robbins, and Pigou; for the Pigou works acknowledgment is gratefully extended also to the St. Martin’s Press, Inc., New York); Oxford University Press and the Clarendon Press, Oxford (for permission to quote from the Proceedings of the British Academy, and from 1. Little, Critique of Welfare Economics); Routledge and Kegan Paul Ltd. (for permission to quote from P. Wicksteed, The Common Sense of Political Economy, F. A. Hayek, Road to Serfdom, and G. Myrdal, Value in Social Theory); Staples Press (for permission to quote from E. Cannan, Wealth, E. Cannan, Theories of Production and Distribution, D. H. Robertson, Economic Commentaries); University of Chicago Press (for permission to quote from F. A. Hayek, Road to Serfdom, F. H. Knight, History and Method of Economics, and from the Journal of Political Economy); The Viking Press, Inc. (for permission to quote from T. Veblen, The Theory of the Leisure Class, The Place of Science in Modern Civilization, Essays in Our Changing Order, and W. Mitchell [editor], What Veblen Taught); Yale University Press (for permission to quote from L. Mises, Human Action).

1

On Defining the Economic Point of View

...What does the economist economize? “‘Tis love, ‘tis love,” said the Duchess, “that makes the world go round.” “Somebody said,” whispered Alice, “that it’s done by everybody minding their own business.” “Ah well,” replied the Duchess, “it means much the same thing.” Not perhaps quite so nearly the same thing as Alice’s contemporaries thought. But if we economists mind our own business, and do that business well, we can, I believe, contribute mightily to the economizing, that is, to the full but thrifty utilization of that scarce resource Love—which we know, just as well as anybody else, to be the most precious thing in the world.
Sir Dennis H. Robertson

It is impossible to draw a clear–cut boundary around the sphere or domain of human action to be included in economic science.
Frank H. Knight

Social phenomena, like other matters of interest to be found in the real world, lend themselves to analysis by a number of disciplines. The same raw data may be capable of classification and explanation in a variety of ways, each of which complements the others and so contributes to the full grasp of the phenomena under consideration. In the interests of reaping the advantages attendant upon the division of labor, a sequence of events may be seen as reflecting the simultaneous operation of several distinct chains of cause and effect. Each of these chains may then become the focus of inquiry, and it may enhance the advantages to be derived from the division of labor to be able to set forth in precisely what ways any one such causal chain constitutes a potentially fruitful theme for separate investigation.

Such a classification of the factors in the observed phenomena that require explanation will, of course, reflect the different points of view with which the observer approaches the data. In the final analysis, the definition of a particular field of investigation is tantamount to the exposition of the point of view chosen by the investigator.

With regard to economics and to the “economic point of view,” many attempts, under a variety of guises, have been made to describe this peculiar field of investigation. Writers have defined the noun “economy”; they have expatiated on the precise demarcation of the scope of economics; they have indulged in lengthy disquisitions on the character of economic activity and on the nature of economic interpretation. They have discussed at length the relationship of the economist to the sociologist, the psychologist, the moralist, the technologist, and the jurist. And they have, in addition, engaged in heated and protracted controversies about the utility of these same definitions, disquisitions, and discussions.

They have, in short, made a large number of attempts to determine precisely the particular point of view of the economist, to dispute existing expositions of it, or to deny altogether to the economist the joy of having a distinct point of view. The sum total of this activity over the better part of two centuries is a vast and fascinating literature. The contemplation and subsequent digestion of this literature yields a series of formulations of the economic point of view that are astounding in their variety. The present essay attempts to survey the literature and to review in historical perspective this wide range of formulations. As a chapter in the history of ideas, this account of the constant search for the precise expression of the point of view of the economist focuses on the particular avenues by which it has been approached and on their remarkable heterogeneity.

Although the present account is historically oriented, we shall adopt the topical, rather than the chronological, approach. We shall not present the various formulations in the order in which they were successively proposed in the history of economic thought. Instead, we shall take up one by one the principal groups of definitions to be found in the literature and shall treat each of them separately as fully as possible. The part played by each group in the history of the problem will become apparent from the discussion of the definitions themselves. We shall discover, in fact, that at any one time a number of widely differing formulations have usually been current. It will be convenient, therefore, to devote to each of these groups of formulations a discussion of its development that will be complete in itself, without the distraction of noticing the simultaneous parallel developments of other definitions.

In this introductory chapter we shall attempt to bring our problem into perspective. It will be helpful in this connection to discuss the significance to be attached to the task of making explicit the nature of the economic point of view; to make clear which operation is, and which related operations are not, the objects of our interest; and to survey briefly the place that has been occupied in economic thought by the attempts to elucidate this economic point of view.

The Economic Point of View and the Scope of Economics

The formulation of the nature of the economic point of view is, of course, intimately related to discussions concerning the scope of economics. The problem of the scope of economics, however, has frequently involved questions with which this essay has nothing to do, and it is perhaps worthwhile to make this clear at the outset. Marshall once wrote to John Maynard Keynes: “It is true of almost every science that, the longer one studies it, the larger its scope seems to be: though in fact its scope may have remained almost unchanged. But the subject matter of economics grows apace...”1

This growth in the subject matter of economics of which Marshall writes is typical of those aspects of the question with which we are not concerned. A perusal of a list of courses offered in the economics department of any university or a cursory examination of the catalogue of the economics room in a large library will easily convince one of the luxuriance of this growth. It is clear that “economics” covers a body of facts, figures, theories and opinions embracing a vast range of phenomena related to one another only in the most tenuous way—often merely by historical accident. At least one outside observer of the controversies concerning the scope of economics has hinted darkly that they represent simply a way of claiming the exclusive right to teach certain subject matter in the universities.2 Dealing, over half a century ago, with the “economic” interpretation of history, Benedetto Croce wrote:

When it is asserted, that in interpreting history we must look chiefly at the economic factors, we think at once of technical conditions, of the distribution of wealth, of classes and subclasses bound together by definite common interests, and so on. It is true these different representations cannot be reduced to a single concept, but no matter, there is no question of that; here we are in an entirely different sphere from that in which abstract questions are discussed.3

Discussions concerning the scope of economics frequently involve these “different representations” that cannot be reduced to a single concept. Our own inquiry, on the other hand, concerns that entirely different sphere in which abstract questions are discussed. And in this sphere it does indeed matter whether or not the term “economic” is understood as being reducible to a single concept; whether, in other words, it is understood as connoting a distinct “point of view.”4

Our problem, then, relates not to the scope of the subject “economics,” but to “economic theory.” When we speak of the point of view of the economist, we shall have him specifically in mind, either as a theorist or as the applier of theory. For ordinary purposes, as Cannan remarked,5 it may well be true that economic things can best be described as economic. The emergence of a voluminous literature attempting to define the economic point of view is not, however, to be dismissed as unfruitful pedantry; it is rather the expression of concern with the epistemological character of economic theory to an extent that goes far beyond that sufficient for ordinary purposes.6

The point can perhaps be expressed somewhat more succinctly by the use of the terminology of the logician. Definitions in general lend themselves fundamentally to classification as either nominal definitions or real definitions.7 The former relate to “names” and attempt to interpret given symbols, verbal or otherwise. Real definitions, on the other hand, try to define “things,” to expose in some way the “essence” and “nature” of the thing defined. The formulations of the economic point of view that are of interest to us in this essay do not content themselves with providing a translation of the word “economic”; they seek to reveal to us the “nature” of the definiendum—which in this case is a concept, a “point of view.” The fascinating variety of these formulations reflects, as we shall see, the numerous, quite distinct operations that logicians have discovered to have been actually performed when men have set out to seek real definitions.

The Multitude of Economic Points of View

Certainly the most outstanding result of the urge to expound the nature of the economic point of view has been the number and the range of the definitions to which it has given rise. This startling multiplicity and variety of formulations was noticed long ago—at a time when their number was modest in comparison with the subsequent accumulations. And for over three–quarters of a century the depressing lack of unanimity among these formulations has led writers to doubt seriously whether they have any value at all.8

Economists have, for example, been well agreed among themselves that the operations of the merchant are of specific interest for the economic perspective on social phenomena; but at this point their unanimity abruptly breaks down. For some, the merchant is engaged in economic activity because he deals in material goods; for others, because his operations involve the use of money; for still others, because these operations hinge on acts of exchange. Some writers see the merchant as an economic agent be- cause his activities are allegedly motivated by selfishness or marked by a peculiar shrewdness in calculating the pros and cons of his dealings. Others see his relevance for economics in that his wares are to some extent related to the maintenance of human life; others, in that they pertain to human “welfare.” Still others classify mercantile pursuits as economic because they involve the judicious disposition of scarce means, while others again find their economic character in their reflection of human motives that permit of measurement. And the list could be still further extended.

The disquietude to which the contemplation of such an array of criteria gives rise is deepened by the realization that in most cases each of them represents a completely different opinion concerning the function of economic analysis. Nor is our equanimity restored by observing the diversity of ways in which the problem of definition is approached. Probably the most significant differences are not those among the specific definitions arrived at, but the disagreements among writers concerning the kind of entity that they are seeking to define and the very direction in which they are to begin their search. Definitions of economic science have time and again required preliminary discussions revolving around the question whether the discipline concerned a kind of object, a kind of activity, a kind of man, or a kind of satisfaction or welfare.

The natural consequence of this state of affairs has been to stimulate frequent soul–searching among economists about the fundamental purpose of defining the economic point of view, as well as a salutary awareness of the real complexity of the problem. The fact that so many different starting points to a territory of knowledge are conceivable is a sign of the intricacy with which the purely economic must be intertwined with other phenomena. And it raises serious questions regarding the very concept of a specifically economic point of view and the usefulness of its precise formulation through rigorous definition.

The Controversy Over the Utility of Definition

As we shall discover, a number of sharply contradictory opinions have been expressed on the usefulness of undertaking the careful definition of the economic point of view or of the nature of the subject matter of economic theory. To those who have considered such a task as significant, its fulfilment represents in itself a distinct scientific achievement. On the other hand, many writers have been at pains to disassociate themselves from an undertaking whose accomplishment seems, in their opinion, to possess no scientific value in itself nor to promise any fruitful results for further work. This book will deal in some detail with many more or less careful attempts at such a definition; and it is only proper to pause to consider the question whether these attempts were potentially fruitful or were by their very character necessarily doomed to be wordy disquisitions, fertile in nothing but the stimulation of sterile controversies.

Among those considering any search for a precise definition of the economic point of view to be a barren enterprise, we find Pareto, Myrdal, and Hutchison.9 Pareto denied that there is objectively an economic phenomenon and considered it therefore “a waste of time to investigate what it may be,” since only a manmade distinction is in question. Myrdal, writing some thirty years later, voiced a closely similar view. A definition of economics can only be a search for arbitrarily drawn boundary lines. “Economics,” in Myrdal’s view, is the only term regarding the precise definition of which the economist need not be concerned; nothing in economic science depends upon it. Hutchison has flatly declared that “the actual assignment of a definition to the word ‘Economics’ does not appear to solve, or even help in the solution of, any useful scientific problem whatsoever.” These pronouncements seem typical of what one writer has noticed as a widespread impression that the discussions concerning the nature and scope of economics “are merely an endless and useless logomachy.”10

But the contrary opinion has been repeatedly expounded. The very voluminous literature on defining economic theory, including the works of the most illustrious masters of the science, constitutes in itself a formidable monument to this position.11 Robbins especially has several times vigorously denied that it is a waste of time to attempt a precise delimitation of the field. It is, on the contrary, a “waste of time not to do so.”12 The science has developed to the point where further progress can take place only if the objective is clearly indicated; where problems are suggested only by “gaps in the unity of theory.” Knight has referred to the delimitation of the nature and content of value theory as “perhaps the ultimate conceptual problem in economics.”13 Macfie, among others, has pointed out the harm that can be done by a lack of a clear–cut definition; more especially he has stressed the distortion that a faulty definition could introduce into the character of the science.14

For the appreciation of the historical trend to the investigation of which this essay is devoted, it is important to understand the nature of this sharp divergence of views concerning the usefulness of a precise definition of the economic point of view. It is possible to interpret the disagreement as merely the expression of different attitudes towards the utility of expending energy in discussing the nature of economics, as compared with that of the effort devoted to the actual increase of our stock of economic knowledge. Numerous justifications for merely perfunctory attempts to provide a definition of the economic point of view do, in fact, stress the great difficulty of the undertaking, in conjunction with its alleged lack of importance for the work of the economist.15 The disagreement might thus be understood as simply reflecting differing estimates of the worthwhileness of the alternatives costs involved in achieving intellectual tidiness in the systematic exposition of the science. But such an interpretation would be a superficial one and would ignore the most significant aspect of the controversy.

An Interpretation of the Controversy

The writers who have denied the fruitfulness of the precise delimitation of the scope of economic theory must be considered as constituting a group whose views, in effect, make up yet another “definition” of the economic point of view—one that altogether denies any such concept. The notion of a peculiarly economic point of view has been variously defined in terms of a large number of different criteria. The subsequent chapters of this essay set forth the more important of these formulations. Certainly it is of moment that there is place found for yet a further attitude towards the notion of a uniquely economic perspective—an attitude that completely fails to recognize any such unique point of view. The disagreement concerning the usefulness of defining economics is thus reducible to a far more interesting controversy: one that deals with what, in fact, is meant at all by defining economics; a controversy concerning the very existence of that economic point of view which we are asked to define.

The issue may be seen most clearly in the question with which one writer found himself faced before embarking on the search for a definition of the economic principle. He asked himself whether economics is “a pie which every economist can...make up with his own ‘recipe,’ or is it a given pie...which is basically made up of well–defined and hardly changeable ingredients? In other words, is economics what the economist is prepared to let it be, or does economics have a ‘nature’ of its own...?”16 Once it is denied that economics has a “nature” of its own, once it is declared that no recipe for a uniquely economic pie, in fact, exists, then, of course, any lengthy search for such a recipe must seem a waste of time. And, similarly, the determination of the particular recipe that may, quite arbitrarily, have been used by some or many economists to make up their own pie then becomes a quite uninteresting undertaking.

If, however, it is maintained that economics has a nature of its own, then it may clearly seem of the highest interest to bring to light the precise character of this economic point of view. Moreover, once the existence of a given recipe has been discovered, and the conviction has been acquired that economics is not a pie to be made up at will, then definition becomes important for yet another reason. It becomes of the first moment to expose the specific character of economics, if only to convince the doubtful of the existence of this uniquely economic point of view that they are so much inclined to deny. The search for the precise nature of economic theory becomes of importance simply because it offers proof that economics has a “nature of its own.”

Definitions, as we have seen, may be either real definitions or nominal definitions. Now, a nominal definition may be given to a term even though one is convinced that no real “thing” in the world in fact corresponds to what the term signifies. But one can embark on a search for a real definition only if it is recognized that the term to be defined actually represents a thing or a concept the essence or nature of which can be set forth. If it is denied that the subject of economic theory displays any essential unity that might be worthy of precise characterization in a definition, then it is clear that any definition of the discipline must remain merely nominal. And if it is believed that economists have been arbitrary in their selection of their problems, then there can be little value in the formulation of the nominal definition of economics.

On the other hand, the discovery in economics of an entity of which a real definition may be advanced promises an interesting range of investigation. It has been demonstrated that when men have attempted to obtain real definitions, they have in many cases proceeded to engage in a wide variety of operations.17 In some cases a search for a real definition of X has meant the search for the key to X, for a single fact from which all the facts of X can be deduced. In other cases the search for real definitions has meant the search for “abstractions,” i.e., the “becoming aware for the first time of a new general element in one’s experience and giving it a name.” In still other cases real definition has concealed the attempt to analyze an abstraction. (A school child in learning that the circle is the locus of all points in a plane equidistant from a given point has learned the analysis of a previously known abstraction, the circle.)

It is not difficult to understand that when writers concerning the scope of economic theory believe themselves to have discovered the “key” with which to explain all departments of economic life, they may feel pardonably complacent about the usefulness of the “definition” in which their discovery is crystallized. It is still more understandable that economists should stress the usefulness of definition when their own formulation of the nature of economics reveals to the world their awareness of a new general element in their experience. Croce provides perhaps the best example of this situation. He was aware of a new general element in his experience of human affairs. This element was not moral, it was not technical, nor did it coincide with any other already–named abstractions. In his formulations, Croce made a vigorous attempt to present this abstraction to the attention of the world by ascribing to it the word “economic.”

When definition entails, in addition, the task of analyzing this newly presented abstraction, that operation becomes more than ever meritorious. If in the effort to provide an adequate definition of economics, an attempt is made to analyze the concept of economy, for example, one necessarily becomes involved in a problem of economic science itself. It was here that Croce could most effectively criticize Pareto’s view that the cutting off of that slice of phenomena which is to constitute the field of economics is a quite simple and arbitrary affair.

You talk of cutting away a slice from a concrete phenomenon, and examining this by itself, but I enquire how you manage to cut away that slice? For it is no question here of a piece of bread or cheese into which we can actually put the knife, but a series of representations which we have in our consciousness, and into which we can insert nothing except the light of our mental analysis. In order to cut off your slice you would thus have to carry out a logical analysis...18

When the nature of economics is defined in this way, by the analysis of a unique general element in our consciousness to which only the term “economy” corresponds, then it must seem very obvious indeed that faulty definitions can seriously distort the character of the science. And when the analysis of this element has been made possible only by virtue of familiarity with the substantive content of the science itself, then its formulation into a definition can clearly take on the character of a positive scientific contribution. It is in this sense that Hayek, in a somewhat different context, was able to write:

It is one of the causes of the unique position of economics that the existence of a definite object of its investigation can be realized only after a prolonged study, and it is, therefore, not surprising that people who have never really studied economic theory will necessarily be doubtful of the legitimacy of its existence...19

From this perspective it will be useful to survey rapidly in the next few pages the historical trend in the attention that economists have paid to the definition of their subject. This will make clear what they have, at various times, looked for in such a definition. Our survey will thus provide a useful introduction to the more detailed discussions in the subsequent body of the essay.

The Economists and Their Definitions: the Classical Economists

Modern investigations into classical economic thought are gradually providing us with a more coherent picture of the intellectual scenery in early nineteenth–century political economy. Among the more important contributions in this direction is the final interment of the idea that there was ever a happy unanimity of opinion, a generally accepted body of theory in the propagation of which the classical economists were a united band of enthusiastic missionaries. Similarly the notion, once widespread, that the classical economists were as a body unconcerned with the methodological foundations of their work is rapidly disappearing from discussions of the subject.20

It seems worthwhile to dispel the rather common impression that the classical economists were generally unconcerned with attaining and enunciating a precise definition of the subject of their inquries.21 This is by no means the case. It is true that J. S. Mill, writing in 1836,22 felt obliged to apologize for the lack of a definition of political economy “framed on strictly logical principles,” by explaining that the definition of any science “has almost invariably not preceded, but followed, the creation of the science itself.” But many economists had already felt the need to delineate the boundaries of their inquiries. And while it is true that the classical economists were generally in broad agreement concerning what it was that they were talking about, they were by no means agreed about how to demarcate this area of their in- vestigations or even how to conceive the unity and logical nature of their field.

The early economists, in fact, when offering definitions of their science, were often far more earnestly concerned with expressing its true essence and nature than were many of their successors. Although the latter, as Mill asserted, may have been better equipped for this task, they had far less occasion to engage in it. For the thinkers of the late eighteenth and early nineteenth centuries, there was a real need for a mode of definition that could justify the conception of a new and separate science. While their definitions might only imperfectly indicate the actual character of their inquiries, they still had to demonstrate the peculiarity in subject matter or method of investigation that prevented economics from being subsumed under some wider, extant discipline.

Classical writers could express themselves about the nature of the economic in two distinct ways. They could define the subject known as political economy. Or, having defined political economy as the science of wealth, they could proceed to set forth the nature of that wealth with which it was maintained that economics is concerned. Each of these approaches was freely used both before and after Mill’s own elaborate attempt to define political economy.

Yet it is true that after 1830 a trend toward more sophistication in definition is undeniably visible. Methodological self–examination became a fairly fashionable undertaking. It was in this period that many of the assumptions hitherto implicitly accepted by economists were first brought to light, and most of the important issues that were to be the subject of methodological controversy over the succeeding century were first given explicit statement. As far as the question of the scope of economics was concerned, discussions treated it as a problem in its own right rather than as one merely introductory to a more important topic. Senior, J. S. Mill, and later Cairnes all devoted careful attention to definition, and so also did many lesser–known economists. At a meeting of the Political Economy Club of London in 1835 the question of the scope of the discipline was put up for discussion. (In 1861 Senior proposed a similar question for debate at the club.)23

Moreover this period reflected a significant advance in the actual approach taken to the task of setting forth the nature of the economic. As will be seen in the subsequent chapters of this essay, writers after 1830 began to rebel against the more extremely objective view of it as the science of wealth that the earlier classical economists had generally held. To several writers after 1830 it was becoming increasingly evident that what they were investigating was not so much a set of objective phenomena whose common denominator was wealth as the phenomena resulting from the wealth–oriented actions of men. What the fundamental characteristic of such actions was, and what the precise balance to be maintained in political economy between the facts of human nature and those of the external world should be, were the subjects of lively discussion. But the first step had been taken along the road toward emancipating economics from its ties to wealth and material welfare.24

The Economic Point of View: the Background of the “Methodenstreit”

After 1870, attempts to define the nature of the economic were definitely colored by the intellectual background of the period. In Germany, Austria, and England economists were paying a good deal of attention indeed to the necessity for reconstructing economics “from the ground up.” This necessity was proclaimed by both groups that were in reaction against the hitherto dominant classical economics. Those following Roscher, Hildebrand, and Knies in their revolt against the abstract reasoning of Ricardian–type economics, as well as those who with Menger and Jevons were dissatisfied with the objectivism of the classical economists—all were imbued with the desire to make over the entire discipline. Inevitably this desire was accompanied by a flourishing self–consciousness on the part of economists in regard to the status of their discipline as a science, its relation to kindred branches of learning, and, in general, its objectives and the kind of knowledge it might be expected to furnish. Together with their researches into economic problems proper, the leaders of both new schools of economic thought felt called upon to still both their own misgivings and those of the public at large concerning the nature and significance of a subject whose methods of approach, after a century of study, its own students were branding as unsound.

It is true, of course, that these discussions came to hinge on the narrower problem of method rather than on that of scope. Even definitions of economics were required, during this period, to embrace statements concerning the purpose and the method of the discipline as well as the character of its subject matter.25 But the methodological points that were at issue in the Methodenstreit did have a direct bearing on the conceptions that were formed of the character of economic phenomena. At the risk of some excusable simplification, the controversy over method could, indeed, be described quite clearly in terms of the different conceptions of the phenomena purportedly investigated by economics. According to the Historical School, economics seeks to describe the phenomena of the real, empirical economic world as it unfolds in its setting of time and space. According to the “theoretical,” “abstract” school of thought, on the other hand, the task of economics is not—or, rather, cannot be—to explain “individual” (or particular) economic phenomena, but only to discover the regularities, the “general” chains of cause and effect, that underlie the innumerably various forms that present themselves in economic history.26

Although this statement of the disagreement does not, of course, point to any simple parallel disagreement concerning the nature of the economic, it does throw light on the background against which discussions about the character of economic phenomena were carried on in the last quarter of the nineteenth century. During this period we find, especially in the German literature, a concern with the correct characterization of economic phenomena that went far beyond previous investigations. It may safely be said that almost all the numerous criteria that have, during the history of economics, been used to define the economic aspect of affairs were in some way mentioned already in the formidable German literature of these decades. Even some definitions that were clearly discussed only in the twentieth century were at least vaguely envisaged during these years. Dietzel and Neumann in particular demonstrated considerable insight in their work in this area. Under the influence of Menger and his followers, writers of this period devoted careful attention to the scarcity criterion and to the operation of the “economic principle.” On the other hand, economists of the Historical School tended to stress the social character of economic phenomena. Both groups still clung to the idea that wealth stands at the core of economic affairs, but frequently the retention of conventional phraseology merely concealed a far more advanced and sensitive grasp of the real nature of economic phenomena.

In England at this time, despite its own form of the Methodenstreit, far less advance was to be seen in formulations of the scope of the discipline. Jevons had kept his economics closely tied to hedonism, and he was followed in this by Edgeworth. Marshall devoted part of his inaugural Cambridge lecture in 1885 to the problem, with interesting results. Several of the methodological rebels were intent on denying economics a separate status apart from sociology. There was even a proposal put forward in the British Association for the Advancement of Science during the late seventies to abolish the very existence of a separate economic section of the association. J. N. Keynes contributed to the judicious resolution of the methodological issues, but did little to advance the conception of the character of the economic point of view. It was not until the appearance of Wicksteed’s brilliant work in this field in 1910 that we find a contribution comparable in exhaustiveness and refinement to several of the German discussions.

Meanwhile in other countries economists were giving the problem careful attention. In the United States literature a number of useful pronouncements are to be found concerning the importance of a correct definition, as well as several highly refined and well–reasoned substantive formulations.27 In France28 and Italy too, parallel advances are to be found in the literature. In 1883 Supino published the first book devoted to an account of the existing definitions of economics.29 Pantaleoni, Pareto, and Croce devoted considerable space to the question of definition, and the famous correspondence at the turn of the century between the two last–named writers contains considerable material that is of particular value for any history of this question.

Twentieth–Century Economic Points of View

Fraser has classified definitions of economics into Type A definitions and Type B definitions.30 Type A definitions consider economics as investigating a particular department of affairs, while Type B definitions see it as concerned with a particular aspect of affairs in general. The specific department singled out by Type A definitions has usually been wealth or material welfare. The aspect referred to in Type B definitions is the constraint that social phenomena uniformly reveal in the necessity to reconcile numerous conflicting ends under the shadow of an inescapable scarcity of means.

During the twentieth century two distinct trends are visible in the definitions of the economic point of view. On the one hand, a transition from Type A to Type B definitions has been vigorously carried forward. On the other hand, there has been a pronounced movement toward the denial of any distinctly economic point of view whatsoever, and the consequent conviction that all attempts to present such a point of view with clarity must be a waste of time.

It will be seen in subsequent chapters that the classification of definitions of the economic point of view into Types A and B is far from an exhaustive one. The voluminous literature since the turn of the century dealing with the problem of definition reveals, indeed, the entire range of formulations that are discussed in this essay. Nevertheless, it remains true that the most outstanding development in the history of the problem is the switch from the search for a department of human affairs to which the adjective “economic” applies, to the search for the appropriate aspect of affairs in which economic concepts are of relevance. (It should be noticed that almost all the numerous formulations of the specific point of view of economic science are considered by their authors, not as describing a new science, but as offering a more consistent characterization of the existing discipline.)31 The emergence of the Type B definitions is reflected in a considerable body of literature on the continent as well as in the English–speaking countries. Type A definitions are treated in the second chapter of this essay, and the transition to Type B definitions is traced in the sixth chapter. Type B definitions are associated especially with the name of Professor Robbins, whose work of 1930 has had an outstandingly stimulating effect on all subsequent discussions.

The final chapter of this essay traces the further development, in recent decades, of this trend away from the association of economics with specific “ends” or a specific department of human affairs. In this development the work of Robbins has been consistently pursued to what appears to the writer to be the most adequate solution of the problem. The developments described in this final chapter are made up of the contributions of several eminent economists, including Mises and Knight. These writers in no way constitute a “school,” and although in this essay the developments of the final chapter are described as “praxeological” (following Mises’ terminology), it is not to be understood that all the writers cited in that chapter fully subscribe to what is here called the praxeological outlook. It is maintained, however, that the consistent and refined development of the ideas first brought to a focus in the Type B definition constitutes a distinct contribution to the history of the problem. The path–breaking work of Mises in this regard has a significance that, in the writer’s opinion, has not been sufficiently recognized because it has not yet been brought into historical perspective.

The movement from Type A definitions toward Type B definitions and finally to the praxeological position runs, of course, in a direction diametrically opposed to that taken by writers who disparage painstaking definitions of economics altogether. What is common to all these writers is, as was noticed earlier in this chapter, that they deny the existence of any given “pie” that could constitute economics. There is no specifically economic point of view, and economic science does not investigate any uniquely separate group of phenomena, or phenomena in general from any uniquely economic aspect. The consistent development of the Type B definition and of praxeological ideas represents the completest denial of this view. Both these conceptions of economics have been able to focus attention, with a clarity never hitherto attained, on an element in our experience that corresponds to nothing else in our consciousness. This element in our experience conforms precisely to the foundation that is discovered to be rigorously necessary and sufficient for the construction of economic theory as it has developed during the past two centuries.

The body of this essay consists of the study of the many alternative formulations of this economic point of view, which make up the trend culminating in the insights of the final chapters.

2

The Science of Wealth and Welfare

This fatal word “material” is probably more responsible for the ignorant slanders on the “dismal science” than any other economic description...
Alec L. Macfie

Political Economy is a science in the same sense in which Astronomy, Dynamics, Chemistry, Physiology are sciences. Its subject–matter is different; it deals with the phenomena of wealth, while they deal with the phenomena of the physical universe.
J. E. Cairnes

...In becoming consciously a science of human behavior economics will lay less stress upon wealth and more stress upon welfare.
Wesley C. Mitchell

It is almost as difficult to define the boundaries of welfare economics as it is to define economics itself.
Kenneth E. Boulding

We take up first of all the class of writers for whom the specifically economic point of view is in some way necessarily associated with wealth or with welfare. It seems fair to consider this view before examining the many other opinions extant in the literature, simply because its supporters (those espousing what Fraser calls the Type A viewpoint)1 were for a long time the ones most frequently to be found in discussions on the subject. And it is a matter of no little significance that it was one form of this view, viz., the description of the economic side of affairs exclusively in terms of wealth, that the earliest classical economists almost invariably adopted. In the course of our discussion it will become apparent that a number of quite different conceptions of economic phenomena at various times found expression in the definitions that simply spoke of wealth or welfare as being the central focus of economic interest. Yet despite the variety of these conceptions they all admit of being broadly grouped together. Those writers who speak of the production of wealth and the distribution of wealth or of some special type of human welfare as being the peculiar interest of the economist share a common outlook on the subject. No matter how widely their opinions on the nature of wealth or welfare may diverge, what is common to all these writers is that they see the distinctive peculiarity of economic phenomena in the class of objects around which they especially revolve or in the specific human condition that they are thought especially to affect. The criterion used by the student of economic phenomena to mark out the scope of his subject is the fact that it is concerned with a special class of objects or a special type of human condition. The botanist studies the phenomena of plant life, the astronomer studies celestial phenomena, the philologist studies a specific “object,” viz., languages—and the economist quite analogously occupies himself with the study of wealth or welfare. The conditions governing the production of wealth or the enhancement of economic welfare, the effects of given events on the exchange and the distribution of wealth—all these are “economic” phenomena because they have to do with wealth or welfare.

We shall see that many writers of this opinion still further narrowed down the concept of wealth to the idea of material wealth, and many of those stressing welfare qualified the term by singling out the material welfare of mankind. These developments meant that more than ever economics has to do with a particular class of objects as its special province of study. And we shall be concerned in this chapter to explain the emergence of this general outlook on the nature of economics simultaneously with the emergence of the science of economics itself. We shall also be concerned to trace the various forms that this general outlook has taken in response to developments within the science of economics and to discover some of the implications of this outlook.

The Emergence of Political Economy as the Science of Wealth

The writers on economics at the time of the emergence of the subject as a serious discipline in its own right, where they made any attempt at all to outline the scope of their inquiries, did so quite as a matter of course by reference to “wealth” as its subject matter. By the latter half of the eighteenth century, thinkers in England, France, and Italy were coming to recognize that the subject of the mass of writings and speculations dealing with commerce, industry, foreign trade, money, interest, taxation, and the like constitutes a distinct theme of inquiry. Hitherto these speculations (such as those of the mercantilist writers and of those whom Schumpeter has called the consultant administrators and pamphleteers) had been isolated inquiries seeking to explain specific phenomena of the real world. Where inquiries on these and kindred subjects had been incorporated into more general systems, they appeared as unmistakably subsidiary material introduced to round out treatises whose subjects were juristic, political, or moral.

With the recognition of the fundamental unity of the principles underlying these scattered inquiries and of their analytical independence of juristic, political, and moral systems, economics, or political economy, emerged as a distinct discipline. Works appeared attempting to deal with economic phenomena in general, and these works typically identified their subject matter as being “wealth.”

It is worthy of notice that the existence in “wealth” of a subject matter ripe for independent investigation seems to have been assumed with little discussion. The conception of wealth as being a distinct phenomenon with its own peculiar scholarly interest was not a creation of the classical economists.2 Adam Smith, who defines political economy as treating of the “nature and causes of the wealth of nations,”3 freely applies the term to denote the area of concern of mercantile policy–makers of a century earlier.4 What converted scattered scraps of knowledge on the subject of “wealth” into an integrated system of ideas was simply the discovery of the regularity of the phenomena of wealth as determined in the market. Newly discovered, seemingly inexorable “laws” governing the wealth of nations turned this “wealth,” already the center of many isolated investigations, into the subject matter of a new science.

That this new science was considered, not as explaining the operation of a specific type of social organization or the results of a certain kind of human behavior or any of the various other matters that economists have at times believed it to be their principal concern to explain, but as primarily explaining the phenomena of wealth, is a circumstance that deserves some closer attention. It seems appropriate to glance briefly at the background against which economic thought developed, in order to throw some light on this interesting circumstance before we trace the later history of this idea on economic affairs.

In later chapters there will come under discussion a number of possibly more sophisticated conceptions of that economic point of view from which the economist scrutinizes the world. In the course of these discussions, the failure of the classical economists to perceive the unity of their subject to be implied in such conceptions will be more fully understood as stemming at least in part from their freedom from those influences that were operative in the emergence of the later views. At this point four positive elements in the background of early economic thought and its surrounding Zeitgeist may be distinguished as possible catalysts in the precipitation of wealth as the recognized subject matter of a distinct discipline.

1) Later methodologists were to devote considerable effort to the problem whether to treat political economy as a positive science or as an art, whether to cast its teachings in the indicative or the imperative moods. There can be little doubt that the founders of economics felt themselves to be expounding an art. According to Adam Smith, political economy “proposes to enrich both the people and the sovereign.”5 A recent writer has characterized the classical economists as a school of economic and social reform.6 The roots of this attitude toward their teachings are not hard to find. Economics, as we have seen, developed, in part at least, from the work of mercantilist writers, the “consultant administrators and pamphleteers.” This class of writers was quite simply interested in practical results. Any scientific work that came from their hands must quite naturally be considered the by–product, rather than the attained goal, of their endeavors. The growing application, in the eighteenth century, of sober and sound analysis to the questions that these earlier writers had discussed did not involve any change in this attitude. Hence, the conception that Smith, the economist, had of his subject was not much removed from that of Steuart, the mercantilist, to whom “oeconomy...is the art of providing for all the wants...” and to whom the “principal object” of his inquiry was “to secure a certain fund of subsistence for all the inhabitants.”7

It is not difficult to see that this attitude toward the utility of economic inquiries necessarily carried with it the elevation of wealth into an object of scientific study. An investigation that sets out to find the means of enriching the people and the sovereign, if it discovers laws governing the attainment of this objective, may not unnaturally presume to have discovered the laws of wealth. If we grant the assumption that the goal of economics is to make the nation wealthy, a goal to which a fairly well–understood meaning was attached, then it follows that economists must be considered, both by themselves and by the public, as expounding the principles of wealth—understood in the same sense—and its acquisition by the nation. How a nation wrests wealth from niggardly nature, how this wealth is distributed and exchanged within the nation—all these inquiries focus the attention on that which now becomes an object of scientific scrutiny. The general objectivism of the classical school in its substantive economic doc- trines here finds its counterpart in that school’s very conception of its task: an economist investigates the phenomena of a special class of objects that together comprise wealth.

2) Another force in the eighteenth–century environment that must have helped to set up wealth as the subject matter of a separate discipline seems to have been the intellectual interest in private property. Despite the variety of meanings that we shall find to have been attached to the term “wealth” by classical economists, almost all these meanings find some common ground with a definition of wealth as consisting in the objects of ownership. Throughout the seventeenth and eighteenth centuries a peculiar attraction seems to have resided in inquiries into the legal and moral bases of the institution of private property. Grotius had discussed the matter from a juristic standpoint. With Hobbes the inquiry into the nature and origins of private property became merged with his theories on the origins of the organization of society under the sovereignty of the state. Locke saw the origin of and justification for private property in natural law. These speculations and theories affected much of the thought of the leading writers throughout the eighteenth century. Discussions of civil justice must turn on the acceptance and justification of property rights; discussions of the legitimacy of slavery must involve the question of the admissible extent of property rights; the movements in France and America towards democracy were generally accompanied by specific attention to private property. For many years democracy was to mean democracy for the property owners. Godwin’s call for the abolition of private property once again drew attention to the foundation of the entire institution.8

Myrdal has attempted to show that it was the heritage of the ideas of the natural–law philosophers regarding property rights that accounts for the classical, and especially the Ricardian, theories of value.9 For the purposes of the present study the relevance of this observation seems sufficiently obvious. The isolation from the other ends of human action of that end represented by property on the one hand reflected, and on the other hand itself strengthened, the artificial line drawn between the study of the phenomena connected with property and the study of human action in general. The focusing of the attention of jurists, philosophers, and moralists on the institution of property cannot but have helped in keeping wealth in a compartment all its own. Moreover, the fundamental defect of classical economics, its lack of appreciation of the subjective nature of its phenomena, may perhaps be partly due to the fact that serious thought had for a long time been devoted to property and wealth in inquiries to which, indeed, this subjective element bore little direct relevance.

3) Yet another element in the environment of early scientific economics must be briefly alluded to in connection with the emergence of wealth as an object of intellectual interest. This is the approach of the moral philosophers of the period to the problems of the relation of the individual to society, and especially of the egoistic and altruistic motives. The birth of political economy may be regarded as a reflection of the confluence at this time of two streams of thought, ethics and politics. Ethics discussed the meaning of good and bad, the source of the sense of moral obligation. Politics explored the origins of society, the most desirable form of its organization, and the rights of the individual in relation to the state. In a society whose economy was becoming more and more dependent on the division of labor, it was natural for the ethics of the individual to become increasingly involved with his relation to society as a whole. The discovery of market regularities, predicated on individual avarice, in the phenomena of the wealth of nations meant in itself a unified application of ethical and political doctrines.10

The controversy stirred up during the eighteenth century by Mandeville’s Fable of the Bees was typical of the problem to which the thinkers of the time sought the solution. Mandeville’s provocative conclusion was “that what we call evil in this world,...is the grand principle that makes us sociable creatures, the solid basis, the life and support of all trades and employments...”11 His critics, including both Hume and Smith, used all manners of approach to dispute his conclusions. Closely allied to this problem was that recognized by Mandeville’s paradox, the venerable feud in human nature between the forces of self–interest and the forces of altruism. Whether or not the urge in a human being to benefit others than himself is a real one or merely the illusory reflection of a selfish desire to relieve one’s own pain incurred by another’s misery was a question well to the fore during this period. Hobbes had been the first of modern philosophers to expound his theory of egoism. Eighteenth–century philosophers, including Butler, Hume, and Smith generally rejected Hobbes’ egoism and postulated a real distinction between selfishness and altruism.

This reaction against extreme egoism and especially against the effect on the nation’s welfare ascribed to egoism seems to be at least partly responsible for the division of the field of human action into two independent classes, the one class of acts being induced by purely egoistic motives, the other class being constituted of acts in which the motivating forces are the altruistic and “higher” impulses. And it is not difficult to see how the acts induced by selfishness could be easily confused with acts aimed at fulfilling material desires. Careful thinking had demonstrated the existence of regularities in the phenomena of wealth. The identification of the study of these regularities with the study of material or other wealth thus obviously provided the new science with an appropriate and distinct niche within the structure of knowledge as conceived by the eighteenth–century thinkers.

4) One final strand in the web of eighteenth–century thought onto which a science of wealth was to be woven must be noticed. This is the position occupied by the natural sciences, and their relation to and influence upon the social sciences. In general the eighteenth–century view has been characterized as “anthropological and subjectivist,” in contrast to the “cosmological and objectivist view which the nineteenth century had of the world.”12 Nevertheless, the position of the nineteenth century had its roots in ideas that go back well into the eighteenth century and earlier.

The tremendous advances in the natural sciences, especially mathematics and astronomy, associated with such names as New- ton, Clairault, Euler, and d’Alembert, were radically transforming the intellectual atmosphere in which the eighteenth–century philosophers thought and taught. The reaction against airy metaphysical speculation set in motion by Hume and the other British empiricists, and the quasi–positivist philosophy of the French Encyclopedists, with its anathematization of all forms of anthropomorphism and animism, were all part of the environment in which economic science emerged.

It is not to be wondered at, then, that the enthusiasm engendered by the signal successes of the objective and impersonal methods of the physical sciences should have left its mark on the earliest researches of the classical economists. It has been well remarked that some of the founders of abstract economic theory in the eighteenth century were at the same time the founders of the positivism that was later to be deployed against that abstract economics.13

Differences of opinion may legitimately exist concerning the weight to be assigned to utterances by the moral philosophers that seem to illustrate the all–pervasive Newtonian influence.14 But these references are persistent. Hutcheson and Hume, Helvetius and Beccaria expressed the desire to treat the data of ethics analogously to the data of experimental physics, or they made analogies between the force of self–interest and the force of gravity.15 The simplification in the conception of the cosmos to which the physical sciences owed their characteristic fascination—i.e., the reduction of seemingly heterogeneous phenomena to a system governed by a few fundamental laws—seems to have perceptibly colored the thinking of the founders of economics. The extent of the gap between the conception of a science embracing the totality of action, on the one hand, and the conception of a science of wealth, on the other, owes something, it would appear, to the ease with which the latter could be incorporated into a structure of universal knowledge in which the physical sciences occupied so conspicuous a position. According to the English individualists, social phenomena spring, not from the interaction of individual subjective preference systems, but from the inter- action of individuals under an impersonal pervasive force of self–interest in relation to objective, material wealth.

The Science of Material Wealth

Our account of the history of the point of view that sees economic affairs as essentially concerned with a special class of objects, i.e., with wealth, finds a convenient point of departure in an early and long–lived form of this idea, which confined economics to the consideration of material wealth.

From the beginning alternative suggestions were made by the economists themselves about what should and what should not be included under the heading of wealth even when the latter was universally regarded as the subject matter of economics. Indeed, many writers, in their definition of political economy, expressly included in its scope the exposition of “the nature” of wealth. Smith, Lauderdale, Malthus, and Senior all felt the elucidation of this question to be part of their task. As has been the lot of other problems taken up by economists, this question was treated in a variety of ways. As early as 1810 the French economist Ganilh cited eight distinct definitions of “wealth” by economists; Senior, writing on terms “peculiarly liable to be used ambiguously” in economics, somewhat despairingly quotes seven different definitions, besides his own contribution.

Of these controversies over the meaning of the term “wealth” probably the best known was that concerning its restriction exclusively to material goods. It must be remembered that the issue was not between a “materialistic” economics and one that embraced the catallactic consequences of man’s “higher” interests and desires. The fact is that the classical economists were little concerned about why an item of wealth was desired. To invest an object with the quality of wealth (apart from other specific conditions, such as scarcity, that may have been required), it sufficed that it was desired. The issue between definitions of “wealth” formulated in material terms and those that extended the concept to include the immaterial was purely one of convenience in analysis. Both sides of the controversy had the same objectivistic outlook on wealth; neither side laid stress on the character of economic behavior. Malthus clearly states his reason for recognizing only material goods as wealth:

If we wish to attain anything like precision in our inquiries, when we treat of wealth, we must narrow the field of inquiry, and draw some line, which will leave us only those objects, the increase or decrease of which is capable of being estimated with more accuracy.16

The discussion concerning material vs. immaterial wealth began with Adam Smith’s distinction between productive and unproductive labor. While not as limiting as the physiocrats’ concept of the “sterile” classes, Smith’s dichotomy put material wealth, the production of which was his criterion of productive labor, on a different level from immaterial wealth.17 On the Continent, the French writers after Smith, following Say’s leadership, generally rejected this artificial line of demarcation. In England Lauderdale defined individual wealth as consisting in “all that man desires as useful or delightful to him; which exists in scarcity.”18 This definition was quoted again and again by later writers and was in most cases criticized as too vague.19 Such a criticism is illuminating in its revelation of classical economic conceptions. Thus Malthus:

This definition obviously includes everything, whether material or intellectual, whether tangible or otherwise, which contributes to the advantage or pleasure of mankind, and of course, includes the benefits and gratifications derived from religion, from music, dancing, acting, and similar sources. But an inquiry into the nature and causes of these kinds of wealth would evidently extend beyond the bounds of any single science....20

For Malthus there was evidently no single bond in logic that could place these benefits and gratifications in a single discipline. McCulloch’s comments are even more revealing:

...if political economy were to embrace a discussion of the production and distribution of all that is useful and agreeable, it would include within itself every other science...Good health is useful and delightful, and therefore, on this hypothesis, the science of wealth ought to comprehend the science of medicine; civil and religious liberty are highly useful, and therefore the science of wealth must comprehend the science of politics...”21

It would be difficult to discover a more damaging statement indicative of the kind of thinking exemplified by the less enlightened classical economists. Ricardo, to whom political economy meant only the distribution, not the production, of wealth, would never have excluded good health from economics on the ground that it involved the science of medicine. If the production of health involves medical science, the production of cement just as much involves chemistry, and the production of wheat, biology. According to McCulloch, wealth was clearly a distinct objective entity, the production of which involved the science of political economy. To draw the line so as to exclude from its purview such inconvenient studies as medicine and politics, McCulloch included only material goods in his technical definition of wealth. Apparently it was believed that certain general laws governing the physical production of material commodities could be abstracted from the several sciences concretely concerned with the production of each specific good. These laws, however, did not admit of further generalization so as to comprise the production of such immaterial goods as health or good government. The only sciences that were relevant to the latter were those of medicine and politics.

The striking feature of this discussion concerning Lauderdale’s definition is that the criticisms levelled against it could easily have led to a less limited view of economic phenomena. It was clearly seen that the extension of the concept of wealth to include everything that is desired would mean the abandonment of the effort to arrive at any scientific laws involving objective wealth. But what was overlooked was that the very broadest conceptions of wealth involved an essential unity, from which a less limited political economy might take its point of departure.

However, the exclusive stress on material wealth was motivated by other considerations, besides those expressed by McCulloch. There appears to be a significant degree of correlation between the restriction of wealth to commodities and the restriction of the scope of political economy to the distribution of wealth, leaving out its production, exchange, and consumption. Ricardo and Read provide excellent examples of this. Both conceived of wealth exclusively as material goods.22 And both emphatically limited political economy to the treatment of the distribution of wealth. Alike in his Principles and in his correspondence with Malthus, Ricardo had stressed this limitation of the scope of economics.23 Read (“an acute but neglected writer,”24 and one of the economists rediscovered by Seligman) treated economics as “an investigation concerning the right to wealth,” teaching what the rights and duties of men in society are with regard to property.25 Read may be considered to have invested with normative and ethical significance Ricardo’s conception of a science of the distribution of wealth. According to Ricardo, economics shows how wealth is distributed among the factors of production; according to Read, economics, in so doing, is at the same time laying down the law of the natural rights of the factors of production to their several shares.

There is every reason why economists concerned purely with the distributive aspects of economics should tend to concentrate on the tangible “pie” from which each of the factors of production is to receive a slice proportioned according to the laws of political economy. Students of “production” may find it difficult to exclude the production of any “utility,” whether or not embodied in a material good. But the laws of distribution can clearly afford to be confined (and with so much more elegant definiteness) to the long–run tendencies in the division of tangible wealth. Where, as with Read, the laws of distribution are the handmaidens of the laws of private property, the convenience and reasonableness of a restriction of wealth to material, alienable goods must have appeared irresistible.

The Science of Subsistence

Thus far the account of what the economic point of view has meant to economists has treated of the classical conception of it as a science of wealth, with special reference to the restriction of the latter concept to that of material goods. The account of the gradual advance of economics from a science of wealth to one of welfare will be resumed later in the chapter, with special attention to those elements of the earlier “material” conception of wealth that continued to be retained. At this point a discussion is in order of a special case of this “material” approach to economics, which seems to have held a fascination for a number of economists over an extended period of time, viz., the view that saw economics as essentially concerned with the goods necessary to ensure the physical subsistence of mankind.

This view seems to be the most extreme form of the materialistic outlook on economic affairs. The distinctive feature of all conceptions of economics as a science of wealth or of material goods, as against alternative conceptions of the discipline, consists in their identification of economics with some special end of human action. Not all action is subject to economic law, but only such action as is directed towards a more or less well–defined class of objects, viz., wealth or material goods. Most of the definitions advanced during the greater part of the nineteenth century can be considered as variants of this view. The earlier ones saw economics as concerned with the results achieved with regard to these ends themselves, its enquiries being directed at describing the phenomena of this desired wealth. The later, less objectivistic definitions looked at economics, as will be seen in subsequent chapters, as a description of man in one department of his activities—that directed towards, or pertaining to, the desired wealth.

When economics is narrowed down still further by restricting it to the study of the goods necessary for human survival, the relevant range of human ends is contracted to the point where the term “end” begins to lose its meaning. No matter how objective a view one had of the wealth around which political economy was supposed to revolve, it was extremely difficult to close one’s eyes to the fact that wealth is wealth only because it is desired by human beings, i.e., that it is an end of human endeavor. But when the only parts of wealth permitted to come into consideration are biological necessities, then it is dangerously tempting to consider these necessities as not being the ends of human desire at all. Instead of being goods brought under the play of market forces by being the goals of human aspirations, these necessities gain their economic relevance purely objectively, by being the physiologically determined causes of quasi–biological tropisms. And this, indeed, is the direction towards which a number of “subsistence” definitions of economic phenomena have tended.

There had been discussions for a long time concerning the question whether wealth should properly include luxuries as well as “necessaries.”26 Steuart had seen the goal of his subject as being “to secure a certain fund of subsistence for all the inhabitants.27 It is noteworthy that during the period of the classical economists most writers did not embrace this “subsistence” approach. As a matter of fact several writers explicitly took a view diametrically opposed to the “subsistence” criterion. So far from confining wealth to necessities, these writers defined wealth as excluding necessaries.28 Wealth was the surplus, often the surplus after all expenditures. Political economy was exclusively the science of great riches, of luxury phenomena. (Both Bentham and Malthus found it necessary to reject this view of economics and attempted to make it absolutely clear that their political economy was concerned with the poverty of nations quite as much as with their wealth.)29

Despite the general absence of the subsistence view in classical economics, there appears to be at least one sturdy offspring of the classical school to which this view is central. This is to be seen in the work of the Marxist writers in developing the thesis of the economic, or materialist, interpretation of history. The significance of the materialist interpretation in Marxist thought lies, of course, in its consequences for the “noneconomic” aspects of history. For the purposes of the present account, however, the Marx–Engels approach to history yields a fresh view of the scope of economic affairs. Superficially one might be content to explain the fact that Marx and his followers equated the “economic” with the “materialist” interpretation of history as deriving merely from the classical economists’ stress on material wealth. An examination of Marx’s writings, however, reveals his conception of political economy to have been even narrower. Professor Knight seems to have put his finger on the essential point when he writes: “The socialistic popularisers of [the economic interpretation of history] have leaned toward the narrower and more definite...conception of downright necessities.”30

This view of the economic interpretation of history seems to be expressed in Marx’s own writings. In a note in which he compares his conception of history to the doctrines of Darwin, Marx writes: “Technology discloses man’s mode of dealing with Nature—the process of production by which he sustains his life, and thereby lays bare the mode of formation of his social relations, and of the mental conceptions that flow from them.”31 In the passage that Kautsky considered the classic formulation of the economic interpretation, Marx explains:

In the social production which men carry on they enter into definite relations; these relations of production correspond to a definite stage of development of their material powers of production...The mode of production in material life determines the general character of the social, political, and spiritual processes of life.32

It is of interest to note that the words which in this extract (from Stone’s translation of Marx’s preface to his Critique of Political Economy) are rendered “...in the social production which men carry on...” are in the German original:...in in der gesellschaftlichen Produktion ihres Lebens...Other translators of Marx have rendered this phrase: “...in the social production of their every–day existence”33 and “...in the social production of their subsistence...”34

Engels too made this subsistence approach very clear. “According to the materialist conception,” he wrote, “the decisive factor in history, is, in the last resort, the production and reproduction of immediate life.”35 And again, “We understand by the economic relations, which we regard as the determining basis of the history of society, the methods by which the members of a given society produce their means of support...”36

Clearly, then, there emerges from the various formulations of the materialist interpretation of history a conception of economic affairs that centers about biological survival. Not the provision of wealth, but the provision of bare life is the realm of economics. Nor is it that life referred to in Ruskin’s phrase, “There is no wealth but life” (in which life includes “all its powers of love, of joy, and of admiration”), but the elemental existence that is the subject of biology. Not “wants,” in the sense of the reflections of standards of ultimate values, but rather the inexorable, objective requisites of survival—“needs”—are the data of economics.

In such a scheme, in which the relationship between ends and means as arranged by rational action is completely obliterated, economics and economic affairs clearly take their place as part of biology. Kautsky is easily understood when he insists that the materialist conception of history does not postulate the dominance of economic motives. We must, we are told, sharply distinguish between economic motives and economic conditions. It is only the latter that are assigned the decisive role in the Marxist scheme of history.37

It is not clear whether economists in general were greatly influenced by this idea. The literature yields very scanty traces of any school of economic thought that placed human survival at the center of their subject.38 Yet it is of interest to notice passages in American economic and sociological literature at the turn of the century that do have a pronounced relevance to this general conception of the economic domain. It is, perhaps, not a complete surprise to find that it is Veblen who seems to approach most closely to the “biological” outlook on economics. Veblen explicitly points out that in the earlier stages of industry the “struggle for wealth” meant “a struggle for subsistence.”39 He considered the essence of the physiocratic system to consist in the fact that it saw “economic reality” in “the increase of nutritive material.”40 Again and again in his writings the phrase “the material means of life” is used as the criterion for distinguishing economic activity. “In economics, the subject of inquiry is the conduct of man in his dealings with the material means of life.” This is a typical Veblenian sentence in this respect.41

We must probably see in this Veblenian tendency to identify economics with the maintenance of life a reflection of a fashionable pastime of applying biological analogies to the phenomena of the social sciences. The terminology of biologists seems to have strengthened this tendency. Franklin Giddings drew attention to the different meanings that the word “economy” had for economists and for biologists. Inherent in the economists’ use of the term is the presumption of “a conscious being, endowed with the capacity for pain and for pleasure, to plan and direct the economy and to profit by it.” The biologists, on the other hand, use “the highly general notion of economy as any system of activities and relations which furthered the well–being of any class or species of living things.” It is this concept that produces such phrases as “the economy of the animal kingdom” and the “economy of nature.” “In these notions there is no implication of consciousness, of pleasure or of pain, and no presumption of intelligent planning or management on the part of the organisms that are benefited by their economy. The thought is altogether objective.”42

The same explicit warning against the biological view of economic affairs was sounded by Sherwood.

In applying the physical formulae of evolution to psychical phenomena, sociologists are guilty of unscientific procedure...The physical formulae of evolution are statements of unexplained fortuitous change. The “fitness” which survives is an unforeseen fitness, an adjustment wrought out in consequence of the struggle. Psychical activities, on the contrary, are essentially teleological. They are directed to ends. The “fitness” in social adjustments is foreseeable, prearranged. Further than that, this fitness is nothing other than “utility” to the individual.43

This statement formulates the issue precisely. The imposition of “subsistence” as the goal of economic activity sets up a value involving among all others the least troublesome subjective differences between individuals. The only area of choice left to human intelligence is in the means objectively best suited to attain this one end. Once man’s power to select his own ends is prescinded from economics, the subject is at once reduced to an only slightly more involved version of biology.

The Science of Wealth Retained

Meanwhile, side by side with this subsistence approach to economics, which it had fostered, the concept of wealth—and even of material wealth—continued to provide a convenient, if facile, criterion for defining the domain of the economic long after the close of the classical period. Mill, Senior, and Cairnes debated whether economics was a physical or a mental science. But Cairnes, famous as the last of the economists of stature to adhere to the general classical tradition, could write in 1875: “...neither mental nor physical nature forms the subject matter of the investigation of the political economist...The subject matter...is wealth.”44 And again, even more clearly: “Political Economy is a science in the same sense in which Astronomy, Dynamics, Chemistry, Physiology are sciences. Its subject matter is different; it deals with the phenomena of wealth, while they deal with the phenomena of the physical universe.”45

Bonamy Price, even while describing the confusion regarding the definition of economics, was still able to declare: “All are agreed that it is concerned with wealth.”46 It is true that many of the pronouncements referring to wealth as the key concept were modified so as to conform more or less closely with more sophisticated views. Especially in a number of German definitions after 1870, the vital role played by acting, choosing man in all the phenomena connected with wealth was well recognized, and yet this did not prevent these definitions from assigning the key position to Güter (often Sachgüter).47

From both of the opposing sides in the Methodenstreit came statements tying the economic world to material goods. In so far as this criterion appeared in the works of economists of the Historical School, the matter admits of some explanation. In later chapters it will be seen that the earliest rebellion against the conception of economics as a science of wealth came as a result of the analysis of actual human behavior and the hypothetical isolation of a specific pattern of behavior in economic affairs. This diverted attention from the wealth itself towards the activity of the wealth- seeker. Such a way out from the limited conception of economics as a science of wealth was obviously closed to the Historical School. It was, after all, the very postulation of such hypothetical patterns of behavior on the part of “economic man” that had initially aroused the protests of the adherents of the Historical School and later became the butt of the ridicule expressed by those of their successors who went to the greatest extremes. The urge to restrict economics arbitrarily to material goods and to see the essential character of economic phenomena in their relationship to these objects may therefore well have been stronger for the adherents of the Historical School. So long as action is to be considered only in its empirical totality, any attempt at an analytical separation of economic phenomena from the rest is ruled out from the start.

In England a similar tendency is noticeable in the writings of proponents of the historical method during the small–scale British counterpart of the Methodenstreit. Such prominent writers as Cliffe Leslie and John K. Ingram found themselves embracing definitions of economics that were closer to those of the earlier classical writers than to those, say, of Mill, against whose then dominant type of economics they were now in rebellion. These writers, insisting on the scientific excommunication of homo oeconomicus and pouring scorn on the abstract constructions of earlier economists, were advocating the new science of sociology. While not going so far as Comte, who had flatly denied the existence of a separate field for economic inquiry, they stressed the futility of seeking laws in economics apart from the laws of society as a whole. “The study of wealth cannot be isolated...from the other social phenomena. There is, in fact, properly speaking, but one great science of sociology...” The laws of economics “must be sought in the great science of Society.”48

All this meant only one thing. If any separate field is to be recognized for economics, it must be the result of viewing a class of objects constituting wealth as forming a distinct category whose conditions represent a legitimately separate area of knowledge. This knowledge, of course, can only be tapped from the larger Science of Society. “Political Economy is thus a department of the science of society which selects a special class of social phenomena for special investigation.” By this “special class of social phenomena” there is no doubt that Leslie means the phenomena of wealth.49

What gives unusual interest to the German literature on “material goods” is the fact that goods and material goods are stressed even by the writers who gave the most careful and explicit attention to the problems of defining economics and economic activity. Writing in the eighties and nineties of the last century, Dietzel dealt exhaustively with the various criteria offered for use in definitions of economics. Most of the ideas to be incorporated in the more careful attempts at definition in recent decades seem to have been anticipated either directly in Dietzel’s own writings or by the writers whom he cites. Dietzel came close to recognizing the universality of the category of human action and yet clung tenaciously to the objectivistic outlook on economics throughout his writings.50 Characteristic is his remark that it is not method, but rather the object, that provides the criterion for distinguishing the activities that are the subject matter of economics.51

A similar situation to that in Britain and Germany prevailed in the United States and France during the same period. Again we find the traditional retention of the wealth formula often merely as a cover for a less limited conception of the scope and character of the science. And yet economists seem to have felt that it was their preoccupation with wealth that made their discipline in any way a development from, or a successor to, classical political economy. In one of Ely’s earlier writings, in which he subjected classical political economy to severe criticism, he could yet find some merit in the older economics. “It separated the phenomena of wealth from other social phenomena for special and separate study.”52 For the eminent Belgian economist, de Laveleye, and for many French writers, the définition habituelle of their subject was unquestionably that which ran in terms of richesses, often with explicit limitation to material goods.53

The decades after 1870 were full of change for economics in many directions. The numerous alternative definitions to be con- sidered in subsequent chapters may almost all be traced to the ferment of economic ideas that were revolutionizing economic theory at this time. Again and again it will be found that the application of methodological self–consciousness and precision to fundamental questions of economic epistemology began in earnest during the Methodenstreit of the eighties. The discussion in the foregoing pages demonstrates the persistence, in the face of these developments, of the older conception of economic affairs. Side by side with the newer views to be noticed later, definitions of economics as a science of wealth or of material wealth continued to occupy a central place in economic thought.

Man Against Nature

It is convenient here to notice a point of view that enjoyed the endorsement of a number of writers. They see economics and economic activities as consisting in the constant struggle on the part of man to subdue nature to his own ends. This creates a line of cleavage between two categories of resources. On the one hand, we have the human agent with all his powers of brain and brawn, emotions and skills. These resources he marshals to attack those of the external physical world which he turns to his own purposes. The interaction between man and his physical environment is the area of economic activity.

The earliest writer to have explicitly applied such a distinction to economic phenomena at all seems to have been the German economist (who wrote his book in French while at the Russian court in St. Petersburg) Storch.54 Writing in 1815, Storch emphatically rejected the prevalent viewpoint, which confined political economy to wealth. Not the wealth of nations, but the “prosperity” of nations, should be the subject of political economy. By prosperity Storch included all “civilization,” and in this connection he spoke of “inner goods” such as health, strength, reason, knowledge. These inner goods stand in contradistinction to wealth, which is comprised of “outer goods.” Storch includes both inner and outer goods in his political economy, but his divi- sion between the two categories of goods shows what he understood to be meant by an exclusive science of wealth.55

The eminent British historian Lecky appears to have considered this distinction between “inner” and “outer” resources as of great importance. Writing in one of his earlier works, Lecky seems to feel the arbitrary nature of the conception of a science dealing with the phenomena of wealth. He considers political economy as an expression of what he calls the “industrial” philosophy, which he contrasts with the “ascetic” point of view. The latter philosophy acknowledges happiness as a condition of the mind and seeks to attain it by acting directly on the mind through diminishing the desires. The industrial philosophy seeks happiness, not by diminishing desires, but by acting on surrounding circumstances in order to fulfil the desires. This conception of economics clearly shifts the emphasis from material wealth as such and sees economic activity as the attempt to fulfil desires by altering the configuration of the external world.56

Among economists such a view seems to have found especial favor in Germany. Albert Schäffle, one of the earliest to stress the fundamental role of man in economic phenomena, appears to have consistently gone out of his way to avoid characterizing economics as concerned with “goods.” The key word in Schäffle’s many writings on the nature of the economy is the Aussenwelt—i.e., the external physical world.57 Schäffle’s avoidance of the criterion of goods in favor of a definition formulated in terms of the “external world” is best interpreted as a conscious attempt to draw attention to human activity directed at want–satisfaction. Not goods, but man’s struggle and conquest of the external world is the subject matter of economics.

Other and later German writers referred to the “external world” in their writings, but often merely as an alternative expression for “goods.” Mangoldt, Cohn, Sax, and several other writers may be mentioned in this connection.58

A fundamentally similar attitude to that of Lecky and Schäffle is evidenced about the turn of the century by the American Tuttle. Tuttle speaks of the “fundamental and universal economic principle“—a phrase that he uses in a sense quite different from the usual one. “Three primary facts,” he writes,

lie at the basis of all economic phenomena: namely, man, man’s environment—the outside world, nature–and the dependence of man upon nature. Man has...an economic relation to his material environment...a relation which may very properly be called the weal–relation. This weal–relation...is the fundamental and universal economic principle...59

Here again the economic relationship is conceived as one involving man and his surroundings. This view of the matter bears the clear imprint of the definition of economic phenomena in terms of material wealth. From the external world man creates the goods with which to satisfy his wants. To effect the production of these goods, man applies his own human resources to the external world. The changes that acting man imposes on the outer world both affect and are affected by the changes that are constantly taking place “within” man himself. Envisaging economic activity in this light, as the interaction of man—with all his shifting desires and human resources—and external nature, Tuttle offers a definition in consonance with the more popular conceptions, formulated in terms of wealth, and at the same time suggestive of the place of acting man in the phenomena of economic life.

From Wealth to Welfare

The period in which economic affairs were chiefly considered as being concerned with a class of objects known as wealth coincided roughly with the nineteenth century. Only since the turn of the century have economists been increasingly inclined to consider the scope of their subject in less objective terms. Yet most of the newer views on the question of definition had already found some expression in the writings of the more thoughtful students of economic methodology well before the present century. These murmurings of dissatisfaction with the traditional wealth–bound conception of economics may most illuminatingly be interpreted as the reflection of the more general revolt against the classical system that came to a head in the last quarter of the century.

This general revolt found expression in various ways. In the domain of formal reasoning, the development of the theory of marginal utility in the seventies by Jevons, Menger, and Walras marked the shift of attention from objective cost to subjective utility. In discussions concerning the nature and scope of economics, the change showed itself in the increasing awareness that this subject has as much to do with man as it has with wealth. Well before 1870 there were already many signs in England of the recognition of the humanistic character of economics.60 Schaffle in Germany and Droz in France had insisted on placing the role of man in economics higher than that of goods.61 Ely described the development of economics as occurring in three steps:

Writers of the first class regard political economy as a science which has to do with external valuable things or economic goods—that is, with wealth...; writers of the second class, as the science which has to do with economic goods in their relation to man; writers of the third class, as the science which has to do with man in his relations to economic goods.62

All this made necessary a search for some new criterion for determining the scope of economics. If economics has to do with goods, then its scope is as clear as is permitted by the definition of the word “goods.” But if it is urged that economics is primarily concerned with man, then there is an obvious need to make clear precisely which aspect of the study of man economic theory is concerned with. The subsequent chapters of this book deal with some of the different approaches that have been made toward the solution of this problem. At this point in the chapter describing the conception of economics as a science of wealth, attention must be drawn to one of the most popular of these approaches, viz., the view that sees economics as dealing with the phenomena connected with economic welfare.

This view of economics had, in fact, the most persuasive claim to qualify as the natural successor to the earlier definition of it as a science of wealth. Wealth promotes the economic welfare of man. If exclusive attention to the objects of wealth was to be declared scientifically inexpedient, then the problem could be avoided by shifting attention from the goods themselves to the welfare to which they minister. Instead of studying the effects of various measures on the wealth of a nation, economic analysis may be viewed as going a step further and studying the welfare of the nation as affected by these measures.

Such a conception of economics provided a framework into which the received body of doctrine could be fitted without excessive strain, while at the same time it reflected the new recognition of the subjective basis of market phenomena. The shift to this fresh conception seemed merely a broadening of the scope of the subject from one narrowly concerned with goods to one concerned with happiness.63 Cannan, writing at the beginning of this century on developments since the appearance of Mill’s Principles, saw this broadening as the work of the theory of marginal utility:

Whatever definition of economics may be adopted, it is clear that the conception of its subject has become wider than it was...The economist of today recognizes that he has to do with man in relation to one particular kind of human welfare...Ever since Jevons...it would be impossible for any economist of the present day to repeat Malthus’ remark that Adam Smith mixes the nature and causes of the wealth of nations with the causes which affect the happiness and comfort of the lower orders of society.64

From the point of view of the long–run developments in the definition of economic phenomena, this broadening of the economics of wealth into the economics of welfare does not mark so radical a change as that marked by the appearance of any of a number of later conceptions to be taken up in subsequent chapters. In fact, as against the other definitions of economics, both the wealth and the welfare formulations contain much in common; many of the features found to be objectionable in the wealth criterion appear unchanged in its welfare counterpart. Both formulations are “classificatory” and “departmental” rather than “analytical.”65 Both see economics as studying something that is produced, whether goods or happiness, rather than a certain type of activity.66 Especially where economic welfare is understood as meaning material welfare, the concept of welfare evinced a strong bond of continuity with that of material wealth.

Nevertheless, as the neoclassical expression of the classical wealth–oriented definition of economics, the welfare and utility criterion did call for a conscious alteration of focus in the contemplation of economic phenomena. This point of view, while it became popular only after the introduction of marginal utility economics, had its forerunners as far back as the classical economists. One of Adam Smith’s successors, Dugald Stewart, considered political economy as dealing with “the happiness and improvement of political society.”67 The position of Henri Storch has already been noticed in this chapter. He broadened economics so as to deal, not with the wealth of nations, but with the “prosperity” of nations—a concept that included “civilization” as well as wealth. John Stuart Mill, when he came to consider the question of defining economics, criticized Say for having a similarly wide conception of political economy. Sismondi’s emphasis on happiness and consumption in economics68 and Lauderdale’s all–embracing definitions of wealth place their conception of economics in the same group.

The more general movement towards the idea of economics as a science of welfare rather than of wealth that accompanied the reaction against the classical school is evidenced in the literature in a number of directions. Cliffe Leslie, who was to become the vigorous proponent of historical consciousness in British economics, had a hand in this development. Writing as early as 1862 in a frequently cited essay, The Love of Money, Leslie attacked the notion that the pursuit of wealth represented a self–contained human motive. The love of money means completely different things to different people. To the scholar it may mean the love of books; to the toper it may mean love of liquor. There is nothing unique in the motives that lead men to seek monetary gain; they are as heterogeneous as are human tastes themselves. Later arguments like these were to lead Leslie and others to denounce the classical economists for their postulation of the possibility of valid laws of wealth apart from the “laws of society.” Yet the impact of these ideas undermining the concept of a unique category of wealth through reference to the heterogeneity of the demand side of economics undoubtedly contributed toward a better grasp of the nature of economic theory. For example, it was the increased attention to the demand factor that made it possible for Jevons to “take utility...as the subject matter of economics,” or for an American writer to declare that all definitions of economics reduce to “the science of enjoyment or ...the science of the means of enjoyment.”69

In France a long tradition of stress on utility lent force to the growing dissatisfaction with the definitions of economics formulated in terms of wealth.70 Welfare, utility, ophelimity—these were the terms around which expositions of economic doctrines revolved. The “ethical neutrality” with which these terms were explicitly invested even further removed the newer views from the wealth–bound conception of the subject, while it at the same time provided the bridge across which economics could, if desired, pass in order to become a science of conduct or a logic of pure choice.

By the early years of the present century, the idea that economics is essentially concerned with welfare, or at least with material well–being, was probably the view most generally accepted among the English economists. Both Marshall and Cannan introduced widely used textbooks, running to many editions, with definitions formulated in terms of material welfare.71 Marshall, it is true, had made it clear that it is only an accident that economics is concerned with material wealth and that its “true philosophic raison d’etre must be sought elsewhere.72 Cannan, however, held the criterion of material welfare to be the real distinguishing feature of economics. When Robbins, in attacking this proposition, took Cannan’s enunciations of it as his principal target, Cannan gladly took up the cudgels in its defense.73 In America economists representing such different outlooks as Fetter and Mitchell both called for a shift in interest away from wealth itself towards the human welfare with which it is related; both saw a need for such a shift in the very conception of the nature of economic science.74

Of course, the identification of economics with the study of economic welfare raised fundamental questions about the justifiability and validity of propositions concerning changes in social welfare. It is under the shadow of this thorny problem, involving the admissibility of interpersonal comparisons of welfare and the legitimacy of possible ethical assumptions, that welfare economists in recent decades have been consciously working.75 Sir Dennis Robertson cites the contention that the implications of envy make it uncertain that welfare would be increased even if everyone had more of every commodity. Robertson’s characteristic reply to this possibility would certainly have won Cannan’s concurrence:

How much better, surely, to assert as a plain matter of fact that economic welfare undoubtedly will be increased in this event; and then to call in the Archbishop of Canterbury to smack people over the head if they are stupid enough to allow the increased happiness which might be derived from this plain fact to be eroded by the gnawings of the green–eyed monster; and I cannot at present persuade myself that such a common–sense distinction between the economic and the not is fatally undermined by the fact that the Archbishop draws a salary and that his gaiters embody scarce resources which might have been devoted to an alternative use.76

Robertson’s words gives added salience to the difficulty that the advance from wealth to welfare brought in its train. If economics is concerned with a part of welfare, how is this part to be identified? The “material wealth” criterion embraced by Cannan provided an answer to this question by retaining a direct bond to the discarded conception of economics as a science of wealth. The objections which might be raised against such a criterion, and which Robertson here brushes aside, are clearly in large measure those that can be levelled at the type of definition treated generally in the present chapter.

The Science of the Lower Side of Human Nature

This chapter on the definitions of economics as a science of wealth cannot close without taking account of the stigma which has persistently clung to economics, and for which these definitions of the subject in terms of wealth must bear a major share of responsibility. Well over a century ago, Bailey discussed the popular view that economics is “a mean, degrading, sordid inquiry.”77 Economists have shrugged off somewhat uneasily Carlyle’s contemptuous description of their subject as a “pig–science.” But economists themselves, especially by conceiving of their subject as a science of wealth, have clearly laid themselves open to such criticisms. From the start an economics centered around wealth had to contend with a climate of opinion in which the so–called “economic virtues” had long been held in moral disrepute.78

By the close of the main period of classical economics, leading writers on the subject found it necessary again and again to defend the ethical standing of their discipline against its detractors.79 Economists of the 1830’s and 1840’s refuted the criticisms levelled against their moral status with indignation, with ridicule, or with disdain. The unworthiness of political economy in public opinion stemmed directly from its explicit preoccupation with so degrading a subject matter as wealth. All the depravities that moralists throughout the centuries have ascribed to wealth became naturally attached to the science of wealth.

The defenses raised by some of the economic apologists against those strictures are revealing. A popular argument that was used did not attempt to deny the possible immoral associations of wealth. But then, the argument ran, political economy must be studied all the more diligently in order to know how to avoid wealth!80

Nevertheless, despite rather extensive apologetics on the part of these writers, the observer may be excused if he gains the impression that many economists themselves were not altogether convinced by these discussions. If they did not consider their subject as actually a degraded one, they very certainly did consider it as concerned chiefly with the lower and seamier side of human nature. R. Jennings, one of the “precursors” of subjectivism in economics, painted a highly repulsive picture of the motives with which economics is concerned. Writing in 1855, he announced that “Political Economy treats only of those human susceptibilities and appetences which are similar or analogous to those...in the brute creation;...it never attempts to enter those higher paths of human conduct which are guided by morality, or by religion.”81

Among later writers, especially those who favored the hedonistic view of economics, a similar opinion prevailed. Economists displayed a sense of moral inferiority towards the votaries of the “higher,” less mundane branches of knowledge. Bagehot speaks of other studies “which are much higher, for they are concerned with things much nobler than wealth or money.”82 Jevons wrote: “My present purpose is accomplished in...assigning a proper place to the pleasures and pains with which the Economist deals. It is the lowest rank of feelings which we treat...” Edgeworth considered economics as “dealing with the lower elements of human nature.”83 It comes as no surprise to find Jevons hopefully writing that he does “not despair” of “tracing the action of the postulates of political economy” among dogs and other more intelligent animals.84

The whole literature on the “lower” side of human nature with which economics was held to be concerned provides a commentary on the wealth-bound conception of the subject.85 The foremost characteristic of this type of definition is that it associates economic activity with a specific type of ends. Of the many goals of human endeavor, one, that known as wealth, is singled out as the subject of economics. Grant that wealth ministers, or at least ministers chiefly, to physical wants, and the sordidness of economic phenomena is well established. It was only in the twentieth century that the need for the ethical insulation of economics became widely recognized, so that the identification of the subject with any one type of end has receded from fashion.

3

The Science of Avarice; Getting the Most for the Least

In the past economists have often been attacked on the grounds that their theories only applied to selfish people; such attacks were brushed aside as absurd. But they were not absurd...
I. M. D. Little

The bottle of medicine for a dying child, or of wine for himself; the tools for his trade; the supplies for a home for the aged, bought as a contribution to the home from a future inmate—all are bought with the same end of getting the most for the least, whatever the motive for the purchase may be.
J. Viner

In the present chapter a number of types of definitions are grouped together by virtue of their possession of either of two special characteristics. These definitions either see economic activity as being essentially motivated by pecuniary self-interest or they see it as conforming to a pattern of behavior prescribed by the so-called “economic principle.” These two points of view and the postulation of a common starting point for both require some elaboration.

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.

The Economic Principle

This pattern of behavior came to be variously known as conforming to the “economic principle,” as obeying the “law of least means,” the “maximization principle,” and the like. One of the earliest formulations of the principle, which displays its close kinship with the classical science of wealth, is that of Senior, when he asserts, as the first of the four elementary propositions of political economy, that “every man desires to obtain additional wealth with as little sacrifice as possible.”13 In this early form, the economic principle is hardly distinguishable, indeed, from pecuniary self-interest. It is this type of proposition that Henry George had in mind when he complained many years later that “for the principle that men always satisfy their desires with the least exertion, there has been substituted, from the time that political economy began to claim the attention of thoughtful men, the principle of human selfishness.”14

The conception of economics in terms of the principle of maximization, whether expressed in terms of selfishness or not, was, in fact, in the direct line of development that was initiated by the explicit delineation of the character of economic man. Its relationship to the view of economic activity that sees it as motivated by pecuniary self-interest parallels that which the concept of welfare bore to the early formulations of economics, discussed in the previous chapter, as the science of wealth. Just as welfare had come to be regarded as the central point of economic interest instead of the objects (i.e., the wealth) considered as necessary for the enjoyment of welfare; so, quite analogously, the idea of behavior patterned on the principle of maximization—i.e., the abstract urge to get more for less—replaced the conception of selfish wealth-oriented activity as central to economic affairs, even though it was greed for wealth that was at first thought to be the sole stimulant to this pattern of conduct.

Although a number of early expressions of the importance of the so-called economic principle appear in the literature, it was not until the last quarter of the nineteenth century that there was any extensive discussion of its significance for the conception of the nature of economic inquiry. Besides Senior, the German economist Hermann had seen the maximization of want-satisfaction as the key concept in economic activity.15 Much of the later discussion in Germany seems to have taken Hermann’s idea as a starting point.

Curiously enough, although it was in England that the pecuniary self-interest conception of economics came into prominence, the maximization criterion did not gain much popularity in British economic literature after the 1870’s. One finds few statements of the principle and no real debate as to its significance until Wicksteed’s masterly work in 1910. Perhaps the clearest expression, in decidedly hedonistic terms, was that of Jevons, who described the “object” of economics as being “to maximize happiness by purchasing pleasure, as it were, at the lowest cost of pain.”16

But in Germany and in the United States the fundamental economic principle was accorded quite extensive and sensitive treatment. The debate in Germany over the status to be assigned to the economic principle is the clearest evidence of the advance in the conception of economics in the last quarter of the century. Regardless of the opinions expressed on both sides, the fact that such a controversy did occur is a sign of the sophistication with which economists were now examining their subject matter. Whether to consider the principle as the defining criterion of economic phenomena or as merely a convenient tool in the analysis of an independently recognized economic activity was a problem that the classical economists were precluded from considering. It was necessary for the economist first to recognize that he is concerned with a species of activity rather than with a species of object before he could begin to debate the role of the economic principle in understanding such activity—whether as an explanatory aid or as a defining characteristic.

The debate in Germany was largely confined to economists who were not afraid of “abstractions” or of theory. Economists of the Historical School, who were pouring scorn on the abstractions of the theorists employing the economic principle as a fundamental hypothesis, could, of course, hardly consider the use of this principle as a possible means of definition. Among the economists who did find a place in these discussions were such prominent figures as Schäffle,17 Wagner, Neumann, and Dietzel. Wagner seems to have undergone a change of outlook on the problem during the thirteen years between the publication of the second and the third editions of his basic textbook. In 1879 he had carefully defined Wirtschaft in terms of the economic principle, which he characterized clearly as prescribing the maximization of want-satisfaction with a minimum of sacrifice. In the 1892 edition this passage is replaced by a conventional definition of Wirtschaft in terms of the production of goods.18

In the interval between the two editions of Wagner’s book Dietzel and Neumann had objected strongly to the use of the economic principle as the defining characteristic of economic activity. Fully aware of the crucial importance of the principle for economic theory, and displaying a sensitive understanding of its meaning, both these writers rejected the use of the principle as the criterion of the economic on similar grounds. Both pointed out that the economic principle describes the pattern of human activity in general and appears in areas of behavior with which the economist has never been concerned.19 Both failed to consider the possibility that this very fact might signify the real homogeneity of all human action, including the “economic,” and might thus render artificial any rigid demarcation of the domain of economics.20

In the United States too the use of the maximization formula as a definition for economics met with the objection that the principle had wide application far beyond the boundaries of that science. Hadley had described the material out of which the science of economics is built as being, not material goods, but a few simple laws of human nature, “the chief of which is that men strive to obtain the maximum of satisfaction with the minimum of sacrifice.”21 But Hawley pointed out that if economics is defined in terms of actions involving the balancing of pros and cons, then it becomes “the Science of Motive in general, which it certainly is not.”22 It is of some interest to notice that Davenport, on the other hand, when declaring that the “economic problem can...be stated as the minimizing of sacrifice,” was rather pleased to find this formula “equally well-adapted to the non-economic facts of life...”23

The “Economic Impulse”

These discussions of the significance, for the understanding of economic phenomena, of such concepts as the pursuit of wealth or the maximization of want-satisfaction invite a brief digression on the idea of a specifically economic motive or impulse. It is clear that the meaning, if any, that is to be attached to such an expression depends on the view taken of economic activity generally. For example, if the view mentioned in the previous chapter is accepted, according to which economic activity is concerned with the sustenance of human life, then the urge for self-preservation may fairly be understood as the economic impulse.24

What makes the question of the meaning of the economic motive especially relevant to the present chapter is that the developments that have been discussed in the conception of economic activity point for the first time to the possibility that no such economic drive may in fact exist. So long as an objective entity—viz., wealth or economic welfare—is singled out as the phenomenon of interest to the economist, as it was in the definitions considered in the previous chapter, then, of course, the concept of an economic motive is meaningful in terms of a drive towards this objective entity. And when economics is understood, as it has been in definitions considered in the present chapter, as examining the phenomena that are attendant upon the activities of man in so far as he is in pursuit of a definite end, viz., wealth, then the economic impulse emerges as the very focus of the economists’ interest. But when the pattern of human activity aimed at maximizing want-satisfaction is made central to economics and the idea of wealth is quietly discarded, then the nature of any economic motive becomes highly problematical.25

The specificity of any one human drive depends on the uniqueness of the end that stimulates and activates it. The most conspicuous feature of the earlier definitions of economics was their identification of the subject with an allegedly unique category of ends, viz., wealth. And it was this association that gave plausibility to the concept of an economic motive. With the recognition that the ends embodied in wealth are as heterogeneous as human wants themselves, the significance of the concept of wealth as a criterion for defining the nature of economic activity declined. Thus, with the progress seen in the present chapter from an economics analyzing human avarice towards an economics analyzing the maximization pattern of human behavior, the notion of a specifically economic impulse fell under a shadow.

In a later chapter it will be seen that a large group of economists who, with Robbins, see the essence of economic activity in the economizing of scarce means consider a major contribution of this conception of economics to be its explosion of the notion of specifically “economic” ends and motives. The idea of an economic motive still has, to be sure, considerable popularity. One recent writer has seen in “acquisitive drives” one of the really significant aspects of behavior in modern economy.26 But the difficulties surrounding the singling out of wealth as a distinct end of human activity were exposed already in the middle of the last century. We have noticed in the previous chapter that Cliffe Leslie, in an influential essay, vigorously attacked the idea of wealth as a unique end. Leslie’s criticisms were aimed at the classical conception of the character of economic activity, especially as embodied in the construction of an economic man. Leslie’s recognition of the multiplicity of motives actuating the quest for wealth impelled him to urge upon economists a more historically oriented and less abstract and deductive methodology. A similar impulse lies behind a remark of Roscher, one of the leaders of the “older” German Historical School in economics. Roscher describes the change in economics since the era of the classical economists as consisting in the investigation of man in the economic sphere of life, instead of the earlier analysis of economic man.27

Thus, the attack on the isolation of any specifically economic motive came from both directions. On the one hand, the theorists were finding it unnecessary to invest wealth with any special role; it was sufficient for analysis to introduce a specific type of human behavior aiming at maximization. On the other hand, the historically-minded economists, interested in the “full reality” of economic phenomena, were finding that it was a misleading over-simplification to see the motive of economic activity in the desire for wealth and were probing into the many and diverse impulses that together constitute the pursuit of wealth.

The most decisive rejection of the notion of any economic motive was contained in Wicksteed’s writings. He terms the concept “a false category” and “one of the most dangerous and indeed disastrous confusions that obstruct the progress of Economics.” The desire for wealth reflects “all the motives and passions that actuate the human breast”; and if, by way of precaution, altruistic motives are excluded by the economist in his study, only self-regarding activity being recognized, then clearly the desire to possess wealth is no longer being treated as the “motive” at all.28

There is one possibility of salvaging the economic motive that remains to be considered. Even when the essence of economic activity is seen in the special maximization pattern of behavior, i.e., in the activity of securing “the most for the least,” it remains a question whether such behavior may not still be regarded as an end in itself in spite of the multiplicity of ends that this type of activity may promote. The rejection of the idea of a specifically economic motive, once the paramount position is given to a “most-for-the-least” pattern of behavior, stems primarily from the fact that this pattern of behavior occurs in areas in which radically different types of motives are at work. It is for this reason that, as we have seen, many writers have sought some other criterion for the delimitation of the economic domain.29 The very fact that the distinctive feature of behavior characterized by maximization consists in its neutrality in regard to motives prevented its wide acceptance as a criterion for economics. The possibility now to be considered is that, despite its neutrality in regard to the motives actuating it, the very activity of maximization carves out a separate niche for itself in human affairs because it satisfies a self-sufficient human urge.

This possibility does not seem to have occurred to any of the nineteenth-century writers who discussed the maximization principle. But several more recent writers have laid stress on this newly isolated “end,” especially in connection with the means-ends conception of economics that, as will be seen in a later chapter, was developed from the “most-for-the-least” approach. Viner seems to have this idea in view when he declares the ends of economic man to be simple enough for inductive investigation:

The bottle of medicine for a dying child, or of wine for himself; the tools for his trade; the supplies for a home for the aged, bought as a contribution to the home from a future inmate—all are bought with the same end of getting the most for the least, whatever the motive for the purchase may be.30

More recently a passage from Boulding typifies the use of this idea as a means of contrasting “the cold, calculating type of behavior” of economic man with the warmth and impulsiveness of romantic, heroic, and visionary natures.31 Clearly this type of contrast tends to run counter to the opinion, previously cited, that the calculation-conscious behavior characteristic of maximization is relevant to all departments of human affairs. This, however, involves the entire problem of the place of the assumption of rationality in economic theory, which belongs in a different chapter. At this point the relevant concept is not the plausibility of that assumption, but rather the recognition, in the activity of getting the most for the least, of an element that makes activity tend to be worthwhile for its own sake, regardless of the further ends that it may serve.

This recognition has been most vigorously accorded in the writings of Macfie. In a book devoted to the isolation and scrutiny of this element in economic activity, Macfie has elevated “economy” into a value with intrinsic appeal to the human capacity for reverence.32 Such a position, if accepted, would clear the way for the retention of the maximization principle in the definition of economic activity. As Macfie himself stresses, any such recognition of the value-laden qualities of economy would, by attaching a specific end to economic activity, convert economics once again into an “ethical” discipline, which it had escaped being when previously defined in terms of the maximization principle. In any survey of what has been understood by the term “economic impulse,” Macfie’s contribution has earned a distinguished place.

Selfishness and “Non-Tuism”

In a chapter which has dealt with the view that economic activity is essentially self-centered and egoistically motivated, space must be found for the novel idea of the economic relationship that Wicksteed substituted in place of the controversial concept of egoism. We have noticed Wicksteed’s vigorous rejection of the notion that economic activity is exclusively self-regarding. Robbins has commented:

Before Wicksteed wrote, it was still possible for intelligent men to give countenance to the belief that the whole structure of Economics depends upon the assumption of a world of economic men, each actuated by egocentric or hedonistic motives. For anyone who has read the Common Sense, the expression of such a view is no longer consistent with intellectual honesty. Wicksteed shattered this mis-conception once and for all.33

In its place Wicksteed defined the economic relationship in terms of “non-tuism.” This innovation seems to have attracted far less attention than Wicksteed’s other contributions to the definition of economics.34 “Non-tuism” is closely connected with the concept of exchange as the core of the economic relationship, but it is itself the actual criterion. The economic relationship is entered into by two parties each of whom is intent on the furtherance of his own (not necessarily selfish) purposes, not those of the other. Wicksteed illustrates this from the case of trustees.

Trustees who have no personal interest whatever in the administration of the estates to which they give time and thought will often drive harder bargains—that is to say, will more rigidly exclude all thought or consideration of the advantage of the person with whom they are dealing—in their capacity as trustees than they would do in their private capacity...the reason why...there is no room for “you” in my consideration is just because “I” am myself already excluded from my own consideration.35

Wicksteed’s major contribution to the characterization of the scope of economics lies in his thorough and exhaustive analysis of the process of economizing. He realizes, however, that the principles of this process are not peculiar to economics but “are laws of life itself.” He seeks to isolate within the realm governed by these laws an area in which a peculiarly “economic” relationship is at work. This area is characterized by “non-tuism”:

...in our industrial relations the thing we are doing is indeed an end, but it is some one else’s end, not ours; and as far as the relation is really economic, the significance to us of what we are doing is measured not by its importance to the man for whom it is done, but by the degree to which it furthers our own ends.36

The existence of such a separate area is made possible by specialization, the division of labor and exchange, but its essence is seen in the lack of regard for the interest of the man with whom one is dealing.

Of course, to postulate such a lack of regard for the interest of others in economic activity involved Wicksteed in the question of the morality of such activity. Egoism is morally reprehensible, but has economics really escaped the castigation of the moralists by throwing in its lot with the “non-tuists” rather than with the egoists? Wicksteed’s answer is that immorality is not necessarily present in “non-tuistic” behavior, as the person with whom we have entered into economic relations “may be one of the last whom we are bound to consider.”37

Few writers have followed Wicksteed in viewing “non-tuistic” behavior as a separate category.38 The case for Wicksteed’s boundary line seems to be built mainly on the conventions of demand-supply analysis. In conventional theory it is convenient and customary to group together all the factors affecting the demand side of the market separately from those underlying supply. While the earlier writers had thought this practice to be justified only on the assumption of self-regarding behavior on the part of both buyers and sellers, Wicksteed has shown that this is not the case. All motives, including the most idealistic and altruistic, could underlie either the demand or the profit-seeking motivating the production of the supply. But if the distinction between buyer and seller is to be preserved at all, Wicksteed felt it necessary to assume purely “non-tuistic” behavior on the part of each. Departure from such “non-tuism” was to be regarded as a well-recognized empirical fact, but one causing a divergence between the results of economic theory and the facts of the real world. The core of the economic relationship, for Wicksteed as well as for the economists who considered egoism as the mainspring of economic activity, lies in the pursuit of one’s own purposes. Wicksteed’s rejection of egoism allowed him to include under “one’s own purposes” every conceivable interest except the interest in the person with whom one is dealing.

There is undoubtedly an element of artificiality, albeit ingenious artificiality, in this exception. If “one’s own purposes” are wide enough to include concern for the support of charitable institutions, they are surely able to include an interest in the welfare of the person with whom one is dealing. Despite the skillfulness and persuasive beauty of Wicksteed’s prose, it remains difficult to see the boundary line as other than the result of a quite arbitrary piece of surgery on the whole of commercial activity. While theorists have been both openly and tacitly employing such surgery on business behavior in order to simplify their analysis, few have followed Wicksteed in elevating what survives their excision into a separate category of economic behavior or in treating it as the sign of a separate economic relationship.

Economics and Mechanics

One further aspect of the class of definitions of economics dealt with in this chapter remains to be discussed. Both the conception of economic activity as the pecuniary operations of self-centered economic man and its conception as the process of getting the most for the least facilitate the analysis of such activity by (the same) mathematical methods. In the previous chapter mention was made of a number of passages in the writings of eighteenth-century thinkers in which the force of self-interest in human affairs was likened to the force of gravitation in the physical world. Economists of the nineteenth century who stressed self-interest or the maximization principle in economic affairs were in a position to pursue this analogy far more thoroughly. Thus, Senior, who, as we have seen, stressed the maximization of wealth as an essential element in economic activity, describes this element, like “gravitation...in Physics,” as “the ultimate fact beyond which reasoning cannot go, and of which almost every other proposition is merely an illustration.”39

For the earlier classical economists, who thought of economics as concerned with wealth understood in a more or less material sense, self-interest was an impersonal force that extracted this wealth from the factors of production and propelled it through the distributive channels of the economy. The greater stress laid by later writers on the force of self-interest itself as the core of economics and the consequent emphasis on maximization-patterns of behavior tended to enhance the attraction of the analogy to mechanics. Jevons’ “mechanics of utility and self-interest” and the “Economic Calculus” of Edgeworth, which investigates the equilibrium of a system of hedonic forces each tending to maximum individual utility, are typical examples. It seems no accident that both Jevons and Edgeworth were early users of mathematical methods in economics. The emphasis that both writers laid on self-interest goes hand in hand with a desire to turn economics into a “science” like mechanics. This required the postulation of a pervading force manipulating “wealth” into various configurations susceptible of analysis through the use of maximization formulae from the calculus. Self-interest was seized upon with avidity from the classical system as providing just such a plausible “force.”

In Italy Pantaleoni (who has been compared to Edgeworth in a number of respects) stressed both the maximization principle in economic activity and the mathematical exposition of the theorems of economics. “Economic problems, in a broad sense, are, e.g., those which constitute the mathematical doctrine known by the generic term: de maximis et minimis...”40 “Economics,” in its broadest sense, meant for Pantaleoni making the most of limited means in any and every connection. In order to delineate the scope of “economic science,” Pantaleoni finds it necessary to limit himself to the consideration of “wealth,” hedonism, and egoism.41 Pantaleoni’s countryman, Benedetto Croce, was later to criticize him for this,42 vigorously asserting the freedom of the economic act from hedonistic or egoistic elements. But according to Pantaleoni, just as to Edgeworth, economic science described the maximization of pleasure, and the phenomena of the market adjust themselves, as it were automatically, under the play of the force tending in that direction.

This mechanical conception of economic phenomena clearly relegated man, the source of economic activity, to the background. It is somewhat ironical that the construction of the concept of a self-centered economic man, a development that led to an increase in the attention paid to the role of the human agent, should have tended to lead to a position in which the objective phenomena of economic life can be viewed as if they occurred automatically. Certainly the most extreme result of the mechanical view of economics in this respect is to be seen in Schumpeter’s early conception of economic science. In his first book, Das Wesen und der Hauptinhalt der theoretischen Nationalökonomie (1908), Schumpeter made an attempt to place economics on a definitive scientific basis, to rear an edifice of impregnable logic grounded on foundations free of the shifting sands of metaphysical speculation. This he was able to do only by directing attention to “goods,” which were to be viewed as if undergoing operations that are not the results of human action.43

Schumpeter’s position seems in many respects like something of a return to classical ideas. Whereas his immediate predecessors had been gradually advancing towards the conception of economics as precisely an aspect of human behavior, Schumpeter found it necessary to carefully exclude human activity from economic investigation. Schumpeter’s view of economics was a conscious effort to see economic affairs from the point of view of mechanics. In mechanics we start with given masses located in a given spatial configuration and attempt to determine the changes in mass and in configuration at future points in time. In economics, Schumpeter explains, we have “economic quantities” of goods undergoing mutually determined changes that admit of being expressed by means of mathematical functions. It is these objective, measurable things possessed by men that make up the Schumpeterian economic system. It is the existence of these functional relationships between all these quantities that makes economic science possible. Indeed, it is these relationships themselves that constitute the whole of the subject matter of that science.44

Although Schumpeter’s lack of interest in the behavior of men and his stress on the impersonal changes in “quantities of goods” are reminiscent of the classical approach, his economics is far from identical with their science of wealth. Schumpeter does not recognize “wealth” as constituting in itself a subject of investigation by virtue of its character as wealth, but simply postulates the presence of mathematical interdependence between the quantities of various “goods” possessed by members of the Volkswirtschaft. It is the exposition of this mutual dependence of goods, rather than the investigation of goods or wealth as such, that constitutes the sum and substance of Schumpeter’s economics.

Yet the absence of man from Schumpeter’s economics remains a classical feature. This effort to exempt, or rather interdict, the economist, qua economist, from investigating the behavior of man as an economic agent stems from, or at least runs parallel to, Schumpeter’s dream of replacing the concept of causality or pur- pose in economics by the type of relationship expressed by the mathematical function.45 Here Schumpeter’s enthusiasm for the mathematical method in economics and for the physical sciences generally46 is undoubtedly responsible for his explicit rejection of teleology as in any way essential to the conception of economic phenomena. The category of purpose has no place in a positivist system from which all but functional relationships have been carefully exorcised.

A criticism that Croce addressed to Pareto (whose position bears a number of points of resemblance to that of Schumpeter)47 would probably have been applicable to Schumpeter as well. While recognizing the service that mathematicians have rendered economics by “reviving in it the dignity of abstract analysis, darkened...by the mass of anecdotes of the Historical School,” Croce complains that they have introduced their own professional prejudices into economics. They take up with regard to economics “which is the science of man, of a form of the conscious activity of man,” the same attitude that they “rightly take up in relation to the empirical natural sciences.”48 The roots of the mechanical conception of economics against which Croce was crusading go back as far as the ascendency of self-interest in economics and its translation into the maximization-pattern of behavior in a form amenable to mathematical treatment. The mechanical conception of economics may thus fairly be regarded as an outgrowth of the conceptions of economics dealt with in this chapter.

4

Economics, the Market, and Society

The definition to which economic writers have yielded a more general assent than to any other...is “the science of exchanges.”
A. S. Bolles (1878)

...that definition of Political Economy which calls it the science of exchanges, is absurd.
Franklin H. Giddings (1887)

The present chapter groups together definitions that see economic affairs as in one way or another necessarily connected with the act of exchange as a social phenomenon. Two groups of these definitions may be distinguished. The one explicitly raises exchange to the first place in economics, regarding the very notion of a distinct economic sphere as revolving around a more or less carefully defined concept of exchange. The other definitions do not stress the phenomenon of exchange itself, but focus attention on such ideas as the market, the economic system, and the “economy” as an aspect of the larger concept of society. These ideas, too, depend in the last analysis on a fusion of individual activities into a social “system” through some form of the exchange relationship. Both groups of definitions provide a fresh and distinctive outlook on economic phenomena, which at the same time reveals a number of points of contact with many of the alternative conceptions.

Economics and Catallactics

The importance of exchange to economics was recognized very early in the development of the science. In France the physiocrats had stressed exchange and had required ability to be exchanged as a condition for the wealth with which political economy is concerned. Among the classical economists there was some debate as to whether the possibility of exchange was either a sufficient or a necessary condition for wealth. James Mill and McCulloch were among those requiring exchangeability as a condition. But Malthus pointed out that many things outside the scope of political economy may be the objects of exchange. “It has been said...that the liberties of England were chiefly obtained by successive purchases from the crown.”1 A number of the classical defination of economics in term of wealth included the exchange of wealth as a department of the subject together with its production, distribution, and consumption. One French writer had even written: “Society is purely and solely a continual series of exchanges...commerce is the whole of society.“2

But during the early classical period there was no attempt to take this phenomenon of exchange and make it the very core of economics. Political economy was the science of wealth. The fact that wealth is exchanged may have been recognized as of the first importance for a science of wealth, but this recognition did not of itself convert political economy into the science of exchanges.

The first attempt to reconsider the scope of political economy in favor of the exchange criterion was the basis for Archbishop Whately’s suggestion in 1831 to rename the entire subject. “The name I should have preferred as the most descriptive...is that of CATALLACTICS, or the ‘Science of Exchanges.’” Whatley’s outlook is perhaps best seen in his definition of man as “an animal that makes exchanges.”3 Whately joined Senior in denying the applicability of political economy to the activities of isolated man. “Robinson Crusoe is in a position of which Political Economy takes no cognizance.”4 It was no longer sufficient to characterize political economy as concerned with the phenomena of wealth or even with the wealth that is involved in exchanges. The catallactic view of economic affairs saw their unity solely in the act of exchange and conceived of political economy as expounding the principles governing these interpersonal exchanges.

Whately’s opinions on the scope of the subject seem to have aroused some interest at the time. At Dublin Whately had endowed a chair in political economy.5 At least two of the holders of the Whately professorship followed the catallactic view of their subject. But besides the enthusiasm of these followers and acceptance by several minor writers,6 Whately’s proposal, where noticed, was rejected as unjustifiably narrowing the scope of the subject.7 It was not until several decades after the publication of Whately’s book that Macleod seized on the view of economics as the science of exchanges and enthusiastically launched the idea in his crusade to revolutionize the entire subject.8 However, Macleod’s unfortunate propensity for expressing his often good ideas in an apparently bombastic fashion prevented his work from making any appreciable impression on the general economic thought of his time.

The substitution, in definitions of political economy, of a verbal noun (“exchange”) instead of the classical noun (“wealth”) was, of course, of considerable significance. The subject matter of the science was now uniquely characterized, not by the objective nature of the goods-phenomena that it investigates, but by the character of the operations involved in the appearance of these phenomena. Nevertheless, the break from the classical conception of economics as a science of wealth that was involved in Whately’s proposal was not so complete as might at first glance be imagined. That which is exchanged in Whately’s Catallactics is still the same “wealth” with which the political economy of a McCulloch is concerned. The views of those who held that economics is a science of exchanges, in fact, provide another interesting example of definitions that, while themselves closely related to the older wealth-bound formulations, point to a complete emancipation from these bonds. An arresting illustration of this is furnished in the writings of Lawson.

Lawson, one of the Dublin professors, devoted his first lecture in 1844 to problems of the scope and methodology of his subject. The object of political economy is “to investigate and trace to general laws the different phenomena of the commercial or exchanging system...” This is clearly in the Whately tradition. But even more noteworthy is Lawson’s declaration that political economy is a science that has man as its subject matter and “views him in connexion with his fellow-man, having reference solely to those relations which are the consequences of a particular act, to which his nature leads him, namely, the act of making exchange.”9 What Lawson has put before us is no less than a completely original “economic man,” fully capable of bearing comparison with his more familiar cousin, the economic man created by J. S. Mill. Mill’s creature was a being bereft of all passions other than avarice. Mill’s economics was a body of principles governing the consequences of avaricious behavior. Lawson’s economic man, on the other hand, is a far less repulsive caricature. His obsession is merely to engage in the act of exchange “to which his nature leads him,” and the task of Lawson’s political economy is to investigate the consequences of this human urge—an impulse that Adam Smith had long ago made famous as the “propensity to truck, barter, and exchange one thing for another.”10

The separation of acts of exchange and their identification with a distinct human urge made the division between economic and other human affairs a far less painful operation for Lawson than it had been for Mill. The consequences of the propensity to truck may be isolated simply by considering only the results of acts of exchange. There is no need to call upon controversial operations of “abstraction” and “hypothesis” as is necessary when one attempts to segregate the consequences of human pecuniary self-interest. Clearly the catallactic view could facilitate the conversion of political economy from a science of wealth into a science of man.

And yet Lawson himself in his second lecture gave a definition of his subject almost identical with the earlier formulations in terms of wealth.11 The contradiction between the first and the second lectures seems capable of resolution only on the assumption that Lawson himself was willing enough to follow Whately in terminology but was not prepared to admit that this difference meant any substantive alteration in outlook.

Several decades later the American Perry warmly endorsed the catallactic view of Whately and Macleod precisely because it offered an escape from the idea of wealth. In order to avoid the difficulty involved in giving an adequate definition of the concept of wealth as the core of political economy, Perry turned to the conception of that discipline as a science of exchanges.12 We have already noticed a trend in economic thought, towards the latter part of the nineteenth century, that favored the abandonment of wealth as the focus of economics and its replacement by such ideas as welfare and the maximization-pattern of behavior. This trend was now reinforced by Perry’s proposal to reject the concept of wealth altogether in favor of the idea of exchange, thus taking the catallactic idea a step beyond Lawson. It may be remarked that Perry’s suggestion was not generally accepted by American economists of his time. Walker pointed out that until one knows precisely what is being exchanged, little meaning is conveyed by defining economics as the science of exchanges. If, on the other hand, one admits that it is wealth that is being exchanged, then, of course, one immediately renounces any claim to the excision of that troublesome concept.13 The definition of economics in terms of exchange has not gotten rid of the notion of wealth; it has simply swept it under the rug. Henry George wrote of Perry’s discarding the noun wealth: “Without the clog of an object-noun political economy...has plunged out of existence...” It is true that one American writer asserted that economists yielded the definition of economics as the science of exchanges “a more general assent than to any other.”14 But more typical of general opinion was probably the blunt declaration made to the American Economic Association in 1887 that “that definition of Political Economy which calls it the science of exchanges, is absurd.”15

Despite the alleged absurdity of this definition, it has always retained some measure of popularity. Several twentieth-century economists who devoted careful attention to the problem of defin- ing their subject and weighed the merits of several more sophisticated formulations still preferred the exchange criterion.16 But the selection of exchange to serve as the core of economics may yet reflect any one of a number of points of view. This is so because the exchange concept itself reflects several related, but distinct, aspects of economic activity, each of which deserves to be kept in clear focus.

Exchange and the Propensity to Truck

The first aspect of the exchange phenomenon that deserves attention is the status of the act of exchange as an element in the activity of an individual. Adam Smith saw exchange as the result of a human propensity to barter. Whately defined man as an animal that exchanges. Now, human beings engage in barter because they hope to improve their positions by exchanging. The act of exchange is thus no different in this respect from all human actions that are undertaken in the hope of improving one’s position. Of course, the act of exchange involves the cooperation of another person, but some further property is needed to distinguish exchange from other forms of cooperation or from the act of bestowing a gift upon one’s fellow man. It is here that the concept of exchange becomes entangled with ideas of sacrifice, of the mutual coincidence of interests, and the like.

In a number of the definitions of the economic that are couched in terms of exchange, the aspect that is stressed is the fact that exchange involves a quid pro quo. In an atmosphere in which economics and self-interest were linked together, the most characteristic feature of exchange is that it provides a new means of getting something for oneself. It is this aspect of commercial behavior that aroused the ire and moral indignation of Ruskin against the “cash-payment relation” between man and man. Exchange suggests the habit of helping one’s neighbor only on the condition that one will be more than repaid in return.

If this aspect of exchange is implicit in the notion of a science of exchanges, then there appears good reason to reject Walker’s contention that in the absence of a clear conception of what is being exchanged a science of exchanges has no meaning. Perry, against whom Walker was arguing, did, in fact, in one connection define economics as concerned with actions done by one person to another for the sake of receiving something in return.17 Clearly this points to the real meaning behind Perry’s exchange formulation. There is no urgent need to introduce any concept of wealth to make precise the definition of economic activity as that which is directed to another person for the sake of obtaining something in return.

In this form, the conception of economic activity as exchange is closely parallel to the “non-tuism” that was noticed in the previous chapter. Wicksteed’s definition of the economic relationship in terms of a lack of regard for the interests of the person with whom one is dealing was given alternative expression as the “relationship into which men spontaneously enter, when they find that they can best further their own purposes by approaching them indirectly”; and as involving man in the search for “some one else to whose purposes he can directly devote his powers or lend his resources...” “The industrial world is a spontaneous organization for transmuting what every man has into what he desires...”18 Exchange in this context is the device whereby a man can get the things he wants by giving up to another the things he has. The entire realm of economic affairs, in this form of the catallactic view, is a vast net of relationships in which this device is being put to work. Several other American writers at the turn of the century seem to have in mind this aspect of exchange as a means of enticing one’s fellow man to provide one with the goods one desires.19 The “propensity to truck” must be understood as the faculty that men possess of recognizing situations in which the device of exchange, understood in this sense, would prove profitable.

Exchange and the Division of Labor

However, the significance of an economics defined as a science of exchanges may be seen, not in the nature of the act of exchange itself, but in its wide consequences. The market may be viewed, not as an institution facilitating the indirect fulfilment of individual desires (in Wicksteed’s sense of disregarding the competitive interests of other people), but on the contrary, as an institution through which individuals may cooperate to satisfy their wants at higher general levels of satisfaction. As Smith pointed out, each individual, by indulging his propensity to truck, unconsciously helps society as a whole to benefit through the increased division of labor. The “general opulence” associated with specialization is a consequence of this propensity to truck and may arise without any knowledge on the part of the barterers of the “extensive utility” that they promote.

This idea is, of course, related to Smith’s “invisible hand,” which directs each member of the economic community to produce that which is most urgently required by the consumers. Looking at the market, the observer recognizes that the benefits of the division of labor in increasing the nation’s output would, at least in principle, be obtained if the producers and consumers could be induced to specialize by any means whatsoever. A system in which productive effort was inspired by the hope of being accorded public honor, such as Marshall has imagined,20 or by the communistic ideal, in which the sole incentive is the desire to promote social welfare, or by a system of police compulsion, can be imagined as directing individual effort into channels sufficiently specialized to increase the total product far beyond what could be achieved by a primitive autarky. The exchange system embodied in the market is only one of several conceivably efficient mechanisms to attain this end; and its distinctive feature in Smith’s view is that this “end” need never be consciously aimed at by any participant in the market.

This remarkable property of the exchange system may thus well be seen as the central thread uniting all economic endeavor. Since of all the possible devices capable of attaining economic specialization only the market system can evolve spontaneously, and it alone is compatible with conventional notions regarding private property rights, the act of exchange emerges as the key to all social cooperation. There seem grounds for suggesting that the early proponents of catallactics did, in fact, have this aspect of exchange in mind. Whately was not thinking of the act of exchange as merely an expression of a more sophisticated avarice. The unwillingness to accord Crusoe the edification of being made the subject of economic analysis was simply the expression of the belief that political economy was primarily interested in the exciting new vistas of social cooperation made possible by the division of labor that was being encouraged by the rise of modern capitalism. Whately’s interest in man as an exchanging animal arises from the tendency of individuals to become associated through acts of exchange and thus to pool their human and acquired resources for the ultimate benefit of all. It is of some interest to note that two eminent sociologists, Gabriel Tarde and Max Weber, saw this aspect of exchange as the central feature of economic life.21 The charge raised against the catallactic definitions that they have failed to eliminate the concept of wealth from their subject undoubtedly has some validity on such an interpretation. The recognition, in the existence of a system of exchange, of a factor favorable to the expansion of total production does presuppose concepts of measurements that, again, imply some form of the idea of wealth.

The “Purely Formal” Concept of Exchange

The catallactic view of economic affairs may be interpreted to refer to yet another aspect of exchange. Like that discussed in the preceeding paragraphs, this view ignores exchange as a peculiarly motivated human act and focuses attention on the consequences of the act. But instead of gaining its significance from the advantages arising from the social cooperation involved in exchange, the idea of exchange is now to be assigned importance as the means whereby “economic quantities” are changed. An exchange of goods alters the configuration of goods in the economy. An exchange of productive resources alters the arrangement of those factors of production. If the exclusive object of interest is the transfer of the goods themselves, then exchange is significant merely as involving the simultaneous variation of several sets of “economic quantities.” A purchase of a consumer good has re- sulted in a reduction both in the inventory of the seller and the cash holdings of the purchaser. The act of exchange is the event that has altered these economic quantities and has generated the ratio of their variations, viz., the phenomenon of price.

The most ambitious attempt to expound this conception of exchange is contained in Schumpeter’s 1908 definition of the scope of economics in terms of the exchange relationship.22 His concept of economy is coincident with this concept of exchange. Perhaps the most arresting and widely discussed implication of Schumpeter’s concept of exchange is its application to the Crusoe economy. If an act of exchange is significant only as the simultaneous alteration in stocks of goods, then the idea of exchange may easily be extended to the activity of a single individual. When Crusoe shoots game, in Schumpeter’s example, he is merely exchanging shot and energy for food. This use of the idea of exchange has been considered by critics as an arbitrary and unfruitful piece of mental gymnastics, but has, at the same time, earned grudging respect as “never to be forgotten subtlety.”23

Schumpeter’s outlook is, of course, consistent with his wish to ignore human behavior as a factor in economics. Leaving human behavior to the psychologists, the economist is merely to examine the results of behavior in terms of related variations in the quantities of goods and prices. From a less positivistic point of view, Schumpeter’s extension of exchange to the isolated economy may, in fact, be seen, not as an extension, but as a restriction, of the interpersonal concept of exchange. With the recognition of the purposive element in human action, exchange is simply the sacrifice of the satisfaction of lesser, for the sake of satisfying more urgent, needs. Interpersonal exchange is significant as reflecting the possibility of simultaneous actions on the part of two purposeful human beings, each intent on attaining that position which he prefers among all the alternatives open to him. And, of course, this element of exchange can be pointed out in the isolated economy as well. It requires neither special subtlety nor mental gymnastics to see that Crusoe is exchanging one satisfaction for another whenever he forgoes the first in order to secure the second. In the words of Seligman, “Crusoe exchanges in his mind apples and nuts in estimating their value to him.”24 But when Schumpeter considers Crusoe to exchange, not by forgoing one pleasure for the sake of another, but because the quantities of the various resources at his command undergo simultaneous variation, then he has effectively robbed the concept of exchange of all but its barest externals. There is little real difference, on this view, between the case where A exchanges his horse for B’s cow and the case where A’s horse and B’s cow have exchanged places and refuse to budge. Nothing is added to the exposition of related variations of economic quantities by explaining that these variations constitute Tausch. Something of this seems to have been felt by Schumpeter himself in writing that his conception of all activity as exchange is “purely formal.”25 The Schumpeterian exchange relationship is best understood when it is denoted by the alternative term that Schumpeter uses for it, “price.”26 Price to Schumpeter meant simply a parameter governing the simultaneous variations in the quantities of goods. The Tausch-relation meant nothing more. The definition of economics in terms of Schumpeter’s exchange relationship merely conveyed in different terms his “mechanical” definition of the subject noticed in an earlier chapter, centering around changes in “economic quantities.”

Exchange and the Economic System

The final aspect of exchange that may make it of significance for defining the scope of economics is its importance in the visualization of an economic system. It is primarily this aspect that is concerned in the second group of definitions mentioned at the beginning of the chapter, which use the idea of an economic system or organization as their criterion. The recognition that, expressed in the anarchy of numberless, seemingly haphazard transactions of economic life, there is a system that relates apparently disconnected actions and organizes them to achieve social “ends” is an achievement of economic science. But the discovery of the existence of such a system clears the way for a fresh conception of the nature of economic science itself. The existence of a system offers a new object for investigation, viz., the system itself. The system may concern wealth, the selfish behavior, or the propensity to truck, of a variety of economic men; but it does provide an independently unique phenomenon in its organization, its structure, and its operation.

The system has been described variously as the exchange system, the price system, the market, and so on. These terms reflect possibly varying outlooks on the character of the system, but all of them imply the phenomenon of exchange. The description of the subject matter of economics as exchanges may thus imply the entire system of exchanges. In the words of one writer: “Economics studies the market as political science studies the state. Appreciation of this analysis seems to me to be fundamental to the catallactic point of view.”27 Undoubtedly this aspect of exchange is akin to that described in a previous section, in which exchanges secure the advantages of specialization and the division of labor, but the two are quite distinct. There the act of exchange was seen as bringing to a focus the possibilities for mutual benefit that are opened up for men by the division of labor, and the aggregate of all such acts of exchange measured the maximum of specialization and effective social cooperation attained. Here the relevant aspect is the relationship between all the acts of exchange themselves, the structural pattern of these acts, and the way in which they all together succeed in “delivering the goods.”28

When the success of the system in achieving generally prized results is not considered, then a description of the system reduces to a positive statement of the functional relationships among the sets of variables within it. And the totality of these relationships may have no special interest independently of the various sets of relationships themselves. This is the standpoint of Schumpeter’s definition in terms of exchange and the other “mechanical” formulations discussed in this and the previous chapter. But if the whole body of interrelationships is considered in its unity, and the existence of such a unity is considered significant in itself, then the idea of a system may assume a prominent place in economics.

Bastiat is an example of an economist who, stressing the exchange point of view, did see the prime interest of his subject as existing in the exposition of such a system. And it seems likely that at least part of the criticism aimed at his work arises from a misunderstanding of Bastiat’s self-assigned scope of investigation. Bastiat is often characterized as a shallow optimist content to bestow lyric praise on the laissez-faire economy. Cairnes attacked Bastiat as unscientific. Bastiat, Cairnes complained, considers it his task as an economist, not only to discuss the phenomena of wealth in a laissez-faire economy, but also to demonstrate that this system is the optimum one.29 This, Cairnes declares, is to assert that the results of political economy are a foregone conclusion, and if this is the case, then it is not a science at all, because “science has no foregone conclusions.” By attempting to justify rather than explain the facts of wealth, Bastiat is departing from the impartiality of science.

Cairnes’ insistence on the disinterested character of scientific inquiry in general, and of economics in particular, is a classic statement of a jealously guarded tenet of scientific economics. Bastiat’s enthusiasm for the innate harmonies of a free economy did produce passages in his writings that are vulnerable to the type of criticism levelled by Cairnes. Nevertheless, it seems that Bastiat’s conception of his subject was sufficiently different from that of Cairnes to exculpate him from at least part of the blame imputed to him in the latter’s reproaches. Bastiat was impressed by the comparative smoothness with which the tremendously complicated machinery of economic endeavor succeeded in fulfilling the wants of consumers. His classic passages in the opening chapter of Harmonies économiques,30 in which he describes how a humble carpenter is served, in exchange for his skilled labor, with commodities brought from the four corners of the earth and how each day the great city of Paris is provided with colossal quantities of food and other articles, have been echoed in subsequent economics textbooks again and again. One would be closing one’s eyes to the light, Bastiat observes, if one failed to recognize that all this is the product of a “prodigiously ingenious mechanism.” “This mechanism is the object of study of political economy.”

Clearly, then, Bastiat felt some justification for assuming beforehand that the system to be studied by political economy was one that worked. After all, it was this successful operation of the system—a success that Bastiat felt to be grounded on observation—that was the object of the study. For Cairnes, who considered economics a dispassionate study of the phenomena of wealth, any predilections towards one system in particular must be unscientific. For Bastiat, what invited explanation was precisely the large degree of efficiency empirically evinced by the system, a phenomenon of which the recognition hardly deserves the suspect position of a “foregone conclusion.”

Be this as it may, Bastiat is typical of a fairly numerous group of writers stressing the organization of the economy as the focus of economic attention and seeing the significance of exchange primarily in this connection. Two eminent twentieth-century economists may be cited as examples of the popularity of this view.Hawtrey writes:

...when the perfect cooperation which would be the ideal of reason is denied us, we turn back to...the whole apparatus of human motives, instinctive, habitual, or other. If each member of society can be induced or impelled to do his allotted task by associating it with some motive that appears to him adequate, then he need never know how he is contributing to the real end, and need not even be aware of the end at all. It is this problem of organization that we shall call the Economic Problem. It is in fact the real subject matter of political economy.31

And Hayek writes:

...the spontaneous interplay of the actions of individuals may produce...an organism in which every part performs a necessary function for the continuance of the whole, without any human mind having devised it....The recognition of the existence of this organism is the recognition that there is a subject matter for economics. It is one of the causes of the unique position of economics that the existence of a definite object of its investigation can be realized only after a prolonged study...32

Economics, the Economy, and the “Volkswirtschaft”

This line of thought leads directly to the role played in discussions of the scope of economic inquiry by the idea of the Volkswirtschaft. The word seems almost by philological accident to have given rise to features in German-language definitions that are absent in English-language discussions of the subject. Numerous disquisitions on the Wesen of the Volkswirtschaft evince conceptions ranging from the more holistic views of some of the economists of the Historical School and advocates of Sozialpolitik, in which the Volkswirtschaft is considered as an organic whole, to views that see it merely as an agglomeration of separately operating individual “economies.”33

It is significant that the existence in the German language of a single word to represent compactly so complex a conception has had considerable bearing on the direction taken by definitions of economic affairs. Many writers defined their subject directly in terms of the study of the Volkswirtschaft (hence Volkswirtschaftslehre). Thus, such a definition immediately places the accent on the social character of economic activity. The absence for a long time in English of a word corresponding to Volkswirtschaft meant that English definitions of the subject were not prone to be thus influenced.34 The current use of the term “the economy,” itself a reflection of the interest in macroeconomic “aggregates,” is too recent and too specialized to have had much influence on English definitions. When Schmoller used the term “political economy” as the equivalent of Volkswirtschaft, the grossen gesellschaftlichen Käorper, he was coining what must at that time have been a new meaning for “political economy.”35

Moreover the use of the term Volkswirtschaft seems to have had more than coincidental connection with a conception of economic phenomena in which temporal relationships, and historical significance generally, were stressed. The term carried with it, especially to the writers who stressed the organic unity of the whole, the same implications of continued identity over time as are asso- ciated with terms such as the State or the Nation (terms cited by Schmoller, for example, as analogous to the Volkswirtschaft).36 To the endowment of the economy with an only arbitrarily divisible extension along the time dimension is certainly in some degree to be ascribed the well-known description of economics by Mangoldt as the “philosophy of economic history” and the similar view of Roscher37 and other economists of the Historical School. Conceived as possessing in this way a kind of fluid unity in its extension over both space and time, the idea of the Volkswirtschaft could lay claim to a distinct entity (distinct, e.g., from the “body politic”) only by virtue of its more conspicuous and enduring function of providing for the material needs of the nation.

It was noticed in the previous chapter that German economists paid considerable attention to the maximization principle. This interest sometimes ran into sharp conflict with the notion of economics as the study of the Volkswirtschaft. One writer typically dismissed these discussions of the “economic principle” by declaring that the task of economics is not to investigate the effects of Wirtschaftlichkeit, but to understand the workings of the Volkswirtschaft.38 In the twentieth century Amonn, who stresses the social character of economic phenomena probably more than any other writer, has sharply criticized attempts to define the scope of economic science in terms of such concepts as individual acts of economizing. Attempts to build up the notion of a Volkswirtschaft from the elements of individual economic behavior are foredoomed to failure.39 It is from the social relationships involved in economic activity that such activity derives its distinctive character. This point gave rise to vigorous disagreement from those who attempted to construct the Volkswirtschaft out of the Wirtschaft.40

Also associated with the idea of the Volkswirtschaft are those definitions of economics that are couched exclusively in terms of national aggregates. To this class belong, for example, the views of economists from the time of the classical school who saw their subject as concerned with national, not individual, wealth.41 Discussion of “social goals” as something apart from individual motives, to which the economy as a whole is conceived as striving, are also related to the idea of the Volkswirtschaft. Both the writings of R. Stolzmann and Othmar Spann are relevant in this regard.42

Economy and Society

Many of the ideas mentioned in the preceding sections of this chapter have a bearing on the relationships that have at various times been held to exist between economics and the social sciences generally. The structures of interpersonal patterns of contact that the economist studies in his analysis of the market may, of course, be of interest to the sociologist or the social psychologist from a totally different aspect. And writers who identified the specifically economic aspect of phenomena with the social quality inherent in exchange, the market, and the like, found themselves influenced more or less deeply by their ideas on the nature and methodology of the social sciences as a group.

The social character of the phenomena studied by the economist was recognized early in the history of the discipline. In his definition of political economy J. S. Mill had stressed this aspect to a degree that seems to have escaped later writers.43 Nevertheless, it is true that the emergence of sociological thought in the second half of the nineteenth century brought with it a vastly increased awareness of the contribution that economics can make to the systematic study of society. This in turn made for a “sociological” attitude towards the study of economics itself, which manifested itself in a variety of forms.

At the extreme was the opinion first propounded by Comte, and taken up by later writers, that it was futile to seek for laws in economics apart from the laws of society as a whole. To Comte the recognition of economic affairs as part of the phenomena of society meant that an economic analysis of society that leaves out intellectual, moral, and political factors must be a “metaphysical” subject, created by an “irrational” separation.44 Later writers, especially those of the Historical School, held essentially similar views. In England Ingram and Leslie were stressing the need for turning to the “great science of society” for any valid economic knowledge.45

Carried to the extreme position held by Comte, these ideas meant, not that the social character of economic affairs made possible a fresh means of definition, but that the awareness of this social character led to the denial that there are any specifically economic affairs whatsoever. Phenomena of wealth might indeed be distinguished. But once it is insisted that the derivation of the laws of wealth requires analysis of intellectual, moral, and political factors, then it is at once contended that no specifically economic point of view can be scientifically illuminating at all.

However, awareness of the sociological importance of economics did not, of course, always involve its submersion in a broadly understood sociology.46 Any number of writers at the turn of the century could be cited who diligently pursued the study of economics, but who were fully conscious of its status among the social sciences. Confining our attention strictly to that aspect of the sociological outlook on economics which affected the conception of the nature of the economic point of view, we notice several strands of thought that run through the literature during the present century.

At one level, we observe again Amonn’s insistence on the futility of the search for the nature of economic science in any concepts built on individual activity. There does exist a given pie that the economist studies, but its essence is the structure of the societal relationships that make up economic affairs as we know them in the world and as they have been traditionally studied by the economists from Ricardo on. To attempt to analyze economic affairs by referring them back to the individual is to abstract from their very essence.47 From the point of view of the scope of this essay, this view is primarily of importance as constituting a rejection of the formulations of the economic point of view that we take up in the final chapters. The emphasis on the social aspect has, however, been used by one or two writers to distinguish economics from technology.48

In a somewhat different context, the recognition that economic affairs refer to the actions of men, not in isolation from one another, but within a societal framework, has affected the conception of the economic point of view in respect of the goals of economic activity. Anderson, Haney, Parsons, and Macfie may be taken as examples of the many writers during the past half century who show this influence.49 The stress, at this level of discourse, is not on the social patterns of relationships that emerge during the course of economic activity. Rather, these writers tend to emphasize the fact that the values and motives that affect and inspire economic activity are overwhelmingly conditioned by society as a whole. Whatever the role of individual activity, it is pointed out that values are socially determined and are the product of forces whose explanation must be sought in sociology or social psychology. This trend of thought, too, seems to be significant to our own problem chiefly in its implied rejection of the “atomistically individualistic” conceptions of the economic point of view treated in later chapters.

Finally, in this necessarily brief and fragmentary survey of the sociologically conditioned conception of the economic point of view, we must notice the attempts to “locate” economics within the more general expanse of sociological theory. These attempts have generally been made by writers who were primarily interested in the study of society and intent on defining precisely the nature of the economic point of view, not for its own sake, but in order to have more clearly in focus the separate facets that together make up the complete sociological perspective. Thus, Pareto conceived of economics as an integral part of sociology and believed that the distinctively economic point of view is obtained by a conscious restriction of attention to certain “variables.”50 A complete sociological theory would entail consideration of all the variables that affect action in society. Economics obtains its separate status by deliberate “abstraction” from the “noneconomic” variables and thus becomes a hypothetical subdiscipline within the all-embracing theory of society. The particular criteria that are to determine the “economic” or “noneconomic” nature of any one variable are not here of chief interest. (In fact they reflect the points of view discussed in several of the chapters in this book.) What is of moment is the idea that an economic point of view is possible only as a first and crude abstraction from a more comprehensive and complex theoretical system, viz., the theory of society.

Professor Parsons, who in his earlier writings had embraced this conceptual framework for the “location” of economics, has more recently espoused a somewhat different idea.51 The new view sees the “economy” as a subsystem of society. The theory of social systems in general will apply to the economy as a special case. The basic variables operative in the economy, (as well as in all special-case subsystems of society) are the same variables as govern the theory of social systems generally. The economy is that subsystem of society which is distinguished by its adaptive function, i.e., that function of any social system which relates to its control of the environment for the purpose of attaining goals.

This view of the matter places the economic point of view even more firmly in a position subordinate to general sociological theory. Economic theory becomes a special case of sociological theory and is conceived, indeed, as providing a mirror that reflects, mutatis mutandis, the propositions of such a theory. The more interesting and important implications of this approach for economics reach beyond the scope of this enquiry. For us it is sufficient to have noticed yet another conception of the economic point of view, one that shares with those noticed in this section the characteristic of leaning heavily on the social aspect of economic affairs, and thus indirectly on the ideas of exchange discussed at length at the beginning of this chapter.

5

Economic Affairs, Money, and Measurement

In love or war or politics, or religion, or morals it is impossible to foretell how mankind will act,...But once place a man’s ear within the ring of pounds, shillings, and pence, and his conduct can be counted on to the greatest nicety.
Robert Lowe

Money may not be the root of all evil, but it is the root of economic science.
Wesley C. Mitchell

The first comprehensive system of economic theory...drew implicitly the borderline between what is to be considered economic and what extra-economic along the line which separates action calculated in monetary terms from other action.
Ludwig Mises

Running through the literature dealing with the problem of uniquely identifying economic affairs there has been a recurrent tendency to introduce the phenomenon of money as the distinctive feature. The present chapter outlines the different views that have at various times seen the use of money as the criterion of the economic.

Money, Wealth, and Exchanges

The most obvious form in which money presents itself as relevant to a definition of economics is in its relationship to wealth. For the most general and powerful form in which wealth appears is in that of ready cash. Money, as the medium of exchange possessing the property of being able to command goods when and where they are needed, is, in general, one of the most desirable forms in which to store wealth. And, of course, the emergence of certain metals as popularly accepted media of exchange was in part the consequence of their suitability for being stored over periods of time without loss of general appeal.

Adam Smith, in his exposition of the nature and causes of the wealth of nations, had found it necessary to point out that the accumulation of a national stock of gold does not, of itself, secure national prosperity. There has, of course, been controversy about whether or not Smith was unjust to the mercantilists in ascribing to them this identification of national wealth with gold.1 it is, in any event true that the early definitions of political economy in terms of wealth were not confined to, and did not even particularly stress, the monetary form of wealth. On the contrary, writers tended rather to emphasize that money in itself lacks many of the characteristics of wealth. The problems of production and distribution in which the classical writers were interested pertained to the goods that directly satisfied human wants or to the productive factors for such goods. The pronounced disregard for the purely monetary effects on the economy, which is a characteristic of classical economics, helped to keep interest from focusing on the medium of exchange.

Nevertheless, there were soon several economists who wrote in terms that made wealth tantamount to money. “Political Economy,” wrote the French Dupuit in 1844, “being concerned only with wealth, can take account of the intensity of a wish only through its monetary expression.”2 Bagehot, who defined political economy as the “science of business,” wrote that “as far as people are what we now always call ‘men of business,’ money, the thing they look for and the thing they want, is their sole object...”3 The passage by Robert Lowe (Viscount Sherbrooke) in which he justifies the possibility of a science of economics is famous: “In love or war or politics, or religion, or morals it is impossible to foretell how mankind will act...But once place a man’s ear within the ring of pounds, shillings, and pence, and his conduct can be counted on to the greatest nicety.”4 When Cliffe Leslie wished to attack the notion of a single wealth-seeking motive in human beings, he did so, as we have seen, in an essay entitled The Love of Money (1862) and quite obviously assumes that by exposing the nonexistence of such a homogeneous love of money he is demolishing the economic man, in whose breast nothing is implanted but the desire for wealth.

In itself there is perhaps not much significance to be attached to this identification of wealth with money. In the earlier formulations in which an objective wealth was the focus of attention, we have seen this identification to have been lacking. The stress on the monetary form of wealth appears in the writings of those who give paramount importance to an economic man, intent on the accumulation of wealth. Since in a market economy the drive for wealth is most easily fulfilled by translation into a drive for money, there is little difference whether one describes economic man by reference to a passion for wealth or to a passion for money.

What these citations do suggest, however, is a tacit assumption that exchange is essential to actual economic affairs. And this circumstance suggests a fresh link between definitions of economics in terms of exchange and the endowment of economic man with an exclusively pecuniary self-interest. Bagehot’s definition of economics as the “science of business” shows the connection quite clearly.5 Bagehot had been impressed by the criticisms of classical political economy made by the historically-minded economists. He acknowledged the “relativity” of economics with respect to time and place and wished to salvage economic theory by restricting its scope to the “business world,” where its assumptions of self-interest, rationality, and the like were reasonably fulfilled. The degree to which the self-interest assumed by the economist is actually at work in the business world, and certainly the treating of this assumption as the unifying thread of economic theory, postulated the introduction of a sharp division into the whole of human action separating the activities of men in their capacity as consumers, on the one hand, from their activities in the capacity of business-type producers, on the other. Of course, what motivates the earning of income is hope of the pleasures to be purchased by spending it, but it was believed that only in their capacity as “men of business,” as income-earners, does the behavior of men admit of economic “laws.” Only in this sphere of activity could it be seriously maintained that pecuniary self-interest is the exclusive passion. In this context the desire for wealth becomes crystallized very definitely into a desire for money, the form in which men of business earn income.

This obviously arbitrary and artificial division is made possible only by the existence of indirect exchange. The fact that the division of labor in a modern economy is made feasible solely by the intervention of a medium of exchange between producer and consumer is responsible for the conception of a distinct area of activity in which men do act as businessmen. From this point of view, exchange, or even more accurately exchange for money, becomes a criterion of economic activity in an entirely novel sense. Economic analysis must be confined to activity revolving around monetary exchange, because only in such activity can an exclusively pecuniary self-interest be reasonably postulated. When men act in spending their income, economic analysis is admittedly baffled by the multiplicity of motives actuating their spending habits. But in so far as men do engage in a separate kind of activity in securing a money income, their actions are susceptible of analysis. Because men do not directly secure the innumerable and heterogeneous goods they desire, but first channel their demand for these goods into a demand for a single good, money, economics can proceed to analyze man’s business behavior in terms of a single motive, viz., the desire for money, or in terms of the maximization of this single good.6

No doubt this conception of economic activity involves some circularity. We must confine economic analysis to human action only in so far as it has a single object in view, the maximization of money income, and we proceed to postulate an “economic” area of “business” defined in terms of such a single object of desire. The justification for such a procedure is the sharp distinction made possible, as we have seen, by the existence of a monetary bridge that both accentuates and spans the gulf between earning income and buying goods. There is, in fact, a twofold aspect to men’s lives. Men do mark off part of their time for the earning of income and part for the enjoyment of income, however hazy the line of demarcation may be. And it is a fact that economic analysis has historically dealt predominantly with the first of these areas. Definitions of economics in terms of money are thus different from definitions of it in terms of wealth. The criterion of money fences off the area of income-earning and makes it a field fruitful for economic analysis.

The long-range trend in the conception of economic activity has consistently been to broaden its scope to cover all human action. Not a part of human activity, but an aspect of its entire range is selected as relevant to economics. The definition in terms of money in the sense here outlined is a special case of the older type of definition that marked off a part of the activity of men for economic analysis, postulating in the area so circumscribed a homogeneous mass of phenomena that did not occur elsewhere. It is of interest that even with the more recent “broad” definitions of economics, which recognize the essential homogeneity of all human action, the applicability of economic analysis is still over-whelmingly to be seen in the “business” or “money” sector of action. For this reason it is apparently still tempting to suppose that there is a clear-cut division between man’s money-making activities and the rest.7

Money as the Measuring Rod

A definition of economic activity in terms of money that involves more sophisticated (and perhaps more controversial) considerations is that which sees money as a measuring rod. Economic analysis is concerned with that part of human activity, with that area of human welfare, which can be measured by the yardstick of money. The literature citing this definition reveals some confusion as to its origin. Usually this formulation of economics is ascribed to Pigou. In fact, Pigou seems to have simply taken over this definition from Marshall without much ado. It was Marshall who first most thoroughly expounded the conception of economics in terms of the money measure, and this despite the fact that his conception of economics is almost always presented by exclusive citation of the opening references in his Principles to “the ordinary business of life” and the “material requisites of well-being.”8

Marshall developed his thesis in extenso in his inaugural lecture at Cambridge in 1885.9 It must be emphasized that Marshall did not consider that he was in fundamental disagreement with his fellow economists, but only that he was presenting a more appropriate characterization of the commonly recognized scope of the subject. In the practical world Marshall is content to consider economics as examining

that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well-being. Thus it is on the one side a study of wealth; and on the other, and more important side, a part of the study of man.10

But Marshall was well aware of the misleading character of such a definition, in so far as the essence of economic activity is concerned. In his inaugural lecture he said:

The outward form of economic theory has been shaped by its connection with material wealth. But it is becoming clear that the true philosophic raison d’être of the theory is that it supplies a machinery to aid us in reasoning about those motives of human action which are measurable. In the world in which we live, money as representing general purchasing power, is so much the best measure of motives that no other can compete with it. But this is, so to speak, an accident...11

Marshall is at pains to explain that it is in the measurability of motives that the homogeneity of economic activity is to be found. That it is money which in real life lends itself to such measurement is merely a convenient accident. In the course of developing this point, Marshall uses the arguments of Cliffe Leslie.

If with Cliffe Leslie we analyse all the infinite variety of motives that are commonly grouped together under the term “love of money,” we see that they are of all kinds. They include many of the highest, the most refined, and the most unselfish elements of our nature. The common link that binds them together is that they can be more or less measured; and in this world they are measured by money.12

Marshall envisages the possibility of an economy in which incentives are in the form, not of money, but of a graduated system of decorations of honor. All this attributes “high and transcendent universality to the central scheme of economic reasoning.”13 Nevertheless, “for practical purposes...” it will be best to go on treating it as chiefly concerned with those motives to “which a money price can be...assigned.”14 In brief, economics deals with the play of measurable motives reinforcing and counteracting one another, “but it also sets out that most complex play of human motives that changes the purchasing power of money, and thus alters the measure of all motives.”15

In his Principles Marshall expresses himself quite frequently in similar terms. “The raison d’être of economics as a separate science is that it deals chiefly with that part of man’s action which is most under the control of measurable motives.” This is a characteristic statement of Marshall’s position.16 It will be noticed that Marshall does not consider this definition to be a watertight one, since he is constantly employing qualifying phrases such as “chiefly,” “more or less,” and the like. This was, indeed, frankly acknowledged by Pigou. In 1912 Pigou had stated that economic welfare arises from that part of the community’s income that enters “easily into relation with the measuring rod of money,”17 and had asserted that the “methodological principle at the basis of economic science, and that which separates it from the other social sciences, is the reference it makes to a measure, namely, money.”18 Later, in his Economics of Welfare, Pigou admits the haziness of such definitions:

It is not, indeed, possible to separate [the economic part of welfare] in any rigid way from other parts, for the part which can be brought into relation with a money measure will be different according as we mean by can, “can easily” or “can with mild straining” or “can with violent straining.” The outline of our territory is, therefore, necessarily vague.19

Money as a Universal Measuring Rod

Before we discuss this fresh conception of economic affairs, it will be of interest to draw attention to a view that has the doubtful distinction of running precisely counter to that of Marshall while yet being built on the very same foundation. The French sociologist Gabriel Tarde, in the course of a campaign to prove that most of the “economic” categories are really common to all the social sciences, attempted to show that money too is not a strictly economic phenomenon. It is true, Tarde wrote, that money is a measure of wealth, but it is not a measure of wealth alone. Money, besides measuring wealth, measures desires and beliefs; it is a universal measure of all social “quantities,” of which wealth is only one.20 Tarde believed that he had thus broken the link that chained money exclusively to economics, whose subject matter, despite some fairly advanced statements in his writings, he still identified solely with richesses.

Both Marshall and Tarde, it will be observed, look upon money as significant primarily on account of its suitability to serve as a measuring rod of human motives. But in postulating the suitability of money as a measure of human motives, Marshall had by the same token held these motives to be economically relevant. Tarde, on the other hand, working unwaveringly on the assumption that only the phenomena of wealth are economic, and confronted with his own conception of money as measuring human desires, is forced to the triumphant conclusion that money itself pertains to noneconomic phenomena.

Clearly the conception of money as a measuring rod is something also of a two-edged sword, capable, perhaps, of replacing wealth as the criterion of the economic, but capable too of forcing itself outside the scope of economics altogether if the latter is defined as the science of wealth.

Measurement and Economics

Several points of criticism present themselves in the consideration of the Marshall-Pigou view of economics. The description of the subject in terms of the possibility of measuring human motives could conceivably be interpreted as stressing the comparison of motives with one another. Economic activities would be those in which the relative strength of human desires would be expressed, through the allocation of resources, in the visible phenomena of the market. But this is not the sense in which Marshall wrote that money measures human motives.

What Marshall had in mind is a means of escape from the dim, hazy realm of desires and feelings into a sharply defined world of quantities brought into clear focus, free of the fuzziness of merely qualitative differences. There is a groping towards the “quantification” and the endowment with “objective measurability” of the numberless subjectively felt urges and drives. Economic phenomena, we are to understand, are in the unique and apparently highly-prized position of being able to reflect in measurable (and hence presumably “scientific”) terms, at least some part of the uncharted wilderness of the human mind. Now there is, no doubt, some satisfaction in feeling that not all human desires remain submerged within individual consciousness; that some of them at least register delicate, but measurable, changes on some external scale for all to see. But it is not clear that the inherence of such a fortunate property in certain motives and feelings offers a valid criterion for a common scientific treatment. As Croce asked Pareto on a slightly different point: “What intrinsic connection is there between this merely accidental attribute, measurability, of the objects which enter into an economic action, and the economic action itself?”21 At least Marshall himself shows appreciation of the good fortune that the motives measured by money all admit of analysis by similar types of reasoning. “The problems which are grouped together as economics,” he wrote, “because they relate specially to man’s conduct under the influence of motives that are measurable by a money price, are found to make a fairly homogeneous group.”22 But surely this homogeneity, under Marshall’s definition, is no more than a happy accident.

Moreover, the whole idea of the measurement of subjective desires by means of money is one that involves serious and controversial problems. It may be readily conceded that human motives, acting in the market place, exert definite effects on money prices. It is by no means clear that the resultant prices offer in any valid sense a means of measuring such motives. Discussions on the possible conception of a cardinal utility may invite ingenious suggestions purporting to measure such a utility. Money has never in any but the crudest of senses been able to serve as such a measure. Undoubtedly Marshall’s idea of money as a measuring rod is related to his frequent use of the hypothesis that money is exempt from the “law” of diminishing marginal utility, but this was never more than a simplifying analytical technique. Prices are not measured in money; they are simply amounts of money given in exchange for goods. Prices are expressed in terms of money, not because money represents any sort of “measuring rod,” but simply because it is money that is commonly used as the quid pro quo for goods.23 One need not draw attention (as Marshall himself did) to the violent fluctuations in the purchasing power of money in order to feel the force of a characteristic sentence of Professor Knight: “If we accept the aphorism, ‘science is measurement,’ as a definition of science, which is its only intelligible meaning, then there is no such thing as ‘economic’ science...”24

Marshall’s was not the only attempt to see economic science as essentially a consequence of measurability. An interesting point of view in this regard was presented in an essay in 1893 by an eminent American contemporary of Marshall, Simon Patten. In the classical economic system, Patten explained, economics was unfortunately divorced from utilitarianism.

Utilitarianism was abstract, and treated of pleasures and pains as purely subjective phenomena. Economics was concrete and treated of utilities as material wealth conditioned by the laws of the objective world...25

The achievement of subjective economics and the development of the theory of consumption makes possible their unification.

When the basis of economics is broadened by making the unit of measurement subjective, and the basis of utilitarianism narrowed by separating it from ethics, the unity of the two, both in the method they use, and in the field they occupy, becomes apparent... There is only one science for measuring the welfare of society and its progress through the gains or losses of those positive utilities which men create or destroy.26

The term “positive utility” is used by Patten in contradistinction to “absolute utility.” By “absolute utilities” Patten understands those which cannot be measured and hence cannot enter into the utilitarian calculus. As instances of such absolute utilities, Patten cites “water in a desert,” “honesty,” and the like. “Positive utilities” are those which, by their susceptibility to measurement, enter into the utilitarian calculus.

Economics is the science of positive utilities—the realm where no other motives are recognized except those resulting from changes in the amount of our measurable pleasures and pains.27

It is true that Patten’s stress on the measurability of economic motives refers to their comparison with one another. Honesty is not directly relevant to economics because it is immeasurable, in the sense that no finite utilities can reach up to it. It is an absolute good.28 But Patten’s position reflects also the felt need for a conception of “quantities” of utility. Of course, in a scheme in which a label bearing for each individual a definite number of “units” of utility is mentally attached to every good, it is difficult to treat in terms of such units those values to whose utility the individual can imagine no limit to be assigned. This difficulty led to the postulation of a difference in kind between “positive” and “absolute” utilities. Economics became neatly identified with the first of these; and measurement, for Patten as for Marshall, constituted the decisive criterion.

But in the absence of a demand to know the “quantity” of a utility, the distinction between “positive” and “absolute” utilities disappears of itself. The modern idea of the role of preference in human action offers a completely adequate view of the matter. When forced to choose between two alternatives, the individual exercises his preference in a way that remains essentially the same regardless whether the alternatives represent “positive” or “absolute” utilities. In the process of preferring, all possible values are placed in an ordered array. “If honor cannot be eaten, eating can be forgone for honor.”29 Measurability becomes a criterion of doubtful worth simply because any results that it brings for comparing utilities with one another can be obtained even more easily without it. A considerable number of writers who cite the Marshall-Pigou view of economics have drawn attention to these weak points in the whole idea of measurement.30

Money and Price-Economics

In a chapter on the role of money in definitions of economics, mention should be made of the part that it has played in the emergence of so-called “price-economics.” In the literature of the second and third decades of this century there was a lively discussion of whether economics should deal with subjective utilities, with welfare itself, or whether it should deal only with the external manifestation of those utilities, with objective prices. The “price-economists” attempted to avoid reference to the underlying motives, desires, and satisfactions that are reflected in market prices. They rejected “explanations” of prices that invoked these subjective concepts. They conceived of economics as concerned, not with the causes of human behavior, but with its consequences as seen in the patterns of prices. Pareto, Cassel, Davenport, and Mitchell are representative of this line of thought. Writers such as Fetter and Viner in the United States, on the other hand, were among those who saw price-economics as an inadequate means of understanding the operations of the market and insisted on the need to dig below the surface phenomena of prices for their explanation.31 It is not necessary for present purposes to go further into the origin and causes of the emergence of a price-economics. In so far as it represents a distinct outlook on the nature of economic phenomena, price-economics can be largely subsumed under the catallactic view of the subject, especially under that conception of the latter that stresses the purely functional relationship between different prices.32

What is of relevance to the present chapter is the degree to which the presence of a general medium of exchange and the identification of economic activities with those involving such a medium may have contributed to the price-economics line of thought. Prices are the corollaries of acts of exchange. Every act of exchange, by definition, is associated with a definite ratio according to which the goods are exchanged against each other. The phenomenon of price is one with a peculiar fascination of its own, especially when the whole structure of prices—the interrelationships between different prices in the same market and between prices at different times—is grasped. It is not difficult to understand the temptation to treat these ratios as “things” in themselves, moving in accordance with their own “laws of motion,” rather than as the manifestations of acts of human choice. The part played by money in the market has only heightened this temptation.

Money prices make possible a system of rational calculation in which any economic decision is influenced by all the relevant factors. The producer and the consumer are alike guided by money prices to adjust their actions in the most advantageous way to the real conditions of the market. In the discussion over the possibility of rational economic calculation of gain and cost in a socialist economy, one fact has emerged with overwhelming unanimity. It is almost universally conceded that in an economy without prices, real or “quasi,” there is no means of judging the economic wisdom or folly of any action. Every prospective buyer or seller, if he is to act in a rational way, must be able to compare his prospective situation at the completion of the transaction with his present situation. This involves the comparison of innumerable “economic quantities” with one another: those actually under his control initially, those to be brought under his control through the transaction, and those possibilities of control which his initial position enables him to command through alternative transactions. The expression of market prices in terms of money is an inestimable boon to the solution of this complex problem. As a common medium of exchange for all marketable goods, money fuses all the alternatives confronting the marketer into an immeasurably simpler chain of decisions. The money price paid for one good expresses succinctly, and more convincingly than is ever conceivable in a barter transaction, a preference for this good over a definite set of alternative goods.

The implications of these well-recognized considerations for the construction of a theoretical “price system” in which the relative movements of different prices are to be reduced to all-embracing “laws” are obvious enough. A conception of a price structure ultimately depends on the sensitivity of each part of the structure to changes in other parts. When changes in prices in one area do not generate related price movements throughout the economy because of undefined “frictional” forces clogging the system, then the concept of “laws” of price movements becomes less and less realistic. The introduction of a monetary numeraire to describe the relationships among the prices in such a system is more than a matter of convenience. The assumption of rational behavior, guided by prices, which the concept of a system of prices postulates would be almost wholly untrue in a barter economy. Besides the extraordinary difficulty that would be entailed in the exposition of a system of barter prices, there would be the more serious objection that the loosely knit relationships that would perforce exist between barter “prices” would make the recognition of any “system” of such prices of negligible significance.

To present the matter briefly: in a market without money prices exchange ratios are of a type almost completely analogous to the transformation functions under which a Crusoe economy operates. In a Crusoe economy no analysis is possible without explicit assumptions regarding subjective categories that price-economics is anxious to avoid. The attempt to see economics as a system of laws governing the movements of prices that are the consequences of human behavior must depend on a common monetary denominator.33 The possibility, of course, exists that improved means of calculation could enable rational comparison of alternatives to take place without guidance by external market prices. But this possibility would destroy the entire field investigated by price-economics. From a point of view that sees economics as essentially concerned with prices, it has been asserted, for example, that if linear programming could set up a system of shadow prices to guide managers, the borderline of economics might need to be reviewed.34 In so far as the signals of shadow prices are not available and guidance must be sought in money prices, it is the preoccupation of economic activity with money that made possible the idea of an economics that could be “positive,” disregarding the realm of dim mysteries of feelings and dealing with definite, observable market prices.

Money as an Economic Institution

Closely associated with the considerations of the previous section is the stress that has been laid on the essentiality of money for economic activity because of its unique role as an institution. Economic affairs, on this view, are monetary affairs, not because money is a passive sign of the presence of economic activity, but because it plays an active role in shaping the character of such activity. According to Marshall, as has been seen, money characterized economic activity by serving as a measure of certain motives. The presence of money was not seen in any way as influencing these motives themselves, or at least it was not because of any such influence that money was taken to be the criterion of the economic. Money was seen as merely expressing the real motives operative in the phenomena of the market. The fact that it served at the same time as a measuring rod was the reason why economics came to be defined in monetary terms.

But it is clear that the use of money is a real factor that has profoundly affected the entire pattern of economic activity. And in the literature on this subject attempts have been made to treat money as the definitive criterion of the economic by virtue of the peculiar influence it exercises on human action. Economic activity becomes such through its reflection of this influence. Professor Mises has pointed out that rational economic activity became possible only with the widespread adoption of a medium of exchange.35 As we have seen in the previous section, the recognition of this fact led to the emergence of the concept of price.

It was Wesley Mitchell who stressed the role of money as an active institution that has shaped human activity in a definite pattern. Of the writers on this subject Mitchell was perhaps the most insistent on the necessity of confining economics to monetary affairs. “Money may not be the root of all evil, but it is the root of economic science.”36 Most of all, Mitchell wanted to avoid discussions on subjective concepts. “When the definite and objective interrelations among money prices have been analyzed it is time enough to penetrate into the dim mysteries of our feelings about utilities...37 But Mitchell paid considerable attention to the positive influence that money has exerted.

Writing within the framework established by Veblen, Mitchell contrasts his “institutional” view of the economic significance of money with Marshall’s concept. The latter sees money as “an indispensable tool for measuring the force of opposing motives; but it remains merely a tool... “ To predict what men will do “one needs to know the motive force of the satisfactions and sacrifices promised by alternative lines of action. That force can best be expressed in terms of money; but the use of money does not alter the substantial character of economic behavior.” But, Mitchell continues, on Veblen’s view of the matter, the whole picture changes.

Money becomes a most significant thing in the economy of society, because it shapes the habits of thought into which our native pro- pensities grow. Instead of being a machine for doing quickly and commodiously what would be done, though less quickly and commodiously, without it, the use of money “exerts a distinct and independent influence of its own” upon our wants as consumers, upon our skill as planners, and upon our ideals as citizens.38

Because of the manner in which the monetary calculus promotes rational behavior, the student of economics cannot picture economic logic without money and without prices.39

Now, while the positive influence on economic activity that money exerts has been rather widely recognized,40 this does not of itself provide a valid criterion of economic 41 The influence that money and monetary calculation has exerted is not so much a matter of innovating as of accelerating and facilitating a pattern of activity that, at least in principle, could exist without it. Nevertheless, the role that money has played in the conception of economic phenomena has been broadened by the “institutional” concept. Money has, in fact, played a role in economic activity, not merely as a passive tool, but also as an active force. The superposition of the ideas on the money criterion presented in this section contributes to fuller appreciation of what has been meant by the statement that money is an essential element in economic affairs.

6

Economics and Economizing

Before Wicksteed wrote, it was still possible for intelligent men to give countenance to the belief that the whole structure of Economics depends upon the assumption of a world of economic men, each actuated by egocentric or hedonistic motives. For anyone who has read the Common Sense, the expression of such a view is no longer consistent with intellectual honesty.
Lionel C. Robbins

Before Robbins explained the “nature” of economic science, it was still possible for the economist to hold to the so-called “materialist” definition of economics, or to similar ones ...
... Similarly, before Robbins' definition, criticism of economics on the ground of its being “too wide” or “too narrow” was still understandable. Now, however, such discussions have become meaningless: economics is a given pie, which the economist is only allowed to dress a bit, to cut as deeply and into as many parts as he wishes, and to eat according to his need.
G. Tagliacozzo

Something of a turning point in discussions on the nature of economic science and of economic affairs came in 1930 with the appearance of Robbins' Nature and Significance of Economic Science. Professor Robbins brought to the problem a method of attack that clearly revealed the logical inadequacies of earlier conceptions of the economic sector of affairs. At the same time he set forth his own positive definition of economics with effective simplicity and persuasive literary charm. The problem of definition was treated by Robbins as an integral part of the exposition of his general views on the appropriate tasks and methodology of economics. As such, the book as a whole and Robbins' definition of economics attracted widespread attention. Although Robbins claimed no originality for his definition, he effectively presented to the English-speaking world a group of earlier views with a clarity and a vigor that made them the focus of a newly awakened interest and unmistakably left his own stamp on the formulation he espoused. Since the publication of his book, discussions of the problem of definition have invariably tended to revolve around Robbins' definition, or at least to take it as a starting point.

The Economics of Professor Robbins

“Economics,” wrote Professor Robbins, “is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”1

From the point of view of the economist, the conditions of human existence exhibit four fundamental characteristics. The ends are various. The time and the means for achieving these ends are limited and capable of alternative application. At the same time the ends have different importance. Here we are, sentient creatures with bundles of desires and aspirations, with masses of instinctive tendencies all urging us in different ways to action. But the time in which these tendencies can be expresed is limited. The external world does not offer full opportunities for their complete achievement. Life is short. Nature is niggardly. Our fellows have other objectives. Yet we can use our lives for doing different things, our materials and the services of others for achieving different objectives.
Now by itself the multiplicity of ends has no necessary interest for the economist. If I want to do two things, and I have ample time and ample means with which to do them, and I do not want the time or the means for anything else, then my conduct assumes none of those forms which are the subject of economic science ...
Nor is the mere limitation of means by itself sufficient to give rise to economic phenomena. If means of satisfaction have no alternative use, then they may be scarce, but they cannot be economised ...
Nor again is the alternative applicability of scarce means a complete condition of the existence of the kind of phenomena we are analysing. If the economic subject has two ends and one means of satisfying them, and the two ends are of equal importance, his position will be like the position of the ass in the fable, paralysed halfway between the two equally attractive bundles of hay.
But when time and the means for achieving ends are limited and capable of alternative application, and the ends are capable of being distinguished in order of importance, then behavior necessarily assumes the form of choice. Every act which involves time and scarce means for the achievement of one end involves the relinquishment of their use for the achievement of another. It has an economic aspect.2

Several highlights stand out in Robbins' conception of the nature of economic affairs. Central to the whole idea is the concept of scarcity. The limitations that prevent the attainment of the desired ends fundamentally affect the character of all activity directed towards these ends. The importance of the role assigned to scarcity as a governing condition of realizing ends makes possible the rejection of the idea that economics is concerned with specific kinds of ends. Robbins' definition rejects the identification of economics with certain kinds of behavior; it attempts, on the other hand, to bring out the economic aspect of behavior of all kinds. All kinds of behavior that occurs under the shadow of inadequate means present such an economic aspect to the observer.

In fact, the recognition that there can be distinguished in human actions a pattern of behavior that depends for its uniqueness, not on any one type of end pursued, but on the economizing aspect of actions directed at ends in general, led Robbins several years later to take yet a further step. Having emancipated economics from the bonds that tied it to particular ends, Robbins was led to suggest that the “economic” motive refers precisely to actions that are not directed to any particular ends. By saying

that a man's motive in doing a certain thing is wholly economic, what we really mean is simply that he regards it only as a way of securing means for satisfying his ends in general. If he does it with only one end in mind, we do not regard his motive as economic; we regard it as having the character of the end to which it is specific. But if he does it with the desire to increase his power to satisfy ends in general, then we regard it as economic ... 3

The core of Robbins' conception is thus the act of economizing scarce means with regard to numerous, differently valued ends. A considerable body of literature has grown up in the past few decades in which this central concept has been subjected to careful scrutiny by economists generally, and economic methodologists in particular. The implications of these ideas for the substantive content of economic science have been thoroughly investigated; and the minute dissection of Robbins' definition has provided several distinct topics for debate. In this chapter we shall proceed to survey the area covered by this literature, after briefly glancing at some earlier ideas to which Robbins' definition owes its source.

Scarcity and Economics

Economists had long recognized, at least to some extent, the role played in economic phenomena by the factor of scarcity. The physiocrats had excluded from their subject matter “free goods” (such as air) because, being abundant, they were not objects of exchange. Among classical writers, Lauderdale explicitly required a degree of scarcity for individual (but not public) wealth;4 most of the classical economists succeeded, in one way or another, in excluding from the scope of the science of “wealth” those goods whose supply was unrestricted. In the classical use of the “law of supply and demand,” what was relevant was the scarcity of the supply.5

With the movement away from the objectivism of the classical science of wealth and with the increasing interest, during the second half of the last century, in man and his behavior, the idea of scarcity as a factor conditioning human action assumed ever greater importance. Economists who recognized the uniqueness of the maximization-pattern of behavior and the paramount position of the so-called economic principle could hardly fail to be aware of the fact that the basic source of both is to be found in the phenomenon of scarcity. A clear understanding of the fundamental character of scarcity as a condition of human action began with the work of Carl Menger.6 Menger still considered economics as concerned essentially with goods, but his definition of “economic goods” and of “economizing” placed the condition of scarcity in the forefront. The four components of the activity of economizing, Menger explained in 1872, are called into play only when “the requirements of men for many goods are greater than the quantities available to them.”7

It is of some importance that writers such as Menger used the criterion of scarcity as a refinement of the definition of economics couched in terms of goods. This circumstance throws light on the relation of the idea of scarcity to the emergence of a clearly recognized “economic principle.” Such a relationship was perceived very soon. Dietzel, in attacking the notion that the economic principle provides a valid means of describing the scope of economic science, remarked that the criterion of scarcity suffers from the same inadequacies as the economic principle, to which it is, indeed, equivalent.8 It is obvious that conformity to the economic principle is called forth by scarcity. In fact, what the economic principle is to economics, considered as the analysis of behavior, scarcity is to economics, viewed as the analysis of goods.

Although several German writers, including Schäffle and Cohn,9 had laid stress on the phenomenon of scarcity and its importance for economics, there is reason to believe that this did not imply the recognition of the role of “economizing” in Menger's sense. Scarcity can be associated with economic affairs, not necessarily as a means of genuine demarcation, but merely as a simplifying device for the theorist. Anything appertaining to the satisfaction of material wants, let us say, may be considered as economic, but in order to facilitate analysis it may be necessary to confine attention to scarce goods. Determinate solutions of economic problems, it is found, are yielded only when scarce goods are involved. And this property of scarce goods may be employed in marking out the scope of economic science without seeing scarcity as affording any real means of distinguishing the economic from other phenomena. The accident that makes scarce goods particularly amenable to theoretical manipulation may not lead to the discovery of any uniqueness in the act of economizing at all.

Something of this seems to underlie Neumann's treatment of the definition of economics in terms of scarcity. In his survey, made in the eighties of the last century, of attempts to define economics, Neumann rejected the criterion of scarcity on rather surprising grounds, which reveal his limited appreciation of the real nature of this criterion. Scarce goods, Neumann asserted, are sometimes used for noneconomic purposes, e.g., for artistic ends. Moreover, Neumann added, there are cases of economic activity that involve only nonscarce goods. Thus, when an entrepreneur acquires sea-water, a nonscarce commodity, for the purpose of renting out sea-water baths, he is surely engaged in economic activity, even though he is dealing in what, according to Menger's definition, is a “noneconomic” good.10 It is fairly obvious that an understanding of the nature of the act of economizing would have prevented Neumann from offering these objections. In so far as sea-water baths are scarce, their provision surely entails economizing and is hence an economic activity, no matter how plentifully one of the materials may be obtainable in some other situation. And in so far as the materials for the expression of artistic impulses are scarce, their provision is also governed quite as powerfully by the economic principle.

Outside Germany there were, before the turn of the century, far fewer references to scarcity as a possible criterion for defining the nature of economic activity. Walras was one of the few writers who stressed this criterion. He required that what he called richesse sociale be both useful and scarce. It is not an accident that “Walras' term for marginal utility is rareté. One writer has remarked that “Walras' rareté appears to be a truer concept than the common notion of marginal utility, for ... he gives clear recognition to the fact that supply limitations are included and expressed in it.”11 For the rest, the focusing of attention by mathematical economists generally on the role of maximization must be accompanied by a lively awareness, even if not explicitly expressed, of the restriction of such behavior to cases admitting of a finite maximandum.

During the present century scarcity definitions of economics have become decidedly popular. Precursors of Robbins' formulation in terms of the act of economizing scarce means for the attainment of competing ends include a number of prominent figures. Besides Menger (in the last century), Robbins himself cites such writers as Wicksteed, Mises, Fetter, Strigl, Schönfeld and Mayer in this regard. Moreover, Robbins' formulation has been described as in some degree akin to ideas expressed by Spann and Oppenheimer. Both Voigt and Max Weber paid explicit attention to this point of view.12 Any number of writers could be mentioned who, without endorsing Robbins' definition of economics, yet ascribe the central economic role to scarcity. In fact, one or two writers have felt bound, in reaction to this trend, to moderate the general enthusiasm for the conception of scarcity by asserting the possibility of an economics of “abundance.”13 It must be admitted that these writers do not demonstrate any partiality to the notion of “economizing,” from the standpoint of which abundance is meaningless in any other than a relative sense.

There was thus a long tradition in economic literature in which the importance of the limitation of resources was recognized, and there were, moreover, many indications pointing to the possibility of using the administration of scarce means as the distinguishing criterion of the economic.14 In pressing the scarcity of means into service as the very core of everything economic, and by discovering in the effects of coping with such scarcity an economic aspect to activity in general, Robbins was crystallizing ideas that had already been in ferment for some time. Perhaps the most useful service afforded by the fresh formulation lay in the clarity with which the conception of economic activity as consisting in “economizing” was contrasted with the older definitions. Perhaps never before had the notion of the allocation of scarce means among competing ends been so consciously and vigorously presented as independent of the particular nature of the ends and means that may be involved.

Economizing and Maximization

Besides the sources for Robbins' formulation to be found in earlier references to scarcity and the approaches to the fundamental notion of economizing, yet another line of thought that was historically relevant to the emergence of the new definition must be recognized. This was the stress on the maximization principle, the getting of the most out of the least, as the distinctive mark of economic activity. The appearance and development of this line of thought has been outlined in an earlier chapter; at this point the relationship between the two concepts—maximization and economizing—must be briefly pointed out.

Maximization as a possible criterion for distinguishing economic phenomena had been clearly suggested towards the last quarter of the past century and even earlier. In its earlier expressions the so-called economic principle usually referred to the maximization of some tangible entity such as wealth and thus bore little resemblance to economizing. However, when maximization is understood to refer to something less objective, such as pleasure or satisfaction, then its similarity to the act of economizing becomes fairly close. After all, the economizing of scarce means in the face of competing arrays of ends is undertaken with the purpose of squeezing as much “satisfaction” out of available resources as their shrewd management will permit. Just as the bare concept of economizing abstracts from the concrete ends at which activity is aimed and the specific means utilized to attain them, so does the idea of getting the greatest return at the least cost. It was seen in an earlier chapter, in fact, that the shift in emphasis to the maximization principle was closely associated with the denial of any specifically economic impulse.

But while the allocation of scarce means among competing ends can be subsumed under the concept of maximization, the converse is not true. And the differences between the two classifications of action, maximization and economizing, are perhaps even more significant than their similarities. Robbins himself pointed out in a footnote that the “maximization of satisfaction” simply replaces the array of “ends” of action by an ultimate goal, viz., satisfaction, to the achievement of which our “ends” are to be regarded as proximate.15 The scarcity of means then enforces the relinquishment of some of our “ends,” at the same time that the task of maximizing satisfaction determines the way in which the available means are disposed among the various “ends” chosen. Maximization, with one ultimate end in view, is thus the source of economizing limited resources among alternative subordinate “ends.” This description of the relationship between maximizing satisfaction and economizing reveals several features of the former category of action that restrict its usefulness as a characterization of the nature of economic activity and perhaps helps to explain the limited part played by the concept of maximization in the line of thought that led to the allocation view of economics.

In substituting an ultimate end such as satisfaction for the intermediate “ends” chosen as conducive to it, the conception of economic activity as maximizing behavior suffers from two weaknesses. On the one hand, it involves setting up such an ultimate end, with the presumption that it can be meaningfully “maximized”; on the other hand, it ignores the multiplicity of intermediary “ends” and the effects that their very number has on the allocation of resources. The first weakness, the postulation of an ultimate “satisfaction” that can be maximized, is brought into relief by the way in which the alternative notion of economizing scarce resources among competing ends avoids altogether this awkward idea of “quantities” of satisfaction. The concept of economizing dispenses with the necessity of assuming that men act as if they were constantly scanning a potential “store” of satisfaction and striving to accumulate the largest possible stock. Instead, this concept recognizes that men act to change their situation until no further action promises to lead to a condition preferred to the present one. The advance in economics from the stress on maximizing satisfaction to that on economizing thus parallels the advance from the older utility analysis (especially where it involved cardinal utility) to the more recent indifference techniques.

The second weakness of the concept of maximization, that it ignores the multiplicity of intermediate “ends,” is a consequence of the fact that it abstracts too drastically from actual economic activity. It may be true to say that the economizing of resources is merely the maximization of a more ultimate satisfaction, but to speak in such terms is to miss one of the really significant features of economic activity, the allocation of these resources among the different uses clamoring for these limited means. The whole idea of the allocation of limited resources and their economic distribution among the competing demands for them is hidden under the facile phrase, “the maximization of satisfaction.” The constraint to administer resources, to apportion them judiciously among alternative uses by the careful comparison and weighing of relative degrees of importance—a necessity imposed by the fact that the intermediate “ends” are numerous—is overlooked in the maximization formula. By its stress on allocation as the characteristic feature of economic activity, the concept of economizing, on the other hand, leads directly to the appreciation of the significance for economics of the idea of price and exchange at the margin. Hence, this formulation is eminently suitable for characterizing the subject matter of economics.

These considerations thus clearly set Robbins' definition apart from the earlier definitions of economic activity in terms of maximization, despite the undoubtedly important part that the latter conception, in conjunction with the literature on scarcity, played in the emergence of Robbins' view of economics. Robbins' formulation of this view, which sees the essence of the subject matter of economics in the peculiar quality of economizing behavior, attracted the critical attention of economists to an extent achieved by no previous attempt at definition. Several waves of debate were set in motion concerning various aspects of the freshly expounded view. These must now be examined more closely, and their investigation will provide an opportunity to glance at the most important of the opinions inspired by Robbins' work.

The Character of Robbins' Definition

Robbins was at some pains to point out that the conception of economics that he expounded had an entirely different character from that of the previously accepted conceptions of the subject. The earlier definitions had almost invariably been classificatory, marking off certain kinds of behavior, i.e., behavior directed to certain types of ends, as the subject matter of economics. Robbins' own formulation, on the other hand, is analytical. It “does not attempt to pick out certain kinds of behavior, but focuses attention on a particular aspect of behavior, the form imposed by the influence of scarcity.”16 Hitherto it had been believed possible to describe certain acts and activities as being “economic”; Robbins' definition, however, does not consider the adjective “economic” as at all appropriate for the description of any act as such, but sees it as singling out a point of view from which actions may be examined. Whereas the earlier definitions of economic affairs had searched for criteria sufficiently comprehensive, and yet sufficiently exclusive, to describe accurately a given class of acts, Robbins' definition sets forth the particular interests that actuate the singling out of the economic aspect of an act. An act pertains to economic science in so far as it reveals the consequences of a compulsion to allocate scarce resources among conflicting ends. Robbins' formulation thus differs from others perhaps less in its choice of a criterion for definition than in its radically different conception of the kind of idea that is to be defined.

The critics subjected this feature of Robbins' contribution to close attention and expressed a wide range of opinions concerning its validity and significance. Writers who hailed Robbins' book as an auspicious turning point in the conception of economic science and who viewed his definition as a final and definitive pronouncement on the particular problem with which it grappled saw one of its principal merits in this concern with an aspect of action rather than with a particular kind of action.17 Writers assessing the difference between Robbins' definition and earlier attempts recognized this approach as one of the most significant features of his contribution.18 Those who have described (and deplored) Robbins' definition as the “dominant academic doctrine” have had especially in mind its lack of concern with the particular ends involved and its concentration on viewing action from a given “aspect.”19

As the essential component of Robbins' definition, this disregard for the kinds of ends pursued in action had certain further consequences that aroused lively discussion. Perhaps the foremost of these is the ethical neutrality of the economic point of view as set forth by Robbins. If the economist is, as such, exempted or interdicted from choosing particular ends of action as his special concern, then the results of his researches will be achieved with ethical indifference towards the data with which he deals. This consequence of the definition of economics in terms of a particular aspect of action is reserved for separate discussion later in this chapter.

Two implications of this ethical neutrality have led to sharp criticism of the definition as a whole. On the one hand, the abandonment of the search for particular ends of action meant that the range of economic interest is widened to cover the “economic aspect” of actions that had not been able to qualify for inclusion in the class of “economic” acts on the basis of any of the previous definitions. On the other hand, the lack of concern for the nature of ends facilitated an academic detachment from the full reality of actions and the cultivation of a “purely formal” view of the economist's interest in the relationship between ends and means.

A. the “breadth” of robbins' definition

The former of these two implications led to immediate attacks on Robbins' definition condemning it as being far too wide, i.e., as bringing within the scope of economics phenomena in regard to which the economist has no professional competence and to which economists have historically paid no attention whatsoever. Some writers have tended to see in this alleged shortcoming an opportunity to indulge their wit in describing the problems—whether literary controversies, games of chess, or even affairs of the heart—with which Professor Robbins, on the basis of his own definition of economics, should, as an economist, be equipped to deal.20

Ultimately these attacks and the consequent pronouncements rejecting the concept of economizing as a criterion for defining the nature of economic phenomena provide yet another instance of the similarities between the conception of economics as a science concerned with economizing and the conception of it as a science concerned with maximization. Writers in the eighties of the last century who had considered the essence of economic behavior to consist in the impulse toward maximization had found themselves vulnerable to the objection that this propensity characterizes all human activities. The fact that economizing, like maximization, is an operation capable of being performed in widely differing situations means that the use of such a concept as a criterion for defining the nature of the economic cuts across many traditional boundaries. But clearly if a definition is to be rejected as too wide, some area must be accepted as the standard of reference. The stress that economists in the past have laid on the phenomena of the market as the area to which their researches applied makes suspect a definition that sees an essential economic unity existing in activities ranging far beyond this area.

Nevertheless, there is an important sense in which the definition of the economic in terms of economizing is less suspect in this regard than that couched in terms of maximization had been. The latter had been used in the form of the so-called economic principle, which was seen as essentially a principle of explanation. Market phenomena were explained on the hypothesis of the existence of such an economic principle. The concept of a form of behavior characterized by maximization was found to yield the results required to understand the real economic world. From this point of view, the definition of economics as the science concerned with the maximization pattern of behavior drew the boundaries of the subject in such a way as to include all phenomena that admitted of explanation on the hypothesis of the existence of such a principle. Any activity that involved maximization was thus prima facie economically relevant. And here the objection was immediately raised that such a criterion embraced all human behavior, including areas in which maximization did not lead to “explanations” such as economists had successfully provided in what was then accepted as the domain of economics.

Robbins' definition of economics in terms of economizing was in a somewhat different case. The concept of economizing was not being used as an explanatory device at all, but only as a means of characterizing certain behavior. The fact that such behavior proved more amenable to economic analysis in regard to market phenomena than in other cases does not necessarily void the use of this definition, since the latter is not predicated on its suitability for this kind of economic analysis. At most, the criticisms aimed at Robbins' definition could cast doubt on its suitability for readily characterizing the day-to-day problems to which economic theory is most frequently applied. Professor Robbins himself has presented the case for his exemption from this type of criticism.21

B. the “formalism” of robbins' definition

The other implication of the ethical neutrality inherent in Robbins' definition has occasioned perhaps even warmer debate. If economic theory is seen as focusing interest, not on the actual ends of action, but merely on the bare relationship that scarce resources have to these ends, then the theory becomes very formal, very pure indeed. Robbins stressed this feature of his conception of economics as finally detaching the essentially economic structure of action from the clutter of concrete data necessarily enveloping it in the real world. But several critics saw this “formalism” as an arid scholastic exercise that succeeded only in leaving out the important features of an economic problem.

This view found its most forthright expression in Souter's bitter essay in 1933 fiercely defending the “Living Classical Faith,” reverently associated with the name of Marshall, against the “Austrian” position as set forth by Robbins. Apparently Professor Robbins came to be identified as a “juggler with a static verbal logic” and a “profane sunderer of ‘form’ from ‘substance.’” Perhaps the principal target for Souter's scathing denunciation was the attempt to define economics as distinct from other disciplines in terms of its attitude towards a subject matter that it shared in common with these other disciplines. Souter's attack on Robbins' “formalism” arises from his burning belief in the status of eco- nomics as a member in a “society” of sciences, each of which can be sealed in an airtight receptacle only on the penalty of death.22 The issue raised by the “formalistic” approach to economics is whether the science “is to enter upon the fatal path of fastidious withdrawal from organic intercourse with its fellows; or whether it will have the courage and honesty to assume its rightful place in the society of sciences.”23 As a member of such a society, economics is “necessarily and inevitably dependent upon sociology, upon psychology, upon technology,”24 and progress in economics must derive from “organic” relationships with the other disciplines.

All this leads to the almost emotional rejection of Robbins' conception of ends that the economist treats from the outset merely as data. Economics may legitimately take over from ethics or psychology the finished results of their study of the determination of the concrete means and ends involved in human action. But any attempt to consider economic analysis or the conception of an economic aspect of a problem as possible without taking into account such factual information concerning the content of action is “mere hocus-pocus.”25 To treat the concrete ends of action as “given,” in the “perverted” sense of not affecting economic analysis, is a display of instincts that are “corruptly sophisticated”26 and involves the bartering of the Mecca of “economic biology” for the mess of pottage of an illusory “static precision.”27

Professor Parsons, in a paper following shortly after that of Souter, provided a calmly reasoned appraisal of the issues involved in the Robbins-Souter controversy. Parsons pointed out that the “formalism” that Souter denounces is not quite the same formalism that Robbins is rather pleased to find in his conception of economics. According to Robbins, economics is formal in the sense that it is abstract, making use of “logic,” which is not confined to specific historical situations. Souter, on the other hand, attacks Robbins' definition on the grounds that it makes economics a “purely formal science of implications” in the sense of “having no reference whatever to empirical facts.” If exception is taken to Robbins' view of economics as necessarily abstract because it involves the use of logical reasoning, then the road is open to a complete “empiricism” and Historismus.28 The only room left for debate on Robbins' formalism is the fruitfulness of the particular abstractions that Robbins requires for his conception of economics.

Such criticisms of Robbins' view of economics, objecting to the degree to which it makes abstraction from reality, have, of course, been made. One writer has recently deplored the fact that by “eliminating economic ends per se, the concept of ‘economizing’ has diverted attention from the really significant aspects of behavior in modern economy (for example, pecuniary thinking and acquisitive drives) ... ”29 But there is some difference between this kind of criticism and that of Souter. In the type of complaint that is voiced here there is room for recognition of the validity of an independent category of economizing. There is even room for recognition of the fundamental and possibly universal character of the category in its significance for economic problems. It is only objected that too-exclusive concentration by the economic theorist on this aspect of action may hinder adequate recognition of the particular, empirical content of a concrete economic problem. When the economist comes to apply his professional skills to the understanding of actual economic phenomena, it is argued, his attempt may be handicapped by the attitude with which he approaches the task. His conception of the nature and role of economic theory may prevent recognition of the actual facts of the situation the understanding of which could explain matters, whereas treating it purely as a case of economizing does not lead to an immediate solution. In other words, this objection does not necessarily question the validity of the concept of economizing as a criterion, but merely condemns it as inadequate in its application to the problems of the real world because of the “misleading” or “unfruitful” abstraction that it may make from significant elements of these problems. Souter, on the other hand, is objecting to theory, not in this way, as unsuitable for practical application, but altogether. He is opposed to the conception of a theory that has no reference to the phenomena of the real world. Yet, as Parsons pointed out, the alternative to the “aspect” type of definition propounded by Robbins must consistently lead all the way in an empiricist direction to the ultimate repudiation of the legitimacy of analytical abstraction to any degree and for any purpose.

In the last analysis, the attempts to condemn Robbins' definition of economics on account of its “formal” character fall into the same class as attempts to discredit economic theory as such and to construct an “economics” altogether free of theoretical propositions. The search for the definition of economic science in a particular “aspect” of the phenomena with which it deals simply brings to the task of definition the analytical attitude with which economic theorists have always expounded the substantive content of the discipline.

The Nature of Ends and Means

Apart from the more general considerations surrounding the “formal” character of Robbins' definition, couched as it is in terms of abstract ends and means, there has been some discussion of a narrower and perhaps more technical character concerning the nature and validity of the concepts of ends and means.30

Several writers have seen the relationship of ends and means in terms of which Professor Robbins defines economic science as an artificial schema that does violence to the true nature of human action. In a book in which the concept of an end of action is used many, many times, Robbins devoted very little space to explaining the nature of an “end” and to elucidating the difficulties that the notion involves. Robbins had described human ends as associated with “tendencies to conduct which can be defined and understood.” This description was seized upon as typical of a certain “positivism” that critics believed themselves to have detected in Robbins' position. Robbins is eager, it is contended, to invest a study of economizing—which is a subjective notion—with the objectivity of science. He has sought to achieve this by pressing human action into a mould involving ends and means that can be defined and understood. Ends are in this respect conceived of as quite analogous to the definite “external” resources of nature that constitute means. Ends, that is, are considered as “external” to the actor. The relationship between the definite means, on the one hand, and equally definite ends, on the other, defines the scope of economic science. This view of Robbins on the nature of ends has been severely criticized by several writers.

The critics, among whom may be named Souter, Parsons, and Macfie, pointed to a number of inadequacies in Robbins' schema.31 The concept of purpose as fundamental to human action seems to be wholly excluded. Ends are simply correlates of “tendencies to conduct”; this draws attention completely away from the conscious aiming that pervades economic activity. By squeezing the element of purpose out of action, Robbins' structure of ends and means is “timeless” in the sense that it ignores the fact that ends are never presented to the actor coincidentally with the means. If an economic act apportions resources among desired ends in much the same way as a pie is shared among a hungry family, then the economic act does not exist. Ends can be conceived as observable states of affairs only after their achievement. At the time of the contemplation of action, ends are to the actor only anticipations of future hoped-for states of affairs. After an action has been completed, it can be described as having achieved a certain allocation of resources among ends, but to characterize an action on these grounds as having involved the subjective notion of economizing is to consider the action from a merely behavioristic standpoint.32 This indictment of Robbins on the charge of “behaviorism” and “positivism” gains in interest in the light of the contribution of the praxeological conception of economics, to be taken up in the following chapter.

In addition to the criticisms of Robbins' concretization of ends, some debate has developed on the very obvious relativity of the ends-means schema. It has been pointed out that ends may be considered as means to further ends, and that means may be equally well considered as the ends of earlier actions. Consciousness of this flimsiness in the ends-means dichotomy must necessarily raise doubts about the validity of a category such as economizing whose claim to a definite status is based exclusively on the relationship between ends and means.

It may be observed that the facile manner in which Robbins assumes the existence of definite ends, without careful discussion of the fact that ends are, as a rule, set up merely as intermediate to the achievement of further chains of ends, is to some extent to be expected from his unconcern with the purposive element in action.33 We have noticed criticism of Robbins' formulation on this score, and there appears to be a direct link between this attitude and the postulation of absolute categories of ends and means. Felix Kaufmann has drawn attention to the fact that it is because of the element of purpose in human conduct that immediate ends are only the means to further ends.34 Kaufmann sees the lack of agreement concerning the definition of the subject matter of economics as arising out of the three possible “levels” of ends that may be considered relevant: the end of acquisition of goods, the further end of consuming them, and the supposed ultimate end of increasing one's happiness. But what is of moment in appraising Robbins' definition is not so much the particular “levels” into which ends may more or less arbitrarily be classified; it is rather the fact that ends, in so far as economic activity is described as directed towards ends, are such only relatively to the particular and immediate context of the action.35

This consideration of itself would not, of course, seriously threaten Robbins' conceptualization of action in terms of means and ends. Parsons,36 following up a classification of the chains of means-end relationships into “ultimate ends” of action, “ultimate means,” and an intermediate sector (in which actions involve both the means to more nearly ultimate ends and the ends of previous preliminary actions), has shown how economic action finds its place in the intermediate sector.

But while the concept of economy and the operation of economizing does not depend on the “absolute” status of an “end” of action, at least one writer has shown the weakness of the ends-means dichotomy as a method of separating the science of economics from technology. It had been one of the principal merits of Robbins' formulation that it provided an elegant and conceptually neat device for distinguishing between problems of economics, on the one hand, and problems of technology, on the other. Where alternative definitions of economics, being classifi- catory in character, failed to provide a satisfactory means of excluding technology, the analytical definition advanced by Robbins enabled him to use Mayer's distinction: “The problem of technique arises when there is one end and a multiplicity of means, the problem of economy when both the ends and the means are multiple.”37

There will be occasion later in this chapter to review some criticisms of the validity of this distinction; at this point the objection must be noticed that the very nature of the concepts, ends and means, makes the distinction inadequate. In a recent paper Rivett38 has contended that while Mayer's distinction is valid in itself, “it cannot be used to separate the science of economics from the science of technology, pushing some relationships into the first field and others into the second.” This is ultimately due to the fact that any course of action undertaken to achieve a desired end thereby becomes itself an end intermediate to the achievement of the originally conceived end. In Rivett's example, if a pencil is picked up in order to accomplish the end of writing, there has been introduced an additional, subordinate end of picking up the pencil. Pursuing this line of thinking, Rivett has no difficulty in demonstrating that the attempt to attain the single end—which, according to the Mayer-Robbins view is the problem of technology—may involve the intermediate pursuit of various subordinate ends that may well conflict with one another. The same problem of securing the single end, a problem of technology from the point of view in which the subordinate ends are seen merely as means, thus becomes a problem of economy from the point of view of a more minute scrutiny in which the harnessing of any of these means is recognized as itself possessing all the qualities of an end.

Once again Robbins' disregard of these considerations seems in consonance with his lack of concern for the element of purpose in human action. Once an end has been postulated as the goal of action, then all the actions undertaken with this end in view can, ex post facto, be grouped in a separate class from that of the end. All the chains of subordinate ends and means leading up to the final goal can be telescoped together to form a homogeneous pool of “resources” and “means” for the final goal. But from the point of view of the actor, such a dichotomy is in no sense unique or even especially significant. To him these resources, means, and subordinate courses of action are all arrays pointing purposefully to the final end, but at the same time and for the same reason containing subpatterns of purposefully ordered arrays, within each of which the ex post facto dichotomy betweens ends and means could be distinguished with equal validity.

These criticisms of Robbins' formulation in terms of ends and means may perhaps be most illuminatingly summed up by reference to the very interesting discussion by Tagliacozzo.39 In the course of an exhaustive analysis of the nature of economic “error,” i.e., of “uneconomic” behavior in failing to resist the temptation of the moment, Tagliacozzo points out that in full reality action necessarily involves the complete identity of ends and means. Tagliacozzo's work has especial relevance for the praxeological view of economics and will be discussed more thoroughly in the succeeding chapter. At this point we note Tagliacozzo's contention that when the economic agent succumbs to a fleeting temptation (e.g., the purchase of wine) at variance with a prearranged economic program, his “error” exists only as relative to the arbitrarily postulated goal of the program. To judge his action as “uneconomic,” because it involves an inappropriate disposition of “means,” is to impose from the outside an ends-means schema that does not conform to the real situation. Seen from the standpoint of full reality, the purchase of wine, as an autonomous act, involves the full identity of the end and the means. Without becoming involved at this point in the significance of these ideas for the concept of economic “rationality,” this discussion focuses attention very clearly on the weakness of Robbins' ends-means formulation. Ends and means are clearly imposed categories artificially dissecting the elements of action; recognition of the relativity of these categories leads to the demand for their far more careful use in attempts to define the nature of economic activity and the scope of economic science.

“Given” Ends and Means

Implicit in the formulation of the nature of economic activity in terms of the allocation of scarce resources with regard to alternative ends is the assumption that the ends of action are merely “data” for the economist investigating economic activity. This property of Professor Robbins' definition, that is, its treatment of wants as given (and, for the purpose of a given economic problem, constant), has been accorded considerable attention. It has, of course, already been noticed in this chapter that an important and widely discussed characteristic of Robbins' definition was its identification of the economic by singling out an aspect of phenomena. This, too, is closely related to his treatment of ends and wants as data. Where earlier definitions had identified economic activity with action directed toward certain more or less well-defined ends, Robbins cultivated an unconcern for the nature of the ends involved in action. Necessarily this meant the removal of these ends from the range of phenomena to be studied and their relegation to the realm of given information upon which the problem to be investigated is based. All this, of course, gave rise to criticism on the part of those wishing to see the economists, in close collaboration with students of the neighboring disciplines, pay more attention to the realities of concrete action.40

But apart from the complaint that the treatment of ends as mere data is an unholy attempt to extrude from economics the contributions of the psychologist and the sociologist, this notion of ends implies a profoundly important outlook on the very nature of human action and the possibility of its scientific explanation. In the full reality of human action the values of men and the ends to which they direct their energies are continually changing, continually becoming modified under the impact of outside changes as well as through the effect of changes wrought by the very action aimed at the original ends and by the very effort of pursuing those ends. The attempt to introduce scientific explanatory analysis into the study of human action has involved the isolation, from the tangled intricacies of the web of action, of an element in it that we call its economic aspect. According to Robbins' conception of the precise nature of this element, its isolation involves the analysis of action in terms of its relation to the array of ends as they are esteemed at a given moment in time. Any proposition deduced from the fundamental concept of the economic act will thus have relevance only within the particular frame of reference relatively to which the economic aspect of action has meaning—i.e., the ends whose respective values were the data of the problem.

This view of the nature of the assumptions implicit in economic theory involves two important corollaries. First, economic theory can only analyze the implications of given wants; it cannot as such explain or determine changes in wants themselves (although, of course, its explanations can throw enormous light on these questions). Second, economic theory has validity only on the assumptions of the constancy of wants throughout the duration of the problem under consideration.

The danger in the conception of ends as data has already been commented on in this chapter. To construct a model of action in terms of ends so conceived may well lead one unwittingly to disregard the fact that to the actor himself ends are not data at all, but have been purposefully chosen and are constantly in danger of being supplanted by newly prized ends.41 In viewing economics as concerned with preselected ends that are the ultimate frame of reference for a particular economic problem, one must exercise constant care not to transform these chosen ends into objective “pulls” similar to physiologically conditioned “needs,” for this would turn economic activity into a series of reflexes responsive to quasi-biological tropisms.

Several writers have pointed out that from the economic point of view it is not only the ends that are data, but also the means. The economic element is the coordination of given ends and means whose substance economic analysis does not and cannot attempt to explore. Professor Knight especially has deplored the unfortunate habit of describing economics as concerned with means, but not with ends. In any sense in which ends are data for economics and are thus not the concern of the economist, means are no less “given” and beyond the range of the economic problem.42

In this respect it is interesting to examine the formula with which Max Weber attempted to distinguish between economics and technology. The problem of expressing such a distinction seems to have exerted some fascination, as attested by the recurrence of passages in Weber's writings discussing this question. Weber brought the distinction into clear relief by asserting that “economic action is primarily oriented to the problem of choosing the end to which a thing shall be applied; technology, to the problem, given the end, of choosing the appropriate means.” A genuinely economic character is that which “takes account of alternative ends and not only of means for a given end.”43 This way of expressing the distinction may at first give the impression that in economic action the means are given, and the ends are still to be selected, whereas in technology the ends are given, and the means are to be selected.44 It would be an error, however, to draw the conclusion that Weber in any way disagrees with the writers who stress that in economics the ends as well as the means are given. Weber too recognized that the economic view of action takes the actor's valuation of ends as a datum. After all, it is this idea that is the cornerstone of the concept of Wertfreiheit that Weber championed as the proper setting for the analysis of economic activity. Weber too is thinking of a given array of ends ordered by the (not-to-be-studied) valuations of the actor. What he has in mind, of course, in describing economic action as the choice of ends to which given means are to be applied is simply the fact that a given ordering of ends will necessitate the allocation of means among these ends in a manner peculiarly consistent with this given order of estimation. Ends are to be “chosen,” not in the sense of being arranged in order of relative esteem, but in the sense of their receiving allocations of resources. With alternative ends competing for given means, these means must be allocated by “choosing” for each resource an end such that its allocation is in harmony with the (already) adopted ordering of ends.

The conception of the ends of economic action as data involves, we have noticed, two corollaries. It is implicit in this conception that the selection and ordering of ends do not constitute an economic problem; and it follows that for the duration of any economic problem its analysis must assume constancy in the relative urgency of the wants that economic action seeks to satisfy. Both these implications of Robbins' formulation are revealing. It requires no great insight into the affairs of the world with which economists largely deal to realize that if the economist is to work under the restraints imposed by these implications, he must, in his capacity as an economist, renounce interest in perhaps the most fascinating and important aspects of the data with which he works. The economist qua economist (and this phrase of Robbins has been used by critics with characteristic, but hardly deserved, sarcasm) must ignore the fact that tastes and values are swiftly changing variables and must avert his eyes from the intensely interesting and important processes whereby men arrive at their judgments of value.

These limitations on the scope of the economist's area of competence have, of course, been condemned again and again by historically-minded and institutionally-conscious critics of economic theory. The fact that the validity of these limitations follows rigorously from Robbins' definition of economics reveals the close faithfulness with which this definition of the subject mirrors the procedures that economic theorists have, in fact, been following all the time. What the explicit recognition of the fact that the phenomena with which the economist deals are data does achieve is the appreciation that self-restraint by economic theorists does not spring from blindness to the facts of economic life. The “abstractions” of the economists, against which realistically-minded critics have so vigorously rebelled, are inherent in the nature of the problems to which they address themselves. Their subject matter forms a distinct field precisely because there exists an element in action that is distinct from the nature of the ends of action and at least conceptually independent of the processes whereby ends are selected and ordered. It must surely be regarded as a merit of Robbins' definition that it isolates this element with clarity. A grasp of the character of this element in action makes it immediately evident that the severely circumscribed applicability of the propositions enunciated by the economic theorist, far from being the necessary result of a crudely unrealistic methodology, is but the properly incomplete contribution of the specialist whose skills have been developed by a judicious and fruitful division of labor. Specific policy recommendations on economic affairs may require long and careful study of the actual attitudes of human beings, their wants, valuations, and expectations. Crucially important though such information may well be, the research and scholarship involved in its compilation is different from the application of economic reasoning. Robbins' definition brings this distinction into sharp focus.

Single End and Multiple Ends

One of the basic components of Robbins' formulation of the nature of economic activity is its assumption of the presence of a multiplicity of ends to which the scarce resources can be applied and among which they must be judiciously allocated. It has been seen that Robbins himself pointed out that where a single ultimate end, such as “utility,” is considered as the goal of action, then the process of economizing resources among competing ends reduces to the operation of maximizing this ultimate end. It has been shown earlier in this chapter that the superiority of the definition of economics in terms of economizing over the definitions couched in terms of the maximization principle has its source in the more penetrating analysis of action that is made possible by the recognition of numerous competing wants whose satisfaction is conducive to the ultimate end of utility.

It was the conception of economic activity as involving numerous ends that enabled Robbins to adopt Mayer's distinction between economics and technology. Technology involves selection among means for the attainment of only a single end, whereas economics necessitates comparing the urgency of several competing ends.45 At this point attention must be turned to the question of the actual multiplicity of ends which, it is alleged, are to be found in economic action, and, on the other hand, of the extent to which the idea of an underlying single ultimate end is to be considered essential to the Mayer-Robbins conception of economizing. The problem arises partly from the very premise from which the Mayer-Robbins formulation starts—the existence of a given ordered array of variously prized ends.

It was seen in the previous section that given wants in Robbins' sense implied an ordering of ends separate from the economic act itself. It is on the assumption of previously ordered ends that the process of allocation of resources can proceed. Professor Knight, among others, has repeatedly stressed, however, that the comparison of ends as to their importance and the allocation of resources consistently with such a comparison imply “quantitative comparability in the final results of all uses of any ‘resource’”; they imply, in other words, that “there is really only one end.”46 It would have to be admitted, if this argument be accepted, that economic action too is merely a matter of technique in so far as the ultimate (single) end of action is concerned.

It must be noted that the reservations that these considerations inspire concerning the validity of the notion of a multiplicity of ends are rather different from those expressed by Souter and Parsons on the same topic. The latter writers too laid stress on the unified character of systems of ends, whether of the individual or society; but their criticisms focused chiefly on Robbins' exposition of the ends of individual economizing in terms of psychological “pulls” that, when unified into a “system,” seem to contradict the very concept of economy.47 The points raised by Knight, on the other hand, do not at all lose their force even if the nature of the ends of action is set forth in less “positivist” terms. If ends can be compared and arranged in order, it is argued, there must be some common denominator relating them to one another. However revealing and significant it may be to break down this single ultimate end of maximization into the numerous intermediate ends of economizing, the elegant Mayer-Robbins distinction between economics and technology seems difficult to salvage.

It is interesting to draw attention at this point to a somewhat different characterization of economic activity as directed to a single end, which was developed by Robbins himself, and which has been used with great effect by Hayek. This is the view that recognizes the economic motive as “merely desire for general opportunity, the desire for power to achieve unspecified ends.”48 Money has come to be linked with the economic motive, according to this view, because it offers the means to enjoy the widest choice of goods and services that we may desire. (One is reminded of a century-old definition of wealth that saw it, not as particular goods and services, but as the “power” to command goods and services in general.)49

The relation between this understanding of an economic “end” and the economic aspect of activity in general is clear. We have, in the description of the economically motivated act as one directed at gaining the power to achieve unspecified ends, the view precisely opposite to the older notion of economic activity as directed to a single, sharply defined end (such as material goods and the like). The first step taken by Robbins away from the older type of definition was the recognition of an economic aspect to activity in general, regardless of the concrete nature of the particular ends involved. With the adjective “economic” freed of positive association with specific ends, Robbins is now able to press still further and identify the economic motive with activity distinguished precisely by the lack of any specifically selected ends.

It is unnecessary to examine the doubts that have been expressed whether Professor Robbins has in fact been able to salvage a scientifically acceptable notion of an “economic” objective distinct, let us say, from military and political objectives.50 What is of interest in the present connection is the significance of the very conception of an activity distinguished by its orientation to ends-in-general rather than to particular ends. The view of economic activity as the effort to gain power to obtain ends that are to be selected only later represents an analysis of action that is intriguingly parallel to that which ignores altogether the multiplicity of ends in human action. We have seen that activity, as analyzed from the economic aspect, may be described in terms of one of two patterns. Either it may, with Robbins, be seen as the allocation of means with regard to numerous, ordered ends; or it may, with Knight, be seen as the technique of maximizing, with given resources, the single ultimate end, “satisfaction,” in terms of which alone the numerous intermediate ends can conceivably be compared. The concept of an activity directed at ends-in-general involves the isolation of one kind of activity, which is, indeed, related to numerous, desired ends, but in which the latter have been superseded by a single end, not as their resultant, but as the preliminary to their attainment. Action was entirely deprived of its economic aspect, in the Robbins-Mayer view, when the ends of action were replaced by the end of “satisfaction,” to which they are conceived as being subservient. Where many ends were supplanted by a single end, viz., the resultant of them all, activity became merely a question of technique with regard to this single, ultimate end. Now, on the other hand, we have isolated an activity in which numerous desired ends are superseded by the single intermediate goal of attaining power in general to command the as-yet-unspecified further ends.

The recognition that a large part of human activity, that directed at gaining general purchasing power in the form of money, does, in fact, conform to this pattern is highly revealing. The maximization of money income, of “wealth,” as the essence of economic activity was one of a group of concepts underlying many older definitions of economics. The maximization of some less specific entity, such as satisfaction, utility, welfare, and the like, came to be identified with economics as a result of the introduction of subjective thinking into the discipline in the latter part of the previous century. Robbins' formulation of the economic aspect of activity in terms of the allocation of scarce means among numerous alternative ends is now seen to occupy a very special position in respect to these two types of maximization. It begins by pressing on to the multiplicity of ends of action that lie behind the quest for wealth. It sees the economic aspect of action to exist precisely in the circumstances brought about by this multiplicity of real goals and action. But it is, on the other hand, able to retain its grip on this economic aspect of action only by deliberately refraining from submerging the multiplicity of these ends into a single, more ultimate end. The economic aspect of affairs, as seen by Robbins, is predicated on an interpretation of action that, while reaching beyond the false homogenization of ends implicit in the definition of all economic activity as the maximization of the single end, “wealth,” is able to resist the parallel homogenization of ends in terms of their resultant that is implicit in the characterization of action as the maximization of “satisfaction.”

Economics and Ethics: the Positive and the Normative

Mention has already been made in this chapter of one important implication of Robbins' formulation of the nature of economic activity, viz., the necessary ethical neutrality of the economic point of view. The highly controversial consequences that have been drawn from this principle and the profound effect that adherence to it must have on the role of the economist and on the nature of his analysis demand a more detailed account of this aspect of Robbins' definition as well as the criticism with which it has been confronted.

The demand that the economist preserve a scientific neutrality with regard to the desirability of particular situations explored by his analysis has been maintained with a fair degree of consistency. Nineteenth-century economic methodologists had stressed the distinction between the science of political economy and a possible art of political economy. “Almost all leading economists, from N. Senior and J. S. Mill onwards” had made pronouncement “that the science of economics should be concerned only with what is and not what ought to be ... ”51 By the turn of the century the relationship between economics and ethics had become a lively topic for discussion in the German literature. Heated controversy over the place of the Werturteil (value judgment) in economics culminated, at the famous Vienna meeting in 1909 of the Verein fürSozialpolitik, in what Schumpeter describes as almost amounting to a row.52 It was at this time that Max Weber was vigorously campaigning for professional and academic Wertfreiheit in the social sciences. What Robbins injected into this time-honored issue was the claim to have demonstrated that such ethical neutrality on the part of the economist follows with rigorous necessity from the very definition of an economic problem.

Previously, the question of freedom from judgments of value on the part of the economist had been debated chiefly from considerations of scientific propriety. Weber had devoted great pains to demonstrating that investigation into the “cultural sciences” is not incompatible with an attitude of detachment. Now Robbins had attempted to make it clear that ethical considerations can, by definition, in no way affect the economic aspect of affairs. The economic point of view is concerned with a concept of the act in which the ends of action have been previously determined and for the duration of which those ends are not permitted to change. The content of these ends is completely irrelevant to the economic aspect of the act and hence to economic analysis. Introduction of judgments of value into the consideration of the economic consequences of action thus constitutes deliberate transgression of the proper scope of economic inquiry.

In Robbins' exposition, this point of view found its expression in the emphasis on the distinction between “positive” studies, on the one hand, and “normative” studies, on the other.53 Between these two fields of enquiry Robbins saw a “logical gulf,” and it is this unbridgeable chasm that separates economics from ethics. The two fields of study are “not on the same plane of discourse.” “Propositions involving the verb ‘ought’ are different in kind from propositions involving the verb ‘is.’” “Economics deals with ascertainable facts; ethics with valuations and obligations.”54

Several years before the publication of his Nature and Significance of Economic Science, Professor Robbins, in objecting to Hawtrey's postulation of the ethical character of economic propositions, had been able to declare that Hawtrey's position was contrary to the general agreement of economists.55 However, Robbins' more extended discussion in his Nature and Significance and especially his postulation of the gulf between the positive and the normative met with far from general agreement. Two streams of sharp dissent may be distinguished in the subsequent literature. The one group of critics, with Souter, denied the validity of Robbins' positive-normative dichotomy on the ground that it is a part of a wholly unacceptable view of the nature of economic activity and economic science. Their condemnation of this distinction followed consistently from fundamental disagreement with Robbins' principal theses. On the other hand, several writers, with Macfie, have built solidly on the general framework constructed by Robbins, but have reached conclusions on the possibility of a normative economics that are sharply at variance with those developed by Robbins himself.56

Souter's' rejection of Robbins' characterization of economics as a “positive” science is closely connected with his previously cited condemnations of Robbins' entire position as “positivist.” The treatment of the ends of action as abstract might indeed justify a distinction between two levels of inquiry: one concerned with the concrete ends of action taken as the “norms,” and the other wtih the “positive” disposition of means with regard to these ends considered in the abstract. But the norms themselves may be studied quite as “positively.” The rules of logic, for example, offer a field of study altogether as “positive” as does the “psychology of reasoning,” even though the former deals with how we “ought” to reason (with truth as our norm), and the latter with how we do.57 The distinction between positive and normative levels of discourse is thus seen to be only a relative one, not at all necessarily warranting the withholding of the name “science” from normative disciplines.58 Moreover, as we have seen, Parsons forcefully pointed out that Robbins' conception of a positive end in the abstract, free of any normative tinge, contradicts the very nature of an end, which necessarily involves the notions of effort and purpose. While the circumstance that men do try to economize can be described and analyzed in “positive” terms by abstracting from the normative aspect of action, such an abstraction must necessarily pass over the essential quality of purposive action.59

The Souter-Parsons critique of Robbins' dichotomy and especially of its application to problems of economy thus has its source in a fundamental disagreement with the conceptual framework into which Robbins has fitted the economic act. Of quite a different character is the position taken up by Macfie with regard to the possibility of a “normative” economics. Macfie vigorously pursues his theme, which leads him to the conviction “that economics is fundamentally a normative science, not merely a positive science like chemistry.”60 But Macfie arrives at this conclusion, diametrically opposed to that of Robbins, by enthusiastically accepting Robbins' general framework and building solidly upon it as the foundation for his own position. In acknowledging his indebtedness to the work of Robbins, Macfie expresses the belief that Robbins' essay is final, “within its chosen scope.” Macfie's own contribution he regards as a “superstructure” erected on it.61

But the superstructure that Macfie has erected would turn the concept of economy and the entire science of economics in a direction completely different from that envisaged by Robbins. Macfie accepts the analysis of economic action as the allocation of means with regard to given alternative ends. He endorses with fervor the rejection of the view linking the concept of economy with specific types of ends. He, too, relies heavily on the notion of economy as an aspect of all kinds of human endeavor. Although Macfie stresses the purposive character of human action far more than Robbins does, he too stresses the essential homogeneity of the economic element in action regardless of the particular type of motivation involved. Where he parts company with Robbins and attempts to embark on the construction of his own “superstructure” is in his elevation of the idea of “economy” into a “value” in its own right.62

With earlier writers the concept of economy was treated simply as the neutral expression of the concrete purposes of action. Where given ends were the motives of human endeavor, the desire to encompass these ends in the face of inadequate resources enforced the application of “economy,” of careful comparison of ends and means, simply in order to fulfil the given goals of endeavor as completely as circumstances would permit. The practice of economy fulfilled only the originally selected goals of action; the content of these goals having been selected before the economic act, analysis of such an economic act could be “positive,” i.e., unconcerned with the nature of the ends of action.

What Macfie introduced into this schema was the idea that, with given competing ends of action and with scarce resources, economy is enforced on the economic agent as an end and final value in itself. By acting rationally to achieve the optimum satisfaction of his previously selected desires, economic man is realizing a reasonable objective. “And the realisation of an objective which is reasonable is in some sense good in itself.”63 The principle “that scarce means should not be wasted, or should be used to the best advantage” is seen as a universal human value that fundamentally affects all kinds of endeavor, whether singing, writing, or activity in the market. If this view of the nature of economy is accepted, then the economic act becomes immediately more than merely the allocation of limited means in order to achieve specific competing ends. Economy, the fitting of scarce means to ends, is imposed not merely by force of the originally selected ends, but “under the persuasiveness of a value, to maximize total satisfactions.” Economics does not “just accept human desires, and give them back unchanged. The principle of economy itself transmutes them through its criticism.” The choice that emerges from subjecting competing desires to judgment in terms of the value, economy, is something quite different from the originally selected ends. Ends cannot remain “constant” throughout economic action because such action in itself injects a new “end” into the system of the agent's desired ends.64

Economics as Macfie conceives it thus emerges as an essentially normative discipline, analyzing the impact on numerous desired ends of a new end, viz., the value, economy, which is introduced through the presence of scarcity. This view has found favor with Professor Knight,65 among recent writers, but the basic thesis is not new. Macfie's value, economy, is strikingly reminiscent of Veblen's “instinct for workmanship.” In Veblen's view there is in the human character “a taste for effective work and a distaste for futile effort ... a sense of the merit of serviceability or efficiency and of the demerit of futility, waste, or incapacity ... ”66 Man is “possessed of a discriminating sense of purpose, by force of which all futility of life or of action is distasteful to him ... It is not a proclivity to effort, but to achievement—to the encompassing of an end. ... Within the purview of economic theory, the last analysis of any given phenomenon must run back to this ubiquitous human impulse to do the next thing.”67 In this discussion of what he calls the “pervading norm of action,” Veblen, in what, coming from his pen, must be considered a remarkable passage, is clearly covering the same ground as Macfie.

The Nature of Economic Science and the Significance of Macroeconomics

In a chapter devoted to the discussion of Professor Robbins' definition of economic science, attention must be paid to the complaint that his formulation excludes from the subject the entire field of the “consideration of the general level of economic activity.”68 In an era in which investigation into the causes of general unemployment of resources has assumed the most prominent place in the work of economic theorists and policy-makers, such a complaint, if well founded, would be a serious limitation on the practical usefulness of Robbins' definition.

The point at issue has been raised by several writers. Robbins' definition is predicated on the necessity, imposed by the scarcity of resources, to economize in order to satisfy most fully alternative human wants. The concept of economy depends on the necessity of comparing alternative ends. This is so because the allocation of resources for any one selected end involves the necessary withdrawal of these resources from possible allocation to another, alternative end. Where, for example in the case of a resource that is a free good, the devotion of the resource to a particular use does not require its withdrawal from an alternative use, no economy is called for and no concept of economic “efficiency” can be applied. What critics of Professor Robbins have pointed out is that the same absence of “economy” that characterizes the use of a free good may quite as certainly characterize the use of a “scarce” resource if there is, for any reason, a demand insufficient to bring the resource into employment. “Efficiency in the use of underemployed scarce resources is as irrelevant as it is in the administration of free resources ... ”69 “The problem of utilizing these [i.e., idle] resources fully is not a matter of deciding whether they should be devoted to use A or use B, but of how they can be used at all.”70

Parallel to the use of this criticism to deny altogether the adequacy of Robbins' definition of economics is the view that the prevalence of idle resources renders inapplicable the conventional economic analysis of which Professor Robbins' formulation is the (correct) definition. It cannot be too strongly emphasized, Barbara Wootton has declared, that the absence of scarcity (through underemployment) of resources “renders inoperative, irrelevant and unreal the whole corpus of economic studies as defined by Professor Robbins and as embodied in the classical analysis and its contemporary elaborations and refinements.”71

The question that is here being raised relates, of course, to the impact that the demand for the reconstruction of economics implicit in Keynes' General Theory must have on the conception of the very nature of economic analysis. On the basis of the “classical” concept of the economy, according to which the idleness of resources could be only a temporary phenomenon of disequilibrium, economic science as defined by Professor Robbins could adequately analyze the economic problems of the real world. In the real world the use of a resource for any one purpose does, in fact, mean its withdrawal from some alternative purpose. But the economics that Barbara Wootton has in mind takes serious account of the Keynesian proposition that resources may be unemployed for reasons other than the fact that too much is asked for their use. This would certainly undermine the whole assumption of scarcity72 and cast a definite shadow on Professor Robbins' definition of economics. It would be inconvenient indeed if the validity of a definition of economics were to be made dependent on the particular view taken of a proposition advanced by an economic theorist, no matter how controversial that proposition might be.

The identification of Robbins' conception of the nature of economic science with “classical” economics and its assumption of full employment must be considered, moreover, from yet another angle. As expounded by Robbins, the analysis of economic affairs proceeds exclusively from the consideration of economizing by individuals. A problem is economic because it involves the necessity for an individual to reconcile his numerous desires with the limited resources available to him. A social problem has an economic aspect only in so far as it affects the conditions in the light of which individuals are constrained to economize. The consideration of the general level of economic activity and the degree of employment of a nation's resources would thus be excluded by definition from an individualistic ends-means economics. Economics, as Professor Robbins conceives it, must, it would seem, remain exclusively a microeconomics.

Despite these misgivings concerning the problems falling within the scope of Robbins' conception of economics, it has been shown by Rivett that it is quite sufficiently elastic to embrace the problems of idle resources. In the relevant sense, it is pointed out, unemployed resources are scarce. While they may be abundant in relation to effective demand, they are most certainly scarce relatively to desire. The doctrine that a deficiency in the effective demand for services is a result of a lack of purchasing power associated with low prices for that factor of production does not necessarily deny that idleness would be removed by sufficiently low prices. “If labor were not scarce relative to demand and were expected never to be scarce again, wages would be nil and ... all labor would soon be employed”73 .

The point is, of course, that it is precisely from the perspective of microeconomics that problems of unemployed resources are most obviously seen to be economic problems in Robbins' sense. If it is an economic problem whether to devote resources to use A or to use B, this is not because the uses A and B are valued, but because they are differently valued. Where the problem is how idle resources can be utilized, not for one or another use, but at all, then society is facing the tragedy of total waste of the means that could be applied to secure desired ends. What seems a resource robbed of its scarcity is clearly a valuable means, which, instead of being allocated to the most prized purpose, has been allocated by a breakdown in the economic system to no end at all. From the point of view of the ends of the members of society, a resource involuntarily idle represents, not a quasi-free good, but scarce means unprofitably withdrawn from a potentially fully-employed economy.

The determination of the circumstances tending to bring about the tragic misallocation (or rather nonallocation) of precious resources must, of course, be one of the principal tasks of a discipline dealing with the way in which the members of society, through the division of labor, concertedly economize the resources at their disposal, with respect to their desired ends.

7

Economics as a Science of Human Action

We must regard industrial and commercial life, not as a separate and detached region of activity, but as an organic part of our whole personal and social life; and we shall find the clue to the conduct of men in their commercial relations, not in the first instance amongst those characteristics wherein our pursuit of industrial objects differs from our pursuit of pleasure or of learning, or our efforts for some political and social ideal, but rather amongst those underlying principles of conduct and selection wherein they all resemble each other ...
Philip H. Wicksteed

The whole subject matter of conduct ... constitutes a different realm of reality from the external world ...
The first fact to be recorded is that this realm of reality exists or “is there.” This fact cannot be proved or argued or “tested.” If anyone denies that men have interests or that “we” have a considerable amount of valid knowledge about them, economics and all its works will simply be to such a person what the world of color is to the blind man. But there would still be one difference: a man who is physically, ocularly blind may still be rated of normal intelligence and in his right mind.
Frank H. Knight

Thus far we have given an account of a number of different conceptions of economic science, each of which reflects a fundamentally distinct understanding of what is to be meant by the economic point of view. In the present chapter we bring our survey to a close with an exposition of yet another conception of the point of view taken by the economist. In its completest form this definition of economics, by virtue of which the discipline emerges as one of the group of sciences of human action, embraces an entire and unique epistemology of the branches of knowledge commonly subsumed under the cultural and social sciences. As such, the view of economics as a science of human action deserves a close and full discussion in its own right, together with a clear exposition of its points of contact, both of agreement and of conflict, with the views treated in previous chapters.

Such a discussion is all the more in order since it has been long overdue in the methodological literature on economics. The concept of a science of human action, or, to use the term applied by Professor Mises, the praxeological view of economics,1 has been singularly unsuccessful in gaining the degree of attention that, in its significance for economic methodology, it unquestionably deserves. Although isolated aspects of the praxeological point of view have been perfunctorily treated in the literature, little attempt has been made to understand them as integral parts of a complete epistemological system of the social sciences. The result has been a tendency to replace the system as a whole, in the public view, with specific controversial propositions concerning such concepts as apriorism, rationality, and the like. Taken out of context and discussed against the background of radically different epistemological ideas, these propositions could rarely command the serious consideration to which they were entitled. Especially unfortunate has been the consequence that the praxeological view has come to be even more profoundly neglected.

It is therefore the task of the present chapter to outline in some detail the conception of the nature of economic science as viewed from the perspective of praxeology. In addition, an attempt will be made to relate this view to several of the alternative definitions treated in earlier chapters. In particular, its points of contact with that discussed in the previous chapter will require careful examination. It will be shown that, side by side with the emergence of the view of economics as the science concerned with the allocation of scarce means, which culminated in the work of Professor Robbins, there has, for over sixty years, existed a stream of thought that has recognized the praxeological aspect of economics. The view of economics as concerned with scarce means will be seen to take its place naturally as an example of a limited application of praxeological ideas; many of its apparent inadequacies are seen to disappear when it is related explicitly to the broader concepts of a general theory of human action.

Coming at the end of a book setting forth a series of widely diverging views on the nature of the economic in human affairs, the subject of the present chapter throws a revealing light on the sources of this remarkable range of disagreement. The exposition of the praxeological element in social phenomena will help to explain why it so long succeeded in eluding the attention of so many brilliant thinkers. The recurrent and unfortunate identification of this economic aspect with so many of the actual facets of social history with which the praxeological element is intimately connected will gain in intelligibility, it is believed, by an understanding of the nature of social phenomena as viewed from the vantage point of praxeology itself.

I

The Sciences of Human Action

The description of economics as a praxeological science must necessarily be preceded by a rather detailed exposition of the praxeological point of view in general. This will readily be seen to embrace a far wider range of phenomena than is considered in conventional economics. At this point it is sufficient that the praxeological view sees economic affairs as distinguished solely by the fact that they belong to the larger body of phenomena that have their source in human actions. The core of the concept of human action is to be found in the unique property possessed by human beings of engaging in operations designed to attain a state of affairs that is preferred to that which has hitherto prevailed. A person perceives the possibility of an improvement in his position, perhaps through possession of an additional commodity, perhaps by the abandonment of an unwanted piece of property, by a change in physical location, or through some other alteration in the configuration of matters that might affect his sense of wellbeing. The recognition of any such opportunity for improving his well-being sets in motion the actions that the person will take to secure the improvement. The pattern of action taken will be broadly defined by the circumstances surrounding the desired alteration of affairs. Sound logic will, in a given situation, point to one or several courses of action that give promise of most successfully securing the desired change. In so far as human behavior is guided by logic, then, conduct will follow a path that has been selected by reason. This path of conduct is what is known praxeologically as human action.

The concrete forms that human action may take are as innumerable as are the ways in which men can achieve relief from states of relative dissatisfaction. The particular form that an individual human action takes is determined by factors that include those making up the specific environmental conditions as well as those that have shaped the character and values of the actor. The conception of sciences of human action recognizes that the form of action as it unfolds in its historical reality is the result of influences that range from the physiological to the religious, the social to the geographical. An explanation of human action can be adequately undertaken only with full awareness of these varied influences. The historian seeking to understand what men have done in particular instances must draw on the disciplines whose task it is to explain the sequences of cause and effect in the physical, physiological, or psychological influences upon action.

The contribution that the praxeological point of view has made to the scientific explication of action in history is the isolation of an element in action the explanation of which is not exhausted by even the most complete application of the sciences concerned with the concrete manifestations of human action. This residual element is that of the operation of human action itself, which neither is explained by physical, physiological, or psychological theories nor requires the assistance of these doctrines for its own exposition. A praxeological science, using the rationality of human action as its foundation, is able to derive theorems describing the path of action under given circumstances. The reasoning that constructs these theorems mirrors the reasoning that is implied in action itself. New links in the chain of knowledge, in the form of praxeological theorems, are forged from the constraint that human purposefulness imposes on action, namely, that it be taken only with the sanction of reason.

Given all the physical, physiological, and psychological influences on the setting of an action, action of a specific form might be predicted with assurance. But such prediction is conceivable, not because these influences in themselves determine action, but because action is subject to the mandate of reason, which guides the act into the path that is to be preferred among those indicated by these external influences. A complete knowledge on the part of an observer of these external influences might allow prediction of the form to be taken by action only because the logic of the observer enables him to know with certainty the path that the actor's own logic will select. When a man is about to perform a mathematical computation upon given data, an observer of the data may attempt to predict the results that the computer will arrive at. But for such a prediction to be successful, it is not sufficient to rely on the fact that these results are “determined” by the data; it is necessary that the observer with his own logic be able to reproduce mentally the logical operations performed by the computer in arriving at his results. There is, of course, a definite meaning to the statement that the results of a mathematical computation are determined by the relevant data. An attempt at the computation by a human mathematician, however, yields these “determined” results only in so far as his logic constrains him to conform to the objectively correct computational operations. The case with human action in general is rather closely analogous to this example.

At the root of the notion of human action is the simple assumption that human reason plays a role in every action. Although, of course, by no means universally acceptable, this assumption remains a simple, and at least superficially, plausible one. No matter how compelling the physiological or physical factors that crave action may seem, it is within the power of reason to resist them. No matter how strong the psychological pressures on man may be, his actions have necessarily passed the scrutiny and gained at least the tacit assent of his reason. These pressures may well be overwhelmingly powerful, and, of course, in sanctioning or prohibiting action, men's reason is operating with the consciousness of these imperious, often contradictory forces. The concept of human action depends, however, on the introspectively valid fact that there is a form of conduct that is specifically human, i.e., conduct that is accompanied by the consciousness of volition, of something more than a bundle of reflexes responding to specific stimuli. The nature of these various stimuli and the directions towards which they variously tend to guide action are completely independent of the desires and will of the actor. As such they are part of the subject matters of the physical, physiological, and psychological sciences. Were action taken simply in instinctive obedience to these stimuli, it could be conceived as objectively determined by the data constituting its setting, in the same way as the results of a mathematical computation are determined by the data of the problem. But because man possesses the power to reject one course of action for another, to arrange the satisfaction to be derived from obeying specific impulses within a wider ordering of values, the physical, physiological, and psychological sciences do not exhaust the facts of action that are capable of scientific explanation. The element in conduct that is the reflection of man's power to weigh, arrange, and choose among courses of behavior is the specifically human element in action. The investigation of this element of human action and of its manifestation in various particular situations forms a field of study unique by virtue of the nature of human action itself. Sciences of human action will be distinct from other sciences in that the former begin where the latter end, viz., in the implications of the rationality that governs purposeful behavior.

The Emergence of the Praxeological View of Economics

Postponing for subsequent discussion the further details of the praxeological view and the consideration of the controversial points involved in it, we shall proceed to outline the development, during the past three quarters of a century, of the stream of thought to be regarded as the praxeological view of economic science. Since its emergence, the praxeological point of view has been most fruitful, not in the extensive exploration of new sciences of human action, but in the consequences of its recognizing the theorems of economics as being the propositions of a science of human action. The possibility of theoretical statements concerning economic activity was seen as not at all due to any supposed uniqueness in the phenomena of wealth or material welfare or money or any of the other numerous criteria that had been used in defining economics. It was perceived that economic theory derives from precisely that element in human behavior which we have described as human action. The particular forms of action that have been traditionally investigated by economists are, indeed, distinguished by close association with various institutions such as money or with specific patterns of action such as interpersonal exchange. But if there is any meaningful underlying unity in the theorems of economics, it is to be found only in the concept of human action. Seen from this vantage point, economic theory acquires immediately a position unique within the range of human knowledge. It is the discipline that has alone successfully sought to harness the element of human action to the scientific explanation of social phenomena.

The earliest formulations of the praxeological view of economics in anything approaching a complete statement appeared about the turn of the century. Before this there had been several penetrating attempts to elucidate the nature of economic science. Several of these, especially those seeking to distinguish a specifically “economic principle” in action, have been cited in earlier chapters. But the uniqueness of human action as seen by praxeology, that is, as making possible a characteristically distinct contribution to the understanding of social phenomena, had not been expounded. Aside from isolated statements by several writers, who seem to have caught a glimpse of such a possibility,2 it was not until the nineties that economics was clearly identified with the logic of conscious choice.

Perhaps the first discussion of the role of economics as a science of human action in this praxeological sense is that of an American, Sidney Sherwood. Writing in 1897 on the “philosophical basis of economics,”3 Sherwood declared that a general science dealing with “consciousness in action,” a “science of practical life,” was the intellectual necessity of the time. Hitherto special disciplines such as history, law, politics, and sociology had groped forward in this direction. But a “master science” was required to give a common starting point and method to these special inquiries. Such a science “must explain all the conscious activities of men by reducing them to terms of the motives and choices of the individual consciousness.” To Sherwood it seemed that economics is the science outstandingly fitted to play this role. “Economics deals with wants consciously felt, resources consciously perceived, and consciously directed to the end of gaining conscious satisfaction ... ” Any restriction of economic reasoning to the sphere of material goods is completely artificial. It seemed “inevitable” to Sherwood that economics must ultimately include all human values. “All pleasures, all values, all choices, all teleological activities, are, in fact, chosen and followed upon principles which economics alone has explained in a scientific manner.”

All human self-directed conduct, Sherwood pointed out, proceeds from choices that are simply the valuations of certain courses of action. The motive power in the practical activities of man is to be found in his consciously felt desires. Sherwood sharply criticized the temptation, to which several sociologists of the period had succumbed, of applying physical and biological concepts to psychical phenomena. The fitness that survives, according to the biological notion of evolution, is an unforeseen fitness, an adjustment wrought out in consequence of the struggle. But psychical activities are essentially purposeful; the fitness that survives in social adjustments is prearranged. Sociologists are guilty of unscientific procedure when they group the phenomena of economic adjustments together with those of unexplained and fortuitous biological change.4

Sherwood's perception of the nature of human action and of the praxeological character of economics is unmistakably clear. The adjective “conscious,” which he constantly uses to describe the types of conduct dealt with by economics, and his explicit relation of such conduct to human motives identify the “master science” for which Sherwood is searching as an all-embracing praxeology. That Sherwood's definition of economics represents, in this respect, an advance over that of his contemporaries becomes apparent from the originality of his attitude towards the use of the “economic principle” as the defining criterion. It was seen in an earlier chapter that several writers, such as Dietzel and Neumann in Germany and Hawley in the United States, had been deterred from using the economic principle as a criterion for defining economics on the very grounds that make the principal significant, namely, that it characterizes all kinds of human activity. These writers recognized the importance to economics of the rational element in economic activity; indeed, this element played so obvious and dominant a role in economic analysis that, as the “economic principle,” it suggested itself to them as the natural mark identifying the phenomena with which the discipline dealt. This suggestion they found themselves forced to reject on the ground that all human activity displays the very same hallmark of rationality, that the economic principle governs all the conscious activities of man. And this left them no choice but to seek for some other quality in economic phenomena that they, among all other social phenomena, might uniquely possess in common.

Sherwood, starting from a position substantially similar to that of these writers, was able to reach a quite different conclusion. Once it had been suggested that economic phenomena are susceptible of analysis by virtue of their rational quality, Sherwood found it impossible to discard this idea. Instead of being dismayed at finding a similar purposefulness, a similar rationality and adherence to the economic principle, throughout the range of human activities, Sherwood was awakened thereby to a new appreciation of the role of economics. Instead of impelling him to look for other characteristics by which to delineate the scope of economic science, the realization of the all-pervasive influence of the economic principle convinced Sherwood of the futility and artificiality of erecting rigid boundaries purporting to separate economic activity from human action generally. The conscious direction of resources to the end of gaining conscious satisfaction was so fundamental to the very conception of economics and was at the same time so obviously a factor decisive in all action, that Sherwood could see economics transformed into a spearhead of a new “master science” that might investigate the consequences in activity generally of the consciously motivated element in action. Hitherto economics had been confined, to be sure, to specific kinds of phenomena, but this restriction was an artificial one and in no way corresponded to a unique field of knowledge.

This statement of the nature of economics seems to have passed unnoticed in the literature. Happily, similar ideas were being formulated at about the very same time by the celebrated Italian philosopher, Benedetto Croce. His views were set down with rather greater painstaking precision and expounded against the background of a fully articulated general philosophical and epistemological system. As such, Croce's position has attracted the attention of a number of subsequent writers. It has not always been appreciated, however, how closely Croce's view of economics mirrors the praxeological outlook. This feature of Croce's ideas on the nature of economy and economics is brought clearly into focus by their juxtaposition with the radically different views of Pareto, with whom Croce conducted an elaborate exchange of opinions on the subject. A brief review of Croce's opinions as expressed in this published correspondence will at the same time provide a remarkably clear, if not complete, statement of the view of economics as a science of human action.

The root of the difference between the outlook of Croce and that of Pareto, and the source of their celebrated debate on the nature of economics, is to be found in their attitudes towards teleology. According to Pareto, the act is a subject for science only in so far as it yields “facts and concrete cases.” According to Croce, on the other hand, the act is aimed at a purpose, and economics obtains its distinctiveness and its homogeneity from this characteristic of the act itself. Croce's crusade against the behaviorism of Pareto5 a took the form of a vigorous rebellion against the latter's injunction to economists to confine their attention to the “result of action” and to leave the “nature” of action for the metaphysicians.6

Pareto's position, Croce complains, itself involves an implicit metaphysical postulate. It is implied that the facts of man's activity are of the same nature as physical facts; that in both cases regularities can be observed and consequences can be thereby deduced, but that the “inner nature of the facts” can never be exposed.7 Upon the testimony of experience, however, Croce insists on the fundamental distinction between the physical and the mental, between mechanics and teleology, between passivity and activity. From this point of view, it is of the utmost relevance (Pareto's statements to the contrary notwithstanding) to recognize that the choice with which economics is concerned is not simply “the fact of choice,” but the fact of conscious choice. And because the economic fact is a fact of conscious choice, a fact of will, its “inner nature” is not at all obscure. The nature of economic activity is grasped as immediately as is the nature of the operation of willing. An act is economic in so far as it is the consistent expression of a man's will, of his conscious aiming at a perceived goal.8

From Croce's position on the nature of economic activity flows immediately his praxeological conception of economic science. The purposefulness of human action—a category to which nothing in physical science corresponds—is the unique element that invests economic science with its individuality. The propositions of economics relate to the effective execution of the purposes willed by the actor. They are not descriptions, but theorems in the sense that they follow rigorously and necessarily from the postulated systems of ends and means. “Economic Science ... is a mathematic applied to the concept of human action ... It does not inquire what human action is; but having posited certain concepts of action, it creates formulae for the prompt recognition of the necessary connections.”9

Croce's ideas will have been perhaps more fully set forth when we shall have considered his contributions to several points of detail in the praxeological conception of economics. Although his stature as a thinker drew more academic attention to these ideas than had been given to those of Sherwood, Croce's impact on the development of economic methodology has to this day not reached its full potential. Writings during the last half century on the proper conception of economic science could in many instances have greatly benefited from familiarity with Croce's work in this field. One author whose writings do deserve a place in any discussion of the evolution of praxeological ideas, although his contribution in this respect scarcely approaches that of Croce, is Max Weber.

Max Weber and Human Action

The great sociologist's views on the nature of economics and, in particular, the significance of his ideas for the development of praxeology are closely related to his views on the social sciences in general. These in turn revolve around the concept of Verstehen, which is the epistemological tool that Weber used to distinguish the Geisteswissenschaften from the natural sciences. It is of some interest to compare Weber's way of achieving this distinction with the method used by Croce.

Like Croce, Weber sees purpose as the most conspicuous feature in action, and, because it is the foundation for the notion of Verstehen, as the source of the possibility of separating the social from the physical sciences. A motive is “a meaningful complex ... which appears to the actor himself or the observer to be an adequate ... ground for his attitudes or acts.” The significance of purpose in the scientific analysis of action is its introduction of a new notion of causality. It permits the grasping of the cause of an action through the understanding (Verstehen) of its motive. A correct causal interpretation of concrete action implies that “the outward course and the motive are each correctly grasped and that their relationship to each other is ‘understandable.’”10 And it is the possibility of making this kind of statement regarding the causation of a phenomenon of interest to the Geisteswissenschaften that marks these disciplines as distinct from the physical sciences. In the latter, events can be only “externally” observed, while the teleological orientation of social phenomena permits their being grasped completely.

Economics, like verstehende Soziologie in general, becomes in this way, for Weber as for Croce, a science of human action. That which is understood is purposeful human action.11 But it is here that Weber and Croce part company and that Weber's progress in praxeological thought becomes diverted. Croce had not understood the economic aspect of human action to consist merely in the simple fact that action is aimed at a purpose. In perceiving the economic aspect, Croce recognized the constraint that purposefulness imposes on action, i.e., that action actually tend to achieve the purposes that serve as its inspiration. Economics, for Croce, is the science that investigates the extensive implications and consequences of precisely this tendency. But this aspect of purpose in action plays no role in Weber's conception of economic activity or of the nature of economic science. Weber's science takes notice of the teleological character of human action merely because this purposive feature opens a window on the “internal” nature of the act, not at all because it implies that the action is constrained to follow a specific path. The fact that human actions are motivated is in itself sufficient only to invest them with the property of being “understood”; it is not sufficient to set up a category of “economy,” still less to establish an economic science.

Weber, indeed, is able to extend the concept of Verstehen to grasp the behavior of the most unreasonable or emotional human beings. To approach the construction of an economic science, it is necessary first for Weber to introduce the notion of the “ideal type,” i.e., the formulation of abstract, arbitrary models of acting man. Only one of Weber's four ideal types finds a place in his concept of economics. This is the ideal type of rational action, the model of a coldly calculating human being conscious of ends and means. Within the range of actions that can be intuitively grasped because of their motivations there exist patterns of action that are distinguished in that they are in fact suited to the attainment of the chosen goals. Among these patterns are to be found the materials to be studied by the economist as Weber conceives him.

The necessity that Weber felt of introducing rationality into economic activity as a specific assumption limiting the general concept of human action reveals the limited extent to which he appreciated the praxeological content of action. For Weber, the common denominator of all human actions that are “understandable” is not their conformity to a rational pattern of utilizing given means towards a desired end, but simply their conscious “direction” towards an end as such. We can understand an action, not necessarily because we ourselves would, under similar circumstances, act likewise, but because we can sense and appreciate the possibility that such an action could be induced by the agent's mental posture of desire towards the end. For Weber, there is no presumption that the action so induced will at all hasten the attainment of the end concerned. A man seeking a desired object may, in his anger at being thwarted, or in the excitement of pursuit, act in a manner that, in the judgment of both the cool observer and subsequent history, is supremely capable of frustrating the attainment of the sought-for end. Such a conception of action is, of course, incapable in itself of serving as a foundation for economic science. Only by imposing an artificial abstraction of the ideal type is Weber able to reach economics. And it is apparent that when conformity to an ideal type must be assumed for the deduction of the propositions of economics, these propositions cease to be the logical implications of human action, and economics ceases to be a branch of praxeology.12

Acting Man and Economizing Man: Mises and Robbins

In the decades following the age of Weber, praxeological ideas developed in two directions, yielding two related, but significantly distinct, conceptions of economic science. On the one hand, there developed, partly under the influence of Max Weber, the conception of economics that has been treated in the previous chapter. Here the ends-means dichotomy came to serve as the framework for the construction of an economic science that took as its foundation the idea of economizing. The previous chapter has described the culmination of this stream of thought in the work of Professor Robbins. This must now be clearly related to another direction of praxeological thought, to the influence of which, indeed, the development of the first must in some degree be ascribed.

This second line of praxeological thought has been led by the work of Professor Mises. It is in this direction that we find the most complete and consistent development of the praxeological concept, and it is this development that the present chapter set out to describe. Mises' explicit enunciation of the character of economics as a science of human action, the most highly developed of the potential praxeological disciplines, represents one of his most seminal and original ideas. It may be reasonably asserted that most, perhaps all, of Mises' characteristic contributions to the various branches of economic theory are, in his eyes, simply the consistently worked out corollaries of this fundamental thesis concerning the nature of economics.13 If economic theory, as the science of human action, has become a system at the hands of Mises, it is so because his grasp of its praxeological character imposes on its propositions an epistemological rationale that in itself creates this systematic unity. It is unfortunate, but not difficult to understand, that disagreement with some of Professor Mises' economic theories on the part of his critics has induced in them a tendency to ignore, if not to disparage, the epistemological basis from which Mises' conclusions seem to follow so rigorously. The truth is that the comprehension of economics as a science of human action provides a basis broad enough to support widely diverging conclusions. The validity of the praxeological approach must be tested on its own merits and by its internal epistemological adequacy.

Although praxeological ideas already appear in germinal form in Mises' first book, The Theory of Money and Credit (1912), it was not until the twenties that they became explicitly formulated. By the early thirties Mises' ideas on the nature and scope of economics had reached their full development,14 and some of these ideas attracted the attention of writers on the methodology of economics in a number of countries.15 The works in which Professor Mises has most fully presented the case for praxeology are his Grundprobleme der Nationalökonomie. (1933), Nationalökonomie (1940), and its English counterpart Human Action (1949). A vigorous restatement of the position of the sciences of human action and a spirited defense of their epistemological assumptions are to be found in Mises' recently published Theory and History (1957).

In comparing the two views of economics represented by the works of Mises and Robbins, it is necessary to notice carefully their points of similarity and to observe even more carefully the degree to which they differ from one another. Writers have tended to group Mises and Robbins together as continuators of Weber in their stress on the ends-means dichotomy and its importance for economic activity.16 But the two views place economic science in two quite distinct positions.

Economizing consists in the allocation of scarce resources among competing ends. Acting, in the praxeological sense, consists in selecting a pattern of behavior designed to further the actor's purposes. Of course, the particular allocation that, in any given situation, will be made of scarce means in respect of different ends will constitute a course of action, a pattern of conduct designed to further the achievement of as many of those goals (in their preferred order) as possible. But the concept of action is wider and at the same time more fundamental than that of economizing. Although action may be described in terms of ends and means, such a description is quite different from that of an operation of economizing. In the concept of economy, ends and means constitute a scheme more or less artificially imposed on action so that the relative valuations of ends can be reflected in the specific pattern in which resources are allocated. The essential idea becomes, not the intent pursuit of a set purpose, but the almost mechanical translation of the scale of “ultimate” ends into appropriately apportioned shares at the level of means. “Means” are required for the notion of economy because they are the entities that must be “allocated”; it is in the comparison of different ways of utilizing resources that economizing finds its place.

With the broader notion of action, on the other hand, we are not primarily interested in the particular pattern in which resources will be apportioned among ends. Such an allocation, if carried out, will be of interest as one of the possible implications of action and will, of course, as such, find a place somewhere in the science of human action. But on the basis of Robbins' conception of the nature of economic science, economics can achieve homogeneity and individuality only by virtue of its concern with the existence of such operations of comparison and allocation of means. The praxeological approach, on the other hand, finds a basis for the homogeneity and individuality of economics at a deeper level, which does not necessarily require a clearly recognizable pattern of allocation. This basis is found in the fundamental characteristic of action, viz., that it is conduct directed at the achievement of a purpose.

In this characteristic, praxeology finds a sufficient source of explanation for the specific patterns of action, among which the judicious disposal of scarce means appears as a frequent example. But a really unique criterion for the definition of economics is not to be found in the idea of allocating scarce resources, nor can this concept serve as an adequate foundation on which that science can be constructed. The key point is not that acting man ponders the comparative efficacy in different uses of certain given “means,” but that he behaves under a constraint that he himself has imposed, i.e., the necessity of acting in order to achieve what he wants to achieve, so that his behavior tends to conform to the pattern implied by his scale of ends. “Means” exist as such for acting man only after he has turned them to his purpose; acting is not apportioning, but doing—doing what seems likely to further one's purposes.

The remainder of this chapter, which attempts to set forth several details of the praxeological view and to consider various criticisms levelled against it, will serve at the same time as a commentary on the similarities and distinctions between an economics built around homo agens and one centered around economizing man.

II

Praxeology and Purpose

We shall begin the more detailed dissection of the category of human action and the discussion of its suitability to serve as the focus of the economic point of view with a survey of the role of purpose in action. It has already been noticed in this chapter that it is purpose that endows the behavior of men with the unique properties that praxeology finds in human action. The views of Croce and Weber have been cited in this connection as expressions of the discovery, in the act, of a phenomenon unlike anything coming within the range of observation of the physical sciences. Stones dislodged from a hillside by the elements and hurtling down on the unsuspecting traveller in the valley are part of a different “event” than stones hurled with intent by men waiting in ambush. The latter are hurled with purpose; they are—in this case literally—aimed by human beings. Stone-throwing by human beings is something that the scientist can in part “explain” by reference to an element not present in natural phenomena, viz., the conscious aim of the thrower. Praxeology takes this very element as its point of departure; it finds human actions amenable to analysis in that they bear the imprint of a constraint imposed by chosen goals.

Now, the recognition of purposefulness in economic activity did not begin with the emergence of praxeological ideas. It is, of course, true that the older conceptions of economic science, which saw it as concerned with an objective entity such as wealth or goods, did not require reference to the purposefulness of human action. The scope of their discipline was described completely by the character of the objects whose “laws” it investigated. But even here it was difficult to avoid the implication of purposefulness in men's attitude towards these objects. This implication was given tacit recognition in the substantive analysis that the classical economists employed, and it tended to be brought into the open in the more sophisticated of the classical attempts to define “wealth.”

With the tendency, during the nineteenth century, to place man at the center of economics, the recognition of the role of purpose became almost a matter of course. Political economy was, in fact, the extended exposition of the consequences of one of man's many purposes, the acquisition of wealth. Discussions of the character that was thrust upon homo oeconomicus could hardly avoid the central fact of his purposefulness. Towards the close of the century economics came to be identified explicitly as a “teleological” discipline.17 Wealth came to be endowed with a “teleological nature.” Discussions of the assumption of rationality made by economists necessarily involved the notion of purposive behavior, of “ends” and “means,” and consequently pointed to the distinction that this characteristic conferred on any human, as against physical, phenomena. The emergence, during the early decades of the present century, of the concept of Verstehen brought the teleological character of human action still further into the forefront.

However, it is of some importance to appreciate the quite different role that praxeology assigns to human purposefulness in economic activity from that assigned by other points of view. Wesley Mitchell could point out that economists cannot understand what men do if they treat them as molecules, leaving their purposes out of account. He and other economists could draw attention to the new element of causality introduced by teleology in human affairs. They could recognize a chain of cause and effect in which the usual temporal relation is reversed, the present being “caused” by the goals set up for the future.18 But all this does not necessarily lead to a praxeological position. The economic point of view could be held to imply any arbitrary criterion that might be imagined, without in any way ruling out recognition of the causal element introduced by the teleological character of economic activity. Mitchell, for example, saw economic activity as essentially connected with phenomena of money. This was perfectly consistent with his stress on the usefulness of referring to purpose in providing the economists with “explanations.” The phenomena of the real world are the products of a number of diverse chains of causes and effects. The investigation of any group of phenomena in the real world must take into account as many such causal relations as possible. In the class of phenomena constituted by “economic affairs,” there exists a causal relation, the consequence of human purposefulness, that is absent among phenomena of the physical world. But no attempt need necessarily be made to state explicitly the distinctive qualities of “economic affairs” in terms of this purposefulness or of the causality to which it is admitted to give rise.

The part played by purposefulness in the praxeological conception of economic activity is a far more important one. Purpose is not something to be merely “taken into account”: it provides the sole foundation of the concept of human action. When Engliš defined economics as a teleological discipline, he was attempting to place his finger on the very nerve center of the subject.19 There is place for a distinct science of economics only because the teleological quality of action makes possible a unique kind of “explanation.” The theorems of economics are derived for praxeology exclusively on the basis of the purposefulness of human behavior. Other determinants of behavior—heredity, environment, and the like—are on a completely different level of “explanation”; as such, they belong to other disciplines; they have no place in a “pure” economic science.

The crucial position that purpose fills in the praxeological system is intimately connected, of course, with the conception of human action as rational. Rationality in human behavior consists, after all, in the consistent pursuit of one's own purposes; in selecting the means that appear best adapted to the achievement of one's goals; in refraining from courses of action that might frustrate their achievement or promise only the attainment of less valued, at the expense of more highly prized, objectives. The place of the rationality of action is sufficiently important for the praxeological point of view to deserve separate discussion in a subsequent section of this chapter. It is sufficient at this point, for the appreciation of the praxeological importance of human purposefulness, to emphasize as much as possible that a concept of rationality exists for praxeology only as the expression of human purposes.20

Emphasis of this kind is called for, perhaps, in order to disassociate the praxeological approach from what may be called the “positivist” conception of rationality in human action. It was seen in the previous chapter that Professor Robbins has been charged with employing the ends-means dichotomy in too positivistic a fashion. An “end” in Robbins' scheme, it has been alleged, is set up by an external observer as something positive, as a “correlate of a tendency to conduct”; it is used by Robbins in a way that abstracts from the conscious aiming and striving that characterizes human actions before they have been completed. “Rationality” in the disposition of means with regard to such denatured ends becomes simply the mechanical ordering and sharing of resources according to a given pattern.

Without our entering here into a discussion concerning the justice of this objection to Robbins' system, it is worthwhile to make explicit the quite different kind of rationality that is central to the praxeological view. Action is not described as rational because it involves the automatic manipulation of resources into a pattern faithfully reflecting a given hierarchy of ends. Rationality consists rather in the transference, to conduct involving means, of those features in behavior that accompany the direct pursuit of ends. Rationality involves the conscious effort to make one's conduct conform to a given path; it calls for the same aiming and striving by the economic agent towards necessary intermediate goals as he displays towards the “final” goals themselves. It is only from the “outside” that such rationality can be described merely in terms of a particular pattern of resource allocation. The full praxeological grasp of human action perceives its rationality as completely pervaded by the “aiming” quality bestowed on action by its teleological character. This aspect of purpose leads, in fact, directly into the more detailed exposition of the praxeological view of rationality, which is the subject of the succeeding section.

Praxeology and Rationality

Few features of the praxeological position seem to have been more seriously misunderstood than the very special significance that it attaches to the rationality of human action. In the praxeological view, action is rational by definition; and this has been attacked from two directions. On the one hand, it has been branded as palpably false and contrary to the facts of experience.21 On the other hand, it has been interpreted as a vicious misuse of language, in which the word “rational” has been emptied of all meaning, so that its use to describe action, while not false, conveys no information whatsoever. The insistent description of action as rational is thus a misleading attempt to appear to be saying something, without, in fact, doing anything of the sort.22 To say that a man acts rationally, it is complained, tells us nothing more about what it is that he does than that he does it. Both these types of criticism rest on a quite incomplete appreciation of how the rationality of action is used in the praxeological system.

The concept of rationality in human behavior has long been a topic for discussion in the literature on the methodology of economics. Attacks on the undue reliance which economic theory has been accused of placing upon human reason are as old as attacks on the very notion of an economic theory. Historically-minded critics of theory long ago discovered that man is possessed of “instincts,” that he is a creature of “habit,” that he is capable of being carried away by mass hysteria and other psychological aberrations. Economic theory, it was found, had blindly ignored the realities of life. Where it had not explicitly endowed economic man with an exclusive thirst for “wealth” or with an utterly selfish character, economics had apparently proceeded on the quite gratuitous assumption that men behave sensibly from the point of view of their own interests. It was easy to demonstrate how far from the truth economics must be; it was easy to point out the true character of men with their full array of impulses, instincts, and stupidities. On the other hand, it was not difficult for economists to defend their theorems as hypothetical constructions with a definite, if limited, applicability to the real world, or, alternatively, as providing norms for the appraisal of actual performance. And debates on these lines abound in the economic journals of the decades around the turn of the century and later.

In all these discussions the assumption of rationality made by traditional economic theory was treated in a special sense; and what is chiefly responsible for the misunderstandings mentioned above is the confusion of this traditional conception of rationality with the conception of it employed in praxeological discussions. The point at issue in the earlier discussions concerning the empirical validity of economic theorems that treat men as reasoning beings free of irrational impulses and instincts was the fruitfulness of a particular simplifying abstraction. The social phenomena of the real world are the consequences of human actions in which all types of influences have played a part. One of these influences stems from man's reasoning powers, which urge him to pursue a selected goal with a steadfastness and tenacity unperturbed by human weaknesses and passions. Economic theory, it was believed, investigates social phenomena on the assumption that this influence of cool reason is, in fact, sufficiently powerful to make man pursue unwaveringly a goal once chosen. And this assumption, introduced in order to make analysis possible, was criticized or defended in respect to its justifiability, in the light of the realities of human nature.

It was quite natural for the conception of rationality that was made central to praxeological ideas to be discussed in a similar fashion. When these ideas are made to hinge on a conception of rationality as a pervasive quality of all human action, they of course invited criticism as being in contradiction to the facts. And when it is pointed out that in the sense in which the praxeological view sees human actions as rational, no such contradiction exists, then the praxeological postulate of rationality is criticized as a misleading and empty use of words. It is explained, for example, that a man who is swayed from the pursuit of his own best interests by falling prey to a fleeting temptation is yet acting “rationally” in the praxeological sense. In the praxeological view, the man has simply substituted a new set of ends, represented by the fleeting temptation, for the previously chosen ends. The fact that in the eyes of an outside observer, or even in the eyes of the man himself at a cooler moment, it is the original set of ends that constitutes the man's “best interests,” is not sufficient to justify our labeling the man's pursuit of his newly selected goal as “irrational.” The selection of an end can never, as such, be judged in regard to its rationality; and there is no reason to question the rationality with which the man pursues his newly chosen end.

It is this kind of explanation that provokes the annoyance of the critics and incurs the charge of using the word “rational” in a viciously misleading manner. These strictures are, in fact, quite undeserved; and it is worthwhile to devote attention to clearing up the confusion on this point. We can perhaps best succeed in this by considering in some detail the contribution of Tagliacozzo, mentioned in the previous chapter, to the clarification of the notion of “economic error” or “uneconomic behavior.” Tagliacozzo deals with the “Rhine-wine” situation which had been involved in the Pareto-Croce correspondence cited earlier in this chapter at the turn of the century.

The “Rhine-wine” case concerned the man who does not wish to indulge in gluttony, who has in fact budgeted all his money for other, more highly valued purposes, but who, yielding to the temptation of the moment, buys and drinks Rhenish wine. Croce had written that by so acting the man has placed himself in contradiction with himself23 and that his sensual pleasure will be followed by a judgment of reprobation, an economic (to be carefully distinguished from a moral) remorse.24 The man is guilty of what Croce has elsewhere called “economic error”: the “failure to aim directly at one's own object: to wish this and that, i.e., not really to wish either this or that.”25 By contrasting this concept of economic error, as an error of will, with a technical error, which is an error of knowledge, Croce was enabled to criticize Pareto's distinction between logical (i.e., rational) actions, which are economic, and illogical actions, which are not. Action, Croce explains, is a fact of will, not of knowledge. The will presupposes reasoning, it is true, but action, which is the expression of will, cannot itself be qualified by adjectives such as “logical” or “illogical,” which pertain only to the application of reason.26

It was with this example of an economic error, the consumption of wine in defiance of a previously chosen program, that Tagliacozzo dealt at length. Tagliacozzo pointed out that the purchase of wine can be appraised from various vantage points. From the standpoint of full reality, no distinction between means and ends need be made at all. Wine has been purchased because such a purchase was desired, and that is all. There is no recognition of any “program” against which the man's action is to be compared and in terms of which it can incur disapproval or excite remorse. There is, consequently, no notion of an “end” separate from the means that might “bring about” the realization of the end.

From the point of view of the man's own budget plan, however, the case is very different. Here a yardstick has been set up by the man himself against which the “economic” correctness of his actions can be measured and found wanting. The artificial creation of a “plan” in the form of a prior selection of ends necessarily carries with it a “point of view” from which it is possible to appraise the wine purchase and to convict it of economic error.

Finally, the man's action can be contemplated with the realization that any one yardstick in the form of a program will necessarily be quite arbitrary; that the span of time over which such a “program” is to have validity may be as long or as short as we please. From this point of view it is clear that what is a “temptation” from the standpoint of a long-range program becomes itself an independent “program” in its own right in relation to a suitably brief span of time taken as a frame of reference. The consumption of wine has now become the desired end; the man's actions can still be appraised, but only for their consistency with this newly adopted “program.”

The distinguishing of these possible attitudes towards the wine purchase and the recognition of the relativity of the notion of an economic error enable Tagliacozzo to pursue Croce's theme to its ultimate praxeological conclusion. In a real action, taken as an independent event, there is no room for any discrepancy between the conception of a program and its realization; the two concepts coincide completely. But this understanding of the situation does not at all exhaust its significance. Actions can be “judged” with regard to the faithfulness with which they conform to “programs.” And there can exist a complete range of such “programs” against which any action may be appraised, depending on the particular frame of reference selected. The important fact is that the very conception of an economic “judgment” implies a particular tendency on the part of human beings such that deviation from it incurs (economic) “disapproval.” This tendency is one that makes for an identity of means and end, comparable to the intrinsic coincidence of means and end that is present in any real action considered as an independent event with no frame of reference other than itself. It is this “tendency” that demands “that given programs be respected; that wine not be bought, if the program does not provide for such purchase; that given means go as far as they can in the fulfilment of the ends.”27

Together with the consciousness of a chosen set of ends that comprise a program there is an inevitable consciousness of an inclination to reduce all the means and resources required for the attainment of the program to the same rank as the chosen purposes themselves. Failure to achieve such a complete coordination of ends and means, which spells susceptibility to the distractions of “temptations of the moment,” can be sustained only at the expense of fighting free of this conscious inclination—a struggle that makes up the sense of economic error. Now in so far as all human action is teleological and is the expression of purposes consciously chosen, it is clear that all action must necessarily be part of the operation of the tendency toward the identification of means and end. The man who has cast aside a budget plan of long standing in order to indulge in the fleeting pleasure of wine still acts under a constraint to adapt the means to the new program. Should a fit of anger impel him to forgo this program as well and to hurl the glass of wine at the bartender's head, there will nonetheless be operative some constraint—let us say the control required to ensure an accurate aim—which prevents his action from being altogether rudderless. It is here that praxeology has grasped the possibility of a new scientific range of explanation of social phenomena. Precisely because man's actions are not haphazard, but are expressions of a necessity for bringing means into harmony with ends, there is room for explanation of the content of particular actions in terms of the relevant array of ends.28

During the course of this discussion of the nature of economic error, the sense in which praxeology sees human action as “rational” will have become abundantly clear. It will also have become clear how the praxeological use of the concept of rationality is quite unaffected by both types of criticisms that we noticed to have been levelled against it. Its description of all human action as rational constitutes a proposition that is, in fact, incapable of being falsified by any experience, yet does, nevertheless, convey highly valuable information. Action is necessarily rational because, as we have seen, the notion of purpose carries with it invariably the implication of requiring the selection of the most reasonable means for its successful fulfilment.29 Such a proposition cannot be proved empirically false because, as we have seen, programs can be changed, so that evidence that a man no longer “follows his best interests” proves only that he has chosen a new “program” the necessary requirements of which no longer permit him to follow—what used to be identified as—his best interests. Despite the impossibility of its empirical contradiction, this proposition yet conveys highly useful information because the insight it provides makes possible the derivation, in regard to whatever program is relevant in given circumstances, of highly developed chains of theorems. The kind of knowledge that such theorems can convey, their dependence on the praxeological postulate of rationality, and the implications of the italicized qualification in the previous sentence will become more easily comprehensible in the subsequent sections of this chapter.

The Assumption of Constant Wants—the Praxeological Context

Closely related to the preceding definition of the sense in which praxeology depends on the rationality of human action is the further clarification of the relevance of such rationality for a praxeological science, and especially of the character of the assumption of a constancy of wants. A praxeological theorem becomes possible because of the quality of purpose in action. This quality enables the praxeological theorist, by resorting to his own reason, to predict the path that a given person will follow under the requirement of using his reason in order to fulfil his purposes.

The appreciation of the character of a praxeological theorem so derived throws immediate light on the notion of “given ends” and the assumption of a constancy of wants, both of which are inevitably involved in such a theorem. The previous chapter dealt in some detail with Robbins' conception of ends as data for economics. It will be noticed that the praxeological view places equal emphasis, and for substantially similar reasons, on the notion of given wants and purposes. The point at issue hinges on the very possibility of knowledge acquired through praxeological excogitation.

A great city is served by alternative means of transportation; one of these means of transportation has been crippled by an accident. It will be obvious to the observer of the effects of the accident that the alternative means of transportation will tend to be employed in larger than normal volume. In making this prediction the observer has made a simple application of his reasoning powers to a problem of human action; he has applied a theorem of praxeology. The knowledge that he has so acquired is a piece of information different from the data from which he began, but which was, nevertheless, implied in the assumptions concerning human purposes that the observer felt entitled to make. Because he was able to assume that many people desired transportation with sufficient urgency, the observer was able, from his own knowledge of the alternatives open to them, to predict the course of action that they would take. It is clear that this newly acquired knowledge was gained only because of the existence of given purposes, and it is only in relation to these given purposes that this praxeological knowledge has significance.

Analysis of human action can proceed only by the treatment of given purposes as data; the effects of a change in surrounding circumstances can be deduced only on the assumption that these purposes are adhered to with constancy, that no new “program” has been substituted for the old. These restrictions on the derivation of praxeological knowledge follow from what has been said in the previous section concerning the rationality implicit in the concept of human action. It was seen that the rationality of action can be appraised relatively to various mutually inconsistent programs that a person may, under different sets of conditions, have chosen. Because this is the case, it is essential, for the derivation of a praxeological theorem, that it be formulated in reference to one such program, whose dominance and relevance must, along with other information, be supplied by the data. Once the data have been supplied, theorems may be derived that will possess necessary truth, but their validity remains strictly dependent on the data; their truth is limited to the “programs” to which they are relevant.

It is a curious fact that critics of economic theory have time and again seized on this feature as a central and damning weakness. The application of economic theorems to the explanation of concrete historical situations requires careful scrutiny of the data on which such theorems are to be grounded. The data will vary, of course, from one concrete case to another. The correct use of economic propositions in particular real situations presupposes, as a matter of course, adequate factual information regarding changes in the data. The writers who have from time to time disparaged the work of economic theorists altogether and urged economists to devote themselves more or less exclusively to the description and classification of those changing facts themselves have pointed to the “relativity” of theories. They considered the necessary limitations on theoretical constructions, which are imposed by virtue of the fact that they are valid only in relation to given programs, as grounds for believing that economic knowledge can be derived more efficiently by simple reference to the changing programs themselves. An economic theory might be an elegant source of intellectual satisfaction, but the severe circumscription of its applicability made it of only academic interest.

It seems worthwhile to point out that, as our discussion of the foundations of praxeological knowledge makes clear, the acknowledged relativity of a praxeological theorem to a given program as its frame of reference is, in fact, not a weakness at all, but is, on the contrary, a reflection of remarkable scientific achievement. Contemplation of the raw data alone presents a range of social phenomena that seem to defy orderly explanation altogether. It seems impossible to develop chains of cause and effect that can bring any semblance of determinacy into the data. Certainly mere analysis of the masses of empirical figures cannot yield any stable “laws” and relationships. The very fact of changing programs, changing tastes and prejudices, makes for an area in which no logical necessity is visible at all and in which everything seems to be in a condition of haphazard flux.

It is into this bewildering mass of empirical data that the economic point of view throws a ray of light. It enables us to grasp an element that does introduce a measure of explanation into social phenomena. This element is laid bare by subjecting the empirical data to a systematic abstraction, made possible by recognition of the character of human action. By taking a cross section of social phenomena at a particular instant in time, by considering the programs that members of society have chosen at that instant and by mentally arresting program changes, one can apply praxeological theorems to these various programs and deduce the consequences. The conclusions so derived are valid in relation to the assumed programs, and provide an explanation of the concrete phenomena of the real world in so far as there is a tendency for men to adhere to programs once they have been initiated. Moreover, once the possibility of this type of explanation is grasped, it is clear that all historical phenomena admit, at least in principle, of being treated in such terms. It becomes merely a matter of feeding the suitable assumptions and data into the theoretical system and extracting the appropriately complicated chains of reasoning.

The crucial point is that the perception of any kind of explanatory framework has been made possible only by prescinding from any conceivable change in a given set of programs. The introduction of any kind of order into the jungle of empirical data has been accomplished by abstracting from full reality and accepting a hypothetical state of affairs as a frame of reference. It is the outstanding achievement of economic theorists to have been able to recognize determinate causal chains within the tangles of statistics; they were able to succeed in this only by treating social phenomena as the systematic working out of the praxeological consequences of given programs that were adhered to. A particular program may not necessarily be adhered to, but the emergence of human action at all presupposes the existence of some program that was adhered to, and it is in reference to this that praxeological reasoning provides the explanatory key.

An economic proposition referring to a given set of circumstances, a particular configuration of demand, a specific technological context will provide information concerning this definite situation. Changes in the data, a revolution in tastes, the acquisition of new habits, the discovery of more efficient techniques will all make up a situation to which a new praxeological solution will be relevant. To deny the applicability of economic reasoning because of the change in conditions is to deny that the old set of conditions did set up specific “forces” constraining action; it is to deny that these “forces” provide an interpretation of action that goes beyond a mere cataloguing of observed events. “But,” as Professor Knight has commented, “this fact certainly cannot be denied.”30

The position that the praxeological element occupies within the whole class of social phenomena has been set forth by various writers. Professors Mises and Knight have devoted considerable attention in their writings to the elucidation of this point.31 Within narrow limits man can be observed and his behavior explained purely mechanically. At this level of interpretation human behavior is considered only in the positive terms of stimulus and response; it is completely “caused” in the sense that the problem-solving elements in human conduct are ignored. On higher levels of interpretation, however, the conduct of men involves recognition of their putting forth effort, of their attempt to solve problems—in short, of their human actions.

Here again various levels of discussion are possible. Unquestionably the most “interesting” and, for the business of living, the most important is the consideration of the ways in which men have acquired their particular interests; the development of particular programs that men believe worthy of undertaking; the forces that determine people's value judgments and the emergence of their sense of absolute moral appraisement. The level of interpretation on which praxeology has a contribution to make is, however, a more modest one. It is willing to accept the interests and programs of men as data and seeks to understand, in terms of these interests and programs, the chains of consequences that can be deduced. The principles of human action make it possible to ascribe and refer back historical events to such interests and programs as “final causes” that can be accepted without further explanation.

Praxeology, Apriorism, and Operationalism

The considerations set forth in the previous section are sufficient to make clear what writers have had in mind when they have characterized economics as an a priori science. This description of economic knowledge has been repeatedly misunderstood; it has been repeatedly taken out of context and held up for ridicule.32 But the matter is essentially logical and clear.

Professor Mises in particular has stressed the a priori nature of praxeological knowledge. A theorem of a praxeological science provides information that has been derived by sheer reasoning; it is the product of pure logic without the assistance of any empirical observation. As such, a praxeological theorem is congeneric with a theorem of geometry; being the rigorously derived consequences of given assumptions, it partakes of the “apodictic certainty” that is necessarily possessed by such an exercise in logic.

Disagreement with this approach has been vigorously expressed by a number of writers. Dissatisfaction has arisen from several points of view. On the one hand, it is pointed out that an a priori theorem, being derived by sheer logic from given axioms, is necessarily circular, in that it merely tells us in a different way what we already know by our knowledge of the axioms themselves. All the information provided by economic reasoning is thus merely extended circumlocution. So long as economics was not acknowledged as a praxeological science, it is argued, this objection could not be raised. So long as it had been necessary to introduce specific postulates about the way in which people actually behave, an economic theorem did tell something new. If, for example, it was postulated that men behave “rationally” and rationality was defined so as to possess definite empirical content, such as a pattern of behavior that maximized money profits, and the like, then the consequences of this assumption do provide new information. Deduction from the specific assumption made has yielded a theory, against which the assumption could, in fact, be tested for its faithfulness to the facts. But with the emergence of the view of economic knowledge that saw it as completely independent of particular empirical assumptions, the situation became completely altered. A theorem describing the consequences of human behavior that does not take into account the concrete content of that behavior must remain, it has been repeatedly asserted, simply a different way of saying that people behave as they behave.33

Closely connected with this criticism of economics a priori are the objections raised against its supposed misuse of a method of doubtful respectability, viz., introspection. Implicit in much of the unfavorable discussion of apriorism in economics is the current belief that only “operationally meaningful” propositions ought to find a place in science.34 A theorem which makes no direct reference to observable facts, and which therefore cannot be “tested” against observable facts, is one the interpersonal validity of which must remain in doubt and to which “scientific” status is to be denied.

Now, these are issues that concern basic epistemological problems far wider than the range of this book. Closely though they relate to the praxeological view of the nature of the economic aspect of affairs, they themselves are concerned with inquiries into the nature of science and knowledge that would carry us far away from our own subject. Professor Robbins has gone so far as to relegate completely to philosophy all such discussions concerning the a priori character of economics.35 Mises, Knight, and Hayek have most vigorously justified the kind of introspection that is necessary for the conception of economic knowledge as “scientific” without being empirically “testable.”36 We are not so much concerned here with the scientific validity that may be attributed to a priori economics as with the clarification of the precise sense in which the praxeological conception of the economic point of view does, in fact, imply a strictly a priori position.

The concept of human action is sufficient, in the praxeological view, for the deduction of complex chains of reasoning concerning the choices men will make, the alternatives from which they will be forced to choose, and the like. Human action relates to real entities, goods, or services; it develops against the background of objectively measurable price relationships. Economic science seeks to provide an explanation of these real phenomena; it seeks to explain the consequences of given changes in data, to relate market phenomena to the underlying human motives. Praxeology envisages the successful attainment of these goals through the scrutiny of human affairs from a specific point of view that recognizes the teleological and rational nature of human action. This point of view makes possible the construction of chains of reasoning that are purely formal, in the sense that they refer to goods, services or factors of production only abstractly; they depend for their validity not on the specific objects with which human action may be concretely concerned, but only on postulated attitudes of men towards them. The propositions that can be deduced in this manner may thus, of course, include the analysis of situations that may be quite unreal. And in order to be of service in the understanding of reality, praxeology must direct its attention exclusively to the analysis of situations that correspond to the actualities of the external world. It would be possible, for example, to examine the consequences of a world in which labor was preferred over leisure. Economics could certainly deduce theorems concerning prices, incomes, and production in such a world. But this would be intellectual gymnastics of a fruitless kind.37

To maintain contact with situations that do in fact require explanation, economics must thus resort to experience for guidance. It must take the facts as they are and apply to them the a priori logic of human action. “It adopts for the organized presentation of its results a form in which aprioristic theory and the interpretation of historical phenomena are intertwined.”38 It is clear that the exposition of economics as an a priori science has never implied that it can dispense with references to factual observation in the final statement of its results. Particular economic propositions will concern human attitudes and conventions that do conform to those of the real world. The sense in which it is maintained that economics is an a priori branch of knowledge is a much narrower one. It concerns the contribution that the recognition of the concept of human action makes to the explanation of social phenomena.

The observation of facts provides useful knowledge. This is the procedure of history. But observation does not exhaust the knowledge and understanding that we can attain concerning these affairs. The economic point of view injects an immediate sense of order into these affairs, an order that brings with it a large measure of explanation. This explanation is achieved by subjecting the observed data to a specific scientific procedure, praxeological reasoning. This procedure is in itself quite independent of the facts to which it is applied. It could be applied to conditions that are nonexistent. It is itself the contribution of human logic and reasoning alone. In this sense the theorems of economics, closely though they refer to concrete reality, are to be described as a priori. They are derived purely from the knowledge that the human mind possesses of the category of action.39

The separation that is thus emphasized, between the facts and their logical analysis through economic reasoning, is a fruitful one. It stresses the quite distinct operations that are being performed in the observation of economic history and in the development of economic theorems. It focuses attention on the new source of knowledge that is provided by our understanding the nature of action. It illuminates the striking fact that pure reason can convey knowledge concerning brute facts of the real world. Because men act as reasoning beings, it is possible to explain their concrete patterns of behavior by applying to their attitude the theorems that our own reason has supplied.

All this does not prevent the praxeologist from maintaining a becoming modesty with regard to his own contribution. He does not in any way believe that his theorems can exhaust all that can be known about social phenomena; he does insist on the unique assistance he can provide. He does not deplore close attention to market data, to masses of statistics, and the like; but he does deprecate the view that this kind of scrutiny can be a substitute for economic reasoning or that it needs to be resorted to as a “test” for the correctness of such reasoning. His recognition of the category of human action does impress upon him most forcefully the utter helplessness with which the masses of facts must be faced without the illumination provided by a procedure of analysis that itself owes nothing to these facts—the application of economic reasoning.

The Economic Point of View and Praxeology

Our discussion thus far in this chapter has made no attempt to distinguish a specifically economic point of view from the general praxeological outlook. We set out, in this book, to examine the various points of view held to characterize economic science and through which an “economic” aspect of social phenomena has been distinguished. Our search has led us in this chapter to consider the filiation of ideas that have found the specifically economic point of view to be merely part of a broader perspective, the praxeological view. The economic aspect of affairs is simply the praxeological; a theorem of economics is simply a praxeological proposition.

To be sure, the praxeological perspective embraces a range of human action far wider than that usually treated in economic theory. All human actions, motivated though they may be by the entire range of the purposes that have inspired and fired men to act, come within the sway of the ideal praxeological discipline. The constraint that men feel to fulfil their purposes in spite of obstacles pervades all aspects of life. It is the position of praxeology that the common category that embraces the entire range of human efforts is the key to economic science. We have seen at various points in this book that economists have again and again searched for something in economics that should differentiate it from the rest of human action. These thinkers were deterred from expounding the praxeological character of economics for the very reason that this character is common to other aspects of social life.

The praxeological view sees economic science as the branch of praxeology that has been most highly developed.40 Perhaps other branches will one day attain a similar stage of development. The important point is that distinctions between various “branches” of praxeology must be arbitrary. Economics is a “given pie”; it is not a pie that every economist can make at will or for which he can prescribe his own recipe. Economic theory has a “nature of its own” that must be respected; certainly it must be recognized if its distinctive contribution is to be made at all. But the pie that is the economic aspect of affairs is bigger than that traditionally treated by economists; it embraces all human action. The slice that makes up economic theory may—so long as it is cut from the correct pie—be cut in any arbitrary way. “It is impossible to draw a clear-cut boundary around the sphere or domain of human action to be included in economic science.”41 “The scope of praxeology, the general theory of human action, can be precisely defined and circumscribed. The specifically economic problems ... can only by and large be disengaged from the comprehensive body of praxeological theory.”42

Economic theory has traditionally dealt with the phenomena of the market, prices, production, and monetary calculation. In these spheres of human activity, theorists have developed constructions that help to explain the regularities these phenomena evince and to bring into clear focus the tendencies for change in these phenomena consequent upon given autonomous changes in the data. Writers on economics have striven to present precise definitions of the scope of this discipline. From the point of view of praxeology, the earlier attempts suffered from their tendency to seek for the defining criteria in the nature of the specific affairs with which market phenomena are concerned. The consequence of these searches was the series of formulations examined in the earlier chapters of this book. The subject matter of economics came to be connected with the material things that are the objects of traffic in the market; it came to be linked peculiarly with the use of money in market transactions or with the specific social relationships that characterize the market system. Where writers came closest to the recognition that these criteria were only accidental characteristics of the affairs upon which economic analysis could be brought to bear, where they were able to glimpse the congenerousness of the specifically economic type of analysis with the underlying actions of men, they were unable to follow this clue to the conclusion to which it pointed. Precisely because those features in action that made it susceptible of economic analysis seemed common to all human activities, these writers were driven back to look for some other defining characteristic. And this meant again the search for some arbitrary quality to justify selecting the particular slice of pie that made up economic theory; but it meant in addition the relegation yet further into the background of the true recipe of that larger pie from which their conception of economics was being arbitrarily hacked.

From this point of view the formulation of the nature of the economic in terms of the allocation of scarce means among competing ends occupies a rather special position. This definition, discussed at length in the previous chapter, differs from the rest in its approach to the problem. It defines an aspect of human activities in general; it does not look for the key to economic phenomena in the specific kinds of activity with which they are mostly concerned. In finding the economic aspect of activities in general to consist in concern with the ends-means relationship, this conception too includes within its scope kinds of actions with which economics has had traditionally little to do. From the praxeological standpoint, in fact, the idea of economizing scarce means in allocating them among alternative ends, when used as a criterion for defining the domain of the economic, is nothing but a convenient, though artificial, framework in which human actions can be analyzed. The allocation among competing goals is a technical concomitant of a good deal of purposeful behavior. Human action does frequently call for carefully apportioning scarce means among competing projects. In a formal sense it is even possible to consider all human action as consisting in such allocation; but this involves the kind of artificiality in the conception of ends and means with which Professor Robbins' definition was charged. The principal merit of the latter is thus its implicit dependence on the concept of human action; its apparent inadequacies stem from its attempt to consider action as conforming to a particular technical pattern. Much of the criticism Robbins' definition received will be seen to dissolve when his conception of economics is related more clearly to the idea of human action. The allocation of scarce means among alternative ends simply signifies the consistent pursuit of ends, the consistent pursuit of the more highly valued ends taking precedence over the fulfilment of the less highly esteemed ends. It means, in fact, the exercise of the human faculty for purposeful action.

It is not to be denied that the ends-means formulation seems to fit with remarkable neatness the phenomena treated by economic theory. But this neatness has been achieved at the cost of a failure to press on to the very crux of the economic point of view. We are not thereby apprised, as the expression of this economic point of view is able to apprise us, how an analysis of human affairs by economic science is made possible by the very perspective from which the economic theorist views them. The ends-means dichotomy does not show how the recognition of the principle that governs the allocation of means conduces at the same time to a recognition of the possibility of scientific analysis and explanation of economic phenomena. Only when the economic point of view is conceived as focusing attention on the nature of human action is it able to provide the key to economic science. And in this sense it can indeed be contended that the definition of economics in terms of the economizing of scarce means (like others before it) “fails to convey an adequate concept of its nature,”43 until this definition is superseded by the fully developed conception of economics to which it logically leads, viz., the praxeological point of view.

“Economists would agree,” Cannan wrote, “that ‘Did Bacon write Shakespeare?’ was not an economic controversy. ... On the other hand, they would agree that the controversy would have an economic side if copyright were perpetual and the descendants of Bacon and Shakespeare were disputing the ownership of the plays.”44 This is so, Professor Robbins explains,45 because the supposed copyright laws would make the use of the plays scarce and would in turn yield their owners scarce means of gratification that would otherwise be differently distributed. Of course, Professor Robbins is correct, but the same explanation can be given in terms that make it immediately clear how the economic side of such a controversy is able to yield material for the economic theorist.

It can be explained, that is, that the controversy has an economic aspect because the assumed copyright laws affect the conditions of human action in either or both of two ways. In the first place, as they render the use of the plays scarce, the laws will have altered the pattern of action on the part of prospective producers. An additional obstacle has been placed in the way of persons desiring to produce the plays; and it will be obvious that a prospective producer will be constrained to forgo some less highly prized gratification in order to fulfil his dramatic purposes. On the other hand, it will be clear that this state of affairs opens up a new avenue by which the legal owner of the plays may possibly be enabled to fulfil his own purposes more completely, through taking advantage of the producers' attitudes. Either of these two influences of the controversy on human actions is sufficient to invest it with interest for the economic point of view. This way of expressing the nature of this point of view, however, reveals at the same time the very nature of the analysis that it makes possible.

[[1]]Memorials of Alfred Marshall, ed. A. C. Pigou (London: Macmillan & Co., 1925), p. 499.

[[2]]R. Robinson, Definition (Oxford, 1950), p. 15.

[[3]]B. Croce, Historical Materialism and the Economics of Karl Marx (English ed.; London: Macmillan & Co., 1915), p. 29.

[[4]]These considerations will account for the absence of references in this essay to the achievements in recent years in mathematical programming, input–output analysis, and game theory. Rivett has suggested, in “The Definition of Economics,” Economic Record, November, 1955, pp. 229–230, that progress in linear programming might one day require review of the borderlines of economics. Apart from its special relevance to Rivett's own definition of economics, this suggestion can refer only to the scope of the subject, not at all to the delineation of the economic point of view. On this point see especially W. J. Baumol, “Activity Analysis in One Lesson,” American Economic Review, December, 1958, p. 837.

[[5]]E. Cannan, Wealth (3rd ed.; London, 1945), p. 4.

[[6]]For examples of the specific restriction of definitions of economics to “economic theory,” or even more narrowly to “price theory,” see J. A. Schumpeter, History of Economic Analysis (New York, 1954), pp. 535–536; F. H. Knight, “The Nature of Economic Science in Some Recent Discussion,” American Economic Review, Vol. XXIV, No. 2 (June, 1934), p. 226.

[[7]]On the distinction between real and nominal definitions, see, e.g., J. S. Mill, A System of Logic (10th ed.; London, 1879), I, 162 f.; L. S. Stebbing, A Modern Introduction to Logic (6th ed.; London, 1948), p. 426; C. K. Ogden and I. A. Richards, The Meaning of Meaning (3rd ed. revised; London, 1930), p. 109 n.

[[8]]For examples of writers who saw in the multiplicity of definitions a proof of their fundamental weakness, see L. Walras, Elémentsd'économie politique pure, ou Théorie de la richesse sociale (Lausanne, 1874), p. 3; A. P. Usher, “The Content of the Value Concept,” Quarterly Journal of Economics, August, 1917, p. 712; F. Kaufmann, “On the Subject Matter and Method of Economic Science,” Economica, November, 1933, pp. 381–382.

[[9]]For Pareto's views on the usefulness of defining economic affairs, see the translation of his paper “On the Economic Phenomenon” (first published in Giornale degli economisti, 1900, II, 139–162) in International Economic Papers, No. 3, p. 194. See also V. Pareto, “L'économie et la sociologie au point de vue scientifique,” Rivista di scienza, 1907, p. 294. Myrdal's views are expressed in his The Political Element in the Development of Economic Theory (Harvard, 1954), pp. 154–155; for those of Hutchison see his The Significance and Basic Postulates of Economic Theory (London: Macmillan & Co., 1938), p. 53.

[[10]]G. Tagliacozzo, “Croce and the Nature of Economic Science,” Quarterly Journal of Economics, Vol. LIX, No. 3 (May, 1945), p. 308.

[[11]]For examples of earlier views recognizing the importance of an adequate definition of economic affairs, see E. de Laveleye, “Les lois naturelles et l'objet de l'économie politique,” Journal des économistes, April, 1883, p. 92; S. Patten, “The Scope of Political Economy,” The Yale Review, November, 1893, reprinted in S. Patten, Essays in Economic Theory (New York, 1924), p. 178.

[[12]]L. Robbins, An Essay on the Nature and Significance of Economic Science (2nd ed.; London: Macmillan & Co., 1935), p. 3. Robbins put forward the same view, as well as the suggestion for a history of the stream of thought leading up to modern definitions, in his Introduction to Wicksteed's The Common Sense of Political Economy (London, 1933), I, xxii. See also L. Robbins, “Live and Dead Issues in the Methodology of Economics,” Economica, August, 1938, p. 344, for an acknowledgment of the minor importance of the precise wording in the expression of the (correct) definition.

[[13]]F. H. Knight, review of L. Mises, Nationalökonomie, in Economica, 1941, p. 410 n.

[[14]]A. L. Macfie, An Essay on Economy and Value (London, 1936), pp. 2–3.

[[15]]For examples of economists convinced of the insuperable difficulty of achieving a determinate definition of economic affairs, see P. T. Homan, “Issues in Economic Theory, an Attempt to Clarify,” Quarterly Journal of Economics, May, 1928, pp. 349, 364; F. St. Leger Daly, “The Scope and Method of Economics,” The Canadian Journal of Economics and Political Science, May, 1945, p. 169.

[[16]]G. Tagliacozzo, “Croce and the Nature of Economic Science,” Quarterly Journal of Economics, May, 1945, p. 307.

[[17]]See, e.g., R. Robinson, Definition, pp. 162–172.

[[18]]B. Croce, “On the Economic Principle II,” translated in International Economic Papers, No. 3, 1953, pp. 197–198, from Giornale degli economisti, I (1901). See also International Economic Papers, No. 3, p. 203, for an interpretation by Pareto of the differences between Croce and himself in terms of the philosophical clash between the medieval nominalists and realists.

[[19]]F. A. Hayek, “The Trend of Economic Thinking,” Economica, May, 1933, p. 131.

[[20]]On these points see, e.g., L. Robbins, The Theory of Economic Policy in English Classical Political Economy (London, 1952), p. 3; M. Bowley, Nassau Senior and Classical Political Economy (London, 1937), pp. 27 f.

[[21]]See, e.g., A. Amonn, Objekt und Grundbegriffe der theoretische Nationalökonomie (2nd ed.), pp. 23 f.

[[22]]J. S. Mill, “On the Definition of Political Economy: and on the Method of Investigation Proper to It,” (in Essays on Some Unsettled Questions of Political Economy) London reprint, pp. 120 f.

[[23]]See the Centenary Volume of the Political Economy Club, London, 1921, p. 44.

[[24]]It was in this period too that one of the earliest denials of a specifically economic side of affairs was put forward by Comte. Any such separation was “irrational” and evidenced the “metaphysical” character of economics. For an account of Comte's criticism of economics and of J. S. Mill's reaction to it, see Ashley's Introduction to his 1909 edition of Mill's Principles, pp. xi f. See also R. Mauduit, A. Comte et la science économique (Paris, 1929); F. A. Hayek, The Counter–Revolution of Science (Glencoe, 1952), pp. 181–182. An early discussion of Comte's views on economics is J. E. Cairnes' “M. Comte and Political Economy,” in Essays in Political Economy (London, 1873).

[[25]]Knies required of a definition of economics that it comprise a) “das Gebiet der Untersuchungen,” b) its “Aufgabe,” and c) its “Methode.” (K. Knies, Die politische Oekonomie vom geschichtliche Standpuncte [Braunschweig, 1883], p. 157.) Menger required a similar scope for a definition. (C. Menger, Untersuchungen über die Methode der Sozialwissenschaften und der politischen Oekonomie insbesondere [Leipzig, 1883], p. 238.)

[[26]]The distinction between the “individual” (or concrete) and the “general” (or abstract) in economic phenomena was made famous by Menger in his Untersuchungen, pp. 3 f.

[[27]]Prominent United States writers who applied themselves to the careful definition of the economic point of view during this period include in their ranks Ely, Patten, Davenport; Taussig, Hadley, Giddings, Hadley, and Ward.

[[28]]Among French writers of the period who concentrated most directly on definition may be mentioned: R. Worms (La science et l'art en économie politique, Paris, 1896); E. Levasseur (De la methode dans les sciences économiques, Paris, 1898); A. Jourdan (Des rapports entre le droit et l'économie politique, Paris, 1884); G. Schmidt (“Rapports de l'économie politique avec la morale et le droit,” Revued'économie politique, 1900); G. Tarde (Psychologie économique, Paris, 1902).

[[29]]Cammillo Supino, La definizione dell'economia politica (Milan, 1883).

[[30]]L. M. Fraser, Economic Thought and Language (2nd printing, 1947), ch. 2.

[[31]]The following references support the conclusion that writers who have sought to define the scope of economics have done so with regard to the discipline as it has actually developed, not to any projected subject: A. Marshall, The Present Position of Economics (London, 1885); L. Robbins, Nature and Significance of Economic Science (2nd ed.; London, 1935), p. 22; R. T. Bye, “The Scope and Definition of Economics,” Journal of Political Economy, October, 1939; A. Amonn, Objekt und Grundbegriffe der theoretischen Nationalökonomie (1911), p. 12.

[[1]]L. M. Fraser, Economic Thought and Language (London, 1947), pp. 21 ff.

[[2]]Contrast, however, Cunningham's appraisal of Adam Smith's achievement as consisting “in isolating the conception of national wealth, while previous writers had treated it in conscious subordination to national power” (quoted in A. Marshall, Principles of Economics, [8th ed.; Macmillan & Co.], p. 758 n.).

[[3]]Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, ed. Cannan (Modern Library, 1937), p. 643.

[[4]]See, e.g., op. cit., p. 403.

[[5]]Op. cit., p. 397. John Neville Keynes has remarked (The Scope and Method of Political Economy [4th ed.; London, 1930], p. 39 n.) that although Smith's work has the form of a science, he himself conceived his subject primarily as an art. In this connection, however, a note of Jeremy Bentham is of considerable interest. He wrote (Economic Writings, ed. Stark, Vol. III [George Allen and Unwin, 1954], p. 318 n.): “To Adam Smith, the science alone has been the direct and constant object in view: the art the collateral and occasional one.”

[[6]]L. Robbins, The Theory of Economic Policy in English Classical Political Economy (London, 1952), pp. 170–171.

[[7]]James Steuart, An Inquiry into the Principles of Political Economy (1767), cited in L. Haney, History of Economic Thought (4th ed.), p. 138.

[[8]]On the attitudes of some of the earliest economic writers towards the right of private property, see, e.g., E. Halévy, The Growth of Philosophic Radicalism (Boston, 1955), p. 45; L. Robbins, The Theory of Economic Policy, pp. 50 f.; J. Bonar, Philosophy and Political Economy (3rd ed.; London, 1922), pp. 142 f. Perhaps the most clear example of an economist who was stimulated by concern with private property rights was Samuel Read. Read, one of the economists “rediscovered” by Seligman (“Some Neglected British Economists,” Economic Journal, 1903), called his book Political Economy. An Inquiry into the Natural Grounds of Right to Vendible Property or Wealth (Edinburgh, 1829). He treated economics, not as concerning wealth, but as concerning the “right to wealth.” It is of interest to note that the alternative name which Read suggested (p. xvii) for political economy, “Political Justice,” is the title of Godwin's book of 1793 fiercely attacking the institution of private property.

[[9]]Gunnar Myrdal, The Political Element in the Development of Economic Theory (English ed.; Harvard, 1954), pp. 69 f. Contrast Schumpeter's remark in this regard (History of Economic Analysis, New York, 1954), p. 120.

[[10]]The intellectual ancestry of classical political economy has been traced variously to the moral tradition represented by the Mandeville–Shaftesbury–Hutcheson realm of thought and to the political tradition of the Grotius–Pufendorf–Hobbes–Locke filiation. See, e.g., J. T. Merz, History of European Thought in the Nineteenth Century (Edinburgh, 1914), IV, 127–128; J. Bonar, Philosophy and Political Economy, pp. 6, 85, 151; W. Hasbach, Untersuchungen über Adam Smith (Leipzig, 1891), pp. 23 f., 140 f. See also F. A. Hayek, “Individualism: True and False” (reprinted in Individualism and Economic Order, Chicago, 1948).

[[11]]B. Mandeville, Fable of the Bees (ed. of 1723), pp. 427–428.

[[12]]W. Röpke, The Social Crisis of Our Time (English edition; Chicago, 1950), p. 68.

[[13]]F. A. Hayek, The Counter–Revolution of Science (Glencoe, 1952), p. 107.

[[14]]See, e.g., W. H. Hutt, Economists and the Public (Jonathan Cape: London, 1936), pp. 301–302.

[[15]]See E. Halévy, The Growth of Philosophic Radicalism (Beacon Press: Boston, 1955), pp. 13, 19, 57.

[[16]]R. T. Malthus, Principles of Political Economy (1820), p. 27. Ricardo in his Notes on Malthus (ibid.) seems to agree with Malthus.

[[17]]For a discussion of the significance of this distinction in Smith's work and of the later controversies over it, see, e.g., E. Cannan, A History of the Theories of Production and Distribution in English Political Economy from 1776 to 1848 (3rd ed.), pp. 14 f.

[[18]]Earl of Lauderdale, Inquiry into the Nature and Origin of Public Wealth (Edinburgh, 1804), p. 57.

[[19]]It is not quite clear whether Lauderdale really intended his definition to be interpreted as broadly as it was. It is noteworthy that in his reply to the scathing review of his book in the Edinburgh Review, Lauderdale speaks of himself as having defined wealth as consisting “of the objects of man's desire.” Lauderdale, Observations on the Review of his Inquiry into the Nature and Origin of Public Wealth, published in the VIIIth number of the Edinburgh Review (Edinburgh, 1804).

[[20]]R. T. Malthus, Principles of Political Economy (1820), p. 27.

[[21]]J. R. McCulloch in the Supplement to the Encyclopaedia Britannica, quoted in Malthus, Definitions in Political Economy (London, 1827), pp. 70 f.

[[22]]See n. 16 above; Read, Political Economy (Edinburgh, 1829,), p. 1.

[[23]]D. Ricardo, Principles of Political Economy and Taxation (1817). Original Preface, (Everyman's ed., p. 1); P. Sraffa, ed., The Works and Correspondence of David Ricardo, Vol. VIII, Letter No. 392, Ricardo to Malthus, 9th October, 1820. Ricardo's stress on distribution was noticed by, among others, G. Ramsay, Essay on the Distribution of Wealth (Edinburgh, 1836), p. v. There is perhaps room for conjecture concerning Ricardo's position in 1817. Early in 1817 Malthus had written to Ricardo referring to “the causes of the wealth and poverty of nations” as the “grand object” of economic enquiries (Sraffa ed., Volume VII, Letter 200), and we have no record of any adverse reaction from Ricardo. Although in his Principles (1817) Ricardo had referred to distribution as the “principal problem” in political economy, this is not quite the same as his declaration to Malthus in 1820 that the laws of distribution are “the only true objects” of the subject. To Malthus in 1820 Ricardo was writing that he was “every day ... more satisfied” of the correctness of his view. This might support the conjecture that Ricardo's 1817 statement was meant to be less emphatic than his later views. There is some support for the view that the scope of Ricardo's Principles (which treated distribution as the “principal problem”) was not meant to cover the whole science. On this see Ricardo's letter to Mill (Sraffa ed., Vol. VII, Letter No. 196); see also T. De Quincy's remarks to this effect in Dialogues of Three Templars on Political Economy, in Vol. X of De Quincy's Works, 1877, p. 205. For a contrary view see Trower's letter to Ricardo (Sraffa ed., Vol. VII, Letter No. 214).

[[24]]M. Bowley, Nassau Senior and Classical Political Economy (London, 1937), p. 303 n., and see above n. 8.

[[25]]Read, Political Economy, Preface, p. ix.

[[26]]On Hume's views in this regard, see J. Bonar, Philosophy and Political Economy, p. 107.

[[27]]See above n. 7.

[[28]]Ganilh in his Inquiry into the Various Systems of Political Economy (English ed.; New York, 1812), pp. 2–4, cites Palmieri's Pubblica felicità (1787) and Canard's Principesd'économie politique (1801) for the view that wealth is superfluous. Boileau (An Introduction to Political Economy [London, 1811], Ganilh himself (op. cit. p. 22) and the American economist Raymond (The Elements of Political Economy, [2nd ed.; Baltimore, 1823], p. 40) all defined wealth as surplus over current expenditure for “wants.” This position seems to have considerable bearing on the classical attitude towards the consumption of wealth. (On this see J. N. Keynes, Scope and Method of Political Economy, [4th ed.; London, 1930], pp. 105 f; L. Robbins, The Theory of Economic Policy, p. 7.) The conception of wealth as surplus after expenditure implies a finite area of human “needs” which are objectively fixed. This conception led to the view that the consumption of wealth is the destruction of wealth rather than the consummation of the process of production. One recalls J. S. Mill's unhappy description of the desire for present enjoyment of goods as being antagonistic to the desire for wealth (Essays on Some Unsettled Questions of Political Economy, London reprint, p. 138).

[[29]]Bentham recommended the use of the term “matter of wealth” in place of “wealth” to make it absolutely clear that political economy was not confined to the treatment of great riches. Malthus in a letter to Ricardo in 1817 explicitly included the poverty of nations in the scope of economics (Sraffa ed., Vol. VII, Letter No. 200). Samuel Bailey, celebrated critic of Ricardian value theory, ascribed the popular view of political economy as a “degrading” inquiry to the mistaken belief that it treats only of excessive wealth. S. Bailey, Discourses on Various Subjects Read Before Literary and Philosophical Societies (London, 1852), p. 125. For examples of later writers clinging to the “surplus” view of wealth, see Sargent, Science of Social Opulence (London, 1856); M. Liberatore, Principles of Political Economy (English ed.; London, 1891).

[[30]]F. H. Knight, The Ethics of Competition (Harper & Bros.), p. 24. See also on this point K. Mannheim, Essays on the Sociology of Culture (New York, 1956), p. 35. For bibliography on the materialist interpretation of history, see W. J. Blake, Elements of Marxian Economic Theory and Its Criticism (New York, 1939), pp. 686–691. See also T. Parsons, “Some Reflections on ‘The Nature and Significance of Economics,’” Quarterly Journal of Economics, May, 1934, p. 534, n. 4.

[[31]]K. Marx, Capital (English ed.; Ch. Kerr & Co., Chicago, 1915), I, 406, n. 2. See, however, the significantly different translation of this note by E. and C. Paul (Everyman's ed.; 1930), p. 393 n.

[[32]]K. Marx, A Contribution to the Critique of Political Economy (translated by N. Stone, Chicago, 1904), pp. 10–11.

[[33]]See E. R. A. Seligman, The Economic Interpretation of History (New York: Columbia University Press, 1902), p. 43.

[[34]]See Eastman's edition of selections from Marx (Modern Library), p. 10.

[[35]]F. Engels, The Origin of the Family, Private Property, and the State (English translation, Moscow, 1940), p. 5. For another statement by Engels in virtually the same words, see Knight, Ethics and Competition, p. 24 n.

[[36]]From a letter by Engels to Der sozialistische Akademiker (1895), quoted in Seligman, The Economic Interpretation of History, pp. 58–59.

[[37]]Karl Kautsky, Die materialistische Geschichtsauffassung (Berlin, 1927), I, 3–6.

[[38]]The following references are to later writers who seem to have formulated their definitions with stress on “subsistence”: B. Hildebrand, Die Nationalökonomie der Gegenwart und Zukunft, ed. by Gehrig (Jena, 1922), p. 305: E. Sax, Das Wesen und die Aufgaben der Nationalökonomie (Vienna, 1884), p. 12; P. Leroy–Beaulieu, Précisd'économie politique (Paris, 1888), p. 1; C. Perin, Premiers principesd'économie politique (Paris, 1896), p. 2.

[[39]]Thorstein Veblen, The Theory of the Leisure Class (Modern Library, 1934), p. 24.

[[40]]T. Veblen, The Place of Science in Modern Civilization and Other Essays, (New York: Viking Press, 1919), p. 91.

[[41]]T. Veblen, “The Limitations of Marginal Utility,” Journal of Political Economy, 1909; reprinted in The Place of Science in Modern Civilization, p. 241. A list of passages in Veblen's writings in which the material–means–of–life criterion is used would include: T. Veblen, “Why Is Economics Not an Evolutionary Science?” Quarterly Journal of Economics, 1895, reprinted in The Place of Science in Modern Civilization, pp. 71, 76; T. Veblen, “Mr. Cummings' Strictures on ‘The Theory of the Leisure Class.’” Journal of Political Economy, 1899, and “The Instinct for Workmanship and the Irksomeness of Labor,” American Journal of Sociology, 1898, both reprinted in Essays in Our Changing Order (New York, 1943), pp. 27, 78, 80. It is of special interest to note that Veblen uses the phrase “material means of life” as synonymous with the object of Marx's materialism. (See his “The Socialist Economics of Karl Marx and His Followers,” Quarterly Journal of Economics, 1906, reprinted in The Place of Science in Modern Civilization, p. 415.)

[[42]]Franklin Giddings, “The Economic Ages,” Political Science Quarterly, June, 1901, p. 195. For a similar distinction between human economy and its biological analogues, see Lester F. Ward, “Psychological Basis of Social Economics,” Annals of the American Academy of Political and Social Science, 1893, pp. 464–465.

[[43]]S. Sherwood, “The Philosophical Basis of Economics,” Publications of the American Academy of Political and Social Science (October 5, 1897), p. 71.

[[44]]J. E. Cairnes, The Character and Logical Method of Political Economy (London, 1875), p. 31. (The lectures published in the book were delivered during the 1850's.)

[[45]]Cairnes, op. cit., p. 18.

[[46]]Bonamy Price, Chapters on Practical Political Economy (London, 1878), p. 19. For further references in which the wealth–focus of economics was retained, see the quotation from a speech by Robert Lowe in Cliffe Leslie, Essays in Political Economy (2nd ed.; 1888), p. 21; H. Sidgwick, The Principles of Political Economy (2d ed.; 1887), p. 12; W. F. Marriott, A Grammar of Political Economy (London, 1874), p. 1; J. N. Keynes, The Scope and Method of Political Economy (4th ed.; 1917), p. 100. Jevons and Marshall made free use of such terms as “the laws of wealth” and the “study of wealth.” W. S. Jevons, “The Future of Political Economy,” Fortnightly Review, November, 1876, reprinted in his Principles of Economics and Other Papers (London, 1905), p. 193; A. Marshall, Principles of Economics (8th ed.; London, 1920), p. 1. When Mr. Norman, a veteran member of the Political Economy Club, rose at the club dinner in 1876 to express his sentiments, he was not fighting an uphill battle when he asserted that the “real essence of Political Economy” is the explanation of wealth phenomena; Revised Report of the Proceedings at the Dinner of 31st May, 1876, held in Celebration of the Hundredth Year of the Publication of the “Wealth of Nations” (Political Economy Club: London, 1876), p. 26.

[[47]]References to writers in German who defined economics with special attention to Güter or Sachgüter include: G. v. Schönberg, “Die Volkswirtschaft,” Handbuch der politischen Oekonomie (4th ed.; Tübingcn, 1896), p. 15; K. Knies, Die politische Oekonomie vom geschichtliche Standpuncte, (Braunschweig, 1883), p. 158; C. Menger, Untersuckungen (1883), p. 232 n.; E. v. Philippovich, Über Aufgabe und Methode der politischen Ökonomie (Freiburg, 1886), pp. 20–21; E. Sax, Das Wesen und die Aufgaben der Nationalökonomie (Vienna, 1884), H. Dietzel, Ueber das Verhaltnis der Volkswirthschaftslehre zur Sozialwirthschaftslehre (Berlin, 1881), p. 9; see also Dietzel “Beitrage zur Methodik der Wirtschaftswissenschaft,” Conrads Jahrbucher, 1884, p. 18.

[[48]]See J. K. Ingram's Preface to Ely's Introduction to the Study of Political Economy (quoted by Ely in his Introduction to the enlarged edition of Ingram's A History of Political Economy [London, 1915], p. xvii); and Cliffe Leslie, “On the Philosophical Method of Political Economy,” Hermathena, 1876 (reprinted in his Essays in Political Economy, p. 189).

[[49]]Cliffe Leslie, op. cit., p. 212.

[[50]]Besides the references to Dietzel's works in note 47 above, see also his “Der Ausgangspunkt der Sozialwirtschaftslehre und ihr Grundbegriff,” Tübinger Zeitschrift, 1883; and his article “Selbstinteresse” in the Handwörterbuch der Staatswissenschaften (3rd ed.; Jena, 1911), VII, 435 ff.

[[51]]H. Dietzel, Theoretische Sozialökonomik (Leipzig, 1895), p. 182.

[[52]]R. T. Ely, The Past and the Present of Political Economy (Baltimore, 1884), p. 20.

[[53]]E. de Laveleye, “Les lois naturelles et l'objet de l'économie politique,” Journal des économistes (April, 1883), p. 92. French writers of this period stressing richesses include: Arendt, Limousin, Landry, Beauregard, Herve–Bazin, Courtois, Worms, and Levasseur.

[[54]]For an interpretation of classical economics generally as seeing the central economic problem in the struggle of man against nature, see M. Dobb, Political Economy and Capitalism, pp. 19 f.; H. Myint, Theories of Welfare Economics, pp. 2 f.

[[55]]H. Storch, Coursd'économie politique (St. Petersburg, 1815), I, ii.

[[56]]See W. E. H. Lecky, History of the Rise and Influence of the Spirit of Rationalism in Europe (1865; American ed., 1955), pp. 335 f. On the possible influence on Lecky exerted by Comte, see Hayek, Counter–Revolution of Science, p. 187.

[[57]]For passages in his writings in which the Aussenwelt is stressed, see A. Schäffle, Die Nationalökonomie oder allgemeine Wirtschaftslehre (Leipzig, 1861), pp. 2, 24; Das gesellschaftliche System der menschlichen Wirtschaft (3rd ed.; Tübingen, 1873), p. 2; “Die ethische Seite der Nationalökonomischen Lehre vom Werthe,” Gesammelte Aufsätze (Tübingen, 1885).

[[58]]On Mangoldt's and Sax's position, see E. Sax, Das Wesen und die Aufgaben der Nationalökonomie (Vienna, 1884), pp. 14–15. On Cohn's position, see Menger, Untersuchungen, p. 243. Julius Lehr in his Grundbegriffe und Grundlagen der Volkswirtschaft (Leipzig, 1893), p. 67, instead of referring to Güter, speaks of “die Dinge der Aussenwelt.”

[[59]]C. A. Tuttle, “The Fundamental Economic Principle,” Quarterly Journal of Economics, 1901, p. 218.

[[60]]On the existence of a line of subjective development in economics after the death of Ricardo, see M. Bowley, Nassau Senior and Classical Political Economy, ch. II.

[[61]]See A. Schäffle, “Mensch und Gut in der Volkswirtschaft” (1861) in his Gesammelte Aufsätze, pp. 158 ff.; Droz's very strongly held position is cited by an American economist, Stephen Colwell, in a preliminary essay to an edition of F. List's National System of Political Economy (Philadelphia, 1856), p. xxxvii; see also P. Cauwés, Précis du coursd'économie politique (Paris, 1881), p. 6.

[[62]]R. T. Ely, An Introduction to Political Economy (New York, 1889), p. 105.

[[63]]This continuity between the classical conception of economics as a science of wealth and the later emphasis on welfare gains in significance if classical economics is interpreted as “welfare analysis at the physical level” on the grounds that the classical economists implicitly assumed “that quantities of satisfaction of given wants are roughly proportional to quantities of physical products.” H. Myint, Theories of Welfare Economics, p. xii.

[[64]]E. Cannan, A History of the Theories of Production and Distribution in English Political Economy from 1776 to 1848 (3rd ed.; London, 1917), p. 312. The quoted passage first appeared in the second edition (1903).

[[65]]On the distinction between “classificatory” and “analytical” definitions of economics, see L. Robbins, Nature and Significance of Economic Science (2nd ed.), pp. 16 f.; A. L. Macfie, An Essay on Economy and Value, p. 2; L. Fraser, Economic Thought and Language, pp. 26 f.

[[66]]“Welfare was like a fluid or a gas which, although perhaps difficult to measure, was in principle measurable ... ” I. Little, A Critique of Welfare Economics (Oxford, 1950), p. 9.

[[67]]Dugald Stewart, Political Economy, ed. Hamilton (1855), I, 9. The passage was written about 1810. Cf. Bonar, Philosophy and Political Economy (London, 1922), p. 152.

[[68]]J. C. L. Simonde de Sismondi, Nouveaux principesd'économie politique (3rd ed.; Geneva, 1951), p. 66.

[[69]]See W. S. Jevons, The Principles of Economics (London: Macmillan & Co., 1905), p. 49; H. H. Powers, “Wealth and Welfare,” Publications of the American Academy of Political and Social Science (April 4, 1899), p. 16.

[[70]]Among French writers of the period who expressly condemned the objectivism of the definitions formulated in terms of richesses were: H. Dameth, Introduction à l'étude de l'économie politique (Paris, 1878), p. 89; A. Girault, “Les grandes divisions de la science économique,” Revued'économie politique, 1900, p. 796; E. Villey, Principesd'économie politique (Paris, 1894), p. 5; C. Gide, Principles of Political Economy (2nd American ed.; Boston, 1905), p. 3 n.; G. Tarde, Psychologie économique (Paris, 1902), I, 127.

[[71]]See L. Robbins, Nature and Significance, p. 4 and footnotes.

[[72]]For a more detailed discussion of Marshall's conception of the economic point of view, see below, chap. V. See also T. Parsons, “Wants and Activities in Marshall,” Quarterly Journal of Economics, November, 1931, pp. 106 ff. For a discussion of the limitations circumscribing Marshall's adoption of the welfare formulation, see also F. Fetter, “Price Economics Versus Welfare Economics,” American Economic Review, 1920, p. 721.

[[73]]E. Cannan, review of L. Robbins' Nature and Significance in Economic Journal, September, 1932, pp. 424–427.

[[74]]F. Fetter, “Price Economics Versus Welfare Economics,” American Economic Review, 1920; W. C. Mitchell, The Backward Art of Spending Money and Other Essays, p. 381.

[[75]]For an informative survey of these problems, see Streeten's Appendix to his translation of Myrdal's The Political Element in the Development of Economic Theory (1954).

[[76]]D. H. Robertson, “Utility and All What?” Economic Journal, December, 1954, reprinted in his Economic Commentaries (London: Staples Press), pp. 57–58. Robertson has coined the term “ecfare” to denote the specific area of human welfare which is of concern to the economist.

[[77]]S. Bailey, “On the Science of Political Economy,” in his Discourses on Various Subjects Read Before Literary and Philosophical Societies (London, 1852), p. 125. This essay was written about 1835.

[[78]]On the disrepute in which the “economic virtues” had been held, see, e.g., R. H. Tawney, Religion and the Rise of Capitalism (London, 1926), ch. IV.

[[79]]In his Inquiry into the Various Systems of Political Economy (translated by D. Boileau, New York, 1812), Ganilh devoted some thirty pages to a survey of classical and modern civilizations, attempting to show that in the latter the desire for wealth bears no similarity to its objectionable counterpart in the former.

[[80]]See R. Whately, Introductory Lectures on Political Economy (4th ed.; London, 1855), p. 25; M. Longfield, Lectures on Political Economy (Dublin, 1834), p. 3.

[[81]]R. Jennings, Natural Elements of Political Economy (London, 1855), p. 41.

[[82]]W. Bagehot, Works (Hartford, 1889), V, 224.

[[83]]See W. S. Jevons, The Theory of Political Economy (1871); (4th ed.; London: Macmillan & Co., 1911), p. 26; F. Y. Edgeworth, Mathematical Psychics (London, 1881), pp. 52–53.

[[84]]See W. S. Jevons, “Future of Political Economy,” reprinted in Principles of Economics and Other Papers, pp. 197–199.

[[85]]See F. A. Hayek, The Road to Serfdom (Chicago, 1956), pp. 88–89, for an interesting commentary on the possible sinister consequences of the belief that economic affairs pertain to the more sordid sides of life.

[[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.

[[13]]N. Senior, An Outline of the Science of Political Economy (George Allen & Unwin), p. 26.

[[14]]Henry George, The Science of Political Economy (New York, 1898), p. 88.

[[15]]F. Hermann, Staatswirtschaftliche Untersuchungen (2nd ed.; Munich, 1870), pp. 67–68. See especially p. 68 n., where Hermann cites from a review that he wrote in 1836 ideas closely similar to those written at the same time by Mill and Bailey.

[[16]]W. S. Jevons, The Theory of Political Economy (Macmillan & Co.), p. 23. See also the quotation from Jevons in Cliffe Leslie, Essays in Political Economy, p. 101.

[[17]]See A. Schäffle, Das gesellschaftliche System der menschlichen Wirthschaft (3rd ed.; Tübingen, 1873), I, 46, cited in C. Menger's Untersuchungen, p. 242.

[[18]]See A. Wagner, Grundlegung der politischen Oekonomie, Vol. I, Grundlagen der Volkswirtschaft (2d ed.; 1879), p. 9; and (3rd ed.; 1892), p. 81.

[[19]]See H. Dietzel, “Der Ausgangspunkt der Sozialwirtschaftslehre, und ihr Grundbegriff,” Tübinger Zeitschrift für gesamte Staatswissenschaften, 1883; H. Dietzel, Theoretische Sozialökonomik (Leipzig, 1895), p. 81;F. J. Neumann, Grundlagen der Volkswirtschaftslehre (Tübingen, 1889), pp. 4 f; see also E. V. Philippovich, Grundriss der politischen Oekonomie, Vol. I (1913), p. 2, and W. Sombart, “Die Elemente des Wirtschaftslebens,” Archiv für Sozialwissenschaft und Sozialpolitik, 1913, XXXVII, for similar expressions. For Sax's views on the usefulness of the economic principle for definition, see his Das Wesen und die Aufgaben der Nationalökonomie (Vienna, 1884), p. 12.

[[20]]It is of interest to note that Robbins has in fact used an argument almost identical with that of Dietzel to reject the material-welfare criterion towards which Dietzel was drawn. To the material-welfare economists Robbins points out the peculiar accident that generalizations valid for material-welfare activities prove to have equal applicability to other activities as well. L. Robbins, “Robertson on Utility and Scope,” Economica, May, 1953, p. 105.

[[21]]A. T. Hadley, “Economic Laws and Methods,” in Science Economic Discussion (New York, 1886), p. 93; for other United States writers of the period who discussed the economic principle, see J. B. Clark, Philosophy of Wealth (Boston, 1892), p. 57; R. T. Ely, Introduction to Political Economy (New York, 1889), pp. 58–59; E. R. A. Seligman, Principles of Economics (10th ed.; 1923), p. 4.

[[22]]F. B. Hawley, Enterprise and the Productive Process (New York, 1907), p. 73.

[[23]]H. J. Davenport, Outlines of Economic Theory (New York, 1896), p. 32.

[[24]]See, however, K. Kautsky, Die materialistische Geschichtsauffassung (Berlin, 1927), I, 3–6, for the denial of this.

[[25]]Of course, where maximization is itself expressed in terms of wealth, it leads back to the old notion of a specifically economic impulse (see, e.g., B. M. Anderson, Social Value [Cambridge, 1911], pp. 144–145).

[[26]]James S. Early, “The Growth and Breadth of Theoretical Economics,” in Economic Theory in Review, ed. C. L. Christenson (Indiana University, 1949) p. 13.

[[27]]W. Roscher, Geschichte der National-Oekonomik in Deutschland (Munich, 1874), p. 1033.

[[28]]P. Wicksteed, Common Sense of Political Economy, ed. Robbins, I, 163–165. For some later views on the subject see Z. Clark Dickinson, “The Relations of Recent Psychological Developments to Economic Theory,” Quarterly Journal of Economics, May, 1919, p. 388; see also his book Economic Motives (Harvard, 1922); T. Parsons, “The Motivation of Economic Activities,” Canadian Journal of Economics and Political Science (1940).

[[29]]Among the writers who rejected the economic principle as a means of definition of the economic point of view, see especially the discussion by Oswalt of a paper by Voigt in Verhandlungen des ersten Deutschen Soziologentages, published in Schriften der Deutschen Gesellschaft fur Soziologie, 1911, p. 270; H. Halberstaedter, Die Problematik des wirtschaftlichen Prinzips (1925), p. 76; F. Zweig, Economics and Technology (London, 1936), p. 19. Compare also P. Wicksteed, The Common Sense of Political Economy, ed. Robbins, I, 159 f.

[[30]]J. Viner, “Some Problems of Logical Method in Political Economy,” Journal of Political Economy, March, 1917, (Copyright 1917 by the University of Chicago), p. 248.

[[31]]K. E. Boulding, The Skills of the Economist (Cleveland: Howard Allen, 1958), p. 179.

[[32]]A. L. Macfie, An Essay on Economy and Value (London, 1936). For further discussion of Macfie's position, see chapter VI of this essay.

[[33]]See Professor Robbins' Introduction to his edition of Wicksteed's Common Sense, p. xxi.

[[34]]Wicksteed's “nontuism” was noted by Roche-Agussol in his Etude bibliographique des sources de la psychologie économique (1919), p. 61, n. 1. Roche-Agussol also points out the similarity of Wicksteed's “nontuism” to the ideas of Hawley (see especially “A Positive Theory of Economics,” Quarterly Journal of Economics, 1902, pp. 233 f; and his Enterprise and the Productive Process [New York, 1907].

[[35]]P. Wicksteed, Common Sense of Political Economy, ed. Robbins, p. 175.

[[36]]P. Wicksteed, “Scope and Method of Political Economy” (reprinted in op. cit., II, 782).

[[37]]P. Wicksteed, Common Sense, p. 182.

[[38]]To be compared with Wicksteed's position is that of Viner, “Some Problems of Logical Method in Political Economy,” Journal of Political Economy, March, 1917, (Copyright 1917 by the University of Chicago), p. 249: “ ... the economic transaction becomes non-moral in the sense that each party excludes the other from his moral situation.”

[[39]]N. Senior, An Outline of the Science of Political Economy (London: George Allen & Unwin, 1938), p. 28. One recalls, in connection with this analogy, Gossen's claim to qualify as the Copernicus of economics.

[[40]]M. Pantaleoni, Pure Economics (1889; English translation, London, 1898), p. 5. (The term “mathematical economics” thus had for Pantaleoni an unusual meaning, for he gave it the task of solving “the problem of inscribing in a given triangle a rectangle of maximum dimensions, or that of circumscribing a given sphere with a minimum cone.”) See also I. Little, Welfare Economics (1950), p. 21.

[[41]]See Pantaleoni, op. cit., pp. 7, 19. See also M. Pantaleoni, “An Attempt to Analyse the Concepts of ‘Strong and Weak’ in their Economic Connection,” Economic Journal, 1898.

[[42]]See B. Croce, “On the Economic Principle I,” in International Economic Papers, No. 3, p. 177.

[[43]]See J. Schumpeter, Das Wesen und der Hauptinhalt der theoretischen Nationalökonomie (Leipzig, 1908), p. 86, for the explicit view that the economist must consider the changes in “economic quantities” as if they were caused automatically, without paying attention to the human beings who may have been involved in the appearance of such changes.

[[44]]Schumpeter's outlook on economics may be related to the influence which Mach in Vienna was exerting at the time on scientific thought. For a characterization of mechanics parallel to Schumpeter's view of economics, see Ernst Mach, The Science of Mechanics (Chicago, 1919), pp. 256 f. It is to be remarked that Schumpeter was surprisingly reticent about precisely what he understood under his güter. (See op. cit., p. 80 n.) At least one of his critics seems to have understood Schumpeter to include all that is meant by “utility.” (See A. Amonn, Objekt und Grundbegriffe der theoretische Nationalökonomie, 1911, p. 129.)

[[45]]J. Schumpeter, Wesen und Hauptinhalt, pp. xvi, xvii, 47, 64.

[[46]]See, e.g., Schumpeter's paper “Über die mathematische Methode der theoretischen Okonomie,” Zeitschrift für Volkswirtschaft, Sozialpolitik, und Verwaltung, XV (1908), 30–49.

[[47]]For the similarity of Pareto's position to that of Schumpeter, see his “On the Economic Phenomenon,” in International Economic Papers, No. 3, p. 184, and his “Anwendungen der Mathematik auf Nationalökonomie,” in Encyclopädie der mathematischen Wissenschaften, 1902, pp. 1107–1108. For a recent example of the hardiness of the Schumpeter view, see Boulding, The Skills of the Economist, pp. 28–29.

[[48]]B. Croce, “On the Economic Principle II,” in International Economic Papers, No. 3, p. 197.

[[1]]T. Malthus, Definitions in Political Economy, pp. 70 f. Mill's position is in his Commerce Defended (1808), p. 22; McCulloch's, in his Principles of Political Economy (1825), part I, p. 5. Parallel to the exchangeability condition required for wealth by these writers is the requirement that items of wealth be capable of appropriation and alienation. (See, e.g., S. Read, Political Economy [Edinburgh, 1929], p. 1.] Sismondi explicitly denied that exchangeability is a prerequisite for wealth (Nouveaux principesd'économie politique [Geneva, 1951], p. 71).

[[2]]Count DeStutt de Tracy, A Treatise on Political Economy (English ed., Georgetown, 1817), “Of Action,” pp. 6, 15.

[[3]]R. Whately, Introductory Lectures on Political Economy (4th ed.; London, 1855), p. 4.

[[4]]Ibid., p. 5. See N. Senior, Outline of the Science of Political Economy, p. 25. Torrens, apparently, was in disagreement (ibid.), See also E. Cannan, Theories of Production and Distribution, 1776–1848, p. 7.

[[5]]On the existence of a Dublin “school” in economics during this period, see R. D. Black, “Trinity College, Dublin, and the Theory of Value, 1832–1863,” Economica, New Series, XII (1945), 140–148.

[[6]]The Whately professors who endorsed the catallactic view were J. A. Lawson, Five Lectures on Political Economy, delivered before the University of Dublin, 1843 (London and Dublin, 1844), pp. 12 f.; and W. N. Hancock, An Introductory Lecture on Political Economy (Dublin, 1849), p. 7. The writer who wrote under the pseudonym Patrick Plough (and was noticed by Seligman in his “On Some Neglected British Economists,” Economic Journal, 1903), bestowed on his book (London, 1842) the following title: Letters on the Rudiments of a Science, called formerly, improperly, Political Economy, recently more pertinently, Catallactics.

[[7]]Among writers who condemned the narrowness of the catallactic view were F. W. Newman, Lectures on Political Economy (London, 1851), p. 19; J. Cazenove, Thoughts on a Few Subjects of Political Economy (London, 1859), p. 70. See also W. E. Hearn, Plutology (London and Melbourne, 1864), p. 6. For later criticism of the narrowness of Whately's position, see W. Roscher, Geschichte der National-Oekonomik in Deutschland (Munich, 1874), pp. 844, 1072; P. Cauwèes, Précis du coursd'économie politique (Paris, 1881), p. 7; P. Leroy-Beaulieu, Traité théorique et pratiqued'économie politique (Paris, 1896), I, 16.

[[8]]H. D. Macleod, The Elements of Political Economy (London, 1858), p. 5. Macleod stresses his independent arrival at the catallactic position. In his notion of exchange Macleod is narrower than some of his precursors. Thus he dismisses taxation from political economy on the grounds that it is not the subject of exchange. Whately expressly considered taxation as exchange (Introductory Lectures, p. 7 n.). Senior too (Outline of the Science of Political Economy, p. 87) viewed “all that is received by the officers of Government as given in Exchange for Services. ... ” In his History of Economics, published some forty years later, Macleod carefully collected favorable references to his own work by later writers and cites the American Perry, about whom more below.

[[9]]J. A. Lawson, Five Lectures on Political Economy, pp. 12–13.

[[10]]A. Smith, Wealth of Nations, ed. Cannan (Modern Library edition), p. 13.

[[11]]See J. A. Lawson, op. cit., p. 26. (A similar ambivalence seems visible also in Plough's work cited above, n. 6.)

[[12]]A. L. Perry, Elements of Political Economy (14th ed.; New York, 1877), pp. 1, 54.

[[13]]F. A. Walker, Political Economy (New York, 1883), p. 3. Henry George's criticism is in his The Science of Political Economy (New York, 1898), p. 130.

[[14]]Albert S. Bolles, Political Economy (New York, 1878), p. 3.

[[15]]Franklin H. Giddings, “The Sociological Character of Political Economy,” read at the second annual meeting of the association; published in the association's Publications, III (1889), 43. It is of some interest that Giddings, who here castigates the “absurdity” of the Perry position, has elsewhere (Essays in Honor of J. B. Clark, 1927) gratefully cited Perry's book as having been his own first textbook in economics.

[[16]]See, e.g., A. Amonn, Objekt und Grundbegriffe der theoretische Nationalökonomie (2nd ed.), pp. 160 f., for Max Weber's position; Felix Kaufmann, “On the Subject Matter and Method of Economic Science,” Economica, November, 1933, pp. 384 f; H. Halberstaedter, Die Problematik des wirtschaftlichen Prinzips (1925), p. 76. Schumpeter's position is discussed later in this chapter.

[[17]]A. L. Perry, An Introduction to Political Economy (New York, 1877), p. 12.

[[18]]P. Wicksteed, “The Scope and Method of Political Economy,” Economic Journal, March, 1914, reprinted in Common Sense of Political Economy, II, 781.

[[19]]See S. Newcomb, Principles of Political Economy (New York, 1886), p. 6; F. B. Hawley, “A Positive Theory of Economics,” Quarterly Journal of Economics, 1902, pp. 233 f.

[[20]]A. Marshall, The Present Position of Political Economy (London, 1885), pp. 22–25.

[[21]]See especially G. Tarde, Psychologie économique (Paris, 1902), pp. 151 f., for the use of this aspect of exchange to distinguish between economics and politics. On Weber's position, see above, n. 16; see also shils and Finch, eds., Max Weber on the Methodology of the Social Sciences (Glencoe, 1949), p. 63; M. Weber, Gesammelte Aufsätze zur Wissenschaftslehre (Tübingen, 1922), pp. 365–366.

[[22]]Schumpeter's definition of economics in terms of exchange was set forth in his Das Wesen und der Hauptinhalt der theoretische Nationalökonomie (Leipzig, 1908); see especially pp. 55, 582. For Schumpeter's maturer view of exchange, see his History of Economic Analysis (1954), p. 911. For what seems to be a change in Schumpeter's appraisal of Whately's stress on catallactics, see Wesen und Hauptinhalt, p. 50 n., and History of Economic Analysis, p. 536 n.

[[23]]See A. Amonn, Objekt und Grundbegriffe der theoretischen Nationalökonomie (1st ed., 1911), p. 128; L. Robbins, Nature and Significance of Economic Science (2nd ed.), p. 21 n.

[[24]]E. R. A. Seligman, “Social Elements in the Theory of Value,” Quarterly Journal of Economics, May, 1901, p. 327. See also L. Mises, Socialism (English ed., London: Jonathan Cape, 1936), pp. 114, 117.

[[25]]J. A. Schumpeter, Wesen und Hauptinhalt, p. 53.

[[26]]Op. cit., p. 49.

[[27]]Carl E. Parry, “A Revaluation of Traditional Economic Theory,” American Economic Review (Supplement, 1921), p. 125.

[[28]]“If economic theory is interpreted as a critique of the competitive system of organization, its first and most general problem is that of determining whether the fundamental tendencies of free contractual relations under competitive control lead to the maximum production of value as measured in price terms.” (F. H. Knight, “Fallacies in the Interpretation of Social Cost,” Quarterly Journal of Economics, 1924, reprinted in The Ethics of Competition, p. 218.)

[[29]]J. E. Cairnes, “Bastiat,” reprinted in his Essays in Political Economy (London, 1873), pp. 312 f.

[[30]]F. Bastiat, Harmonies économiques (8th ed.; Paris, 1881), pp. 25–28.

[[31]]R. G. Hawtrey, The Economic Problem (London: Longmans, Green & Co., 1925), p. 3.

[[32]]F. A. v. Hayek, “The Trend of Economic Thinking,” Economica, May, 1933, pp. 130–131. For similar passages stressing the economic organization for the purposes of definition, see R. T. Bye, “The Scope and Definition of Economics,” Journal of Political Economy, October, 1939, p. 626; K. E. Boulding, The Skills of the Economist (Cleveland, 1958), p. 8. See also F. Oppenheimer, “Alfred Amonn's ‘Objekt und Grundbegriffe,’” Weltwirtschaftliches Archiv. Bd. 27 (1928), I, Literatur, p. 170.

[[33]]For samples of the literature on this point, see C. Menger's Untersuchungen (Appendix I, “Ueber das Wesen der Volkswirthschaft”); G. Schmoller, “Die Volkswirtschaft, die Volkswirtschaftslehre, und ihre Methode” (1893), reprinted in his Über einige Grundfragen der Sozialpolitik und der Volkswirtschaftslehre (Leipzig, 1898).

[[34]]For one example of German influence in this regard, see Ely's approving reference to the definition of economics as the “science of national housekeeping,” an idea which he relates to that of a “Volkswirthschaft” (Introduction to Political Economy [New York, 1889], p. 95).

[[35]]See G. Schmoller, Über einige Grundfragen, p. 217.

[[36]]See G. Schmoller, Grundriss der allgemeinen Volkswirtschaftslehre (11th and 12th ed.; 1919), I, 1.

[[37]]W. Roscher, System der Volkswirtschaft, I (Berlin, 1906), 42.

[[38]]F. Kleinwachter, “Wesen, Aufgabe und System der Nationalökonemie,” Conrads Jahrbucher (1889), p. 639.

[[39]]See especially A. Amonn, Objekt und Grundbegriffe (2nd ed.), pp. 153 f.

[[40]]See especially the article by Oppenheimer cited above, n. 32.

[[41]]See, e.g., D. Raymond, The Elements of Political Economy (2nd ed.; Baltimore, 1823), p. 35; Patrick Plough (pseud.), Letters on the Rudiments of ... Catallactics, p. 4; R. Whately, Introductory Lectures, pp. 16, 33 f.

[[42]]On this see T. Suranyi-Unger, Economics in the Twentieth Century (English ed., New York, 1931), p. 78. See also the next section in this chapter.

[[43]]For J. S. Mill's emphasis on the social character of economic affairs, see his Essays on Some Unsettled Questions of Political Economy, pp. 133, 135, 137, 140. Amonn, in his sharply critical review of Mill's position (Objekt und Grundbegriffe, 1st ed., pp. 35–36), does not seem to take notice of these passages. Gehrig (in an essay introducing his 1922 edition of Hildebrand's Die Nationalökonomie der Gegenwart und Zukunft, p. 1x), ascribes it to the credit of the “new” economists to have first recognized the social character of their discipline.

[[44]]See Comte's Cours de philosophie positive (2nd ed., 1864), IV, 194 f.; see also the works cited above, ch. I, n. 24.

[[45]]On this see above, ch. II, n. 48. Compare Parsons' view that Marshall's conception of economics turned it into an “encyclopedic sociology,” so that any separate identity of economic theory as a discipline is destroyed. (See, e.g., T. Parsons, The Structure of Social Action [Glencoe, 1949], p. 173.)

[[46]]See, e.g., A. Amonn, Objekt und Grundbegriffe (1st ed.), p. 154 n.

[[47]]It comes as not altogether a shock to discover at least one writer who advanced a view precisely opposed to that of Amonn. A. Schor (in his dissertation Die rein ökonomische Kategorie in der Wirtschaft [Königsberg, 1903]) can find the purely economic aspect of affairs only by abstracting completely from the social element.

[[48]]R. T. Bye, “The Scope and Definition of Economics,” Journal of Political Economy, October, 1939, p. 625; J. F. Hayford, “The Relation of Engineering to Economics,” Journal of Political Economy, January, 1917, p. 59.

[[49]]See above n. 42. See also B. M. Anderson, Social Value (Cambridge, 1911); L. H. Haney, “The Social Point of View in Economics,” Quarterly Journal of Economics, 1913; T. Parsons, “Some Reflections on ‘The Nature and Significance of Economics,’” Quarterly Journal of Economics, May, 1934, pp. 518 f.; Alec L. Macfie, Economic Efficiency and Social Welfare (London, 1943). The justification for what might seem the perfunctory treatment of the matters touched on in this paragraph must be that, important as they are in other connections, they have far less relevance—and that of a chiefly negative character—for our own discussion.

[[50]]On this, see Talcott Parsons and Neil J. Smelser, Economy and Society (Glencoe, 1956), p. 6.

[[51]]Ibid., Parsons and Smelser ascribe the original suggestion to Professor W. W. Rostow. See also P. A. Sorokin, Society, Culture and Personality (New York, 1947), pp. 7 f.

[[1]]See, e.g., E. Cannan, A History of the Theories of Production and Distribution in English Political Economy from 1776–1848, ch. I.

[[2]]J. Dupuit, “On the Measurement of Utility of Public Works” (translated in International Economic Papers, No. 2, p. 89).

[[3]]W. Bagehot, Works (Hartford, 1889), V, 324.

[[4]]R. Lowe, “Recent Attacks on Political Economy,” Nineteenth Century, November, 1878, p. 864.

[[5]]For passages in which Bagehot consistently refers to economics as the “science of business,” see his Works (Hartford, 1889), III, 269; V, 243, 259, 324. See III, 44 for a passage in which Bagehot writes of Cairnes that he defined “the exact sort of science which political economy is” better than any previous writer.

[[6]]The use of money as the criterion for defining the nature of economic activity, on the grounds that human action directed towards consumer goods is first channeled into a search for general purchasing power in the form of money, bears a close similarity to a distinction used later by Robbins and Hayek. In the following chapter we shall notice the identification by these writers of the economic motive with the desire for general opportunity, the ability to achieve unspecified ends. On this point see also L. Robbins, Nature and Significance (2nd ed.), pp. 30–31.

[[7]]For examples of writers who have fairly recently sought for a defining criterion in this division between man's money-getting actions and his other actions, see K. Rivett, “The Definition of Economics,” Economic Record, November, 1955, pp. 221, 229; E. Heimann, “Comparative Economic Systems,” in Goals of Economic Life, ed. A. D. Ward (New York, 1953), pp. 122 f.

[[8]]Parsons has minimized the importance to Marshall of his criterion of measurability (Structure of Social Action, p. 134). Robbins consistently associates the criterion of money as a measuring rod with Pigou rather than with Marshall. See also J. N. Tewari, “What Is Economics?” Indian Journal of Economics, April, 1947, for a similar implication of a difference between Marshall and Pigou with regard to the idea of money as a measuring rod.

[[9]]A. Marshall, The Present Position of Economics (London, 1885). Passages from this lecture appear again in the Principles; in particular, several passages having reference to this chapter reappear verbatim in Appendix D (in the 8th edition).

[[10]]A. Marshall, Principles of Economics (8th ed.; Macmillan & Co.), p. 1.

[[11]]A. Marshall, The Present Position of Economics, pp. 22 f.

[[12]]Ibid., p. 28.

[[13]]Ibid., pp. 22–25.

[[14]]Ibid., p. 29.

[[15]]Ibid., p. 31.

[[16]]A. Marshall, Principles, p. 38. Similar passages are to be found on pp. 15, 27, 57.

[[17]]A. C. Pigou, Wealth and Welfare (London: Macmillan & Co., 1912), p. 3.

[[18]]Ibid., p. 8. See also Pigou's inaugural Cambridge lecture, published as Economic Science in Relation to Practice (London, 1908).

[[19]]A. C. Pigou, The Economics of Welfare (4th ed.; London: Macmillan & Co., 1932), p. 11.

[[20]]See G. Tarde, Psychologie économique (Paris, 1902), p. 77.

[[21]]B. Croce, “On the Economic Principle II,” in International Economic Papers, No. 3, p. 197.

[[22]]A. Marshall, The Present Position of Economics, p. 27.

[[23]]See the article by L. Mises in Studium Generale, VI, No. 2, 1953.

[[24]]F. H. Knight, “The Nature of Economic Science in Some Recent Discussion,” American Economic Review, June, 1934, p. 236.

[[25]]S. Pattern, “The Scope of Political Economy,” reprinted in S. Patten, Essays in Economic Theory, ed. R. Tugwell (New York: Alfred Knopf, 1924), p. 192.

[[26]]Ibid., p. 185.

[[27]]Ibid. For other passages on economics and measurable motives, see O. R. Trowbridge, Bisocialism (1903), p. 106; R. Scoon, “Professor Robbins' Definition of Economics,” Journal of Political Economy, August, 1943, p. 321.

[[28]]On the possibility of infinite utility, see P. H. Wicksteed, “On Certain Passages in Jevons' Theory of Political Economy,“ Quarterly Journal of Economics, 1889, reprinted in Common Sense, II, 736.

[[29]]L. Mises, Socialism (London: Jonathan Cape, 1936), p. 116.

[[30]]Writers who have criticized the criterion of money as a measuring rod include J. A. Hobson, Free Thought in the Social Sciences (New York, 1926), pp. 97 f.; R. G. Hawtrey, The Economic Problem (London, 1925), p. 184; F. A. Fetter, “Price Economics Versus Welfare Economics,” American Economic Review, 1920, pp. 721, 736; A. L. Macfie, An Essay on Economy and Value (London, 1936), pp. 72–73.

[[31]]See, e.g., V. Pareto, “On the Economic Phenomenon,” International Economic Papers, No. 3, p. 190; H. J. Davenport, “Fetter's ‘Economic Principles,’” Journal of Political Economy, March, 1916; W. Mitchell, The Backward Art of Spending Money, pp. 232–233, 256–257; J. Viner, “The Utility Concept in Value Theory and Its Critics,” Journal of Political Economy, 1925, p. 659.

[[32]]At least one writer explicitly identified the position of the “priceeconomists” as the “catallactic point of view” (Carl Parry, “A Revaluation of Traditional Economic Theory,” American Economic Review [Supplement, 1921], p. 123.)

[[33]]For a discussion of the restriction of price-economics to monetary phenomena see F. A. Fetter, “Davenport's Competitive Economics,” Journal of Political Economy, June, 1914, pp. 554 ff.

[[34]]See above, ch. I, n. 4.

[[35]]L. Mises, Nation, Staat and Wirtschaft (1919), p. 133. See also L. Mises, Human Action (1949), p. 232 on the same point.

[[36]]W. C. Mitchell, “The Role of Money in Economic Theory,” American Economic Review (Supplement, 1916), reprinted in The Backward Art of Spending Money, p. 171.

[[37]]The Backward Art of Spending Money, pp. 256–257.

[[38]]W. C. Mitchell, “Thorstein Veblen,” in The Backward Art of Spending Money, pp. 304–305.

[[39]]Op. cit., p. 256.

[[40]]C. H. Cooley, especially, expanded on the pecuniary influences on society in a number of papers in the second decade of this century. See also A. A. Young, “Some Limitations of the Value Concept,” Quarterly Journal of Economics, May, 1911, p. 415.

[[41]]L. Robbins, “Live and Dead Issues in the Methodology of Economics,” Economica, August, 1938, p. 344.

[[1]]L. Robbins, The Nature and Significance of Economic Science (2nd ed.; Macmillan & Co.), p. 16.

[[2]]Ibid., pp. 12–14.

[[3]]L. Robbins, The Economic Causes of War (London: Jonathan Cape, 1939), pp. 117–118. This point is discussed further in a later section of this chapter.

[[4]]Earl of Lauderdale, Inquiry into the Nature and Origin of Public Wealth (Edinburgh, 1804), pp. 56–57.

[[5]]See, e.g., N. Senior, An Outline of the Science of Political Economy, pp. 14 f.

[[6]]On this point see Hayek's essay “Carl Menger,” Economica, 1934, printed as the Introduction to the edition of Menger's Collected Works of the London School of Economics, p. xiii. See also Knight's critical comment on this in his Introduction to the English edition of Menger's Grundsätze (Glencoe, 1950), p. 13, n. 5.

[[7]]C. Menger, Principles of Economics (trans. Dingwall and Hoselitz, Glencoe, 1950), p. 96.

[[8]]H. Dietzel, Theoretische Sozialökonomik, p. 160.

[[9]]See A. Schäffle, Das gasellschaftliche System der menschlichen Wirthschaft (Tubingen, 1873), p. 2; G. Cohn, Grundlegung der Nationalökonomie (Stuttgart, 1885), p. 4 (see, however, an earlier passage by Cohn cited in Menger's Untersuchungen, p. 254).

[[10]]F. J. Neumann, Grundlagen der Volkswirtschaftslehre (Tübingen, 1889), p. 16.

[[11]]L. Haney, History of Economic Thought (New York: Macmillan & Co., 1949), p. 600; see also K. Wicksell, Lectures on Political Economy (London, 1934), I. 32, for the same point.

[[12]]For these references to precursors of Robbins' definition, see Nature and Significance, pp. 15, 16; L. Robbins, “Live and Dead Issues in the Methodology of Economics,” Economica, August, 1938, p. 344; A. Lowe, Economics and Sociology (London, 1935), p. 42; A. Emery, “The Totalitarian Economics of Othmar Spann,” Journal of Social Philosophy, April, 1936, pp. 270–271; F. Oppenheimer, “Alfred Amonn's ‘Objekt und Grundbegriffe,’” Weltwirtschaftliches Archiv, Bd. 27 (1928), I, 174–175. A. Voigt, “Die Unterscheidung von Wirtschaft und Technik, Erwiderung,” Zeitschrift fur Sozialwissenschaft, 1915, p. 395; Shils and Finch, eds., Max Weber on the Methodology of the Social Sciences (Glencoe: Free Press, 1949), pp. 63 f.; Gesammelte Aufsatze zur Wissenschaftslehre von Max Weber (Tübingen, 1922), p. 365. See, however, Weber's comment on Voigt's position, in Verhandlung des ersten Deutschen Soziologentages (Schriften der Deutschen Gesellschaft für Soziologie, 1911), pp. 265 f.

[[13]]See D. H. MacGregor, Economic Thought and Policy (London, 1949), pp. 1–6; see also O. F. Boucke, A Critique of Economics (New York, 1922), p. 249.

[[14]]See H. Myint, Theories of Welfare Economics (Harvard, 1948), pp. 2 f., for a discussion of the position of the classical economists towards the scarcity view of economics.

[[15]]L. Robbins, Nature and Significance, p. 15 n.; for examples of writers who seem to view the act of economizing as being essentially identical with that of maximizing, see F. H. Knight, “The Nature of Economic Science in Some Recent Discussion,” American Economic Review, June, 1934, p. 228; F. Machlup, “Marginal Analysis and Empirical Research,” American Economic Review, September, 1946, p. 519.

[[16]]L. Robbins, Nature and Significance, pp. 16–17; see also Robbins' Introduction to his edition of Wicksteed's Common Sense of Political Economy, p. xxii.

[[17]]Among the writers who have hailed Robbins' stress on the concern of economics with an aspect of action are A. L. Macfie, An Essay on Economy and Value, pp. 2–6; G. Tagliacozzo, “Croce and the Nature of Economic Science,” Quarterly Journal of Economics, May, 1945, pp. 308 f; W. H. Hutt, Economists and the Public (London, 1936), pp. 308–309.

[[18]]L. M. Fraser, Economic Thought and Language, p. 32.

[[19]]These writers include E. Heimann, “Comparative Economic Systems,” in Goals of Economic Life, ed. by A. D. Ward (New York, 1953), p. 122; J. S. Early, “The Growth and Breadth of Theoretical Economics,” in Economic Theory in Review, ed. by C. L. Christenson (1949), pp. 12–13; see also S. Schoeffler, The Failures of Economics: a Diagnostic Study (Harvard, 1955), pp. 11 f.

[[20]]For examples see B. Higgins, What Do Economists Know? (Melbourne, 1951), pp. 2–3; L. M. Fraser, Economic Thought and Language, p. 32; L. Robbins, Nature and Significance, p. 22. See also G. J. Stigler, The Theory of Price (revised ed., 1952), p. 1 n.

[[21]]Nature and Significance, pp. 19 f.

[[22]]R. W. Souter, “The Nature and Significance of Economic Science' in Recent Discussion,” Quarterly Journal of Economics, May, 1933, p. 384.

[[23]]Ibid., p. 386.

[[24]]Ibid., p. 399.

[[25]]Ibid., p. 390.

[[26]]Ibid., p. 395 n.

[[27]]Ibid., p. 400.

[[28]]T. Parsons, “Some Reflections on ‘The Nature and Significance of Economics,’” Quarterly Journal of Economics, May, 1934, pp. 536–537, 530–531.

[[29]]J. S. Early, “The Growth and Breadth of Theoretical Economics,” in Economic Theory in Review, p. 13.

[[30]]On these matters see G. Myrdal, Value in Social Theory (London, 1958), pp. 206 ff. See also the Introduction by P. Streeten, pp. xxi f.

[[31]]R. W. Souter, op. cit., p. 379; T. Parsons, op. cit., pp. 513–516; A. L. Macfie, An Essay on Economy and Value, p. 16; see also F. H. Knight's review of Robbins' Nature and Significance in the International Journal of Ethics, April, 1934, p. 359.

[[32]]T. Parsons, op. cit., pp. 514 f.

[[33]]For Robbins' views on the purposive element in economic activity, see Nature and Significance, p. 93.

[[34]]F. Kaufmann, “On the Subject Matter and Method of Economic Science,” Economica, November, 1933, p. 383.

[[35]]See F. Zweig, Economics and Technology (London, 1936), p. 20.

[[36]]T. Parsons, op. cit., pp. 523 f.

[[37]]Cited in L. Robbins, Nature and Significance, p. 35. See also E. Fossati, The Theory of General Static Equilibrium, ed. G. L. Shackle (1957), p. 9.

[[38]]K. Rivett, “The Definition of Economics,” Economic Record, Vol. XXXI, No. 61 (November, 1955), pp. 217–219.

[[39]]G. Tagliacozzo, “Croce and the Nature of Economic Science,” Quarterly Journal of Economics, May, 1945.

[[40]]Cf. Parsons, The Structure of Social Action, ch. IV, for a discussion of the degree in which Marshall refused to consider wants as data for economics.

[[41]]On this see, e.g., F. H. Knight, “Professor Parsons on Economic Motivation,” Canadian Journal of Economics and Political Science, 1940, p. 464.

[[42]]The fact that means as well as ends are data for the economist is made clear by a number of writers; see A. Lowe, Economics and Sociology, p. 43: F. H. Knight, “The Nature of Economic Science in Some Recent Discussion,” American Economic Review, 1934, p. 229. Among the writers apparently not admitting this, see W. C. Mitchell, Backward Art of Spending Money, p. 224.

[[43]]Max Weber, The Theory of Social and Economic Organization (translated by A. M. Henderson and T. Parsons, New York, 1947), pp. 162, 209. For passages in which Weber discusses the distinction between economics and technology, see Shils and Finch, eds., Max Weber on the Methodology of the Social Sciences (Glencoe: Free Press, 1949). pp. 34–35; and “R. Stammler's ‘Ueberwindung’ der materialistischen Geschichtsauffassung,” Archiv fur Sozialwissenschaft und Sozialpolitik, 1907, reprinted in Gesammelte Aufsatze zur Wissenschaftslehre von Max Weber, p. 328.

[[44]]See, e.g., F. Zweig, Economics and Technology (London, 1936), pp. 20 f.

[[45]]For an example of the use of this kind of distinction, see Dorfman, Samuelson, and Solow, Linear Programming and Economic Analysis (1958), p. 202.

[[46]]F. H. Knight, “The Nature of Economic Science in Recent Discussion,” American Economic Review, June, 1934, p. 228; see also Knight's review of Robbins' Nature and Significance in the International Journal of Ethics, April, 1934, p. 359; and his “Professor Parsons on Economic Motivation,” Canadian Journal of Economics and Political Science, 1940, p. 463.

[[47]]See especially T. Parsons, Quarterly Journal of Economics, May, 1934, pp. 516–518.

[[48]]F. Hayek, The Road to Serfdom (University of Chicago Press, copyright 1956 by the University of Chicago), p. 89, and footnote. See also above, ch. V, n. 6.

[[49]]P. Plough (pseud.), Letters on the Rudiments of ... Catallactics (London, 1842), p. 15.

[[50]]For such criticism see K. Rivett, “The Definition of Economics,” Economic Record, November, 1955, pp. 227 f.

[[51]]G. Myrdal, Value in Social Theory (London: Routledge & Kegan Paul, 1958), p. 237; see also Myrdal's Political Element in the Development of Economic Theory.

[[52]]J. A. Schumpeter, History of Economic Analysis (1954), p. 805.

[[53]]Nature and Significance, pp. 147 ff.

[[54]]For the claim to have discovered an inconsistency in Robbins' position on this point, see L. M. Fraser, “How Do We Want Economists to Behave?” Economic Journal, December, 1932, p. 557 n.; A. L. Macfie, An Essay on Economy and Value, p. 27.

[[55]]L. Robbins, “Mr. Hawtrey on the Scope of Economics,” Economica, 1927, p. 174.

[[56]]On Knight's position in the positive-normative controversy, see his article: “Professor Parsons on Economic Motivation,” Canadian Journal of Economics and Political Science (1940), p. 461; see, however, below n. 65.

[[57]]R. Souter, Quarterly Journal of Economics, May, 1933, pp. 402 ff.

[[58]]Cf. T. W. Hutchison, Significance and Basic Postulates of Economic Theory (London, 1938), pp. 153–155.

[[59]]See T. Parsons, Quarterly Journal of Economics, May, 1934, p. 520.

[[60]]A. L. Macfie, An Essay on Economy and Value (Macmillan & Co.), p. 69.

[[61]]Ibid., pp. vii-viii. See also Macfie's article “What Kind of Experience Is Economizing?” Ethics, 1949, pp. 19 ff.

[[62]]See also the discussion concerning Macfie's position above in ch. III of this essay.

[[63]]A. L. Macfie, Economy and Value, p. 34.

[[64]]Ibid., pp. 69–70.

[[65]]See Knight's preface to Macfie, Economic Efficiency and Social Welfare (London, 1943), p. v; see also F. H. Knight, “‘What Is Truth’ in Economics?” Journal of Political Economy, February, 1940, reprinted in his On the History and Method of Economics (Chicago, 1956), p. 172; F. Kaufmann, “On the Postulates of Economic Theory,” Social Research, September, 1942, p. 393.

[[66]]T. Veblen, Theory of the Leisure Class (Modern Library, 1934), p. 15.

[[67]]T. Veblen, Essays in Our Changing Order (New York: Viking Press, 1943), pp. 80–81; see also R. B. Perry, “Economic Value and Moral Value,” Quarterly Journal of Economics, May, 1916, pp. 444 f.

[[68]]R. T. Bye, “The Scope and Definition of Economics,” Journal of Political Economy, October, 1939 (Copyright 1939 by the University of Chicago), p. 645.

[[69]]T. Scitovsky, Welfare and Competition (London, 1952), p. 9.

[[70]]R. T. Bye, op. cit., p. 646.

[[71]]B. Wootton, Lament for Economics (New York, 1938), p. 106.

[[72]]See Wootton, op. cit., p. 96; cf. also T. W. Hutchison, Significance and Basic Postulates, p. 135.

[[73]]K. Rivett, “The Definition of Economics,” Economic Record, Vol. XXXI, No. 61 (November, 1955), p. 217.

[[1]]On the term “praxeology,” see A. Espinas, “Les origines de la technologie,” Revue philosophique de la France et de l'étranger, 15th Year, July-December, 1890; L. Mises, Human Action (1949), p. 3; F. A. Hayek, The Counter-Revolution of Science, p. 209, note 20.

[[2]]For such early glimpses of the possibility of a science of human action, see H. Storch, Coursd'économie politique (St. Petersburg, 1815), I, ii; R. Jennings, Natural Elements of Political Economy (London, 1855), p. 41, where political economy is described as “a science of human actions”; W. E. Hearn, Plutology: or the Theory of the Efforts to Satisfy Human Wants (London and Melbourne, 1864).

[[3]]Sidney Sherwood, “The Philosophical Basis of Economics, A Word to Sociologists,” Publications of the American Academy of Political and Social Science, October 5, 1897.

[[4]]See further above, ch. II, in the section entitled “The Science of Subsistence.”

[[5]]See, however, T. Parsons, “Economics and Sociology: Marshall in Relation to the Thought of His Time,” Quarterly Journal of Economics, February, 1932, p. 340, for the emphasis on that aspect of Pareto's thinking which cuts him off from economic behaviorism.

[[6]]See International Economic Papers, No. 3, pp. 190, 204.

[[7]]For a similar charge of implicit metaphysical bias in the position of those denying the concept of human action, see L. Mises, Theory and History (Yale, 1957), pp. 3 f.

[[8]]The writings of R. G. Collingwood reveal some similarity to Croce's views. See, e.g., his “Human Nature and Human History,” Proceedings of the British Academy, Vol. XXII (1936): “The self-knowledge of reason is not an accident; it belongs to its essence.” See also his “Economics as a Philosophical Science,” Ethics, Vol. XXXVI (1926).

[[9]]B. Croce, Philosophy of the Practical (English ed.; London: Macmillan & Co., 1913), pp. 365–371. For a brief exposition of the position which Croce's views on economy occupy within his complete system of philosophy, see G. Tagliacozzo, “Croce and the Nature of Economic Science,” Quarterly Journal of Economics, May, 1945.

[[10]]M. Weber, “Die Objektivitat sozialwissenschaftlicher und sozialpolitischer Erkenntnis,” Archiv fur Sozialwissenschaft und Sozialpolitik, 1904; translated in Shils and Finch, eds., Max Weber on the Methodology of the Social Sciences (Glencoe: Free Press, 1949), p. 83.

[[11]]See, e.g., M. Weber, “Die Grenznutzlehre und das ‘psychophysische’ Grundgesetz,” Archiv fur Sozialwissenschaft und Sozialpolitik, 1908; reprinted in Gesammelte Aufsatze zur Wissenschaftslehre von Max Weber (Tübingen, 1922), pp. 364–365.

[[12]]For criticism of Weber's conception of economics, see L. Mises, “Soziologie und Geschichte, Epilog zum Methodenstreit in der Nationalökonomie,” Archiv fur Sozialwissenschaft und Sozialpolitik, 1929, pp. 465 ff. See further T. Parsons, The Structure of Social Action, ch. XVI, and Essays in Sociological Theory, Pure and Applied (Glencoe, 1949), pp. 67–147.

[[13]]Cf. F. A. Hayek, The Counter-Revolution of Science, p. 209, n. 24.

[[14]]See also L. Mises, Socialism (English ed.; London, 1936), pp. 111 ff.; L. Mises, “Vom Weg der subjektivistichen Wertlehre,” Schriften des Vereins fur Sozialpolitik, 183/1, pp. 76–93; L. Mises, “Begreifen und Verstehen,” Schmollers Jahrbuch, 1930.

[[15]]See, e.g., L. Robbins, Nature and Significance (1930); also his “Live and Dead Issues in the Methodology of Economics,” Economica, August, 1938; F. Kaufmann, Methodology of the Social Sciences (English ed.; New York, 1944), ch. XVI; M. Bowley, Nassau Senior and Classical Political Economy (1937), p. 64; T. W. Hutchison, The Significance and Basic Postulates of Economic Theory (1938); O. Morgenstern, The Limits of Economics (English ed.; 1937), p. 154.

[[16]]See, e.g., L. M. Lachmann, “The Science of Human Action,” Economica, November, 1951, p. 413.

[[17]]See, e.g., G. H. Schmidt, “Rapports de l'économie politique avec la morale et le droit,” Revued'économie politique, 1900, p. 334; G. Trade, Psychologie économique (Paris, 1902), p. 151.

[[18]]On the use of teleology for the recognition of causation as running from the future back to the present, see W. C. Mitchell, “Commons on Institutional Economics,” American Economic Review, December, 1935, reprinted in The Backward Art of Spending Money, p. 334; Z. C. Dickinson, “The Relations of Recent Psychological Developments to Economic Theory,” Quarterly Journal of Economics, May, 1919, p. 388; see also the reference to Weber's writing above in note 10. Cf., however, M. J. Plotnick, Werner Sombart and His Type of Economics (New York, 1937), pp. 88–89.

[[19]]K. Engliš, Grundlagen des wirtschaftlichen Denkens (Brunn, 1925).

[[20]]See J. N. Tewari, “What Is Economics?” Indian Journal of Economics, April, 1947, pp. 421 ff., for the identification of rationality with purposefulness.

[[21]]For an example of this kind of criticism, see J. Robinson, Economics Is a Serious Subject (Cambridge, 1932), p. 10.

[[22]]For this type of objection, see L. M. Fraser, Economic Thought and Language, p. 37 n.; T. W. Hutchison, Significance and Basic Postulates of Economic Theory, pp. 115 ff.

[[23]]Croce's characterization of the action of a man yielding to temptation as placing himself in contradiction to himself finds a recent echo in a passage in Little's Critique of Welfare Economics, p. 23. Little makes it clear that what is meant by a man's maximization of his utility is simply his behaving in the way in which he said he would behave. “Roughly speaking, maximizing utility means telling the truth.”

[[24]]International Economic Papers, No. 3, p. 201. For an appraisal of Croce's position, see A. L. Macfie, An Essay on Economy and Value, Appendix B, pp. 143 ff.

[[25]]International Economic Papers, No. 3, p. 177.

[[26]]Professor Mises has not recognized the close similarity to his own position which is evidenced in Croce's writing (see L. Mises, Theory and History, p. 308). What appears to be the principal point of difference between their positions has little relevance to the conception of the character of economic science. Both writers emphasize the rationality of all human action; both recognize that a chosen program may fail to be adhered to either because of a technical error (an error of knowledge) or because of the choice of a new program of ends with respect to which action will be “rational.” Where the two writers disagree is that the discarding of a chosen program in favor of one chosen in response to a “temptation of the moment” is, for Croce, itself a special kind of error—an economic error, an error of will. For Mises, there is room for only one kind of error, an error of knowledge (see Theory and History, p. 268). The conscious abandonment of a chosen program under the influence of a fleeting temptation is considered “positively” as merely the adoption of a new set of ends instead of the old, and that is all.

[[27]]G. Tagliacozzo, “Croce and the Nature of Economic Science,” Quarterly Journal of Economics, May, 1945, pp. 319–320.

[[28]]Especially relevant to the considerations of this section are Mises' strictures on Weber's “ideal type” of rational economic behavior. See above, note 10.

[[29]]The proposition that the notion of purpose implies a constraint that one select the most suitable means for the fulfilment of the purpose is not a proposition about that purpose. The proposition as such cannot, for example, be “explained” (as Macfie does) by the postulation of a moral urge to fulfil one's purposes. Rather, the proposition, on the praxeological view, sets forth the nature of purpose itself. The statement that man's actions are purposeful is thus only another way of saying that man feels constrained to match means to ends.

[[30]]F. H. Knight, “Professor Parsons on Economic Motivation,” Canadian Journal of Economics and Political Science, 1940, p. 463. In this connection it is of interest to notice that the position of economic science in the face of changing hierarchies of chosen programs has been set forth with exceptional clarity by F. S. C. Northrop in his article “The Impossibility of a Theoretical Science of Economic Dynamics,” Quarterly Journal of Economics, November, 1941, reprinted as ch. XIII in his The Logic of the Sciences and the Humanities (New York: Macmillan & Co., 1947). Northrop demonstrates the impossibility of theoretical economic dynamics (on the assumptions and with the method of contemporary economic theory) by pointing out the lack, in economic affairs, of the conditions for such a theory. The data of economics (human wants) are, for its theorems, purely formal entities, whose specific properties are necessarily not to be considered. Moreover, there is no way of deducing the structure of future wants from present wants because wants obey no “conservation law.” Nor, Northrop adds, is there any a priori reason why the subject matter of economics should be conceived in terms of concepts obeying such a law. The quest for an economic dynamics may well “have its basis in a dogmatic assumption, with respect to which our empirical knowledge already gives the lie.” Northrop takes two groups of critics to task: those who mistakenly demand of economics that it take account of changes in the basic data—the relevant chosen ends; and those who, despairing of such an achievement, conclude that economics is of no use whatsoever. Both extremes err in their assessment of the nature of the scientific contribution that it is in the power of economic theory to make.

[[31]]See, e.g., L. Mises, Theory and History, ch. XII; F. H. Knight, “Professor Parsons on Economic Motivation,” Canadian Journal of Economics and Political Science, 1940, pp. 463 ff.; F. H. Knight, “‘What Is Truth’ in Economics?” On the History and Method of Economics (Chicago, 1956), pp. 171–173.

[[32]]For passages in which the a priori view has been compared to scholasticism, see R. F. Harrod, The Trade Cycle, pp. 38–39; E. C. Harwood, Reconstruction of Economics, p. 39.

[[33]]See, e.g., T. W. Hutchison, Significance and Basic Postulates of Economic Theory, p. 116; P. A. Samuelson, Foundations of Economic Analysis (Cambridge, 1948), p. 91.

[[34]]On this see the references in the previous note; see also A. G. Papandreou, Economics as a Science (1958). For a criticism of this position, see F. Machlup, “The Inferiority Complex of the Social Sciences” in On Freedom and Free Enterprise, Essays in Honor of Ludwig von Mises, ed. M. Sennholz (1956).

[[35]]L. Robbins, “Live and Dead Issues in the Methodology of Economics,” Economica, August, 1938, p. 348.

[[36]]See, e.g., L. Mises, Theory and History, pp. 283 ff.; F. H. Knight, “‘What Is Truth’ in Economics?” On the History and Method of Economics, p. 160; F. A. Hayek, Counter-Revolution of Science, Part I, ch. III; cf. also P. A. Sorokin, Socio-cultural Causality, Space, Time (Durham, 1943), ch. I. See also F. S. C. Northrop, Logic of the Sciences and the Humanities, p. 247, for the recognition of the “empirical verification” of economic theory in the confirmation of its logical derivation from the immediately confirmed postulates. On this see also M. Rothbard, “Mises' ‘Human Action’: Comment,” American Economic Review, March, 1951, p. 181; M. Rothbard, “Towards a Reconstruction of Utility and Welfare Economics” in On Freedom and Free Enterprise, Essays in Honor of Ludwig von Mises, ed. M. Sennholz (1956), pp. 225–228.

[[37]]L. Mises, Human Action (Yale, 1949), p. 65; cf. M. Pantaleoni, Pure Economics (English ed.; London, 1898), p. 8.

[[38]]L. Mises, Human Action, p. 66. See also F. A. Hayek, “Economics and Knowledge,” Economica, 1937; reprinted in Individualism and Economic Order (1948), pp. 47–48.

[[39]]See especially the remarks on Mises' “apriorism” by H. Bernadelli in his “What Has Philosophy to Contribute to the Social Sciences, and to Economics in Particular?” Economica, November, 1936, p. 449. For an analysis of propositions concerning land rent which displays the a priori nature of the pure economic theory involved as well as its relation to the empirical finding that makes the theory applicable to specific situations, see Hayek, Counter-Revolution of Science, p. 32.

[[40]]For a systematic table of the possible praxeological sciences and the place that economics occupies within the system, see M. Rothbard, “Praxeology: Reply to Mr. Schuller,” American Economic Review, December, 1951, pp. 945–946.

[[41]]F. H. Knight, “The Common Sense of Political Economy,” Journal of Political Economy, October, 1934, reprinted in On the History and Method of Economics (University of Chicago Press, copyright 1956 by the University of Chicago), p. 110.

[[42]]L. Mises, Human Action, p. 235.

[[43]]C. L. Robbins, Nature and Significance, p. 22.

[[44]]E. Cannan, Wealth (1st ed.), ch. I.

[[45]]L. Robbins, Nature and Significance, p. 22.
Back to Top
2: Ludwig von Mises, Liberalism: The Classical Tradition (LF ed.) [1962]

Ludwig von Mises, Liberalism: The Classical Tradition, trans. Ralph Raico, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2005).

Accessed from oll.libertyfund.org/title/1463 on 2008-03-05

The copyright to this edition, in both print and electronic forms, is held by Liberty Fund, Inc.

PREFACE, 1985

The term “liberalism,” from the Latin “liber” meaning “free,” referred originally to the philosophy of freedom. It still retained this meaning in Europe when this book was written (1927) so that readers who opened its covers expected an analysis of the freedom philosophy of classical liberalism. Unfortunately, however, in recent decades, “liberalism” has come to mean something very different. The word has been taken over, especially in the United States, by philosophical socialists and used by them to refer to their government intervention and “welfare state” programs. As one example among many possible ones, former U.S. Senator Joseph S. Clark, Jr., when he was mayor of Philadelphia, described the modern “liberal” position very frankly in these words:
To lay a ghost at the outset and to dismiss semantics, a liberal is here defined as one who believes in utilizing the full force of government for the advancement of social, political, and economic justice at the municipal, state, national, and international levels. . . . A liberal believes government is a proper tool to use in the development of a society which attempts to carry Christian principles of conduct into practical effect. (Atlantic, July 1953, p. 27)

This view of “liberalism” was so prevalent in 1962, when the English translation of this book appeared, that Mises believed then that to translate literally the original title, Liberalismus, would be too confusing. So he called the English version The Free and Prosperous Commonwealth. By the following year, however, Mises had decided that the advocates of freedom and free markets should not relinquish “liberalism” to the philosophical socialists. In the prefaces of both the second (1963) and third (1966) editions of his magnum opus, Human Action, Mises wrote that the advocates of the freedom philosophy should reclaim “the term ‘liberal’ . . . because there is simply no other term available to signify the great political and intellectual movement” that ushered in modern civilization by fostering the free market economy, limited government and individual freedom. It is in this sense that “liberalism” is used throughout this book.

For the benefit of readers who are not familiar with the works of Ludwig von Mises (1881–1973), he was for decades the leading spokes-man of the “Austrian” school of economics, so named because Mises as well as his two prominent predecessors—Carl Menger and Eugen von Böhm-Bawerk—were all Austrian born. The cornerstone of the “Austrian” school is the subjective value marginal utility theory. This theory traces all economic phenomena, simple and complex, to the actions of individuals, each undertaken as a result of personal subjective values. On the basis of this subjective value theory, Mises explained and analyzed methodology, value, action, prices, markets, money, monopoly, government intervention, economic booms and busts, etc., making especially significant contributions in the fields of money and economic calculation.

Mises earned his doctorate from the University of Vienna in 1906. His thesis, The Theory of Money and Credit, published in German in 1912 and in English in 1934, was the first of his many theoretical works in economics. During the interwar years, in addition to writing articles and books, such as the powerful treatise, Socialism, Mises worked full time at the Austrian Chamber of Commerce as economic adviser to the Austrian government and taught part time as a Privatdozent (lecturer) at the University of Vienna. He also conducted a private economics seminar for scholars, many of whom became influential worldwide. In 1926 he established the private Austrian Institute for Business Cycle Research which still survives.

After Hitler came to power in Germany, Mises anticipated trouble for Austria. So in 1934 he took a position in Switzerland with the Graduate Institute of International Studies. While there he wrote Nationaloekonomie (1940). Although there were few German readers in national socialist Europe for this monumental economic treatise, Mises’s explanations of sound economic principles have reached a much wider audience through the English-language version of Nationaloekonomie, completely rewritten by Mises for American readers under the title of Human Action (1st edition, 1949).

To escape Hitler-dominated Europe, Mises and his wife left Switzerland in 1940 and came to the United States. His reputation had been well established in Europe, but he was little known in this country. Therefore, he had to begin practically all over again to attract students and readers. English-language books began to appear from his pen—Omnipotent Government and Bureaucracy, both in 1944. And then his masterful economic treatise, Human Action, in 1949. There soon followed Planning for Freedom (1952), The Anti-Capitalistic Mentality (1952), Theory and History (1957) and The Ultimate Foundations of Economic Science (1962), all important books in economic theory.

In 1947, Mises was instrumental in founding the international Mont Pèlerin Society. He lectured widely in the U.S. and Latin America and for 24 years he conducted his well-known graduate economics seminar at New York University. He also served as a consultant to the National Association of Manufacturers and as adviser to the Foundation for Economic Education.

Mises received many honors throughout the course of his lifetime—honorary doctorates from Grove City College (1957), New York University (1963), and the University of Freiburg (1964) in Germany. His accomplishments were recognized in 1956 by his alma mater, the University of Vienna, when his doctorate was memorialized on its 50th anniversary and “renewed,” a European tradition, and in 1962 by the Austrian government. He was also cited in 1969 as “Distinguished Fellow” by the American Economic Association.

Mises’s influence continues to spread among thoughtful persons. His most prominent student from his European days, Nobel Laureate F. A. Hayek, has written: “Mises’s influence now reaches beyond the personal sphere. . . . The torch which you [Mises] have lighted has become the guide of a new movement for freedom which is gathering strength every day.” And one of his leading students in the United States, Professor Israel Kirzner of New York University, has described his impact on modern students: “[T]o the ferment and sense of excitement now evident in the resurgence of interest in this Austrian perspective, Mises’s contributions have been crucial and decisive.”

Mises was always the careful and logical theoretician, but he was not only an ivory tower theoretician. Driven by the logic of his scientific reasoning to the conclusion that a liberal society with free markets is the only road to domestic and international peace and harmony, he felt compelled to apply the economic theories he expounded to government policy. In Liberalism Mises not only offers brief explanations of many important economic phenomena, but he also presents, more explicitly than in any of his other books, his views on government and its very limited but essential role in preserving social cooperation under which the free market can function. Mises’s views still appear fresh and modern and readers will find his analysis pertinent.

Mises’s message, that ideas rule the world, runs as a constant refrain throughout all his books. But it comes through especially strong in Liberalism. “The ultimate outcome of the struggle” between liberalism and totalitarianism, he wrote in 1927, “will not be decided by arms, but by ideas. It is ideas that group men into fighting factions, that press the weapons into their hands, and that determine against whom and for whom the weapons shall be used. It is they alone, and not arms, that, in the last analysis, turn the scales.”

In fact, the only hope of keeping the world from plunging still further into international chaos and conflict is to convince the people to abandon government intervention and adopt liberal policies.

Bettina Bien Greaves
- The Foundation for Economic Education, Inc.
August, 1985

PREFACE TO THE ENGLISH-LANGUAGE EDITION

The social order created by the philosophy of the Enlightenment assigned supremacy to the common man. In his capacity as a consumer, the “regular fellow” was called upon to determine ultimately what should be produced, in what quantity and of what quality, by whom, how, and where; in his capacity as a voter, he was sovereign in directing his nation’s policies. In the precapitalistic society those had been paramount who had the strength to beat their weaker fellows into submission. The much decried “mechanism” of the free market leaves only one way open to the acquisition of wealth, viz., to succeed in serving the consumers in the best possible and cheapest way. To this “democracy” of the market corresponds, in the sphere of the conduct of affairs of state, the system of representative government. The greatness of the period between the Napoleonic Wars and the first World War consisted precisely in the fact that the social ideal after the realization of which the most eminent men were striving was free trade in a peaceful world of free nations. It was an age of unprecedented improvement in the standard of living for a rapidly increasing population. It was the age of liberalism.

Today the tenets of this nineteenth-century philosophy of liberalism are almost forgotten. In continental Europe it is remembered only by a few. In England the term “liberal” is mostly used to signify a program that only in details differs from the totalitarianism of the socialists.* In the United States “liberal” means today a set of ideas and political postulates that in every regard are the opposite of all that liberalism meant to the preceding generations. The American self-styled liberal aims at government omnipotence, is a resolute foe of free enterprise, and advocates all-round planning by the authorities, i.e., socialism. These “liberals” are anxious to emphasize that they disapprove of the Russian dictator’s policies not on account of their socialistic or communistic character but merely on account of their imperialistic tendencies. Every measure aiming at confiscating some of the assets of those who own more than the average or at restricting the rights of the owners of property is considered as liberal and progressive. Practically unlimited discretionary power is vested in government agencies the decisions of which are exempt from judicial review. The few upright citizens who dare to criticize this trend toward administrative despotism are branded as extremists, reactionaries, economic royalists, and Fascists. It is suggested that a free country ought not to tolerate political activities on the part of such “public enemies.”

Surprisingly enough, these ideas are in this country viewed as specifically American, as the continuation of the principles and the philosophy of the Pilgrim Fathers, the signers of the Declaration of Independence, and the authors of the Constitution and the Federalist papers. Only few people realize that these allegedly progressive policies originated in Europe and that their most brilliant nineteenth-century exponent was Bismarck, whose policies no American would qualify as progressive and liberal. Bismarck’s Sozialpolitik was inaugurated in 1881, more than fifty years before its replica, F. D. Roosevelt’s New Deal. Following in the wake of the German Reich, the then most successful power, all European industrial nations more or less adopted the system that pretended to benefit the masses at the expense of a minority of “rugged individualists.” The generation that reached voting age after the end of the first World War took statism for granted and had only contempt for the “bourgeois prejudice,” liberty.

When, thirty-five years ago, I tried to give a summary of the ideas and principles of that social philosophy that was once known under the name of liberalism, I did not indulge in the vain hope that my account would prevent the impending catastrophes to which the policies adopted by the European nations were manifestly leading. All I wanted to achieve was to offer to the small minority of thoughtful people an opportunity to learn something about the aims of classical liberalism and its achievements and thus to pave the way for a resurrection of the spirit of freedom after the coming debacle.

On October 28, 1951, Professor J. P. Hamilius of Luxembourg ordered a copy of Liberalismus from the publishing firm of Gustav Fischer in Jena (Russian Zone of Germany). The publishing firm answered, on November 14, 1951, that no copies of the book were available and added: “Die Vorräte dieser Schrift mussten auf Anordnung behördlicher Stellen restlos makuliert werden.” (By order of the authorities all the copies of this book had to be destroyed.) The letter did not say whether the “authorities” referred to were those of Nazi Germany or those of the “democratic” republic of East Germany.

In the years that elapsed since the publication of Liberalismus I have written much more about the problems involved. I have dealt with many issues with which I could not deal in a book the size of which had to be limited in order not to deter the general reader. On the other hand, I referred in it to some matters that have little importance for the present. There are, moreover, in this book various problems of policy treated in a way which can be understood and correctly appreciated only if one takes into account the political and economic situation at the time in which it was written.

I have not changed anything in the original text of the book and did not influence in any way the translation made by Dr. Ralph Raico and the editing done by Mr. Arthur Goddard. I am very grateful to these two scholars for the pains they took in making the book available to the English-reading public.

Ludwig von Mises
New York, April, 1962

liberalism

The Classical Tradition

Introduction

1

Liberalism

The philosophers, sociologists, and economists of the eighteenth and the early part of the nineteenth century formulated a political program that served as a guide to social policy first in England and the United States, then on the European continent, and finally in the other parts of the inhabited world as well. Nowhere was this program ever completely carried out. Even in England, which has been called the homeland of liberalism and the model liberal country, the proponents of liberal policies never succeeded in winning all their demands. In the rest of the world only parts of the liberal program were adopted, while others, no less important, were either rejected from the very first or discarded after a short time. Only with some exaggeration can one say that the world once lived through a liberal era. Liberalism was never permitted to come to full fruition.

Nevertheless, brief and all too limited as the supremacy of liberal ideas was, it sufficed to change the face of the earth. A magnificent economic development took place. The release of man’s productive powers multiplied the means of subsistence many times over. On the eve of the World War (which was itself the result of a long and bitter struggle against the liberal spirit and which ushered in a period of still more bitter attacks on liberal principles), the world was incomparably more densely populated than it had ever been, and each inhabitant could live incomparably better than had been possible in earlier centuries. The prosperity that liberalism had created reduced considerably infant mortality, which had been the pitiless scourge of earlier ages, and, as a result of the improvement in living conditions, lengthened the average span of life.

Nor did this prosperity flow only to a select class of privileged persons. On the eve of the World War the worker in the industrial nations of Europe, in the United States, and in the overseas dominions of England lived better and more graciously than the nobleman of not too long before. Not only could he eat and drink according to his desire; he could give his children a better education; he could, if he wished, take part in the intellectual and cultural life of his nation; and, if he possessed enough talent and energy, he could, without difficulty, raise his social position. It was precisely in the countries that had gone the farthest in adopting the liberal program that the top of the social pyramid was composed, in the main, not of those who had, from their very birth, enjoyed a privileged position by virtue of the wealth or high rank of their parents, but of those who, under favorable conditions, had worked their way up from straitened circumstances by their own power. The barriers that had in earlier ages separated lords and serfs had fallen. Now there were only citizens with equal rights. No one was handicapped or persecuted on account of his nationality, his opinions, or his faith. Domestic political and religious persecutions had ceased, and international wars began to become less frequent. Optimists were already hailing the dawn of the age of eternal peace.

But events have turned out otherwise. In the nineteenth century strong and violent opponents of liberalism sprang up who succeeded in wiping out a great part of what had been gained by the liberals. The world today wants to hear no more of liberalism. Outside England the term “liberalism” is frankly proscribed. In England, there are, to be sure, still “liberals,” but most of them are so in name only. In fact, they are rather moderate socialists. Everywhere today political power is in the hands of the antiliberal parties. The program of antiliberalism unleashed the forces that gave rise to the great World War and, by virtue of import and export quotas, tariffs, migration barriers, and similar measures, has brought the nations of the world to the point of mutual isolation. Within each nation it has led to socialist experiments whose result has been a reduction in the productivity of labor and a concomitant increase in want and misery. Whoever does not deliberately close his eyes to the facts must recognize everywhere the signs of an approaching catastrophe in world economy. Antiliberalism is heading toward a general collapse of civilization.

If one wants to know what liberalism is and what it aims at, one cannot simply turn to history for the information and inquire what the liberal politicians stood for and what they accomplished. For liberalism nowhere succeeded in carrying out its program as it had intended.

Nor can the programs and actions of those parties that today call themselves liberal provide us with any enlightenment concerning the nature of true liberalism. It has already been mentioned that even in England what is understood as liberalism today bears a much greater resemblance to Toryism and socialism than to the old program of the freetraders. If there are liberals who find it compatible with their liberalism to endorse the nationalization of railroads, of mines, and of other enterprises, and even to support protective tariffs, one can easily see that nowadays nothing is left of liberalism but the name.

Nor does it any longer suffice today to form one’s idea of liberalism from a study of the writings of its great founders. Liberalism is not a completed doctrine or a fixed dogma. On the contrary, it is the application of the teachings of science to the social life of man. And just as economics, sociology, and philosophy have not stood still since the days of David Hume, Adam Smith, David Ricardo, Jeremy Bentham, and Wilhelm Humboldt, so the doctrine of liberalism is different today from what it was in their day, even though its fundamental principles have remained unchanged. For many years now no one has undertaken to present a concise statement of the essential meaning of that doctrine. This may serve to justify our present attempt at providing just such a work.

2

Material Welfare

Liberalism is a doctrine directed entirely towards the conduct of men in this world. In the last analysis, it has nothing else in view than the advancement of their outward, material welfare and does not concern itself directly with their inner, spiritual and metaphysical needs. It does not promise men happiness and contentment, but only the most abundant possible satisfaction of all those desires that can be satisfied by the things of the outer world.

Liberalism has often been reproached for this purely external and materialistic attitude toward what is earthly and transitory. The life of man, it is said, does not consist in eating and drinking. There are higher and more important needs than food and drink, shelter and clothing. Even the greatest earthly riches cannot give man happiness; they leave his inner self, his soul, unsatisfied and empty. The most serious error of liberalism has been that it has had nothing to offer man’s deeper and nobler aspirations.

But the critics who speak in this vein show only that they have a very imperfect and materialistic conception of these higher and nobler needs. Social policy, with the means that are at its disposal, can make men rich or poor, but it can never succeed in making them happy or in satisfying their inmost yearnings. Here all external expedients fail. All that social policy can do is to remove the outer causes of pain and suffering; it can further a system that feeds the hungry, clothes the naked, and houses the homeless. Happiness and contentment do not depend on food, clothing, and shelter, but, above all, on what a man cherishes within himself. It is not from a disdain of spiritual goods that liberalism concerns itself exclusively with man’s material well-being, but from a conviction that what is highest and deepest in man cannot be touched by any outward regulation. It seeks to produce only outer well-being because it knows that inner, spiritual riches cannot come to man from without, but only from within his own heart. It does not aim at creating anything but the outward preconditions for the development of the inner life. And there can be no doubt that the relatively prosperous individual of the twentieth century can more readily satisfy his spiritual needs than, say, the individual of the tenth century, who was given no respite from anxiety over the problem of eking out barely enough for survival or from the dangers that threatened him from his enemies.

To be sure, to those who, like the followers of many Asiatic and medieval Christian sects, accept the doctrine of complete asceticism and who take as the ideal of human life the poverty and freedom from want of the birds of the forest and the fish of the sea, we can make no reply when they reproach liberalism for its materialistic attitude. We can only ask them to let us go our way undisturbed, just as we do not hinder them from getting to heaven in their own fashion. Let them shut themselves up in their cells, away from men and the world, in peace.

The overwhelming majority of our contemporaries cannot understand the ascetic ideal. But once one rejects the principle of the ascetic conduct of life, one cannot reproach liberalism for aiming at outer well-being.

3

Rationalism

Liberalism is usually reproached, besides, for being rationalistic. It wants to regulate everything reasonably and thus fails to recognize that in human affairs great latitude is, and, indeed, must be, given to feelings and to the irrational generally—i.e., to what is unreasonable.

Now liberalism is by no means unaware of the fact that men sometimes act unreasonably. If men always acted reasonably, it would be superfluous to exhort them to be guided by reason. Liberalism does not say that men always act intelligently, but rather that they ought, in their own rightly understood interest, always to act intelligently. And the essence of liberalism is just this, that it wants to have conceded to reason in the sphere of social policy the acceptance that is conceded to it without dispute in all other spheres of human action.

If, having been recommended a reasonable—i.e., hygienic—mode of life by his doctor, someone were to reply: “I know that your advice is reasonable; my feelings, however, forbid me to follow it. I want to do what is harmful for my health even though it may be unreasonable,” hardly anybody would regard his conduct as commendable. No matter what we undertake to do in life, in order to reach the goal that we have set for ourselves we endeavor to do it reasonably. The person who wants to cross a railroad track will not choose the very moment when a train is passing over the crossing. The person who wants to sew on a button will avoid pricking his finger with the needle. In every sphere of his practical activity man has developed a technique or a technology that indicates how one is to proceed if one does not want to behave in an unreasonable way. It is generally acknowledged that it is desirable for a man to acquire the techniques which he can make use of in life, and a person who enters a field whose techniques he has not mastered is derided as a bungler.

Only in the sphere of social policy, it is thought, should it be otherwise. Here, not reason, but feelings and impulses should decide. The question: How must things be arranged in order to provide good illumination during the hours of darkness? is generally discussed only with reasonable arguments. As soon, however, as the point in the discussion is reached when it is to be decided whether the lighting plant should be managed by private individuals or by the municipality, then reason is no longer considered valid. Here sentiment, world view—in short, unreason—should determine the result. We ask in vain: Why?

The organization of human society according to the pattern most suitable for the attainment of the ends in view is a quite prosaic and matter-of-fact question, not unlike, say, the construction of a railroad or the production of cloth or furniture. National and governmental affairs are, it is true, more important than all other practical questions of human conduct, since the social order furnishes the foundation for everything else, and it is possible for each individual to prosper in the pursuit of his ends only in a society propitious for their attainment. But however lofty may be the sphere in which political and social questions are placed, they still refer to matters that are subject to human control and must consequently be judged according to the canons of human reason. In such matters, no less than in all our other mundane affairs, mysticism is only an evil. Our powers of comprehension are very limited. We cannot hope ever to discover the ultimate and most profound secrets of the universe. But the fact that we can never fathom the meaning and purpose of our existence does not hinder us from taking precautions to avoid contagious diseases or from making use of the appropriate means to feed and clothe ourselves, nor should it deter us from organizing society in such a way that the earthly goals for which we strive can be most effectually attained. Even the state and the legal system, the government and its administration are not too lofty, too good, too grand, for us to bring them within the range of rational deliberation. Problems of social policy are problems of social technology, and their solution must be sought in the same ways and by the same means that are at our disposal in the solution of other technical problems: by rational reflection and by examination of the given conditions. All that man is and all that raises him above the animals he owes to his reason. Why should he forgo the use of reason just in the sphere of social policy and trust to vague and obscure feelings and impulses?

4

The Aim of Liberalism

There is a widespread opinion that liberalism is distinguished from other political movements by the fact that it places the interests of a part of society—the propertied classes, the capitalists, the entrepreneurs—above the interests of the other classes. This assertion is completely mistaken. Liberalism has always had in view the good of the whole, not that of any special group. It was this that the English utilitarians meant to express—although, it is true, not very aptly—in their famous formula, “the greatest happiness of the greatest number.” Historically, liberalism was the first political movement that aimed at promoting the welfare of all, not that of special groups. Liberalism is distinguished from socialism, which likewise professes to strive for the good of all, not by the goal at which it aims, but by the means that it chooses to attain that goal.

If it is maintained that the consequence of a liberal policy is or must be to favor the special interests of certain strata of society, this is still a question that allows of discussion. It is one of the tasks of the present work to show that such a reproach is in no way justified. But one cannot, from the very outset, impute unfairness to the person who raises it; though we consider his opinion incorrect, it could very well be advanced in the best of faith. In any case, whoever attacks liberalism in this way concedes that its intentions are disinterested and that it wants nothing but what it says it wants.

Quite different are those critics of liberalism who reproach it for wanting to promote, not the general welfare, but only the special interests of certain classes. Such critics are both unfair and ignorant. By choosing this mode of attack, they show that they are inwardly well aware of the weakness of their own case. They snatch at poisoned weapons because they cannot otherwise hope for success.

If a doctor shows a patient who craves food detrimental to his health the perversity of his desire, no one will be so foolish as to say: “The doctor does not care for the good of the patient; whoever wishes the patient well must not grudge him the enjoyment of relishing such delicious food.” Everyone will understand that the doctor advises the patient to forgo the pleasure that the enjoyment of the harmful food affords solely in order to avoid injuring his health. But as soon as the matter concerns social policy, one is prone to consider it quite differently. When the liberal advises against certain popular measures because he expects harmful consequences from them, he is censured as an enemy of the people, and praise is heaped on the demagogues who, without consideration of the harm that will follow, recommend what seems to be expedient for the moment.

Reasonable action is distinguished from unreasonable action by the fact that it involves provisional sacrifices. The latter are only apparent sacrifices, since they are outweighed by the favorable consequences that later ensue. The person who avoids tasty but unwholesome food makes merely a provisional, a seeming sacrifice. The outcome—the nonoccurrence of injury to his health—shows that he has not lost, but gained. To act in this way, however, requires insight into the consequences of one’s action. The demagogue takes advantage of this fact. He opposes the liberal, who calls for provisional and merely apparent sacrifices, and denounces him as a hard-hearted enemy of the people, meanwhile setting himself up as a friend of humanity. In supporting the measures he advocates, he knows well how to touch the hearts of his hearers and to move them to tears with allusions to want and misery.

Antiliberal policy is a policy of capital consumption. It recommends that the present be more abundantly provided for at the expense of the future. It is in exactly the same case as the patient of whom we have spoken. In both instances a relatively grievous disadvantage in the future stands in opposition to a relatively abundant momentary gratification. To talk, in such a case, as if the question were one of hard-heartedness versus philanthropy is downright dishonest and untruthful. It is not only the common run of politicians and the press of the antiliberal parties that are open to such a reproach. Almost all the writers of the school of Sozialpolitik have made use of this underhanded mode of combat.

That there is want and misery in the world is not, as the average newspaper reader, in his dullness, is only too prone to believe, an argument against liberalism. It is precisely want and misery that liberalism seeks to abolish, and it considers the means that it proposes the only suitable ones for the achievement of this end. Let whoever thinks that he knows a better, or even a different, means to this end adduce the proof. The assertion that the liberals do not strive for the good of all members of society, but only for that of special groups, is in no way a substitute for this proof.

The fact that there is want and misery would not constitute an argument against liberalism even if the world today followed a liberal policy. It would always be an open question whether still more want and misery might not prevail if other policies had been followed. In view of all the ways in which the functioning of the institution of private property is curbed and hindered in every quarter today by antiliberal policies, it is manifestly quite absurd to seek to infer anything against the correctness of liberal principles from the fact that economic conditions are not, at present, all that one could wish. In order to appreciate what liberalism and capitalism have accomplished, one should compare conditions as they are at present with those of the Middle Ages or of the first centuries of the modern era. What liberalism and capitalism could have accomplished had they been allowed free rein can be inferred only from theoretical considerations.

5

Liberalism and Capitalism

A society in which liberal principles are put into effect is usually called a capitalist society, and the condition of that society, capitalism. Since the economic policy of liberalism has everywhere been only more or less closely approximated in practice, conditions as they are in the world today provide us with but an imperfect idea of the meaning and possible accomplishments of capitalism in full flower. Nevertheless, one is altogether justified in calling our age the age of capitalism, because all that has created the wealth of our time can be traced back to capitalist institutions. It is thanks to those liberal ideas that still remain alive in our society, to what yet survives in it of the capitalist system, that the great mass of our contemporaries can enjoy a standard of living far above that which just a few generations ago was possible only to the rich and especially privileged.

To be sure, in the customary rhetoric of the demagogues these facts are represented quite differently. To listen to them, one would think that all progress in the techniques of production redounds to the exclusive benefit of a favored few, while the masses sink ever more deeply into misery. However, it requires only a moment’s reflection to realize that the fruits of all technological and industrial innovations make for an improvement in the satisfaction of the wants of the great masses. All big industries that produce consumers’ goods work directly for their benefit; all industries that produce machines and half-finished products work for them indirectly. The great industrial developments of the last decades, like those of the eighteenth century that are designated by the not altogether happily chosen phrase, “the Industrial Revolution,” have resulted, above all, in a better satisfaction of the needs of the masses. The development of the clothing industry, the mechanization of shoe production, and improvements in the processing and distribution of foodstuffs have, by their very nature, benefited the widest public. It is thanks to these industries that the masses today are far better clothed and fed than ever before. However, mass production provides not only for food, shelter, and clothing, but also for other requirements of the multitude. The press serves the masses quite as much as the motion picture industry, and even the theater and similar strongholds of the arts are daily becoming more and more places of mass entertainment.

Nevertheless, as a result of the zealous propaganda of the antiliberal parties, which twists the facts the other way round, people today have come to associate the ideas of liberalism and capitalism with the image of a world plunged into ever increasing misery and poverty. To be sure, no amount of depreciatory propaganda could ever succeed, as the demagogues had hoped, in giving the words “liberal” and “liberalism” a completely pejorative connotation. In the last analysis, it is not possible to brush aside the fact that, in spite of all the efforts of antiliberal propaganda, there is something in these expressions that suggests what every normal person feels when he hears the word “freedom.” Antiliberal propaganda, therefore, avoids mentioning the word “liberalism” too often and prefers the infamies that it attributes to the liberal system to be associated with the term “capitalism.” That word brings to mind a flint-hearted capitalist, who thinks of nothing but his own enrichment, even if that is possible only through the exploitation of his fellow men.

It hardly occurs to anyone, when he forms his notion of a capitalist, that a social order organized on genuinely liberal principles is so constituted as to leave the entrepreneurs and the capitalists only one way to wealth, viz., by better providing their fellow men with what they themselves think they need. Instead of speaking of capitalism in connection with the prodigious improvement in the standard of living of the masses, antiliberal propaganda mentions capitalism only in referring to those phenomena whose emergence was made possible solely because of the restraints that were imposed upon liberalism. No reference is made to the fact that capitalism has placed a delectable luxury as well as a food, in the form of sugar, at the disposal of the great masses. Capitalism is mentioned in connection with sugar only when the price of sugar in a country is raised above the world market price by a cartel. As if such a development were even conceivable in a social order in which liberal principles were put into effect! In a country with a liberal regime, in which there are no tariffs, cartels capable of driving the price of a commodity above the world market price would be quite unthinkable.

The links in the chain of reasoning by which antiliberal demagogy succeeds in laying upon liberalism and capitalism the blame for all the excesses and evil consequences of antiliberal policies are as follows: One starts from the assumption that liberal principles aim at promoting the interests of the capitalists and entrepreneurs at the expense of the interests of the rest of the population and that liberalism is a policy that favors the rich over the poor. Then one observes that many entrepreneurs and capitalists, under certain conditions, advocate protective tariffs, and still others—the armaments manufacturers—support a policy of “national preparedness”; and, out of hand, one jumps to the conclusion that these must be “capitalistic” policies.

In fact, however, the case is quite otherwise. Liberalism is not a policy in the interest of any particular group, but a policy in the interest of all mankind. It is, therefore, incorrect to assert that the entrepreneurs and capitalists have any special interest in supporting liberalism. Their interest in championing the liberal program is exactly the same as that of everyone else. There may be individual cases in which some entrepreneurs or capitalists cloak their special interests in the program of liberalism; but opposed to these are always the special interests of other entrepreneurs or capitalists. The matter is not quite so simple as those who everywhere scent “interests” and “interested parties” imagine. That a nation imposes a tariff on iron, for example, cannot “simply” be explained by the fact that this benefits the iron magnates. There are also persons with opposing interests in the country, even among the entrepreneurs; and, in any case, the beneficiaries of the tariff on iron are a steadily diminishing minority. Nor can bribery be the explanation, for the people bribed can likewise be only a minority; and, besides, why does only one group, the protectionists, do the bribing, and not their opponents, the freetraders?

The fact is that the ideology that makes the protective tariff possible is created neither by the “interested parties” nor by those bribed by them, but by the ideologists, who give the world the ideas that direct the course of all human affairs. In our age, in which antiliberal ideas prevail, virtually everyone thinks accordingly, just as, a hundred years ago, most people thought in terms of the then prevailing liberal ideology. If many entrepreneurs today advocate protective tariffs, this is nothing more than the form that antiliberalism takes in their case. It has nothing to do with liberalism.

6

The Psychological Roots of Antiliberalism

It cannot be the task of this book to discuss the problem of social cooperation otherwise than with rational arguments. But the root of the opposition to liberalism cannot be reached by resort to the method of reason. This opposition does not stem from the reason, but from a pathological mental attitude—from resentment and from a neurasthenic condition that one might call a Fourier complex, after the French socialist of that name.

Concerning resentment and envious malevolence little need be said. Resentment is at work when one so hates somebody for his more favorable circumstances that one is prepared to bear heavy losses if only the hated one might also come to harm. Many of those who attack capitalism know very well that their situation under any other economic system will be less favorable. Nevertheless, with full knowledge of this fact, they advocate a reform, e.g., socialism, because they hope that the rich, whom they envy, will also suffer under it. Time and again one hears socialists say that even material want will be easier to bear in a socialist society because people will realize that no one is better off than his neighbor.

At all events, resentment can still be dealt with by rational arguments. It is, after all, not too difficult to make clear to a person who is filled with resentment that the important thing for him cannot be to worsen the position of his better situated fellow men, but to improve his own.

The Fourier complex is much harder to combat. What is involved in this case is a serious disease of the nervous system, a neurosis, which is more properly the concern of the psychologist than of the legislator. Yet it cannot be neglected in investigating the problems of modern society. Unfortunately, medical men have hitherto scarcely concerned themselves with the problems presented by the Fourier complex. Indeed, they have hardly been noticed even by Freud, the great master of psychology, or by his followers in their theory of neurosis, though it is to psychoanalysis that we are indebted for having opened up the path that alone leads to a coherent and systematic understanding of mental disorders of this kind.

Scarcely one person in a million succeeds in fulfilling his life’s ambition. The upshot of one’s labors, even if one is favored by fortune, remains far inferior to what the wistful daydreams of youth allowed one to hope for. Plans and desires are shattered on a thousand obstacles, and one’s powers prove too weak to achieve the goals on which one has set one’s heart. The failure of his hopes, the frustration of his schemes, his own inadequacy in the face of the tasks that he has set himself—these constitute every man’s most deeply painful experience. They are, indeed, the common lot of man.

There are two ways in which man can react to this experience. One way is indicated by the practical wisdom of Goethe:
- Dost thou fancy that I should hate life,
- Should flee to the wilderness,
- Because not all my budding dreams have
- blossomed?
his Prometheus cries. And Faust recognizes at the “highest moment” that “the last word of wisdom” is:
- No man deserves his freedom or his life
- Who does not daily win them anew.
Such a will and such a spirit cannot be vanquished by any earthly misfortune. He who accepts life for what it is and never allows himself to be overwhelmed by it does not need to seek refuge for his crushed self-confidence in the solace of a “saving lie.” If the longed-for success is not forthcoming, if the vicissitudes of fate destroy in the twinkling of an eye what had to be painstakingly built up by years of hard work, then he simply multiplies his exertions. He can look disaster in the eye without despairing.

The neurotic cannot endure life in its real form. It is too raw for him, too coarse, too common. To render it bearable he does not, like the healthy man, have the heart to “carry on in spite of everything.” That would not be in keeping with his weakness. Instead, he takes refuge in a delusion. A delusion is, according to Freud, “itself something desired, a kind of consolation”; it is characterized by its “resistance to attack by logic and reality.” It by no means suffices, therefore, to seek to talk the patient out of his delusion by conclusive demonstrations of its absurdity. In order to recuperate, the patient himself must overcome it. He must learn to understand why he does not want to face the truth and why he takes refuge in delusions.

Only the theory of neurosis can explain the success enjoyed by Fourierism, the mad product of a seriously deranged brain. This is not the place to adduce evidence of Fourier’s psychosis by quoting passages from his writings. Such descriptions are of interest only to the psychiatrist and, perhaps, also to people who derive a certain pleasure from reading the productions of a lewd phantasy. But the fact is that Marxism, when it is obliged to leave the field of pompous dialectical rhetoric and the derision and defamation of its opponents and to make a few meager remarks pertinent to the issue, never has anything different to advance from what Fourier, the “utopian,” had to offer. Marxism is likewise unable to construct a picture of a socialist society without making two assumptions already made by Fourier that contradict all experience and all reason. On the one hand, it assumes that the “material substratum” of production, which is “already present in nature without the need of productive effort on the part of man,” stands at our disposal in such abundance that it need not be economized; hence the faith of Marxism in a “practically limitless increase in production.” On the other hand, it assumes that in a socialist community work will change from “a burden into a pleasure”—indeed, that it will become “the primary necessity of life.” Where a superfluity of all goods abounds and work is a pleasure, it is, doubtless, an easy matter to establish a land of Cockaigne.

Marxism believes that from the height of its “scientific socialism” it is entitled to look down with contempt on romanticism and romantics. But in reality its own procedure is no different from theirs. Instead of removing the impediments that stand in the way of the realization of its desires, it too prefers to let all obstacles simply fade away in the mists of phantasy.

In the life of the neurotic the “saving lie” has a double function. It not only consoles him for past failure, but holds out the prospect of future success. In the case of social failure, which alone concerns us here, the consolation consists in the belief that one’s inability to attain the lofty goals to which one has aspired is not to be ascribed to one’s own inadequacy, but to the defectiveness of the social order. The malcontent expects from the overthrow of the latter the success that the existing system has withheld from him. Consequently, it is entirely futile to try to make clear to him that the utopia he dreams of is not feasible and that the only foundation possible for a society organized on the principle of the division of labor is private ownership of the means of production. The neurotic clings to his “saving lie,” and when he must make the choice of renouncing either it or logic, he prefers to sacrifice logic. For life would be unbearable for him without the consolation that he finds in the idea of socialism. It tells him that not he himself, but the world, is at fault for having caused his failure; and this conviction raises his depressed self-confidence and liberates him from a tormenting feeling of inferiority.

Just as the devout Christian could more easily endure the misfortune that befell him on earth because he hoped for a continuation of personal existence in another, better world, where those who on earth had been first would be last and the last would be first; so, for modern man, socialism has become an elixir against earthly adversity. But whereas the belief in immortality, in a recompense in the hereafter, and in resurrection formed an incentive to virtuous conduct in this life, the effect of the socialist promise is quite different. It imposes no other duty than that of giving political support to the party of socialism; but at the same time it raises expectations and demands.

This being the character of the socialist dream, it is understandable that every one of the partisans of socialism expects from it precisely what has so far been denied to him. Socialist authors promise not only wealth for all, but also happiness in love for everybody, the full physical and spiritual development of each individual, the unfolding of great artistic and scientific talents in all men, etc. Only recently Trotsky stated in one of his writings that in the socialist society “the average human type will rise to the heights of an Aristotle, a Goethe, or a Marx. And above this ridge new peaks will rise.”1 The socialist paradise will be the kingdom of perfection, populated by completely happy supermen. All socialist literature is full of such nonsense. But it is just this nonsense that wins it the most supporters.

One cannot send every person suffering from a Fourier complex to the doctor for psychoanalytic treatment; the number of those afflicted with it is far too great. No other remedy is possible in this case than the treatment of the illness by the patient himself. Through self-knowledge he must learn to endure his lot in life without looking for a scapegoat on which he can lay all the blame, and he must endeavor to grasp the fundamental laws of social cooperation.}}

LIBERALISM

The Classical Tradition

CHAPTER 1

The Foundations of Liberal Policy

1

Property

Human society is an association of persons for cooperative action. As against the isolated action of individuals, cooperative action on the basis of the principle of the division of labor has the advantage of greater productivity. If a number of men work in cooperation in accordance with the principle of the division of labor, they will produce (other things being equal) not only as much as the sum of what they would have produced by working as self-sufficient individuals, but considerably more. All human civilization is founded on this fact. It is by virtue of the division of labor that man is distinguished from the animals. It is the division of labor that has made feeble man, far inferior to most animals in physical strength, the lord of the earth and the creator of the marvels of technology. In the absence of the division of labor, we would not be in any respect further advanced today than our ancestors of a thousand or ten thousand years ago.

Human labor by itself is not capable of increasing our well-being. In order to be fruitful, it must be applied to the materials and resources of the earth that Nature has placed at our disposal. Land, with all the substances and powers resident within it, and human labor constitute the two factors of production from whose purposeful cooperation proceed all the commodities that serve for the satisfaction of our outer needs. In order to produce, one must deploy labor and the material factors of production, including not only the raw materials and resources placed at our disposal by Nature and mostly found in the earth, but also the intermediate products already fabricated of these primary natural factors of production by previously performed human labor. In the language of economics we distinguish, accordingly, three factors of production: labor, land, and capital. By land is to be understood everything that Nature places at our disposal in the way of substances and powers on, under, and above the surface of the earth, in the water, and in the air; by capital goods, all the intermediate goods produced from land with the help of human labor that are made to serve further production, such as machines, tools, half-manufactured articles of all kinds, etc.

Now we wish to consider two different systems of human cooperation under the division of labor—one based on private ownership of the means of production, and the other based on communal ownership of the means of production. The latter is called socialism or communism; the former, liberalism or also (ever since it created in the nineteenth century a division of labor encompassing the whole world) capitalism. The liberals maintain that the only workable system of human cooperation in a society based on the division of labor is private ownership of the means of production. They contend that socialism as a completely comprehensive system encompassing all the means of production is unworkable and that the application of the socialist principle to a part of the means of production, though not, of course, impossible, leads to a reduction in the productivity of labor, so that, far from creating greater wealth, it must, on the contrary, have the effect of diminishing wealth.

The program of liberalism, therefore, if condensed into a single word, would have to read: property, that is, private ownership of the means of production (for in regard to commodities ready for consumption, private ownership is a matter of course and is not disputed even by the socialists and communists). All the other demands of liberalism result from this fundamental demand.

Side by side with the word “property” in the program of liberalism one may quite appropriately place the words “freedom” and “peace.” This is not because the older program of liberalism generally placed them there. We have already said that the program of present-day liberalism has outgrown that of the older liberalism, that it is based on a deeper and better insight into interrelationships, since it can reap the benefit of the advances that science has made in the last decades. Freedom and peace have been placed in the forefront of the program of liberalism, not because many of the older liberals regarded them as coordinate with the fundamental principle of liberalism itself, rather than as merely a necessary consequence following from the one fundamental principle of the private ownership of the means of production; but solely because freedom and peace have come under especially violent attack from the opponents of liberalism, and liberals have not wanted to give the appearance, through the omission of these principles, that they in any way acknowledged the justness of the objections raised against them.

2

Freedom

The idea of freedom has become so ingrained in all of us that for a long time no one dared to call it into question. People were accustomed always to speaking of freedom only with the greatest of reverence; it remained for Lenin to call it a “bourgeois prejudice.” Although the fact is often forgotten today, all this is an achievement of liberalism. The very name of liberalism is derived from freedom, and the name of the party in opposition to the liberals (both designations arose in the Spanish constitutional struggles of the first decades of the nineteenth century) was originally the “servile.”

Before the rise of liberalism even high-minded philosophers, founders of religions, clerics animated by the best of intentions, and statesmen who genuinely loved their people, viewed the thralldom of a part of the human race as a just, generally useful, and downright beneficial institution. Some men and peoples are, it was thought, destined by nature for freedom, and others for bondage. And it was not only the masters who thought so, but the greater number of the slaves as well. They put up with their servitude, not only because they had to yield to the superior force of the masters, but also because they found some good in it: the slave is relieved of concern for securing his daily bread, for the master is obliged to provide him with the necessities of life. When liberalism set out, in the eighteenth and the first half of the nineteenth century, to abolish the serfdom and subjection of the peasant population in Europe and the slavery of the Negroes in the overseas colonies, not a few sincere humanitarians declared themselves in opposition. Unfree laborers are used to their bondage and do not feel it as an evil. They are not ready for freedom and would not know how to make use of it. The discontinuation of the master’s care would be very harmful to them. They would not be capable of managing their affairs in such a way as always to provide more than just the bare necessities of life, and they would soon fall into want and misery. Emancipation would thus not only fail to gain for them anything of real value, but would seriously impair their material well-being.

What was astonishing was that one could hear these views expressed even by many of the slaves whom one questioned. In order to counter such opinions, many liberals believed it necessary to represent as the general rule and even on occasion to depict in an exaggerated manner the exceptional cases in which serfs and slaves had been cruelly abused. But these excesses were by no means the rule. There were, of course, isolated instances of abuse, and the fact that there were such cases was an additional reason for the abolition of this system. As a rule, however, the treatment of bondsmen by their masters was humane and mild.

When those who recommended the abolition of involuntary servitude on general humanitarian grounds were told that the retention of the system was also in the interest of the enslaved, they knew of nothing to say in rejoinder. For against this objection in favor of slavery there is only one argument that can and did refute all others—namely, that free labor is incomparably more productive than slave labor. The slave has no interest in exerting himself fully. He works only as much and as zealously as is necessary to escape the punishment attaching to failure to perform the minimum. The free worker, on the other hand, knows that the more his labor accomplishes, the more he will be paid. He exerts himself to the full in order to raise his income. One has only to compare the demands placed on the worker by the tending of a modern tractor with the relatively small expenditure of intelligence, strength, and industry that just two generations ago was deemed sufficient for the enthralled ploughmen of Russia. Only free labor can accomplish what must be demanded of the modern industrial worker.

Muddleheaded babblers may therefore argue interminably over whether all men are destined for freedom and are as yet ready for it. They may go on contending that there are races and peoples for whom Nature has prescribed a life of servitude and that the master races have the duty of keeping the rest of mankind in bondage. The liberal will not oppose their arguments in any way because his reasoning in favor of freedom for all, without distinction, is of an entirely different kind. We liberals do not assert that God or Nature meant all men to be free, because we are not instructed in the designs of God and of Nature, and we avoid, on principle, drawing God and Nature into a dispute over mundane questions. What we maintain is only that a system based on freedom for all workers warrants the greatest productivity of human labor and is therefore in the interest of all the inhabitants of the earth. We attack involuntary servitude, not in spite of the fact that it is advantageous to the “masters,” but because we are convinced that, in the last analysis, it hurts the interests of all members of human society, including the “masters.” If mankind had adhered to the practice of keeping the whole or even a part of the labor force in bondage, the magnificent economic developments of the last hundred and fifty years would not have been possible. We would have no railroads, no automobiles, no airplanes, no steamships, no electric light and power, no chemical industry, just as the ancient Greeks and Romans, with all their genius, were without these things. It suffices merely to mention this for everyone to realize that even the former masters of slaves or serfs have every reason to be satisfied with the course of events after the abolition of involuntary servitude. The European worker today lives under more favorable and more agreeable outward circumstances than the pharaoh of Egypt once did, in spite of the fact that the pharaoh commanded thousands of slaves, while the worker has nothing to depend on but the strength and skill of his hands. If a nabob of yore could be placed in the circumstances in which a common man lives today, he would declare without hesitation that his life had been a beggarly one in comparison with the life that even a man of moderate means can lead at present.

This is the fruit of free labor. It is able to create more wealth for everyone than slave labor once provided for the masters.

3

Peace

There are high-minded men who detest war because it brings death and suffering. However much one may admire their humanitarianism, their argument against war, in being based on philanthropic grounds, seems to lose much or all of its force when we consider the statements of the supporters and proponents of war. The latter by no means deny that war brings with it pain and sorrow. Nevertheless, they believe it is through war and war alone that mankind is able to make progress. War is the father of all things, said a Greek philosopher, and thousands have repeated it after him. Man degenerates in time of peace. Only war awakens in him slumbering talents and powers and imbues him with sublime ideals. If war were to be abolished, mankind would decay into indolence and stagnation.

It is difficult or even impossible to refute this line of reasoning on the part of the advocates of war if the only objection to war that one can think of is that it demands sacrifices. For the proponents of war are of the opinion that these sacrifices are not made in vain and that they are well worth making. If it were really true that war is the father of all things, then the human sacrifices it requires would be necessary to further the general welfare and the progress of humanity. One might lament the sacrifices, one might even strive to reduce their number, but one would not be warranted in wanting to abolish war and to bring about eternal peace.

The liberal critique of the argument in favor of war is fundamentally different from that of the humanitarians. It starts from the premise that not war, but peace, is the father of all things. What alone enables mankind to advance and distinguishes man from the animals is social cooperation. It is labor alone that is productive: it creates wealth and therewith lays the outward foundations for the inward flowering of man. War only destroys; it cannot create. War, carnage, destruction, and devastation we have in common with the predatory beasts of the jungle; constructive labor is our distinctively human characteristic. The liberal abhors war, not, like the humanitarian, in spite of the fact that it has beneficial consequences, but because it has only harmful ones.

The peace-loving humanitarian approaches the mighty potentate and addresses him thus: “Do not make war, even though you have the prospect of furthering your own welfare by a victory. Be noble and magnanimous and renounce the tempting victory even if it means a sacrifice for you and the loss of an advantage.” The liberal thinks otherwise. He is convinced that victorious war is an evil even for the victor, that peace is always better than war. He demands no sacrifice from the stronger, but only that he should come to realize where his true interests lie and should learn to understand that peace is for him, the stronger, just as advantageous as it is for the weaker.

When a peace-loving nation is attacked by a bellicose enemy, it must offer resistance and do everything to ward off the onslaught. Heroic deeds performed in such a war by those fighting for their freedom and their lives are entirely praiseworthy, and one rightly extols the manliness and courage of such fighters. Here daring, intrepidity, and contempt for death are praiseworthy because they are in the service of a good end. But people have made the mistake of representing these soldierly virtues as absolute virtues, as qualities good in and for themselves, without consideration of the end they serve. Whoever holds this opinion must, to be consistent, likewise acknowledge as noble virtues the daring, intrepidity, and contempt for death of the robber. In fact, however, there is nothing good or bad in and of itself. Human actions become good or bad only through the end that they serve and the consequences they entail. Even Leonidas would not be worthy of the esteem in which we hold him if he had fallen, not as the defender of his homeland, but as the leader of an invading army intent on robbing a peaceful people of its freedom and possessions.

How harmful war is to the development of human civilization becomes clearly apparent once one understands the advantages derived from the division of labor. The division of labor turns the self-sufficient individual into the ζῷον πολιτιϗόν [political animal] dependent on his fellow men, the social animal of which Aristotle spoke. Hostilities between one animal and another, or between one savage and another, in no way alter the economic basis of their existence. The matter is quite different when a quarrel that has to be decided by an appeal to arms breaks out among the members of a community in which labor is divided. In such a society each individual has a specialized function; no one is any longer in a position to live independently, because all have need of one another’s aid and support. Self-sufficient farmers, who produce on their own farms everything that they and their families need, can make war on one another. But when a village divides into factions, with the smith on one side and the shoemaker on the other, one faction will have to suffer from want of shoes, and the other from want of tools and weapons. Civil war destroys the division of labor inasmuch as it compels each group to content itself with the labor of its own adherents.

If the possibility of such hostilities had been considered likely in the first place, the division of labor would never have been allowed to develop to the point where, in case a fight really did break out, one would have to suffer privation. The progressive intensification of the division of labor is possible only in a society in which there is an assurance of lasting peace. Only under the shelter of such security can the division of labor develop. In the absence of this prerequisite, the division of labor does not extend beyond the limits of the village or even of the individual household. The division of labor between town and country—with the peasants of the surrounding villages furnishing grain, cattle, milk, and butter to the town in exchange for the manufactured products of the townsfolk—already presupposes that peace is assured at least within the region in question. If the division of labor is to embrace a whole nation, civil war must lie outside the realm of possibility; if it is to encompass the whole world, lasting peace among nations must be assured.

Everyone today would regard it as utterly senseless for a modern metropolis like London or Berlin to prepare to make war on the inhabitants of the adjacent countryside. Yet for many centuries the towns of Europe kept this possibility in mind and made economic provision for it. There were towns whose fortifications were, from the very beginning, so constructed that in case of need they could hold out for a while by keeping cattle and growing grain within the town walls.

At the beginning of the nineteenth century by far the greater part of the inhabited world was still divided into a number of economic regions that were, by and large, self-sufficient. Even in the more highly developed areas of Europe, the needs of a region were met, for the most part, by the production of the region itself. Trade that went beyond the narrow confines of the immediate vicinity was relatively insignificant and comprised, by and large, only such commodities as could not be produced in the area itself because of climatic conditions. In by far the greater part of the world, however, the production of the village itself supplied almost all the needs of its inhabitants. For these villagers, a disturbance in trade relations caused by war did not generally mean any impairment of their economic well-being. But even the inhabitants of the more advanced countries of Europe did not suffer very severely in time of war. If the Continental System, which Napoleon I imposed on Europe in order to exclude from the continent English goods and those coming from across the ocean only by way of England, had been enforced even more rigorously than it was, it would have still inflicted on the inhabitants of the continent hardly any appreciable privations. They would, of course, have had to do without coffee and sugar, cotton and cotton goods, spices, and many rare kinds of wood; but all these things then played only a subordinate role in the households of the great masses.

The development of a complex network of international economic relations is a product of nineteenth-century liberalism and capitalism. They alone made possible the extensive specialization of modern production with its concomitant improvement in technology. In order to provide the family of an English worker with all it consumes and desires, every nation of the five continents cooperates. Tea for the breakfast table is provided by Japan or Ceylon, coffee by Brazil or Java, sugar by the West Indies, meat by Australia or Argentina, cotton from America or Egypt, hides for leather from India or Russia, and so on. And in exchange for these things, English goods go to all parts of the world, to the most remote and out-of-the-way villages and farmsteads. This development was possible and conceivable only because, with the triumph of liberal principles, people no longer took seriously the idea that a great war could ever again break out. In the golden age of liberalism, war among members of the white race was generally considered a thing of the past.

But events have turned out quite differently. Liberal ideas and programs were supplanted by socialism, nationalism, protectionism, imperialism, etatism, and militarism. Whereas Kant and Von Humboldt, Bentham and Cobden had sung the praises of eternal peace, the spokesmen of a later age never tired of extolling war, both civil and international. And their success came only all too soon. The result was the World War, which has given our age a kind of object lesson on the incompatibility between war and the division of labor.

4

Equality

Nowhere is the difference between the reasoning of the older liberalism and that of neoliberalism clearer and easier to demonstrate than in their treatment of the problem of equality. The liberals of the eighteenth century, guided by the ideas of natural law and of the Enlightenment, demanded for everyone equality of political and civil rights because they assumed that all men are equal. God created all men equal, endowing them with fundamentally the same capabilities and talents, breathing into all of them the breath of His spirit. All distinctions between men are only artificial, the product of social, human—that is to say, transitory—institutions. What is imperishable in man—his spirit—is undoubtedly the same in rich and poor, noble and commoner, white and colored.

Nothing, however, is as ill-founded as the assertion of the alleged equality of all members of the human race. Men are altogether unequal. Even between brothers there exist the most marked differences in physical and mental attributes. Nature never repeats itself in its creations; it produces nothing by the dozen, nor are its products standardized. Each man who leaves her workshop bears the imprint of the individual, the unique, the never-to-recur. Men are not equal, and the demand for equality under the law can by no means be grounded in the contention that equal treatment is due to equals.

There are two distinct reasons why all men should receive equal treatment under the law. One was already mentioned when we analyzed the objections to involuntary servitude. In order for human labor to realize its highest attainable productivity, the worker must be free, because only the free worker, enjoying in the form of wages the fruits of his own industry, will exert himself to the full. The second consideration in favor of the equality of all men under the law is the maintenance of social peace. It has already been pointed out that every disturbance of the peaceful development of the division of labor must be avoided. But it is well-nigh impossible to preserve lasting peace in a society in which the rights and duties of the respective classes are different. Whoever denies rights to a part of the population must always be prepared for a united attack by the disenfranchised on the privileged. Class privileges must disappear so that the conflict over them may cease.

It is therefore quite unjustifiable to find fault with the manner in which liberalism put into effect its postulate of equality, on the ground that what it created was only equality before the law, and not real equality. All human power would be insufficient to make men really equal. Men are and will always remain unequal. It is sober considerations of utility such as those we have here presented that constitute the argument in favor of the equality of all men under the law. Liberalism never aimed at anything more than this, nor could it ask for anything more. It is beyond human power to make a Negro white. But the Negro can be granted the same rights as the white man and thereby offered the possibility of earning as much if he produces as much.

But, the socialists say, it is not enough to make men equal before the law. In order to make them really equal, one must also allot them the same income. It is not enough to abolish privileges of birth and of rank. One must finish the job and do away with the greatest and most important privilege of all, namely, that which is accorded by private property. Only then will the liberal program be completely realized, and a consistent liberalism thus leads ultimately to socialism, to the abolition of private ownership of the means of production.

Privilege is an institutional arrangement favoring some individuals or a certain group at the expense of the rest. The privilege exists, although it harms some—perhaps the majority—and benefits no one except those for whose advantage it was created. In the feudal order of the Middle Ages certain lords had the hereditary right to hold a judgeship. They were judges because they had inherited the position, regardless of whether they possessed the abilities and qualities of character that fit a man to be a judge. In their eyes this office was nothing more than a lucrative source of income. Here judgeship was the privilege of a class of noble birth.

If, however, as in modern states, judges are always drawn from the circle of those with legal knowledge and experience, this does not constitute a privilege in favor of lawyers. Preference is given to lawyers, not for their sake, but for the sake of the public welfare, because people are generally of the opinion that a knowledge of jurisprudence is an indispensable prerequisite for holding a judgeship. The question whether a certain institutional arrangement is or is not to be regarded as a privilege granted to a certain group, class, or person is not to be decided by whether or not it is advantageous to that group, class, or person, but according to how beneficial to the general public it is considered to be. The fact that on a ship at sea one man is captain and the rest constitute his crew and are subject to his command is certainly an advantage for the captain. Nevertheless, it is not a privilege of the captain if he possesses the ability to steer the ship between reefs in a storm and thereby to be of service not only to himself, but to the whole crew.

In order to determine whether an institutional arrangement is to be regarded as the special privilege of an individual or of a class, the question one should ask is not whether it benefits this or that individual or class, but only whether it is beneficial to the general public. If we reach the conclusion that only private ownership of the means of production makes possible the prosperous development of human society, it is clear that this is tantamount to saying that private property is not a privilege of the property owner, but a social institution for the good and benefit of all, even though it may at the same time be especially agreeable and advantageous to some.

It is not on behalf of property owners that liberalism favors the preservation of the institution of private property. It is not because the abolition of that institution would violate property rights that the liberals want to preserve it. If they considered the abolition of the institution of private property to be in the general interest, they would advocate that it be abolished, no matter how prejudicial such a policy might be to the interests of property owners. However, the preservation of that institution is in the interest of all strata of society. Even the poor man, who can call nothing his own, lives incomparably better in our society than he would in one that would prove incapable of producing even a fraction of what is produced in our own.

5

The Inequality of Wealth and Income

What is most criticized in our social order is the inequality in the distribution of wealth and income. There are rich and poor; there are very rich and very poor. The way out is not far to seek: the equal distribution of all wealth.

The first objection to this proposal is that it will not help the situation much because those of moderate means far outnumber the rich, so that each individual could expect from such a distribution only a quite insignificant increment in his standard of living. This is certainly correct, but the argument is not complete. Those who advocate equality of income distribution overlook the most important point, namely, that the total available for distribution, the annual product of social labor, is not independent of the manner in which it is divided. The fact that that product today is as great as it is, is not a natural or technological phenomenon independent of all social conditions, but entirely the result of our social institutions. Only because inequality of wealth is possible in our social order, only because it stimulates everyone to produce as much as he can and at the lowest cost, does mankind today have at its disposal the total annual wealth now available for consumption. Were this incentive to be destroyed, productivity would be so greatly reduced that the portion that an equal distribution would allot to each individual would be far less than what even the poorest receives today.

The inequality of income distribution has, however, still a second function quite as important as the one already mentioned: it makes possible the luxury of the rich.

Many foolish things have been said and written about luxury. Against luxury consumption it has been objected that it is unjust that some should enjoy great abundance while others are in want. This argument seems to have some merit. But it only seems so. For if it can be shown that luxury consumption performs a useful function in the system of social cooperation, then the argument will be proved invalid. This, however, is what we shall seek to demonstrate.

Our defense of luxury consumption is not, of course, the argument that one occasionally hears, that is, that it spreads money among the people. If the rich did not indulge themselves in luxuries, it is said, the poor would have no income. This is simply nonsense. For if there were no luxury consumption, the capital and labor that would otherwise have been applied to the production of luxury goods would produce other goods: articles of mass consumption, necessary articles, instead of “superfluous” ones.

To form a correct conception of the social significance of luxury consumption, one must first of all realize that the concept of luxury is an altogether relative one. Luxury consists in a way of living that stands in sharp contrast to that of the great mass of one’s contemporaries. The conception of luxury is, therefore, essentially historical. Many things that seem to us necessities today were once considered as luxuries. When, in the Middle Ages, an aristocratic Byzantine lady who had married a Venetian doge made use of a golden implement, which could be called the forerunner of the fork as we know it today, instead of her fingers, in eating her meals, the Venetians looked on this as a godless luxury, and they thought it only just when the lady was stricken with a dreadful disease; this must be, they supposed, the well-merited punishment of God for such unnatural extravagance. Two or three generations ago even in England an indoor bathroom was considered a luxury; today the home of every English worker of the better type contains one. Thirty-five years ago there were no automobiles; twenty years ago the possession of such a vehicle was the sign of a particularly luxurious mode of living; today in the United States even the worker has his Ford. This is the course of economic history. The luxury of today is the necessity of tomorrow. Every advance first comes into being as the luxury of a few rich people, only to become, after a time, the indispensable necessity taken for granted by everyone. Luxury consumption provides industry with the stimulus to discover and introduce new things. It is one of the dynamic factors in our economy. To it we owe the progressive innovations by which the standard of living of all strata of the population has been gradually raised.

Most of us have no sympathy with the rich idler who spends his life in pleasure without ever doing any work. But even he fulfills a function in the life of the social organism. He sets an example of luxury that awakens in the multitude a consciousness of new needs and gives industry the incentive to fulfill them. There was a time when only the rich could afford the luxury of visiting foreign countries. Schiller never saw the Swiss mountains, which he celebrated in Wilhelm Tell, although they bordered on his Swabian homeland. Goethe saw neither Paris nor Vienna nor London. Today, however, hundreds of thousands travel, and soon millions will do so.

6

Private Property and Ethics

In seeking to demonstrate the social function and necessity of private ownership of the means of production and of the concomitant inequality in the distribution of income and wealth, we are at the same time providing proof of the moral justification for private property and for the capitalist social order based upon it.

Morality consists in the regard for the necessary requirements of social existence that must be demanded of each individual member of society. A man living in isolation has no moral rules to follow. He need have no qualms about doing anything he finds it to his advantage to do, for he does not have to consider whether he is not thereby injuring others. But as a member of society, a man must take into consideration, in everything he does, not only his own immediate advantage, but also the necessity, in every action, of affirming society as such. For the life of the individual in society is possible only by virtue of social cooperation, and every individual would be most seriously harmed if the social organization of life and of production were to break down. In requiring of the individual that he should take society into consideration in all his actions, that he should forgo an action that, while advantageous to him, would be detrimental to social life, society does not demand that he sacrifice himself to the interests of others. For the sacrifice that it imposes is only a provisional one: the renunciation of an immediate and relatively minor advantage in exchange for a much greater ultimate benefit. The continued existence of society as the association of persons working in cooperation and sharing a common way of life is in the interest of every individual. Whoever gives up a momentary advantage in order to avoid imperiling the continued existence of society is sacrificing a lesser gain for a greater one.

The meaning of this regard for the general social interest has frequently been misunderstood. Its moral value was believed to consist in the fact of the sacrifice itself, in the renunciation of an immediate gratification. One refused to see that what is morally valuable is not the sacrifice, but the end served by the sacrifice, and one insisted on ascribing moral value to sacrifice, to renunciation, in and for itself alone. But sacrificing is moral only when it serves a moral end. There is a world of difference between a man who risks his life and property for a good cause and the man who sacrifices them without benefiting society in any way.

Everything that serves to preserve the social order is moral; everything that is detrimental to it is immoral. Accordingly, when we reach the conclusion that an institution is beneficial to society, one can no longer object that it is immoral. There may possibly be a difference of opinion about whether a particular institution is socially beneficial or harmful. But once it has been judged beneficial, one can no longer contend that, for some inexplicable reason, it must be condemned as immoral.

7

State and Government

The observance of the moral law is in the ultimate interest of every individual, because everyone benefits from the preservation of social cooperation; yet it imposes on everyone a sacrifice, even though only a provisional one that is more than counterbalanced by a greater gain. To perceive this, however, requires a certain insight into the connection between things, and to conform one’s actions in accordance with this perception demands a certain strength of will. Those who lack the perception, or, having the perception, lack the necessary will power to put it to use, are not able to conform to the moral law voluntarily. The situation here is no different from that involved in the observance of the rules of hygiene that the individual ought to follow in the interest of his own well-being. Someone may give himself over to unwholesome dissipation, such as indulgence in narcotics, whether because he does not know the consequences, or because he considers them less disadvantageous than the renunciation of the momentary pleasure, or because he lacks the requisite will power to adjust his behavior to his knowledge. There are people who consider that society is justified in resorting to coercive measures to set such a person on the right path and to correct anyone whose heedless actions imperil his own life and health. They advocate that alcoholics and drug addicts be forcibly deterred from indulging their vices and compelled to protect their good health.

The question whether compulsion really answers the purpose in such cases we shall reserve for later consideration. What concerns us here is something quite different, namely, the question whether people whose actions endanger the continued existence of society should be compelled to refrain from doing so. The alcoholic and the drug addict harm only themselves by their behavior; the person who violates the rules of morality governing man’s life in society harms not only himself, but everyone. Life in society would be quite impossible if the people who desire its continued existence and who conduct themselves accordingly had to forgo the use of force and compulsion against those who are prepared to undermine society by their behavior. A small number of antisocial individuals, i.e., persons who are not willing or able to make the temporary sacrifices that society demands of them, could make all society impossible. Without the application of compulsion and coercion against the enemies of society, there could not be any life in society.

We call the social apparatus of compulsion and coercion that induces people to abide by the rules of life in society, the state; the rules according to which the state proceeds, law; and the organs charged with the responsibility of administering the apparatus of compulsion, government.

There is, to be sure, a sect that believes that one could quite safely dispense with every form of compulsion and base society entirely on the voluntary observance of the moral code. The anarchists consider state, law, and government as superfluous institutions in a social order that would really serve the good of all, and not just the special interests of a privileged few. Only because the present social order is based on private ownership of the means of production is it necessary to resort to compulsion and coercion in its defense. If private property were abolished, then everyone, without exception, would spontaneously observe the rules demanded by social cooperation.

It has already been pointed out that this doctrine is mistaken in so far as it concerns the character of private ownership of the means of production. But even apart from this, it is altogether untenable. The anarchist, rightly enough, does not deny that every form of human cooperation in a society based on the division of labor demands the observance of some rules of conduct that are not always agreeable to the individual, since they impose on him a sacrifice, only temporary, it is true, but, for all that, at least for the moment, painful. But the anarchist is mistaken in assuming that everyone, without exception, will be willing to observe these rules voluntarily. There are dyspeptics who, though they know very well that indulgence in a certain food will, after a short time, cause them severe, even scarcely bearable pains, are nevertheless unable to forgo the enjoyment of the delectable dish. Now the interrelationships of life in society are not as easy to trace as the physiological effects of a food, nor do the consequences follow so quickly and, above all, so palpably for the evildoer. Can it, then, be assumed, without falling completely into absurdity, that, in spite of all this, every individual in an anarchist society will have greater foresight and will power than a gluttonous dyspeptic? In an anarchist society is the possibility entirely to be excluded that someone may negligently throw away a lighted match and start a fire or, in a fit of anger, jealousy, or revenge, inflict injury on his fellow man? Anarchism misunderstands the real nature of man. It would be practicable only in a world of angels and saints.

Liberalism is not anarchism, nor has it anything whatsoever to do with anarchism. The liberal understands quite clearly that without resort to compulsion, the existence of society would be endangered and that behind the rules of conduct whose observance is necessary to assure peaceful human cooperation must stand the threat of force if the whole edifice of society is not to be continually at the mercy of any one of its members. One must be in a position to compel the person who will not respect the lives, health, personal freedom, or private property of others to acquiesce in the rules of life in society. This is the function that the liberal doctrine assigns to the state: the protection of property, liberty, and peace.

The German socialist, Ferdinand Lassalle, tried to make the conception of a government limited exclusively to this sphere appear ridiculous by calling the state constituted on the basis of liberal principles the “night-watchman state.” But it is difficult to see why the night-watchman state should be any more ridiculous or worse than the state that concerns itself with the preparation of sauerkraut, with the manufacture of trouser buttons, or with the publication of newspapers. In order to understand the impression that Lassalle was seeking to create with this witticism, one must keep in mind that the Germans of his time had not yet forgotten the state of the monarchical despots, with its vast multiplicity of administrative and regulatory functions, and that they were still very much under the influence of the philosophy of Hegel, which had elevated the state to the position of a divine entity. If one looked upon the state, with Hegel, as “the self-conscious moral substance,” as the “Universal in and for itself, the rationality of the will,” then, of course, one had to view as blasphemous any attempt to limit the function of the state to that of serving as a night watchman.

It is only thus that one can understand how it was possible for people to go so far as to reproach liberalism for its “hostility” or enmity towards the state. If I am of the opinion that it is inexpedient to assign to the government the task of operating railroads, hotels, or mines, I am not an “enemy of the state” any more than I can be called an enemy of sulphuric acid because I am of the opinion that, useful though it may be for many purposes, it is not suitable either for drinking or for washing one’s hands.

It is incorrect to represent the attitude of liberalism toward the state by saying that it wishes to restrict the latter’s sphere of possible activity or that it abhors, in principle, all activity on the part of the state in relation to economic life. Such an interpretation is altogether out of the question. The stand that liberalism takes in regard to the problem of the function of the state is the necessary consequence of its advocacy of private ownership of the means of production. If one is in favor of the latter, one cannot, of course, also be in favor of communal ownership of the means of production, i.e., of placing them at the disposition of the government rather than of individual owners. Thus, the advocacy of private ownership of the means of production already implies a very severe circumscription of the functions assigned to the state.

The socialists are sometimes wont to reproach liberalism with a lack of consistency. It is, they maintain, illogical to restrict the activity of the state in the economic sphere exclusively to the protection of property. It is difficult to see why, if the state is not to remain completely neutral, its intervention has to be limited to protecting the rights of property owners.

This reproach would be justified only if the opposition of liberalism to all governmental activity in the economic sphere going beyond the protection of property stemmed from an aversion in principle against any activity on the part of the state. But that is by no means the case. The reason why liberalism opposes a further extension of the sphere of governmental activity is precisely that this would, in effect, abolish private ownership of the means of production. And in private property the liberal sees the principle most suitable for the organization of man’s life in society.

8

Democracy

Liberalism is therefore far from disputing the necessity of a machinery of state, a system of law, and a government. It is a grave misunderstanding to associate it in any way with the idea of anarchism. For the liberal, the state is an absolute necessity, since the most important tasks are incumbent upon it: the protection not only of private property, but also of peace, for in the absence of the latter the full benefits of private property cannot be reaped.

These considerations alone suffice to determine the conditions that a state must fulfill in order to correspond to the liberal ideal. It must not only be able to protect private property; it must also be so constituted that the smooth and peaceful course of its development is never interrupted by civil wars, revolutions, or insurrections.

Many people are still haunted by the idea, which dates back to the preliberal era, that a certain nobility and dignity attaches to the exercise of governmental functions. Up to very recently public officials in Germany enjoyed, and indeed still enjoy even today, a prestige that has made the most highly respected career that of a civil servant. The social esteem in which a young “assessor”* or lieutenant is held far exceeds that of a businessman or an attorney grown old in honest labor. Writers, scholars, and artists whose fame and glory have spread far beyond Germany enjoy in their own homeland only the respect corresponding to the often rather modest rank they occupied in the bureaucratic hierarchy.

There is no rational basis for this overestimation of the activities carried on in the offices of the administrative authorities. It is a form of atavism, a vestige from the days when the burgher had to fear the prince and his knights because at any moment he might be spoliated by them. In itself it is no finer, nobler, or more honorable to spend one’s days in a government office filling out documents than, for example, to work in the blueprint room of a machine factory. The tax collector has no more distinguished an occupation than those who are engaged in creating wealth directly, a part of which is skimmed off in the form of taxes to defray the expenses of the apparatus of government.

This notion of the special distinction and dignity attaching to the exercise of all the functions of government is what constitutes the basis of the pseudodemocratic theory of the state. According to this doctrine, it is shameful for anyone to allow himself to be ruled by others. Its ideal is a constitution in which the whole people rules and governs. This, of course, never has been, never can be, and never will be possible, not even under the conditions prevailing in a small state. It was once thought that this ideal had been realized in the Greek city-states of antiquity and in the small cantons of the Swiss mountains. This too was a mistake. In Greece only a part of the populace, the free citizens, had any share in the government; the metics and slaves had none. In the Swiss cantons only certain matters of a purely local character were and still are settled on the constitutional principle of direct democracy; all affairs transcending these narrow territorial bounds are managed by the Federation, whose government by no means corresponds to the ideal of direct democracy.

It is not at all shameful for a man to allow himself to be ruled by others. Government and administration, the enforcement of police regulations and similar ordinances, also require specialists: professional civil servants and professional politicians. The principle of the division of labor does not stop short even of the functions of government. One cannot be an engineer and a policeman at the same time. It in no way detracts from my dignity, my well-being, or my freedom that I am not myself a policeman. It is no more undemocratic for a few people to have the responsibility of providing protection for everyone else than it is for a few people to undertake to produce shoes for everyone else. There is not the slightest reason to object to professional politicians and professional civil servants if the institutions of the state are democratic. But democracy is something entirely different from what the romantic visionaries who prattle about direct democracy imagine.

Government by a handful of people—and the rulers are always as much in the minority as against those ruled as the producers of shoes are as against the consumers of shoes—depends on the consent of the governed, i.e., on their acceptance of the existing administration. They may see it only as the lesser evil, or as an unavoidable evil, yet they must be of the opinion that a change in the existing situation would have no purpose. But once the majority of the governed becomes convinced that it is necessary and possible to change the form of government and to replace the old regime and the old personnel with a new regime and new personnel, the days of the former are numbered. The majority will have the power to carry out its wishes by force even against the will of the old regime. In the long run no government can maintain itself in power if it does not have public opinion behind it, i.e., if those governed are not convinced that the government is good. The force to which the government resorts in order to make refractory spirits compliant can be successfully applied only as long as the majority does not stand solidly in opposition.

There is, therefore, in every form of polity a means for making the government at least ultimately dependent on the will of the governed, viz., civil war, revolution, insurrection. But it is just this expedient that liberalism wants to avoid. There can be no lasting economic improvement if the peaceful course of affairs is continually interrupted by internal struggles. A political situation such as existed in England at the time of the Wars of the Roses would plunge modern England in a few years into the deepest and most dreadful misery. The present level of economic development would never have been attained if no solution had been found to the problem of preventing the continual outbreak of civil wars. A fratricidal struggle like the French Revolution of 1789 cost a heavy loss in life and property. Our present economy could no longer endure such convulsions. The population of a modern metropolis would have to suffer so frightfully from a revolutionary uprising that could bar the importation of food and coal and cut off the flow of electricity, gas, and water that even the fear that such disturbances might break out would paralyze the life of the city.

Here is where the social function performed by democracy finds its point of application. Democracy is that form of political constitution which makes possible the adaptation of the government to the wishes of the governed without violent struggles. If in a democratic state the government is no longer being conducted as the majority of the population would have it, no civil war is necessary to put into office those who are willing to work to suit the majority. By means of elections and parliamentary arrangements, the change of government is executed smoothly and without friction, violence, or bloodshed.

9

Critique of the Doctrine of Force

The champions of democracy in the eighteenth century argued that only monarchs and their ministers are morally depraved, injudicious, and evil. The people, however, are altogether good, pure, and noble, and have, besides, the intellectual gifts needed in order always to know and to do what is right. This is, of course, all nonsense, no less so than the flattery of the courtiers who ascribed all good and noble qualities to their princes. The people are the sum of all individual citizens; and if some individuals are not intelligent and noble, then neither are all together.

Since mankind entered the age of democracy with such high-flown expectations, it is not surprising that disillusionment should soon have set in. It was quickly discovered that the democracies committed at least as many errors as the monarchies and aristocracies had. The comparison that people drew between the men whom the democracies placed at the head of the government and those whom the emperors and kings, in the exercise of their absolute power, had elevated to that position, proved by no means favorable to the new wielders of power. The French are wont to speak of “killing with ridicule.” And indeed, the statesmen representative of democracy soon rendered it everywhere ridiculous. Those of the old regime had displayed a certain aristocratic dignity, at least in their outward demeanor. The new ones, who replaced them, made themselves contemptible by their behavior. Nothing has done more harm to democracy in Germany and Austria than the hollow arrogance and impudent vanity with which the Social-Democratic leaders who rose to power after the collapse of the empire conducted themselves.

Thus, wherever democracy triumphed, an antidemocratic doctrine soon arose in fundamental opposition to it. There is no sense, it was said, in allowing the majority to rule. The best ought to govern, even if they are in the minority. This seems so obvious that the supporters of antidemocratic movements of all kinds have steadily increased in number. The more contemptible the men whom democracy has placed at the top have proved themselves to be, the greater has grown the number of the enemies of democracy.

There are, however, serious fallacies in the antidemocratic doctrine. What, after all, does it mean to speak of “the best man” or “the best men”? The Republic of Poland placed a piano virtuoso* at its head because it considered him the best Pole of the age. But the qualities that the leader of a state must have are very different from those of a musician. The opponents of democracy, when they use the expression “the best,” can mean nothing else than the man or the men best fitted to conduct the affairs of the government, even if they understand little or nothing of music. But this leads to the same political question: Who is the best fitted? Was it Disraeli or Gladstone? The Tory saw the best man in the former; the Whig, in the latter. Who should decide this if not the majority?

And so we reach the decisive point of all antidemocratic doctrines, whether advanced by the descendants of the old aristocracy and the supporters of hereditary monarchy, or by the syndicalists, Bolsheviks, and socialists, viz., the doctrine of force. The opponents of democracy champion the right of a minority to seize control of the state by force and to rule over the majority. The moral justification of this procedure consists, it is thought, precisely in the power actually to seize the reins of government. One recognizes the best, those who alone are competent to govern and command, by virtue of their demonstrated ability to impose their rule on the majority against its will. Here the teaching of l’Action Française coincides with that of the syndicalists, and the doctrine of Ludendorff and Hitler, with that of Lenin and Trotsky.

Many arguments can be urged for and against these doctrines, depending on one’s religious and philosophical convictions, about which any agreement is scarcely to be expected. This is not the place to present and discuss the arguments pro and con, for they are not conclusive. The only consideration that can be decisive is one that bases itself on the fundamental argument in favor of democracy.

If every group that believes itself capable of imposing its rule on the rest is to be entitled to undertake the attempt, we must be prepared for an uninterrupted series of civil wars. But such a state of affairs is incompatible with the stage of the division of labor that we have reached today. Modern society, based as it is on the division of labor, can be preserved only under conditions of lasting peace. If we had to prepare for the possibility of continual civil wars and internal struggles, we should have to retrogress to such a primitive stage of the division of labor that each province at least, if not each village, would become virtually autarkic, i.e., capable of feeding and maintaining itself for a time as a self-sufficient economic entity without importing anything from the outside. This would mean such an enormous decline in the productivity of labor that the earth could feed only a fraction of the population that it supports today. The antidemocratic ideal leads to the kind of economic order known to the Middle Ages and antiquity. Every city, every village, indeed, every individual dwelling was fortified and equipped for defense, and every province was as independent of the rest of the world as possible in its provision of commodities.

The democrat too is of the opinion that the best man ought to rule. But he believes that the fitness of a man or of a group of men to govern is better demonstrated if they succeed in convincing their fellow citizens of their qualifications for that position, so that they are voluntarily entrusted with the conduct of public affairs, than if they resort to force to compel others to acknowledge their claims. Whoever does not succeed in attaining to a position of leadership by virtue of the power of his arguments and the confidence that his person inspires has no reason to complain about the fact that his fellow citizens prefer others to him.

To be sure, it should not and need not be denied that there is one situation in which the temptation to deviate from the democratic principles of liberalism becomes very great indeed. If judicious men see their nation, or all the nations of the world, on the road to destruction, and if they find it impossible to induce their fellow citizens to heed their counsel, they may be inclined to think it only fair and just to resort to any means whatever, in so far as it is feasible and will lead to the desired goal, in order to save everyone from disaster. Then the idea of a dictatorship of the elite, of a government by the minority maintained in power by force and ruling in the interests of all, may arise and find supporters. But force is never a means of overcoming these difficulties. The tyranny of a minority can never endure unless it succeeds in convincing the majority of the necessity or, at any rate, of the utility, of its rule. But then the minority no longer needs force to maintain itself in power.

History provides an abundance of striking examples to show that, in the long run, even the most ruthless policy of repression does not suffice to maintain a government in power. To cite but one, the most recent and the best known: when the Bolsheviks seized control in Russia, they were a small minority, and their program found scant support among the great masses of their countrymen. For the peasantry, who constitute the bulk of the Russian people, would have nothing to do with the Bolshevik policy of farm collectivization. What they wanted was the division of the land among the “landed poverty,” as the Bolsheviks call this part of the population. And it was this program of the peasantry, not that of the Marxist leaders, which was actually put into effect. In order to remain in power, Lenin and Trotsky not only accepted this agrarian reform, but even made it a part of their own program, which they undertook to defend against all attacks, domestic and foreign. Only thus were the Bolsheviks able to win the confidence of the great mass of the Russian people. Since they adopted this policy of land distribution, the Bolsheviks rule no longer against the will of the great mass of the people, but with their consent and support. There were only two possible alternatives open to them: either their program or their control of the government had to be sacrificed. They chose the first and remained in power. The third possibility, to carry out their program by force against the will of the great mass of the people, did not exist at all. Like every determined and well-led minority, the Bolsheviks were able to seize control by force and retain it for a short time. In the long run, however, they would have been no better able to keep it than any other minority. The various attempts of the Whites to dislodge the Bolsheviks all failed because the mass of the Russian people were against them. But even if they had succeeded, the victors too would have had to respect the desires of the overwhelming majority of the population. It would have been impossible for them to alter in any way after the event the already accomplished fact of the land distribution and to restore to the landowners what had been stolen from them.

Only a group that can count on the consent of the governed can establish a lasting regime. Whoever wants to see the world governed according to his own ideas must strive for dominion over men’s minds. It is impossible, in the long run, to subject men against their will to a regime that they reject. Whoever tries to do so by force will ultimately come to grief, and the struggles provoked by his attempt will do more harm than the worst government based on the consent of the governed could ever do. Men cannot be made happy against their will.

10

The Argument of Fascism*

If liberalism nowhere found complete acceptance, its success in the nineteenth century went so far at least as that some of the most important of its principles were considered beyond dispute. Before 1914, even the most dogged and bitter enemies of liberalism had to resign themselves to allowing many liberal principles to pass unchallenged. Even in Russia, where only a few feeble rays of liberalism had penetrated, the supporters of the Czarist despotism, in persecuting their opponents, still had to take into consideration the liberal opinions of Europe; and during the World War, the war parties in the belligerent nations, with all their zeal, still had to practice a certain moderation in their struggle against internal opposition.

Only when the Marxist Social Democrats had gained the upper hand and taken power in the belief that the age of liberalism and capitalism had passed forever did the last concessions disappear that it had still been thought necessary to make to the liberal ideology. The parties of the Third International consider any means as permissible if it seems to give promise of helping them in their struggle to achieve their ends. Whoever does not unconditionally acknowledge all their teachings as the only correct ones and stand by them through thick and thin has, in their opinion, incurred the penalty of death; and they do not hesitate to exterminate him and his whole family, infants included, whenever and wherever it is physically possible.

The frank espousal of a policy of annihilating opponents and the murders committed in the pursuance of it have given rise to an opposition movement. All at once the scales fell from the eyes of the non-Communist enemies of liberalism. Until then they had believed that even in a struggle against a hateful opponent one still had to respect certain liberal principles. They had had, even though reluctantly, to exclude murder and assassination from the list of measures to be resorted to in political struggles. They had had to resign themselves to many limitations in persecuting the opposition press and in suppressing the spoken word. Now, all at once, they saw that opponents had risen up who gave no heed to such considerations and for whom any means was good enough to defeat an adversary. The militaristic and nationalistic enemies of the Third International felt themselves cheated by liberalism. Liberalism, they thought, stayed their hand when they desired to strike a blow against the revolutionary parties while it was still possible to do so. If liberalism had not hindered them, they would, so they believe, have bloodily nipped the revolutionary movements in the bud. Revolutionary ideas had been able to take root and flourish only because of the tolerance they had been accorded by their opponents, whose will power had been enfeebled by a regard for liberal principles that, as events subsequently proved, was overscrupulous. If the idea had occurred to them years ago that it is permissible to crush ruthlessly every revolutionary movement, the victories that the Third International has won since 1917 would never have been possible. For the militarists and nationalists believe that when it comes to shooting and fighting, they themselves are the most accurate marksmen and the most adroit fighters.

The fundamental idea of these movements—which, from the name of the most grandiose and tightly disciplined among them, the Italian, may, in general, be designated as Fascist—consists in the proposal to make use of the same unscrupulous methods in the struggle against the Third International as the latter employs against its opponents. The Third International seeks to exterminate its adversaries and their ideas in the same way that the hygienist strives to exterminate a pestilential bacillus; it considers itself in no way bound by the terms of any compact that it may conclude with opponents, and it deems any crime, any lie, and any calumny permissible in carrying on its struggle. The Fascists, at least in principle, profess the same intentions. That they have not yet succeeded as fully as the Russian Bolsheviks in freeing themselves from a certain regard for liberal notions and ideas and traditional ethical precepts is to be attributed solely to the fact that the Fascists carry on their work among nations in which the intellectual and moral heritage of some thousands of years of civilization cannot be destroyed at one blow, and not among the barbarian peoples on both sides of the Urals, whose relationship to civilization has never been any other than that of marauding denizens of forest and desert accustomed to engage, from time to time, in predatory raids on civilized lands in the hunt for booty. Because of this difference, Fascism will never succeed as completely as Russian Bolshevism in freeing itself from the power of liberal ideas. Only under the fresh impression of the murders and atrocities perpetrated by the supporters of the Soviets were Germans and Italians able to block out the remembrance of the traditional restraints of justice and morality and find the impulse to bloody counteraction. The deeds of the Fascists and of other parties corresponding to them were emotional reflex actions evoked by indignation at the deeds of the Bolsheviks and Communists. As soon as the first flush of anger had passed, their policy took a more moderate course and will probably become even more so with the passage of time.

This moderation is the result of the fact that traditional liberal views still continue to have an unconscious influence on the Fascists. But however far this may go, one must not fail to recognize that the conversion of the Rightist parties to the tactics of Fascism shows that the battle against liberalism has resulted in successes that, only a short time ago, would have been considered completely unthinkable. Many people approve of the methods of Fascism, even though its economic program is altogether antiliberal and its policy completely interventionist, because it is far from practicing the senseless and unrestrained destructionism that has stamped the Communists as the arch-enemies of civilization. Still others, in full knowledge of the evil that Fascist economic policy brings with it, view Fascism, in comparison with Bolshevism and Sovietism, as at least the lesser evil. For the majority of its public and secret supporters and admirers, however, its appeal consists precisely in the violence of its methods.

Now it cannot be denied that the only way one can offer effective resistance to violent assaults is by violence. Against the weapons of the Bolsheviks, weapons must be used in reprisal, and it would be a mistake to display weakness before murderers. No liberal has ever called this into question. What distinguishes liberal from Fascist political tactics is not a difference of opinion in regard to the necessity of using armed force to resist armed attackers, but a difference in the fundamental estimation of the role of violence in a struggle for power. The great danger threatening domestic policy from the side of Fascism lies in its complete faith in the decisive power of violence. In order to assure success, one must be imbued with the will to victory and always proceed violently. This is its highest principle. What happens, however, when one’s opponent, similarly animated by the will to be victorious, acts just as violently? The result must be a battle, a civil war. The ultimate victor to emerge from such conflicts will be the faction strongest in number. In the long run, a minority—even if it is composed of the most capable and energetic—cannot succeed in resisting the majority. The decisive question, therefore, always remains: How does one obtain a majority for one’s own party? This, however, is a purely intellectual matter. It is a victory that can be won only with the weapons of the intellect, never by force. The suppression of all opposition by sheer violence is a most unsuitable way to win adherents to one’s cause. Resort to naked force—that is, without justification in terms of intellectual arguments accepted by public opinion—merely gains new friends for those whom one is thereby trying to combat. In a battle between force and an idea, the latter always prevails.

Fascism can triumph today because universal indignation at the infamies committed by the socialists and communists has obtained for it the sympathies of wide circles. But when the fresh impression of the crimes of the Bolsheviks has paled, the socialist program will once again exercise its power of attraction on the masses. For Fascism does nothing to combat it except to suppress socialist ideas and to persecute the people who spread them. If it wanted really to combat socialism, it would have to oppose it with ideas. There is, however, only one idea that can be effectively opposed to socialism, viz., that of liberalism.

It has often been said that nothing furthers a cause more than creating martyrs for it. This is only approximately correct. What strengthens the cause of the persecuted faction is not the martyrdom of its adherents, but the fact that they are being attacked by force, and not by intellectual weapons. Repression by brute force is always a confession of the inability to make use of the better weapons of the intellect—better because they alone give promise of final success. This is the fundamental error from which Fascism suffers and which will ultimately cause its downfall. The victory of Fascism in a number of countries is only an episode in the long series of struggles over the problem of property. The next episode will be the victory of Communism. The ultimate outcome of the struggle, however, will not be decided by arms, but by ideas. It is ideas that group men into fighting factions, that press the weapons into their hands, and that determine against whom and for whom the weapons shall be used. It is they alone, and not arms, that, in the last analysis, turn the scales.

So much for the domestic policy of Fascism. That its foreign policy, based as it is on the avowed principle of force in international relations, cannot fail to give rise to an endless series of wars that must destroy all of modern civilization requires no further discussion. To maintain and further raise our present level of economic development, peace among nations must be assured. But they cannot live together in peace if the basic tenet of the ideology by which they are governed is the belief that one’s own nation can secure its place in the community of nations by force alone.

It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.

11

The Limits of Governmental Activity

As the liberal sees it, the task of the state consists solely and exclusively in guaranteeing the protection of life, health, liberty, and private property against violent attacks. Everything that goes beyond this is an evil. A government that, instead of fulfilling its task, sought to go so far as actually to infringe on personal security of life and health, freedom, and property would, of course, be altogether bad.

Still, as Jacob Burckhardt says, power is evil in itself, no matter who exercises it. It tends to corrupt those who wield it and leads to abuse. Not only absolute sovereigns and aristocrats, but the masses also, in whose hands democracy entrusts the supreme power of government, are only too easily inclined to excesses.

In the United States, the manufacture and sale of alcoholic beverages are prohibited. Other countries do not go so far, but nearly everywhere some restrictions are imposed on the sale of opium, cocaine, and similar narcotics. It is universally deemed one of the tasks of legislation and government to protect the individual from himself. Even those who otherwise generally have misgivings about extending the area of governmental activity consider it quite proper that the freedom of the individual should be curtailed in this respect, and they think that only a benighted doctrinairism could oppose such prohibitions. Indeed, so general is the acceptance of this kind of interference by the authorities in the life of the individual that those who are opposed to liberalism on principle are prone to base their argument on the ostensibly undisputed acknowledgment of the necessity of such prohibitions and to draw from it the conclusion that complete freedom is an evil and that some measure of restriction must be imposed upon the freedom of the individual by the governmental authorities in their capacity as guardians of his welfare. The question cannot be whether the authorities ought to impose restrictions upon the freedom of the individual, but only how far they ought to go in this respect.

No words need be wasted over the fact that all these narcotics are harmful. The question whether even a small quantity of alcohol is harmful or whether the harm results only from the abuse of alcoholic beverages is not at issue here. It is an established fact that alcoholism, cocainism, and morphinism are deadly enemies of life, of health, and of the capacity for work and enjoyment; and a utilitarian must therefore consider them as vices. But this is far from demonstrating that the authorities must interpose to suppress these vices by commercial prohibitions, nor is it by any means evident that such intervention on the part of the government is really capable of suppressing them or that, even if this end could be attained, it might not therewith open up a Pandora’s box of other dangers, no less mischievous than alcoholism and morphinism.

Whoever is convinced that indulgence or excessive indulgence in these poisons is pernicious is not hindered from living abstemiously or temperately. This question cannot be treated exclusively in reference to alcoholism, morphinism, cocainism, etc., which all reasonable men acknowledge to be evils. For if the majority of citizens is, in principle, conceded the right to impose its way of life upon a minority, it is impossible to stop at prohibitions against indulgence in alcohol, morphine, cocaine, and similar poisons. Why should not what is valid for these poisons be valid also for nicotine, caffein, and the like? Why should not the state generally prescribe which foods may be indulged in and which must be avoided because they are injurious? In sports too, many people are prone to carry their indulgence further than their strength will allow. Why should not the state interfere here as well? Few men know how to be temperate in their sexual life, and it seems especially difficult for aging persons to understand that they should cease entirely to indulge in such pleasures or, at least, do so in moderation. Should not the state intervene here too? More harmful still than all these pleasures, many will say, is the reading of evil literature. Should a press pandering to the lowest instincts of man be allowed to corrupt the soul? Should not the exhibition of pornographic pictures, of obscene plays, in short, of all allurements to immorality, be prohibited? And is not the dissemination of false sociological doctrines just as injurious to men and nations? Should men be permitted to incite others to civil war and to wars against foreign countries? And should scurrilous lampoons and blasphemous diatribes be allowed to undermine respect for God and the Church?

We see that as soon as we surrender the principle that the state should not interfere in any questions touching on the individual’s mode of life, we end by regulating and restricting the latter down to the smallest detail. The personal freedom of the individual is abrogated. He becomes a slave of the community, bound to obey the dictates of the majority. It is hardly necessary to expatiate on the ways in which such powers could be abused by malevolent persons in authority. The wielding of powers of this kind even by men imbued with the best of intentions must needs reduce the world to a graveyard of the spirit. All mankind’s progress has been achieved as a result of the initiative of a small minority that began to deviate from the ideas and customs of the majority until their example finally moved the others to accept the innovation themselves. To give the majority the right to dictate to the minority what it is to think, to read, and to do is to put a stop to progress once and for all.

Let no one object that the struggle against morphinism and the struggle against “evil” literature are two quite different things. The only difference between them is that some of the same people who favor the prohibition of the former will not agree to the prohibition of the latter. In the United States, the Methodists and Fundamentalists, right after the passage of the law prohibiting the manufacture and sale of alcoholic beverages, took up the struggle for the suppression of the theory of evolution, and they have already succeeded in ousting Darwinism from the schools in a number of states. In Soviet Russia, every free expression of opinion is suppressed. Whether or not permission is granted for a book to be published depends on the discretion of a number of uneducated and uncultivated fanatics who have been placed in charge of the arm of the government empowered to concern itself with such matters.

The propensity of our contemporaries to demand authoritarian prohibition as soon as something does not please them, and their readiness to submit to such prohibitions even when what is prohibited is quite agreeable to them shows how deeply ingrained the spirit of servility still remains within them. It will require many long years of self-education until the subject can turn himself into the citizen. A free man must be able to endure it when his fellow men act and live otherwise than he considers proper. He must free himself from the habit, just as soon as something does not please him, of calling for the police.

12

Tolerance

Liberalism limits its concern entirely and exclusively to earthly life and earthly endeavor. The kingdom of religion, on the other hand, is not of this world. Thus, liberalism and religion could both exist side by side without their spheres’ touching. That they should have reached the point of collision was not the fault of liberalism. It did not transgress its proper sphere; it did not intrude into the domain of religious faith or of metaphysical doctrine. Nevertheless, it encountered the church as a political power claiming the right to regulate according to its judgment not only the relationship of man to the world to come, but also the affairs of this world. It was at this point that the battle lines had to be drawn.

So overwhelming was the victory won by liberalism in this conflict that the church had to give up, once and for all, claims that it had vigorously maintained for thousands of years. The burning of heretics, inquisitorial persecutions, religious wars—these today belong to history. No one can understand any longer how quiet people, who practiced their devotions as they believed right within the four walls of their own home, could have been dragged before courts, incarcerated, martyred, and burned. But even if no more stakes are kindled ad majorem Dei gloriam [for the greater glory of God], a great deal of intolerance still persists.

Liberalism, however, must be intolerant of every kind of intolerance. If one considers the peaceful cooperation of all men as the goal of social evolution, one cannot permit the peace to be disturbed by priests and fanatics. Liberalism proclaims tolerance for every religious faith and every metaphysical belief, not out of indifference for these “higher” things, but from the conviction that the assurance of peace within society must take precedence over everything and everyone. And because it demands toleration of all opinions and all churches and sects, it must recall them all to their proper bounds whenever they venture intolerantly beyond them. In a social order based on peaceful cooperation, there is no room for the claim of the churches to monopolize the instruction and education of the young. Everything that their supporters accord them of their own free will may and must be granted to the churches; nothing may be permitted to them in respect to persons who want to have nothing to do with them.

It is difficult to understand how these principles of liberalism could make enemies among the communicants of the various faiths. If they make it impossible for a church to make converts by force, whether its own or that placed at its disposal by the state, on the other hand they also protect that church against coercive proselytization by other churches and sects. What liberalism takes from the church with one hand it gives back again with the other. Even religious zealots must concede that liberalism takes nothing from faith of what belongs to its proper sphere.

To be sure, the churches and sects that, where they have the upper hand, cannot do enough in their persecution of dissenters, also demand, where they find themselves in the minority, tolerance at least for themselves. However, this demand for tolerance has nothing whatever in common with the liberal demand for tolerance. Liberalism demands tolerance as a matter of principle, not from opportunism. It demands toleration even of obviously nonsensical teachings, absurd forms of heterodoxy, and childishly silly superstitions. It demands toleration for doctrines and opinions that it deems detrimental and ruinous to society and even for movements that it indefatigably combats. For what impels liberalism to demand and accord toleration is not consideration for the content of the doctrine to be tolerated, but the knowledge that only tolerance can create and preserve the condition of social peace without which humanity must relapse into the barbarism and penury of centuries long past.

Against what is stupid, nonsensical, erroneous, and evil, liberalism fights with the weapons of the mind, and not with brute force and repression.

13

The State and Antisocial Conduct

The state is the apparatus of compulsion and coercion. This holds not only for the “night-watchman” state, but just as much for every other, and most of all for the socialist state. Everything that the state is capable of doing it does by compulsion and the application of force. To suppress conduct dangerous to the existence of the social order is the sum and substance of state activity; to this is added, in a socialist community, control over the means of production.

The sober logic of the Romans expressed this fact symbolically by adopting the axe and the bundle of rods as the emblem of the state. Abstruse mysticism, calling itself philosophy, has done as much as possible in modern times to obscure the truth of the matter. For Schelling, the state is the direct and visible image of absolute life, a phase in the revelation of the Absolute or World Soul. It exists only for its own sake, and its activity is directed exclusively to the maintenance of both the substance and the form of its existence. For Hegel, Absolute Reason reveals itself in the state, and Objective Spirit realizes itself in it. It is ethical mind developed into an organic reality—reality and the ethical idea as the revealed substantial will intelligible to itself. The epigones of idealist philosophy outdid even their masters in their deification of the state. To be sure, one comes no closer to the truth if, in reaction to these and similar doctrines, one calls the state, with Nietzsche, the coldest of all cold monsters. The state is neither cold nor warm, for it is an abstract concept in whose name living men—the organs of the state, the government—act. All state activity is human action, an evil inflicted by men on men. The goal—the preservation of society—justifies the action of the organs of the state, but the evils inflicted are not felt as any less evil by those who suffer under them.

The evil that a man inflicts on his fellow man injures both—not only the one to whom it is done, but also the one who does it. Nothing corrupts a man so much as being an arm of the law and making men suffer. The lot of the subject is anxiety, a spirit of servility and fawning adulation; but the pharisaical self-righteousness, conceit, and arrogance of the master are no better.

Liberalism seeks to take the sting out of the relationship of the government official to the citizen. In doing so, of course, it does not follow in the footsteps of those romantics who defend the antisocial behavior of the lawbreaker and condemn not only judges and policemen, but also the social order as such. Liberalism neither wishes to nor can deny that the coercive power of the state and the lawful punishment of criminals are institutions that society could never, under any circumstances, do without. However, the liberal believes that the purpose of punishment is solely to rule out, as far as possible, behavior dangerous to society. Punishment should not be vindictive or retaliatory. The criminal has incurred the penalties of the law, but not the hate and sadism of the judge, the policeman, and the ever lynch-thirsty mob.

What is most mischievous about the coercive power that justifies itself in the name of the “state” is that, because it is always of necessity ultimately sustained by the consent of the majority, it directs its attack against germinating innovations. Human society cannot do without the apparatus of the state, but the whole of mankind’s progress has had to be achieved against the resistance and opposition of the state and its power of coercion. No wonder that all who have had something new to offer humanity have had nothing good to say of the state or its laws! Incorrigible etatist mystics and state-worshippers may hold this against them; liberals will understand their position even if they cannot approve it. Yet every liberal must oppose this understandable aversion to everything that pertains to jailers and policemen when it is carried to the point of such overweening self-esteem as to proclaim the right of the individual to rebel against the state. Violent resistance against the power of the state is the last resort of the minority in its effort to break loose from the oppression of the majority. The minority that desires to see its ideas triumph must strive by intellectual means to become the majority. The state must be so constituted that the scope of its laws permits the individual a certain amount of latitude within which he can move freely. The citizen must not be so narrowly circumscribed in his activities that, if he thinks differently from those in power, his only choice is either to perish or to destroy the machinery of state.

CHAPTER 2

Liberal Economic Policy

1

The Organization of the Economy

It is possible to distinguish five different conceivable systems of organizing the cooperation of individuals in a society based on the division of labor: the system of private ownership of the means of production, which, in its developed form, we call capitalism; the system of private ownership of the means of production with periodic confiscation of all wealth and its subsequent redistribution; the system of syndicalism; the system of public ownership of the means of production, which is known as socialism or communism; and, finally, the system of interventionism.

The history of private ownership of the means of production coincides with the history of the development of mankind from an animal-like condition to the highest reaches of modern civilization. The opponents of private property have gone to great pains to demonstrate that in the primeval beginnings of human society the institution of private property still did not exist in a complete form because a part of the land under cultivation was subject to periodic redistribution. From this observation, which shows that private property is only a “historical category,” they have tried to draw the conclusion that it could once again be quite safely dispensed with. The logical fallacy involved in this reasoning is too flagrant to require any further discussion. That there was social cooperation in remote antiquity even in the absence of a completely realized system of private property cannot provide the slightest proof that one could manage without private property just as well at higher stages of civilization. If history could prove anything at all in regard to this question, it could only be that nowhere and at no time has there ever been a people which has raised itself without private property above a condition of the most oppressive penury and savagery scarcely distinguishable from animal existence.

The earlier opponents of the system of private ownership of the means of production did not attack the institution of private property as such, but only the inequality of income distribution. They recommended the abolition of the inequality of income and wealth by means of a system of periodical redistribution of the total quantity of commodities or, at least, of land, which was at that time virtually the only factor of production taken into consideration. In the technologically backward countries, where primitive agricultural production prevails, this idea of an equal distribution of property still holds sway today. People are accustomed to call it agrarian socialism, though the appellation is not at all apposite since this system has nothing to do with socialism. The Bolshevist revolution in Russia, which had begun as socialist, did not establish socialism in agriculture—i.e., communal ownership of the land—but, instead, agrarian socialism. In large areas of the rest of Eastern Europe, the division of big landed estates among the small farmers, under the name of agrarian reform, is the ideal espoused by influential political parties.

It is unnecessary to enter further into a discussion of this system. That it must result in a reduction in the output of human labor will scarcely be disputed. Only where land is still cultivated in the most primitive way can one fail to recognize the decrease in productivity which follows upon its division and distribution. That it is utterly senseless to break up a dairy farm equipped with all the devices of modern technology will be conceded by everyone. As for the transference of this principle of division and distribution to industry or commercial enterprises, it is altogether unthinkable. A railroad, a rolling mill, or a machine factory cannot be divided up. One could undertake to carry out the periodical redistribution of property only if one first completely broke up the economy based on the division of labor and the unhampered market and returned to an economy of self-sufficient farmsteads existing side by side without engaging in exchange.

The idea of syndicalism represents the attempt to adapt the ideal of the equal distribution of property to the circumstances of modern large-scale industry. Syndicalism seeks to invest ownership of the means of production neither in individuals nor in society, but in the workers employed in each industry or branch of production.1

Since the proportion in which the material and the personal factors of production are combined is different in the different branches of production, equality in the distribution of property cannot be attained in this way at all. From the very outset the worker will receive a greater portion of property in some branches of industry than in others. One has only to consider the difficulties that must arise from the necessity, continually present in any economy, of shifting capital and labor from one branch of production to another. Will it be possible to withdraw capital from one branch of industry in order thereby more generously to equip another? Will it be possible to remove workers from one branch of production in order to transfer them to another where the quota of capital per worker is smaller? The impossibility of such transfers renders the syndicalist commonwealth utterly absurd and impracticable as a form of social organization. Yet if we assume that over and above the individual groups there exists a central power that is entitled to carry out such transfers, we are no longer dealing with syndicalism, but with socialism. In reality, syndicalism as a social ideal is so absurd that only muddleheads who have not sufficiently thought the problem through have ventured to advocate it on principle.

Socialism or communism is that organization of society in which property—the power of deploying all the means of production—is vested in society, i.e., in the state, as the social apparatus of compulsion and coercion. For a society to be judged as socialist it is of no consequence whether the social dividend is distributed equally or according to some other principle. Neither is it of decisive significance whether socialism is brought about by a formal transfer of the ownership of all the means of production to the state, the social apparatus of compulsion and coercion, or whether the private owners retain their property in name and the socialization consists in the fact that all these “owners” are entitled to employ the means of production left in their hands only according to instructions issued by the state. If the government decides what is to be produced and how, and to whom it is to be sold, and at what “price,” then private property still exists in name only; in reality, all property is already socialized, for the mainspring of economic activity is no longer profit-seeking on the part of entrepreneurs and capitalists, but the necessity of fulfilling an imposed duty and of obeying commands.

Finally, we still have to speak of interventionism. According to a widespread opinion, there is, midway between socialism and capitalism, a third possibility of social organization: the system of private property regulated, controlled, and guided by isolated authoritarian decrees (acts of intervention).

The system of periodical redistribution of property and the system of syndicalism will not be discussed in what follows. These two systems are not generally at issue. No one who is in any way to be taken seriously advocates either one. We have to concern ourselves only with socialism, interventionism, and capitalism.

2

Private Property and Its Critics

Man’s life is not a state of unalloyed happiness. The earth is no paradise. Although this is not the fault of social institutions, people are wont to hold them responsible for it. The foundation of any and every civilization, including our own, is private ownership of the means of production. Whoever wishes to criticize modern civilization, therefore, begins with private property. It is blamed for everything that does not please the critic, especially those evils that have their origin in the fact that private property has been hampered and restrained in various respects so that its full social potentialities cannot be realized.

The usual procedure adopted by the critic is to imagine how wonderful everything would be if only he had his own way. In his dreams he eliminates every will opposed to his own by raising himself, or someone whose will coincides exactly with his, to the position of absolute master of the world. Everyone who preaches the right of the stronger considers himself as the stronger. He who espouses the institution of slavery never stops to reflect that he himself could be a slave. He who demands restrictions on the liberty of conscience demands it in regard to others, and not for himself. He who advocates an oligarchic form of government always includes himself in the oligarchy, and he who goes into ecstasies at the thought of enlightened despotism or dictatorship is immodest enough to allot to himself, in his daydreams, the role of the enlightened despot or dictator, or, at least, to expect that he himself will become the despot over the despot or the dictator over the dictator. Just as no one desires to see himself in the position of the weaker, of the oppressed, of the overpowered, of the negatively privileged, of the subject without rights; so, under socialism, no one desires himself otherwise than in the role of the general director or the mentor of the general director. In the dream and wish phantasies of socialism there is no other life that would be worth living.

Anticapitalist literature has created a fixed pattern for these phantasies of the daydreamer in the customary opposition between profitability and productivity. What takes place in the capitalist social order is contrasted in thought with what—corresponding to the desires of the critic—would be accomplished in the ideal socialist society. Everything that deviates from this ideal image is characterized as unproductive. That the greatest profitability for private individuals and the greatest productivity for the community do not always coincide was long considered the most serious reproach against the capitalist system. Only in recent years has the knowledge gained ground that in the majority of these cases a socialist community could proceed no differently from the way individuals in a capitalist community do. But even where the alleged opposition actually does exist, it cannot simply be assumed that a socialist society would necessarily do what is right and that the capitalist social order is always to be condemned if it does anything else. The concept of productivity is altogether subjective; it can never provide the starting point for an objective criticism.

It is not worth while, therefore, to concern ourselves with the musings of our daydream-dictator. In his dream vision, everyone is willing and obedient, ready to execute his commands immediately and punctiliously. But it is quite another question how things must appear in a real, and not merely visionary, socialist society. The assumption that the equal distribution of the total annual output of the capitalist economy among all members of society would suffice to assure everyone a sufficient livelihood is, as simple statistical calculations show, altogether false. Thus, a socialist society could scarcely achieve a perceptible increase in the standard of living of the masses in this way. If it holds out the prospect of well-being, and even riches, for all, it can do so only on the assumption that labor in a socialist society will be more productive than it is under capitalism and that a socialist system will be able to dispense with a number of superfluous—and consequently unproductive—expenditures.

In connection with this second point, one thinks, for example, of the abolition of all those expenses originating in the costs of marketing merchandise, of competition, and of advertising. It is clear that there is no room in a socialist community for such expenditures. Yet one must not forget that the socialist apparatus of distribution too will involve not inconsiderable costs, perhaps even greater than those of a capitalist economy. But this is not the decisive element in our judgment of the significance of these expenses. The socialist assumes, without question, as a matter of course, that in a socialist system the productivity of labor will be at least the same as in a capitalist society, and he seeks to prove that it will be even greater. But the first assumption is by no means as self-evident as the advocates of socialism seem to think. The quantity of things produced in a capitalist society is not independent of the manner in which production is carried on. What is of decisive significance is that at every single stage of each branch of production the special interest of the persons engaged in it is bound up most intimately with the productivity of the particular share of labor being performed. Every worker must exert himself to the utmost, since his wages are determined by the output of his labor, and every entrepreneur must strive to produce more cheaply—i.e., with less expenditure of capital and labor—than his competitors.

Only because of these incentives has the capitalist economy been able to produce the wealth that is at its command. To take exception to the alleged excessive costs of the capitalist marketing apparatus is to take a myopic view of things indeed. Whoever reproaches capitalism with squandering resources because there are many competing haberdashers and even more tobacconists to be found on bustling business streets fails to see that this sales organization is only the end result of an apparatus of production that warrants the greatest productivity of labor. All advances in production have been achieved only because it is in the nature of this apparatus continually to make advances. Only because all entrepreneurs are in constant competition and are mercilessly weeded out if they do not produce in the most profitable manner are methods of production perpetually being improved and refined. Were this incentive to disappear, there would be no further progress in production and no effort to economize in the application of the traditional methods. Consequently, it is completely absurd to pose the question how much could be saved if the costs of advertising were abolished. One must rather ask how much could be produced if competition among producers were abolished. The answer to this question cannot be in doubt.

Men can consume only if they labor, and then only as much as their labor has produced. Now it is the characteristic feature of the capitalist system that it provides each member of society with this incentive to carry on his work with the greatest efficiency and thus achieves the highest output. In a socialist society, this direct connection between the labor of the individual and the goods and services he might thereby enjoy would be lacking. The incentive to work would not consist in the possibility of enjoying the fruit of one’s labor, but in the command of the authorities to work and in one’s own feeling of duty. The precise demonstration that this organization of labor is unfeasible will be offered in a later chapter.

What is always criticized in the capitalist system is the fact that the owners of the means of production occupy a preferential position. They can live without working. If one views the social order from an individualistic standpoint, one must see in this a serious shortcoming of capitalism. Why should one man be better off than another? But whoever considers things, not from the standpoint of individual persons, but from that of the whole social order, will find that the owners of property can preserve their agreeable position solely on condition that they perform a service indispensable for society. The capitalist can keep his favored position only by shifting the means of production to the application most important for society. If he does not do this—if he invests his wealth unwisely—he will suffer losses, and if he does not correct his mistake in time, he will soon be ruthlessly ousted from his preferential position. He will cease to be a capitalist, and others who are better qualified for it will take his place. In a capitalist society, the deployment of the means of production is always in the hands of those best fitted for it; and whether they want to or not, they must constantly take care to employ the means of production in such a way that they yield the greatest output.

3

Private Property and the Government

All those in positions of political power, all governments, all kings, and all republican authorities have always looked askance at private property. There is an inherent tendency in all governmental power to recognize no restraints on its operation and to extend the sphere of its dominion as much as possible. To control everything, to leave no room for anything to happen of its own accord without the interference of the authorities—this is the goal for which every ruler secretly strives. If only private property did not stand in the way! Private property creates for the individual a sphere in which he is free of the state. It sets limits to the operation of the authoritarian will. It allows other forces to arise side by side with and in opposition to political power. It thus becomes the basis of all those activities that are free from violent interference on the part of the state. It is the soil in which the seeds of freedom are nurtured and in which the autonomy of the individual and ultimately all intellectual and material progress are rooted. In this sense, it has even been called the fundamental prerequisite for the development of the individual. But it is only with many reservations that the latter formulation can be considered acceptable, because the customary opposition between individual and collectivity, between individualistic and collective ideas and aims, or even between individualistic and universalistic science, is an empty shibboleth.

Thus, there has never been a political power that voluntarily desisted from impeding the free development and operation of the institution of private ownership of the means of production. Governments tolerate private property when they are compelled to do so, but they do not acknowledge it voluntarily in recognition of its necessity. Even liberal politicians, on gaining power, have usually relegated their liberal principles more or less to the background. The tendency to impose oppressive restraints on private property, to abuse political power, and to refuse to respect or recognize any free sphere outside or beyond the dominion of the state is too deeply ingrained in the mentality of those who control the governmental apparatus of compulsion and coercion for them ever to be able to resist it voluntarily. A liberal government is a contradictio in adjecto [a contradiction in terms]. Governments must be forced into adopting liberalism by the power of the unanimous opinion of the people; that they could voluntarily become liberal is not to be expected.

It is easy to understand what would constrain rulers to recognize the property rights of their subjects in a society composed exclusively of farmers all of whom were equally rich. In such a social order, every attempt to abridge the right to property would immediately meet with the resistance of a united front of all subjects against the government and thus bring about the latter’s fall. The situation is essentially different, however, in a society in which there is not only agricultural but also industrial production, and especially where there are big business enterprises involving large-scale investments in industry, mining, and trade. In such a society, it is quite possible for those in control of the government to take action against private property. In fact, politically there is nothing more advantageous for a government than an attack on property rights, for it is always an easy matter to incite the masses against the owners of land and capital. From time immemorial, therefore, it has been the idea of all absolute monarchs, of all despots and tyrants, to ally themselves with the “people” against the propertied classes. The Second Empire of Louis Napoleon was not the only regime to be founded on the principle of Caesarism. The Prussian authoritarian state of the Hohenzollerns also took up the idea, introduced by Lassalle into German politics during the Prussian constitutional struggle, of winning the masses of workers to the battle against the liberal bourgeoisie by means of a policy of etatism and interventionism. This was the basic principle of the “social monarchy” so highly extolled by Schmoller and his school.

In spite of all persecutions, however, the institution of private property has survived. Neither the animosity of all governments, nor the hostile campaign waged against it by writers and moralists and by churches and religions, nor the resentment of the masses—itself deeply rooted in instinctive envy—has availed to abolish it. Every attempt to replace it with some other method of organizing production and distribution has always of itself promptly proved unfeasible to the point of absurdity. People have had to recognize that the institution of private property is indispensable and to revert to it whether they liked it or not.

But for all that, they have still refused to admit that the reason for this return to the institution of free private ownership of the means of production is to be found in the fact that an economic system serving the needs and purposes of man’s life in society is, in principle, impracticable except on this foundation. People have been unable to make up their minds to rid themselves of an ideology to which they have become attached, namely, the belief that private property is an evil that cannot, at least for the time being, be dispensed with as long as men have not yet sufficiently evolved ethically. While governments—contrary to their intentions, of course, and to the inherent tendency of every organized center of power—have reconciled themselves to the existence of private property, they have still continued to adhere firmly—not only outwardly, but also in their own thinking—to an ideology hostile to property rights. Indeed, they consider opposition to private property to be correct in principle and any deviation from it on their part to be due solely to their own weakness or to consideration for the interests of powerful groups.

4

The Impracticability of Socialism

People are wont to consider socialism impracticable because they think that men lack the moral qualities demanded by a socialist society. It is feared that under socialism most men will not exhibit the same zeal in the performance of the duties and tasks assigned to them that they bring to their daily work in a social order based on private ownership of the means of production. In a capitalist society, every individual knows that the fruit of his labor is his own to enjoy, that his income increases or decreases according as the output of his labor is greater or smaller. In a socialist society, every individual will think that less depends on the efficiency of his own labor, since a fixed portion of the total output is due him in any case and the amount of the latter cannot be appreciably diminished by the loss resulting from the laziness of any one man. If, as is to be feared, such a conviction should become general, the productivity of labor in a socialist community would drop considerably.

The objection thus raised against socialism is completely sound, but it does not get to the heart of the matter. Were it possible in a socialist community to ascertain the output of the labor of every individual comrade with the same precision with which this is accomplished for each worker by means of economic calculation in the capitalist system, the practicability of socialism would not be dependent on the good will of every individual. Society would be in a position, at least within certain limits, to determine the share of the total output to be allotted to each worker on the basis of the extent of his contribution to production. What renders socialism impracticable is precisely the fact that calculation of this kind is impossible in a socialist society.

In the capitalist system, the calculation of profitability constitutes a guide that indicates to the individual whether the enterprise he is operating ought, under the given circumstances, to be in operation at all and whether it is being run in the most efficient possible way, i.e., at the least cost in factors of production. If an undertaking proves unprofitable, this means that the raw materials, half-finished goods, and labor that are needed in it are employed by other enterprises for an end that, from the standpoint of the consumers, is more urgent and more important, or for the same end, but in a more economical manner (i.e., with a smaller expenditure of capital and labor). When, for instance, hand weaving came to be unprofitable, this signified that the capital and labor employed in weaving by machine yield a greater output and that it is consequently uneconomical to adhere to a method of production in which the same input of capital and labor yields a smaller output.

If a new enterprise is being planned, one can calculate in advance whether it can be made profitable at all and in what way. If, for example, one has the intention of constructing a railroad line, one can, by estimating the traffic to be expected and its ability to pay the freight rates, calculate whether it pays to invest capital and labor in such an undertaking. If the result of this calculation shows that the projected railroad promises no profit, this is tantamount to saying that there is other, more urgent employment for the capital and the labor that the construction of the railroad would require; the world is not yet rich enough to be able to afford such an expenditure. But it is not only when the question arises whether or not a given undertaking is to be begun at all that the calculation of value and profitability is decisive; it controls every single step that the entrepreneur takes in the conduct of his business.

Capitalist economic calculation, which alone makes rational production possible, is based on monetary calculation. Only because the prices of all goods and services in the market can be expressed in terms of money is it possible for them, in spite of their heterogeneity, to enter into a calculation involving homogeneous units of measurement. In a socialist society, where all the means of production are owned by the community, and where, consequently, there is no market and no exchange of productive goods and services, there can also be no money prices for goods and services of higher order. Such a social system would thus, of necessity, be lacking in the means for the rational management of business enterprises, viz., economic calculation. For economic calculation cannot take place in the absence of a common denominator to which all the heterogeneous goods and services can be reduced.

Let us consider a quite simple case. For the construction of a railroad from A to B several routes are conceivable. Let us suppose that a mountain stands between A and B. The railroad can be made to run over the mountain, around the mountain, or, by way of a tunnel, through the mountain. In a capitalist society, it is a very easy matter to compute which line will prove the most profitable. One ascertains the cost involved in constructing each of the three lines and the differences in operating costs necessarily incurred by the anticipated traffic on each. From these quantities it is not difficult to determine which stretch of road will be the most profitable. A socialist society could not make such calculations. For it would have no possible way of reducing to a uniform standard of measurement all the heterogeneous quantities and qualities of goods and services that here come into consideration. In the face of the ordinary, everyday problems which the management of an economy presents, a socialist society would stand helpless, for it would have no possible way of keeping its accounts.

The prosperity that has made it possible for many more people to inhabit the earth today than in the precapitalist era is due solely to the capitalist method of lengthy chains of production, which necessarily requires monetary calculation. This is impossible under socialism. In vain have socialist writers labored to demonstrate how one could still manage even without monetary and price calculation. All their efforts in this respect have met with failure.

The leadership of a socialist society would thus be confronted by a problem that it could not possibly solve. It would not be able to decide which of the innumerable possible modes of procedure is the most rational. The resulting chaos in the economy would culminate quickly and irresistibly in universal impoverishment and a retrogression to the primitive conditions under which our ancestors once lived.

The socialist ideal, carried to its logical conclusion, would eventuate in a social order in which all the means of production were owned by the people as a whole. Production would be completely in the hands of the government, the center of power in society. It alone would determine what was to be produced and how, and in what way goods ready for consumption were to be distributed. It makes little difference whether we imagine this socialist state of the future as democratically constituted or otherwise. Even a democratic socialist state would necessarily constitute a tightly organized bureaucracy in which everyone, apart from the highest officials, though he might very well, in his capacity as a voter, have participated in some fashion in framing the directives issued by the central authority, would be in the subservient position of an administrator bound to carry them out obediently.

A socialist state of this kind is not comparable to the state enterprises, no matter how vast their scale, that we have seen developing in the last decades in Europe, especially in Germany and Russia. The latter all flourish side by side with private ownership of the means of production. They engage in commercial transactions with enterprises that capitalists own and manage, and they receive various stimuli from these enterprises that invigorate their own operation. State railroads, for instance, are provided by their suppliers, the manufacturers of locomotives, coaches, signal installations, and other equipment, with apparatus that has proved successful elsewhere in the operation of privately owned railroads. Thence they receive the incentive to institute innovations in order to keep up with the progress in technology and in methods of business management that is taking place all around them.

It is a matter of common knowledge that national and municipal enterprises have, on the whole, failed, that they are expensive and inefficient, and that they have to be subsidized out of tax funds just to maintain themselves in operation. Of course, where a public enterprise occupies a monopolistic position—as is, for instance, generally the case with municipal transportation facilities and electric light and power plants—the bad consequences of inefficiency need not always express themselves in visible financial failure. Under certain circumstances it may be possible to conceal it by making use of the opportunity open to the monopolist of raising the price of his products and services high enough to render these enterprises, in spite of their uneconomic management, still profitable. The lower productivity of the socialist method of production merely manifests itself differently here and is not so easily recognized as otherwise; essentially, however, the case remains the same.

But none of these experiments in the socialist management of enterprises can afford us any basis for judging what it would mean if the socialist ideal of the communal ownership of all means of production were to be realized. In the socialist society of the future, which will leave no room whatsoever for the free activity of private enterprises operating side by side with those owned and controlled by the state, the central planning board will lack entirely the gauge provided for the whole economy by the market and market prices. In the market, where all goods and services come to be traded, exchange ratios, expressed in money prices, may be determined for everything bought and sold. In a social order based on private property, it thus becomes possible to resort to monetary calculation in checking on the results of all economic activities. The social productivity of every economic transaction may be tested by the methods of bookkeeping and cost accounting. It yet remains to be shown that public enterprises are unable to make use of cost accounting in the same way as private enterprises do. Nevertheless, monetary calculation does give even governmental and communal enterprises some basis for judging the success or failure of their management. In a completely socialist economic system, this would be quite impossible, for in the absence of private ownership of the means of production, there could be no exchange of capital goods in the market and consequently neither money prices nor monetary calculation. The general management of a purely socialist society will therefore have no means of reducing to a common denominator the costs of production of all the heterogeneous commodities that it plans to produce.

Nor can this be achieved by setting expenditures in kind against savings in kind. One cannot calculate if it is not possible to reduce to a common medium of expression hours of labor of various grades, iron, coal, building materials of every kind, machines, and all the other things needed in the operation and management of different enterprises. Calculation is possible only when one is able to reduce to monetary terms all the goods under consideration. Of course, monetary calculation has its imperfections and deficiencies, but we have nothing better to put in its place. It suffices for the practical purposes of life as long as the monetary system is sound. If we were to renounce monetary calculation, every economic computation would become absolutely impossible.

This is the decisive objection that economics raises against the possibility of a socialist society. It must forgo the intellectual division of labor that consists in the cooperation of all entrepreneurs, landowners, and workers as producers and consumers in the formation of market prices. But without it, rationality, i.e., the possibility of economic calculation, is unthinkable.

5

Interventionism

The socialist ideal is now beginning to lose more and more of its adherents. The penetrating economic and sociological investigations of the problems of socialism that have shown it to be impracticable have not remained without effect, and the failures in which socialist experiments everywhere have ended have disconcerted even its most enthusiastic supporters. Gradually people are once more beginning to realize that society cannot do without private property. Yet the hostile criticism to which the system of private ownership of the means of production has been subjected for decades has left behind such a strong prejudice against the capitalist system that, in spite of their knowledge of the inadequacy and impracticability of socialism, people cannot make up their minds to admit openly that they must return to liberal views on the question of property. To be sure, it is conceded that socialism, the communal ownership of the means of production, is altogether, or at least for the present, impracticable. But, on the other hand, it is asserted that unhampered private ownership of the means of production is also an evil. Thus people want to create a third way, a form of society standing midway between private ownership of the means of production, on the one hand, and communal ownership of the means of production, on the other. Private property will be permitted to exist, but the ways in which the means of production are employed by the entrepreneurs, capitalists, and landowners will be regulated, guided, and controlled by authoritarian decrees and prohibitions. In this way, one forms the conceptual image of a regulated market, of a capitalism circumscribed by authoritarian rules, of private property shorn of its allegedly harmful concomitant features by the intervention of the authorities.

One can best acquire an insight into the meaning and nature of this system by considering a few examples of the consequences of government interference. The crucial acts of intervention with which we have to deal aim at fixing the prices of goods and services at a height different from what the unhampered market would have determined.

In the case of prices formed on the unhampered market, or which would have been formed in the absence of interference on the part of the authorities, the costs of production are covered by the proceeds. If a lower price is decreed by the government, the proceeds will fall short of the costs. Merchants and manufacturers will, therefore, unless the storage of the goods involved would cause them to deteriorate rapidly in value, withhold their merchandise from the market in the hope of more favorable times, perhaps in the expectation that the government order will soon be rescinded. If the authorities do not want the goods concerned to disappear altogether from the market as a result of their interference, they cannot limit themselves to fixing the price; they must at the same time also decree that all stocks on hand be sold at the prescribed price.

But even this does not suffice. At the price determined on the unhampered market, supply and demand would have coincided. Now, because the price was fixed lower by government decree, the demand has increased while the supply has remained unchanged. The stocks on hand are not sufficient to satisfy fully all who are prepared to pay the prescribed price. A part of the demand will remain unsatisfied. The mechanism of the market, which otherwise tends to equalize supply and demand by means of price fluctuations, no longer operates. Now people who would have been prepared to pay the price prescribed by the authorities must leave the market with empty hands. Those who were on line earlier or who were in a position to exploit some personal connection with the sellers have already acquired the whole stock; the others have to go unprovided. If the government wishes to avoid this consequence of its intervention, which runs counter to its intentions, it must add rationing to price control and compulsory sale: a governmental regulation must determine how much of a commodity may be supplied to each individual applicant at the prescribed price.

But once the supplies already on hand at the moment of the government’s intervention are exhausted, an incomparably more difficult problem arises. Since production is no longer profitable if the goods are to be sold at the price fixed by the government, it will be reduced or entirely suspended. If the government wishes to have production continue, it must compel the manufacturers to produce, and, to this end, it must also fix the prices of raw materials and half-finished goods and the wages of labor. Its decrees to this effect, however, cannot be limited to only the one or the few branches of production that the authorities wish to regulate because they deem their products especially important. They must encompass all branches of production. They must regulate the price of all commodities and all wages. In short, they must extend their control over the conduct of all entrepreneurs, capitalists, landowners, and workers. If some branches of production are left free, capital and labor will flow into these, and the government will fail to attain the goal that it wished to achieve by its first act of intervention. But the object of the authorities is that there should be an abundance of production in precisely that branch of industry which, because of the importance they attach to its products, they have especially singled out for regulation. It runs altogether counter to their design that precisely in consequence of their intervention this branch of production should be neglected.

It is therefore clearly evident that an attempt on the part of the government to interfere with the operation of the economic system based on private ownership of the means of production fails of the goal that its authors wished to achieve by means of it. It is, from the point of view of its authors, not only futile, but downright contrary to purpose, because it enormously augments the very “evil” that it was supposed to combat. Before the price controls were decreed, the commodity was, in the opinion of the government, too expensive; now it disappears from the market altogether. This, however, is not the result aimed at by the government, which wanted to make the commodity accessible to the consumer at a cheaper price. On the contrary: from its viewpoint, the absence of the commodity, the impossibility of securing it, must appear as by far the greater evil. In this sense one can say of the intervention of the authorities that it is futile and contrary to the purpose that it was intended to serve, and of the system of economic policy that attempts to operate by means of such acts of intervention that it is impracticable and unthinkable, that it contradicts economic logic.

If the government will not set things right again by desisting from its interference, i.e., by rescinding the price controls, then it must follow up the first step with others. To the prohibition against asking any price higher than the prescribed one it must add not only measures to compel the sale of all stocks on hand under a system of enforced rationing, but price ceilings on goods of higher order, wage controls, and, ultimately, compulsory labor for entrepreneurs and workers. And these regulations cannot be limited to one or a few branches of production, but must encompass them all. There is simply no other choice than this: either to abstain from interference in the free play of the market, or to delegate the entire management of production and distribution to the government. Either capitalism or socialism: there exists no middle way.

The mechanism of the series of events just described is well known to all who have witnessed the attempts of governments in time of war and during periods of inflation to fix prices by fiat. Everyone knows nowadays that government price controls had no other result than the disappearance from the market of the goods concerned. Wherever the government resorts to the fixing of prices, the result is always the same. When, for instance, the government fixes a ceiling on residential rents, a housing shortage immediately ensues. In Austria, the Social Democratic Party has virtually abolished residential rent. The consequence is that in the city of Vienna, for example, in spite of the fact that the population has declined considerably since the beginning of the World War and that several thousand new houses have been constructed by the municipality in the meantime, many thousands of persons are unable to find accommodations.

Let us take still another example: the fixing of minimum wage rates.

When the relationship between employer and employee is left undisturbed by legislative enactments or by violent measures on the part of trade unions, the wages paid by the employer for every type of labor are exactly as high as the increment of value that it adds to the materials in production. Wages cannot rise any higher than this because, if they did, the employer could no longer make a profit and hence would be compelled to discontinue a line of production that did not pay. But neither can wages fall any lower, because then the workers would turn to other branches of industry where they would be better rewarded, so that the employer would be forced to discontinue production because of a labor shortage.

There is, therefore, in the economy always a wage rate at which all workers find employment and every entrepreneur who wishes to undertake some enterprise still profitable at that wage finds workers. This wage rate is customarily called by economists the “static” or “natural” wage. It increases if, other things being equal, the number of workers diminishes; it decreases if, other things being equal, the available quantity of capital for which employment in production is sought suffers any diminution. However, one must, at the same time, observe that it is not quite precise to speak simply of “wages” and “labor.” Labor services vary greatly in quality and quantity (calculated per unit of time), and so too do the wages of labor.

If the economy never varied from the stationary state, then in a labor market unhampered by interference on the part of the government or by coercion on the part of the labor unions there would be no unemployed. But the stationary state of society is merely an imaginary construction of economic theory, an intellectual expedient indispensable for our thinking, that enables us, by contrast, to form a clear conception of the processes actually taking place in the economy which surrounds us and in which we live. Life—fortunately, we hasten to add—is never at rest. There is never a standstill in the economy, but perpetual changes, movement, innovation, the continual emergence of the unprecedented. There are, accordingly, always branches of production that are being shut down or curtailed because the demand for their products has fallen off, and other branches of production that are being expanded or even embarked upon for the first time. If we think only of the last few decades, we can at once enumerate a great number of new industries that have sprung up: e.g., the automobile industry, the airplane industry, the motion picture industry, the rayon industry, the canned goods industry, and the radio broadcasting industry. These branches of industry today employ millions of workers, only some of whom have been drawn from the increase in population. Some came from branches of production that were shut down, and even more from those that, as a result of technological improvements, are now able to manage with fewer workers.

Occasionally the changes that occur in the relations among individual branches of production take place so slowly that no worker is obliged to shift to a new type of job; only young people, just beginning to earn their livelihood, will enter, in greater proportion, the new or expanding industries. Generally, however, in the capitalist system, with its rapid strides in improving human welfare, progress takes place too swiftly to spare individuals the necessity of adapting themselves to it. When, two hundred years or more ago, a young lad learned a craft, he could count on practicing it his whole life long in the way he had learned it, without any fear of being injured by his conservatism. Things are different today. The worker too must adjust himself to changing conditions, must add to what he has learned, or begin learning anew. He must leave occupations which no longer require the same number of workers as previously and enter one which has just come into being or which now needs more workers than before. But even if he remains in his old job, he must learn new techniques when circumstances demand it.

All this affects the worker in the form of changes in wage rates. If a particular branch of business employs relatively too many workers, it discharges some, and those discharged will not easily find new work in the same branch of business. The pressure on the labor market exercised by the discharged workers depresses wages in this branch of production. This, in turn, induces the worker to look for employment in those branches of production that wish to attract new workers and are therefore prepared to pay higher wages.

From this it becomes quite clear what must be done in order to satisfy the workers’ desire for employment and for high wages. Wages in general cannot be pushed above the height that they would normally occupy in a market unhampered either by government interference or other institutional pressures without creating certain side effects that cannot be desirable for the worker. Wages can be driven up in an individual industry or an individual country if the transfer of workers from other industries or their immigration from other countries is prohibited. Such wage increases are effected at the expense of the workers whose entrance is barred. Their wages are now lower than they would have been if their freedom of movement had not been hindered. The rise in wages of one group is thus achieved at the expense of the others. This policy of obstructing the free movement of labor can benefit only the workers in countries and industries suffering from a relative labor shortage. In an industry or a country where this is not the case, there is only one thing that can raise wages: a rise in the general productivity of labor, whether by virtue of an increase in the capital available or through an improvement in the technological processes of production.

If, however, the government fixes minimum wages by law above the height of the static or natural wage, then the employers will find that they are no longer in a position to carry on successfully a number of enterprises that were still profitable when wages stood at the lower point. They will consequently curtail production and discharge workers. The effect of an artificial rise in wages, i.e., one imposed upon the market from the outside, is, therefore, the spread of unemployment.

Now, of course, no attempt is being made today to fix minimum wage rates by law on a large scale. But the position of power that the trade unions occupy has enabled them to do so even in the absence of any positive legislation to that effect. The fact that workers form unions for the purpose of bargaining with the employers does not, in and of itself, necessarily provoke disturbances in the operation of the market. Even the fact that they successfully arrogate to themselves the right to break, without notice, contracts duly entered into by them and to lay down their tools would not itself result in any further disturbance in the labor market. What does create a new situation in the labor market is the element of coercion involved in strikes and compulsory union membership that prevails today in most of the industrial countries of Europe. Since the unionized workers deny access to employment to those who are not members of their union, and resort to open violence during strikes to prevent other workers from taking the place of those on strike, the wage demands that the unions present to the employers have precisely the same force as government decrees fixing minimum wage rates. For the employer must, if he does not wish to shut down his whole enterprise, yield to the demands of the union. He must pay wages such that the volume of production has to be restricted, because what costs more to produce cannot find as large a market as what costs less. Thus, the higher wages exacted by the trade unions become a cause of unemployment.

The unemployment originating from this source differs entirely in extent and duration from that which arises from the changes constantly taking place in the kind and quality of the labor demanded in the market. If unemployment had its cause only in the fact that there is constant progress in industrial development, it could neither assume great proportions nor take on the character of a lasting institution. The workers who can no longer be employed in one branch of production soon find accommodation in others which are expanding or just coming into being. When workers enjoy freedom of movement and the shift from one industry to another is not impeded by legal and other obstacles of a similar kind, adjustment to new conditions takes place without too much difficulty and rather quickly. For the rest, the setting up of labor exchanges would contribute much toward reducing still further the extent of this type of unemployment.

But the unemployment produced by the interference of coercive agencies in the operation of the labor market is no transitory phenomenon continually appearing and disappearing. It is incurable as long as the cause that called it into existence continues to operate, i.e., as long as the law or the violence of the trade unions prevents wages from being reduced, by the pressure of the jobless seeking employment, to the level that they would have reached in the absence of interference on the part of the government or the unions, namely, the rate at which all those eager for work ultimately find it.

For the unemployed to be granted support by the government or by the unions only serves to enlarge the evil. If what is involved is a case of unemployment springing from dynamic changes in the economy, then the unemployment benefits only result in postponing the adjustment of the workers to the new conditions. The jobless worker who is on relief does not consider it necessary to look about for a new occupation if he no longer finds a position in his old one; at least, he allows more time to elapse before he decides to shift to a new occupation or to a new locality or before he reduces the wage rate he demands to that at which he could find work. If unemployment benefits are not set too low, one can say that as long as they are offered, unemployment cannot disappear.

If, however, the unemployment is produced by the artificial raising of the height of wage rates in consequence of the direct intervention of the government or of its toleration of coercive practices on the part of the trade unions, then the only question is who is to bear the costs involved, the employers or the workers. The state, the government, the community never do so; they load them either onto the employer or onto the worker or partially onto each. If the burden falls on the workers, then they are deprived entirely or partially of the fruits of the artificial wage increase they have received; they may even be made to bear more of these costs than the artificial wage increase yielded them. The employer can be saddled with the burden of unemployment benefits to some extent by having to pay a tax proportionate to the total amount of wages paid out by him. In this case, unemployment insurance, by raising the costs of labor, has the same effect as a further increase in wages above the static level: the profitability of the employment of labor is reduced, and the number of workers who still can be profitably engaged is concomitantly decreased. Thus, unemployment spreads even further, in an ever widening spiral. The employers can also be drawn on to pay the costs of the unemployment benefits by means of a tax on their profits or capital, without regard for the number of workers employed. But this too only tends to spread unemployment even further. For when capital is consumed or when the formation of new capital is at least slowed down, the conditions for the employment of labor become, ceteris paribus, less favorable.2

It is obviously futile to attempt to eliminate unemployment by embarking upon a program of public works that would otherwise not have been undertaken. The necessary resources for such projects must be withdrawn by taxes or loans from the application they would otherwise have found. Unemployment in one industry can, in this way, be mitigated only to the extent that it is increased in another.

From whichever side we consider interventionism, it becomes evident that this system leads to a result that its originators and advocates did not intend and that, even from their standpoint, it must appear as a senseless, self-defeating, absurd policy.

6

Capitalism: The Only Possible System of Social Organization

Every examination of the different conceivable possibilities of organizing society on the basis of the division of labor must always come to the same result: there is only the choice between communal ownership and private ownership of the means of production. All intermediate forms of social organization are unavailing and, in practice, must prove self-defeating. If one further realizes that socialism too is unworkable, then one cannot avoid acknowledging that capitalism is the only feasible system of social organization based on the division of labor. This result of theoretical investigation will not come as a surprise to the historian or the philosopher of history. If capitalism has succeeded in maintaining itself in spite of the enmity it has always encountered from both governments and the masses, if it has not been obliged to make way for other forms of social cooperation that have enjoyed to a much greater extent the sympathies of theoreticians and of practical men of affairs, this is to be attributed only to the fact that no other system of social organization is feasible.

Nor is there any further need to explain why it is impossible for us to return to the forms of social and economic organization characteristic of the Middle Ages. Over the whole area now inhabited by the modern nations of Europe the medieval economic system was able to support only a fraction of the number of people who now dwell in that region, and it placed much less in the way of material goods at the disposal of each individual for the provision of his needs than the capitalist form of production supplies men with today. A return to the Middle Ages is out of the question if one is not prepared to reduce the population to a tenth or a twentieth part of its present number and, even further, to oblige every individual to be satisfied with a modicum so small as to be beyond the imagination of modern man.

All the writers who represent the return to the Middle Ages, or, as they put it, to the “new” Middle Ages, as the only social ideal worth striving for reproach the capitalist era above all for its materialistic attitude and mentality. Yet they themselves are much more deeply committed to materialistic views than they believe. For it is nothing but the crassest materialism to think, as many of these writers do, that after reverting to the forms of political and economic organization characteristic of the Middle Ages, society could still retain all the technological improvements in production created by capitalism and thus preserve the high degree of productivity of human labor that it has attained in the capitalist era. The productivity of the capitalist mode of production is the outcome of the capitalist mentality and of the capitalist approach to man and to the satisfaction of man’s wants; it is a result of modern technology only in so far as the development of technology must, of necessity, follow from the capitalist mentality. There is scarcely anything so absurd as the fundamental principle of Marx’s materialist interpretation of history: “The hand mill made feudal society; the steam mill, capitalist society.” It was precisely capitalist society that was needed to create the necessary conditions for the original conception of the steam mill to be developed and put into effect. It was capitalism that created the technology, and not the other way round. But no less absurd is the notion that the technological and material appurtenances of our economy could be preserved even if the intellectual foundations on which they are based were destroyed. Economic activity can no longer be carried on rationally once the prevailing mentality has reverted to traditionalism and faith in authority. The entrepreneur, the catalytic agent, as it were, of the capitalist economy and, concomitantly, also of modern technology, is inconceivable in an environment in which everyone is intent solely on the contemplative life.

If one characterizes as unfeasible every system other than that based on private ownership of the means of production, it follows necessarily that private property must be maintained as the basis of social cooperation and association and that every attempt to abolish it must be vigorously combatted. It is for this reason that liberalism defends the institution of private property against every attempt to destroy it. When, therefore, people call the liberals apologists for private property, they are completely justified, for the Greek word from which “apologist” is derived means the same as “defender.” Of course, it would be better to avoid using the foreign word and to be content to express oneself in plain English. For to many people the expressions “apology” and “apologist” convey the connotation that what is being defended is unjust.

Much more important, however, than the rejection of any pejorative suggestion that may be involved in the use of these expressions is the observation that the institution of private property requires no defense, justification, support, or explanation. The continued existence of society depends upon private property, and since men have need of society, they must hold fast to the institution of private property to avoid injuring their own interests as well as the interests of everyone else. For society can continue to exist only on the foundation of private property. Whoever champions the latter champions by the same token the preservation of the social bond that unites mankind, the preservation of culture and civilization. He is an apologist and defender of society, culture, and civilization, and because he desires them as ends, he must also desire and defend the one means that leads to them, namely, private property.

To advocate private ownership of the means of production is by no means to maintain that the capitalist social system, based on private property, is perfect. There is no such thing as earthly perfection. Even in the capitalist system something or other, many things, or even everything, may not be exactly to the liking of this or that individual. But it is the only possible social system. One may undertake to modify one or another of its features as long as in doing so one does not affect the essence and foundation of the whole social order, viz., private property. But by and large we must reconcile ourselves to this system because there simply cannot be any other.

In Nature too, much may exist that we do not like. But we cannot change the essential character of natural events. If, for example, someone thinks—and there are some who have maintained as much—that the way in which man ingests his food, digests it, and incorporates it into his body is disgusting, one cannot argue the point with him. One must say to him: There is only this way or starvation. There is no third way. The same is true of property: either-or —either private ownership of the means of production, or hunger and misery for everyone.

The opponents of liberalism are wont to call its economic doctrine “optimistic.” They intend this epithet either as a reproach or as a derisive characterization of the liberal way of thinking.

If by calling the liberal doctrine “optimistic” one means that liberalism considers the capitalist world as the best of all worlds, then this is nothing but pure nonsense. For an ideology based, like that of liberalism, entirely on scientific grounds, such questions as whether the capitalist system is good or bad, whether or not a better one is conceivable, and whether it ought to be rejected on certain philosophic or metaphysical grounds are entirely irrelevant. Liberalism is derived from the pure sciences of economics and sociology, which make no value judgments within their own spheres and say nothing about what ought to be or about what is good and what is bad, but, on the contrary, only ascertain what is and how it comes to be. When these sciences show us that of all the conceivable alternative ways of organizing society only one, viz., the system based on private ownership of the means of production, is capable of being realized, because all other conceivable systems of social organization are unworkable, there is absolutely nothing in this that can justify the designation “optimistic.” That capitalism is practicable and workable is a conclusion that has nothing to do with optimism.

To be sure, the opponents of liberalism are of the opinion that this society is very bad. As far as this assertion contains a value judgment, it is naturally not open to any discussion that intends to go beyond highly subjective and therefore unscientific opinions. As far, however, as it is founded on an incorrect understanding of what takes place within the capitalist system, economics and sociology can rectify it. This too is not optimism. Entirely aside from everything else, even the discovery of a great many deficiencies in the capitalist system would not have the slightest significance for the problems of social policy as long as it has not been shown, not that a different social system would be better, but that it would be capable of being realized at all. But this has not been done. Science has succeeded in showing that every system of social organization that could be conceived as a substitute for the capitalist system is self-contradictory and unavailing, so that it could not bring about the results aimed at by its proponents.

How little one is justified in speaking in this connection of “optimism” and “pessimism” and how much the characterization of liberalism as “optimistic” aims at surrounding it with an unfavorable aura by bringing in extrascientific, emotional considerations is best shown by the fact that one can, with as much justice, call those people “optimists” who are convinced that the construction of a socialist or of an interventionist commonwealth would be practicable.

Most of the writers who concern themselves with economic questions never miss an opportunity to heap senseless and childish abuse on the capitalist system and to praise in enthusiastic terms either socialism or interventionism, or even agrarian socialism and syndicalism, as excellent institutions. On the other hand, there have been a few writers who, even if in much milder terms, have sung the praises of the capitalist system. One may, if one wishes, call these writers “optimists.” But if one does so, then one would be a thousand times more justified in calling the antiliberal writers “hyperoptimists” of socialism, interventionism, agrarian socialism, and syndicalism. The fact that this does not happen, but that, instead, only liberal writers like Bastiat are called “optimists,” shows clearly that in these cases what we are dealing with is not an attempt at a truly scientific classification, but nothing more than a partisan caricature.

What liberalism maintains is, we repeat, by no means that capitalism is good when considered from some particular point of view. What it says is simply that for the attainment of the ends that men have in mind only the capitalist system is suitable and that every attempt to realize a socialist, interventionist, agrarian socialist, or syndicalist society must necessarily prove unsuccessful. Neurotics who could not bear this truth have called economics a dismal science. But economics and sociology are no more dismal because they show us the world as it really is than the other sciences are—mechanics, for instance, because it teaches the impracticability of perpetual motion, or biology because it teaches us the mortality of all living things.

7

Cartels, Monopolies, and Liberalism

The opponents of liberalism assert that the necessary preconditions for the adoption of the liberal program no longer exist in the contemporary world. Liberalism was still practicable when many concerns of medium size were engaged in keen competition in each industry. Nowadays, since trusts, cartels, and other monopolistic enterprises are in complete control of the market, liberalism is as good as done for in any case. It is not politics that has destroyed it, but a tendency inherent in the inexorable evolution of the system of free enterprise.

The division of labor gives a specialized function to each productive unit in the economy. This process never stops as long as economic development continues. We long ago passed the stage at which the same factory produced all types of machines. Today a machine factory that does not limit itself exclusively to the production of certain types of machinery is no longer able to meet competition. With the progress of specialization, the area served by an individual supplier must continue to widen. The market supplied by a textile mill that produces only a few kinds of fabrics must be larger than that served by a weaver who weaves every kind of cloth. Undoubtedly this progressive specialization of production tends toward the development in every field of enterprises that have the whole world for their market. If this development is not opposed by protectionist and other anticapitalist measures, the result will be that in every branch of production there will be a relatively small number of concerns, or even only a single concern, intent on producing with the highest degree of specialization and on supplying the whole world.

Today, of course, we are very far from this state of affairs, since the policy of all governments aims at snipping off from the unity of the world economy small areas in which, under the protection of tariffs and other measures designed to achieve the same result, enterprises that would no longer be able to meet competition on the free world market are artificially preserved or even first called into being. Apart from considerations of commercial policy, measures of this kind, which are directed against the concentration of business, are defended on the ground that they alone have prevented the consumers from being exploited by monopolistic combinations of producers.

In order to assess the validity of this argument, we shall assume that the division of labor throughout the whole world has already advanced so far that the production of every article offered for sale is concentrated in a single concern, so that the consumer, in his capacity as a buyer, is always confronted with only a single seller. Under such conditions, according to an ill-considered economic doctrine, the producers would be in a position to keep prices pegged as high as they wished, to realize exorbitant profits, and thereby to worsen considerably the standard of living of the consumers. It is not difficult to see that this idea is completely mistaken. Monopoly prices, if they are not made possible by certain acts of intervention on the part of the government, can be lastingly exacted only on the basis of control over mineral and other natural resources. An isolated monopoly in manufacturing that yielded greater profits than those yielded elsewhere would stimulate the formation of rival firms whose competition would break the monopoly and restore prices and profits to the general rate. Monopolies in manufacturing industries cannot, however, become general, since at every given level of wealth in an economy the total quantity of capital invested and of available labor employed in production—and consequently also the amount of the social product—is a given magnitude. In any particular branch of production, or in several, the amount of capital and labor employed could be reduced in order to increase the price per unit and the aggregate profit of the monopolist or monopolists by curtailing production. The capital and labor thereby freed would then flow into another industry. If, however, all industries attempt to curtail production in order to realize higher prices, they forthwith free labor and capital which, because they are offered at lower rates, will provide a strong stimulus to the formation of new enterprises that must again destroy the monopolistic position of the others. The idea of a universal cartel and monopoly of the manufacturing industry is therefore completely untenable.

Genuine monopolies can be established only by control of land or mineral resources. The notion that all the arable land on earth could be consolidated into a single world monopoly needs no further discussion; the only monopolies that we shall consider here are those originating in the control of useful minerals. Monopolies of this kind do, in fact, already exist in the case of a few minerals of minor importance, and it is at any rate conceivable that attempts to monopolize other minerals as well may some day prove successful. This would mean that the owners of such mines and quarries would derive an increased ground rent from them and that the consumers would restrict consumption and look for substitutes for the materials that had become more expensive. A world petroleum monopoly would lead to an increased demand for hydroelectric power, coal, etc. From the standpoint of world economy and sub specie aeternitatis [under the aspect of eternity], this would mean that we would have to be more sparing than we otherwise would have been in our use of those costly materials that we can only exhaust, but cannot replace, and thus leave more of them for future generations than would have been the case in an economy free of monopolies.

The bugbear of monopoly, which is always conjured up when one speaks of the unhampered development of the economy, need cause us no disquiet. The world monopolies that are really feasible could concern only a few items of primary production. Whether their effect is favorable or unfavorable cannot be so easily decided. In the eyes of those who, in treating economic problems, are unable to free themselves from feelings of envy, these monopolies appear as pernicious from the very fact that they yield their owners increased profits. Whoever approaches the question without prepossessions will find that such monopolies lead to a more sparing use of those mineral resources that are at man’s disposal only in a rather limited quantity. If one really envies the monopolist his profit, one can, without danger and without having to expect any harmful economic consequences, have it pass into the public coffers by taxing the income from the mines.

In contradistinction to these world monopolies are the national and international monopolies, which are of practical importance today precisely because they do not originate in any natural evolutionary tendency on the part of the economic system when it is left to itself, but are the product of antiliberal economic policies. Attempts to secure a monopolistic position in regard to certain articles are in almost all cases feasible only because tariffs have divided the world market up into small national markets. Besides these, the only other cartels of any consequence are those which the owners of certain natural resources are able to form because the high cost of transportation protects them against the competition of producers from other areas in the narrow compass of their own locality.

It is a fundamental error, in judging the consequences of trusts, cartels, and enterprises supplying a market with one article alone, to speak of “control” of the market and of “price dictation” by the monopolist. The monopolist does not exercise any control, nor is he in a position to dictate prices. One could speak of control of the market or of price dictation only if the article in question were, in the strictest and most literal sense of the word, necessary for existence and absolutely irreplaceable by any substitute. This is evidently not true of any commodity. There is no economic good whose possession is indispensable to the existence of those prepared to purchase it on the market.

What distinguishes the formation of a monopoly price from the formation of a competitive price is the fact that, under certain very special conditions, it is possible for the monopolist to reap a greater profit from the sale of a smaller quantity at a higher price (which we call the monopoly price) than by selling at the price that the market would determine if more sellers were in competition (the competitive price). The special condition required for the emergence of a monopoly price is that the reaction of the consumers to a price increase does not involve a falling off of demand so sharp as to preclude a greater total profit from fewer sales at higher prices. If it is actually possible to achieve a monopolistic position in the market and to use it to realize monopoly prices, then profits higher than average will be yielded in the branch of industry concerned.

It may be that, in spite of these higher profits, new enterprises of the same kind are not undertaken because of the fear that, after reducing the monopoly price to the competitive price, they will not prove correspondingly profitable. One must, nevertheless, take into account the possibility that related industries, which are in a position to enter into production of the cartelized article at a relatively small cost, may appear as competitors; and, in any case, industries producing substitute commodities will be immediately at hand to avail themselves of the favorable circumstances for expanding their own production. All these factors make it extraordinarily rare for a monopoly to arise in a manufacturing industry that is not based on monopolistic control of particular raw materials. Where such monopolies do occur, they are always made possible only by certain legislative measures, such as patents and similar privileges, tariff regulations, tax laws, and the licensing system. A few decades ago people used to speak of a transportation monopoly. To what extent this monopoly was based on the licensing system remains uncertain. Today people generally do not bother much about it. The automobile and the airplane have become dangerous competitors of the railroads. But even before the appearance of these competitors the possibility of using waterways already set a definite limit to the rates that the railroads could venture to charge for their services on several lines.

It is not only a gross exaggeration, but a misunderstanding of the facts, to speak, as one commonly does today, of the formation of monopolies as having eliminated an essential prerequisite for the realization of the liberal ideal of a capitalist society. Twist and turn the monopoly problem as one may, one always comes back to the fact that monopoly prices are possible only where there is control over natural resources of a particular kind or where legislative enactments and their administration create the necessary conditions for the formation of monopolies. In the unhampered development of the economy, with the exception of mining and related branches of production, there is no tendency toward the exclusion of competition. The objection commonly raised against liberalism that the conditions of competition as they existed at the time when classical economics and liberal ideas were first developed no longer prevail is in no way justified. Only a few liberal demands (viz., free trade within and between nations) need to be realized in order to re-establish these conditions.

8

Bureaucratization

There is yet another sense in which it is commonly said that the necessary conditions for the realization of the liberal ideal of society no longer obtain today. In the big businesses made necessary by progress in the division of labor, the personnel employed must increase more and more. These enterprises must, therefore, in their conduct of business, become ever more like the government bureaucracy that the liberals in particular have made the target of their criticism. From day to day they become more cumbersome and less open to innovations. The selection of personnel for executive positions is no longer made on the basis of demonstrated proficiency on the job, but in accordance with purely formal criteria, such as educational background or seniority, and often just as a result of personal favoritism. Thus the distinctive feature of private, as opposed to public, enterprise finally disappears. If it was still justifiable in the age of classical liberalism to oppose government ownership on the ground that it paralyzes all free initiative and kills the joy of labor, it is no longer so today when private enterprises are carried on no less bureaucratically, pedantically, and formalistically than those that are publicly owned and operated.

In order to be able to assess the validity of these objections, one must first be clear as to what is really to be understood by bureaucracy and the bureaucratic conduct of business, and just how these are distinguished from commercial enterprise and the commercial conduct of business. The opposition between the commercial and the bureaucratic mentality is the counterpart in the intellectual realm of the opposition between capitalism—private ownership of the means of production—and socialism—communal ownership of the means of production. Whoever has factors of production at his disposal, whether his own or those lent to him by their owners in return for some compensation, must always be careful to employ them in such a way as to satisfy those needs of society that, under the given circumstances, are the most urgent. If he does not do this, he will operate at a loss and will find himself at first under the necessity of curtailing his activity as owner and entrepreneur and ultimately ousted from that position altogether. He ceases to be the one or the other and has to fall back into the ranks of those who have only their labor to sell and who do not have the responsibility of guiding production into those channels that, from the point of view of the consumers, are the right ones. In the calculation of profits and losses, which constitutes the whole sum and substance of the businessman’s bookkeeping and accounting, entrepreneurs and capitalists possess a method that enables them to check, with the greatest attainable exactitude, every step in their procedure down to the smallest detail and, where possible, to see what effect each individual transaction in the conduct of their operations will have on the total outcome of the enterprise. Monetary calculation and cost accounting constitute the most important intellectual tool of the capitalist entrepreneur, and it was no one less than Goethe who pronounced the system of double-entry bookkeeping “one of the finest inventions of the human mind.” Goethe could say this because he was free from the resentment that the petty literati always foster against the businessman. It is they that form the chorus whose constant refrain is that monetary calculation and concern with profit and loss are the most shameful of sins.

Monetary calculation, bookkeeping, and statistics on sales and operations make it possible for even the biggest and most complex business concerns to make an exact check on the results achieved in every single department and thereby to form a judgment on the extent to which the head of each department has contributed to the total success of the enterprise. Thus, a reliable guide is provided for determining the treatment to be accorded to the managers of the various departments. One can know what they are worth and how much they are to be paid. Advancement to higher and more responsible positions is by way of unquestionably demonstrated success in a more circumscribed sphere of action. And just as one is able to check on the activity of the manager of each department by means of cost accounting, so one can also scrutinize the activity of the enterprise in every single field of its over-all operation, as well as the effects of certain organizational and similar measures.

There are, to be sure, limits to this exact control. One cannot determine the success or failure of the activity of each individual within a department as one can that of its manager. There are, besides, departments whose contribution to the total output cannot be comprehended by means of calculation: what a research department, a legal bureau, a secretariat, a statistical service, etc., accomplishes cannot be ascertained in the same way as, for instance, the performance of a particular sales or production department. The former may be quite safely left to the approximate estimation of the person in charge of the department, and the latter to that of the general manager of the concern; for conditions can be seen with relative clarity and those who are called upon to make these judgments (both the general management and that of the various departments) have a personal interest in their correctness, as their own incomes are affected by the productivity of the operations of which they are in charge.

The opposite of this type of enterprise, whose every transaction is controlled by the calculation of profit and loss, is represented by the apparatus of public administration. Whether a judge (and what is true of a judge is true in the same way of every high administrative official) has discharged his duties better or worse cannot be demonstrated by any computation. There is no possible way of establishing by an objective criterion whether a district or a province is being administered well or badly, cheaply or expensively. The judgment of the activity of public officials is thus a matter of subjective, and therefore quite arbitrary, opinion. Even the question whether a particular bureau is necessary, whether it has too many or too few employees, and whether its organization is or is not suited to its purpose can be decided only on the basis of considerations that involve some element of subjectivity. There is but one field of public administration in which the criterion of success or failure is unquestionable: the waging of war. But even here the only thing certain is whether the operation has been crowned with success. The question how far the distribution of power determined the issue even before the beginning of hostilities and how much of the outcome is to be attributed to the competence or incompetence of the leaders in their conduct of the operations and to the appropriateness of the measures they took cannot be strictly and precisely answered. There have been generals celebrated for their victories who, in fact, did everything to facilitate the triumph of the enemy and who owe their success solely to circumstances so favorable as to outweigh their mistakes. And vanquished leaders have sometimes been condemned whose genius had done everything possible to prevent the inevitable defeat.

The manager of a private enterprise gives the employees to whom he assigns independent duties only one directive: to make as much profit as possible. Everything that he has to say to them is comprehended in this one order, and an examination of the accounts makes it possible to determine easily and accurately to what extent they have followed it. The manager of a bureaucratic department finds himself in a quite different situation. He can tell his subordinates what they have to accomplish, but he is not in a position to ascertain whether the means employed for the attainment of this result are the most appropriate and economical under the circumstances. If he is not omnipresent in all the offices and bureaus subordinate to him, he cannot judge whether the attainment of the same result would not have been possible with a lesser expenditure of labor and materials. The fact that the result itself is also not amenable to numerical measurement, but only to approximate assessment, need not be discussed here. For we are not considering administrative technique from the point of view of its external effects, but merely from the standpoint of its reaction upon the internal operation of the bureaucratic apparatus; we are concerned with the result attained, therefore, only in its relation to the expenses incurred.

Because it is out of the question to undertake to determine this relationship by means of computations after the manner of commercial bookkeeping, the manager of a bureaucratic organization must provide his subordinates with instructions with which compliance is made obligatory. In these instructions provision is made, in a general way, for the ordinary and regular course of business. In all extraordinary cases, however, before any money is spent, permission must first be obtained from higher authority—a tedious and rather ineffectual procedure in favor of which all that can be said is that it is the only method possible. For if every subaltern bureau, every department head, every branch office, were given the right to make the expenditures that they deemed requisite, the costs of administration would soon soar without limit. One should not delude oneself about the fact that this system is seriously defective and very unsatisfactory. Many expenses are incurred that are superfluous, and many that would be necessary are not made because a bureaucratic apparatus cannot, by its very nature, adjust itself to circumstances as a commercial organization can.

The effect of bureaucratization is most apparent in its representative—the bureaucrat. In a private enterprise, the hiring of labor is not the conferring of a favor, but a business transaction from which both parties, employer and employee, benefit. The employer must endeavor to pay wages corresponding in value to the labor performed. If he does not do this, he runs the risk of seeing the worker leave his employment for that of a better-paying competitor. The employee, in order not to lose his job, must in his turn endeavor to fulfill the duties of his position well enough to be worth his wages. Since employment is not a favor, but a business transaction, the employee does not need to fear that he may be discharged if he falls into personal disfavor. For the entrepreneur who discharges, for reasons of personal bias, a useful employee who is worth his pay harms only himself and not the worker, who can find a similar position elsewhere. There is not the slightest difficulty in entrusting to the manager of each department the authority to hire and fire employees; for under the pressure of the control exercised over his activities by bookkeeping and cost accounting he must see to it that his department shows as great a profit as possible, and hence he is obliged, in his own interest, to be careful to retain the best employees there. If out of spite he discharges someone whom he ought not to have discharged, if his actions are motivated by personal, and not objective, considerations, then it is he himself who must suffer the consequences. Any impairment of the success of the department headed by him must ultimately redound to his loss. Thus, the incorporation of the nonmaterial factor, labor, into the process of production takes place without any friction.

In a bureaucratic organization things are quite different. Since the productive contribution of the individual department, and hence also of the individual employee, even when he occupies an executive position, cannot in this case be ascertained, the door is wide open to favoritism and personal bias both in appointment and remuneration. The fact that the intercession of influential persons plays a certain role in filling official positions in the civil service is not due to a peculiar baseness of character on the part of those responsible for filling these posts, but to the fact that from the very outset there is no objective criterion for determining an individual’s qualification for appointment. Of course, it is the most competent who ought to be employed, but the question is: Who is the most competent? If this question could be as easily answered as the question what an ironworker or a compositor is worth, there would be no problem. But since this is not the case, an element of arbitrariness is necessarily involved in comparing the qualifications of different individuals.

In order to keep this within the narrowest possible limits, one seeks to set up formal conditions for appointment and promotion. Attainment to a particular position is made dependent on the fulfillment of certain educational requirements, on the passing of examinations, and on continued employment for a certain period of time in other positions; promotion is made dependent on years of previous service. Naturally, all these expedients are in no sense a substitute for the possibility of finding the best available man for every post by means of the calculation of profit and loss. It would be supererogatory to point out in particular that attendance at school, examinations, and seniority do not offer the slightest guarantee that the selection will be correct. On the contrary: this system from the very outset prevents the energetic and the competent from occupying positions in line with their powers and capabilities. Never yet has anyone of real worth risen to the top by way of a prescribed program of study and promotion in due course along the established lines. Even in Germany, which has a pious faith in her bureaucrats, the expression, “a perfect functionary,” is used to connote a spineless and ineffectual person, however well intentioned.

Thus, the characteristic mark of bureaucratic management is that it lacks the guidance provided by considerations of profit and loss in judging the success of its operations in relation to the expenses incurred and is consequently obliged, in the effort to compensate for this deficiency, to resort to the entirely inadequate expedient of making its conduct of affairs and the hiring of its personnel subject to a set of formal prescriptions. All the evils that are commonly imputed to bureaucratic management—its inflexibility, its lack of resourcefulness, and its helplessness in the face of problems that are easily solved in profit-seeking enterprise—are the result of this one fundamental deficiency. As long as the activity of the state is restricted to the narrow field that liberalism assigns to it, the disadvantages of bureaucracy cannot, at any rate, make themselves too apparent. They become a grave problem for the whole economy only when the state—and naturally the same is true of municipalities and other forms of local government—proceeds to socialize the means of production and to take an active part in it or even in trade.

A public enterprise conducted with an eye to maximizing profits can, to be sure, make use of monetary calculation as long as most business is privately owned and hence a market still exists and market prices are formed. The only hindrance to its operation and development is the fact that its managers, as functionaries of the state, do not have the personal interest in the success or failure of the business that is characteristic of the management of private enterprises. The director cannot, therefore, be given freedom to act independently in making crucial decisions. Since he would not suffer the losses that could result, under certain circumstances, from his business policy, his conduct of affairs could all too easily be disposed to run risks that would not be taken by a director who, because he must share in the loss, is genuinely responsible. His authority must, therefore, be in some way limited. Whether it is bound by a set of rigid regulations or the decisions of a control council or the consent of a superior authority, bureaucratic management in any case continues to suffer from the unwieldiness and the lack of ability to adjust itself to changing conditions that have everywhere led public enterprises from one failure to another.

But, in fact, it is only seldom that a public enterprise aims at nothing but profit and sets aside all other considerations. As a rule, it is demanded of a public enterprise that it keep in mind certain “national” and other considerations. It is expected, for instance, in its procurement and sales policy, to favor domestic as against foreign production. It is demanded of state railways that they set a schedule of rates that will serve a specific commercial policy on the part of the government, that they construct and maintain lines that cannot be profitably operated simply in order to promote the economic development of a certain area, and that they operate certain others for strategic or similar reasons. When such factors play a role in the conduct of a business, all control by the methods of cost accounting and the calculation of profit and loss is out of the question. The director of the state railways who presents an unfavorable balance sheet at the end of the year is in a position to say: “The railway lines under my supervision have, to be sure, operated at a loss if considered from the strictly commercial point of view of profit-seeking private enterprise; but if one takes into consideration such factors as our national economic and military policy, one must not forget that they have accomplished a great deal that does not enter into the calculation of profit and loss.” Under such circumstances the calculation of profit and loss has clearly lost all value for judging the success of an enterprise, so that—even apart from other factors having the same tendency—it must necessarily be managed quite as bureaucratically as, for example, the administration of a prison or a tax bureau.

No private enterprise, whatever its size, can ever become bureaucratic as long as it is entirely and solely operated on a profit basis. Firm adherence to the entrepreneurial principle of aiming at the highest profit makes it possible for even the largest concern to ascertain with complete precision the part played by every transaction and by the activity of every department in contributing to the total result. As long as enterprises look only to profit, they are proof against all the evils of bureaucratism. The bureaucratization of privately owned enterprises that we see going on about us everywhere today is purely the result of interventionism, which forces them to take into account factors that, if they were free to determine their policies for themselves, would be far from playing any role whatsoever in the conduct of their business. When a concern must pay heed to political prejudices and sensibilities of all kinds in order to avoid being continually harassed by various organs of the state, it soon finds that it is no longer in a position to base its calculations on the solid ground of profit and loss. For instance, some of the public utility enterprises in the United States, in order to avoid conflicts with public opinion and with the legislative, judicial, and administrative organs of the government which it influences, make it a policy not to hire Catholics, Jews, atheists, Darwinists, Negroes, Irishmen, Germans, Italians, and all newly arrived immigrants. In the interventionist state, every business is under the necessity of accommodating itself to the wishes of the authorities in order to avoid burdensome penalties. The result is that these and other considerations foreign to the profit-seeking principle of entrepreneurial management come to play an ever increasing role in the conduct of business, while the part played by precise calculation and cost accounting concomitantly dwindles in significance, and private enterprise begins increasingly to adopt the mode of management of public enterprises, with their elaborate apparatus of formally prescribed rules and regulations. In a word, it becomes bureaucratized.

Thus, the progressing bureaucratization of big business is by no means the result of an inexorable tendency inherent in the development of the capitalist economy. It is nothing but the necessary consequence of adopting a policy of interventionism. In the absence of government interference with their operations, even the largest firms could be run in exactly as businesslike a way as the small ones.

CHAPTER 3

Liberal Foreign Policy

1

The Boundaries of the State

For the liberal, there is no opposition between domestic policy and foreign policy, and the question so often raised and exhaustively discussed, whether considerations of foreign policy take precedence over those of domestic policy or vice versa, is, in his eyes, an idle one. For liberalism is, from the very outset, a world-embracing political concept, and the same ideas that it seeks to realize within a limited area it holds to be valid also for the larger sphere of world politics. If the liberal makes a distinction between domestic and foreign policy, he does so solely for purposes of convenience and classification, to subdivide the vast domain of political problems into major types, and not because he is of the opinion that different principles are valid for each.

The goal of the domestic policy of liberalism is the same as that of its foreign policy: peace. It aims at peaceful cooperation just as much between nations as within each nation. The starting point of liberal thought is the recognition of the value and importance of human cooperation, and the whole policy and program of liberalism is designed to serve the purpose of maintaining the existing state of mutual cooperation among the members of the human race and of extending it still further. The ultimate ideal envisioned by liberalism is the perfect cooperation of all mankind, taking place peacefully and without friction. Liberal thinking always has the whole of humanity in view and not just parts. It does not stop at limited groups; it does not end at the border of the village, of the province, of the nation, or of the continent. Its thinking is cosmopolitan and ecumenical: it takes in all men and the whole world. Liberalism is, in this sense, humanism; and the liberal, a citizen of the world, a cosmopolite.

Today, when the world is dominated by antiliberal ideas, cosmopolitanism is suspect in the eyes of the masses. In Germany there are overzealous patriots who cannot forgive the great German poets, especially Goethe, whose thinking and feeling, instead of being confined by national bounds, had a cosmopolitan orientation. It is thought that an irreconcilable conflict exists between the interests of the nation and those of mankind and that one who directs his aspirations and endeavors toward the welfare of the whole of humanity thereby disregards the interests of his own nation. No belief could be more deeply mistaken. The German who works for the good of all mankind no more injures the particular interests of his compatriots—i.e., those of his fellow men with whom he shares a common land and language and with whom he often forms an ethnic and spiritual community as well—than one who works for the good of the whole German nation injures the interests of his own home town. For the individual has just as much of an interest in the prosperity of the whole world as he has in the blooming and flourishing of the local community in which he lives.

The chauvinistic nationalists, who maintain that irreconcilable conflicts of interests exist among the various nations and who seek the adoption of a policy aimed at securing, by force if need be, the supremacy of their own nation over all others, are generally most emphatic in insisting on the necessity and utility of internal national unity. The greater the stress they place on the necessity of war against foreign nations, the more urgently do they call for peace and concord among the members of their own nation. Now this demand for domestic unity the liberal by no means opposes. On the contrary: the demand for peace within each nation was itself an outcome of liberal thinking and attained to prominence only as the liberal ideas of the eighteenth century came to be more widely accepted. Before the liberal philosophy, with its unconditional extolment of peace, gained ascendancy over men’s minds, the waging of war was not confined to conflicts between one country and another. Nations were themselves torn by continual civil strife and sanguinary internal struggles. In the eighteenth century Briton still stood arrayed in battle against Briton at Culloden, and even as late as the nineteenth century, in Germany, while Prussia waged war against Austria, other German states joined in the fighting on both sides. At that time Prussia saw nothing wrong in fighting on the side of Italy against German Austria, and, in 1870, only the rapid progress of events prevented Austria from joining the French in the war against Prussia and its allies. Many of the victories of which the Prussian army is so proud were won by Prussian troops over those of other German states. It was liberalism that first taught the nations to preserve in their internal conduct of affairs the peace that it desires to teach them to keep also in their relations with other countries.

It is from the fact of the international division of labor that liberalism derives the decisive, irrefutable argument against war. The division of labor has for a long time now gone beyond the boundaries of any one nation. No civilized nation today satisfies its need as a self-sufficient community directly from its own production. All are obliged to obtain goods from abroad and to pay for them by exporting domestic products. Anything that would have the effect of preventing or stopping the international exchange of goods would do immense damage to the whole of human civilization and undermine the well-being, indeed, the very basis of existence, of millions upon millions of people. In an age in which nations are mutually dependent on products of foreign provenance, wars can no longer be waged. Since any stoppage in the flow of imports could have a decisive effect on the outcome of a war waged by a nation involved in the international division of labor, a policy that wishes to take into consideration the possibility of a war must endeavor to make the national economy self-sufficient, i.e., it must, even in time of peace, aim at making the international division of labor come to an end at its own borders. If Germany wished to withdraw from the international division of labor and attempted to satisfy all its needs directly through domestic production, the total annual product of German labor would diminish, and thus the well-being, the standard of living, and the cultural level of the German people would decline considerably.

2

The Right of Self-Determination

It has already been pointed out that a country can enjoy domestic peace only when a democratic constitution provides the guarantee that the adjustment of the government to the will of the citizens can take place without friction. Nothing else is required than the consistent application of the same principle in order to assure international peace as well.

The liberals of an earlier age thought that the peoples of the world were peaceable by nature and that only monarchs desire war in order to increase their power and wealth by the conquest of provinces. They believed, therefore, that to assure lasting peace it was sufficient to replace the rule of dynastic princes by governments dependent on the people. If a democratic republic finds that its existing boundaries, as shaped by the course of history before the transition to liberalism, no longer correspond to the political wishes of the people, they must be peacefully changed to conform to the results of a plebiscite expressing the people’s will. It must always be possible to shift the boundaries of the state if the will of the inhabitants of an area to attach themselves to a state other than the one to which they presently belong has made itself clearly known. In the seventeenth and eighteenth centuries, the Russian Czars incorporated into their empire large areas whose population had never felt the desire to belong to the Russian state. Even if the Russian Empire had adopted a completely democratic constitution, the wishes of the inhabitants of these territories would not have been satisfied, because they simply did not desire to associate themselves in any bond of political union with the Russians. Their democratic demand was: freedom from the Russian Empire; the formation of an independent Poland, Finland, Latvia, Lithuania, etc. The fact that these demands and similar ones on the part of other peoples (e.g., the Italians, the Germans in Schleswig-Holstein, the Slavs in the Hapsburg Empire) could be satisfied only by recourse to arms was the most important cause of all the wars that have been fought in Europe since the Congress of Vienna.

The right of self-determination in regard to the question of membership in a state thus means: whenever the inhabitants of a particular territory, whether it be a single village, a whole district, or a series of adjacent districts, make it known, by a freely conducted plebiscite, that they no longer wish to remain united to the state to which they belong at the time, but wish either to form an independent state or to attach themselves to some other state, their wishes are to be respected and complied with. This is the only feasible and effective way of preventing revolutions and civil and international wars.

To call this right of self-determination the “right of self-determination of nations” is to misunderstand it. It is not the right of self-determination of a delimited national unit, but the right of the inhabitants of every territory to decide on the state to which they wish to belong. This misunderstanding is even more grievous when the expression “self-determination of nations” is taken to mean that a national state has the right to detach and incorporate into itself against the will of the inhabitants parts of the nation that belong to the territory of another state. It is in terms of the right of self-determination of nations understood in this sense that the Italian Fascists seek to justify their demand that the canton Tessin and parts of other cantons be detached from Switzerland and united to Italy, even though the inhabitants of these cantons have no such desire. A similar position is taken by some of the advocates of Pan-Germanism in regard to German Switzerland and the Netherlands.

However, the right of self-determination of which we speak is not the right of self-determination of nations, but rather the right of self-determination of the inhabitants of every territory large enough to form an independent administrative unit. If it were in any way possible to grant this right of self-determination to every individual person, it would have to be done. This is impracticable only because of compelling technical considerations, which make it necessary that a region be governed as a single administrative unit and that the right of self-determination be restricted to the will of the majority of the inhabitants of areas large enough to count as territorial units in the administration of the country.

So far as the right of self-determination was given effect at all, and wherever it would have been permitted to take effect, in the nineteenth and twentieth centuries, it led or would have led to the formation of states composed of a single nationality (i.e., people speaking the same language) and to the dissolution of states composed of several nationalities, but only as a consequence of the free choice of those entitled to participate in the plebiscite. The formation of states comprising all the members of a national group was the result of the exercise of the right of self-determination, not its purpose. If some members of a nation feel happier politically independent than as a part of a state composed of all the members of the same linguistic group, one may, of course, attempt to change their political ideas by persuasion in order to win them over to the principle of nationality, according to which all members of the same linguistic group should form a single, independent state. If, however, one seeks to determine their political fate against their will by appealing to an alleged higher right of the nation, one violates the right of self-determination no less effectively than by practicing any other form of oppression. A partition of Switzerland among Germany, France, and Italy, even if it were performed exactly according to linguistic boundaries, would be just as gross a violation of the right of self-determination as was the partition of Poland.

3

The Political Foundations of Peace

One would think that after the experience of the World War the realization of the necessity of perpetual peace would have become increasingly common. However, it is still not appreciated that everlasting peace can be achieved only by putting the liberal program into effect generally and holding to it constantly and consistently and that the World War was nothing but the natural and necessary consequence of the antiliberal policies of the last decades.

A senseless and thoughtless slogan makes capitalism responsible for the origin of the war. The connection between the latter and the policy of protectionism is clearly evident, and, as a result of what is certainly a grievous ignorance of the facts, the protective tariff is identified outright with capitalism. People forget that only a short time ago all the nationalistic publications were filled with violent diatribes against international capital (“finance capital” and the “international gold trust”) for being without a country, for opposing protective tariffs, for being averse to war and inclined toward peace. It is altogether absurd to hold the armaments industry responsible for the outbreak of the war. The armaments industry has arisen and grown to a considerable size because governments and peoples bent on war demanded weapons. It would be really preposterous to suppose that the nations turned to imperialistic policies as a favor to the ordnance manufacturers. The armaments industry, like every other, arose in order to satisfy a demand. If the nations had preferred other things to bullets and explosives, then the factory-owners would have produced the former instead of the materials of war.

One can assume that the desire for peace is today universal. But the peoples of the world are not at all clear as to what conditions would have to be fulfilled in order to secure peace.

If the peace is not to be disturbed, all incentive for aggression must be eliminated. A world order must be established in which nations and national groups are so satisfied with living conditions that they will not feel impelled to resort to the desperate expedient of war. The liberal does not expect to abolish war by preaching and moralizing. He seeks to create the social conditions that will eliminate the causes of war.

The first requirement in this regard is private property. When private property must be respected even in time of war, when the victor is not entitled to appropriate to himself the property of private persons, and the appropriation of public property has no great significance because private ownership of the means of production prevails everywhere, an important motive for waging war has already been excluded. However, this is far from being enough to guarantee peace. So that the exercise of the right of self-determination may not be reduced to a farce, political institutions must be such as to render the transference of sovereignty over a territory from one government to another a matter of the least possible significance, involving no advantage or disadvantage for anyone. People do not have a correct conception of what this requires. It is therefore necessary to make it clear by a few examples.

Examine a map of linguistic and national groups in Central or Eastern Europe and notice how often, for example, in northern and western Bohemia, boundaries between them are crossed by railway lines. Here, under conditions of interventionism and etatism, there is no way of making the borders of the state correspond to the linguistic frontier. It will not do to operate a Czech state railroad on the soil of the German state, and it will do even less to run a railroad line that is under a different management every few miles. It would be just as unthinkable after every few minutes or quarter of an hour on a railroad trip to have to face a tariff barrier with all its formalities. It is thus easy to understand why etatists and interventionists reach the conclusion that the “geographic” or “economic” unity of such areas must not be “ruptured” and that the territory in question must therefore be placed under the sovereignty of a single “ruler.” (Obviously, every nation seeks to prove that it alone is entitled and competent to play the role of ruler under such circumstances.) For liberalism there is no problem here at all. Private railroads, if quite free of government interference, can traverse the territory of many states without any trouble. If there are no tariff boundaries and no limitations on the movement of persons, animals, or goods, then it is of no consequence whether a train ride in a few hours crosses over the borders of the state more or less often.

The linguistic map also reveals the existence of national enclaves. Without any land connection of the same nationality with the main body of their people, compatriots dwell together in closed-off settlements or linguistic islands. Under present political conditions, they cannot be incorporated into the mother country. The fact that the area encompassed by the state is today protected by tariff walls makes unbroken territorial continuity a political necessity. A small “foreign possession,” in being isolated from the immediately adjacent territory by tariffs and other measures of protectionism, would be exposed to economic strangulation. But once there is free trade and the state restricts itself to the preservation of private property, nothing is simpler than the solution of this problem. No linguistic island then has to acquiesce in the infringement of its rights as a nation merely because it is not connected to the main body of its own people by a territorial bridge inhabited by its fellow nationals.

The notorious “problem of the corridor” also arises only in an imperialist-etatist-interventionist system. An inland country believes that it needs a “corridor” to the sea in order to keep its foreign trade free of the influence of the interventionist and etatist policies of the countries whose territories separate it from the sea. If free trade were the rule, it would be hard to see what advantage an inland country could expect from the possession of a “corridor.”

Transfer from one “economic zone” (in the etatist sense) to another has serious economic consequences. One need only think, for instance, of the cotton industry of upper Alsatia, which has twice had to undergo this experience, or the Polish textile industry of Upper Silesia, etc. If a change in the political affiliation of a territory involves advantages or disadvantages for its inhabitants, then their freedom to vote for the state to which they really wish to belong is essentially limited. One can speak of genuine self-determination only if the decision of each individual stems from his own free will, and not from fear of loss or hope of profit. A capitalist world organized on liberal principles knows no separate “economic” zones. In such a world, the whole of the earth’s surface forms a single economic territory.

The right of self-determination works to the advantage only of those who comprise the majority. In order to protect minorities as well, domestic measures are required, of which we shall first consider those involving the national policy in regard to education.

In most countries today school attendance, or at least private instruction, is compulsory. Parents are obliged to send their children to school for a certain number of years or, in lieu of this public instruction at school, to have them given equivalent instruction at home. It is pointless to go into the reasons that were advanced for and against compulsory education when the matter was still a live issue. They do not have the slightest relevance to the problem as it exists today. There is only one argument that has any bearing at all on this question, viz., that continued adherence to a policy of compulsory education is utterly incompatible with efforts to establish lasting peace.

The inhabitants of London, Paris, and Berlin will no doubt find such a statement completely incredible. What in the world does compulsory education have to do with war and peace? One must not, however, judge this question, as one does so many others, exclusively from the point of view of the peoples of Western Europe. In London, Paris, and Berlin, the problem of compulsory education is, to be sure, easily solved. In these cities no doubt can arise as to which language is to be used in giving instruction. The population that lives in these cities and sends its children to school may be considered, by and large, of homogeneous nationality. But even the non-English-speaking people who live in London find it in the obvious interest of their children that instruction is given in English and in no other language, and things are not different in Paris and Berlin.

However, the problem of compulsory education has an entirely different significance in those extensive areas in which peoples speaking different languages live together side by side and intermingled in polyglot confusion. Here the question of which language is to be made the basis of instruction assumes crucial importance. A decision one way or the other can, over the years, determine the nationality of a whole area. The school can alienate children from the nationality to which their parents belong and can be used as a means of oppressing whole nationalities. Whoever controls the schools has the power to injure other nationalities and to benefit his own.

It is no solution of this problem to suggest that each child be sent to the school in which the language of his parents is spoken. First of all, even apart from the problem posed by children of mixed linguistic background, it is not always easy to decide what the language of the parents is. In polyglot areas many persons are required by their profession to make use of all the languages spoken in the country. Besides, it is often not possible for an individual—again out of regard for his means of livelihood—to declare himself openly for one or another nationality. Under a system of interventionism, it could cost him the patronage of customers belonging to other nationalities or a job with an entrepreneur of a different nationality. Then again, there are many parents who would even prefer to send their children to the schools of another nationality than their own because they value the advantages of bilingualism or assimilation to the other nationality more highly than loyalty to their own people. If one leaves to the parents the choice of the school to which they wish to send their children, then one exposes them to every conceivable form of political coercion. In all areas of mixed nationality, the school is a political prize of the highest importance. It cannot be deprived of its political character as long as it remains a public and compulsory institution. There is, in fact, only one solution: the state, the government, the laws must not in any way concern themselves with schooling or education. Public funds must not be used for such purposes. The rearing and instruction of youth must be left entirely to parents and to private associations and institutions.

It is better that a number of boys grow up without formal education than that they enjoy the benefit of schooling only to run the risk, once they have grown up, of being killed or maimed. A healthy illiterate is always better than a literate cripple.

But even if we eliminate the spiritual coercion exercised by compulsory education, we should still be far from having done everything that is necessary in order to remove all the sources of friction between the nationalities living in polyglot territories. The school is one means of oppressing nationalities—perhaps the most dangerous, in our opinion—but it certainly is not the only means. Every interference on the part of the government in economic life can become a means of persecuting the members of nationalities speaking a language different from that of the ruling group. For this reason, in the interest of preserving peace, the activity of the government must be limited to the sphere in which it is, in the strictest sense of the word, indispensable.

We cannot do without the apparatus of government in protecting and preserving the life, liberty, property, and health of the individual. But even the judicial and police activities performed in the service of these ends can become dangerous in areas where any basis at all can be found for discriminating between one group and another in the conduct of official business. Only in countries where there is no particular incentive for partiality will there generally be no reason to fear that a magistrate who is supposed to apply the established laws for the protection of life, liberty, property, and health will act in a biased manner. Where, however, differences of religion, nationality, or the like have divided the population into groups separated by a gulf so deep as to exclude every impulse of fairness or humanity and to leave room for nothing but hate, the situation is quite different. Then the judge who acts consciously, or still more often unconsciously, in a biased manner thinks he is fulfilling a higher duty when he makes use of the prerogatives and powers of his office in the service of his own group.

To the extent that the apparatus of government has no other function than that of protecting life, liberty, property, and health, it is possible, at any rate, to draw up regulations that so strictly circumscribe the domain in which the administrative authorities and the courts are free to act as to leave little or no latitude for the exercise of their own discretion or arbitrary, subjective judgment. But once a share in the management of production is relinquished to the state, once the apparatus of government is called upon to determine the disposition of goods of higher order, it is impossible to hold administrative officials to a set of binding rules and regulations that would guarantee certain rights to every citizen. A penal law designed to punish murderers can, to some extent at least, draw a dividing line between what is and what is not to be considered murder and thus set certain limits to the area in which the magistrate is free to use his own judgment. Of course, every lawyer knows only too well that even the best law can be perverted, in concrete cases, in interpretation, application, and administration. But in the case of a government bureau charged with the management of transportation facilities, mines, or public lands, as much as one may restrain its freedom of action on other grounds (which have already been discussed in section 2), the most one can do to keep it impartial in regard to controversial questions of national policy is to give it directives couched in empty generalities. One must grant it a great deal of leeway in many respects because one cannot know beforehand under what circumstances it will have to act. Thus, the door is left wide open for arbitrariness, bias, and the abuse of official power.

Even in areas inhabited by people of various nationalities, there is need for a unified administration. One cannot place at every street-corner both a German and a Czech policeman, each of whom would have to protect only members of his own nationality. And even if this could be done, the question would still arise as to who is to intervene when members of both nationalities are involved in a situation that calls for intervention. The disadvantages that result from the necessity of a unified administration in these territories are unavoidable. But if difficulties already exist even in carrying out such indispensable functions of government as the protection of life, liberty, property, and health, one should not raise them to really monstrous proportions by extending the range of state activity to other fields in which, by their very nature, still greater latitude must be granted to arbitrary judgment.

Large areas of the world have been settled, not by the members of just one nationality, one race, or one religion, but by a motley mixture of many peoples. As a result of the migratory movements that necessarily follow shifts in the location of production, more new territories are continually being confronted with the problem of a mixed population. If one does not wish to aggravate artificially the friction that must arise from this living together of different groups, one must restrict the state to just those tasks that it alone can perform.

4

Nationalism

As long as nations were ruled by monarchical despots, the idea of adjusting the boundaries of the state to coincide with the boundaries between nationalities could not find acceptance. If a potentate desired to incorporate a province into his realm, he cared little whether the inhabitants—the subjects—agreed to a change of rulers or not. The only consideration that was regarded as relevant was whether the available military forces were sufficient to conquer and hold the territory in question. One justified one’s conduct publicly by the more or less artificial construction of a legal claim. The nationality of the inhabitants of the area concerned was not taken into account at all.

It was with the rise of liberalism that the question of how the boundaries of states are to be drawn first became a problem independent of military, historical, and legal considerations. Liberalism, which founds the state on the will of the majority of the people living in a certain territory, disallows all military considerations that were formerly decisive in defining the boundaries of the state. It rejects the right of conquest. It cannot understand how people can speak of “strategic frontiers” and finds entirely incomprehensible the demand that a piece of land be incorporated into one’s own state in order to possess a glacis. Liberalism does not acknowledge the historical right of a prince to inherit a province. A king can rule, in the liberal sense, only over persons and not over a certain piece of land, of which the inhabitants are viewed as mere appendages. The monarch by the grace of God carries the title of a territory, e.g., “King of France.” The kings installed by liberalism received their title, not from the name of the territory, but from that of the people over whom they ruled as constitutional monarchs. Thus, Louis Philippe bore the title “King of the French”; thus too, there is a “King of the Belgians,” as there was once a “King of the Hellenes.”

It was liberalism that created the legal form by which the desire of the people to belong or not to belong to a certain state could gain expression, viz., the plebiscite. The state to which the inhabitants of a certain territory wish to belong is to be ascertained by means of an election. But even if all the necessary economic and political conditions (e.g., those involving the national policy in regard to education) were fulfilled in order to prevent the plebiscite from being reduced to a farce, even if it were possible simply to take a poll of the inhabitants of every community in order to determine to which state they wished to attach themselves, and to repeat such an election whenever circumstances changed, some unresolved problems would certainly still remain as possible sources of friction between the different nationalities. The situation of having to belong to a state to which one does not wish to belong is no less onerous if it is the result of an election than if one must endure it as the consequence of a military conquest. But it is doubly difficult for the individual who is cut off from the majority of his fellow citizens by a language barrier.

To be a member of a national minority always means that one is a second-class citizen. Discussions of political questions must, of course, be carried on by means of the written and spoken word—in speeches, newspaper articles, and books. However, these means of political enlightenment and debate are not at the disposal of the linguistic minority to the same extent as they are for those whose mother tongue—the language used in everyday speech—is that in which the discussions take place. The political thought of a people, after all, is the reflection of the ideas contained in its political literature. Cast into the form of statute law, the outcome of its political discussions acquires direct significance for the citizen who speaks a foreign tongue, since he must obey the law; yet he has the feeling that he is excluded from effective participation in shaping the will of the legislative authority or at least that he is not allowed to cooperate in shaping it to the same extent as those whose native tongue is that of the ruling majority. And when he appears before a magistrate or any administrative official as a party to a suit or a petition, he stands before men whose political thought is foreign to him because it developed under different ideological influences.

But even apart from all this, the very fact that the members of the minority are required, in appearing before tribunals and administrative authorities, to make use of a language foreign to them already handicaps them seriously in many respects. There is all the difference in the world, when one is on trial, between being able to speak in court directly to one’s judges and being compelled to avail oneself of the services of an interpreter. At every turn, the member of a national minority is made to feel that he lives among strangers and that he is, even if the letter of the law denies it, a second-class citizen.

All these disadvantages are felt to be very oppressive even in a state with a liberal constitution in which the activity of the government is restricted to the protection of the life and property of the citizens. But they become quite intolerable in an interventionist or a socialist state. If the administrative authorities have the right to intervene everywhere according to their free discretion, if the latitude granted to judges and officials in reaching their decisions is so wide as to leave room also for the operation of political prejudices, then a member of a national minority finds himself delivered over to arbitrary judgment and oppression on the part of the public functionaries belonging to the ruling majority. What happens when school and church as well are not independent, but subject to regulation by the government, has already been discussed.

It is here that one must seek for the roots of the aggressive nationalism that we see at work today. Efforts to trace back to natural rather than political causes the violent antagonisms existing between nations today are altogether mistaken. All the symptoms of supposedly innate antipathy between peoples that are customarily offered in evidence exist also within each individual nation. The Bavarian hates the Prussian; the Prussian, the Bavarian. No less fierce is the hatred existing among individual groups within both France and Poland. Nevertheless, Germans, Poles, and Frenchmen manage to live peacefully within their own countries. What gives the antipathy of the Pole for the German and of the German for the Pole a special political significance is the aspiration of each of the two peoples to seize for itself political control of the border areas in which Germans and Poles live side by side and to use it to oppress the members of the other nationality. What has kindled the hatred between nations to a consuming fire is the fact that people want to use the schools to estrange children from the language of their fathers and to make use of the courts and administrative offices, political and economic measures, and outright expropriation to persecute those speaking a foreign tongue. Because people are prepared to resort to violent means in order to create favorable conditions for the political future of their own nation, they have established a system of oppression in the polyglot areas that imperils the peace of the world.

As long as the liberal program is not completely carried out in the territories of mixed nationality, hatred between members of different nations must become every fiercer and continue to ignite new wars and rebellions.

5

Imperialism

The lust for conquest on the part of the absolute monarchs of previous centuries was aimed at an extension of their sphere of power and an increase in their wealth. No prince could be powerful enough, for it was by force alone that he could preserve his rule against internal and external enemies. No prince could be rich enough, for he needed money for the maintenance of his soldiers and the upkeep of his entourage.

For a liberal state, the question whether or not the boundaries of its territory are to be further extended is of minor significance. Wealth cannot be won by the annexation of new provinces, since the “revenue” derived from a territory must be used to defray the necessary costs of its administration. For a liberal state, which entertains no aggressive plans, a strengthening of its military power is unimportant. Thus, liberal parliaments resisted all endeavors to increase their country’s war potential and opposed all bellicose and annexationist policies.

But the liberal policy of peace which, in the early sixties of the last [nineteenth] century, as liberalism swept from one victory to another, was considered as already assured, at least in Europe, was based on the assumption that the people of every territory would have the right to determine for themselves the state to which they wished to belong. However, in order to secure this right, since the absolutist powers had no intention of peacefully relinquishing their prerogatives, a number of rather serious wars and revolutions were first necessary. The overthrow of foreign domination in Italy, the preservation of the Germans in Schleswig-Holstein in the face of threatening denationalization, the liberation of the Poles and of the South Slavs could be attempted only by force of arms. In only one of the many places where the existing political order found itself opposed by a demand for the right of self-determination could the issue be peacefully resolved: liberal England freed the Ionian islands. Everywhere else the same situation resulted in wars and revolutions. From the struggles to form a unified German state developed the disastrous modern Franco-German conflict; the Polish question remained unresolved because the Czar crushed one rebellion after another; the Balkan question was only partially settled; and the impossibility of solving the problems of the Hapsburg monarchy against the will of the ruling dynasty ultimately led to the incident that became the immediate cause of the World War.*

Modern imperialism is distinguished from the expansionist tendencies of the absolute principalities by the fact that its moving spirits are not the members of the ruling dynasty, nor even of the nobility, the bureaucracy, or the officers’ corps of the army bent on personal enrichment and aggrandizement by plundering the resources of conquered territories, but the mass of the people, who look upon it as the most appropriate means for the preservation of national independence. In the complex network of antiliberal policies, which have so far expanded the functions of the state as to leave hardly any field of human activity free of government interference, it is futile to hope for even a moderately satisfactory solution of the political problems of the areas in which members of several nationalities live side by side. If the government of these territories is not conducted along completely liberal lines, there can be no question of even an approach to equality of rights in the treatment of the various national groups. There can then be only rulers and those ruled. The only choice is whether one will be hammer or anvil. Thus, the striving for as strong a national state as possible—one that can extend its control to all territories of mixed nationality—becomes an indispensable requirement of national self-preservation.

But the problem of linguistically mixed areas is not limited to countries long settled. Capitalism opens up for civilization new lands offering more favorable conditions of production than great parts of the countries that have been long inhabited. Capital and labor flow to the most favorable location. The migratory movement thus initiated exceeds by far all the previous migrations of the peoples of the world. Only a few nations can have their emigrants move to lands in which political power is in the hands of their compatriots. Where, however, this condition does not prevail, the migration gives rise once again to all those conflicts that generally develop in polyglot territories. In particular cases, into which we shall not enter here, matters are somewhat different in the areas of overseas colonization than in the long-settled countries of Europe. Nevertheless, the conflicts that spring from the unsatisfactory situation of national minorities are, in the last analysis, identical. The desire of each country to preserve its own nationals from such a fate leads, on the one hand, to the struggle for the acquisition of colonies suitable for settlement by Europeans, and, on the other hand, to the adoption of the policy of using import duties to protect domestic production operating under less favorable conditions against the superior competition of foreign industry, in the hope of thereby making the emigration of workers unnecessary. Indeed, in order to expand the protected market as far as possible, efforts are made to acquire even territories that are not regarded as suitable for European settlement. We may date the beginning of modern imperialism from the late seventies of the last [nineteenth] century, when the industrial countries of Europe started to abandon the policy of free trade and to engage in the race for colonial “markets” in Africa and Asia.

It was in reference to England that the term “imperialism” was first employed to characterize the modern policy of territorial expansion. England’s imperialism, to be sure, was primarily directed, not so much toward the incorporation of new territories as toward the creation of an area of uniform commercial policy out of the various possessions subject to the King of England. This was the result of the peculiar situation in which England found itself as the mother country of the most extensive colonial settlements in the world. Nevertheless, the end that the English imperialists sought to attain in the creation of a customs union embracing the dominions and the mother country was the same as that which the colonial acquisitions of Germany, Italy, France, Belgium, and other European countries were intended to serve, viz., the creation of protected export markets.

The grand commercial objectives aimed at by the policy of imperialism were nowhere attained. The dream of an all-British customs union remained unrealized. The territories annexed by European countries in the last decades, as well as those in which they were able to obtain “concessions,” play such a subordinate role in the provision of raw materials and half-manufactured goods for the world market and in their corresponding consumption of industrial products that no essential change in conditions could be brought about by such arrangements. In order to attain the goals that imperialism aimed at, it was not enough for the nations of Europe to occupy areas inhabited by savages incapable of resistance. They had to reach out for territories that were in the possession of peoples ready and able to defend themselves. And it is here that the policy of imperialism suffered shipwreck, or will soon do so. In Abyssinia, in Mexico, in the Caucasus, in Persia, in China—everywhere we see the imperialist aggressors in retreat or at least already in great difficulties.

6

Colonial Policy

The considerations and objectives that have guided the colonial policy of the European powers since the age of the great discoveries stand in the sharpest contrast to all the principles of liberalism. The basic idea of colonial policy was to take advantage of the military superiority of the white race over the members of other races. The Europeans set out, equipped with all the weapons and contrivances that their civilization placed at their disposal, to subjugate weaker peoples, to rob them of their property, and to enslave them. Attempts have been made to extenuate and gloss over the true motive of colonial policy with the excuse that its sole object was to make it possible for primitive peoples to share in the blessings of European civilization. Even assuming that this was the real objective of the governments that sent out conquerors to distant parts of the world, the liberal could still not see any adequate basis for regarding this kind of colonization as useful or beneficial. If, as we believe, European civilization really is superior to that of the primitive tribes of Africa or to the civilizations of Asia—estimable though the latter may be in their own way—it should be able to prove its superiority by inspiring these peoples to adopt it of their own accord. Could there be a more doleful proof of the sterility of European civilization than that it can be spread by no other means than fire and sword?

No chapter of history is steeped further in blood than the history of colonialism. Blood was shed uselessly and senselessly. Flourishing lands were laid waste; whole peoples destroyed and exterminated. All this can in no way be extenuated or justified. The dominion of Europeans in Africa and in important parts of Asia is absolute. It stands in the sharpest contrast to all the principles of liberalism and democracy, and there can be no doubt that we must strive for its abolition. The only question is how the elimination of this intolerable condition can be accomplished in the least harmful way possible.

The most simple and radical solution would be for the European governments to withdraw their officials, soldiers, and police from these areas and to leave the inhabitants to themselves. It is of no consequence whether this is done immediately or whether a freely held plebiscite of the natives is made to precede the surrender of the colonies. For there can scarcely be any doubt as to the outcome of a truly free election. European rule in the overseas colonies cannot count on the consent of its subjects.

The immediate consequence of this radical solution would be, if not outright anarchy, then at least continual conflicts in the areas evacuated by the Europeans. It may be safely taken for granted that up to now the natives have learned only evil ways from the Europeans, and not good ones. This is not the fault of the natives, but rather of their European conquerors, who have taught them nothing but evil. They have brought arms and engines of destruction of all kinds to the colonies; they have sent out their worst and most brutal individuals as officials and officers; at the point of the sword they have set up a colonial rule that in its sanguinary cruelty rivals the despotic system of the Bolsheviks. Europeans must not be surprised if the bad example that they themselves have set in their colonies now bears evil fruit. In any case, they have no right to complain pharisaically about the low state of public morals among the natives. Nor would they be justified in maintaining that the natives are not yet mature enough for freedom and that they still need at least several years of further education under the lash of foreign rulers before they are capable of being left on their own. For this “education” itself is at least partly responsible for the terrible conditions that exist today in the colonies, even though its consequences will not make themselves fully apparent until after the eventual withdrawal of European troops and officials.

But perhaps it will be contended that it is the duty of the Europeans, as members of a superior race, to avoid the anarchy that would presumably break out after the evacuation of the colonies and therefore to maintain their dominion in the interests and for the benefit of the natives themselves. In order to strengthen this argument, a lurid picture may be painted of the conditions that existed in Central Africa and in many parts of Asia before the establishment of European rule. One may recall the hunts for slaves conducted by the Arabs in Central Africa and the wanton outrages that many Indian despots allowed themselves. Of course, there is much that is hypocritical in this mode of argumentation, and one should not forget, for example, that the slave trade in Africa could prosper only because the descendants of Europeans in the American colonies entered the slave market as buyers. But it is not at all necessary for us to go into the pros and cons of this line of reasoning. If all that can be adduced in favor of the maintenance of European rule in the colonies is the supposed interest of the natives, then one must say that it would be better if this rule were brought to an end completely. No one has a right to thrust himself into the affairs of others in order to further their interest, and no one ought, when he has his own interests in view, to pretend that he is acting selflessly only in the interest of others.

There is, however, yet another argument in favor of the continuance of European authority and influence in the colonial areas. If the Europeans had never brought the tropical colonies under their dominion, if they had not made their economic system dependent to a considerable extent on the importation of tropical raw materials and overseas agricultural products that they paid for with industrial goods, it would still be possible to discuss quite calmly the question whether or not it is advisable to draw these areas into the network of the world market. But since colonization has already forced all these territories into the framework of the world-wide economic community, the situation is quite different. The economy of Europe today is based, to a great extent, on the inclusion of Africa and large parts of Asia in the world economy as suppliers of raw materials of all kinds. These raw materials are not taken from the natives of these areas by force. They are not carried away as tribute, but handed over in voluntary exchange for the industrial products of Europe. Thus, relations are not founded on any one-sided advantage; they are, on the contrary, mutually beneficial, and the inhabitants of the colonies derive from them just as many advantages as the inhabitants of England or Switzerland. Any stoppage in these trade relations would involve serious economic losses for Europe as well as for the colonies and would sharply depress the standard of living of great masses of people. If the slow extension of economic relations over the whole earth and the gradual development of the world economy was one of the most important sources of the increasing wealth of the last hundred and fifty years, a reversal of this trend would represent for the world an economic catastrophe of hitherto unprecedented proportions. In its extent and consequences, this catastrophe would exceed by far the crisis connected with the economic consequences of the World War. Ought the well-being of Europe and, at the same time, that of the colonies as well to be allowed to decline further in order to give the natives a chance to determine their own political destinies, when this would lead, in any event, not to their freedom, but merely to a change of masters?

This is the consideration that must be decisive in judging questions of colonial policy. European officials, troops, and police must remain in these areas, as far as their presence is necessary in order to maintain the legal and political conditions required to insure the participation of the colonial territories in international trade. It must be possible to carry on commercial, industrial, and agricultural operations in the colonies, to exploit mines, and to bring the products of the country, by rail and river, to the coast and thence to Europe and America. That all this should continue to be possible is in the interest of everyone, not only of the inhabitants of Europe, America, and Australia, but also of the natives of Asia and Africa themselves. Wherever the colonial powers do not go beyond this in the treatment of their colonies, one can raise no objection to their activities even from the liberal standpoint.

But everyone knows how seriously all the colonial powers have sinned against this principle. It is hardly necessary to recall the horrors that trustworthy English correspondents have reported as having been perpetrated in the Belgian Congo. Let us assume that these atrocities were not intended by the Belgian government and are only to be attributed to the excesses and evil characters of the functionaries sent out to the Congo. Yet the very fact that almost all the colonial powers have established in their overseas possessions a commercial system that grants a favored position to the goods of the mother country shows that present-day colonial policy is dominated by considerations altogether different from those that ought to prevail in this field.

In order to bring the interests of Europe and of the white race into harmony with those of the colored races in the colonies in regard to all questions of economic policy, the League of Nations must be given supreme authority in the administration of all those overseas territories in which there is no system of parliamentary government. The League would have to see to it that self-government is granted as soon as possible to the lands that today do not yet possess it and that the authority of the mother country is limited to the protection of property, of the civil rights of foreigners, and of trade relations. The natives as well as the nationals of other powers must be granted the right to bring complaints directly to the League if any measures of the mother country exceed what is required to guarantee the security of trade and commerce and of economic activity in general in these territories, and the League of Nations must be granted the right to make an effective settlement of such complaints.

The application of these principles would mean, in effect, that all the overseas territories of the European countries would at first be turned into mandates of the League. But even this would have to be viewed only as a transitional stage. The final goal must continue to be the complete liberation of the colonies from the despotic rule under which they live today.

With this solution to a difficult problem—which is becoming ever more difficult with the passage of time—not only the nations of Europe and America that do not possess colonies, but also the colonial powers and the natives would have to be content. The colonial powers have to realize that in the long run they will not be able to maintain their dominion over the colonies. As capitalism has penetrated into these territories, the natives have become self-reliant; there is no longer any cultural disparity between their upper classes and the officers and officials who are in charge of the administration on behalf of the mother country. Militarily and politically, the distribution of power today is quite different from what it was even a generation ago. The attempt of the European powers, the United States, and Japan to treat China as a colonial territory has proved a failure. In Egypt, the English are even now in retreat; in India, they are already in a defensive position. That the Netherlands would be unable to hold the East Indies against a really serious attack is well known. The same is true of the French colonies in Africa and Asia. The Americans are not happy with the Philippines and would be prepared to give them up if a suitable occasion presented itself. The transfer of the colonies to the care of the League of Nations would guarantee to the colonial powers the undiminished possession of their capital investments and protect them against having to make sacrifices to quell native uprisings. The natives too could only be grateful for a proposal that would assure them independence by way of a peaceful evolution and with it the guarantee that no neighbor bent on conquest would threaten their political independence in the future.

7

Free Trade

The theoretical demonstration of the consequences of the protective tariff and of free trade is the keystone of classical economics. It is so clear, so obvious, so indisputable, that its opponents were unable to advance any arguments against it that could not be immediately refuted as completely mistaken and absurd.

Nevertheless, nowadays we find protective tariffs—indeed, often even outright prohibitions on imports—all over the world. Even in England, the mother country of free trade, protectionism is in the ascendancy today. The principle of national autarky wins new supporters with every day that passes. Even countries with only a few million inhabitants, like Hungary and Czechoslovakia, are attempting, by means of a high-tariff policy and prohibitions on imports, to make themselves independent of the rest of the world. The basic idea of the foreign trade policy of the United States is to impose on all goods produced abroad at lower costs import duties to the full amount of this difference. What renders the whole situation grotesque is the fact that all countries want to decrease their imports, but at the same time to increase their exports. The effect of these policies is to interfere with the international division of labor and thereby generally to lower the productivity of labor. The only reason this result has not become more noticeable is that the advances of the capitalist system have always been so far sufficient to outweigh it. However, there can be no doubt that everyone today would be richer if the protective tariff did not artificially drive production from more favorable to less favorable localities.

Under a system of completely free trade, capital and labor would be employed wherever conditions are most favorable for production. Other locations would be used as long as it was still possible to produce anywhere under more favorable conditions. To the extent to which, as a result of the development of the means of transportation, improvements in technology, and more thorough exploration of countries newly opened to commerce, it is discovered that there are sites more favorable for production than those currently being used, production shifts to these localities. Capital and labor tend to move from areas where conditions are less favorable for production to those in which they are more favorable.

But the migration of capital and labor presupposes not only complete freedom of trade, but also the complete absence of obstacles to their movement from one country to another. This was far from being the case at the time that the classical free-trade doctrine was first developed. A whole series of obstacles stood in the way of the free movement of both capital and labor. Because of ignorance of conditions, a general insecurity in regard to law and order, and a number of similar reasons, capitalists felt reluctant about investing in foreign countries. As for the workers, they found it impossible to leave their native land, not only because of their ignorance of foreign languages, but because of legal, religious, and other difficulties. At the beginning of the nineteenth century, it was, to be sure, generally true that capital and labor could move freely within each country, but obstacles stood in the way of their movement from one country to another. The sole justification for distinguishing in economic theory between domestic and foreign trade is to be found in the fact that in the case of the former there is free mobility of capital and labor, whereas this is not true in regard to the commerce between nations. Thus, the problem that the classical theory had to solve may be stated as follows: What are the effects of free trade in consumers’ goods between one country and another if the mobility of capital and labor from one to the other is restricted?

To this question Ricardo’s doctrine provided the answer. The branches of production distribute themselves among the individual countries in such a way that each country devotes its resources to those industries in which it possesses the greatest superiority over other countries. The mercantilists had feared that a country with unfavorable conditions for production would import more than it would export, so that it would ultimately find itself without any money; and they demanded that protective tariffs and prohibitions on imports be decreed in time to prevent such a deplorable situation from arising. The classical doctrine shows that these mercantilist fears were groundless. For even a country in which the conditions of production in every branch of industry are less favorable than they are in other countries need not fear that it will export less than it will import. The classical doctrine demonstrated, in a brilliant and incontrovertible way that has never been contested by anybody, that even countries with relatively favorable conditions of production must find it advantageous to import from countries with comparatively unfavorable conditions of production those commodities that they would, to be sure, be better fitted to produce, but not so much better fitted as they are to produce other commodities in whose production they then specialize.

Thus, what the classical theory of free trade says to the statesman is: There are countries with relatively favorable and others with relatively unfavorable natural conditions of production. In the absence of interference on the part of governments, the international division of labor will, of itself, result in every country’s finding its place in the world economy, no matter how its conditions of production compare with those of other countries. Of course, the countries with comparatively favorable conditions of production will be richer than the others, but this is a fact that cannot be altered by political measures in any case. It is simply the consequence of a difference in the natural factors of production.

This was the situation that confronted the older liberalism, and to this situation it responded with the classical doctrine of free trade. But since the days of Ricardo world conditions have changed considerably, and the problem that the free-trade doctrine had to face in the last sixty years before the outbreak of the World War was completely different from the one with which it had to deal at the close of the eighteenth and the beginning of the nineteenth century. For the nineteenth century partially eliminated the obstacles that, at its beginning, had stood in the way of the free mobility of capital and labor. In the second half of the nineteenth century it was far easier for a capitalist to invest his capital abroad than it had been in Ricardo’s day. Law and order were established on a considerably firmer foundation; knowledge of foreign countries, manners, and customs had spread; and the joint-stock company offered the possibility of dividing the risk of foreign enterprises among many persons and thereby reducing it. It would, of course, be an exaggeration to say that at the beginning of the twentieth century capital was as mobile in its passage from one country to another as it was within the territory of the country itself. Certain differences still existed, to be sure; yet the assumption that capital had to remain within the boundaries of each country was no longer valid. Nor was this any longer true of labor either. In the second half of the nineteenth century millions left Europe to find better opportunities for employment overseas.

In so far as the conditions presupposed by the classical doctrine of free trade, viz., the immobility of capital and labor, no longer existed, the distinction between the effects of free trade in domestic commerce and in foreign commerce likewise necessarily lost its validity. If capital and labor can move as freely between one country and another as they do within the confines of each, then there is no further justification for making a distinction between the effects of free trade in domestic commerce and in foreign commerce. For then what was said in regard to the former holds for the latter as well: the result of free trade is that only those locations are used for production in which the conditions for it are comparatively favorable, while those in which the conditions of production are comparatively unfavorable remain unused. Capital and labor flow from the countries with less favorable conditions of production toward those where the conditions of production are more favorable, or, more precisely, from the long-settled, thickly populated European countries toward America and Australia, as areas that offer more favorable conditions of production.

For the European nations that had at their disposal, besides the old areas of settlement in Europe, overseas territories suitable for colonization by Europeans, this meant nothing more than that they now settled a part of their population overseas. In England’s case, for example, some of her sons now lived in Canada, Australia, or South Africa. The emigrants who had left England could retain their English citizenship and nationality in their new homes. But for Germany the case was quite different. The German who emigrated landed in the territory of a foreign country and found himself among the members of a foreign nation. He became the citizen of a foreign state, and it was to be expected that after one, two, or at the most three generations, his attachment to the German people would be dissolved and the process of his assimilation as a member of a foreign nation would be completed. Germany was faced with the problem of whether it was to look on with indifference while a part of her capital and her people emigrated overseas.

One must not fall into the error of assuming that the problems of commercial policy that England and Germany had to face in the second half of the nineteenth century were the same. For England, it was a question of whether or not she ought to permit a number of her sons to emigrate to the dominions, and there was no reason to hinder their emigration in any way. For Germany, however, the problem was whether it ought to stand by quietly while her nationals emigrated to the British colonies, to South America, and to other countries, where it was to be expected that these emigrants, in the course of time, would give up their citizenship and nationality just as hundreds of thousands, indeed, millions, who had previously emigrated, had already done. Because it did not want this to happen, the German Empire, which during the sixties and seventies had been approaching ever more closely to a policy of free trade, now shifted, toward the end of the seventies, to one of protectionism by the imposition of import duties designed to shield German agriculture and industry against foreign competition. Under the protection of these tariffs German agriculture was able to some extent to bear East-European and overseas competition from farms operating on better land, and German industry could form cartels that kept the domestic price above the price on the world market, enabling it to use the profits thereby realized to undersell its competitors abroad.

But the ultimate goal that was aimed at in the return to protectionism could not be achieved. The higher living and production costs rose in Germany as a direct consequence of these protective tariffs, the more difficult its trade position necessarily became. To be sure, it was possible for Germany to make a mighty industrial upswing in the first three decades of the era of the new commercial policy. But this upswing would have occurred even in the absence of a protective tariff, for it was primarily the result of the introduction of new methods in the German iron and chemical industries, which enabled them to make better use of the country’s abundant natural resources.

Antiliberal policy, by abolishing the free mobility of labor in international trade and considerably restricting even the mobility of capital, has, to a certain extent, eliminated the difference that existed in the conditions of international trade between the beginning and the end of the nineteenth century and has reverted to those prevailing at the time the doctrine of free trade was first formulated. Once again capital and, above all, labor are hindered in their movements. Under the conditions existing today, unhampered trade in consumers’ goods could not give rise to any migratory movements. Once again, it would result in a state of affairs in which the individual peoples of the world would be engaged in those types and branches of production for which the relatively best conditions exist in their own countries.

But whatever may be the prerequisites for the development of international trade, protective tariffs can accomplish only one thing: to prevent production from being carried on where the natural and social conditions are most favorable for it and to cause it to be carried on instead where conditions are worse. The outcome of protectionism is, therefore, always a reduction in the productivity of human labor. The freetrader is far from denying that the evil that the nations of the world wish to combat by means of a policy of protectionism really is an evil. What he maintains is only that the means recommended by the imperialists and protectionists cannot eliminate that evil. He therefore proposes a different way. In order to create the indispensable conditions for a lasting peace, one of the features of the present international situation that the liberal wishes to change is the fact that emigrants from nations like Germany and Italy, which have been treated like stepchildren in the division of the world, must live in areas in which, because of the adoption of antiliberal policies, they are condemned to lose their nationality.

8

Freedom of Movement

Liberalism has sometimes been reproached on the ground that its program is predominantly negative. This follows necessarily, it is asserted, from the very nature of freedom, which can be conceived only as freedom from something, for the demand for freedom consists essentially in the rejection of some sort of claim. On the other hand, it is thought, the program of the authoritarian parties is positive. Since a very definite value judgment is generally connoted by the terms “negative” and “positive,” this way of speaking already involves a surreptitious attempt to discredit the political program of liberalism.

There is no need to repeat here once again that the liberal program—a society based on private ownership of the means of production—is no less positive than any other conceivable political program. What is negative in the liberal program is the denial, the rejection, and the combatting of everything that stands in opposition to this positive program. In this defensive posture, the program of liberalism—and, for that matter, that of every movement—is dependent on the position that its opponents assume towards it. Where the opposition is strongest, the assault of liberalism must also be strongest; where it is relatively weak or even completely lacking, a few brief words, under the circumstances, are sufficient. And since the opposition that liberalism has had to confront has changed during the course of history, the defensive aspect of the liberal program has also undergone many changes.

This becomes most clearly evident in the stand that it takes in regard to the question of freedom of movement. The liberal demands that every person have the right to live wherever he wants. This is not a “negative” demand. It belongs to the very essence of a society based on private ownership of the means of production that every man may work and dispose of his earnings where he thinks best. This principle takes on a negative character only if it encounters forces aiming at a restriction of freedom of movement. In this negative aspect, the right to freedom of movement has, in the course of time, undergone a complete change. When liberalism arose in the eighteenth and nineteenth centuries, it had to struggle for freedom of emigration. Today, the struggle is over freedom of immigration. At that time, it had to oppose laws which hindered the inhabitants of a country from moving to the city and which held out the prospect of severe punishment for anyone who wanted to leave his native land in order to better himself in a foreign land. Immigration, however, was at that time generally free and unhampered.

Today, as is well known, things are quite different. The trend began some decades ago with laws against the immigration of Chinese coolies. Today in every country in the world that could appear inviting to immigration, there are more or less stringent laws either prohibiting it entirely or at least restricting it severely.

This policy must be considered from two points of view: first, as a policy of the trade unions, and then as a policy of national protectionism.

Aside from such coercive measures as the closed shop, compulsory strikes, and violent interference with those willing to work, the only way the trade unions can have any influence on the labor market is by restricting the supply of labor. But since it is not within the power of the trade unions to reduce the number of workers living in the world, the only other possibility remaining open to them is to block access to employment, and thus diminish the number of workers, in one branch of industry or in one country at the expense of the workers employed in other industries or living in other countries. For reasons of practical politics, it is possible only to a limited extent for those engaged in a particular branch of industry to bar from it the rest of the workers in the country. On the other hand, no special political difficulty is involved in imposing such restrictions on the entrance of foreign labor.

The natural conditions of production and, concomitantly, the productivity of labor are more favorable, and, as a consequence, wage rates are higher, in the United States than in vast areas of Europe. In the absence of immigration barriers, European workers would emigrate to the United States in great numbers to look for jobs. The American immigration laws make this exceptionally difficult. Thus, the wages of labor in the United States are kept above the height that they would reach if there were full freedom of migration, whereas in Europe they are depressed below this height. On the one hand, the American worker gains; on the other hand, the European worker loses.

However, it would be a mistake to consider the consequences of immigration barriers exclusively from the point of view of their immediate effect on wages. They go further. As a result of the relative oversupply of labor in areas with comparatively unfavorable conditions of production, and the relative shortage of labor in areas in which the conditions of production are comparatively favorable, production is further expanded in the former and more restricted in the latter than would be the case if there were full freedom of migration. Thus, the effects of restricting this freedom are just the same as those of a protective tariff. In one part of the world comparatively favorable opportunities for production are not utilized, while in another part of the world less favorable opportunities for production are being exploited. Looked at from the standpoint of humanity, the result is a lowering of the productivity of human labor, a reduction in the supply of goods at the disposal of mankind.

Attempts to justify on economic grounds the policy of restricting immigration are therefore doomed from the outset. There cannot be the slightest doubt that migration barriers diminish the productivity of human labor. When the trade unions of the United States or Australia hinder immigration, they are fighting not only against the interests of the workers of the rest of the countries of the world, but also against the interests of everyone else in order to secure a special privilege for themselves. For all that, it still remains quite uncertain whether the increase in the general productivity of human labor which could be brought about by the establishment of complete freedom of migration would not be so great as to compensate entirely the members of the American and Australian trade unions for the losses that they could suffer from the immigration of foreign workers.

The workers of the United States and Australia could not succeed in having restrictions imposed on immigration if they did not have still another argument to fall back upon in support of their policy. After all, even today the power of certain liberal principles and ideas is so great that one cannot combat them if one does not place allegedly higher and more important considerations above the interest in the attainment of maximum productivity. We have already seen how “national interests” are cited in justification of protective tariffs. The same considerations are also invoked in favor of restrictions on immigration.

In the absence of any migration barriers whatsoever, vast hordes of immigrants from the comparatively overpopulated areas of Europe would, it is maintained, inundate Australia and America. They would come in such great numbers that it would no longer be possible to count on their assimilation. If in the past immigrants to America soon adopted the English language and American ways and customs, this was in part due to the fact that they did not come over all at once in such great numbers. The small groups of immigrants who distributed themselves over a wide land quickly integrated themselves into the great body of the American people. The individual immigrant was already half assimilated when the next immigrants landed on American soil. One of the most important reasons for this rapid national assimilation was the fact that the immigrants from foreign countries did not come in too great numbers. This, it is believed, would now change, and there is real danger that the ascendancy—or more correctly, the exclusive dominion—of the Anglo-Saxons in the United States would be destroyed. This is especially to be feared in the case of heavy immigration on the part of the Mongolian peoples of Asia.

These fears may perhaps be exaggerated in regard to the United States. As regards Australia, they certainly are not. Australia has approximately the same number of inhabitants as Austria; its area, however, is a hundred times greater than Austria’s, and its natural resources are certainly incomparably richer. If Australia were thrown open to immigration, it can be assumed with great probability that its population would in a few years consist mostly of Japanese, Chinese, and Malayans.

The aversion that most people feel today towards the members of foreign nationalities and especially towards those of other races is evidently too great to admit of any peaceful settlement of such antagonisms. It is scarcely to be expected that the Australians will voluntarily permit the immigration of Europeans not of English nationality, and it is completely out of the question that they should permit Asiatics too to seek work and a permanent home in their continent. The Australians of English descent insist that the fact that it was the English who first opened up this land for settlement has given the English people a special right to the exclusive possession of the entire continent for all time to come. The members of the world’s other nationalities, however, do not in the least desire to contest the right of the Australians to occupy any of the land that they already are making use of in Australia. They think only that it is unfair that the Australians do not permit the utilization of more favorable conditions of production that today lie fallow and force them to carry on production under the less favorable conditions prevailing in their own countries.

This issue is of the most momentous significance for the future of the world. Indeed, the fate of civilization depends on its satisfactory resolution. On the one side stand scores, indeed, hundreds of millions of Europeans and Asiatics who are compelled to work under less favorable conditions of production than they could find in the territories from which they are barred. They demand that the gates of the forbidden paradise be opened to them so that they may increase the productivity of their labor and thereby receive for themselves a higher standard of living. On the other side stand those already fortunate enough to call their own the land with the more favorable conditions of production. They desire—as far as they are workers, and not owners of the means of production—not to give up the higher wages that this position guarantees them. The entire nation, however, is unanimous in fearing inundation by foreigners. The present inhabitants of these favored lands fear that some day they could be reduced to a minority in their own country and that they would then have to suffer all the horrors of national persecution to which, for instance, the Germans are today exposed in Czechoslovakia, Italy, and Poland.

It cannot be denied that these fears are justified. Because of the enormous power that today stands at the command of the state, a national minority must expect the worst from a majority of a different nationality. As long as the state is granted the vast powers which it has today and which public opinion considers to be its right, the thought of having to live in a state whose government is in the hands of members of a foreign nationality is positively terrifying. It is frightful to live in a state in which at every turn one is exposed to persecution—masquerading under the guise of justice—by a ruling majority. It is dreadful to be handicapped even as a child in school on account of one’s nationality and to be in the wrong before every judicial and administrative authority because one belongs to a national minority.

If one considers the conflict from this point of view, it seems as if it allows of no other solution than war. In that case, it is to be expected that the nation inferior in numbers will be defeated, that, for example, the nations of Asia, counting hundreds of millions, will succeed in driving the progeny of the white race from Australia. But we do not wish to indulge in such conjectures. For it is certain that such wars—and we must assume that a world problem of such great dimensions cannot be solved once and for all in just one war—would lead to the most frightful catastrophe for civilization.

It is clear that no solution of the problem of immigration is possible if one adheres to the ideal of the interventionist state, which meddles in every field of human activity, or to that of the socialist state. Only the adoption of the liberal program could make the problem of immigration, which today seems insoluble, completely disappear. In an Australia governed according to liberal principles, what difficulties could arise from the fact that in some parts of the continent Japanese and in other parts Englishmen were in the majority?

9

The United States of Europe

The United States of America is the mightiest and richest nation in the world. Nowhere else was capitalism able to develop more freely and with less interference from the government. The inhabitants of the United States of America are therefore far richer than those of any other country on earth. For more than sixty years their country was not involved in any war. If they had not waged a war of extermination against the original inhabitants of the land, if they had not needlessly waged war against Spain in 1898, and if they had not participated in the World War, only a few graybeards among them would today be able to give a first-hand account of what war means. It is doubtful whether the Americans themselves appreciate how much they owe to the fact that more of the policies of liberalism and capitalism have been realized in their country than in any other. Even foreigners do not know what it is that has made the much-envied republic rich and powerful. But—apart from those who, filled with resentment, affect a profound contempt for the “materialism” of American culture—all are agreed in desiring nothing more eagerly than that their country should be as rich and as powerful as the United States.

In various quarters it is being proposed, as the simplest way to achieve this end, that a “United States of Europe” be formed. By themselves the individual countries of the European continent are too thinly populated and do not have enough land at their disposal to be able to hold their own in the international struggle for supremacy as against the ever increasing power of the United States, against Russia, against the British Empire, against China, and against other groupings of similar size that may be formed in the future, perhaps in South America. They must therefore consolidate into a military and political union, into a defensive and offensive alliance, which alone would be capable of assuring to Europe in the centuries to come the importance in world politics that it has enjoyed in the past. What gives special support to the idea of a Pan-European union is the realization, which is every day impressing itself more strongly on everyone, that nothing can be more absurd than the protective tariff policies presently being pursued by the nations of Europe. Only the further development of the international division of labor can increase the well-being and produce the abundance of goods needed to raise the standard of living, and thereby also the cultural level, of the masses. The economic policies of all countries, but especially those of the smaller European nations, are aimed precisely at destroying the international division of labor. If the conditions under which American industry operates, with a potential market of more than a hundred twenty million rich consumers, unhampered by tariffs or similar obstacles, are compared with those against which German, Czechoslovakian, or Hungarian industry must contend, the utter absurdity of endeavors to create little autarkic economic territories becomes immediately obvious.

The evils that those who champion the idea of a United States of Europe are trying to combat undoubtedly exist, and the sooner they are eliminated, the better. But the formation of a United States of Europe would not be an appropriate means to achieve this end.

Any reform in international relations must aim at abolishing a situation in which each country seeks in every way possible to enlarge its territory at the expense of other countries. The problem of international boundaries, which has assumed such overwhelming importance today, must lose all its significance. The nations must come to realize that the most important problem of foreign policy is the establishment of lasting peace, and they must understand that this can be assured throughout the world only if the field of activity permitted to the state is limited to the narrowest range. Only then will the size and extent of the territory subject to the sovereignty of the state no longer assume such overwhelming importance for the life of the individual as to make it seem natural, now as in the past, for rivers of blood to be shed in disputes over boundaries. The narrow-mindedness which sees nothing beyond one’s own state and one’s own nation and which has no conception of the importance of international cooperation must be replaced by a cosmopolitan outlook. This, however, is possible only if the society of nations, the international superstate, is so constituted that no people and no individual is oppressed on account of nationality or national peculiarities.

Nationalist policies, which always begin by aiming at the ruination of one’s neighbor, must, in the final analysis, lead to the ruination of all. In order to overcome such provincialism and to replace it by a policy genuinely cosmopolitan in its orientation, it is first necessary for the nations of the world to realize that their interests do not stand in mutual opposition and that every nation best serves its own cause when it is intent on promoting the development of all nations and scrupulously abstains from every attempt to use violence against other nations or parts of other nations. Thus, what is needed is not the replacement of national chauvinism by a chauvinism that would have some larger, supranational entity for its object, but rather the recognition that every sort of chauvinism is mistaken. The old, militaristic methods of international politics must now give way to new, peaceful methods aiming at cooperative effort, and not at mutual warfare.

The champions of Pan-Europe and of the United States of Europe, however, have other ends in view. They do not plan on establishing a new kind of state different in its policies from the imperialistic and militaristic states that have existed up to now, but on a reconstitution of the old imperialistic and militaristic idea of the state. Pan-Europe is to be greater than the individual states that will comprise it; it is to be more powerful than they are and therefore more efficient militarily and better suited to oppose such great powers as England, the United States of America, and Russia. A European chauvinism is to take the place of the French, the German, or the Hungarian variety; a united front formed of all the European nations is to be directed against “foreigners”: Britons, Americans, Russians, Chinese, and Japanese.

Now one can base a chauvinistic political consciousness and a chauvinistic military policy on a national foundation, but not on a geographic one. Community of language binds members of the same nationality close together, while linguistic diversity gives rise to a gulf between nations. If it were not for this fact—aside from all ideologies—chauvinistic thinking would never have been able to develop. The geographer, with map in hand, may, no doubt, very well view the European continent (with the exception of Russia) as a unity if he is so minded; but this does not create among the inhabitants of that region any feeling of community or solidarity on which the statesman could base his plans. A Rhinelander can be made to understand that he is defending his own cause if he goes into battle for the Germans of East Prussia. It may even be possible to bring him to see that the cause of all mankind is also his own cause. But he will never be able to understand that, while he has to stand side by side with the Portuguese because they too are Europeans, the cause of England is that of an enemy, or, at best, of a neutral alien. It is not possible to efface from men’s minds (nor, incidentally, does liberalism have any desire to do so) the imprint left by a long historical development that has brought it about that the heart of a German beats faster at every mention of Germany, of the German people, or of all that is typically German. This feeling of nationality existed before any political attempt was made to base upon it the idea of a German state, a German policy, and German chauvinism. All the well-intentioned schemes for replacing national states by a federation of states, whether Central European, Pan-European, Pan-American, or constructed on some similar artificial basis, suffer from the same fundamental defect. They fail to take account of the fact that the words “Europe” or “Pan-Europe” and “European” or “Pan-European” do not have this kind of emotional connotation and are thus incapable of evoking sentiments of the kind called forth by such words as “Germany” and “German.”

The matter may be seen in its clearest light if we direct our attention to the problem, which plays a decisive role in all these projects, of agreeing on a commercial policy for such a federation of states. As conditions are today, a Bavarian can be induced to regard the protection of German labor—let us say, in Saxony—as a sufficient justification for a tariff that makes it more expensive for him, the Bavarian, to purchase some article. We may hope that some day he will succeed in being converted to the realization that all political measures designed to achieve autarky, and hence all protective tariffs, are senseless and self-defeating and consequently ought to be abolished. But never will one succeed in inducing a Pole or a Hungarian to consider it justified that he should pay more than the world market price for any commodity merely in order to enable the French, the Germans, or the Italians to carry on its production in their countries. One can certainly win support for a policy of protectionism by combining an appeal to feelings of national solidarity with the nationalistic doctrine that the interests of different nations are mutually incompatible; but there is nothing similar that could serve a federation of states as an ideological basis for a system of protectionism. It is manifestly absurd to break up the ever increasing unity of world economy into a number of small national territories, each as autarkic as possible. But one cannot counteract the policy of economic isolation on a national scale by replacing it with the same policy on the part of a larger political entity comprising a number of different nationalities. The only way to counteract tendencies toward protectionism and autarky is to recognize their harmfulness and to appreciate the harmony of the interests of all nations.

Once it has been demonstrated that the disintegration of the world economy into a number of small autarkic areas has detrimental consequences for all nations, the conclusion in favor of free trade necessarily follows. In order to prove that a Pan-European zone of autarky should be set up under the shelter of a protective tariff, it would first be necessary to demonstrate that the interests of the Portuguese and the Rumanians, although in harmony with each other, both collide with those of Brazil and Russia. One would have to adduce proof that it is good for the Hungarians to give up their domestic textile industry in favor of the German, the French, and the Belgian, but that the interests of the Hungarians would be injured by the importation of English or American textiles.

The movement in favor of the formation of a federation of European states has arisen from a correct recognition of the untenability of all forms of chauvinistic nationalism. But what the supporters of this movement wish to set in its place is impracticable because it lacks a vital basis in the consciousness of the people. And even if the goal of the Pan-European movement could be achieved, the world would not be in the least the better for it. The struggle of a united European continent against the great world powers outside its territory would be no less ruinous than is the present struggle of the countries of Europe among themselves.

10

The League of Nations

Just as, in the eyes of the liberal, the state is not the highest ideal, so it is also not the best apparatus of compulsion. The metaphysical theory of the state declares—approaching, in this respect, the vanity and presumption of the absolute monarchs—that each individual state is sovereign, i.e., that it represents the last and highest court of appeals. But, for the liberal, the world does not end at the borders of the state. In his eyes, whatever significance national boundaries have is only incidental and subordinate. His political thinking encompasses the whole of mankind. The starting-point of his entire political philosophy is the conviction that the division of labor is international and not merely national. He realizes from the very first that it is not sufficient to establish peace within each country, that it is much more important that all nations live at peace with one another. The liberal therefore demands that the political organization of society be extended until it reaches its culmination in a world state that unites all nations on an equal basis. For this reason he sees the law of each nation as subordinate to international law, and that is why he demands supranational tribunals and administrative authorities to assure peace among nations in the same way that the judicial and executive organs of each country are charged with the maintenance of peace within its own territory.

For a long time the demand for the establishment of such a supranational world organization was confined to a few thinkers who were considered utopians and went unheeded. To be sure, after the end of the Napoleonic Wars, the world repeatedly witnessed the spectacle of the statesmen of the leading powers gathered around the conference table to arrive at a common accord, and after the middle of the nineteenth century, an increasing number of supranational institutions were established, the most widely noted of which are the Red Cross and the International Postal Union. Yet all of this was still a very far cry from the creation of a genuine supranational organization. Even the Hague Peace Conference signified hardly any progress in this respect. It was only the horrors of the World War that first made it possible to win widespread support for the idea of an organization of all nations that would be in a position to prevent future conflicts. With the end of the war, the victors took steps to create an association which they called “The League of Nations” and which is widely held throughout the world to be the nucleus of what could be a really effective future international organization.

In any case, there can be no doubt that what today goes under that name is in no way a realization of the liberal ideal of a supranational organization. In the first place, some of the most important and powerful nations of the world do not belong to the League at all. The United States, not to mention smaller nations, still stands outside. Besides, the covenant of the League of Nations suffers from the very outset from the fact that it distinguishes between two categories of member states: those that enjoy full rights and those that, having been on the losing side in the World War, are not fully qualified members. It is clear that such an inequality of status in the community of nations must bear within itself the seeds of war in the same way that every such division into castes does within a country. All these shortcomings have combined to weaken the League lamentably and to render it impotent in regard to all the substantive questions with which it has been confronted. One has only to think of its conduct in the conflict between Italy and Greece or in regard to the Mosul question, and especially in those cases in which the fate of oppressed minorities depended on its decision.

There are in all countries, but especially in England and Germany, groups that believe that in the interest of transforming this sham League of Nations into a real one—into a genuine supranational state—its present weaknesses and defects should be treated in the most indulgent possible way. Such opportunism never does any good, no matter what question is at issue. The League of Nations is—and this would certainly have to be conceded by everybody except the functionaries and the staff employed in its bureaus—an inadequate institution in no way corresponding to the demands that one is entitled to make of a world organization. This fact, far from being minimized or ignored, needs to be repeatedly and insistently emphasized so that attention is called to all the changes that would have to be made in order to transform this sham into a real League of Nations. Nothing has done greater harm to the idea of a supranational world organization than the intellectual confusion arising from the belief that the present League constitutes a complete or virtually complete realization of what every honest and sincere liberal must demand. It is impossible to build a real League of Nations, capable of assuring lasting peace, on the principle that the traditional, historically determined boundaries of each country are to be treated as inalterably fixed. The League of Nations retains the fundamental defect of all previous international law: in setting up procedural rules for adjudicating disputes between nations, it is not in the least interested in creating any other norms for their settlement than the preservation of the status quo and the enforcement of existing treaties. Under such circumstances, however, peace cannot be assured unless it be by reducing the whole world situation to a state of frozen immobility.

To be sure, the League does hold out, even though very cautiously and with many reservations, the prospect of some future boundary adjustments to do justice to the demands of some nations and parts of nations. It also promises—again very cautiously and qualifiedly—protection to national minorities. This permits us to hope that from these extremely inadequate beginnings a world superstate really deserving of the name may some day be able to develop that would be capable of assuring the nations the peace that they require. But this question will not be decided at Geneva in the sessions of the present League, and certainly not in the parliaments of the individual countries that comprise it. For the problem involved is not at all a matter of organization or of the technique of international government, but the greatest ideological question that mankind has ever faced. It is a question of whether we shall succeed in creating throughout the world a frame of mind without which all agreements for the preservation of peace and all the proceedings of courts of arbitration will remain, at the crucial moment, only worthless scraps of paper. This frame of mind can be nothing less than the unqualified, unconditional acceptance of liberalism. Liberal thinking must permeate all nations, liberal principles must pervade all political institutions, if the prerequisites of peace are to be created and the causes of war eliminated. As long as nations cling to protective tariffs, immigration barriers, compulsory education, interventionism, and etatism, new conflicts capable of breaking out at any time into open warfare will continually arise to plague mankind.

11

Russia

The law-abiding citizen by his labor serves both himself and his fellow man and thereby integrates himself peacefully into the social order. The robber, on the other hand, is intent, not on honest toil, but on the forcible appropriation of the fruits of others’ labor. For thousands of years the world had to submit to the yoke of military conquerors and feudal lords who simply took for granted that the products of the industry of other men existed for them to consume. The evolution of mankind toward civilization and the strengthening of social bonds required, first of all, overcoming the intellectual and physical influence of the military and feudal castes that aspired to rule the world and the substitution of the ideal of the bourgeois for that of the hereditary lord. The supplanting of the militaristic ideal, which esteems only the warrior and despises honest labor, has not, by any means, even yet been completely achieved. In every nation there are still individuals whose minds are altogether taken up with the ideas and images of the militaristic ages. There are nations in which transient atavistic impulses toward plunder and violence, which one would have presumed to have long since been mastered, still break out and once more gain ascendancy. But, by and large, one can say of the nations of the white race that today inhabit central and western Europe and America that the mentality that Herbert Spencer called “militaristic” has been displaced by that to which he gave the name “industrial.” Today there is only one great nation that steadfastly adheres to the militaristic ideal, viz., the Russians.

Of course, even among the Russian people there are some who do not share this attitude. It is only to be regretted that they have not been able to prevail over their compatriots. Ever since Russia was first in a position to exercise an influence on European politics, it has continually behaved like a robber who lies in wait for the moment when he can pounce upon his victim and plunder him of his possessions. At no time did the Russian Czars acknowledge any other limits to the expansion of their empire than those dictated by the force of circumstances. The position of the Bolsheviks in regard to the problem of the territorial expansion of their dominions is not a whit different. They too acknowledge no other rule than that, in the conquest of new lands, one may and indeed must go as far as one dares, with due regard to one’s resources. The fortunate circumstance that saved civilization from being destroyed by the Russians was the fact that the nations of Europe were strong enough to be able successfully to stand off the onslaught of the hordes of Russian barbarians. The experiences of the Russians in the Napoleonic Wars, the Crimean War, and the Turkish campaign of 1877–78 showed them that, in spite of the great number of their soldiers, their army is unable to seize the offensive against Europe. The World War merely confirmed this.

More dangerous than bayonets and cannon are the weapons of the mind. To be sure, the response that the ideas of the Russians found in Europe was due, in the first place, to the fact that Europe itself was already full of these ideas before they came out of Russia. Indeed, it would perhaps be more nearly correct to say that these Russian ideas themselves were not originally Russian, however much they may have suited the character of the Russian people, but that they were borrowed by the Russians from Europe. So great is the intellectual sterility of the Russians that they were never able to formulate for themselves the expression of their own inmost nature.

Liberalism, which is based completely on science and whose policies represent nothing but the application of the results of science, must be on its guard not to make unscientific value judgments. Value judgments stand outside of science and are always purely subjective. One cannot, therefore, classify nations according to their worth and speak of them as worthy or as less worthy. Consequently, the question whether or not the Russians are inferior lies completely outside the scope of our consideration. We do not at all contend that they are so. What we maintain is only that they do not wish to enter into the scheme of human social cooperation. In relation to human society and the community of nations their position is that of a people intent on nothing but the consumption of what others have accumulated. People among whom the ideas of Dostoyevsky, Tolstoy, and Lenin are a living force cannot produce a lasting social organization. They must revert to a condition of complete barbarism. Russia is endowed far more richly by nature with fertility of soil and mineral resources of all kinds than is the United States. If the Russians had pursued the same capitalistic policy as the Americans, they would today be the richest people in the world. Despotism, imperialism, and Bolshevism have made them the poorest. Now they are seeking capital and credits from all over the world.

Once this is recognized, it clearly follows what must be the guiding principle of the policy of the civilized nations toward Russia. Let the Russians be Russians. Let them do what they want in their own country. But do not let them pass beyond the boundaries of their own land to destroy European civilization. This is not to say, of course, that the importation and translation of Russian writings ought to be prohibited. Neurotics may enjoy them as much as they wish; the healthy will, in any case, eschew them. Nor does this mean that the Russians ought to be prohibited from spreading their propaganda and distributing bribes the way the Czars did throughout the world. If modern civilization were unable to defend itself against the attacks of hirelings, then it could not, in any case, remain in existence much longer. This is not to say, either, that Americans or Europeans ought to be prevented from visiting Russia if they are attracted to it. Let them view at first hand, at their own risk and on their own responsibility, the land of mass murder and mass misery. Nor does this mean that capitalists ought to be prevented from granting loans to the Soviets or otherwise to invest capital in Russia. If they are foolish enough to believe that they will ever see any part of it again, let them make the venture.

But the governments of Europe and America must stop promoting Soviet destructionism by paying premiums for exports to Soviet Russia and thereby furthering the Russian Soviet system by financial contributions. Let them stop propagandizing for emigration and the export of capital to Soviet Russia.

Whether or not the Russian people are to discard the Soviet system is for them to settle among themselves. The land of the knout and the prison-camp no longer poses a threat to the world today. With all their will to war and destruction, the Russians are no longer capable seriously of imperiling the peace of Europe. One may therefore safely let them alone. The only thing that needs to be resisted is any tendency on our part to support or promote the destructionist policy of the Soviets.

CHAPTER 4

Liberalism and the Political Parties

1

The “Doctrinairism” of the Liberals

Classical liberalism has been reproached with being too obstinate and not ready enough to compromise. It was because of its inflexibility that it was defeated in its struggle with the nascent anticapitalist parties of all kinds. If it had realized, as these other parties did, the importance of compromise and concession to popular slogans in winning the favor of the masses, it would have been able to preserve at least some of its influence. But it has never bothered to build for itself a party organization and a party machine as the anticapitalist parties have done. It has never attached any importance to political tactics in electoral campaigns and parliamentary proceedings. It has never gone in for scheming opportunism or political bargaining. This unyielding doctrinairism necessarily brought about the decline of liberalism.

The factual assertions contained in these statements are entirely in accordance with the truth, but to believe that they constitute a reproach against liberalism is to reveal a complete misunderstanding of its essential spirit. The ultimate and most profound of the fundamental insights of liberal thought is that it is ideas that constitute the foundation on which the whole edifice of human social cooperation is constructed and sustained and that a lasting social structure cannot be built on the basis of false and mistaken ideas. Nothing can serve as a substitute for an ideology that enhances human life by fostering social cooperation—least of all lies, whether they be called “tactics,” “diplomacy,” or “compromise.” If men will not, from a recognition of social necessity, voluntarily do what must be done if society is to be maintained and general well-being advanced, no one can lead them to the right path by any cunning stratagem or artifice. If they err and go astray, then one must endeavor to enlighten them by instruction. But if they cannot be enlightened, if they persist in error, then nothing can be done to prevent catastrophe. All the tricks and lies of demagogic politicians may well be suited to promote the cause of those who, whether in good faith or bad, work for the destruction of society. But the cause of social progress, the cause of the further development and intensification of social bonds, cannot be advanced by lies and demagogy. No power on earth, no crafty stratagem or clever deception could succeed in duping mankind into accepting a social doctrine that it not only does not acknowledge, but openly spurns.

The only way open to anyone who wishes to lead the world back to liberalism is to convince his fellow citizens of the necessity of adopting the liberal program. This work of enlightenment is the sole task that the liberal can and must perform in order to avert as much as lies within his power the destruction toward which society is rapidly heading today. There is no place here for concessions to any of the favorite or customary prejudices and errors. In regard to questions that will decide whether or not society is to continue to exist at all, whether millions of people are to prosper or perish, there is no room for compromise either from weakness or from misplaced deference for the sensibilities of others.

If liberal principles once again are allowed to guide the policies of great nations, if a revolution in public opinion could once more give capitalism free rein, the world will be able gradually to raise itself from the condition into which the policies of the combined anticapitalist factions have plunged it. There is no other way out of the political and social chaos of the present age.

The most serious illusion under which classical liberalism labored was its optimism in regard to the direction that the evolution of society was bound to take. To the champions of liberalism—the sociologists and economists of the eighteenth and the first half of the nineteenth century and their supporters—it seemed certain that mankind would advance to ever higher stages of perfection and that nothing would be able to arrest this progress. They were firmly convinced that rational cognition of the fundamental laws of social cooperation and interdependence, which they had discovered, would soon become common and that thereafter the social bonds peacefully uniting mankind would become ever closer, there would be a progressive improvement in general well-being, and civilization would rise to ever higher levels of culture. Nothing could shake their optimism. As the attack on liberalism began to grow steadily fiercer, as the ascendancy of liberal ideas in politics was challenged from all sides, they thought that what they had to contend with was only the last volleys fired in retreat by a moribund system that did not require serious study and counterattack because it would in any case soon collapse of itself.

The liberals were of the opinion that all men have the intellectual capacity to reason correctly about the difficult problems of social cooperation and to act accordingly. They were so impressed with the clarity and self-evidence of the reasoning by which they had arrived at their political ideas that they were quite unable to understand how anyone could fail to comprehend it. They never grasped two facts: first, that the masses lack the capacity to think logically; and secondly, that in the eyes of most people, even when they are able to recognize the truth, a momentary, special advantage that may be enjoyed immediately appears more important than a lasting greater gain that must be deferred. Most people do not have even the intellectual endowments required to think through the—after all very complicated—problems of social cooperation, and they certainly do not have the will power necessary to make those provisional sacrifices that all social action demands. The slogans of interventionism and of socialism, especially proposals for the partial expropriation of private property, always find ready and enthusiastic approval with the masses, who expect to profit directly and immediately from them.

2

Political Parties

There can be no more grievous misunderstanding of the meaning and nature of liberalism than to think that it would be possible to secure the victory of liberal ideas by resorting to the methods employed today by the other political parties.

In a caste and status society, constituted not of citizens with equal rights, but divided into ranks vested with different duties and prerogatives, there are no political parties in the modern sense. As long as the special privileges and immunities of the different castes are not called into question, peace reigns among them. But once the privileges of caste and status are contested, the issue is joined, and civil war can be avoided only if one side or the other, recognizing its weakness, yields without an appeal to arms. In all such conflicts, the position of each individual is determined from the outset by his status as a member of one caste or another. To be sure, there can be renegades who, in the expectation of being better able to provide for their personal advantage on the side of the enemy, fight against the members of their own caste and are consequently viewed by them as traitors. But, apart from such exceptional cases, the individual is not confronted with the question of which of the opposing groups he ought to join. He stands by the members of his own caste and shares their fate. The caste or castes that are dissatisfied with their position rebel against the prevailing order and have to win their demands against the opposition of the others. The ultimate outcome of the conflict is—if everything does not, in fact, remain as it was because the rebels have been worsted—that the old order is replaced by a new one in which the rights of the various castes are different from what they were before.

With the advent of liberalism came the demand for the abolition of all special privileges. The society of caste and status had to make way for a new order in which there were to be only citizens with equal rights. What was under attack was no longer only the particular privileges of the different castes, but the very existence of all privileges. Liberalism tore down the barriers of rank and status and liberated man from the restrictions with which the old order had surrounded him. It was in capitalist society, under a system of government founded on liberal principles, that the individual was first granted the opportunity to participate directly in political life and was first called upon to make a personal decision in regard to political goals and ideals. In the caste and status society of earlier days, the only political conflicts had been those among the different castes, each of which had formed a solid front in opposition to the others; or, in the absence of such conflicts, there were, within those castes that were permitted a share in political life, factional conflicts among coteries and cliques for influence, power, and a place at the helm. Only under a polity in which all citizens enjoy equal rights—corresponding to the liberal ideal, which has nowhere ever been fully achieved—can there be political parties consisting of associations of persons who want to see their ideas on legislation and administration put into effect. For there can very well be differences of opinion concerning the best way to achieve the liberal aim of assuring peaceful social cooperation, and these differences of opinion must join issue as conflicts of ideas.

Thus, in a liberal society there could be socialist parties too. Even parties that seek to have a special legal position conceded to particular groups would not be impossible under a liberal system. But all these parties must acknowledge liberalism (at least temporarily, until they emerge victorious) so far as to make use in their political struggles solely of the weapons of the intellect, which liberalism views as the only ones permissible in such contests, even though, in the last analysis, as socialists or as champions of special privileges, the members of the antiliberal parties reject the liberal philosophy. Thus, some of the pre-Marxist “utopian” socialists fought for socialism within the framework of liberalism, and in the golden age of liberalism in western Europe, the clergy and the nobility tried to achieve their ends within the framework of a modern constitutional state.

The parties that we see at work today are of an entirely different kind. To be sure, some part of their program is concerned with the whole of society and purports to address itself to the problem of how social cooperation is to be achieved. But what this part of their program says is only a concession wrung from them by the liberal ideology. What they aim at in reality is set forth in another part of their program, which is the only part that they pay any attention to and which stands in irreconcilable contradiction to the part that is couched in terms of the general welfare. Present-day political parties are the champions not only of certain of the privileged orders of earlier days that desire to see preserved and extended traditional prerogatives that liberalism had to allow them to keep because its victory was not complete, but also of certain groups that strive for special privileges, that is to say, that desire to attain the status of a caste. Liberalism addresses itself to all and proposes a program acceptable to all alike. It promises no one privileges. By calling for the renunciation of the pursuit of special interests, it even demands sacrifices, though, of course, only provisional ones, involving the giving up of a relatively small advantage in order to attain a greater one. But the parties of special interests address themselves only to a part of society. To this part, for which alone they intend to work, they promise special advantages at the expense of the rest of society.

All modern political parties and all modern party ideologies originated as a reaction on the part of special group interests fighting for a privileged status against liberalism. Before the rise of liberalism, there were, of course, privileged orders with their special interests and prerogatives and their mutual conflicts, but at that time the ideology of the status society could still express itself in a completely naive and unembarrassed way. In the conflicts that occurred in those days between the champions and the opponents of special privilege, there was never any question of the antisocial character of the whole system nor any need of maintaining the pretense of justifying it on social grounds. One cannot, therefore, draw any direct comparison between the old system of privileged orders and the activities and propaganda of the present-day parties of special interests.

To understand the true character of all these parties, one must keep in mind the fact that they were originally formed solely as a defense of special privileges against the teachings of liberalism. Their party doctrines are not, like those of liberalism, the political application of a comprehensive, carefully thought-out theory of society. The political ideology of liberalism was derived from a fundamental system of ideas that had first been developed as a scientific theory without any thought of its political significance. In contradistinction to this, the special rights and privileges sought by the antiliberal parties were, from the very outset, already realized in existing social institutions, and it was in justification of the latter that one undertook subsequently to elaborate an ideology, a task that was generally treated as a matter of little moment that could easily be disposed of with a few brief words. Farm groups think it sufficient to point out the indispensability of agriculture. The trade unions appeal to the indispensability of labor. The parties of the middle class cite the importance of the existence of a social stratum that represents the golden mean. It seems to trouble them little that such appeals contribute nothing to proving the necessity or even the advantageousness to the general public of the special privileges they are striving for. The groups that they desire to win over will follow them in any case, and as for the others, every attempt at recruiting supporters from their ranks would be futile.

Thus, all these modern parties of special interests, no matter how far apart their goals may diverge or how violently they may contend against one another, form a united front in the battle against liberalism. In the eyes of all of them, the principle of liberalism that the rightly understood interests of all men are, in the long run, compatible is like a red cloth waved in front of a bull. As they see it, there are irreconcilable conflicts of interests that can be settled only by the victory of one faction over the others, to the advantage of the former and the disadvantage of the latter. Liberalism, these parties assert, is not what it pretends to be. It too is nothing but a party program seeking to champion the special interests of a particular group, the bourgeoisie, i.e., the capitalists and entrepreneurs, against the interests of all other groups.

The fact that this allegation forms part of the propaganda of Marxism accounts for much of the latter’s success. If the doctrine of the irreconcilable conflict between the interests of different classes within a society based on private ownership of the means of production is taken as the essential dogma of Marxism, then all the parties active today on the European continent would have to be considered as Marxist. The doctrine of class antagonisms and of class conflict is also accepted by the nationalist parties in so far as they share the opinion that these antagonisms do exist in capitalist society and that the conflicts to which they give rise must run their course. What distinguishes them from the Marxist parties is only that they wish to overcome class conflict by reverting to a status society constituted along the lines that they recommend and by shifting the battlefront to the international arena, where they believe it should be. They do not dispute the statement that conflicts of this kind occur in a society based on private ownership of the means of production. They merely contend that such antagonisms ought not to arise, and in order to eliminate them, they want to guide and regulate private property by acts of government interference; they want interventionism in place of capitalism. But, in the last analysis, this is in no way different from what the Marxists say. They too promise to lead the world to a new social order in which there will be no more classes, class antagonisms, or class conflicts.

In order to grasp the meaning of the doctrine of the class war, one must bear in mind that it is directed against the liberal doctrine of the harmony of the rightly understood interests of all members of a free society founded on the principle of private ownership of the means of production. The liberals maintained that with the elimination of all the artificial distinctions of caste and status, the abolition of all privileges, and the establishment of equality before the law, nothing else stands in the way of the peaceful cooperation of all members of society, because then their rightly understood, long-run interests coincide. All the objections that the champions of feudalism, of special privileges, and of distinctions of caste and status sought to advance against this doctrine soon proved quite unjustified and were unable to gain any notable support. But in Ricardo’s system of catallactics one may find the point of departure for a new theory of the conflict of interests within the capitalist system. Ricardo believed that he could show how, in the course of progressive economic development, a shift takes place in the relations among the three forms of income in his system, viz., profit, rent, and wages. It was this that impelled a few English writers in the third and fourth decades of the nineteenth century to speak of the three classes of capitalists, landowners, and wage-laborers and to maintain that an irreconcilable antagonism exists among these groups. This line of thought was later taken up by Marx.

In the Communist Manifesto, Marx still did not distinguish between caste and class. Only later, when he became acquainted in London with the writings of the forgotten pamphleteers of the twenties and thirties and, under their influence, began the study of Ricardo’s system, did he realize that the problem in this case was to show that even in a society without caste distinctions and privileges irreconcilable conflicts still exist. This antagonism of interests he deduced from Ricardo’s system by distinguishing among the three classes of capitalists, landowners, and workers. But he by no means adhered firmly to this distinction. Sometimes he asserts that there are only two classes, the propertied and the propertyless; at other times he distinguishes among more classes than just the two or three great ones. At no time, however, did Marx or any one of his many followers attempt in any way to define the concept and nature of the classes. It is significant that the chapter entitled “The Classes” in the third volume of Capital breaks off after a few sentences. More than a generation elapsed from the appearance of the Communist Manifesto, in which Marx first makes class antagonism and class war the keystone of his entire doctrine, to the time of his death. During this entire period Marx wrote volume after volume, but he never came to the point of explaining what is to be understood by a “class.” In his treatment of the problem of classes Marx never went beyond the mere statement, without any proof, of a dogma or, let us rather say, of a slogan.

In order to prove that the doctrine of class warfare is true, one would have to be able to establish two facts: on the one hand, that there is an identity of interests among the members of each class; and, on the other hand, that what benefits one class injures the other. This, however, has never been accomplished. Indeed, it has never even been attempted. Precisely because “class comrades” are all in the same “social situation,” there is no identity of interests among them, but rather competition. The worker, for example, who is employed under better-than-average conditions has an interest in excluding competitors who could reduce his income to the average level. In the decades when the doctrine of the international solidarity of the proletariat was proclaimed time and time again in verbose resolutions adopted at the international Marxist congresses, the workers of the United States and Australia set up the greatest obstacles to immigration. By means of a complex network of petty regulations, the English trade unions made impossible the entrance of outsiders into their branches of labor. What has been done by the labor parties in this regard in every country during the last few years is well known. Of course, one can say that this ought not to have happened; the workers ought to have acted differently; what they did was wrong. But one cannot deny that it directly served their interests—at least for the moment.

Liberalism has demonstrated that the antagonism of interests, which, according to a widely prevalent opinion, is supposed to exist among different persons, groups, and strata within a society based on private ownership of the means of production, does not, in fact, occur. Any increase in total capital raises the income of capitalists and landowners absolutely and that of workers both absolutely and relatively. As regards their income, any shifts in the various interests of the different groups and strata of society—the entrepreneurs, capitalists, landowners, and workers—occur together and move in the same direction as they pass through different phases in their fluctuations; what varies is only the ratio of their shares of the social product. The interests of the landowners oppose those of the members of the other groups only in the one case of a genuine monopoly of a certain mineral. The interests of the entrepreneurs can never diverge from those of the consumers. The entrepreneur prospers the better, the better he is able to anticipate the desires of the consumers.

Conflicts of interests can occur only in so far as restrictions on the owners’ free disposal of the means of production are imposed by the interventionist policy of the government or by interference on the part of other social forces armed with coercive power. For example, the price of a certain article can be artificially raised by a protective tariff, or the wages of a certain group of workers can be increased by excluding all competitors for their jobs. The famous line of reasoning of the free-trade school, never refuted and forever irrefutable, applies to cases of this kind. Such special privileges can, of course, benefit the particular group on whose behalf they were instituted only if other groups have been unable to win similar privileges for themselves. But it cannot be assumed that it would be possible, in the long run, to deceive the majority of the people about the real significance of such special privileges so that they will tolerate them willingly. Yet if one undertakes to use force to compel their acceptance, one will provoke violent rebellion—in short, a disturbance of the peaceful course of social cooperation, the preservation of which is in the interest of everyone. If one seeks to solve the problem by making these special privileges, not exceptions on behalf of just one or a few persons, groups, or strata of society, but the general rule, as, for example, by resorting to import duties to protect most of the articles sold on the home market, or by using similar measures to bar access to the majority of occupations, the advantages gained by each particular group are counterbalanced by the disadvantages that they must suffer, and the end result is only that all are injured by the consequent lowering of the productivity of labor.

If one rejects this doctrine of liberalism, if one heaps ridicule on the controversial theory of the “harmony of interests of all men,” then it is not true, either, as is wrongly assumed by all schools of antiliberal thought, that there could still be a solidarity of interests within narrower circles, as, for instance, among members of the same nation (as against other nations) or among members of the same “class” (as against other classes). In order to demonstrate the existence of such an alleged solidarity, a special line of reasoning would be necessary that no one has followed or has even attempted to follow. For all the arguments that could be employed to prove the existence of a solidarity of interests among the members of any of these groups prove much more besides, viz., the universal solidarity of interests within ecumenical society. How those apparent conflicts of interest that seem at first sight to be irreconcilable are in fact resolved can be shown only by means of a line of reasoning that treats all mankind as an essentially harmonious community and allows no room for the demonstration of any irreconcilable antagonisms among nations, classes, races, and the like.

The antiliberal parties do not, as they believe, prove that there is any solidarity of interests within nations, classes, races, etc. All that they actually do is to recommend to the members of these particular groups alliances for a common struggle against all other groups. When they speak of a solidarity of interests within these groups, they are not so much affirming a fact as stating a postulate. In reality, they are not saying, “The interests are identical,” but rather, “The interests ought to be made identical by an alliance for united action.”

The modern parties of special interests declare quite frankly and unequivocally, from the very outset, that the aim of their policy is the creation of special privileges for a particular group. Agrarian parties strive for protective tariffs and other advantages (e.g., subsidies) for farmers; civil service parties aim at securing privileges for bureaucrats; regional parties are dedicated to gaining special advantages for the inhabitants of a certain region. All these parties evidently seek nothing but the advantage of a single group in society, without consideration of the whole of society or of all other groups, however much they may seek to palliate their procedure by declaring that the welfare of the whole of society can be achieved only by furthering the interests of agriculture, the civil service, etc. Indeed, their exclusive concern with but a single segment of society and their labors and endeavors on its behalf alone have become increasingly obvious and more cynical with the passage of the years. When the modern antiliberal movements were still in their infancy, they had to be more circumspect in regard to such matters, because the generation that had been reared on the liberal philosophy had learned to look upon the undisguised advocacy of the special interests of various groups as antisocial.

The champions of special interests can form great parties only by composing a single combat unit out of the combined forces of various groups whose special interests are in conflict. Privileges granted to a particular group, however, have practical value only when they accrue to a minority and are not outweighed by the privileges granted to another group. But unless circumstances are exceptionally favorable, a small group cannot hope at present, while the liberal condemnation of the privileges of the nobility still retains some traces of its earlier influence, to be able to have their claim to be treated as a privileged class prevail against all other groups. The problem of all the parties of special interests, therefore, is to form great parties out of relatively small groups with differing and, indeed, directly conflicting interests. But in view of the mentality that leads these smaller parties to put forth and defend their demands for special privileges, it is quite impracticable to achieve this end by way of an open alliance among the various groups. No provisional sacrifice can be asked of the man who strives for the acquisition of a privileged position for his own group or even for himself alone; if he were capable of understanding the reason for making the provisional sacrifice, then he would certainly think along liberal lines and not in terms of the demands of those engaged in the scramble for special privileges. Nor can one openly tell him that he will gain more from the privilege intended for him than he will lose from the privileges that he will have to concede to others, for any speeches and writings to this effect could not, in the long run, remain hidden from the others and would impel them to raise their demands even higher.

Thus, the parties of special interests are obliged to be cautious. In speaking of this most important point in their endeavors, they must resort to ambiguous expressions intended to obscure the true state of affairs. Protectionist parties are the best example of this kind of equivocation. They must always be careful to represent the interest in the protective tariffs they recommend as that of a wider group. When associations of manufacturers advocate protective tariffs, the party leaders generally take care not to mention that the interests of individual groups and often even of individual concerns are by no means identical and harmonious. The weaver is injured by tariffs on machines and yarn and will promote the protectionist movement only in the expectation that textile tariffs will be high enough to compensate him for the loss that he suffers from the other tariffs. The farmer who grows fodder demands tariffs on fodder, which the cattle raisers oppose; the winegrower demands a tariff on wine, which is just as disadvantageous to the farmer who does not happen to cultivate a vineyard as it is to the urban consumer. Nevertheless, the protectionists appear as a single party united behind a common program. This is made possible only by throwing a veil of obscurity over the truth of the matter.

Any attempt to found a party of special interests on the basis of an equal apportionment of privileges among the majority of the population would be utterly senseless. A privilege accruing to the majority ceases to be such. In a predominantly agricultural country, which exports farm products, an agrarian party working for special favors for farmers would be, in the long run, impossible. What should it demand? Protective tariffs could not benefit these farmers, who must export; and subsidies could not be paid to the majority of producers, because the minority could not provide them. The minority, on the other hand, which demands privileges for itself must induce the illusion that great masses stand behind it. When the agrarian parties in the industrial countries present their demands, they include in what they call the “farm population” landless workers, cottagers, and owners of small plots of land, who have no interest in a protective tariff on agricultural products. When the labor parties make some demand on behalf of a group of workers, they always talk of the great mass of the working people and gloss over the fact that the interests of trade-unionists employed in different branches of production are not identical, but, on the contrary, actually antagonistic, and that even within individual industries and concerns there are sharp conflicts of interest.

This is one of the two fundamental weaknesses of all parties aiming at privileges on behalf of special interests. On the one hand, they are obliged to rely on only a small group, because privileges cease to be privileges when they are granted to the majority; but, on the other hand, it is only in their guise as the champions and representatives of the majority that they have any prospect of realizing their demands. The fact that many parties in different countries have sometimes succeeded in overcoming this difficulty in carrying on their propaganda and have managed to imbue each social stratum or group with the conviction that its members may expect special advantages from the triumph of the party speaks only for the diplomatic and tactical skill of the leadership and for the want of judgment and the political immaturity of the voting masses. It by no means proves that a real solution of the problem is, in fact, possible. Of course, one can simultaneously promise city-dwellers cheaper bread and farmers higher prices for grain, but one cannot keep both promises at the same time. It is easy enough to promise one group that one will support an increase in certain government expenditures without a corresponding reduction in other government expenditures, and at the same time hold out to another group the prospect of lower taxes; but one cannot keep both these promises at the same time either. The technique of these parties is based on the division of society into producers and consumers. They are also wont to make use of the usual hypostasis of the state in questions of fiscal policy that enables them to advocate new expenditures to be paid out of the public treasury without any particular concern on their part over how such expenses are to be defrayed, and at the same time to complain about the heavy burden of taxes.

The other basic defect of these parties is that the demands they raise for each particular group are limitless. There is, in their eyes, only one limit to the quantity to be demanded: the resistance put up by the other side. This is entirely in keeping with their character as parties striving for privileges on behalf of special interests. Yet parties that follow no definite program, but come into conflict in the pursuit of unlimited desires for privileges on behalf of some and for legal disabilities for others, must bring about the destruction of every political system. People have been coming to recognize this ever more clearly and have begun to speak of a crisis of the modern state and of a crisis of the parliamentary system. In reality, what is involved is a crisis of the ideologies of the modern parties of special interests.

3

The Crisis of Parliamentarism and the Idea of a Diet Representing Special Groups

Parliamentarism, as it has slowly developed in England and in some of her colonies since the seventeenth century, and on the European continent since the overthrow of Napoleon and the July and February Revolutions, presupposes the general acceptance of the ideology of liberalism. All who enter a parliament charged with the responsibility of there deciding how the country shall be governed must be imbued with the conviction that the rightly understood interests of all parts and members of society coincide and that every kind of special privilege for particular groups and classes of the population is detrimental to the common good and must be eliminated. The different parties in a parliament empowered to perform the functions assigned to it by all the constitutions of recent times may, of course, take different sides in regard to particular political questions, but they must consider themselves as the representatives of the whole nation, not as representatives of particular districts or social strata. Above all their differences of opinion there must prevail the conviction that, in the last analysis, they are united by a common purpose and an identical aim and that only the means to the attainment of the goal toward which they all aspire are in dispute. The parties are not separated by an unbridgeable gulf nor by conflicts of interests that they are prepared to carry on to the bitter end even if this means that the whole nation must suffer and the country be brought to ruin. What divides the parties is the position they take in regard to concrete problems of policy. There are, therefore, only two parties: the party in power and the one that wants to be in power. Even the opposition does not seek to obtain power in order to promote certain interests or to fill official posts with its party members, but in order to translate its ideas into legislation and to put them into effect in the administration of the country.

Only under these conditions are parliaments or parliamentary governments practicable. For a time they were realized in the Anglo-Saxon countries, and some traces of them can still be found there today. On the European continent, even during the period usually characterized as the golden age of liberalism, one could really speak only of a certain approximation to these conditions. For decades now, conditions in the popular assemblies of Europe have been something like their direct opposite. There are a great number of parties, and each particular party is itself divided into various subgroups, which generally present a united front to the outside world, but usually oppose one another within the party councils as vehemently as they oppose the other parties publicly. Each particular party and faction feels itself appointed to be the sole champion of certain special interests, which it undertakes to lead to victory at any cost. To allot as much as possible from the public coffers to “our own,” to favor them by protective tariffs, immigration barriers, “social legislation,” and privileges of all kinds, at the expense of the rest of society, is the whole sum and substance of their policy.

As their demands are, in principle, limitless, it is impossible for any one of these parties ever to achieve all the ends it envisages. It is unthinkable that what the agrarian or labor parties strive for could ever be entirely realized. Every party seeks, nevertheless, to attain to such influence as will permit it to satisfy its desires as far as possible, while also taking care always to be able to justify to its electors why all their wishes could not be fulfilled. This can be done either by seeking to give in public the appearance of being in the opposition, although the party is actually in power, or by striving to shift the blame to some force not answerable to its influence: the sovereign, in the monarchical state; or, under certain circumstances, foreign powers or the like. The Bolsheviks cannot make Russia happy nor the socialists Austria because “western capitalism” prevents it. For at least fifty years antiliberal parties have ruled in Germany and Austria, yet we still read in their manifestoes and public statements, even in those of their “scientific” champions, that all existing evils are to be blamed on the dominance of “liberal” principles.

A parliament composed of the supporters of the antiliberal parties of special interests is not capable of carrying on its business and must, in the long run, disappoint everyone. This is what people mean today and have meant for many years now when they speak of the crisis of parliamentarism.

As the solution for this crisis, some demand the abolition of democracy and the parliamentary system and the institution of a dictatorship. We do not propose to discuss once again the objections to dictatorship. This we have already done in sufficient detail.

A second suggestion is directed toward remedying the alleged deficiencies of a general assembly composed of members elected directly by all the citizens, by either supplementing or replacing it altogether with a diet composed of delegates chosen by autonomous corporative bodies or guilds formed by the different branches of trade, industry, and the professions. The members of a general popular assembly, it is said, lack the requisite objectivity and the knowledge of economic affairs. What is needed is not so much a general policy as an economic policy. The representatives of industrial and professional guilds would be able to come to an agreement on questions whose solution either eludes entirely the delegates of constituencies formed on a merely geographical basis or becomes apparent to them only after long delay.

In regard to an assembly composed of delegates representing different occupational associations, the crucial question about which one must be clear is how a vote is to be taken, or, if each member is to have one vote, how many representatives are to be granted to each guild. This is a problem that must be resolved before the diet convenes; but once this question is settled, one can spare oneself the trouble of calling the assembly into session, for the outcome of the voting is thereby already determined. To be sure, it is quite another question whether the distribution of power among the guilds, once established, can be maintained. It will always be—let us not cherish any delusions on this score—unacceptable to the majority of the people. In order to create a parliament acceptable to the majority, there is no need of an assembly divided along occupational lines. Everything will depend on whether the discontent aroused by the policies adopted by the deputies of the guilds is great enough to lead to the violent overthrow of the whole system. In contrast to the democratic system, this one offers no guarantee that a change in policy desired by the overwhelming majority of the population will take place. In saying this, we have said everything that needs to be said against the idea of an assembly constituted on the basis of occupational divisions. For the liberal, any system which does not exclude every violent interruption of peaceful development is, from the very outset, out of the question.

Many supporters of the idea of a diet composed of guild representatives think that conflicts should be settled, not by the submission of one faction to another, but by the mutual adjustment of differences. But what is supposed to happen if the parties cannot succeed in reaching agreement? Compromises come about only when the threatening spectre of an unfavorable issue induces each party to the dispute to make some concession. No one prevents the different parties from coming to an agreement even in a parliament composed of delegates elected directly by the whole nation. No one will be able to compel agreement in a diet consisting of deputies chosen by the members of occupational associations.

Thus, an assembly so constituted cannot function like a parliament that serves as the organ of a democratic system. It cannot be the place where differences of political opinion are peacefully adjusted. It is not in a position to prevent the violent interruption of the peaceful progress of society by insurrection, revolution, and civil war. For the crucial decisions that determine the distribution of political power in the state are not made within its chambers or during the elections that decide its composition. The decisive factor in determining the distribution of power is the relative weight assigned by the constitution to the different corporate associations in the shaping of public policy. But this is a matter that is decided outside the chambers of the diet and without any organic relationship to the elections by which its members are chosen.

It is therefore quite correct to withhold the name “parliament” from an assembly consisting of representatives of corporate associations organized along occupational lines. Political terminology has been accustomed, in the last two centuries, to make a sharp distinction between a parliament and such an assembly. If one does not wish to confound all the concepts of political science, one does well to adhere to this distinction.

Sidney and Beatrice Webb, as well as a number of syndicalists and guild socialists, following in this respect recommendations already made in earlier days by many continental advocates of a reform in the upper chamber, have proposed letting two chambers exist side by side, one elected directly by the whole nation, and the other composed of deputies elected from constituencies divided along occupational lines. However, it is obvious that this suggestion in no way remedies the defects of the system of guild representation. In practice, the bicameral system can function only if one house has the upper hand and has the unconditional power to impose its will on the other, or if, when the two chambers take different positions on an issue, an attempt at a compromise solution must be made. In the absence of such an attempt, however, the conflict remains to be settled outside the chambers of parliament, in the last resort by force alone. Twist and turn the problem as one will, one always returns in the end to the same insurmountable difficulties. Such are the stumbling blocks on which all proposals of this and a similar kind must come to grief, whether they are called corporativism, guild socialism, or anything else. The impracticability of these schemes is admitted when people finally content themselves by recommending a completely inconsequential innovation: the establishment of an economic council empowered to serve solely in an advisory capacity.

The champions of the idea of an assembly composed of guild deputies labor under a serious delusion if they think that the antagonisms that today rend the fabric of national unity can be overcome by dividing the population and the popular assembly along occupational lines. One cannot get rid of these antagonisms by tinkering with technicalities in the constitution. They can be overcome only by the liberal ideology.

4

Liberalism and the Parties of Special Interests

The parties of special interests, which see nothing more in politics than the securing of privileges and prerogatives for their own groups, not only make the parliamentary system impossible; they rupture the unity of the state and of society. They lead not merely to the crisis of parliamentarism, but to a general political and social crisis. Society cannot, in the long run, exist if it is divided into sharply defined groups, each intent on wresting special privileges for its own members, continually on the alert to see that it does not suffer any setback, and prepared, at any moment, to sacrifice the most important political institutions for the sake of winning some petty advantage.

To the parties of special interests, all political questions appear exclusively as problems of political tactics. Their ultimate goal is fixed for them from the start. Their aim is to obtain, at the cost of the rest of the population, the greatest possible advantages and privileges for the groups they represent. The party platform is intended to disguise this objective and give it a certain appearance of justification, but under no circumstances to announce it publicly as the goal of party policy. The members of the party, in any case, know what their goal is; they do not need to have it explained to them. How much of it ought to be imparted to the world is, however, a purely tactical question.

All antiliberal parties want nothing but to secure special favors for their own members, in complete disregard of the resulting disintegration of the whole structure of society. They cannot withstand for a moment the criticism that liberalism makes of their aims. They cannot deny, when their demands are subjected to the test of logical scrutiny, that their activity, in the last analysis, has antisocial and destructive effects and that even on the most cursory examination it must prove impossible for any social order to arise from the operations of parties of special interests continually working against one another. To be sure, the obviousness of these facts has not been able to damage the parties of special interests in the eyes of those who lack the capacity to look beyond the immediate present. The great mass of people do not inquire what will happen the day after tomorrow or later on. They think of today and, at most, of the next day. They do not ask what must follow if all other groups too, in the pursuit of their special interests, were to display the same unconcern for the general welfare. They hope to succeed not only in realizing their own demands, but also in beating down those of others. For the few who apply higher standards to the activities of political parties, who demand that even in political action Kant’s categorical imperative be followed (“Act only on that principle which you can will—at the same time—to be a universal law, i.e., so that no contradiction results from the attempt to conceive of your action as a law to be universally complied with”), the ideology of the parties of special interests certainly has nothing to offer.

Socialism has gained a considerable advantage from this logical deficiency in the position adopted by the parties of special interests. For many who are unable to grasp the great ideal of liberalism, but who think too clearly to be content with demands for privileged treatment on behalf of particular groups, the principle of socialism took on a special significance. The idea of a socialist society—to which one cannot, in spite of its necessarily inherent defects, which we have already discussed in detail, deny a certain grandeur of conception—served to conceal and, at the same time, to vindicate the weakness of the position taken by the parties of special interests. It had the effect of diverting the attention of the critic from the activities of the party to a great problem, which, whatever one may think of it, was at all events deserving of serious and exhaustive consideration.

In the last hundred years, the socialist ideal, in one form or another, has found adherents among many sincere and honest people. A number of the best and noblest men and women have accepted it with enthusiasm. It has been the guiding star of distinguished statesmen. It has achieved a dominant position at the universities and has served as a source of inspiration to youth. It has so filled the thoughts and fed the emotions of both the past and the present generation that history will some day quite justly characterize our era as the age of socialism. In the last decades, in all countries people have done as much as they could to make the socialist ideal a reality by nationalizing and municipalizing enterprises and by adopting measures designed to lead to a planned economy. The defects necessarily involved in socialist management—its unfavorable effects on the productivity of human labor and the impossibility of economic calculation under socialism—everywhere brought these endeavors to the point where virtually every step further in the direction of socialism threatened too flagrant an impairment of the supply of goods available to the public. From sheer necessity one had to pause on the road to socialism; and the socialist ideal—even while preserving its ideological ascendancy—became, in practical politics, merely a cloak for the labor parties in their scramble for privileges.

This could be shown to be true of each of the many socialist parties, such as, for instance, the various factions among the Christian socialists. We propose, however, to confine our discussion to the case of the Marxian socialists, who undoubtedly were and are the most important socialist party.

Marx and his followers were really serious about socialism. Marx rejected all those measures on behalf of particular groups and strata of society that are demanded by the parties of special interests. He did not dispute the validity of the liberal argument that the outcome of such acts of interference can only be a general reduction in the productivity of labor. When he thought, wrote, and spoke consistently, he always took the position that every attempt to tamper with the mechanism of the capitalist system by acts of intervention on the part of the government or of other social organs armed with the same coercive power is pointless because it does not bring about the result intended by its advocates, but instead reduces the productivity of the economy. Marx wanted to organize the workers for the conflict that would lead to the establishment of socialism, but not for the achievement of certain special privileges within a society still based on private ownership of the means of production. He wanted a socialist labor party, but not, as he put it, a “petty-bourgeois” party aiming at individual, piecemeal reforms.

Prevented by blind adherence to the preconceptions of his scholastic system from taking an unbiased view of things as they are, he thought that the workers, whom the writers under his intellectual influence had organized into “socialist” parties, would be content to stand by quietly watching the evolution of the capitalist system according to doctrine, so as not to postpone the day when it would be fully ripe for the expropriation of the expropriators and would “turn into” socialism. He did not see that the labor parties, just like the other parties of special interests that were simultaneously springing up everywhere, while acknowledging the socialist program as correct in principle, in practical politics were concerned only with the immediate goal of winning special privileges for the workers. The Marxist theory of the solidarity of the interests of all workers, which Marx had developed with quite other political ends in view, rendered excellent service in skillfully concealing the fact that the costs of the victories won by some groups of workers had to be borne by other groups of workers; that is to say, that in the field of allegedly “prolabor” legislation, as well as in trade-union struggles, the interests of the proletarians by no means coincide. In this respect, the Marxist doctrine performed the same service for the party championing the special interests of the workers as was accomplished for the German Centrist and other clerical parties by the appeal to religion; for the nationalist parties, by the appeal to national solidarity; for the agrarian parties, by the contention that the interests of the various groups of agricultural producers are identical; and for the protectionist parties, by the doctrine of the necessity of a comprehensive tariff for the protection of national labor. The more the social-democratic parties grew, the stronger became the influence of the trade unions within them and the more they became an association of trade unions that saw everything from the point of view of the closed shop and the increase of wages.

Liberalism does not have the least thing in common with any of these parties. It stands at the very opposite pole from all of them. It promises special favors to no one. It demands from everyone sacrifices on behalf of the preservation of society. These sacrifices—or, more accurately, the renunciation of immediately attainable advantages—are, to be sure, merely provisional; they quickly pay for themselves in greater and more lasting gains. Nevertheless, for the time being, they are sacrifices. Because of this, liberalism finds itself, from the very outset, in a peculiar position in the competition among parties. The antiliberal candidate promises special privileges to every particular group of voters: higher prices to the producers and lower prices to the consumers; higher salaries to public officeholders and lower taxes to taxpayers. He is prepared to agree to any desired expenditure at the cost of the public treasury or of the rich. No group is too small for him to disdain to seek its favor by a gift from the pocket of the “general public.” The liberal candidate can only say to all voters that the pursuit of such special favors is antisocial.

5

Party Propaganda and Party Organization

When liberal ideas began to spread to central and eastern Europe from their homeland in western Europe, the traditional powers—the monarchy, the nobility, and the clergy—trusting in the instruments of repression that were at their disposal, felt completely safe. They did not consider it necessary to combat liberalism and the mentality of the Enlightenment with intellectual weapons. Suppression, persecution, and imprisonment of the malcontents seemed to them to be more serviceable. They boasted of the violent and coercive machinery of the army and the police. Too late they realized with horror that the new ideology snatched these weapons from their hands by conquering the minds of officials and soldiers. It took the defeat suffered by the old regime in the battle against liberalism to teach its adherents the truth that there is nothing in the world more powerful than ideologies and ideologists and that only with ideas can one fight against ideas. They realized that it is foolish to rely on arms, since one can deploy armed men only if they are prepared to obey, and that the basis of all power and dominion is, in the last analysis, ideological.

The acknowledgment of this sociological truth was one of the fundamental convictions on which the political theory of liberalism was based. From it liberalism had drawn no other conclusion than that, in the long run, truth and righteousness must triumph because their victory in the realm of ideas cannot be doubted. And whatever is victorious in this realm must ultimately succeed in the world of affairs as well, since no persecution is capable of suppressing it. It is therefore superfluous to trouble oneself especially about the spread of liberalism. Its victory is, in any case, certain.

The opponents of liberalism can be understood even in this respect only if one keeps in mind that their actions are nothing but the reverse of what liberalism teaches; that is, they are based on the rejection of and reaction against liberal ideas. They were not in a position to offer a comprehensive and consistent body of social and economic doctrine in opposition to the liberal ideology, for liberalism is the only possible conclusion that can be validly drawn from such a doctrine. Yet a program that promised something to only one group or a few groups had no chance of winning general support and was doomed from the outset to political failure. Thus, these parties had no other recourse than to hit upon some arrangement that would bring the groups to whom they addressed themselves completely under their sway and to keep them that way. They had to take care that liberal ideas found no adherents among the classes on which they depended.

To this end, they created party organizations that hold the individual so tightly in their grip that he dare not even think of resigning. In Germany and Austria, where this system was developed with pedantic thoroughness, and in the countries of eastern Europe, where it was copied, the individual is today no longer primarily a citizen, but a party member. Already as a child he is taken care of by the party. Sports and social activities are organized on partisan lines. The farmers’ cooperative system, through whose intervention alone the farmer can lay claim to his share of the subsidies and grants accruing to agricultural producers; the institutions for the advancement of the professional classes; and the workingmen’s labor exchange and savings bank system are all managed along party lines. In all matters on which the authorities are free to use their discretion, the individual, in order to be respected, requires the support of his party. Under such circumstances, laxity in party affairs leads to suspicion, but resignation means serious economic detriment, if not ruination and social ostracism.

The parties of special interests reserve for the problem of the professional classes a treatment peculiar to it alone. The independent professions of the lawyer, the doctor, the writer, and the artist are not represented in sufficiently great number to permit them to figure as parties of special interests in their own right. They are therefore the least open to the influence of the ideology of special class privileges. Their members clung longest and most stubbornly to liberalism. They had nothing to gain from adopting a policy of ruthless and unyielding struggle for the promotion of their particular interests. This was a situation that the parties working on behalf of organized pressure groups viewed with the utmost misgiving. They could not tolerate the intelligentsia’s continued adherence to liberalism, for they feared that their own ranks might be thinned if liberal ideas, once again developed and expounded by a few individuals in these groups, were to gain enough strength to find acceptance and approval among the mass of their members. They had just learned how dangerous such ideologies could be to the prerogatives of the privileged orders of the caste and status society. The parties of special interests therefore proceeded systematically to organize themselves in such a way as to make the members of the “liberal” professions dependent on them. This was soon achieved by incorporating them into the mechanism of the party machinery. The doctor, the lawyer, the writer, the artist must enroll themselves in and subordinate themselves to the organization of their patients, clients, readers, and patrons. Whoever holds back or openly rebels is boycotted into compliance.

The subjugation of the independent professional classes finds its complement in the procedure followed in making appointments to teaching positions and to posts in the civil service. Where the party system is fully developed, only party members are appointed, whether of the one currently in power or of all the parties of special interests in accordance with an arrangement, tacit though it may be, arrived at among themselves. And ultimately even the independent press is brought under control by the threat of a boycott.

A crowning stroke in the organization of these parties was the establishment of their own bands of armed men. Organized in military fashion, after the pattern of the national army, they have drawn up their mobilization and operational plans, have weapons at their disposal, and are ready to strike. With their banners and brass bands they march through the streets heralding to the world the dawn of an era of endless agitation and warfare.

Two circumstances have so far served to mitigate the dangers of this situation. In the first place, a certain balance of power among the party forces has been reached in some of the more important countries. Where this is lacking, as in Russia and Italy, the power of the state, in disregard of the few remaining liberal principles that the rest of the world still acknowledges, is used to suppress and persecute the adherents of the opposition parties.

The second circumstance that, for the moment, still prevents the worst from happening is that even nations imbued with hostility toward liberalism and capitalism count on capital investment from the lands that have been the classical exemplars of the liberal and capitalist mentality—above all, the United States. Without these credits, the consequences of the policy of capital consumption that they have been pursuing would have already become much more obvious. Anticapitalism can maintain itself in existence only by sponging on capitalism. It must therefore take into consideration to a certain extent the public opinion of the West, where liberalism is still acknowledged today, even though in a much diluted form. In the fact that capitalists generally desire to lend only to such borrowers as hold out some prospect of repaying the loan, the destructionist parties profess to see that “world ascendancy of capital” about which they raise such a hue and cry.

6

Liberalism as the “Party of Capital”

Thus, it is easily seen that liberalism cannot be put into the same class with the parties of special interests without denying its very nature. It is something radically different from them all. They are out for battle and extol violence; liberalism, on the contrary, desires peace and the ascendancy of ideas. It is for this reason that all parties, however badly disunited they may otherwise be, form a united front against liberalism.

The enemies of liberalism have branded it as the party of the special interests of the capitalists. This is characteristic of their mentality. They simply cannot understand a political ideology as anything but the advocacy of certain special privileges opposed to the general welfare.

One cannot look on liberalism as a party of special interests, privileges, and prerogatives, because private ownership of the means of production is not a privilege redounding to the exclusive advantage of the capitalists, but an institution in the interest of the whole of society and consequently an institution that benefits everyone. This is the opinion not only of the liberals, but even, up to a certain point, of their opponents. When the Marxists champion the view that socialism cannot be made a reality until the world is “ripe” for it, because a social system never becomes extinct before “all the productive forces have developed for which it is broad enough,” they concede, at least for the present, the social indispensability of the institution of private property. Even the Bolsheviks, who only a little while ago propagated with fire, sword, and the gallows their interpretation of Marxism—that is, that “ripeness” had already been achieved—now have to admit that it is still too early. If, however, even if it is only for the moment, conditions are such that capitalism and its juridical “superstructure,” private property, cannot be dispensed with, can one say of an ideology that considers private property the foundation of society that it serves only to promote the selfish interests of the owners of capital against the interests of everyone else?

To be sure, if the antiliberal ideologies treat private property as indispensable, whether just for the present or forever, they believe, nevertheless, that it must be regulated and restricted by authoritarian decrees and similar acts of intervention on the part of the state. They recommend, not liberalism and capitalism, but interventionism. But economics has demonstrated that the system of interventionism is contrary to purpose and self-defeating. It cannot attain the ends that its advocates intend it to attain. Consequently, it is an error to suppose that besides socialism (communal property) and capitalism (private property) still a third system of organizing social cooperation is thinkable and workable, namely, interventionism. Attempts to put interventionism into effect must, of necessity, lead to conditions that run counter to the intentions of their authors, who are then faced with the alternative either of abstaining from all acts of intervention, and thereby leaving private property on its own, or of replacing private property by socialism.

This too is a thesis that liberal economists are not alone in maintaining. (Of course, the popular idea that economists are divided along party lines is altogether mistaken.) Marx too, in all his theoretical discussions, saw only the alternatives of socialism or capitalism and had nothing but derision and contempt for those reformers who, imprisoned in “petty-bourgeois thinking,” reject socialism and, at the same time, still want to remodel capitalism. Economics has never even attempted to show that a system of private property regulated and restricted by government intervention would be practicable. When the “socialists of the chair” wanted to prove this at any cost, they began by denying the possibility of scientific knowledge in the economic field and ultimately ended by declaring that whatever the state does must surely be rational. Since science demonstrated the absurdity of the policy that they wished to recommend, they sought to invalidate logic and science.

The same is true of the proof of the possibility and practicability of socialism. The pre-Marxist writers had labored in vain to provide it. They could not do so, nor were they able in any way to attack the validity of the weighty objections to the practicability of their utopia that their critics based on the findings of science. Around the middle of the nineteenth century the socialist idea seemed already to have been effectively disposed of. Then Marx made his appearance. He did not, to be sure, adduce the proof—which, indeed, cannot be adduced—that socialism is realizable, but he simply declared—of course, without being able to demonstrate it—that the coming of socialism is inevitable. From this arbitrary assumption and from the axiom, which seemed to him self-evident, that everything occurring later in human history represents an advance over what came earlier, Marx drew the conclusion that socialism is therefore more perfect than capitalism and so there could naturally be no doubt as to its practicability. Consequently, it is altogether unscientific to concern oneself with the question of the possibility of a socialist society or even to study the problems of such a social order at all. Whoever wanted to try it was ostracized by the socialists and excommunicated by public opinion, which they controlled. Heedless of all these—to be sure, only external—difficulties, economics occupied itself with the theoretical construction of a socialist system and demonstrated irrefutably that every type of socialism is unworkable because economic calculation is impossible in a socialist community. The advocates of socialism have scarcely ventured to make any reply to this, and what they have advanced in rebuttal has been altogether trivial and devoid of significance.

What was proved by science theoretically was corroborated in practice by the failure of all socialist and interventionist experiments.

Hence, it is nothing but specious propaganda designed to rely for its effectiveness on the lack of judgment of the thoughtless to assert, as people do, that the defense of capitalism is purely an affair of the capitalists and the entrepreneurs, whose special interests, as opposed to those of other groups, are furthered by the capitalist system. The “have’s” do not have any more reason to support the institution of private ownership of the means of production than do the “have-not’s.” If their immediate special interests come into question, they are scarcely liberal. The notion that, if only capitalism is preserved, the propertied classes could remain forever in possession of their wealth stems from a misunderstanding of the nature of the capitalist economy, in which property is continually being shifted from the less efficient to the more efficient businessman. In a capitalist society one can hold on to one’s fortune only if one perpetually acquires it anew by investing it wisely. The rich, who are already in possession of wealth, have no special reason to desire the preservation of a system of unhampered competition open to all; particularly if they did not themselves earn their fortune, but inherited it, they have more to fear than to hope from competition. They do have a special interest in interventionism, which always has a tendency to preserve the existing division of wealth among those in possession of it. But they cannot hope for any special treatment from liberalism, a system in which no heed is paid to the time-honored claims of tradition advanced by the vested interests of established wealth.

The entrepreneur can prosper only if he provides what the consumers demand. When the world is afire with the lust for war, the liberal seeks to expound the advantages of peace; the entrepreneur, however, produces artillery and machine-guns. If public opinion today favors capital investment in Russia, the liberal may endeavor to explain that it is as intelligent to invest capital in a land whose government openly proclaims as the ultimate goal of its policy the expropriation of all capital as it would be to dump goods into the sea; but the entrepreneur does not hesitate to furnish supplies to Russia if only he is in a position to shift the risk to others, whether it be to the state or to some less clever capitalists, who allow themselves to be misled by public opinion, itself manipulated by Russian money. The liberal struggles against the trend toward commercial autarky; the German manufacturer, however, builds a factory in the eastern province, which excludes German goods, in order to serve this market while under the protection of the tariff. Clear-thinking entrepreneurs and capitalists may view the consequences of an antiliberal policy as ruinous for the whole of society; but in their capacity as entrepreneurs and capitalists they must seek, not to oppose it, but to adjust themselves to the given conditions.

There is no class that could champion liberalism for its own selfish interests to the detriment of the whole of society and the other strata of the population, simply because liberalism serves no special interest. Liberalism cannot count on the help that the antiliberal parties receive from the fact that everyone who seeks to win some privilege for himself at the expense of the rest of society attaches himself to them. When the liberal comes before the electorate as a candidate for public office and is asked by those whose votes he solicits what he or his party intends to do for them and their group, the only answer he can give is: Liberalism serves everyone, but it serves no special interest.

To be a liberal is to have realized that a special privilege conceded to a small group to the disadvantage of others cannot, in the long run, be preserved without a fight (civil war), but that, on the other hand, one cannot bestow privileges on the majority, since these then cancel one another out in their value for those whom they are supposed to specially favor, and the only net result is a reduction in the productivity of social labor.

CHAPTER 5

The Future of Liberalism

All earlier civilizations perished, or at least reached a state of stagnation, long before they had attained the level of material development that modern European civilization has succeeded in achieving. Nations were destroyed by wars with foreign enemies as well as by internecine strife. Anarchy forced a retrogression in the division of labor; cities, commerce, and industry declined; and, with the decay of their economic foundations, intellectual and moral refinements had to give way to ignorance and brutality. The Europeans of the modern age have succeeded in intensifying the social bonds among individuals and nations much more strongly than was ever the case before in history. This was an achievement of the ideology of liberalism, which, from the end of the seventeenth century, was elaborated with ever increasing clarity and precision and continually gained in influence over men’s minds. Liberalism and capitalism created the foundations on which are based all the marvels characteristic of our modern way of life.

Now our civilization is beginning to scent a whiff of death in the air. Dilettantes loudly proclaim that all civilizations, including our own, must perish: this is an inexorable law. Europe’s final hour has come, warn these prophets of doom, and they find credence. An autumnal mood is perceptibly beginning to set in everywhere.

But modern civilization will not perish unless it does so by its own act of self-destruction. No external enemy can destroy it the way the Spaniards once destroyed the civilization of the Aztecs, for no one on earth can match his strength against the standard-bearers of modern civilization. Only inner enemies can threaten it. It can come to an end only if the ideas of liberalism are supplanted by an antiliberal ideology hostile to social cooperation.

There has come to be a growing realization that material progress is possible only in a liberal, capitalist society. Even if this point is not expressly conceded by the antiliberal, it is fully acknowledged indirectly in the panegyrics extolling the idea of stability and a state of rest.

The material advances of recent generations, it is said, have, of course, been really very agreeable and beneficial. Now, however, it is time to call a halt. The frantic hustle and bustle of modern capitalism must make way for tranquil contemplation. One must acquire time for self-communion, and so another economic system must take the place of capitalism, one that is not always restlessly chasing after novelties and innovations. The romantic looks back nostalgically to the economic conditions of the Middle Ages—not to the Middle Ages as they actually were, but to an image of them constructed by his fancy without any counterpart in historical reality. Or he turns his gaze upon the Orient—again not, of course, the real Orient, but a dream-vision of his phantasy. How happy men were without modern technology and modern culture! How could we ever have renounced this paradise so light-mindedly?

Whoever preaches the return to simple forms of the economic organization of society ought to keep in mind that only our type of economic system offers the possibility of supporting in the style to which we have become accustomed today the number of people who now populate the earth. A return to the Middle Ages means the extermination of many hundreds of millions of people. The friends of stability and rest, it is true, say that one by no means has to go as far as that. It suffices to hold fast to what has already been achieved and to forgo further advances.

Those who extol the state of rest and stable equilibrium forget that there is in man, in so far as he is a thinking being, an inherent desire for the improvement of his material condition. This impulse cannot be eradicated; it is the motive power of all human action. If one prevents a man from working for the good of society while at the same time providing for the satisfaction of his own needs, then only one way remains open to him: to make himself richer and others poorer by the violent oppression and spoliation of his fellow men.

It is true that all this straining and struggling to increase their standard of living does not make men any happier. Nevertheless, it is in the nature of man continually to strive for an improvement in his material condition. If he is forbidden the satisfaction of this aspiration, he becomes dull and brutish. The masses will not listen to exhortations to be moderate and contented; it may be that the philosophers who preach such admonitions are laboring under a serious self-delusion. If one tells people that their fathers had it much worse, they answer that they do not know why they should not have it still better.

Now, whether it is good or bad, whether it receives the sanction of the moral censor or not, it is certain that men always strive for an improvement in their conditions and always will. This is man’s inescapable destiny. The restlessness and inquietude of modern man is a stirring of the mind, the nerves, and the senses. One can as easily restore to him the innocence of childhood as lead him back to the passivity of past periods of human history.

But, after all, what is being offered in return for the renunciation of further material progress? Happiness and contentment, inner harmony and peace will not be created simply because people are no longer intent on further improvement in the satisfaction of their needs. Soured by resentment, the literati imagine that poverty and the absence of wants create especially favorable conditions for the development of man’s spiritual capacities, but this is nonsense. In discussing these questions, one should avoid euphemisms and call things by their right names. Modern wealth expresses itself above all in the cult of the body: hygiene, cleanliness, sport. Today still the luxury of the well-to-do—no longer, perhaps, in the United States, but everywhere else—these will come within the reach of everyone in the not too distant future if economic development progresses as it has hitherto. Is it thought that man’s inner life is in any way furthered by excluding the masses from the attainment of the level of physical culture that the well-to-do already enjoy? Is happiness to be found in the unkempt body?

To the panegyrists of the Middle Ages one can only answer that we know nothing about whether the medieval man felt happier than the modern man. But we may leave it to those who hold up the mode of life of the Orientals as a model for us to answer the question whether Asia is really the paradise that they describe it as.

The fulsome praise of the stationary economy as a social ideal is the last remaining argument that the enemies of liberalism have to fall back upon in order to justify their doctrines. Let us keep clearly in mind, however, that the starting-point of their critique was that liberalism and capitalism impede the development of productive forces, that they are responsible for the poverty of the masses. The opponents of liberalism have alleged that what they are aiming at is a social order that could create more wealth than the one they are attacking. And now, driven to the wall by the counterattack of economics and sociology, they must concede that only capitalism and liberalism, only private property and the unhampered activity of entrepreneurs, can guarantee the highest productivity of human labor.

It is often maintained that what divides present-day political parties is a basic opposition in their ultimate philosophical commitments that cannot be settled by rational argument. The discussion of these antagonisms must therefore necessarily prove fruitless. Each side will remain unshaken in its conviction because the latter is based on a comprehensive world view that cannot be altered by any considerations proposed by the reason. The ultimate ends toward which men strive are diverse. Hence, it is altogether out of the question that men aiming at these diverse ends could agree on a uniform procedure.

Nothing is more absurd than this belief. Aside from the few consistent ascetics, who seek to divest life of all its external trappings and who finally succeed in attaining to a state of renunciation of all desire and action and, indeed, of self-annihilation, all men of the white race, however diverse may be their views on supernatural matters, agree in preferring a social system in which labor is more productive to one in which it is less productive. Even those who believe that an ever progressing improvement in the satisfaction of human wants does no good and that it would be better if we produced fewer material goods—though it is doubtful whether the number of those who are sincerely of this opinion is very large—would not wish that the same amount of labor should result in fewer goods. At most, they would wish that there should be less labor and consequently less production, but not that the same amount of labor should produce less.

The political antagonisms of today are not controversies over ultimate questions of philosophy, but opposing answers to the question how a goal that all acknowledge as legitimate can be achieved most quickly and with the least sacrifice. This goal, at which all men aim, is the best possible satisfaction of human wants; it is prosperity and abundance. Of course, this is not all that men aspire to, but it is all that they can expect to attain by resort to external means and by way of social cooperation. The inner blessings—happiness, peace of mind, exaltation—must be sought by each man within himself alone.

Liberalism is no religion, no world view, no party of special interests. It is no religion because it demands neither faith nor devotion, because there is nothing mystical about it, and because it has no dogmas. It is no world view because it does not try to explain the cosmos and because it says nothing and does not seek to say anything about the meaning and purpose of human existence. It is no party of special interests because it does not provide or seek to provide any special advantage whatsoever to any individual or any group. It is something entirely different. It is an ideology, a doctrine of the mutual relationship among the members of society and, at the same time, the application of this doctrine to the conduct of men in actual society. It promises nothing that exceeds what can be accomplished in society and through society. It seeks to give men only one thing, the peaceful, undisturbed development of material well-being for all, in order thereby to shield them from the external causes of pain and suffering as far as it lies within the power of social institutions to do so at all. To diminish suffering, to increase happiness: that is its aim.

No sect and no political party has believed that it could afford to forgo advancing its cause by appealing to men’s senses. Rhetorical bombast, music and song resound, banners wave, flowers and colors serve as symbols, and the leaders seek to attach their followers to their own person. Liberalism has nothing to do with all this. It has no party flower and no party color, no party song and no party idols, no symbols and no slogans. It has the substance and the arguments. These must lead it to victory.

APPENDIX

1

On the Literature of Liberalism

To prevent this book from becoming too long, I have tried to keep this bibliography short. This seems justified since I have already treated all the basic problems of liberalism thoroughly in a number of books and monographs.

For the reader who wishes to acquire a more exhaustive understanding of these matters, I append the following compilation of the most important literature.

Liberal ideas are already to be found in the works of many of the earlier writers. The great English and Scotch thinkers of the eighteenth and the beginning of the nineteenth century were the first to formulate these ideas into a system. Whoever wants to familiarize himself with the liberal mind must return to them:
- David Hume, Essays Moral, Political, and Literary (1741 and 1742), and
- Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), but especially
- Jeremy Bentham, numerous writings, beginning with Defence of Usury (1787), up to the Deontology, or the Science of Morality, published after his death in 1834. All his writings, with the exception of the Deontology, were published in the complete edition edited by Bowring between 1838 and 1843.
John Stuart Mill is an epigone of classical liberalism and, especially in his later years, under the influence of his wife, full of feeble compromises. He slips slowly into socialism and is the originator of the thoughtless confounding of liberal and socialist ideas that led to the decline of English liberalism and to the undermining of the living standards of the English people. Nevertheless—or perhaps precisely because of this—one must become acquainted with Mill’s principal writings:
- Principles of Political Economy (1848)
- On Liberty (1859)
- Utilitarianism (1862)
Without a thorough study of Mill it is impossible to understand the events of the last two generations, for Mill is the great advocate of socialism. All the arguments that could be advanced in favor of socialism are elaborated by him with loving care. In comparison with Mill all other socialist writers—even Marx, Engels, and Lassalle—are scarcely of any importance.

One cannot understand liberalism without a knowledge of economics. For liberalism is applied economics; it is social and political policy based on a scientific foundation. Here, besides the writings already mentioned, one must familiarize oneself with the great master of classical economics:
- David Ricardo, Principles of Political Economy and Taxation (1817).
The best introductions to the study of modern scientific economics are:
- H. Oswalt, Vorträge über wirtschaftliche Grundbegriffe (many editions)
- C. A. Verrijn Stuart, Die Grundlagen der Volkswirtschaft (1923).
The German masterpieces of modern economics are:
- Carl Menger, Grundsätze der Volkswirtschaftslehre (first edition, 1871). [An English translation of this work was published as Principles of Economics (Glencoe, Ill.: The Free Press, 1950).]
- Eugen von Böhm-Bawerk: The Positive Theory of Capital (New York, 1923). [Published in a new English translation as Volume II of Böhm-Bawerk’s 3-volume Capital and Interest (South Holland, Ill.: Libertarian Press, 1959). Also instructive is Böhm’s Karl Marx and the Close of His System (1896), available in English translation as “Unresolved Contradiction in the Marxian Economic System” in Shorter Classics of Böhm-Bawerk, Volume I. (Grove City, Pa.: Libertarian Press, 1962.)]
The two most important contributions that Germany made to liberal literature suffered a misfortune no different from that which befell German liberalism itself. Wilhelm von Humboldt’s On the Sphere and Duties of Government (London, 1854) lay completed in 1792. In the same year Schiller published an excerpt in the Neuen Thalia, and other excerpts appeared in the Berliner Monatsschrift. Since, however, Humboldt’s publisher feared to issue the book, it was set aside, forgotten, and, only after the death of the author, discovered and published.

Hermann Heinrich Gossen’s work, Entwicklung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für menschliches Handeln, found a publisher, to be sure, but when it appeared in 1854 it attracted no readers. The work and its author remained forgotten until the Englishman Adamson came upon a copy.

Liberal thinking permeates German classical poetry, above all the works of Goethe and Schiller.

The history of political liberalism in Germany is brief and marked by rather meager success. Modern Germany—and this includes the defenders of the Weimar Constitution no less than their opponents—is a world apart from the spirit of liberalism. People in Germany no longer know what liberalism is, but they know how to revile it. Hatred of liberalism is the only point on which the Germans are united. Of the newer German writings on liberalism reference should be made to the works of Leopold von Wiese, Der Liberalismus in Vergangenheit und Zukunft (1917); Staatssozialismus (1916); and Freie Wirtschaft (1918).

Hardly a breath of the liberal spirit has ever reached the peoples of eastern Europe.

Although liberal thought is in decline even in western Europe and in the United States, one may yet call these nations liberal in comparison to the Germans.

Of the older liberal writers one should also read Frédéric Bastiat, Oeuvres Complètes (Paris, 1855) [The works of Frédéric Bastiat—Economic Sophisms, Economic Harmonies, and Essays on Political Economy—English translations published by D. Van Nostrand, 1964, are available from The Foundation for Economic Education, Irvington-on-Hudson, N.Y.]. Bastiat was a brilliant stylist, so that the reading of his writings affords a quite genuine pleasure. In view of the tremendous advances that economic theory has made since his death, it is not astonishing that his teachings are obsolete today. Yet his critique of all protectionist and related tendencies is even today unsurpassed. The protectionists and interventionists have not been able to advance a single word in pertinent and objective rejoinder. They just continue to stammer: Bastiat is “superficial.”

In reading the more recent political literature in English, one must not ignore the fact that in England today the word “liberalism” is frequently understood as denoting a moderate socialism. A concise presentation of liberalism is given by the Englishman L. T. Hobhouse, Liberalism (1911), and by the American Jacob H. Hollander, Economic Liberalism (1925). Even better introductions to the mind of the English liberals are:
- Hartley Withers, The Case for Capitalism (1920).
- Ernest J. P. Benn, The Confessions of a Capitalist (1925). If I Were a Labor Leader (1926). The Letters of an Individualist (1927). The last-named book includes a bibliography (pp. 74 et seq.) of the English literature on the basic problems of the economic system. The Return to Laisser Faire (London, 1928).
A critique of protectionist policy is presented by Francis W. Hirst in Safeguarding and Protection (1926).

Also instructive is the record of the public debate held in New York on January 23, 1921, between E. R. A. Seligmann and Scott Nearing on the topic: “That capitalism has more to offer to the workers of the United States than has socialism.”

Introductions to sociological thought are provided by Jean Izoulet, La cité moderne (first edition, 1890), and R. M. MacIver, Community (1924).

The history of economic ideas is presented by Charles Gide and Charles Rist, Histoire des doctrines économiques (many editions) [English translation of second revised and augmented edition of 1913 published as A History of Economic Doctrines: From the Time of the Physiocrats to the Present Day, D. C. Heath (New York, 1915)]; Albert Schatz, L’individualisme économique et social (1907); and Paul Barth, Die Philosophie der Geschichte als Soziologie (many editions).

The role of political parties is treated by Walter Sulzbach in Die Grundlagen der politischen Parteibildung (1921).

Oskar Klein-Hattingen, Geschichte des deutschen Liberalismus (1911/1912, two volumes) provides an essay on the history of German liberalism, and Guido de Ruggiero does the same for liberalism in Europe in The History of European Liberalism (Oxford, 1927).

Finally, I cite my own works in so far as they stand in close connection with the problems of liberalism:
- Nation, State, and Economy (1919). [English translation, New York University Press, 1983; new publication scheduled by Liberty Fund.]
- Socialism: An Economic and Sociological Analysis (1922). [English translation, Macmillan, 1938; Yale University Press, 1951; Jonathan Cape, 1969; Liberty Fund, 1981.]
* * * *

Editor’s Note: Mises’s major post-1927 works, listed here with the date and publisher of their first English editions, are also pertinent:
- Critique of Interventionism (1929). English translation, Arlington House, 1977.
- Epistemological Problems of Economics (1933). English translation, D. Van Nostrand, 1962.
- Omnipotent Government, Yale University Press, 1944.
- Bureaucracy, Yale University Press, 1944.
- Human Action, Yale University Press, 1949; 3rd edition, Regnery, 1966.
- The Anti-Capitalistic Mentality, D. Van Nostrand, 1956.
- Theory and History, Yale University Press, 1957.
- The Ultimate Foundation of Economic Science, Yale University Press, 1962.
- Interventionism: An Economic Analysis (1940). English translation, Foundation for Economic Education, 1998.
2

On the Term “Liberalism”

Those who are familiar with the writings on the subject of liberalism that have appeared in the last few years and with current linguistic usage will perhaps object that what has been called liberalism in the present volume does not coincide with what is understood by that term in contemporary political literature. I am far from disputing this. On the contrary! I have myself expressly pointed out that what is understood by the term “liberalism” today, especially in Germany, stands in direct opposition to what the history of ideas must designate as liberalism because it constituted the essential content of the liberal program of the eighteenth and nineteenth centuries. Almost all who call themselves “liberals” today decline to profess themselves in favor of private ownership of the means of production and advocate measures partly socialist and partly interventionist. They seek to justify this on the ground that the essence of liberalism as they define this word does not consist in adherence to the institution of private property, but in other things, and that these other things demand a further development of “liberalism” so that it must today no longer advocate private ownership of the means of production but instead either socialism or interventionism.

As to just what these “other things” might be, these pseudo “liberals” have yet to enlighten us. We hear much about humanity, magnanimity, real freedom, etc. These are certainly very fine and noble sentiments, and everyone will readily subscribe to them. And, in fact, every ideology does subscribe to them. Every ideology—aside from a few cynical schools of thought—believes that it is championing humanity, magnanimity, real freedom, etc. What distinguishes one social doctrine from another is not the ultimate goal of universal human happiness, which they all aim at, but the way by which they seek to attain this end. The characteristic feature of liberalism as the term is used in this book is that it proposes to reach it by way of private ownership of the means of production.

But terminological issues are, after all, of secondary importance. What counts is not the name, but the thing signified by it. However fanatical may be one’s opposition to private property, one must still concede at least the possibility that someone may be in favor of it. And if one concedes this much, one will, of course, have to have some name to designate this school of thought. One must ask those who today call themselves “liberals” what name they would give to an ideology that advocates the preservation of private ownership of the means of production. They will perhaps answer that they wish to call this ideology “Manchesterism.” The word “Manchesterism” was originally coined as a term of derision and abuse. Nevertheless, this would not stand in the way of its being employed to designate the liberal ideology if it were not for the fact that this expression has hitherto always been used to denote the economic rather than the general program of liberalism.

The school of thought that advocates private ownership of the means of production must in any case also be granted a claim to some name or other. And it is best to adhere to the traditional name. It would only create confusion if one followed the new usage that allows even protectionists, socialists, and warmongers to call themselves “liberal” when it suits them to do so.

The question could rather be raised whether, in the interest of facilitating the diffusion of liberal ideas, one ought not to give the ideology of liberalism a new name, so that the general prejudice fostered against it, especially in Germany, should not stand in its way. Such a suggestion would be well-intentioned, but completely antithetic to the spirit of liberalism. Just as liberalism must, from inner necessity, eschew every trick of propaganda and all the underhanded means of winning general acceptance favored by other movements, so it must also avoid abandoning its old name simply because it is unpopular. Precisely because the word “liberal” has a bad connotation in Germany, liberalism must stick with it. One may not make the way to liberal thinking easier for anyone, for what is of importance is not that men declare themselves “liberals,” but that they become liberals and think and act as liberals.

A second objection that can be raised against the terminology used in this book is that liberalism and democracy are not here conceived as opposites. Today in Germany “liberalism” is often taken to mean the doctrine whose political ideal is the constitutional monarchy, and “democracy” is understood as that which takes as its political ideal the parliamentary monarchy of the republic. This view is, even historically, altogether untenable. It was the parliamentary, not the constitutional, monarchy that liberalism strove for, and its defeat in this regard consisted precisely in the fact that in the German Empire and in Austria it was able to achieve only a constitutional monarchy. The triumph of antiliberalism lay in the fact that the German Reichstag was so weak that it might be accurately, if not politely, characterized as a “babblers’ club,” and the conservative party leader who said that a lieutenant and twelve men would suffice to dissolve the Reichstag was speaking the truth.

Liberalism is the more comprehensive concept. It denotes an ideology embracing all of social life. The ideology of democracy encompasses only that part of the realm of social relationships that refers to the constitution of the state. The reason why liberalism must necessarily demand democracy as its political corollary was demonstrated in the first part of this book. To show why all antiliberal movements, including socialism, must also be antidemocratic is the task of investigations that undertake to provide a thorough analysis of the character of these ideologies. In regard to socialism, I have attempted this in my book, Socialism.

It is easy for a German to go astray here, for he thinks always of the National Liberals and the Social Democrats. But the National Liberals were not, even from the outset—at least in matters of constitutional law—a liberal party. They were that wing of the old “liberal” party which professed to take its stand on “the facts as they really are”; that is, which accepted as unalterable the defeat that liberalism had sustained in the Prussian constitutional conflict from the opponents on the “Right” (Bismarck) and on the “Left” (the followers of Lassalle). The Social Democrats were democratic only so long as they were not the ruling party; that is, so long as they still felt themselves not strong enough to suppress their opponents by force. The moment they thought themselves the strongest, they declared themselves—as their writers had always asserted was advisable at this point—for dictatorship. Only when the armed bands of the Rightist parties had inflicted bloody defeats on them did they again become democratic “until further notice.” Their party writers express this by saying: “In the councils of the social democratic parties, the wing which declared for democracy triumphed over the one which championed dictatorship.”

Of course, the only party that may properly be described as democratic is one that under all circumstances—even when it is the strongest and in control—champions democratic institutions.

The typeface used in setting this book is Electra, designed in 1935 by the great American typographer William Addison Dwiggins. Dwiggins was a student and associate of Frederic Goudy and served for a time as acting director of Harvard University Press. In his illustrious career as typographer and book designer (he coined the term “graphic designer”), Dwiggins created a number of typefaces, including Metro and Caledonia, and designed as well many of the typographic ornaments or “dingbats” familiar to readers.

Electra is a crisp, elegant and readable typeface, strongly suggestive of calligraphy. The contrast between its strokes is relatively muted, and it produces an even but still “active” impression in text. Interestingly, the design of the italic form—called “cursive” in this typeface—is less calligraphic than the italic form of many faces, and more closely resembles the roman.

This book is printed on paper that is acid-free and meets the requirements of the American National Standard for Permanence of Paper for Printed Library Materials, z39.48–1992. ○∞

Book design adapted by Erin Kirk New, Watkinsville, Georgia, after a design by Martin Lubin Graphic Design, Jackson Heights, New York

Typography by G&S Typesetters, Inc., Austin, Texas

Printed and bound by Edwards Brothers, Inc., Ann Arbor, Michigan

[* ]Yet one should mention the fact that a few eminent Englishmen continue to espouse the cause of genuine liberalism.

[1. ]Leon Trotsky, Literature and Revolution, trans. by R. Strunsky (London, 1925), p. 256.

[* ][One who has passed his second state examination.—Editor. (Original note from the 1st English translation, 1962.)]

[* ]Ignace Jan Paderewski (1860–1941), Polish statesman, patriot, and composer.

[* ]In this section, Mises distinguishes between (1) antiliberals who were Communists, Bolsheviks, and Marxians and (2) antiliberals whom he called “Fascists.” Mises recognized no redeeming feature in Communism. The “intellectual and moral heritage” of the Communists descended from “barbarian peoples . . . whose relationship to civilization has never been any other than that of marauding denizens of forest and desert,” and whose “senseless and unrestrained destructionism . . . has stamped the Communists as the archenemies of civilization.” On the other hand, the anti-Communist and anti-Marxist Fascists, which included nationalists, socialists, collectivists, and interventionists, had operated among nations—notably Italy and Germany—“in which the intellectual and moral heritage of some thousands of years of civilization” had prevailed. This “liberal and moral heritage” temporarily stayed their governments’ use of unscrupulous methods and saved civilization in the short run. However, Mises warned (1927) that in time their reliance on naked force to impose their antiliberal socialist programs would give rise to dictatorship and “an endless series of wars that must destroy modern civilization.” Incidentally, it was the anti-Communist anti-Marxists who later became National-Socialists or Nazis.

[1. ]Syndicalism as an end and as a social idea is not to be confused with syndicalism as a trade-union tactic (the “direct action” of the French syndicalists). Of course, the latter can serve as a means in the struggle for the realization of the syndicalist ideal, but it can also be made to serve other ends incompatible with that ideal. One can strive, for example—and this is precisely what some of the French syndicalists hope to do—to achieve socialism by resorting to syndicalist tactics.

[2. ]Even if wages were artificially raised (by intervention on the part of the government or by coercion on the part of the trade unions), simultaneously throughout the whole world and in all branches of production, the result would simply be capital consumption and ultimately, as a further consequence of the latter, a still further reduction in wages. I have treated this question in detail in the writings listed in the appendix.

[* ]The assassination by a Serbian national, Gavrilo Princip, on June 28, 1914, of Archduke Francis Ferdinand, heir apparent to his uncle, Hapsburg Emperor Francis Joseph.
Back to Top
3: Ludwig von Mises, Bureaucracy [1944]

Ludwig von Mises, Bureaucracy, edited and with a Foreword by Bettina Bien Greaves (Indianapolis: Liberty Fund, 2007).

Accessed from oll.libertyfund.org/title/1891 on 2008-03-05

The copyright to this edition, in both print and electronic forms, is held by Liberty Fund, Inc.

EDITOR’S FOREWORD

When this book appeared in 1944, World War II was raging. Socialism then prevailed in Britain, Germany, and the USSR. In the United States also, self-styled progressives were fully convinced that socialism was the wave of the future. “Our age,” Professor Mises wrote, “has witnessed a triumphal advance of the socialist cause.” According to him, “The problems involved in the antagonism between socialism and capitalism can be attacked from various viewpoints. At present it seems as if an investigation of the expansion of bureaucratic agencies is the most expedient avenue of approach. An analysis of bureaucratism offers an excellent opportunity to recognize the fundamental problems of the controversy” (see p. xiii).

By 1962, when the second edition of Bureaucracy was published, socialism per se, i.e., “all-round planning by a central authority,” had largely been discredited. Government interventionism had replaced socialism as the guide for political policy. Mises recognized this shift in a new preface: “[S]ome of the idols of 1944 have lost their halos. But the essential characteristics of the political problems involved have not changed. The great historical conflict between individualism and collectivism is [still] dividing mankind. Therefore,” he said, “the investigation of the contrast between bureaucratic and business management is still of current importance” (see p. xvi).

In many respects, the climate of opinion has changed since 1962. Today lip service is paid to freedom and free markets, although most people believe that government must interfere with the market to preserve free enterprise. Countless government interventions have been enacted, with the best of intentions—to regulate interest rates and the quantity of money; to fix some prices and wages; to provide “social security” and medical care to the elderly; to control international trade; to restrict drug trafficking; to relieve poverty and unemployment; to regulate big business and employer-employee bargaining; to subsidize schools, farmers, and businesses; to restrict racial, religious, and sexual discrimination in schools and the workplace; etc.

Such programs have become widely accepted as integral to the American way of life. Yet all such programs introduce coercion and compulsion into the marketplace, interfere with market phenomena, and must be implemented by bureaucratic rules and regulations. They disturb the harmony that is brought about in the private property market economy by supply and demand and by free and open competition. Government interventions are no part of a truly liberal economy. They create “winners” and “losers,” help some at the expense of others, and, if not modified or repealed, may lead to problems requiring still further intervention. As Mises has written, government interventions, no matter how well intentioned, have unintended and undesired consequences: “All varieties of interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which—from the point of view of their authors’ and advocates’ valuations—is less desirable than the previous state of affairs which they were designed to alter” (Human Action, p. 858).

A majority of the American people today believe in the need for government intervention to protect them from what they believe are dangers inherent in capitalism. Only a small minority grasp the significance of Mises’s fundamental and most important thesis—that there is in the free market economy, in a truly liberal world, a harmony among rightly understood interests. “There are in the market economy no conflicts between the interests of the buyers and sellers. There are disadvantages caused by inadequate foresight. . . . What secures the best possible satisfaction of the demands of each member of society is precisely the fact that those who succeeded better than other people in anticipating future conditions are earning profits” (Human Action, p. 665).

Mises reminded us in Planning for Freedom that trends can change; they have changed in the past and they will change again in the future. As socialism yielded to government intervention, so may political reform in the future expand free markets and reduce government interference in the economy. To accomplish that, however, the ideas of the people must be changed. “If the majority of the nation is committed to unsound principles and prefers unworthy office-seekers, there is no remedy other than to try to change their mind by expounding more reasonable principles and recommending better men. A minority will never win lasting success by other means” (Human Action, p. 150).

According to Mises, the sole legitimate purpose of government is to protect equally the lives and property of all its citizens, leaving them all free to pursue their own goals so long as they do not use force or threat of violence to interfere with the equal rights of others. Mises’s great contribution has been to explain how and why, when government fulfills that legitimate role, there prevails in the free market economy harmony among rightly understood interests. In contrasting bureaucratic and business (profit and loss) management, as he does in this book, he offers one chapter in that explanation.

Bettina Bien Greaves
September 2006

PREFACE TO THE FIRST EDITION

The main issue in present-day social and political conflicts is whether or not man should give away freedom, private initiative, and individual responsibility and surrender to the guardianship of a gigantic apparatus of compulsion and coercion, the socialist state. Should authoritarian totalitarianism be substituted for individualism and democracy? Should the citizen be transformed into a subject, a subordinate in an allembracing army of conscripted labor, bound to obey unconditionally the orders of his superiors? Should he be deprived of his most precious privilege to choose means and ends and to shape his own life?

Our age has witnessed a triumphal advance of the socialist cause. As much as half a century ago an eminent British statesman, Sir William Harcourt, asserted: “We are all socialists now.”1 At that time this statement was premature as far as Great Britain was concerned, but today it is almost literally true for that country, once the cradle of modern liberty. It is no less true with regard to continental Europe. America alone is still free to choose. And the decision of the American people will determine the outcome for the whole of mankind.

The problems involved in the antagonism between socialism and capitalism can be attacked from various viewpoints. At present it seems as if an investigation of the expansion of bureaucratic agencies is the most expedient avenue of approach. An analysis of bureaucratism offers an excellent opportunity to recognize the fundamental problems of the controversy.

Although the evolution of bureaucratism has been very rapid in these last years, America is still, compared with the rest of the world, only superficially afflicted. It shows only a few of the characteristic features of bureaucratic management. A scrutiny of bureaucratism in this country would be incomplete therefore if it did not deal with some aspects and results of the movement which became visible only in countries with an older bureaucratic tradition. Such a study must analyze the experiences of the classical countries of bureaucratism—France, Germany, and Russia.

However it is not the object of such occasional references to European conditions to obscure the radical difference which exists, with regard to bureaucratism, between the political and social mentality of America and that of continental Europe. To the American mind the notion of an Obrigkeit, a government the authority of which is not derived from the people, was and is unknown. It is even extremely difficult to explain to a man for whom the writings of Milton and Paine, the Declaration of Independence, the Constitution, and the Gettysburg Address are the fountain springs of political education, what this German term Obrigkeit implies and what an Obrigkeits-Staat is. Perhaps the two following quotations will help to elucidate the matter.

On January 15, 1838, the Prussian Minister of the Interior, G. A. R. von Rochow, declared in reply to a petition of citizens of a Prussian city: “It is not seemly for a subject to apply the yardstick of his wretched intellect to the acts of the Chief of the State and to arrogate to himself, in haughty insolence, a public judgment about their fairness.” This was in the days in which German liberalism challenged absolutism, and public opinion vehemently resented this piece of overbearing bureaucratic pretension.

Half a century later German liberalism was stone dead. The Kaiser’s Sozialpolitik, the statist system of government interference with business and of aggressive nationalism, had supplanted it. Nobody minded when the Rector of the Imperial University of Strassburg quietly characterized the German system of government thus: “Our officials . . . will never tolerate anybody’s wresting the power from their hands, certainly not parliamentary majorities whom we know how to deal with in a masterly way. No kind of rule is endured so easily or accepted so gratefully as that of high-minded and highly educated civil servants. The German State is a State of the supremacy of officialdom—let us hope that it will remain so.”2

Such aphorisms could not be enunciated by any American. It could not happen here.

PREFACE TO THE 1962 EDITION

There are two methods for the conduct of affairs within the frame of human society, i.e., peaceful cooperation among men. One is bureaucratic management, the other is profit management.

It is well known that profit management is highly unpopular in our age. People are anxious to substitute all-round planning by a central authority—i.e., socialism—for the supremacy of the consumers as operative in the market economy. But at the same time the same people severely blame the shortcomings of bureaucratism. They do not see that in clamoring for the suppression of profit management they themselves are asking for more and more bureaucracy, even for full bureaucratization of every sphere of human affairs.

There are areas of man’s activities in which there cannot be any question of profit management and where bureaucratic management must prevail. A police department cannot be operated according to the methods resorted to in the conduct of a gainful enterprise. A bakery serves a definite number of people—its customers—in selling them piecemeal what it has produced; it is the patronage of its customers that provides the social legitimacy—the profitability—of the bakery’s business. A police department cannot sell its “products”; its achievements, however valuable, even indispensable as they may be, have no price on the market and therefore cannot be contrasted with the total expenditure made in the endeavors to bring them about.

This essay does not condemn or blame bureaucracy. It tries to point out what bureaucratic management of affairs means and in what it differs from profit management. It further shows in which field bureaucratic management is the only possible method for the conduct of affairs. It finally aims at putting into relief the effects which the attempts of contemporary governments and political parties to substitute government action for private business have brought about and are bound to bring about in the future.

The examination of these issues provides the insight required for an adequate appraisal of the two systems of society’s economic organization, the market economy and socialism. It discloses the meaning of Lenin’s program “to organize the whole national economy like the postal system,” to make the whole of society “one office and one factory,” and to transform all citizens “into hired employees of the state.”*

This essay was written and first published in 1944. It refers in some points to conditions and persons of that period. The outward appearance of conditions has changed in some ways and some of the idols of 1944 have lost their halos. But the essential characteristics of the political problems involved have not changed. The great historical conflict between individualism and collectivism is dividing mankind into two hostile camps as it did eighteen years ago. Therefore the investigation of the contrast between bureaucratic and business management is still of current importance.

New YorkCity
January 1962

BUREAUCRACY

Introduction

1.

The Opprobrious Connotation of the Term Bureaucracy

The terms bureaucrat, bureaucratic, and bureaucracy are clearly invectives. Nobody calls himself a bureaucrat or his own methods of management bureaucratic. These words are always applied with an opprobrious connotation. They always imply a disparaging criticism of persons, institutions, or procedures. Nobody doubts that bureaucracy is thoroughly bad and that it should not exist in a perfect world.

The abusive implication of the terms in question is not limited to America and other democratic countries. It is a universal phenomenon. Even in Prussia, the paragon of authoritarian government, nobody wanted to be called a bureaucrat. The Prussian king’s wirklicher geheimer Ober-Regierungsrat* was proud of his dignity and of the power that it bestowed. His conceit delighted in the reverence of his subordinates and of the populace. He was imbued with the idea of his own importance and infallibility. But he would have deemed it an impudent insult if somebody had the effrontery to call him a bureaucrat. He was, in his own opinion, not a bureaucrat but a civil servant, his Majesty’s mandatory, a functionary of the State unswervingly attending day and night to the welfare of the nation.

It is noteworthy that the “progressives” whom the critics of bureaucracy make responsible for its spread do not venture to defend the bureaucratic system. On the contrary, they join those whom they in other respects scorn as “reactionaries” in condemning it. For, they maintain, these bureaucratic methods are not at all essential for the utopia at which they themselves are aiming. Bureaucracy, they say, is rather the unsatisfactory way in which the capitalist system tries to come to an arrangement with the inexorable trend toward its own disappearance. The inevitable final triumph of socialism will abolish not only capitalism but bureaucratism also. In the happy world of tomorrow, in the blessed paradise of all-round planning, there will no longer be any bureaucrats. The common man will be paramount; the people themselves will take care of all their affairs. Only narrow-minded bourgeois can fall prey to the error that bureaucracy gives a foretaste of what socialism has in store for mankind.

Thus everyone seems to agree that bureaucracy is an evil. But it is no less true that nobody has ever tried to determine in unambiguous language what bureaucracy really means. The word is generally used loosely. Most people would be embarrassed if somebody were to ask them for a precise definition and explanation. How can they condemn bureaucracy and bureaucrats if they do not even know what the terms mean?

2.

The American Citizen’s Indictment of Bureaucratism

An American, asked to specify his complaints about the evils of progressing bureaucratization, might say something like this:

“Our traditional American system of government was based on the separation of the legislative, the executive, and the judicial powers and on a fair division of jurisdiction between the Union and the States. The legislators, the most important executives, and many of the judges were chosen by election. Thus the people, the voters, were supreme. Moreover, none of the three arms of the government had the right to interfere with the private affairs of the citizens. The law-abiding citizen was a free man.

“But now, for many years and especially since the appearance of the New Deal, powerful forces are on the point of substituting for this old and well-tried democratic system the tyrannical rule of an irresponsible and arbitrary bureaucracy. The bureaucrat does not come into office by election of the voters but by appointment of another bureaucrat. He has arrogated a good deal of the legislative power. Government commissions and bureaus issue decrees and regulations undertaking the management and direction of every aspect of the citizens’ lives. Not only do they regulate matters which hitherto have been left to the discretion of the individual; they do not shrink from decreeing what is virtually a repeal of duly enacted laws. By means of this quasi-legislation, the bureaus usurp the power to decide many important matters according to their own judgment of the merits of each case, that is, quite arbitrarily. The rulings and judgments of the bureaus are enforced by Federal officials. The purported judicial review is in fact illusory. Every day the bureaucrats assume more power; pretty soon they will run the whole country.

“There cannot be any doubt that this bureaucratic system is essentially antiliberal, undemocratic, and un-American, that it is contrary to the spirit and to the letter of the Constitution, and that it is a replica of the totalitarian methods of Stalin and Hitler. It is imbued with a fanatical hostility to free enterprise and private property. It paralyzes the conduct of business and lowers the productivity of labor. By heedless spending it squanders the nation’s wealth. It is inefficient and wasteful. Although it styles what it does planning, it has no definite plans and aims. It lacks unity and uniformity; the various bureaus and agencies work at cross-purposes. The outcome is a disintegration of the whole social apparatus of production and distribution. Poverty and distress are bound to follow.”

This vehement indictment of bureaucracy is, by and large, an adequate although emotional description of present-day trends in American government. But it misses the point as it makes bureaucracy and the bureaucrats responsible for an evolution the causes of which must be sought for elsewhere. Bureaucracy is but a consequence and a symptom of things and changes much more deeply rooted.

The characteristic feature of present-day policies is the trend toward a substitution of government control for free enterprise. Powerful political parties and pressure groups are fervently asking for public control of all economic activities, for thorough government planning, and for the nationalization of business. They aim at full government control of education and at the socialization of the medical profession. There is no sphere of human activity that they would not be prepared to subordinate to regimentation by the authorities. In their eyes, state control is the panacea for all ills.

These enthusiastic advocates of government omnipotence are very modest in the appraisal of the role they themselves play in the evolution toward totalitarianism. The trend toward socialism, they contend, is inevitable. It is the necessary and unavoidable tendency of historical evolution. With Karl Marx they maintain that socialism is bound to come “with the inexorability of a law of nature.” Private ownership of the means of production, free enterprise, capitalism, the profit system are doomed. The “wave of the future” carries men toward the earthly paradise of full government control. The champions of totalitarianism call themselves “progressives” precisely because they pretend to have comprehended the meaning of the portents. And they ridicule and disparage as “reactionaries” all those who try to resist the working of forces which—as they say—no human effort is strong enough to stop.

Because of these “progressive” policies new offices and government agencies thrive like mushrooms. The bureaucrats multiply and are anxious to restrict, step by step, the individual citizen’s freedom to act. Many citizens, i.e., those whom the “progressives” scorn as “reactionaries,” resent this encroachment upon their affairs, and blame the incompetence and wastefulness of the bureaucrats. But these opponents have hitherto been only a minority. The proof is that, in the past elections, they were not in a position to poll a majority of the votes. The “progressives,” the adamant foes of free enterprise and private initiative and fanatical champions of totalitarian government control of business, defeated them.

It is a fact that the policy of the New Deal has been supported by the voters. Nor is there any doubt that this policy will be entirely abandoned if the voters withdraw their favor from it. The United States is still a democracy. The Constitution is still intact. Elections are still free. The voters do not cast their ballot under duress. It is therefore not correct to say that the bureaucratic system carried its victory by unconstitutional and undemocratic methods. The lawyers may be right in questioning the legality of some minor points. But as a whole the New Deal was backed by Congress. Congress made the laws and appropriated the money.

Of course, America is faced with a phenomenon that the framers of the Constitution did not foresee and could not foresee: the voluntary abandonment of congressional rights. Congress has in many instances surrendered the function of legislation to government agencies and commissions, and it has relaxed its budgetary control through the allocation of large appropriations for expenditures, which the Administration has to determine in detail. The right of Congress to delegate some of its powers temporarily is not uncontested. In the case of the National Recovery Administration the Supreme Court declared it unconstitutional. But delegations of power formulated in a more cautious way are an almost regular practice. At any rate, Congress, in acting this way, has hitherto not been at variance with the declared will of the majority of the sovereign people.

On the other hand, we must realize that delegation of power is the main instrument of modern dictatorship. It is by virtue of delegation of power that Hitler and his Cabinet rule Germany. It is by delegation of power that the British Left wants to establish its dictatorship and to transform Great Britain into a socialist commonwealth. It is obvious that delegation of power can be used as a quasi-constitutional disguise for a dictatorship. But this is certainly not the case at present in this country. Congress has undoubtedly still the legal right and the actual might to take back all the power it has delegated. The voters still have the right and the power to return senators and representatives who are radically opposed to any abandonment of congressional powers. In the United States, bureaucracy is based on constitutional grounds.

Nor is it correct to deem as unconstitutional the progressing concentration of jurisdictional powers in the central government and the resulting diminution of the importance of the States. Washington has not openly usurped any constitutional powers of the States. The equilibrium in the distribution of powers between the Federal Government and the States as established by the Constitution has been seriously disturbed because the new powers that the authorities acquired for the most part accrued to the Union and not to the States. This is not the effect of sinister machinations on the part of mysterious Washington cliques, eager to curb the States and to establish centralization. It is the consequence of the fact that the United States is an economic unit with a uniform monetary and credit system and with free mobility of commodities, capital, and men among the States. In such a country, government control of business must be centralized. It would be out of the question to leave it to the individual States. If each State were free to control business according to its own plans, the unity of the domestic market would disintegrate. State control of business would be practicable only if every State were in a position to separate its territory from the rest of the nation by trade and migration barriers and an autonomous monetary and credit policy. As nobody seriously suggests breaking up the economic unity of the nation, it has been necessary to entrust the control of business to the Union. It is in the nature of a system of government control of business to aim at the utmost centralization. The autonomy of the States as guaranteed by the Constitution is realizable only under a system of free enterprise. In voting for government control of business the voters implicitly, although unwittingly, are voting for more centralization.

Those who criticize bureaucracy make the mistake of directing their attacks against a symptom only and not against the seat of the evil. It makes no difference whether the innumerable decrees regimenting every aspect of the citizen’s economic activities are issued directly by a law, duly passed by Congress, or by a commission or government agency to which power has been given by a law and by the allocation of money. What people are really complaining about is the fact that the government has embarked upon such totalitarian policies, not the technical procedures applied in their establishment. It would make little difference if Congress had not endowed these agencies with quasi-legislative functions and had reserved to itself the right to issue all decrees required for the conduct of their functions.

Once price control is declared a task of government, an indefinite number of price ceilings must be fixed and many of them must, with changing conditions, be altered again and again. This power is vested in the Office of Price Administration. But the sway of its bureaucrats would not be impaired substantially if they were under the necessity of approaching Congress for legislating such ceilings. Congress would be flooded by a multitude of bills, the content of which would extend beyond the range of its competence. The members of Congress would lack both the time and the information to examine seriously the proposals elaborated by the various subdivisions of the OPA. No choice would be left to them other than trusting the chief of the office and its employees and voting en bloc for the bills or repealing the law giving the Administration the power to control prices. It would be out of the question for the members of Congress to look into the matter with the same conscientiousness and scrupulousness they ordinarily apply in deliberating about policies and laws.

Parliamentary procedures are an adequate method for dealing with the framing of laws needed by a community based on private ownership of the means of production, free enterprise, and consumers’ sovereignty. They are essentially inappropriate for the conduct of affairs under government omnipotence. The makers of the Constitution never dreamed of a system of government under which the authorities would have to determine the prices of pepper and of oranges, of photographic cameras and of razor blades, of neckties and of paper napkins. But if such a contingency had occurred to them, they surely would have considered as insignificant the question whether such regulations should be issued by Congress or by a bureaucratic agency. They would have easily understood that government control of business is ultimately incompatible with any form of constitutional and democratic government.

It is not an accident that socialist countries are ruled in a dictatorial way. Totalitarianism and government by the people are irreconcilable. Things in Germany and Russia would not be different if Hitler and Stalin were to submit all their decrees to the decision of their “parliaments.” Under government control of business, parliaments cannot be anything else than assemblies of yes men.

Neither is it justifiable to find fault with the fact that the offices of the bureaucratic administrators are not elective. Election of executives is reasonable only in the case of top executives. Here the voters have to choose among candidates whose political character and convictions they know. It would be absurd to use the same method for the appointment of a host of unknown people. It makes sense if the citizens vote for President, for Governor, or for Mayor. It would be nonsensical to let them vote for the hundreds and thousands of minor clerks. In such elections the voters would have no choice but to endorse the list proposed by their party. It makes no material difference whether the duly elected President or Governor nominates all his aides or whether the voters vote for a list containing the names of all those men whom their preferred candidate has chosen as aides.

It is quite correct, as the opponents of the trend toward totalitarianism say, that the bureaucrats are free to decide according to their own discretion questions of vital importance for the individual citizen’s life. It is true that the officeholders are no longer the servants of the citizenry but irresponsible and arbitrary masters and tyrants. But this is not the fault of bureaucracy. It is the outcome of the new system of government which restricts the individual’s freedom to manage his own affairs and assigns more and more tasks to the government. The culprit is not the bureaucrat but the political system. And the sovereign people is still free to discard this system.

It is further true that bureaucracy is imbued with an implacable hatred of private business and free enterprise. But the supporters of the system consider precisely this the most laudable feature of their attitude. Far from being ashamed of their anti-business policies, they are proud of them. They aim at full control of business by the government and see in every businessman who wants to evade this control a public enemy.

Finally it is true that the new policy, although not unconstitutional from a merely formalistic viewpoint, is contrary to the spirit of the Constitution, that it is tantamount to an overthrow of all that was precious to the older generations of Americans, that it must result in an abandonment of what people used to call democracy, and that it is in this sense un-American. But this reproach too does not discredit the “progressive” tendencies in the eyes of their supporters. They look at the past with other eyes than their critics’. For them the history of all hitherto existing society is a record of human degradation, misery, and ruthless exploitation of the masses by ruling classes. What is called “individualism” in the American language is, they say, “a high-sounding term for money greed transfigured and parading as a virtue.” The idea was “to give a free hand to money-getters, sharp-witted tricksters, stock manipulators and other bandits who lived by raids on the national income.”1 The American system is scorned as a spurious “bill-of-rights democracy,” and the Russian system of Stalin is extravagantly praised as the only truly democratic one.

The main issue in present-day political struggles is whether society should be organized on the basis of private ownership of the means of production (capitalism, the market system) or on the basis of public control of the means of production (socialism, communism, planned economy). Capitalism means free enterprise, sovereignty of the consumers in economic matters, and sovereignty of the voters in political matters. Socialism means full government control of every sphere of the individual’s life and the unrestricted supremacy of the government in its capacity as central board of production management. There is no compromise possible between these two systems. Contrary to a popular fallacy there is no middle way, no third system possible as a pattern of a permanent social order.2 The citizens must choose between capitalism and socialism or, as many Americans say, between the American and the Russian way of life.

Whoever in this antagonism sides with capitalism must do it frankly and directly. He must give positive support to private property and free enterprise. It is vain to content oneself with attacks on some measures designed to pave the way for socialism. It is useless to fight mere attendant phenomena and not the tendency toward totalitarianism as such. It is idle to dwell on a criticism of bureaucratism only.

3.

The “Progressives’” View of Bureaucratism

The “progressive” critics of bureaucratism direct their attacks primarily against the bureaucratization of corporate big business. Their reasoning runs this way:

“In the past business firms were comparatively small. The entrepreneur was in a position to survey all parts of his enterprise and to make all important decisions personally. He was the owner of all the capital invested or at least of the greater part of it. He was himself vitally interested in the success of his enterprise. He was therefore to the best of his abilities intent on making his outfit as efficient as possible and on avoiding waste.

“But with the inexorable trend toward economic concentration, conditions changed radically. Today the scene is dominated by corporate big business. It is absentee ownership; the legal owners, the stockholders, have no actual voice in the management. This task is left to professional administrators. The enterprises are so large that functions and activities must be distributed among departments and administrative subdivisions. The conduct of affairs necessarily becomes bureaucratic.

“The present-day champions of free enterprise are romantics like the eulogists of the medieval arts and crafts. They are entirely mistaken in attributing to mammoth corporations the qualities which once were the excellence of small or medium-size business. There cannot be any question of breaking up the big aggregates into smaller units. On the contrary, the tendency toward a further concentration of economic power will prevail. Monopolized big business will congeal into rigid bureaucratism. Its managers, responsible to nobody, will become a hereditary aristocracy; the governments will become mere puppets of an omnipotent business clique.

“It is indispensable to curb the power of this managerial oligarchy by government action. The complaints about government regimentation are unfounded. As things are, there is only the choice between the rule of an irresponsible managerial bureaucracy and that of the nation’s government.”

The apologetic character of such reasoning is obvious. To the general criticism of the spread of governmental bureaucratism the “progressives” and New Dealers reply that bureaucracy is not at all limited to government. It is a universal phenomenon present both in business and in government. Its broadest cause is “the tremendous size of the organization.”3 It is therefore an inescapable evil.

This book will try to demonstrate that no profit-seeking enterprise, no matter how large, is liable to become bureaucratic provided the hands of its management are not tied by government interference. The trend toward bureaucratic rigidity is not inherent in the evolution of business. It is an outcome of government meddling with business. It is a result of the policies designed to eliminate the profit motive from its role in the framework of society’s economic organization.

In these introductory remarks we want to dwell only upon one point of the popular complaints about the growing bureaucratization of business. Bureaucratization, people say, is caused by “the lack of competent, effective leadership.”4 What is wanting is “creative leadership.”

To complain of lack of leadership is, in the field of political affairs, the characteristic attitude of all harbingers of dictatorship. In their eyes the main deficiency of democratic government is that it is unable to produce great Führers and Duces.

In the field of business, creative leadership manifests itself in the adjustment of production and distribution to the changing conditions of demand and supply and in the adaptation of technical improvements to practical uses. The great businessman is he who produces more, better, and cheaper goods, who, as a pioneer of progress, presents his fellowmen with commodities and services hitherto unknown to them or beyond their means. We may call him a leader because his initiative and activity force his competitors either to emulate his achievements or to go out of business. It is his indefatigable inventiveness and fondness for innovations that prevent all business units from degenerating into idle bureaucratic routine. He embodies in his person the restless dynamism and progressivism inherent in capitalism and free enterprise.

It would certainly be an exaggeration to say that such creative leaders are lacking in present-day America. Many of the old heroes of American business are still alive and active in the conduct of their affairs. It would be a delicate matter to express an opinion about the creativeness of younger men. Some temporal distance is needed for a correct appreciation of their achievements. A true genius is very rarely acknowledged as such by his contemporaries.

Society cannot contribute anything to the breeding and growing of ingenious men. A creative genius cannot be trained. There are no schools for creativeness. A genius is precisely a man who defies all schools and rules, who deviates from the traditional roads of routine and opens up new paths through land inaccessible before. A genius is always a teacher, never a pupil; he is always self-made. He does not owe anything to the favor of those in power. But, on the other hand, the government can bring about conditions which paralyze the efforts of a creative spirit and prevent him from rendering useful services to the community.

This is the case today in the field of business. Let us look at one instance only, the income tax. In the past an ingenious newcomer started a new project. It was a modest start; he was poor, his funds were small and most of them borrowed. When initial success came, he did not increase his consumption, but reinvested the much greater part of the profits. Thus his business grew quickly. He became a leader in his line. His threatening competition forced the old rich firms and the big corporations to adjust their management to the conditions brought about by his intervention. They could not disregard him and indulge in bureaucratic negligence. They were under the necessity of being on their guard day and night against such dangerous innovators. If they could not find a man able to rival the newcomer for the management of their own affairs, they had to merge their own business with his and yield to his leadership.

But today the income tax absorbs 80 or more percent of such a newcomer’s initial profits. He cannot accumulate capital; he cannot expand his business; his enterprise will never become big business. He is no match for the old vested interests. The old firms and corporations already own a considerable capital. Income and corporation taxes prevent them from accumulating more capital, while they prevent the newcomer from accumulating any capital. He is doomed to remain small business forever. The already existing enterprises are sheltered against the dangers from ingenious newcomers. They are not menaced by their competition. They enjoy a virtual privilege as far as they content themselves with keeping their business in the traditional lines and in the traditional size.5 Their further development, of course, is curtailed. The continuous drain on their profits by taxes makes it impossible for them to expand their business out of their own funds. Thus a tendency toward rigidity originates.

In all countries all tax laws are today written as if the main purpose of taxes were to hinder the accumulation of new capital and the improvements which it could achieve. The same tendency manifests itself in many other branches of public policy. The “progressives” are badly off the mark when they complain about the lack of creative business leadership. Not the men are lacking but the institutions which would permit them to utilize their gifts. Modern policies result in tying the hands of innovators no less than did the guild system of the Middle Ages.

4.

Bureaucratism and Totalitarianism

It will be shown in this book that bureaucracy and bureaucratic methods are very old and that they must be present in the administrative apparatus of every government the sovereignty of which stretches over a large area. The Pharaohs of ancient Egypt and the emperors of China built a huge bureaucratic machine and so did all the other rulers. Medieval feudalism was an attempt to organize the government of large territories without bureaucrats and bureaucratic methods. It failed utterly in these endeavors. It resulted in a complete disintegration of political unity and in anarchy. The feudal lords, originally officeholders only and as such subject to the authority of the central government, became virtually independent princes, fighting one another almost continually and defying the king, the courts, and the laws. From the fifteenth century on curbing the arrogance of the vassals was the main task of the various European kings. The modern state is built upon the ruins of feudalism. It substituted bureaucratic management of public affairs for the supremacy of a multitude of petty princes and counts.

Far ahead in this evolution were the kings of France. Alexis de Tocqueville has shown how the Bourbon kings unswervingly aimed at the abolition of the autonomy of powerful vassals and of oligarchic groups of aristocrats.* In this regard the French Revolution only achieved what the absolute kings themselves had begun. It eliminated the arbitrariness of the kings, it made the law supreme in the field of administration and restricted the scope of affairs subject to the discretionary judgment of the officeholders. It did not brush away bureaucratic management; it only put it on a legal and constitutional basis. France’s nineteenth-century administrative system was an attempt to tame the arbitrariness of the bureaucrats as much as possible by law. It served as a model for all other liberal nations which—outside of the realm of Anglo-Saxon Common Law—were anxious to make law and legality paramount in the conduct of civil administration.

It is not sufficiently known that the Prussian administrative system, so much admired by all advocates of government omnipotence, in its early beginnings was but an imitation of French institutions. Frederick II, the “Great” King, imported from royal France not only the methods but even the personnel for their execution. He handed over the administration of the excise duties and the customs to an imported staff of several hundred French bureaucrats. He appointed a Frenchman Postmaster General and another Frenchman President of the Academy. The eighteenth-century Prussians had even better grounds for calling bureaucratism un-Prussian than the present-day Americans for calling it un-American.

The legal technique of administrative activity in the countries of Anglo-Saxon Common Law was very different from that of the continental countries of Europe. Both the British and the Americans were fully convinced that their system gave them a most effective protection against the encroachment of administrative arbitrariness. However, the experience of the last decades has clearly evidenced that no legal precautions are strong enough to resist a trend supported by a powerful ideology. The popular ideas of government interference with business and of socialism have undermined the dams erected by twenty generations of Anglo-Saxons against the flood of arbitrary rule. Many intellectuals and numerous voters organized in the pressure groups of farming and of labor disparage the traditional American system of government as “plutocratic” and yearn for the adoption of the Russian methods which do not accord the individual any protection at all against the discretionary power of the authorities.

Totalitarianism is much more than mere bureaucracy. It is the subordination of every individual’s whole life, work, and leisure to the orders of those in power and office. It is the reduction of man to a cog in an allembracing machine of compulsion and coercion. It forces the individual to renounce any activity of which the government does not approve. It tolerates no expression of dissent. It is the transformation of society into a strictly disciplined labor-army—as the advocates of socialism say—or into a penitentiary—as its opponents say. At any rate it is the radical break from the way of life to which the civilized nations clung in the past. It is not merely the return of mankind to the oriental despotism under which, as Hegel observed, one man alone was free and all the rest slaves, for those Asiatic kings did not interfere with the daily routine of their subjects. To the individual farmers, cattle breeders, and artisans a field of activities was left in the performance of which they were not troubled by the king and his satellites. They enjoyed some amount of autonomy within their own households and families. It is different with modern socialism. It is totalitarian in the strict sense of the term. It holds the individual in tight rein from the womb to the tomb. At every instant of his life the “comrade” is bound to obey implicitly the orders issued by the supreme authority. The State is both his guardian and his employer. The State determines his work, his diet, and his pleasures. The State tells him what to think and what to believe in.

Bureaucracy is instrumental in the execution of these plans. But people are unfair in indicting the individual bureaucrat for the vices of the system. The fault is not with the men and women who fill the offices and bureaus. They are no less the victims of the new way of life than anybody else. The system is bad, not its subordinate handymen. A government cannot do without bureaus and bureaucratic methods. And as social cooperation cannot work without a civil government, some amount of bureaucracy is indispensable. What people resent is not bureaucratism as such, but the intrusion of bureaucracy into all spheres of human life and activity. The struggle against the encroachments of bureaucracy is essentially a revolt against totalitarian dictatorship. It is a misnomer to label the fight for freedom and democracy a fight against bureaucracy.

Nonetheless there is some substance in the general complaint against bureaucratic methods and procedures. For their faults are indicative of the essential defects of any socialist or totalitarian scheme. In thoroughly investigating the problem of bureaucracy we must finally discover why the socialist utopias are entirely impracticable and must, when put into practice, result not only in impoverishment for all but also in the disintegration of social cooperation—in chaos. Thus the study of bureaucracy is a good approach to a study of both systems of social organization, capitalism and socialism.

5.

The Alternative: Profit Management or Bureaucratic Management

If we want to find out what bureaucracy really means, we must start with an analysis of the operation of the profit motive within the framework of a capitalist society. The essential features of capitalism are no less unknown than those of bureaucracy. Spurious legends, popularized by demagogic propaganda, have entirely misrepresented the capitalist system. Capitalism has succeeded in raising the material well-being of the masses in an unprecedented way. In the capitalist countries population figures are now several times higher than they were at the eve of the “industrial revolution,” and every citizen of these nations enjoys a standard of living much higher than that of the well-to-do of earlier ages. Nevertheless a great part of public opinion disparages free enterprise and private ownership of the means of production as dismal institutions that are detrimental to the immense majority of the nation and further only the selfish class interests of a small group of exploiters. Politicians whose main achievement consisted in restricting agricultural output and in attempts to put obstacles in the way of technical improvement of methods of manufacturing discredit capitalism as an “economy of scarcity” and talk about the abundance that socialism will bring about. The heads of labor unions, whose members drive their own motor cars, are enthusiastic in exalting the conditions of the ragged and barefooted Russian proletarians and in praising the freedom that the workers enjoy in Russia where labor unions have been suppressed and strikes are a criminal offense.

There is no need to enter into a detailed scrutiny of these fables. Our intention is neither to praise nor to condemn. We want to know what the two systems in question are, how they work, and how they serve the needs of the people.

In spite of all the vagueness in the use of the term bureaucracy there seems to be unanimity with regard to the distinction between two contrary methods of doing things: the private citizens’ way and the way in which the offices of the government and the municipalities are operated. Nobody denies that the principles according to which a police department is operated differ essentially and radically from the principles applied in the conduct of a profit-seeking enterprise. It will therefore be appropriate to begin with an investigation of the methods in use in these two classes of institutions and to compare them with each other.

Bureaucracy, its merits and its demerits, its working and its operation, can be understood only by contrasting it with the operation of the profit motive as it functions in the capitalistic market society.

I

Profit Management

1.

The Operation of the Market Mechanism

Capitalism or market economy is that system of social cooperation and division of labor that is based on private ownership of the means of production. The material factors of production are owned by individual citizens, the capitalists and the landowners. The plants and the farms are operated by the entrepreneurs and the farmers, that is, by individuals or associations of individuals who either themselves own the capital and the soil or have borrowed or rented them from the owners. Free enterprise is the characteristic feature of capitalism. The objective of every enterpriser—whether businessman or farmer—is to make profit.

The capitalists, the enterprisers, and the farmers are instrumental in the conduct of economic affairs. They are at the helm and steer the ship. But they are not free to shape its course. They are not supreme, they are steersmen only, bound to obey unconditionally the captain’s orders. The captain is the consumer.

Neither the capitalists nor the entrepreneurs nor the farmers determine what has to be produced. The consumers do that. The producers do not produce for their own consumption but for the market. They are intent on selling their products. If the consumers do not buy the goods offered to them, the businessman cannot recover the outlays made. He loses his money. If he fails to adjust his procedure to the wishes of the consumers, he will very soon be removed from his eminent position at the helm. Other men who did better in satisfying the demand of the consumers replace him.

The real bosses, in the capitalist system of market economy, are the consumers. They, by their buying and by their abstention from buying, decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser. They make poor men rich and rich men poor. They are no easy bosses. They are full of whims and fancies, changeable and unpredictable. They do not care a whit for past merit. As soon as something is offered to them that they like better or that is cheaper, they desert their old purveyors. With them nothing counts more than their own satisfaction. They bother neither about the vested interests of capitalists nor about the fate of the workers who lose their jobs if as consumers they no longer buy what they used to buy.

What does it mean when we say that the production of a certain commodity A does not pay? It is indicative of the fact that the consumers are not willing to pay the producers of A enough to cover the prices of the required factors of production, while at the same time other producers will find their incomes exceeding their costs of production. The demand of the consumers is instrumental in the allocation of various factors of production to the various branches of manufacturing consumers’ goods. The consumers thus decide how much raw material and labor should be used for the manufacturing of A and how much for some other merchandise. It is therefore nonsensical to contrast production for profit and production for use. With the profit motive the enterpriser is compelled to supply the consumers with those goods which they are asking for most urgently. If the enterpriser were not forced to take the profit motive as his guide, he could produce more of A, in spite of the fact that the consumers prefer to get something else. The profit motive is precisely the factor that forces the businessman to provide in the most efficient way those commodities the consumers want to use.

Thus the capitalist system of production is an economic democracy in which every penny gives a right to vote. The consumers are the sovereign people. The capitalists, the entrepreneurs, and the farmers are the people’s mandatories. If they do not obey, if they fail to produce, at the lowest possible cost, what the consumers are asking for, they lose their office. Their task is service to the consumer. Profit and loss are the instruments by means of which the consumers keep a tight rein on all business activities.

2.

Economic Calculation

The preeminence of the capitalist system consists in the fact that it is the only system of social cooperation and division of labor which makes it possible to apply a method of reckoning and computation in planning new projects and appraising the usefulness of the operation of those plants, farms, and workshops already working. The impracticability of all schemes of socialism and central planning is to be seen in the impossibility of any kind of economic calculation under conditions in which there is no private ownership of the means of production and consequently no market prices for these factors.

The problem to be solved in the conduct of economic affairs is this: There are countless kinds of material factors of production, and within each class they differ from one another both with regard to their physical properties and to the places at which they are available. There are millions and millions of workers and they differ widely with regard to their ability to work. Technology provides us with information about numberless possibilities in regard to what could be achieved by using this supply of natural resources, capital goods, and manpower for the production of consumers’ goods. Which of these potential procedures and plans are the most advantageous? Which should be carried out because they are apt to contribute most to the satisfaction of the most urgent needs? Which should be postponed or discarded because their execution would divert factors of production from other projects the execution of which would contribute more to the satisfaction of urgent needs?

It is obvious that these questions cannot be answered by some calculation in kind. One cannot make a variety of things enter into a calculus if there is no common denominator for them.

In the capitalist system all designing and planning is based on the market prices. Without them all the projects and blueprints of the engineers would be a mere academic pastime. They would demonstrate what could be done and how. But they would not be in a position to determine whether the realization of a certain project would really increase material well-being or whether it would not, by withdrawing scarce factors of production from other lines, jeopardize the satisfaction of more urgent needs, that is, of needs considered more urgent by the consumers. The guide of economic planning is the market price. The market prices alone can answer the question whether the execution of a project P will yield more than it costs, that is, whether it will be more useful than the execution of other conceivable plans which cannot be realized because the factors of production required are used for the performance of project P.

It has been frequently objected that this orientation of economic activity according to the profit motive, i.e., according to the yardstick of a surplus of yield over costs, leaves out of consideration the interests of the nation as a whole and takes account only of the selfish interests of individuals, different from and often even contrary to the national interests. This idea lies at the bottom of all totalitarian planning. Government control of business, it is claimed by the advocates of authoritarian management, looks after the nation’s well-being, while free enterprise, driven by the sole aim of making profits, jeopardizes national interests.

The case is exemplified nowadays by citing the problem of synthetic rubber. Germany, under the rule of Nazi socialism, has developed the production of synthetic rubber, while Great Britain and the United States, under the supremacy of profit-seeking free enterprise, did not care about the unprofitable manufacture of such an expensive Ersatz. Thus they neglected an important item of war preparedness and exposed their independence to a serious danger.

Nothing can be more spurious than this reasoning. Nobody ever asserted that the conduct of a war and preparing a nation’s armed forces for the emergency of a war are a task that could or should be left to the activities of individual citizens. The defense of a nation’s security and civilization against aggression on the part both of foreign foes and of domestic gangsters is the first duty of any government. If all men were pleasant and virtuous, if no one coveted what belongs to another, there would be no need for a government, for armies and navies, for policemen, for courts, and for prisons. It is the government’s business to make the provisions for war. No individual citizen and no group or class of citizens is to blame if the government fails in these endeavors. The guilt rests always with the government and consequently, in a democracy, with the majority of voters.

Germany armed for war. As the German General Staff knew that it would be impossible for warring Germany to import natural rubber, they decided to foster domestic production of synthetic rubber. There is no need to inquire whether or not the British and American military authorities were convinced that their countries, even in case of a new World War, would be in a position to rely upon the rubber plantations of Malaya and the Dutch Indies. At any rate they did not consider it necessary to pile up domestic stocks of natural rubber or to embark upon the production of synthetic rubber. Some American and British businessmen examined the progress of synthetic rubber production in Germany. But as the cost of the synthetic product was considerably higher than that of the natural product, they could not venture to imitate the example set by the Germans. No entrepreneur can invest money in a project which does not offer the prospect of profitability. It is precisely this fact that makes the consumers sovereign and forces the enterpriser to produce what the consumers are most urgently asking for. The consumers, that is, the American and the British public, were not ready to allow for synthetic rubber prices which would have rendered its production profitable. The cheapest way to provide rubber was for the Anglo-Saxon countries to produce other merchandise, for instance, motor cars and various machines, to sell these things abroad, and to import foreign natural rubber.

If it had been possible for the Governments of London and Washington to foresee the events of December 1941, and January and February 1942, they would have turned toward measures securing a domestic production of synthetic rubber. It is immaterial with regard to our problem which method they would have chosen for financing this part of defense expenditure. They could subsidize the plants concerned or they could raise, by means of tariffs, the domestic price of rubber to such a level that home production of synthetic rubber would have become profitable. At any rate the people would have been forced to pay for what was done.

If the government does not provide for a defense measure, no capitalist or entrepreneur can fill the gap. To reproach some chemical corporations for not having taken up production of synthetic rubber is no more sensible than to blame the motor industry for not, immediately after Hitler’s rise to power, converting its plants into plane factories. Or it would be as justifiable to blame a scholar for having wasted his time writing a book on American history or philosophy instead of devoting all his efforts to training himself for his future functions in the Expeditionary Force. If the government fails in its task of equipping the nation to repel an attack, no individual citizen has any way open to remedy the evil but to criticize the authorities in addressing the sovereign—the voters—in speeches, articles, and books.1

Many doctors describe the ways in which their fellow citizens spend their money as utterly foolish and opposed to their real needs. People, they say, should change their diet, restrict their consumption of intoxicating beverages and tobacco, and employ their leisure time in a more reasonable manner. These doctors are probably right. But it is not the task of government to improve the behavior of its “subjects.” Neither is it the task of businessmen. They are not the guardians of their customers. If the public prefers hard to soft drinks, the entrepreneurs have to yield to these wishes. He who wants to reform his countrymen must take recourse to persuasion. This alone is the democratic way of bringing about changes. If a man fails in his endeavors to convince other people of the soundness of his ideas, he should blame his own disabilities. He should not ask for a law, that is, for compulsion and coercion by the police.

The ultimate basis of economic calculation is the valuation of all consumers’ goods on the part of all the people. It is true that these consumers are fallible and that their judgment is sometimes misguided. We may assume that they would appraise the various commodities differently if they were better instructed. However, as human nature is, we have no means of substituting the wisdom of an infallible authority for people’s shallowness.

We do not assert that the market prices are to be considered as expressive of any perennial and absolute value. There are no such things as absolute values, independent of the subjective preferences of erring men. Judgments of value are the outcome of human arbitrariness. They reflect all the shortcomings and weaknesses of their authors. However, the only alternative to the determination of market prices by the choices of all consumers is the determination of values by the judgment of some small groups of men, no less liable to error and frustration than the majority, notwithstanding the fact that they are called “authority.” No matter how the values of consumers’ goods are determined, whether they are fixed by a dictatorial decision or by the choices of all consumers—the whole people—values are always relative, subjective, and human, never absolute, objective, and divine.

What must be realized is that within a market society organized on the basis of free enterprise and private ownership of the means of production the prices of consumers’ goods are faithfully and closely reflected in the prices of the various factors required for their production. Thus it becomes feasible to discover by means of a precise calculation which of the indefinite multitude of thinkable processes of production are more advantageous and which less. “More advantageous” means in this connection: an employment of these factors of production in such a way that the production of the consumers’ goods more urgently asked for by the consumers gets a priority over the production of commodities less urgently asked for by the consumers. Economic calculation makes it possible for business to adjust production to the demands of the consumers. On the other hand, under any variety of socialism, the central board of production management would not be in a position to engage in economic calculation. Where there are no markets and consequently no market prices for the factors of production, they cannot become elements of a calculation.

For a full understanding of the problems involved we must try to grasp the nature and the origin of profit.

Within a hypothetical system without any change there would not be any profits and losses at all. In such a stationary world, in which nothing new occurs and all economic conditions remain permanently the same, the total sum that a manufacturer must spend for the factors of production required would be equal to the price he gets for the product. The prices to be paid for the material factors of production, the wages and interest for the capital invested, would absorb the whole price of the product. Nothing would be left for profit. It is obvious that such a system would not have any need for entrepreneurs and no economic function for profits. As only those things are produced today which were produced yesterday, the day before yesterday, last year, and ten years ago, and as the same routine will go on forever, as no changes occur in the supply or demand either of consumers’ or of producers’ goods or in technical methods, as all prices are stable, there is no room left for any entrepreneurial activity.

But the actual world is a world of permanent change. Population figures, tastes, and wants, the supply of factors of production and technological methods are in a ceaseless flux. In such a state of affairs there is need for a continuous adjustment of production to the change in conditions. This is where the entrepreneur comes in.

Those eager to make profits are always looking for an opportunity. As soon as they discover that the relation of the prices of the factors of production to the anticipated prices of the products seems to offer such an opportunity, they step in. If their appraisal of all the elements involved was correct, they make a profit. But immediately the tendency toward a disappearance of such profits begins to take effect. As an outcome of the new projects inaugurated, the prices of the factors of production in question go up and, on the other hand, those of the products begin to drop. Profits are a permanent phenomenon only because there are always changes in market conditions and in methods of production. He who wants to make profits must be always on the watch for new opportunities. And in searching for profit, he adjusts production to the demands of the consuming public.

We can view the whole market of material factors of production and of labor as a public auction. The bidders are the entrepreneurs. Their highest bids are limited by their expectation of the prices the consumers will be ready to pay for the products. The co-bidders competing with them, whom they must outbid if they are not to go away empty-handed, are in the same situation. All these bidders are, as it were, acting as mandatories of the consumers. But each of them represents a different aspect of the consumers’ wants, either another commodity or another way of producing the same commodity. The competition among the various entrepreneurs is essentially a competition among the various possibilities open to individuals to remove as far as possible their state of uneasiness by the acquisition of consumers’ goods. The resolution of any man to buy a refrigerator and to postpone the purchase of a new car is a determining factor in the formation of the prices of cars and of refrigerators. The competition between the entrepreneurs reflects these prices of consumers’ goods in the formation of the prices of the factors of production. The fact that the various wants of the individual, which conflict because of the inexorable scarcity of the factors of production, are represented on the market by various competing entrepreneurs results in prices for these factors that make economic calculation not only feasible but imperative. An entrepreneur who does not calculate, or disregards the result of the calculation, would very soon go bankrupt and be removed from his managerial function.

But within a socialist community in which there is only one manager there are neither prices of the factors of production nor economic calculation. To the entrepreneur of capitalist society a factor of production through its price sends out a warning: Don’t touch me, I am earmarked for the satisfaction of another, more urgent need. But under socialism these factors of production are mute. They give no hint to the planner. Technology offers him a great variety of possible solutions for the same problem. Each of them requires the outlay of other kinds and quantities of various factors of production. But as the socialist manager cannot reduce them to a common denominator, he is not in a position to find out which of them is the most advantageous.

It is true that under socialism there would be neither discernible profits nor discernible losses. Where there is no calculation, there is no means of getting an answer to the question whether the projects planned or carried out were those best fitted to satisfy the most urgent needs; success and failure remain unrecognized in the dark. The advocates of socialism are badly mistaken in considering the absence of discernible profit and loss an excellent point. It is, on the contrary, the essential vice of any socialist management. It is not an advantage to be ignorant of whether or not what one is doing is a suitable means of attaining the ends sought. A socialist management would be like a man forced to spend his life blindfolded.

It has been objected that the market system is at any rate quite inappropriate under the conditions brought about by a great war. If the market mechanism were to be left alone, it would be impossible for the government to get all the equipment needed. The scarce factors of production required for the production of armaments would be wasted for civilian uses which, in a war, are to be considered as less important, even as luxury and waste. Thus it was considered imperative in wartime to resort to the system of government-established priorities and to create the necessary bureaucratic apparatus.

The error of this reasoning is that it does not realize that the necessity for giving the government full power to determine for what kinds of production the various raw materials should be used is not an outcome of the war but of the methods applied in financing the war expenditure.

If the whole amount of money needed for the conduct of the war had been collected by taxes and by borrowing from the public, everybody would have been forced to restrict his consumption drastically. With a money income (after taxes) much lower than before, the consumers would have stopped buying many goods they used to buy before the war. The manufacturers, precisely because they are driven by the profit motive, would have discontinued producing such civilian goods and would have shifted to the production of those goods which the government, now by virtue of the inflow of taxes the biggest buyer on the market, would be ready to buy.

However, a great part of the war expenditure is financed by an increase of currency in circulation and by borrowing from the commercial banks. On the other hand, under price control, it is illegal to raise commodity prices. With higher money incomes and with unchanged commodity prices people would not only not have restricted but would have increased their buying of goods for their own consumption. To avoid this, it was necessary to take recourse to rationing and to governmentimposed priorities. These measures were needed because previous government interference that paralyzed the operation of the market resulted in paradoxical and highly unsatisfactory conditions. Not the insufficiency of the market mechanism but the inadequacy of previous government meddling with market phenomena made the priority system unavoidable. In this as in many other instances the bureaucrats see in the failure of their preceding measures a proof that further inroads into the market system are necessary.

3.

Management under the Profit System

All business transactions are examined by shrewdly calculating profit and loss. New projects are subject to a precise scrutiny of the chances they offer. Every step toward their realization is reflected in entries in the books and accounts. The profit-and-loss account shows whether or not the whole business, or any of its parts, was profitable. The figures of the ledger serve as a guide for the conduct of the whole business and of each of its divisions. Branches which do not pay are discontinued, those yielding profit are expanded. There cannot be any question of clinging to unprofitable lines of business if there is no prospect of rendering them profitable in a not-too-distant future.

The elaborate methods of modern bookkeeping, accountancy, and business statistics provide the enterpriser with a faithful image of all his operations. He is in a position to learn how successful or unsuccessful every one of his transactions was. With the aid of these statements he can check the activities of all departments of his concern no matter how large it may be. There is, to be sure, some amount of discretion in determining the distribution of overhead costs. But apart from this, the figures provide a faithful reflection of all that is going on in every branch or department. The books and the balance sheets are the conscience of business. They are also the businessman’s compass.

The devices of bookkeeping and accountancy are so familiar to the businessman that he fails to observe what a marvelous instrument they are. It needed a great poet and writer to appreciate them at their true value. Goethe called bookkeeping by double-entry “one of the finest inventions of the human mind.” By means of this, he observed, the businessman can at any time survey the general whole, without needing to perplex himself with the details.2

Goethe’s characterization hit the core of the matter. The virtue of commercial management lies precisely in the fact that it provides the manager with a method of surveying the whole and all its parts without being enmeshed in details and trifles.

The entrepreneur is in a position to separate the calculation of each part of his business in such a way that he can determine the role that it plays within his whole enterprise. For the public every firm or corporation is an undivided unity. But for the eye of its management it is composed of various sections, each of which is viewed as a separate entity and appreciated according to the share it contributes to the success of the whole enterprise. Within the system of business calculation each section represents an integral being, a hypothetical independent business as it were. It is assumed that this section “owns” a definite part of the whole capital employed in the enterprise, that it buys from other sections and sells to them, that it has its own expenses and its own revenues, that its dealings result either in a profit or a loss which is imputed to its own conduct of affairs as separate from the results achieved by the other sections. Thus the general manager of the whole enterprise can assign to each section’s management a great deal of independence. There is no need for the general manager to bother about the minor details of each section’s management. The managers of the various sections can have a free hand in the administration of their sections’ “internal” affairs. The only directive that the general manager gives to the men whom he entrusts with the management of the various sections, departments, and branches is: Make as much profit as possible. And an examination of the accounts shows him how successful or unsuccessful they were in executing the directive.

In a large-scale enterprise many sections produce only parts or half-finished products which are not directly sold but are used by other sections in manufacturing the final product. This fact does not alter the conditions described. The general manager compares the costs incurred by the production of such parts and half-finished products with the prices he would have to pay for them if he had to buy them from other plants. He is always confronted by the question: Does it pay to produce these things in our own workshops? Would it not be more satisfactory to buy them from other plants specializing in their production?

Thus, within the framework of a profit-seeking enterprise, responsibility can be divided. Every submanager is responsible for the working of his department. It is to his credit if the accounts show a profit, and it is to his disadvantage if they show a loss. His own selfish interests push him toward the utmost care and exertion in the conduct of his section’s affairs. If he incurs losses, he will be their victim. He will be replaced by another man whom the general manager expects to be more successful, or the whole section will be discontinued. At any rate he will be discharged and lose his job. If he succeeds in making profits, he will see his income increased or at least he will not be in danger of losing it. Whether or not a departmental manager is entitled to a share in the profit of his department is not so important with regard to the personal interest he takes in the results of his department’s dealings. His fate is at any rate closely connected with that of his department. In working for it, he works not only for his boss but also for himself.

It would be impracticable to restrict the discretion of such a responsible submanager by too much interference with detail. If he is efficient, such meddling would at best be superfluous, if not harmful by tying his hands. If he is inefficient, it would not render his activities more successful. It would only provide him with a lame excuse that the failure was caused by his superior’s inappropriate instructions. The only instruction required is self-understood and does not need to be especially mentioned: Seek profit. Moreover, most of the details can and must be left to the head of every department.

This system was instrumental in the evolution of modern business. Large-scale production in great production aggregates and the establishment of subsidiaries in distant parts of the country and in foreign countries, the department stores, and the chain stores are all built upon the principle of the subordinate managers’ responsibility. This does not in any way limit the responsibility of the general manager. The subordinates are responsible only to him. They do not free him from the duty of finding the right man for every job.

If a New York firm establishes branch shops or plants in Los Angeles, in Buenos Aires, in Budapest, and in Calcutta, the chief manager establishes the auxiliary’s relation to the head office or parental company only in fairly general terms. All minor questions are to be within the range of the local manager’s duties. The auditing department of headquarters carefully inspects the branch’s financial transactions and informs the general manager as soon as any irregularities appear. Precautions are taken to prevent irreparable waste of the capital invested in the branch, a squandering of the whole concern’s good will and reputation and a collision between the branch’s policy and that of headquarters. But a free hand is left to the local management in every other regard. It is practicable to place confidence in the chief of a subsidiary, a department, or a section because his interests and those of the whole concern coincide. If he were to spend too much for current operations or to ne glect an opportunity for profitable transactions, he would imperil not only the concern’s profits but his own position as well. He is not simply a hired clerk whose only duty is the conscientious accomplishment of an assigned, definite task. He is a businessman himself, a junior partner as it were of the entrepreneur, no matter what the contractual and financial terms of his employment are. He must to the best of his abilities contribute to the success of the firm with which he is connected.

Because this is so, there is no danger in leaving important decisions to his discretion. He will not waste money in the purchase of products and services. He will not hire incompetent assistants and workers; he will not discharge able collaborators in order to replace them by incompetent personal friends or relatives. His conduct is subject to the incorruptible judgment of an unbribable tribunal: the account of profit and loss. In business there is only one thing that matters: success. The unsuccessful department manager is doomed no matter whether the failure was caused by him or not, or whether it would have been possible for him to attain a more satisfactory result. An unprofitable branch of business—sooner or later—must be discontinued, and its manager loses his job.

The sovereignty of the consumers and the democratic operation of the market do not stop at the doors of a big business concern. They permeate all its departments and branches. Responsibility to the consumer is the lifeblood of business and enterprise in an unhampered market society. The profit motive through the instrumentality of which the entrepreneurs are driven to serve the consumers to the best of their ability is at the same time the first principle of any commercial and industrial aggregate’s internal organization. It joins together utmost centralization of the whole concern with almost complete autonomy of the parts; it brings into agreement full responsibility of the central management with a high degree of interest and incentive of the subordinate managers of sections, departments, and auxiliaries. It gives to the system of free enterprise that versatility and adaptability which result in an unswerving tendency toward improvement.

4.

Personnel Management under an Unhampered Labor Market

The staff of a modern large-scale enterprise sometimes includes many hundreds of thousands of clerks and workers. They form a highly differentiated body from the general manager or president down to the scrubwomen, messenger boys, and apprentices. The handling of such a huge body raises many problems. However, they can be solved.

No matter how big a concern may be, the central management deals only with sections, departments, branches, and subsidiaries, the role of which can be precisely determined from the evidence provided by the accounts and statistics. Of course, the accounts do not always demonstrate what may be wrong with a section. They show only that something is wrong, that it does not pay and must be either reformed or discontinued. The sentences they pass are unappealable. They reveal each department’s cash value. And it is cash value alone that matters on the market. The consumers are merciless. They never buy in order to benefit a less efficient producer and to protect him against the consequences of his failure to manage better. They want to be served as well as possible. And the working of the capitalist system forces the entrepreneur to obey the orders issued by the consumers. He does not have the power to distribute bounties at the expense of the consumers. He would waste his funds if he were to use his own money for such a purpose. He simply cannot pay anybody more than he can realize in selling the product.

The same relation that exists between the general manager and his immediate subordinates, the heads of the various sections, pervades the whole business hierarchy. Every section head values his immediate subordinates according to the same principle by which the chief manager values him, and the foreman applies similar methods in appraising his subordinates. The only difference is that under the simpler conditions of the lower units no elaborate accountancy schemes are required for the establishment of each man’s cash value. It does not matter whether piece wages or hourly wages are paid. In the long run the worker can never get more than the consumer allows.

No man is infallible. It often happens that a superior errs in judging a subordinate. One of the qualifications required for any higher position is precisely the ability to judge people correctly. He who fails in this regard jeopardizes his chances of success. He hurts his own interests no less than those of the men whose efficiency he has underrated. Things being so, there is no need to look for special protection for the employees against arbitrariness on the part of their employers or their employers’ mandatories. Arbitrariness in dealing with personnel is, under the unhampered profit system, an offense that strikes home to its author.

Under an unhampered market economy the appraisal of each individual’s effort is detached from any personal considerations and can therefore be free both from bias and dislike. The market passes judgment on the products, not on the producers. The appraisal of the producer results automatically from the appraisal of his product. Each co-operator is valued according to the value of his contribution to the process of production of goods and services. Salaries and wages do not depend on arbitrary decisions. On the labor market every quantity and quality of work is prized to the amount the consumers are ready to pay for the products. It is not a favor on the part of the employer to pay wages and salaries, it is a business transaction, the purchase of a factor of production. The price of labor is a market phenomenon determined by the consumers’ demands for goods and services. Virtually every employer is always in search of cheaper labor and every employee in search of a job with higher remuneration.

The very fact that labor is, under capitalism, a commodity and is bought and sold as a commodity makes the wage earner free from any personal dependence. Like the capitalists, the entrepreneurs, and the farmers, the wage earner depends on the arbitrariness of the consumers. But the consumers’ choices do not concern the persons engaged in production; they concern things and not men. The employer is not in a position to indulge in favoritism or in prejudice with regard to personnel. As far as he does, the deed itself brings about its own penalty.

It is this fact, and not only constitutions and bills of rights, that makes the receivers of salaries and wages within an unhampered capitalist system free men . They are sovereign in their capacity as consumers, and as producers they are, like all other citizens, unconditionally subject to the law of the market. In selling a factor of production, namely, their toil and trouble, on the market at the market price to everybody who is ready to buy it, they do not jeopardize their own standing. They do not owe their employer thanks and subservience, they owe him a definite quantity of labor of a definite quality. The employer, on the other hand, is not in search of sympathetic men whom he likes but efficient workers who are worth the money he pays them.

This cool rationality and objectivity of capitalist relations is, of course, not realized to the same degree in the whole field of business. The nearer a man’s function brings him to the consumers, the more personal factors interfere. In the service trades some role is played by sympathies and antipathies; relations are more “human.” Stubborn doctrinaires and adamant baiters of capitalism are prepared to call this an advantage. In fact it curtails the businessman’s and his employees’ personal freedom. A small shopkeeper, a barber, an innkeeper, and an actor are not so free in expressing their political or religious convictions as the owner of a cotton mill or a worker in a steel plant.

But these facts do not invalidate the general characteristics of the market system. It is a system which automatically values every man according to the services he renders to the body of sovereign consumers, i.e., to his fellowmen.

II

Bureaucratic Management

1.

Bureaucracy under Despotic Government

The chieftain of a small primitive tribe is as a rule in a position to concentrate in his hands all legislative, administrative, and judiciary power. His will is the law. He is both executive and judge.

But it is different when the despot has succeeded in expanding the size of his realm. As he lacks ubiquity, he must delegate a part of his power to subordinates. They are, in their districts, his deputies, acting in his name and under his auspices. In fact they become local despots only nominally subject to the mighty overlord who has appointed them. They rule their provinces according to their own will, they become satraps. The great king has the power to discharge them and to appoint a successor. But that is no remedy either. The new governor also soon becomes an almost independent satrap. What some critics—wrongly— assert with regard to representative democracy, namely, that the people are sovereign only on election day, is literally true with regard to such a system of despotism; the king is sovereign in the provinces only on the day he appoints a new governor.

In what does the position of such a provincial governor differ from that of the manager of a business branch? The manager of the whole concern hands over an aggregate to the newly appointed branch manager and gives him one directive only: Make profits. This order, the observance of which is continuously checked by the accounts, is sufficient to make the branch a subservient part of the whole concern and to give to its manager’s action the direction aimed at by the central manager. But if the despot, for whom his own arbitrary decision is the only principle of government, appoints a governor and says to him: “Be my deputy in this province,” he makes the deputy’s arbitrariness supreme in this province. He renounces, at least temporarily, his own power to the benefit of the governor.

In order to avoid this outcome the king tries to limit the governor’s powers by issuing directives and instructions. Codes, decrees, and statutes tell the governors of the provinces and their subordinates what to do if such or such a problem arises. Their free discretion is now limited; their first duty is now to comply with the regulations. It is true that their arbitrariness is now restricted in so far as the regulations must be applied. But at the same time the whole character of their management changes. They are no longer eager to deal with each case to the best of their abilities; they are no longer anxious to find the most appropriate solution for every problem. Their main concern is to comply with the rules and regulations, no matter whether they are reasonable or contrary to what was intended. The first virtue of an administrator is to abide by the codes and decrees. He becomes a bureaucrat.

2.

Bureaucracy within a Democracy

The same thing is essentially valid for democratic government.

It is frequently asserted that bureaucratic management is incompatible with democratic government and institutions. This is a fallacy. Democracy implies the supremacy of the law. If it were otherwise, the officeholders would be irresponsible and arbitrary despots and the judges inconstant and capricious cadis. The two pillars of democratic government are the primacy of the law and the budget.1

Primacy of the law means that no judge or officeholder has the right to interfere with any individual’s affairs or conditions unless a valid law requires or empowers him to do so. Nulla poena sine lege, no punishment unless ordered by a law. It is precisely the inability of the Nazis to understand the importance of this fundamental principle that qualifies them as antidemocratic. In the totalitarian system of Hitler Germany the judge has to come to his decision according to das gesunde Volksempfinden, i.e., in accordance with the sound feelings of the people. As the judge himself has to decide what the sound feelings of the people are, he is sovereign on his bench like the chieftain of a primitive tribe.

It is in fact an awkward thing if a scoundrel evades punishment because a law is defective. But it is the minor evil when compared with judicial arbitrariness. If the legislators in a democracy acknowledge that the law is inadequate, they can substitute a more satisfactory law for a less satisfactory. They are the mandatories of the sovereign, the people; they are, in this capacity, supreme and responsible to the voters. If the voters disapprove of the methods applied by their representatives, they will, at the next election, return other men who know better how to adjust their actions to the will of the majority.

It is the same with the executive power. In this field too there is only the alternative between the arbitrary rule of despotic officeholders and the rule of the people enforced by the instrumentality of law abidance. It is a euphemism to call a government in which the rulers are free to do whatever they themselves believe best serves the commonweal a welfare state, and to contrast it with the state in which the administration is bound by law and the citizens can make good in a court of law their rights against illegal encroachments of the authorities. This so-called welfare state is in fact the tyranny of the rulers. (Incidentally we have to realize that even a despotic government cannot do without regulations and bureaucratic directives if it is not to degenerate into a chaotic regime of local caciques and to disintegrate into a multitude of petty despotisms.) The aim of the constitutional state also is public welfare. The characteristic feature that distinguishes it from despotism is that not the authorities but the duly elected people’s representatives have to decide what best serves the commonweal. This system alone makes the people sovereign and secures their right of self-determination. Under this system the citizens are not only sovereign on election day but no less so between elections.

The administration, in a democratic community, is not only bound by law but also by the budget. Democratic control is budgetary control. The people’s representatives have the keys of the treasury. Not a penny must be spent without the consent of parliament. It is illegal to use public funds for any expenditures other than those for which parliament has allocated them.

Bureaucratic management means, under democracy, management in strict accordance with the law and the budget. It is not for the personnel of the administration and for the judges to inquire what should be done for the public welfare and how the public funds should be spent. This is the task of the sovereign, the people, and their representatives. The courts, the various branches of the administration, the army, and the navy execute what the law and the budget order them to do. Not they but the sovereign is policy-making.

Most of the tyrants, despots, and dictators are sincerely convinced that their rule is beneficial for the people, that theirs is government for the people. There is no need to investigate whether these claims of Messrs. Hitler, Stalin, and Franco are well founded or not. At any rate their system is neither government of the people nor by the people. It is not democratic but authoritarian.

The assertion that bureaucratic management is an indispensable instrument of democratic government is paradoxical. Many will object. They are accustomed to consider democratic government as the best system of government and bureaucratic management as one of the great evils. How can these two things, one good, the other bad, be linked together?

Moreover, America is an old democracy and the talk about the dangers of bureaucracy is a new phenomenon in this country. Only in recent years have people become aware of the menace of bureaucracy, and they consider bureaucracy not an instrument of democratic government but, on the contrary, the worst enemy of freedom and democracy.

To these objections we must answer again that bureaucracy in itself is neither good nor bad. It is a method of management which can be applied in different spheres of human activity. There is a field, namely, the handling of the apparatus of government, in which bureaucratic methods are required by necessity. What many people nowadays consider an evil is not bureaucracy as such, but the expansion of the sphere in which bureaucratic management is applied. This expansion is the unavoidable consequence of the progressive restriction of the individual citizen’s freedom, of the inherent trend of present-day economic and social policies toward the substitution of government control for private initiative. People blame bureaucracy, but what they really have in mind are the endeavors to make the state socialist and totalitarian.

There has always been bureaucracy in America. The administration of the customs and of the foreign service has always been conducted according to bureaucratic principles. What characterizes our time is the expansion of the sphere of government interference with business and with many other items of the citizenry’s affairs. And this results in a substitution of bureaucratic management for profit management.

3.

The Essential Features of Bureaucratic Management

The lawyers, the philosophers, and the politicians look upon the supremacy of the law from another angle than does this book. From their point of view the main function of the law is to limit the power of the authorities and the courts to inflict evils upon the individual citizen and to restrict his freedom. If one assigns to the authorities the power to imprison or even to kill people, one must restrict and clearly circumscribe this power. Otherwise the officeholder or judge would turn into an irresponsible despot. The law determines under what conditions the judge should have the right and the duty to sentence and the policeman to fire his gun. The law protects the people against the arbitrariness of those in office.

The viewpoint of this book is somewhat different. We are dealing here with bureaucracy as a principle of administrative technique and organization. This book looks upon the rules and regulations not merely as measures for the protection of the people and for safeguarding the citizen’s rights and freedom but as measures for the execution of the will of the supreme authority. The need to limit the discretion of subordinates is present in every organization. Any organization would disintegrate in the absence of such restrictions. Our task is to investigate the peculiar characteristics of bureaucratic management as distinguished from commercial management.

Bureaucratic management is management bound to comply with detailed rules and regulations fixed by the authority of a superior body. The task of the bureaucrat is to perform what these rules and regulations order him to do. His discretion to act according to his own best conviction is seriously restricted by them.

Business management or profit management is management directed by the profit motive. The objective of business management is to make a profit. As success or failure to attain this end can be ascertained by accounting not only for the whole business concern but also for any of its parts, it is feasible to decentralize both management and accountability without jeopardizing the unity of operations and the attainment of their goal. Responsibility can be divided. There is no need to limit the discretion of subordinates by any rules or regulations other than that underlying all business activities, namely, to render their operations profitable.

The objectives of public administration cannot be measured in money terms and cannot be checked by accountancy methods. Take a nationwide police system like the FBI. There is no yardstick available that could establish whether the expenses incurred by one of its regional or local branches were not excessive. The expenditures of a police station are not reimbursed by its successful management and do not vary in proportion to the success attained. If the head of the whole bureau were to leave his subordinate station chiefs a free hand with regard to money expenditure, the result would be a large increase in costs as every one of them would be zealous to improve the service of his branch as much as possible. It would become impossible for the top executive to keep the expenditures within the appropriations allocated by the representatives of the people or within any limits whatever. It is not because of punctiliousness that the administrative regulations fix how much can be spent by each local office for cleaning the premises, for furniture repairs, and for lighting and heating. Within a business concern such things can be left without hesitation to the discretion of the responsible local manager. He will not spend more than necessary because it is, as it were, his money; if he wastes the concern’s money, he jeopardizes the branch’s profit and thereby indirectly hurts his own interests. But it is another matter with the local chief of a government agency. In spending more money he can, very often at least, improve the result of his conduct of affairs. Thrift must be imposed on him by regimentation.

In public administration there is no connection between revenue and expenditure. The public services are spending money only; the insignificant income derived from special sources (for example, the sale of printed matter by the Government Printing Office) is more or less accidental. The revenue derived from customs and taxes is not “produced” by the administrative apparatus. Its source is the law, not the activities of customs officers and tax collectors. It is not the merit of a collector of internal revenue that the residents of his district are richer and pay higher taxes than those of another district. The time and effort required for the administrative handling of an income tax return are not in proportion to the amount of the taxable income it concerns.

In public administration there is no market price for achievements. This makes it indispensable to operate public offices according to principles entirely different from those applied under the profit motive.

Now we are in a position to provide a definition of bureaucratic management: Bureaucratic management is the method applied in the conduct of administrative affairs the result of which has no cash value on the market. Remember: We do not say that a successful handling of public affairs has no value, but that it has no price on the market, that its value cannot be realized in a market transaction and consequently cannot be expressed in terms of money.

If we compare the conditions of two countries, say Atlantis and Thule, we can establish many important statistical figures of each of them: the size of the area and of the population, the birth rate and the death rate, the number of illiterates, of crimes committed, and many other demographical data. We can determine the sum of the money income of all its citizens, the money value of the yearly social product, the money value of the goods imported and exported, and many other economic data. But we cannot assign any arithmetical value to the system of government and administration. That does not mean that we deny the importance or the value of good government. It means only that no yardstick can measure these things. They are not liable to an expression in figures.

It may well be that the greatest thing in Atlantis is its good system of government. It may be that Atlantis owes its prosperity to its constitutional and administrative institutions. But we cannot compare them with those of Thule in the same way as we can compare other things, for instance, wage rates or milk prices.

Bureaucratic management is management of affairs which cannot be checked by economic calculation.

4.

The Crux of Bureaucratic Management

The plain citizen compares the operation of the bureaus with the working of the profit system, which is more familiar to him. Then he discovers that bureaucratic management is wasteful, inefficient, slow, and rolled up in red tape. He simply cannot understand how reasonable people allow such a mischievous system to endure. Why not adopt the well-tried methods of private business?

However, such criticisms are not sensible. They misconstrue the features peculiar to public administration. They are not aware of the fundamental difference between government and profit-seeking private enterprise. What they call deficiencies and faults of the management of administrative agencies are necessary properties. A bureau is not a profit-seeking enterprise; it cannot make use of any economic calculation; it has to solve problems which are unknown to business management. It is out of the question to improve its management by reshaping it according to the pattern of private business. It is a mistake to judge the efficiency of a government department by comparing it with the working of an enterprise subject to the interplay of market factors.

There are, of course, in every country’s public administration manifest shortcomings which strike the eye of every observer. People are sometimes shocked by the degree of maladministration. But if one tries to go to their roots, one often learns that they are not simply the result of culpable negligence or lack of competence. They sometimes turn out to be the result of special political and institutional conditions or of an attempt to come to an arrangement with a problem for which a more satisfactory solution could not be found. A detailed scrutiny of all the difficulties involved may convince an honest investigator that, given the general state of political forces, he himself would not have known how to deal with the matter in a less objectionable way.

It is vain to advocate a bureaucratic reform through the appointment of businessmen as heads of various departments. The quality of being an entrepreneur is not inherent in the personality of the entrepreneur; it is inherent in the position which he occupies in the framework of market society. A former entrepreneur who is given charge of a government bureau is in this capacity no longer a businessman but a bureaucrat. His objective can no longer be profit, but compliance with the rules and regulations. As head of a bureau he may have the power to alter some minor rules and some matters of internal procedure. But the setting of the bureau’s activities is determined by rules and regulations which are beyond his reach.

It is a widespread illusion that the efficiency of government bureaus could be improved by management engineers and their methods of scientific management. However, such plans stem from a radical misconstruction of the objectives of civil government.

Like any kind of engineering, management engineering too is conditioned by the availability of a method of calculation. Such a method exists in profit-seeking business. Here the profit-and-loss statement is supreme. The problem of bureaucratic management is precisely the absence of such a method of calculation.

In the field of profit-seeking enterprise the objective of the management engineer’s activities is clearly determined by the primacy of the profit motive. His task is to reduce costs without impairing the market value of the result or to reduce costs more than the ensuing reduction of the market value of the result or to raise the market value of the result more than the required rise in costs. But in the field of government the result has no price on a market. It can neither be bought nor sold.

Let us consider three examples.

A police department has the job of protecting a defense plant against sabotage. It assigns thirty patrolmen to this duty. The responsible commissioner does not need the advice of an efficiency expert in order to discover that he could save money by reducing the guard to only twenty men. But the question is: Does this economy outweigh the increase in risk? There are serious things at stake: national defense, the morale of the armed forces and of civilians, repercussions in the field of foreign affairs, the lives of many upright workers. All these valuable things cannot be assessed in terms of money. The responsibility rests entirely with Congress allocating the appropriations required and with the executive branch of the government. They cannot evade it by leaving the decision to an irresponsible adviser.

One of the tasks of the Bureau of Internal Revenue is the final determination of taxes due. Its duty is the interpretation and application of the law. This is not merely a clerical job; it is a kind of judicial function. Any taxpayer objecting to the commissioner’s interpretation of the law is free to bring suit in a Federal court to recover the amount paid. Of what use can the efficiency engineer with his time and motion studies be for the conduct of these affairs? His stopwatch would be in the wrong place in the office rooms of the bureau. It is obvious that—other things being equal—a clerk who works more quickly is a more desirable employee than another who is slower. But the main problem is the quality of the performance. Only the experienced senior clerks are in a position to appreciate duly the achievements of their aides. Intellectual work cannot be measured and valued by mechanical devices.

Let us finally consider an instance in which neither problems of “higher” politics nor those of the correct application of the law are involved. A bureau is in charge of buying all the supplies needed for the technical conduct of office work. This is a comparatively simple job. But it is by no means a mechanical job. The best clerk is not he who fills out the greatest number of orders in an hour. The most satisfactory performance is to buy the most appropriate materials at the cheapest price.

It is therefore, as far as the management of government is concerned, not correct to assert that time study, motion study, and other tools of scientific management “show with reasonable accuracy how much time and effort are required for each of the available methods” and that they therefore “can show which of the possible methods and procedures require the least time and effort.”2 All such things are quite useless because they cannot be coordinated to the quality of the work done. Speed alone is not a measure of intellectual work. You cannot “measure” a doctor according to the time he employs in examining one case. And you cannot “measure” a judge according to the time he needs to adjudicate one case.

If a businessman manufactures some article destined for export into foreign countries, he is eager to reduce the man-hours spent for the production of the various parts of the commodity in question. But the license required for shipping this commodity abroad is not a part of the commodity. The government in issuing a license does not contribute anything to the production, the marketing, and the shipping of this commodity. Its bureau is not a workshop turning out one of the parts needed for the finishing of the product. What the government aims at in making exports depend on the grant of a license is restraint of export trade. It wants to reduce the total volume of exports or the volume exported by undesirable exporters or sold to undesirable buyers. The issuance of licenses is not the objective but a technical device for its attainment. From the point of view of the government the licenses refused or not even applied for are more important than those granted. It would therefore not be to the purpose to take “the total man-hours spent per license” as the standard of the bureau’s performance. It would be unsuitable to perform “the operation of processing the licenses . . . on an assembly line basis.”3

There are other differences. If in the course of a manufacturing process a piece gets spoiled or lost, the result is a precisely limited increase in production costs. But if a license application is lost in the bureau, serious damage may be inflicted upon a citizen. The law may prevent the individual harmed from suing the bureau for indemnification. But the political and moral liability of the government to deal with these applications in a very careful way remains nonetheless.

The conduct of government affairs is as different from the industrial processes as is prosecuting, convicting, and sentencing a murderer from the growing of corn or the manufacturing of shoes. Government efficiency and industrial efficiency are entirely different things. A factory’s management cannot be improved by taking a police department for its model, and a tax collector’s office cannot become more efficient by adopting the methods of a motor-car plant. Lenin was mistaken in holding up the government’s bureaus as a pattern for industry.* But those who want to make the management of the bureaus equal to that of the factories are no less mistaken.

There are many things about government administration which need to be reformed. Of course, all human institutions must again and again be adjusted anew to the change of conditions. But no reform could transform a public office into a sort of private enterprise. A government is not a profit-seeking enterprise. The conduct of its affairs cannot be checked by profit-and-loss statements. Its achievement cannot be valued in terms of money. This is fundamental for any treatment of the problems of bureaucracy.

5.

Bureaucratic Personnel Management

A bureaucrat differs from a nonbureaucrat precisely because he is working in a field in which it is impossible to appraise the result of a man’s effort in terms of money. The nation spends money for the upkeep of the bureaus, for the payment of salaries and wages, and for the purchase of all the equipment and materials needed. But what it gets for the expenditure, the service rendered, cannot be appraised in terms of money, however important and valuable this “output” may be. Its appraisal depends on the discretion of the government.

It is true that the appraisal of the various commodities sold and bought on the market depends no less on discretion, that is, on the discretion of the consumers. But as the consumers are a vast body of different people, an anonymous and amorphous aggregation, the judgments they pass are congealed into an impersonal phenomenon, the market price, and are thus severed from their arbitrary origin. Moreover, they refer to commodities and services as such, not to their performers. The seller-buyer nexus as well as the employer-employee relation in profit-seeking business is purely matter of fact and impersonal. It is a deal from which both parties derive an advantage. They mutually contribute to each other’s living. But it is different with a bureaucratic organization. There the nexus between superior and subordinate is personal. The subordinate depends on the superior’s judgment of his personality, not of his work. As long as the office clerk can rely on his chances of getting a job with private business, this dependence cannot become so oppressive as to mark the clerk’s whole character. But it is different under the present trend toward general bureaucratization.

The American scene until a few years ago did not know the bureaucrat as a particular type of human being. There were always bureaus and they were, by necessity, operated in a bureaucratic way. But there was no numerous class of men who considered work in the public offices their exclusive calling. There was a continuous change of personnel between government jobs and private jobs. Under civil-service provisions public service became a regular career. Appointments were based on examinations and no longer depended on the political affiliation of the applicants. Many remained in public bureaus for life. But they retained their personal independence because they could always consider a return to private jobs.

It was different in continental Europe. There the bureaucrats have long formed an integrated group. Only for a few eminent men was a return to nonofficial life practically open. The majority were tied up with the bureaus for life. They developed a character peculiar to their permanent removal from the world of profit-seeking business. Their intellectual horizon was the hierarchy and its rules and regulations. Their fate was to depend entirely on the favor of their superiors. They were subject to their sway not only when on duty. It was understood that their private activities also—and even those of their wives—had to be appropriate to the dignity of their position and to a special—unwritten— code of conduct becoming to a Staatsbeamter or fonctionnaire. It was expected that they would endorse the political viewpoint of the cabinet ministers who happened at the time to be in office. At any rate their freedom to support a party of opposition was sensibly curtailed.

The emergence of a large class of such men dependent on the government became a serious menace to the maintenance of constitutional institutions. Attempts were made to protect the individual clerk against arbitrariness on the part of his superiors. But the only result achieved was that discipline was relaxed and that looseness in the performance of the duties spread more and more.

America is a novice in the field of bureaucracy. It has much less experience in this matter than the classical countries of bureaucracy, France, Germany, Austria, and Russia, acquired. In the United States there still prevails a leaning toward an overvaluation of the usefulness of civil-service regulations. Such regulations require that the applicants be a certain age, graduate from certain schools, and pass certain examinations. For promotion to higher ranks and higher salary a certain number of years spent in the lower ranks and the passing of further examinations are required. It is obvious that all such requirements refer to things more or less superficial. There is no need to point out that school attendance, examinations, and years spent in the lower positions do not necessarily qualify a man for a higher job. This machinery for selection sometimes bars the most competent men from a job and does not always prevent the appointment of an utter incompetent. But the worst effect produced is that the main concern of the clerks is to comply with these and other formalities. They forget that their job is to perform an assigned duty as well as possible.

In a properly arranged civil-service system the promotion to higher ranks depends primarily on seniority. The heads of the bureaus are for the most part old men who know that after a few years they will be retired. Having spent the greater part of their lives in subordinate positions, they have lost vigor and initiative. They shun innovations and improvements. They look on every project for reform as a disturbance of their quiet. Their rigid conservatism frustrates all endeavors of a cabinet minister to adjust the service to changed conditions. They look down upon the cabinet minister as an inexperienced layman. In all countries with a settled bureaucracy people used to say: The cabinets come and go, but the bureaus remain.

It would be a mistake to ascribe the frustration of European bureaucratism to intellectual and moral deficiencies of the personnel. In all these countries there were many good families whose scions chose the bureaucratic career because they were honestly intent on serving their nation. The ideal of a bright poor boy who wanted to attain a better station in life was to join the staff of the administration. Many of the most gifted and lofty members of the intelligentsia served in the bureaus. The prestige and the social standing of the government clerks surpassed by far those of any other class of the population with the exception of the army officers and the members of the oldest and wealthiest aristocratic families.

Many civil servants published excellent treatises dealing with the problems of administrative law and statistics. Some of them were in their leisure hours brilliant writers or musicians. Others entered the field of politics and became eminent party leaders. Of course, the bulk of the bureaucrats were rather mediocre men. But it cannot be doubted that a considerable number of able men were to be found in the ranks of the government employees.

The failure of European bureaucracy was certainly not due to incapacities of the personnel. It was an outcome of the unavoidable weakness of any administration of public affairs. The lack of standards which could, in an unquestionable way, ascertain success or nonsuccess in the performance of an official’s duties creates insoluble problems. It kills ambition, destroys initiative and the incentive to do more than the minimum required. It makes the bureaucrat look at instructions, not at material and real success.

III

Bureaucratic Management of Publicly Owned Enterprises

1.

The Impracticability of Government All-round Control

Socialism, that is, full government control of all economic activities, is impracticable because a socialist community would lack the indispensable intellectual instrument of economic planning and designing: economic calculation. The very idea of central planning by the state is self-contradictory. A socialist central board of production management will be helpless in the face of the problems to be solved. It will never know whether the projects considered are advantageous or whether their performance would not bring about a waste of the means available. Socialism must result in complete chaos.

The recognition of this truth has for many years been prevented by the taboos of Marxism. One of Marxism’s main contributions to the success of pro-socialist propaganda was to outlaw the study of the economic problems of a socialist commonwealth. Such studies were in the opinion of Karl Marx and his sect the mark of an illusory “utopianism.” “Scientific” socialism, as Marx and Engels called their own brand, must not indulge in such useless investigations. The “scientific” socialists have to satisfy themselves with the insight that socialism is bound to come and that it will transform the earth into a paradise. They must not be so preposterous as to ask how the socialist system will work.

One of the most remarkable facts of the intellectual history of the nineteenth and early twentieth centuries is that this Marxian Verboten was strictly obeyed. The few economists who dared to defy it were disregarded and soon fell into oblivion. Only about twenty-five years ago the spell was broken. The impossibility of economic calculation under socialism was demonstrated in an irrefutable way.

Of course, some stubborn Marxians raised objections. They could not help admitting that the problem of economic calculation was the most serious issue of socialism and that it was a scandal that the socialists in eighty years of fanatical propaganda wasted their time on trifles without divining in what the main problem consisted. But they assured their alarmed partisans that it would be easy to find a satisfactory solution. Indeed, various socialist professors and writers both in Russia and in the Western countries suggested schemes for an economic calculation under socialism. These schemes proved utterly spurious. It was not difficult for the economists to unmask their fallacies and contradictions. The socialists failed completely in their desperate attempts to reject the demonstration that no economic calculation is feasible in any system of socialism.1

It is obvious that a socialist management also would aim at supplying the community with as many and as good commodities as can be produced under the existing conditions of the supply of factors of production and of technological knowledge. A socialist government too would be eager to use the available factors of production for producing those goods that, according to its opinion, are most urgently needed, and to forego the production of those goods which it considers less urgently needed. But the unfeasibility of economic calculation will make it impossible to find out which methods for the production of the goods needed are the most economical ones.

The socialist governments of Russia and Germany are operating in a world the greater part of which still clings to a market economy. They thus are in a position to use for their economic calculation the prices established abroad. Only because they can refer to these prices are they able to calculate, to keep books, and to make plans. It would be quite different if every nation were to adopt socialism. Then there would be no more prices for factors of production and economic calculation would be impossible.2

2.

Public Enterprise within a Market Economy

The same is the case with enterprises owned and operated by the government or the municipalities of a country in which the greater part of economic activity is under the management of free enterprise. For them too economic calculation offers no difficulties.

We do not need to ask whether or not it would be feasible to manage such government, state, and municipal enterprises in the same way as private enterprise. For it is a fact that as a rule the authorities are inclined to deviate from the profit system. They do not want to operate their enterprises from the viewpoint of the attainment of the greatest possible profit. They consider the accomplishment of other tasks more important. They are ready to renounce profit or at least a part of profit or even to take a loss for the achievement of other ends.

Whatever these other goals aimed at may be, the result of such a policy always amounts to subsidizing some people to the burden of others. If a government-owned enterprise operates at a loss or with a part only of the profit which it could attain if it were conducted solely according to the profit motive, the falling off affects the budget and thereby the taxpayers. If, for instance, a city-owned transportation system charges the customers so low a fare that the costs of the operation cannot be covered, the taxpayers are virtually subsidizing those riding the trains.

But we need not, in a book dealing with the problems of bureaucracy, bother about these financial aspects. From our point of view another outcome is to be considered.

As soon as an undertaking is no longer operated under the profit motive, other principles must be adopted for the conduct of its affairs. The city authorities cannot simply instruct the manager: Do not bother about a profit. They must give him more definite and precise orders. What kind of orders could these be?

The champions of nationalized and municipalized enterprise are prone to answer this question in a rather naive manner: The public enterprise’s duty is to render useful services to the community. But the problem is not so simple as this. Every undertaking’s sole task is to render useful services. But what does this term mean? Who is, in the case of public enterprise, to decide whether a service is useful? And much more important: How do we find out whether the services rendered are not too heavily paid for, i.e., whether the factors of production absorbed by their performance are not withdrawn from other lines of utilization in which they could render more valuable services?

With private profit-seeking enterprise this problem is solved by the attitudes of the public. The proof of the usefulness of the services rendered is that a sufficient number of citizens is ready to pay the price asked for them. There cannot be any doubt about the fact that the customers consider the services rendered by the bakeries useful. They are ready to pay the price asked for bread. Under this price the production of bread tends to expand until saturation is reached, that is, until a further expansion would withdraw factors of production from branches of industry for whose products the demand of the consumers is more intense. In taking the profit motive as a guide, free enterprise adjusts its activities to the desires of the public. The profit motive pushes every entrepreneur to accomplish those services that the consumers deem the most urgent. The price structure of the market tells them how free they are to invest in every branch of production.

But if a public enterprise is to be operated without regard to profits, the behavior of the public no longer provides a criterion of its usefulness. If the government or the municipal authorities are resolved to go on notwithstanding the fact that the operation costs are not made up by the payments received from the customers, where may a criterion be found of the usefulness of the services rendered? How can we find out whether the deficit is not too big with regard to these services? And how discover whether the deficit could not be reduced without impairing the value of the services?

A private business is doomed if its operation brings losses only and no way can be found to remedy this situation. Its unprofitability is the proof of the fact that the consumers disallow it. There is, with private enterprise, no means of defying this verdict of the public and of keeping on. The manager of a plant involving a loss may explain and excuse the failure. But such apologies are of no avail; they cannot prevent the final abandonment of the unsuccessful project.

It is different with a public enterprise. Here the appearance of a deficit is not considered a proof of failure. The manager is not responsible for it. It is the aim of his boss, the government, to sell at such a low price that a loss becomes unavoidable. But if the government were to limit its interference with the fixing of the sales prices and to leave everything else to the manager, it would give him full power to draw on the treasury’s funds.

It is important to realize that our problem has nothing at all to do with the necessity of preventing the manager from the criminal abuse of his power. We assume that the government or the municipality has appointed an honest and efficient manager and that the moral climate of the country or city and the organization of the undertaking concerned offer a satisfactory protection against any felonious misprision. Our problem is quite different. It stems from the fact that every service can be improved by increasing expenditures. However excellent a government hospital, subway system, or waterworks may be, the manager always knows how he could improve the service provided the funds required are available. In no field of human wants can full satisfaction be reached in such a way that no further improvement is possible. The specialists are intent upon improving the satisfaction of needs only in their special branches of activity. They do not and cannot bother about the check which an expansion of the plant entrusted to them would impose upon other classes of need-satisfaction. It is not the task of the hospital director to renounce some improvement of the municipal hospital lest it impede the improvement of the subway system or vice versa. It is precisely the efficient and honest manager who will try to make the services of his outfit as good as possible. But as he is not restrained by any considerations of financial success, the costs involved would place a heavy burden on the public funds. He would become a sort of irresponsible spender of the taxpayers’ money. As this is out of the question, the government must give attention to many details of the management. It must define in a precise way the quality and the quantity of the services to be rendered and the commodities to be sold; it must issue detailed instructions concerning the methods to be applied in the purchase of material factors of production and in hiring and rewarding labor. As the account of profit or loss is not to be considered the criterion of the management’s success or failure, the only means to make the manager responsible to the boss, the treasury, is to limit his discretion by rules and regulations. If he believes that it is expedient to spend more than these instructions allow, he must make an application for a special allotment of money. In this case the decision rests with his boss, the government, or the municipality. At any rate the manager is not a business executive but a bureaucrat, that is, an officer bound to abide by various instructions. The criterion of good management is not the approval of the customers resulting in an excess of revenue over costs but the strict obedience to a set of bureaucratic rules. The supreme rule of management is subservience to such rules.

Of course, the government or the town council will be eager to draft these rules and regulations in such a way that the services rendered become as useful as they want them to be and the deficit not higher than they want to have it. But this does not remove the bureaucratic character of the conduct of affairs. The management is under the necessity of abiding by a code of instructions; this alone matters. The manager is not answerable if his actions are correct from the point of view of this code. His main task cannot be efficiency as such, but efficiency within the limits of subservience to the regulations. His position is not that of an executive in a profit-seeking enterprise but that of a civil servant, for instance, the head of a police department.

The only alternative to profit-seeking business is bureaucratic management. It would be utterly impracticable to delegate to any individual or group of individuals the power to draw freely on public funds. It is necessary to curb the power of the managers of nationalized or municipalized systems by bureaucratic makeshifts if they are not to be made irresponsible spenders of public money and if their management is not to disorganize the whole budget.

IV

Bureaucratic Management of Private Enterprises

1.

How Government Interference and the Impairment of the Profit Motive Drive Business toward Bureaucratization

No private enterprise will ever fall prey to bureaucratic methods of management if it is operated with the sole aim of making profit. It has already been pointed out that under the profit motive every industrial aggregate, no matter how big it may be, is in a position to organize its whole business and each part of it in such a way that the spirit of capitalist acquisitiveness permeates it from top to bottom.

But ours is an age of a general attack on the profit motive. Public opinion condemns it as highly immoral and extremely detrimental to the commonweal. Political parties and governments are anxious to remove it and to put in its place what they call the “service” point of view and what is in fact bureaucratic management.

We do not need to deal in detail with what the Nazis have achieved in this regard. The Nazis have succeeded in entirely eliminating the profit motive from the conduct of business. In Nazi Germany there is no longer any question of free enterprise. There are no more entrepreneurs. The former entrepreneurs have been reduced to the status of Betriebsführer (shop manager). They are not free in their operation; they are bound to obey unconditionally the orders issued by the Central Board of Production Management, the Reichswirtschaftsministerium, and its subordinate district and branch offices. The government not only determines the prices and interest rates to be paid and to be asked, the height of wages and salaries, the amount to be produced and the methods to be applied in production; it allots a definite income to every shop manager, thus virtually transforming him into a salaried civil servant. This system has, but for the use of some terms, nothing in common with capitalism and a market economy. It is simply socialism of the German pattern, Zwangswirtschaft. It differs from the Russian pattern of socialism, the system of outright nationalization of all plants, only in technical matters. And it is, of course, like the Russian system, a mode of social organization that is purely authoritarian.

In the rest of the world things have not gone as far as that. In the Anglo-Saxon countries there is still private enterprise. But the general tendency of our time is to let the government interfere with private business. And this interference in many instances forces bureaucratic management upon the private enterprise.

2.

Interference with the Height of Profit

The government may apply various methods in order to restrict the profits which an enterprise is free to earn. The most frequent methods are:
- 1. The profits that a special class of undertakings is free to make are limited. A surplus is either to be handed over to the authority (for instance, the city) or to be distributed as a bonus to the employees or it must be eliminated by a reduction of the rates or prices charged to the customers.
- 2. The authority is free to determine the prices or rates that the enterprise is entitled to charge for the commodities sold or the services rendered. It uses this power for the prevention of what it calls excessive profits.
- 3. The enterprise is not free to charge more for commodities sold and services rendered than its actual costs plus an additional amount determined by the authority either as a percentage of the costs or as a fixed fee.
- 4. The enterprise is free to earn as much as market conditions allow; but taxes absorb all profit or the greater part of it above a certain amount.
What is common to all these instances is the fact that the enterprise is no longer interested in increasing its profits. It loses the incentive to lower costs and to do its job as efficiently and as cheaply as possible. But on the other hand all the checks on improvements in the procedures and on attempts to reduce costs remain. The risks connected with the adoption of new cost-saving devices fall upon the entrepreneur. The disagreements involved in resisting the demand of the employees for higher wages and salaries are left to him.

Public opinion, biased by the spurious fables of the socialists, is rash in blaming the entrepreneurs. It is, we are told, their immorality that results in the lowering of efficiency. If they were as conscientious and devoted to the promotion of public welfare as the unselfish civil servants are, they would unswervingly aim to the best of their abilities at an improvement in service although their selfish profit interests are not involved. It is their mean greed that jeopardizes the working of enterprises under limited profit chances. Why should a man not do his best even if he may not expect any personal advantage from the most beneficial performance of his duties?

Nothing could be more nonsensical than to hold the bureaucrat up in this way as a model for the entrepreneur. The bureaucrat is not free to aim at improvement. He is bound to obey rules and regulations established by a superior body. He has no right to embark upon innovations if his superiors do not approve of them. His duty and his virtue is to be obedient.

Let us take as an example the conditions of army life. Armies are certainly the most ideal and perfect bureaucratic organizations. In most countries they are commanded by officers who are sincerely dedicated to one goal only: to make their own nation’s armed forces as efficient as possible. Nevertheless the conduct of military affairs is characterized by a stubborn hostility to every attempt toward improvement. It has been said that the general staffs are always preparing for the last war, never for the future war. Every new idea always meets with adamant opposition on the part of those in charge of the management. The champions of progress have had most unpleasant experiences. There is no need to insist upon these facts; they are familiar to everybody.

The reason for this unsatisfactory state of affairs is obvious. Progress of any kind is always at variance with the old and established ideas and therefore with the codes inspired by them. Every step of progress is a change involving heavy risks. Only a few men, endowed with exceptional and rare abilities, have the gift of planning new things and of recognizing their blessings. Under capitalism the innovator is free to embark upon an attempt to realize his plans in spite of the unwillingness of the majority to acknowledge their merits. It is enough if he succeeds in persuading some reasonable men to lend him funds to start with. Under a bureaucratic system it is necessary to convince those at the top, as a rule old men accustomed to doing things in prescribed ways, and no longer open to new ideas. No progress and no reforms can be expected in a state of affairs where the first step is to obtain the consent of the old men. The pioneers of new methods are considered rebels and are treated as such. For a bureaucratic mind, law abidance, i.e., clinging to the customary and antiquated, is the first of all virtues.

To say to the entrepreneur of an enterprise with limited profit chances, “Behave as the conscientious bureaucrats do,” is tantamount to telling him to shun any reform. Nobody can be at the same time a correct bureaucrat and an innovator. Progress is precisely that which the rules and regulations did not foresee; it is necessarily outside the field of bureaucratic activities.

The virtue of the profit system is that it puts on improvements a premium high enough to act as an incentive to take high risks. If this premium is removed or seriously curtailed, there cannot be any question of progress.

Big business spends considerable sums on research because it is eager to profit from new methods of production. Every entrepreneur is always on the search for improvement; he wants to profit either from lowering costs or from perfecting his products. The public sees only the successful innovation. It does not realize how many enterprises failed because they erred in adopting new procedures.

It is vain to ask an entrepreneur to embark, in spite of the absence of a profit incentive, on all the improvements which he would have put to work if the expected profit were to enrich him. The free enterpriser makes his decision on close and careful examination of all the pros and cons and on a weighing of the chances of success and failure. He balances possible gain against possible loss. Either loss or gain will occur in his own fortune. This is essential. Balancing the risk of losing one’s own money against the government’s or other people’s chance for profit means viewing the matter from a quite different angle.

But there is also something much more important. A faulty innovation must not only impair the capital invested, it must no less reduce future profits. The greater part of these profits would have flowed, if earned, into the treasury. Now, their falling off affects the government’s revenue. The government will not permit the enterpriser to risk what it considers to be its own revenue. It will think that it is not justified in leaving the enterpriser the right to expose to loss what is virtually the government’s money. It will restrict the entrepreneur’s freedom to manage his “own” affairs, which practically are no longer his own but the government’s.

We are already at the beginning of such policies. In the case of cost-plus contracts the government tries to satisfy itself not only as to whether the costs claimed by the contractor were actually incurred, but no less whether they are allowable under the terms of the contract. It takes every reduction in costs incurred for granted, but it does not acknowledge expenditures which, in the opinion of its employees, the bureaucrats, are not necessary. The resulting situation is this: The contractor spends some money with the intention of reducing costs of production. If he succeeds, the result is—under the cost plus a percentage of cost method—that his profit is curtailed. If he does not succeed, the government does not reimburse the outlays in question and he loses too. Every attempt to change anything in the traditional routine of production has to turn out badly for him. The only way to avoid being penalized is for him not to change anything.

In the field of taxation the limitations placed on salaries are the starting point of a new development. They affect, at present, only the higher salaries. But they will hardly stop here. Once the principle is accepted, that the Bureau of Internal Revenue has the right to declare whether certain costs, deductions, or losses are justified or not, the powers of the enterpriser will also be restricted with regard to other items of costs. Then the management will be under the necessity of assuring itself, before it embarks upon any change, whether the tax authorities approve of the required expenditure. The Collectors of Internal Revenue will become the supreme authorities in matters of manufacturing.

3.

Interference with the Choice of Personnel

Every kind of government meddling with the business of private enterprise results in the same disastrous consequences. It paralyzes initiative and breeds bureaucratism. We cannot investigate all the methods applied. It will be enough to consider one especially obnoxious instance.

Even in the nineteenth century, in the prime of European liberalism, private enterprise was never so free as it once was in this country. In continental Europe every enterprise and particularly every corporation always depended in many respects on the discretion of government agencies. Bureaus had the power of inflicting serious damage upon every firm. In order to avoid such detriments it was necessary for the management to live on good terms with those in power.

The most frequent procedure was to yield to the government’s wishes concerning the composition of the board of directors. Even in Great Britain a board of directors which did not include several peers was considered not quite respectable. In continental Europe and especially in Eastern and Southern Europe the boards were full of former cabinet ministers and generals, of politicians and of cousins, brothers-in-law, schoolmates, and other friends of such dignitaries. With these directors no commercial ability or business experience was required.

The presence of such ignoramuses on the board of directors was by and large innocuous. All they did was to collect their fees and share in the profits. But there were other relatives and friends of those in power who were not eligible for directorships. For them there were salaried positions on the staff. These men were much more a liability than an asset.

With the increasing government interference with business it became necessary to appoint executives whose main duty it was to smooth away difficulties with the authorities. First it was only one vice-president in charge of “affairs referring to government administration.” Later the main requirement for the president and for all vice-presidents was to be in good standing with the government and the political parties. Finally no corporation could afford the “luxury” of an executive unpopular with the administration, the labor unions, and the great political parties. Former government officials, assistant secretaries, and councilors of the various ministries were considered the most appropriate choice for executive positions.

Such executives did not care a whit for the company’s prosperity. They were accustomed to bureaucratic management and they accordingly altered the conduct of the corporation’s business. Why bother about bringing out better and cheaper products if one can rely on support on the part of the government? For them government contracts, more effective tariff protection, and other government favors were the main concern. And they paid for such privileges by contributions to party funds and government propaganda funds and by appointing people sympathetic to the authorities.

It is long since the staffs of the big German corporations were selected from the viewpoint of commercial and technological ability. Exmembers of smart and politically reliable students’ clubs often had a better chance of employment and advancement than efficient experts.

American conditions are very different. As in every sphere of bureaucracy, America is “backward” in the field of bureaucratization of private enterprise also. It is an open question whether Secretary Ickes* was right in saying: “Every big business is a bureaucracy.”1 But if the Secretary of the Interior is right, or as far as he is right, this is not an outcome of the evolution of private business but of the growing government interference with business.

4.

Unlimited Dependence on the Discretion of Government Bureaus

Every American businessman who has had the opportunity to become acquainted with economic conditions in Southern and Eastern Europe condenses his observations into two points: The entrepreneurs of these countries do not bother about production efficiency, and the governments are in the hands of corrupt cliques. This characterization is by and large correct. But it fails to mention that both industrial inefficiency and corruption are the consequences of methods of government interference with business as applied in these countries.

Under this system the government has unlimited power to ruin every enterprise or to lavish favors upon it. The success or failure of every business depends entirely upon the free discretion of those in office. If the businessman does not happen to be a citizen of a powerful foreign nation whose diplomatic and consular agents grant him protection, he is at the mercy of the administration and the ruling party. They can take away all his property and imprison him. On the other hand, they can make him rich.

The government determines the height of tariffs and freight rates. It grants or denies import and export licenses. Every citizen or resident is bound to sell all his proceeds in foreign exchange to the government at a price fixed by the government. On the other hand, the government is the only seller of foreign exchange; it is free to refuse ad libitum applications for foreign exchange. In Europe where almost every kind of production depends upon the importation of equipment, machinery, raw materials, and half-finished goods from abroad, such a refusal is tantamount to a closing of the factory. The final determination of taxes due is practically left to the unlimited discretion of the authorities. The government can use any pretext for the seizure of any plant or shop. Parliament is a puppet in the hands of the rulers; the courts are packed.

In such an environment the entrepreneur must resort to two means: diplomacy and bribery. He must use these methods not only with regard to the ruling party, but no less with regard to the outlawed and persecuted opposition groups which one day may seize the reins. It is a dangerous kind of double-dealing; only men devoid of fear and inhibitions can last in this rotten milieu. Businessmen who have grown up under the conditions of a more liberal age have to leave and are replaced by adventurers. West European and American entrepreneurs, used to an environment of legality and correctness, are lost unless they secure the services of native agents.

This system, of course, does not offer much incentive for technological improvement. The entrepreneur considers additional investment only if he can buy the machinery on credit from a foreign firm. Being a debtor of a corporation of one of the Western countries is deemed an advantage because one expects that the diplomats concerned will interfere for the protection of the creditor and thus help the debtor too. New branches of production are inaugurated only if the government grants such a premium that huge profits are to be hoped for.

It would be a mistake to place the blame for this corruption on the system of government interference with business and bureaucratism as such. It is bureaucratism degenerated into racketeering in the hands of depraved politicians. Yet we must realize that these countries would have avoided the evil if they had not abandoned the system of free enterprise. Economic postwar reconstruction must start in these countries with a radical change in their policies.

V

The Social and Political Implications of Bureaucratization

1.

The Philosophy of Bureaucratism

The antagonism which the people had to encounter in earlier struggles for freedom was simple and could be understood by everybody. There were on the one side the tyrants and their supporters; there were on the other side the advocates of popular government. The political conflicts were struggles of various groups for supremacy. The question was: Who should rule? We or they? The few or the many? The despot or the aristocracy or the people?

Today the fashionable philosophy of Statolatry has obfuscated the issue. The political conflicts are no longer seen as struggles between groups of men. They are considered a war between two principles, the good and the bad. The good is embodied in the great god State, the materialization of the eternal idea of morality, and the bad in the “rugged individualism” of selfish men.1 In this antagonism the State is always right and the individual always wrong. The State is the representative of the commonweal, of justice, civilization, and superior wisdom. The individual is a poor wretch, a vicious fool.

When a German says “der Staat” or when a Marxian says “society,” they are overwhelmed by reverential awe. How can a man be so entirely corrupt as to rise in rebellion against this Supreme Being?

Louis XIV was very frank and sincere when he said: I am the State. The modern etatist is modest. He says: I am the servant of the State; but, he implies, the State is God. You could revolt against a Bourbon king, and the French did it. This was, of course, a struggle of man against man. But you cannot revolt against the god State and against his humble handyman, the bureaucrat.

Let us not question the sincerity of the well-intentioned officeholder. He is fully imbued with the idea that it is his sacred duty to fight for his idol against the selfishness of the populace. He is, in his opinion, the champion of the eternal divine law. He does not feel himself morally bound by the human laws which the defenders of individualism have written into the statutes. Men cannot alter the genuine laws of god, the State. The individual citizen, in violating one of the laws of his country, is a criminal deserving punishment. He has acted for his own selfish advantage. But it is quite a different thing if an officeholder evades the duly promulgated laws of the nation for the benefit of the “State.” In the opinion of “reactionary” courts he may be technically guilty of a contravention. But in a higher moral sense he was right. He has broken human laws lest he violate a divine law.

This is the essence of the philosophy of bureaucratism. The written laws are, in the eyes of the officials, barriers erected for the protection of scoundrels against the fair claims of society. Why should a criminal evade punishment only because the “State” in prosecuting him has violated some frivolous formalities? Why should a man pay lower taxes only because there is a loophole left in the tax law? Why should lawyers make a living advising people how to profit from the imperfections of the written law? What is the use of all these restrictions imposed by the written law upon the government official’s honest endeavors to make the people happy? If only there were no constitutions, bills of rights, laws, parliaments, and courts! No newspapers and no attorneys! How fine the world would be if the “State” were free to cure all ills!

It is one step only from such a mentality to the perfect totalitarianism of Stalin and Hitler.

The answer to be given to these bureaucratic radicals is obvious. The citizen may reply: You may be excellent and lofty men, much better than we other citizens are. We do not question your competence and your intelligence. But you are not the vicars of a god called “the State.” You are servants of the law, the duly passed laws of our nation. It is not your business to criticize the law, still less to violate it. In violating the law you are perhaps worse than a good many of the racketeers, no matter how good your intentions may be. For you are appointed, sworn, and paid to enforce the law, not to break it. The worst law is better than bureaucratic tyranny.

The main difference between a policeman and a kidnapper and between a tax collector and a robber is that the policeman and the tax collector obey and enforce the law, while the kidnapper and robber violate it. Remove the law, and society will be destroyed by anarchy. The State is the only institution entitled to apply coercion and compulsion and to inflict harm upon individuals. This tremendous power cannot be abandoned to the discretion of some men, however competent and clever they may deem themselves. It is necessary to restrict its application. This is the task of the laws.

The officeholders and the bureaucrats are not the State. They are men selected for the application of the laws. One may call such opinions orthodox and doctrinaire. They are indeed the expression of old wisdom. But the alternative to the rule of law is the rule of despots.

2.

Bureaucratic Complacency

The officeholder’s task is to serve the public. His office has been established—directly or indirectly—by a legislative act and by the allocation of the means necessary for its support in the budget. He executes the laws of his country. In performing his duties he shows himself a useful member of the community, even if the laws which he has to put into practice are detrimental to the commonweal. For it is not he who is responsible for their inadequacy. The sovereign people is to blame, not the faithful executor of the people’s will. As the distillers are not responsible for people getting drunk, so the government’s clerks are not responsible for the undesirable consequences of unwise laws.

On the other hand, it is not the merit of the bureaucrats that many benefits are derived from their actions. That the police department’s work is so efficient that the citizens are fairly well protected against murder, robbery, and theft does not oblige the rest of the people to be more grateful to the police officers than to any other fellow citizens rendering useful services. The police officer and the fireman have no better claim to the public’s gratitude than the doctors, the railroad engineers, the welders, the sailors, or the manufacturers of any useful commodity. The traffic cop has no more cause for conceit than the manufacturer of traffic lights. It is not his merit that his superiors assigned him to a duty in which he daily and hourly prevents accidental killing and thus saves many people’s lives.

It is true that society could not do without the services rendered by patrolmen, tax collectors, and clerks of the courts. But it is no less true that everyone would suffer great damage if there were no scavengers, chimney sweepers, dishwashers, and bug exterminators. Within the framework of social cooperation every citizen depends on the services rendered by all his fellow citizens. The great surgeon and the eminent musician would never have been able to concentrate all their efforts upon surgery and music if the division of labor had not freed them from the necessity of taking care of many trifles the performance of which would have prevented them from becoming perfect specialists. The ambassador and the lighthouse keeper have no better claim to the epithet pillar of society than the Pullman porter and the charwoman. For, under the division of labor, the structure of society rests on the shoulders of all men and women.

There are, of course, men and women serving in an altruistic and entirely detached way. Mankind would never have reached the present state of civilization without heroism and self-sacrifice on the part of an elite. Every step forward on the way toward an improvement of moral conditions has been an achievement of men who were ready to sacrifice their own well-being, their health, and their lives for the sake of a cause that they considered just and beneficial. They did what they considered their duty without bothering whether they themselves would not be victimized. These people did not work for the sake of reward, they served their cause unto death.

It was a purposeful confusion on the part of the German metaphysicians of statolatry that they clothed all men in the government service with the gloriole of such altruistic self-sacrifice. From the writings of the German etatists the civil servant emerges as a saintly being, a sort of monk who forsook all earthly pleasures and all personal happiness in order to serve, to the best of his abilities, God’s lieutenant, once the Hohenzollern king and today the Führer. The Staatsbeamte does not work for pay because no salary however large could be considered an adequate reward for the invaluable and priceless benefits that society derives from his self-denying sacrifice. Society owes him not pay but a maintenance adequate to his rank in the official hierarchy. It is a misnomer to call this maintenance a salary.2 Only liberals, biased by the prejudices and errors of commercialism, use such a wrong term. If the Beamtengehalt (the civil servant’s salary) were a real salary, it would be only just and natural to give the holder of the most modest office an income higher than that of anybody outside of the official hierarchy. Every civil servant is, when on duty, a mandatory of the State’s sovereignty and infallibility. His testimony in court counts more than that of the layman.

All this was sheer nonsense. In all countries most people joined the staff of the government offices because the salary and the pension offered were higher than what they could expect to earn in other occupations. They did not renounce anything in serving the government. Civil service was for them the most profitable job they could find.

The incentive offered by the civil service in Europe consisted not only in the level of the salary and the pension; many applicants, and not the best ones, were attracted by the ease of the work and by the security. As a rule government jobs were less exigent than those in business. Besides, the appointments were for life. An employee could be dismissed only when a kind of judicial trial had found him guilty of heinous neglect of his duties. In Germany, Russia, and France, every year many thousands of boys whose life plan was completely fixed entered the lowest grade of the system of secondary education. They would take their degrees, they would get a job in one of the many departments, they would serve thirty or forty years, and then retire with a pension. Life had no surprises and no sensations for them, everything was plain and known beforehand.

The difference between the social prestige of government jobs in continental Europe and in America may be illustrated by an example. In Europe social and political discrimination against a minority group took the form of barring such people from access to all government jobs, no matter how modest the position and the salary. In Germany, in the Austro-Hungarian Empire, and in many other countries all those subordinate jobs that did not require special abilities or training—like attendants, ushers, heralds, beadles, apparitors, messengers, janitors— were legally reserved for ex-soldiers who had voluntarily given more years of active service in the armed forces than the minimum required by the law. These jobs were considered highly valued rewards for noncommissioned officers. In the eyes of the people, it was a privilege to serve as an attendant in a bureau. If in Germany there had been a class of the social status of the American Negro, such persons would never have ventured to apply for one of these jobs. They would have known that such an ambition was extravagant for them.

3.

The Bureaucrat as a Voter

The bureaucrat is not only a government employee. He is, under a democratic constitution, at the same time a voter and as such a part of the sovereign, his employer. He is in a peculiar position: He is both employer and employee. And his pecuniary interest as employee towers above his interest as employer, as he gets much more from the public funds than he contributes to them.

This double relationship becomes more important as the people on the government’s payroll increase. The bureaucrat as voter is more eager to get a raise than to keep the budget balanced. His main concern is to swell the payroll.

The political structure of Germany and France, in the last years preceding the fall of their democratic constitutions, was to a very great extent influenced by the fact that for a considerable part of the electorate the state was the source of income. There were not only the hosts of public employees, and those employed in the nationalized branches of business (e.g., railroad, post, telegraph, and telephone), there were the receivers of the unemployment dole and of social security benefits, as well as the farmers and some other groups which the government directly or indirectly subsidized. Their main concern was to get more out of the public funds. They did not care for “ideal” issues like liberty, justice, the supremacy of the law, and good government. They asked for more money, that was all. No candidate for parliament, provincial diets, or town councils could risk opposing the appetite of the public employees for a raise. The various political parties were eager to outdo one another in munificence.

In the nineteenth century the parliaments were intent on restricting public expenditures as much as possible. But now thrift became despicable. Boundless spending was considered a wise policy. Both the party in power and the opposition strove for popularity by openhandedness. To create new offices with new employees was called a “positive” policy, and every attempt to prevent squandering public funds was disparaged as “negativism.”

Representative democracy cannot subsist if a great part of the voters are on the government payroll. If the members of parliament no longer consider themselves mandatories of the taxpayers but deputies of those receiving salaries, wages, subsidies, doles, and other benefits from the treasury, democracy is done for.

This is one of the antinomies inherent in present-day constitutional issues. It has made many people despair of the future of democracy. As they became convinced that the trend toward more government interference with business, toward more offices with more employees, toward more doles and subsidies is inevitable, they could not help losing confidence in government by the people.

4.

The Bureaucratization of the Mind

The modern trend toward government omnipotence and totalitarianism would have been nipped in the bud if its advocates had not succeeded in indoctrinating youth with their tenets and in preventing them from becoming acquainted with the teachings of economics.

Economics is a theoretical science and as such does not tell man what values he should prefer and what ends he should aim at. It does not establish ultimate ends. This is not the task of the thinking man but that of the acting man. Science is a product of thought, action a product of will. In this sense we may say that economics as a science is neutral with regard to the ultimate ends of human endeavor.

But it is different with regard to the means to be applied for the attainment of given social ends. There economics is the only reliable guide of action. If men are eager to succeed in the pursuit of any social ends, they must adjust their conduct to the results of economic thinking.

The outstanding fact of the intellectual history of the last hundred years is the struggle against economics. The advocates of government omnipotence did not enter into a discussion of the problems involved. They called the economists names, they cast suspicion upon their motives, they ridiculed them and called down curses upon them.

It is, however, not the task of this book to deal with this phenomenon. We have to limit ourselves to the description of the role that bureaucracy played in this development.

In most countries of the European continent the universities are owned and operated by the government. They are subject to the control of the Ministry of Education as a police station is subject to the head of the police department. The teachers are civil servants like patrolmen and customs officers. Nineteenth-century liberalism tried to limit the right of the Ministry of Education to interfere with the freedom of university professors to teach what they considered true and correct. But as the government appointed the professors, it appointed only trustworthy and reliable men, that is, men who shared the government’s viewpoint and were ready to disparage economics and to teach the doctrine of government omnipotence.

As in all other fields of bureaucratization, nineteenth-century Germany was far ahead of other nations in this matter too. Nothing characterizes the spirit of the German universities better than a passage of an oration that the physiologist Emil du Bois-Reymond delivered in 1870 in his double capacity as Rector of the University of Berlin and as President of the Prussian Academy of Science: “We, the University of Berlin, quartered opposite the King’s palace, are, by the deed of our foundation, the intellectual bodyguard of the House of Hohenzollern.” The idea that such a royal henchman should profess views contrary to the tenets of the government, his employer, was incomprehensible to the Prussian mind. To maintain the theory that there are such things as economic laws was deemed a kind of rebellion. For if there are economic laws, then governments cannot be regarded as omnipotent, as their policies could only succeed when adjusted to the operation of these laws. Thus the main concern of the German professors of the social sciences was to denounce the scandalous heresy that there is a regularity in economic phenomena. The teaching of economics was anathematized and wirtschaftliche Staatswissenschaften (economic aspects of political science) put in its place. The only qualities required in an academic teacher of the social sciences were disparagement of the operation of the market system and enthusiastic support of government control. Under the Kaiser radical Marxians who openly advocated a revolutionary upheaval and the violent overthrow of the government were not appointed to full-time professorships; the Weimar Republic virtually abolished this discrimination.

Economics deals with the operation of the whole system of social cooperation, with the interplay of all its determinants, and with the interdependence of the various branches of production. It cannot be broken up into separate fields open to treatment by specialists who neglect the rest. It is simply nonsensical to study money or labor or foreign trade with the same kind of specialization which historians apply when dividing human history into various compartments. The history of Sweden can be treated with almost no reference to the history of Peru. But you cannot deal with wage rates without dealing at the same time with commodity prices, interest rates, and profits. Every change occurring in one of the economic elements affects all other elements. One will never discover what a definite policy or change brings about if one limits his investigation to a special segment of the whole system.

It is precisely this interdependence that the government does not want to see when it meddles in economic affairs. The government pretends to be endowed with the mystical power to accord favors out of an inexhaustible horn of plenty. It is both omniscient and omnipotent. It can by a magic wand create happiness and abundance.

The truth is that the government cannot give if it does not take from somebody. A subsidy is never paid by the government out of its own funds; it is at the expense of the taxpayer that the state grants subsidies. Inflation and credit expansion, the preferred methods of present-day government openhandedness, do not add anything to the amount of resources available. They make some people more prosperous, but only to the extent that they make others poorer. Interference with the market, with commodity prices, wage rates, and interest rates as determined by demand and supply, may in the short run attain the ends aimed at by the government. But in the long run such measures always result in a state of affairs which—from the viewpoint of the government—is more unsatisfactory than the previous state they were intended to alter.

It is not in the power of the government to make everybody more prosperous. It can raise the income of the farmers by forcibly restricting domestic agricultural production. But the higher prices of farm products are paid by the consumers, not by the state. The counterpart of the farmers’ higher standard of living is the lowering of the standard of living of the rest of the nation. The government can protect the small shops against the competition of department stores and chain stores. But here again the consumers foot the bill. The state can improve the conditions of a part of the wage earners by allegedly pro-labor legislation or by giving a free hand to labor union pressure and compulsion. But if this policy does not result in a corresponding rise in the prices of manufactures, thereby bringing real wage rates back to the market level, it brings about unemployment of a considerable part of those willing to earn wages.

A scrutiny of such policies from the viewpoint of economic theory must necessarily show their futility. This is why economics is tabooed by the bureaucrats. But the governments encourage the specialists who limit their observations to a narrow field without bothering about the further consequences of a policy. The labor economist deals only with the immediate results of pro-labor policies, the farm economist only with the rise of agricultural prices. They both view the problems only from the angle of those pressure groups which are immediately favored by the measure in question and disregard its ultimate social consequences. They are not economists, but expounders of government activities in a particular branch of the administration.

For under government interference with business, the unity of government policies has long since disintegrated into badly coordinated parts. Gone are the days when it was still possible to speak of a government’s policy. Today in most countries each department follows its own course, working against the endeavors of the other departments. The department of labor aims at higher wage rates and at lower living costs. But the same administration’s department of agriculture aims at higher food prices, and the department of commerce tries to raise domestic commodity prices by tariffs. One department fights against monopoly, but other departments are eager to bring about—by tariffs, patents, and other means—the conditions required for the building of monopolistic restraint. And each department refers to the expert opinion of those specialized in their respective fields.

Thus the students no longer receive an initiation into economics. They learn incoherent and disconnected facts about various government measures thwarting one another. Their doctor’s theses and their graduate research work deal not with economics but with various topics of economic history and various instances of government interference with business. Such detailed and well-documented statistical studies of the conditions of the immediate past (mistakenly often labeled studies about “present-day” conditions) are of great value for the future historian. They are no less important for the vocational tasks of lawyers and office clerks. But they are certainly not a substitute for the lack of instruction in economics. It is amazing that Stresemann’s doctoral thesis dealt with the conditions of the bottled beer trade in Berlin. Under the conditions of the German university curriculum this meant that he devoted a considerable part of his university work to the study of the marketing of beer and of the drinking habits of the population. This was the intellectual equipment that the glorified German university system gave to a man who later acted as the Reich’s chancellor in the most critical years of German history.*

After the old professors who had got their chairs in the short flowering of German liberalism had died, it became impossible to hear anything about economics at the universities of the Reich. There were no longer any German economists, and the books of foreign economists could not be found in the libraries of the university seminars. The social scientists did not follow the example of the professors of theology who acquainted their students with the tenets and dogmas of other churches and sects and with the philosophy of atheism because they were eager to refute the creeds they deemed heretical. All that the students of the social sciences learned from their teachers was that economics is a spurious science and that the so-called economists are, as Marx said, sycophantic apologists of the unfair class interests of bourgeois exploiters, ready to sell the people to big business and finance capital.3 The graduates left the universities convinced advocates of totalitarianism either of the Nazi variety or of the Marxian brand.

Conditions in other countries were similar. The most eminent establishment of French learning was the École Normale Supérieure in Paris; its graduates filled the most important posts in public administration, politics, and higher education. This school was dominated by Marxians and other supporters of full government control. In Russia the Imperial Government did not admit to a university chair anybody suspected of the liberal ideas of “Western” economics. But, on the other hand, it appointed many Marxians of the “loyal” wing of Marxism, i.e., those who kept out of the way of the revolutionary fanatics. Thus the Czars themselves contributed to the later triumph of Marxism.

European totalitarianism is an upshot of bureaucracy’s preeminence in the field of education. The universities paved the way for the dictators.

Today both in Russia and in Germany the universities are the main strongholds of the one-party system. Not only the social sciences, history, and philosophy, but all other branches of knowledge, of art, and of literature are regimented or, as the Nazis say, gleichgeschaltet. Even Sidney and Beatrice Webb, naive and uncritical admirers of the Soviets as they are, were shocked when they discovered that the Journal for Marxist-Leninist Natural Sciences stands “for party in mathematics” and “for the purity of Marxist-Leninist theory in surgery” and that the Soviet Herald of Venereology and Dermatology aims at considering all problems that it discusses from the point of view of dialectical materialism.4

5.

Who Should Be the Master?

Under any system of the division of labor a principle for the coordination of the activities of the various specialists is needed. The specialist’s effort would be aimless and contrary to purpose if he were not to find a guide in the supremacy of the public. Of course, production’s only end is to serve the consumers.

Under a market society the profit motive is the directing principle. Under government control it is regimentation. There is no third possibility left. To a man not driven by the impulse to make money on the market some code must say what to do and how.

One of the most frequent objections raised against the liberal and democratic system of capitalism is that it stresses mainly the individual’s rights, to the neglect of his duties. People stand on their rights and forget their obligations. However, from the social viewpoint the duties of the citizens are more important than their rights.

There is no need for us to dwell upon the political and constitutional aspect of this antidemocratic critique. The rights of man as codified in the various bills of rights are promulgated for the protection of the individual against governmental arbitrariness. But for them all people would be slaves of despotic rulers.

In the economic sphere the right to acquire and to own property is not a privilege. It is the principle that safeguards the best satisfaction of the wants of the consumers. He who is eager to earn, to acquire, and to hold wealth is under the necessity of serving the consumers. The profit motive is the means of making the public supreme. The better a man succeeds in supplying the consumers, the greater become his earnings. It is to everybody’s advantage that the entrepreneur who produces good shoes at the cheapest cost becomes rich; most people would suffer some loss if a law were to limit his right to get richer. Such a law would only favor his less efficient competitors. It would not lower but raise the price of shoes.

Profit is the reward for the best fulfillment of some voluntarily assumed duties. It is the instrument that makes the masses supreme. The common man is the customer for whom the captains of industry and all their aides are working.

It has been objected that this is not true as far as big business is concerned. The consumer has no other choice than either to patronize the business or to forego the satisfaction of a vital need. He is thus forced to submit to any price asked by the entrepreneur. Big business is no longer a supplier and purveyor but a master. It is not under the necessity of improving and cheapening its service.

Let us consider the case of a railroad connecting two cities not connected by any other rail line. We may even ignore the fact that other means of transportation are in competition with the railroad: buses, passenger cars, aeroplanes, and river boats. Under these assumptions it is true that whoever wants to travel is forced to patronize the railroad. But this does not remove the company’s interest in good and cheap service. Not all those who consider traveling are forced to make the journey under any conditions. The number of passengers both for pleasure and for business depends on the efficiency of the service and on the rates charged. Some people will travel in any case. Others will travel only if the quality and speed of the service and cheap rates make traveling attractive. It is precisely this second group whose patronage means for the company the difference between dull or even bad business and profitable business. If this is true for a railroad under the extreme assumptions made above, it is much more true for any other branch of business.

All specialists, whether businessmen or professional people, are fully aware of their dependence on the consumers’ directives. Daily experience teaches them that, under capitalism, their main task is to serve the consumers. Those specialists who lack an understanding of the fundamental social problems resent very deeply this “servitude” and want to be freed. The revolt of narrow-minded experts is one of the powerful forces pushing toward general bureaucratization.

The architect must adjust his blueprints to the wishes of those for whom he builds homes; or—in the case of apartment houses—of the proprietors who want to own a building that suits the tastes of the prospective tenants and can therefore be easily rented. There is no need to find out whether the architect is right in believing that he knows better what a fine house should look like than the foolish laymen who lack good taste. He may foam with rage when he is forced to debase his wonderful projects in order to please his customers. And he yearns for an ideal state of affairs in which he could build homes that meet his own artistic standards. He longs for a government housing office and sees himself in his daydreams at the top of this bureau. Then he will construct dwellings according to his own fashion.

This architect would be highly offended if somebody were to call him a would-be dictator. My only aim, he could retort, is to make people happy by providing them with finer houses; these people are too ignorant to know what would best promote their own well-being; the expert, under the auspices of the government, must take care of them; there should be a law against ugly buildings. But, let us ask, who is to decide which kind of architectural style has to be considered good and which bad? Our architect will answer: Of course, I, the expert. He boldly disregards the fact that there is, even among the architects, very considerable dissent with regard to styles and artistic values.

We do not want to stress the point that this architect, even under a bureaucratic dictatorship and precisely under such a totalitarianism, will not be free to build according to his own ideas. He will have to comply with the tastes of his bureaucratic superiors, and they themselves will be subject to the whims of the supreme dictator. In Nazi Germany the architects are not free either. They have to accommodate themselves to the plans of the frustrated artist Hitler.

Still more important is this. There are, in the field of esthetics as in all other fields of human endeavor, no absolute criteria of what is beautiful and what is not. If a man forces his fellow citizens to submit to his own standards of value, he does not make them any happier. They themselves alone can decide what makes them happy and what they like. You do not increase the happiness of a man eager to attend a performance of Abie’s Irish Rose by forcing him to attend a perfect performance of Hamlet instead. You may deride his poor taste. But he alone is supreme in matters of his own satisfaction.

The dictatorial nutrition expert wants to feed his fellow citizens according to his own ideas about perfect alimentation. He wants to deal with men as the cattle breeder deals with his cows. He fails to realize that nutrition is not an end in itself but the means for the attainment of other ends. The farmer does not feed his cow in order to make it happy but in order to attain some end which the well-fed cow should serve. There are various schemes for feeding cows. Which one of them he chooses depends on whether he wants to get as much milk as possible or as much meat as possible or something else. Every dictator plans to rear, raise, feed, and train his fellowmen as the breeder does his cattle. His aim is not to make the people happy but to bring them into a condition which renders him, the dictator, happy. He wants to domesticate them, to give them cattle status. The cattle breeder also is a benevolent despot.

The question is: Who should be the master? Should man be free to choose his own road toward what he thinks will make him happy? Or should a dictator use his fellowmen as pawns in his endeavors to make himself, the dictator, happier?

We may admit that some experts are right in telling us that most people behave foolishly in their pursuit of happiness. But you cannot make a man happier by putting him under guardianship. The experts of the various government agencies are certainly fine men. But they are not right in becoming indignant whenever the legislature frustrates their carefully elaborated designs. What is the use of representative government, they ask; it merely thwarts our good intentions. But the only question is: Who should run the country? The voters or the bureaucrats?

Every half-wit can use a whip and force other people to obey. But it requires brains and diligence to serve the public. Only a few people succeed in producing shoes better and cheaper than their competitors. The inefficient expert will always aim at bureaucratic supremacy. He is fully aware of the fact that he cannot succeed within a competitive system. For him all-round bureaucratization is a refuge. Equipped with the power of an office he will enforce his rulings with the aid of the police.

At the bottom of all this fanatical advocacy of planning and socialism there is often nothing else than the intimate consciousness of one’s own inferiority and inefficiency. The man who is aware of his inability to stand competition scorns “this mad competitive system.” He who is unfit to serve his fellow citizens wants to rule them.

VI

The Psychological Consequences of Bureaucratization

1.

The German Youth Movement

Highbrows turn up their noses at Horatio Alger’s philosophy. Yet Alger succeeded better than anybody else in stressing the most characteristic point of capitalist society. Capitalism is a system under which everybody has the chance of acquiring wealth; it gives everybody unlimited opportunity. Not everybody, of course, is favored by good luck. Very few become millionaires. But everybody knows that strenuous effort and nothing less than strenuous effort pays. All roads are open to the smart youngster. He is optimistic in the awareness of his own strength. He has self-confidence and is full of hope. And as he grows older and realizes that many of his plans have been frustrated, he has no cause for despair. His children will start the race again and he does not see any reason why they should not succeed where he himself failed. Life is worth living because it is full of promise.

All this was literally true of America. In old Europe there still survived many checks inherited from the ancien régime. Even in the prime of liberalism, aristocracy and officialdom were struggling for the maintenance of their privileges. But in America there were no such remnants of the Dark Ages. It was in this sense a young country, and it was a free country. Here were neither industrial codes nor guilds. Thomas Alva Edison and Henry Ford did not have to overcome any obstacles erected by shortsighted governments and a narrow-minded public opinion.

Under such conditions the rising generation are driven by the spirit of the pioneer. They are born into a progressing society, and they realize that it is their task to contribute something to the improvement of human affairs. They will change the world, shape it according to their own ideas. They have no time to waste; tomorrow is theirs and they must prepare for the great things that are waiting for them. They do not talk about their being young and about the rights of youth; they act as young people must act. They do not boast about their own “dynamism”; they are dynamic and there is no need for them to emphasize this quality. They do not challenge the older generation with arrogant talk. They want to beat it by their deeds.

But it is quite a different thing under the rising tide of bureaucratization. Government jobs offer no opportunity for the display of personal talents and gifts. Regimentation spells the doom of initiative. The young man has no illusions about his future. He knows what is in store for him. He will get a job with one of the innumerable bureaus, he will be but a cog in a huge machine the working of which is more or less mechanical. The routine of a bureaucratic technique will cripple his mind and tie his hands. He will enjoy security. But this security will be rather of the kind that the convict enjoys within the prison walls. He will never be free to make decisions and to shape his own fate. He will forever be a man taken care of by other people. He will never be a real man relying on his own strength. He shudders at the sight of the huge office buildings in which he will bury himself.

In the decade preceding the First World War Germany, the country most advanced on the path toward bureaucratic regimentation, witnessed the appearance of a phenomenon hitherto unheard of: the youth movement. Turbulent gangs of untidy boys and girls roamed the country, making much noise and shirking their school lessons. In bombastic words they announced the gospel of a golden age. All preceding generations, they emphasized, were simply idiotic; their incapacity has converted the earth into a hell. But the rising generation is no longer willing to endure gerontocracy, the supremacy of impotent and imbecile senility. Henceforth the brilliant youths will rule. They will destroy everything that is old and useless, they will reject all that was dear to their parents, they will substitute new real and substantial values and ideologies for the antiquated and false ones of capitalist and bourgeois civilization, and they will build a new society of giants and supermen.

The inflated verbiage of these adolescents was only a poor disguise for their lack of any ideas and of any definite program. They had nothing to say but this: We are young and therefore chosen; we are ingenious because we are young; we are the carriers of the future; we are the deadly foes of the rotten bourgeois and Philistines. And if somebody was not afraid to ask them what their plans were, they knew only one answer: Our leaders will solve all problems.

It has always been the task of the new generation to provoke changes. But the characteristic feature of the youth movement was that they had neither new ideas nor plans. They called their action the youth movement precisely because they lacked any program which they could use to give a name to their endeavors. In fact they espoused entirely the program of their parents. They did not oppose the trend toward government omnipotence and bureaucratization. Their revolutionary radicalism was nothing but the impudence of the years between boyhood and manhood; it was a phenomenon of a protracted puberty. It was void of any ideological content.

The chiefs of the youth movement were mentally unbalanced neurotics. Many of them were affected by a morbid sexuality, they were either profligate or homosexual. None of them excelled in any field of activity or contributed anything to human progress. Their names are long since forgotten; the only trace they left were some books and poems preaching sexual perversity. But the bulk of their followers were quite different. They had one aim only: to get a job as soon as possible with the government. Those who were not killed in the wars and revolutions are today pedantic and timid bureaucrats in the innumerable offices of the German Zwangswirtschaft. They are obedient and faithful slaves of Hitler. But they will be no less obedient and faithful handymen of Hitler’s successor, whether he is a German nationalist or a puppet of Stalin.

From Germany the youth movement spread to other countries. Italian Fascism masked itself as a youth movement. Its party song, “Giovinezza,” is a hymn of youth. Its buffoon Duce boasted still in his late fifties of his youthful vigor and was anxious to conceal his age like a coquettish lady. But the only concern of the rank-and-file Fascist was to get a government job. In the time of the Ethiopian war the present writer asked some graduate students of one of the great Italian universities for an explanation of their hostility to France and Great Britain. The answer was amazing: “Italy,” they said, “does not offer enough opportunity for its intelligentsia. We want to conquer British and French colonies in order to get in the administration of these territories the jobs which are now in the hands of British and French bureaucrats.”

The youth movement was an expression of the uneasiness that young people felt in face of the gloomy prospects that the general trend toward regimentation offered them. But it was a counterfeit rebellion doomed to failure because it did not dare to fight seriously against the growing menace of government all-round control and totalitarianism. The tumultuous would-be rioters were impotent because they were under the spell of the totalitarian superstitions. They indulged in seditious babble and chanted inflammatory songs, but they wanted first of all government jobs.

Today the youth movement is dead in the countries most advanced on the way toward totalitarianism. In Russia, in Germany, and in Italy the children and the adolescents are firmly integrated into the allembracing apparatus of state control. Children from the tenderest age are members of the political organizations. From the cradle to the grave all citizens are subject to the machine of the one-party system, bound to obey without asking questions. No “private” associations or gatherings are permitted. The official apparatus does not tolerate any competition. The official ideology does not tolerate any dissenters. Such is the reality of the bureaucratic utopia.

2.

The Fate of the Rising Generation within a Bureaucratic Environment

The youth movement was an impotent and abortive revolt of youth against the menace of bureaucratization. It was doomed because it did not attack the seed of the evil, the trend toward socialization. It was in fact nothing but a confused expression of uneasiness, without any clear ideas and definite plans. The revolting adolescents were so completely under the spell of socialist ideas that they simply did not know what they wanted.

It is evident that youth is the first victim of the trend toward bureaucratization. The young men are deprived of any opportunity to shape their own fate. For them there is no chance left. They are in fact “lost generations” for they lack the most precious right of every rising generation, the right to contribute something new to the old inventory of civilization. The slogan: Mankind has reached the stage of maturity, is their undoing. What are young people to whom nothing is left to change and to improve? Whose only prospect is to start at the lowest rung of the bureaucratic ladder and to climb slowly in strict observance of the rules formulated by older superiors? Seen from their viewpoint bureaucratization means subjection of the young to the domination of the old. This amounts to a return to a sort of caste system.

Among all nations and civilizations—in the ages preceding the rise of modern liberalism and its offspring, capitalism—society was based on status. The nation was divided into castes. There were privileged castes such as kings and noblemen, and underprivileged castes such as serfs and slaves. A man was born into a definite caste, remained in it throughout his whole life, and bequeathed his caste status to his children. He who was born into one of the lower castes was forever deprived of the right to attain one of the stations of life reserved to the privileged. Liberalism and capitalism abolished all such discrimination and made all people equal under the law. Now virtually everybody was free to compete for every place in the community.

Marxism provides a different interpretation of liberalism’s achievements. The main dogma of Karl Marx is the doctrine of the irreconcilable conflict of economic classes. Capitalist society is divided into classes the interests of which are antagonistic. Thus the class struggle is inevitable. It will disappear only in the future classless society of socialism.

The most remarkable fact about this doctrine is that it has never been explicitly expounded. In the Communist Manifesto the instances used for the exemplification of class struggles are taken from the conflict between castes. Then Marx adds that the modern bourgeois society has established new classes. But he never said what a class is and what he had in mind in speaking of classes and class antagonisms and in coordinating classes to castes. All his writings center around these never-defined terms. Although indefatigable in publishing books and articles full of sophisticated definitions and scholastic hairsplitting, Marx never attempted to explain in unambiguous language what the characteristic mark of an economic class is. When he died, thirty-five years after the publication of the Communist Manifesto, he left the manuscript of the third volume of his main treatise, Capital, unfinished. And, very significantly, the manuscript breaks off just at the point at which the explanation of this fundamental notion of his entire philosophy was to be given. Neither Marx nor any one of the host of Marxian writers could tell us what a social class is, much less whether such social classes really play in the social structure the role assigned to them in the doctrine.

Of course, from the logical viewpoint it is permissible to classify things according to any trait chosen. The question is only whether a classification on the ground of the traits selected is useful for further investigation and for the clarification and amplification of our knowledge. The question is therefore not whether the Marxian classes really exist, but whether they really have the importance attached to them by Marx. Marx failed to provide a precise definition of the concept social class that he had used in all his writings in a loose and uncertain way, because a clear definition would have unmasked its futility and its valuelessness for dealing with economic and social problems and the absurdity of coordinating it to social castes.

The characteristic feature of a caste is its rigidity. The social classes, as Marx exemplified them in calling the capitalists, the entrepreneurs, and the wage earners distinct classes, are characterized by their flexibility. There is a perpetual change in the composition of the various classes. Where today are the scions of those who in the days of Marx were entrepreneurs? And where were the ancestors of the contemporary entrepreneurs in the days of Marx? Access to the various stations of modern capitalist society is open to everyone. We may call the United States senators a class without violating logical principles. But it would be a mistake to coordinate them to a hereditary aristocratic caste, notwithstanding the fact that some senators may be descendants of senators of earlier days.

The point has already been stressed that the anonymous forces operating on the market are continuously determining anew who should be entrepreneur and who should be capitalist. The consumers vote, as it were, for those who are to occupy the exalted positions in the setting of the nation’s economic structure.

Now under socialism there are neither entrepreneurs nor capitalists. In this sense, namely, that what Marx called a class will no longer exist, he was right to call socialism a classless society. But this is of no avail. There will be other differences in social functions which we can call classes with surely no less justification than that of Marx. There will be those who issue orders and those who are bound to obey these orders unconditionally; there will be those who make plans and those whose job it is to execute these plans.

The only thing that counts is the fact that under capitalism everybody is the architect of his own fortune. A boy eager to improve his own lot must rely on his own strength and effort. The vote of the consumers passes judgment without respect to persons. The achievements of the candidate, not his person, are valued. Work well done and services well rendered are the only means to succeed.

Under socialism, on the contrary, the beginner must please those already settled. They do not like too efficient newcomers. (Neither do old-established entrepreneurs like such men; but, under the supremacy of the consumers, they cannot prevent their competition.) In the bureaucratic machine of socialism the way toward promotion is not achievement but the favor of the superiors. The youth depends entirely on the kind disposition of the old men. The rising generation is at the mercy of the aged.

It is useless to deny this fact. There are no Marxian classes within a socialist society. But there is an irreconcilable conflict between those who are in favor with Stalin and Hitler and those who are not. And it is simply human for a dictator to prefer those who share his opinions and praise his work to those who do not.

It was in vain that the Italian Fascists made a hymn to youth their party song and that the Austrian socialists taught the children to sing: “We are young and this is fine.” It is not fine to be a young man under bureaucratic management. The only right that young people enjoy under this system is to be docile, submissive, and obedient. There is no room for unruly innovators who have their own ideas.

This is more than a crisis of the youth. It is a crisis of progress and civilization. Mankind is doomed when the youths are deprived of the opportunity to remodel society according to their own fashion.

3.

Authoritarian Guardianship and Progress

Paternal government by an order of lofty and wise men, by any elite of noble bureaucrats, can claim a very eminent champion, Plato.

Plato’s ideal and perfect state is to be ruled by unselfish philosophers. They are unbribable judges and impartial administrators, strictly abiding by the eternal immutable laws of justice. For this is the characteristic mark of Plato’s philosophy: It does not pay any attention to the evolution of social and economic conditions and to changes in human ideas concerning ends and means. There exists the perennial pattern of the good state, and every deviation of actual conditions from this model cannot be anything else than corruption and degradation. The problem is simply to establish the perfect society and then to keep it from any alteration, as change must be tantamount to deterioration. Social and economic institutions are rigid. The notion of progress in knowledge, in technological procedures, in business methods, and in social organization is foreign to Plato’s mind. And all later utopians who shaped the blueprints of their earthly paradises according to Plato’s example in the same way believed in the immutability of human affairs.

Plato’s ideal of elite rule has been converted into fact by the Catholic Church. The Roman Church, under the Tridentine organization as it emerged from the Counter-Reformation, is a perfect bureaucracy. It has successfully solved the most delicate problem of every nondemocratic government, the selection of the top executives. To every boy access to the highest dignities of the Church is virtually open. The local priest is anxious to smooth the way to education for the most intelligent youths of his parish; they are trained in the Bishop’s seminary; once ordained, their further career depends entirely upon their character, their zeal, and their intellect. There are among the prelates many scions of noble and wealthy families. But they do not owe their office to their ancestry. They have to compete, on almost equal terms, with the sons of poor peasants, workers, and serfs. The princes of the Catholic Church, the abbots and the teachers of the theological universities, are a body of eminent men. Even in the most advanced countries they are worthy rivals of the most brilliant scholars, philosophers, scientists, and statesmen.

It is to this marvelous instance that the authors of all modern socialist utopias refer as an example. The case is manifest with two forerunners of present-day socialism: Count Henri de Saint-Simon and Auguste Comte. But it was essentially the same with most other socialist authors, although for obvious reasons they did not point to the Church as a model. No precedent of a perfect hierarchy could be found other than that presented by Catholicism.

However, the reference to the Church is fallacious. The realm of Christianity which the Pope and the other Bishops administer is not subject to any change. It is built upon a perennial and immutable doctrine. The creed is fixed forever. There is no progress and no evolution. There is only obedience to the law and the dogma. The methods of selection adopted by the Church are very efficient in the government of a body clinging to an undisputed, unchangeable set of rules and regulations. They are perfect in the choice of the guardians of an eternal treasure of doctrine.

But the case of human society and civil government is different. It is the most precious privilege of man to strive ceaselessly for improvement and to fight by improved methods against the obstacles that nature opposes to his life and welfare. This innate impulse has transformed the descendants of crude cave dwellers into the somewhat civilized men of our age. But mankind has not yet reached a state of perfection beyond which no further progress is possible. The forces that brought about our present civilization are not dead. If not tied by a rigid system of social organization, they will go on and bring further improvement. The selective principle according to which the Catholic Church chooses its future chiefs is unswerving devotion to the creed and its dogmas. It does not look for innovators and reformers, for pioneers of new ideas radically opposed to the old ones. This is what the appointment of the future top executives by the old and well-tried present rulers can safeguard. No bureaucratic system can achieve anything else. But it is precisely this adamant conservatism that makes bureaucratic methods utterly inadequate for the conduct of social and economic affairs.

Bureaucratization is necessarily rigid because it involves the observation of established rules and practices. But in social life rigidity amounts to petrification and death. It is a very significant fact that stability and security are the most cherished slogans of present-day “reformers.” If primitive men had adopted the principle of stability, they would never have gained security; they would long since have been wiped out by beasts of prey and microbes.

German Marxians coined the dictum: If socialism is against human nature, then human nature must be changed. They did not realize that if man’s nature is changed, he ceases to be a man. In an all-round bureaucratic system neither the bureaucrats nor their subjects would any longer be real human beings.

4.

The Selection of the Dictator

All champions of salvation through the rule of noble despots blithely assume that there cannot be any doubt about the question of who this lofty ruler or class of rulers should be and that all men will voluntarily yield to the supremacy of this superhuman dictator or aristocracy. They do not realize that many men and groups of men could claim primacy for themselves. If the decision between various candidates is not left to majority vote, no principle of selection remains other than civil war. The alternative to the democratic principle of selection through popular election is the seizure of power by ruthless adventurers.

In the second century after Christ the Roman Empire was ruled according to a sublime elaboration of the Führer principle. The Emperor was the most able and eminent man. He did not bequeath his dignity to a member of his family, but he chose as successor the man whom he considered best fitted for the office. This system gave the Empire a succession of four great monarchs: Trajan, Hadrian, Antoninus Pius, and Marcus Aurelius. But then followed the era of the Praetorians, continuous civil war, anarchy, and rapid decay. The rule of the worst was substituted for the rule of the best. Ambitious generals, supported by mercenaries, seized power and ruled until another adventurer defeated them. Treachery, rebellion, and murder became the selective principle. Historians blame Marcus Aurelius, the last of the good emperors. He was guilty, they say, because he abandoned the practice of his predecessors and, instead of choosing the most suitable man, installed his incompetent son Commodus. However, a system that can be wrecked by the fault of only one man is a bad system, even if the fault were less pardonable and understandable than that of a father overrating the character and capacity of his offspring. The truth is that such a Führer system must necessarily result in permanent civil war as soon as there are several candidates for the supreme office.

All present-day dictators came into office through violence. They later had to defend their supremacy against the aspirations of rivals. Political language has coined a special term to refer to such actions: They are called purges. The successors of these dictators will rise to power through the same methods and will apply the same cruelty and ruthlessness in maintaining it. The ultimate basis of an all-round bureaucratic system is violence. The security that it allegedly gives is the turmoil of endless civil war.

5.

The Vanishing of the Critical Sense

The socialists assert that capitalism is degrading, that it is incompatible with man’s dignity, that it weakens man’s intellectual abilities and spoils his moral integrity. Under capitalism, they say, everybody must regard his fellowmen as competitors. Man’s innate instincts of benevolence and companionship are thus converted into hatred and a ruthless striving for personal success at the expense of all other people. But socialism will restore the virtues of human nature. Amicableness, fraternity, and comradeship will be the characteristic features of future man. What is needed first is to eliminate this worst of all evils, competition.

However, competition can never be eliminated. As there will always be positions which men value more highly than other positions, people will strive for them and try to outstrip their rivals. It is immaterial whether we call this emulation rivalry or competition. At any rate, in some way or other it must be decided whether or not a man ought to get the job he is applying for. The question is only what kind of competition should exist.

The capitalist variety of competition is to outdo other people on the market through offering better and cheaper goods. The bureaucratic variety consists in intrigues at the “courts” of those in power.

There was a good deal of flattery, adulation, servility, and cringing at the courts of all despotic rulers. But there had always been some men at least who were not afraid to tell a tyrant the truth. It is different in our day. Politicians and writers outdo one another in the adulation of the sovereign, the “common man.” They do not venture to impair their popularity by the expression of unpopular ideas. The courtiers of Louis XIV never went as far as some people go today in praising the Führers and their supporters, the masses. It seems that our contemporaries have lost all common sense and self-criticism.

At a Communist Party Congress a writer named Avdyenko addressed Stalin in these terms: “Centuries shall elapse and the communist generations of the future will deem us the happiest of all mortals that have inhabited this planet throughout the ages, because we have seen Stalin the leader genius, Stalin the Sage, the smiling, the kindly, the supremely simple. When I met Stalin, even at a distance, I throbbed with his forcefulness, his magnetism, and his greatness. I wanted to sing, to shriek, to howl from happiness and exaltation.”1 A bureaucrat addressing his superior on whom his promotion depends is less poetic but no less crawling.

When at the Diamond Jubilee of Emperor Francis Joseph a statistician attributed to the Emperor’s credit that after sixty years of his reign the country had many thousands of miles of railroads, while at its beginning there were much fewer, the public (and probably the Emperor himself) simply laughed at this piece of toadyism. But nobody laughed when the Soviet Government in the World’s Fairs of Paris and New York flamboyantly boasted of the fact that while the Russia of the Czars used no tractors at all, a quarter of a century later it had already imitated this new American invention.

Nobody ever believed that the paternal absolutism of Marie Thérèse and her grandson Francis was justified by the fact that Mozart, Haydn, Beethoven, and Schubert composed immortal music. But the symphony of a contemporary Russian composer who probably will be forgotten after a few years is claimed as a proof of the eminence of Soviet totalitarianism.

The question is whether the system of bureaucratic control or the system of economic freedom is more efficient. This question can be answered only by economic reasoning. The mere assertion of the fact that the cigarettes manufactured by the French Government’s tobacco monopoly were not so bad as to induce the French to give up smoking is not an argument in favor of government operation of industry. Neither is the fact that the cigarettes manufactured by the Greek Government’s monopoly were the delight of smokers. It is not a merit of the Greek bureaucrats that the climatic and physical conditions of their country make the tobacco grown by the peasants delicate and fragrant.

Every German took it for granted that the very essence and nature of things make it imperative that universities, railroads, telegraphs, and telephones be operated by the government. For a Russian the idea that a man could live without a passport, duly issued and authenticated by the police, always seemed paradoxical. Under the conditions that developed in the last thirty years the citizens of continental Europe became mere appurtenances of their identification papers. In many countries it was risky to go out for a walk without these documents. In most European countries a man has not been free to stay overnight in any place without immediately reporting to the local police department his sleeping place and every change of address.2

It is possible that some good may be derived from such regimentation. Of course, it is not of much use in fighting crime and prosecuting criminals. A murderer in hiding will not shrink from violating the law requiring a report of any change of address.3 In defending their system the bureaucrats become melodramatic. They ask the public how poor abandoned children could find their unscrupulous parents again. They do not mention that a smart detective might be able to find them. Moreover, the fact that there are some scoundrels cannot be considered a sufficient reason for restricting the freedom of the immense majority of decent people.

A profit-seeking enterprise is supported by the voluntary patronage of the public. It cannot subsist if customers do not pour in. But the bureaus forcibly acquire their “patrons.” That an office is approached by many people is not proof of its satisfying an urgent need of the people. It only shows that it interferes with matters that are important to the life of everyone.

The fading of the critical sense is a serious menace to the preservation of our civilization. It makes it easy for quacks to fool the people. It is remarkable that the educated strata are more gullible than the less educated. The most enthusiastic supporters of Marxism, Nazism, and Fascism were the intellectuals, not the boors. The intellectuals were never keen enough to see the manifest contradictions of their creeds. It did not in the least impair the popularity of Fascism that Mussolini in the same speech praised the Italians as the representatives of the oldest Western civilization and as the youngest among the civilized nations. No German nationalist minded it when dark-haired Hitler, corpulent Goering, and lame Goebbels were praised as the shining representatives of the tall, slim, fair-haired, heroic Aryan master race. Is it not amazing that many millions of non-Russians are firmly convinced that the Soviet regime is democratic, even more democratic than America?

This absence of criticism makes it possible to tell people that they will be free men in a system of all-round regimentation. People imagine a regime in which all means are owned by the state and the government is the sole employer as a realm of freedom. They never take into account the possibility that the almighty government of their utopia could aim at ends of which they themselves entirely disapprove. They always tacitly assume that the dictator will do exactly what they themselves want him to do.

VII

Is There Any Remedy Available?

1.

Past Failures

We must acknowledge the fact that hitherto all endeavors to stop the further advance of bureaucratization and socialization have been in vain. In the twenty-seven years that have passed since President Wilson led America into the war to make the world safe for democracy, democracy has lost more and more ground. Despotism triumphs in most of the European countries. Even America has adopted policies which, some decades ago, it disparaged as “Prussian.” Mankind is manifestly moving toward totalitarianism. The rising generation yearns for full government control of every sphere of life.

Learned lawyers have published excellent treatises depicting the progressive substitution of administrative arbitrariness for the rule of law.1 They have told the story of how the undermining of self-government makes all the rights of the individual citizen disappear and results in a hyperdespotism of the oriental style. But the socialists do not care a whit for freedom and private initiative.

Neither have satirical books been more successful than the ponderous tomes of the lawyers. Some of the most eminent writers of the nineteenth century—Balzac, Dickens, Gogol, Maupassant, Courteline—have struck devastating blows against bureaucratism. Aldous Huxley was even courageous enough to make socialism’s dreamed paradise the target of his sardonic irony. The public was delighted. But his readers rushed nonetheless to apply for jobs with the government.

Some people like to make fun of especially extravagant features of bureaucracy. It is indeed curious that the government of the world’s most powerful and richest nation runs an office—the Bureau of Home Economics of the United States Department of Agriculture—one of the tasks of which is to design trousers “for the very small child who is just learning to dress himself.” But for many of our contemporaries there is nothing ridiculous in this. They aim at a mode of government under which the production of hose, underwear, and all other useful things should be a task of the authorities.

All learned criticisms and witty satires are of no avail because they do not hit the core of the problem. Bureaucratization is only a particular feature of socialization. The main matter is: Capitalism or Socialism? Which?

The supporters of socialism contend that capitalism is an unfair system of exploitation, that it is extremely detrimental to the welfare of the masses and that it results in misery, degradation, and progressive pauperization of the immense majority. On the other hand, they depict their socialist utopia as a promised land of milk and honey in which everybody will be happy and rich. Are they right or are they wrong? This is the question.

2.

Economics versus Planning and Totalitarianism

This is entirely an economic problem. It cannot be decided without entering into a full scrutiny of economics. The spurious catchwords and fallacious doctrines of the advocates of government control, socialism, communism, planning, and totalitarianism cannot be unmasked except by economic reasoning. Whether one likes it or not, it is a fact that the main issues of present-day politics are purely economic and cannot be understood without a grasp of economic theory. Only a man conversant with the main problems of economics is in a position to form an independent opinion on the problems involved. All the others are merely repeating what they have picked up by the way. They are an easy prey to demagogic swindlers and idiotic quacks. Their gullibility is the most serious menace to the preservation of democracy and to Western civilization.

The first duty of a citizen of a democratic community is to educate himself and to acquire the knowledge needed for dealing with civic affairs. The franchise is not a privilege but a duty and a moral responsibility. The voter is virtually an officeholder; his office is the supreme one and implies the highest obligation. A citizen fully absorbed by his scientific work in other fields or by his calling as an artist may plead extenuating circumstances when failing in this task of self-instruction. Perhaps such men are right in pretending that they have more important tasks to fulfill. But all the other intelligent men are not only frivolous but also mischievous in neglecting to educate and instruct themselves for the best performance of their duties as sovereign voters.

The main propaganda trick of the supporters of the allegedly “progressive” policy of government control is to blame capitalism for all that is unsatisfactory in present-day conditions and to extol the blessings which socialism has in store for mankind. They have never attempted to prove their fallacious dogmas or still less to refute the objections raised by the economists. All they did was to call their adversaries names and to cast suspicion upon their motives. And, unfortunately, the average citizen cannot see through these stratagems.

Consider, for instance, the problem of mass unemployment prolonged year after year. The “progressive” interprets it as an evil inherent in capitalism. The naive public is ready to swallow this explanation. People do not realize that in an unhampered labor market, manipulated neither by labor-union pressure nor by government-fixed minimum wage rates, unemployment affects only small groups for a short time. Under free capitalism unemployment is a comparatively unimportant temporary phenomenon; there prevails a permanent tendency for unemployment to disappear. Economic changes may bring about new unemployment. But at the wage rates established in a free labor market everyone eager to earn wages finally gets a job. Unemployment as a mass phenomenon is the outcome of allegedly “pro-labor” policies of the governments and of labor-union pressure and compulsion.

This explanation is by no means peculiar to those economists whom the “progressives” call “reactionaries.” Karl Marx himself was fully convinced that labor unions cannot succeed in raising wage rates for all workers. The Marxian doctrinaires for many years firmly opposed all endeavors to fix minimum wage rates. They deemed such measures contrary to the interests of the great majority of wage earners.

It is an illusion to believe that government spending can create jobs for the unemployed, that is, for those who cannot get jobs on account of the labor unions’ or the government’s policies. If the government’s spending is financed by noninflationary methods, that is, either by taxing the citizens or by borrowing from the public, it abolishes on the one hand as many jobs as it creates on the other. If it is financed by inflation, that is, either by an increase of money and bank notes in circulation or by borrowing from the commercial banks, it reduces unemployment only if money wages lag behind the rise of commodity prices, that is, if and so far as real wage rates drop. There is but one way toward an increase of real wage rates for all those eager to earn wages: the progressive accumulation of new capital and the improvement of technical methods of production which the new capital brings about. The true interests of labor coincide with those of business.

The approach to a grasp of economic problems does not consist in an indiscriminate assimilation of more or less disconnected facts and figures. It consists rather in a careful analysis and examination of conditions by reasonable reflection. What is needed above all is common sense and logical clarity. Go right to the bottom of things is the main rule. Do not acquiesce in superficial explanations and solutions. Use your power of thinking and your critical abilities.

It would be a serious blunder to believe that this recommendation of economic studies aims at a substitution of another brand of propaganda for the propaganda of the various governments and parties. Propaganda is one of the worst evils of bureaucracy and socialism. Propaganda is always the propaganda of lies, fallacies, and superstitions. Truth does not need any propaganda; it holds its own. The characteristic mark of truth is that it is the correct representation of reality, i.e., of a state of affairs that is and works whether or not anybody recognizes it. The recognition and pronouncement of truth is as such a condemnation of everything that is untrue. It carries on by the mere fact of being true.

Therefore let the false prophets go on. Do not try to imitate their policies. Do not try as they do to silence and to outlaw dissenters. The liars must be afraid of truth and are therefore driven to suppress its pronouncement. But the advocates of truth put their hopes upon their own rightness. Veracity does not fear the liars. It can stand their competition. The propagandists may continue to spread their fables and to indoctrinate youth. They will fail lamentably.

Lenin and Hitler knew very well why they abolished freedom of thought, speech, and the press, and why they closed the frontiers of their countries to any import of ideas from abroad. Their systems could not survive without concentration camps, censors, and hangmen. Their main instruments are the GPU and the Gestapo.

The British champions of socialization and bureaucratization are no less fully aware than the Bolsheviks and the Nazis of the fact that under freedom of speech and thought they will never achieve their ends. Professor Harold Laski is frank enough to declare that a restriction of Parliament’s powers is necessary to safeguard the transition to socialism.2 Sir Stafford Cripps, the favorite candidate of the self-styled liberals for Prime Minister, has advised a “Planning and Enabling Act” which, once passed by Parliament, could not be discussed, still less repealed again. By virtue of this act, which should be very general and leave all “details” to the Cabinet, the Government would be endowed with irrevocable powers. Its orders and decrees should never be considered by Parliament; neither should there be a recourse to the Courts of Justice. All offices should be manned by “staunch party members,” by “persons of known Socialist views.”3 The British “Council of Clergy and Ministers for Common Ownership” declares in a pamphlet to which the Bishop of Bradford wrote the foreword that the establishment of real and permanent socialism requires “that all the fundamental opposition must be liquidated, i.e., rendered politically inactive by disfranchisement, and, if necessary, by imprisonment.”4 Professor Joan Robinson of Cambridge University, second only to Lord Keynes himself in the leadership of the Keynesian school, is no less intolerant in her zeal to realize socialism. In her opinion “the notion of freedom is a slippery one.” It is “only when there is no serious enemy, without or within, that full freedom of speech can be safely allowed.” Mrs. Robinson is not only afraid of independent churches, universities, learned societies, and publishing houses, but no less of independent theaters and philharmonic societies. All such institutions, she contends, should be allowed to exist only “provided the regime is sufficiently secure to risk criticism.”5 And another distinguished advocate of British collectivism, J. G. Crow ther, does not shrink from praising the blessings of inquisition.6 What a pity the Stuarts did not live to witness the triumph of their principles!

Thus the most eminent advocates of socialism implicitly admit that their tenets and plans cannot stand the criticism of economic science and are doomed under a regime of freedom.

But as happily there are still some free countries left there is still some hope for a resurrection of truth.

3.

The Plain Citizen versus the Professional Propagandist of Bureaucratization

The aim of the popularization of economic studies is not to make every man an economist. The idea is to equip the citizen for his civic functions in community life.

The conflict between capitalism and totalitarianism, on the outcome of which the fate of civilization depends, will not be decided by civil wars and revolutions. It is a war of ideas. Public opinion will determine victory and defeat.

Wherever and whenever men meet for discussing any affairs of their municipality, state, or nation, public opinion is in the process of evolving and changing, however trifling the immediate topic concerned may be. Public opinion is influenced by anything that is spoken or done in transactions between buyers and sellers, between employers and employees, between creditors and debtors. Public opinion is shaped in the debates of countless representative bodies, committees and commissions, associations and clubs, by editorials and letters to the editor, by the pleading of lawyers and by the opinions of judges.

In all these discussions the professionals have an advantage over the laymen. The odds are always in favor of those who devote all their effort exclusively to one thing only. Although not necessarily experts and often certainly not more clever than the amateurs, they enjoy the benefit of being specialists. Their eristic technique as well as their training is superior. They come to the encounter with rested mind and body, not tired after a long day’s work like the amateurs.

Now, almost all these professionals are zealous advocates of bureaucratism and socialism. There are, first of all, the hosts of employees of the governments’ and the various parties’ propaganda offices. There are furthermore the teachers of various educational institutions which curiously enough consider the avowal of bureaucratic, socialist, or Marxian radicalism the mark of scientific perfection. There are the editors and contributors of “progressive” newspapers and magazines, labor-union leaders and organizers, and finally leisured ambitious men anxious to get into the headlines by the expression of radical views. The ordinary businessman, lawyer, or wage earner is no match for them.

The layman may brilliantly succeed in proving his argument. It is of no use. For his adversary, clothed with the full dignity of his office or his professorship, shouts back: “The fallacy of the gentleman’s reasoning has long since been unmasked by the famous German professors, Mayer, Müller, and Schmid. Only an idiot can still cling to such antiquated and done-for ideas.” The layman is discredited in the eyes of the audience, fully trusting in professional infallibility. He does not know how to answer. He has never heard the names of these eminent German professors. Thus he does not know that their books are simple humbug, full of nonsense, and that they did not touch the problems which he raised. He may learn it later. But that cannot alter the fact that he has been defeated on the spot.

Or the layman may cleverly demonstrate the impracticability of some project suggested. Then the professional retorts: “This gentleman is so ignorant as not to know that the scheme proposed succeeded very well in socialist Sweden and in red Vienna.” Again our layman is silenced. How can he know that almost all English-language books on Sweden and Vienna are propaganda products badly distorting the facts? He has not had the opportunity of getting correct information from the original sources.

The climax of the professional’s oratory is, of course, always the reference to Russia, the paradise of the workers and peasants. For almost thirty years only fanatical communists and fellow travelers were permitted to enter Russia. Their reports are uncritical glorifications of the Soviets, some of them utterly dishonest, the rest childish in their naive credulity. It is one of the most comforting facts that some of these travelers abandoned in Russia their pro-Soviet leanings and, back home, published unvarnished accounts. But the professionals easily dispose of these books by calling their authors “Fascists.”

What is needed is to make the civic leaders fit for such encounters with professional preachers of bureaucratization and socialization. It is hopeless to stop the trend toward bureaucratization by the mere expression of indignation and by a nostalgic glorification of the good old times. These old days were not so good as they appear to some of our contemporaries. What was great in them was their reliance on the tendency toward improvement inherent in the system of unhampered market economy. They did not believe in the government’s godlikeness. This was their glory.

The most detrimental outcome of the average citizen’s repugnance to a serious concern with economic problems is his readiness to back a program of compromise. He looks upon the conflict between capitalism and socialism as if it were a quarrel between two groups—labor and capital—each of which claims for itself the whole of the matter at issue. As he himself is not prepared to appraise the merits of the arguments advanced by each of the parties, he thinks it would be a fair solution to end the dispute by an amicable arrangement: Each claimant should have a part of his claim. Thus the program of government interference with business acquired its prestige. There should be neither full capitalism nor full socialism, but something in between, a middle way. This third system, assert its supporters, should be capitalism regulated and regimented by government interference with business. But this government intervention should not amount to full government control of all economic activities; it should be limited to the elimination of some especially objectionable excrescences of capitalism without suppressing the activities of the entrepreneur altogether. Thus a social order will result which is allegedly as far from full capitalism as it is from pure socialism and, while retaining the advantages inherent in each of these two systems, will avoid their disadvantages. Almost all those who do not unconditionally advocate full socialism support this system of interventionism today and all governments which are not outright and frankly pro-socialist have espoused a policy of economic interventionism. There are nowadays very few who oppose any kind of government interference with prices, wage rates, interest rates, and profits and are not afraid to contend that they consider capitalism and free enterprise the only workable system, beneficial to the whole of society and to all its members.

Yet, the reasoning of the advocates of this middle solution is entirely fallacious. The conflict between socialism and capitalism is not a struggle between two parties for a greater share in the social dividend. To see the matter this way is tantamount to a full acceptance of the tenets of the Marxians and the other socialists. The adversaries of socialism deny that any class or group would fare better under socialism than under outright capitalism. They contest the thesis that the workers would be better off in a socialist commonwealth and are, consequently, wronged by the very existence of the capitalist system. They do not recommend capitalism for the sake of selfish interests of the entrepreneurs and capitalists but for the sake of all members of society. The great historical conflict concerning the problem of society’s economic organization cannot be dealt with like a quarrel between two businessmen concerning an amount of money; it cannot be solved by splitting the difference.

Economic interventionism is a self-defeating policy. The individual measures that it applies do not achieve the results sought. They bring about a state of affairs, which—from the viewpoint of its advocates themselves—is much more undesirable than the previous state they intended to alter. Unemployment of a great part of those ready to earn wages, prolonged year after year, monopoly, economic crisis, general restriction of the productivity of economic effort, economic nationalism, and war are the inescapable consequences of government interference with business as recommended by the supporters of the third solution. All those evils for which the socialists blame capitalism are precisely the product of this unfortunate, allegedly “progressive” policy. The catastrophic events which are grist for the mills of the radical socialists are the outcome of the ideas of those who say: “I am not against capitalism, but . . .” Such people are virtually nothing but pacemakers of socialization and thorough bureaucratization. Their ignorance begets disaster.

Division of labor and specialization are essential features of civilization. But for them, both material prosperity and intellectual progress would be impossible. The existence of an integrated group of scientists, scholars, and research workers is an outcome of the division of labor just as is the existence of any other class of specialists. The man who specializes in economics is a specialist like all other specialists. The further advancement of economic science will in the future also be an achievement of men devoting all their endeavors to this task.

But it would be a fateful error for the citizens to leave concern with economic studies to the professionals as their exclusive domain. As the main issues of present-day politics are essentially economic, such a resignation would amount to a complete abdication of the citizens for the benefit of the professionals. If the voters or the members of a parliament are faced with the problems raised by a bill concerning the prevention of cattle diseases or the construction of an office building, they may leave the discussion of the details to the experts. Such veterinarian and engineering problems do not interfere with the fundamentals of social and political life. They are important but not primary and vital. But if not only the masses but even the greater part of their elected representatives declare: “These monetary problems can only be comprehended by specialists; we do not have the inclination to study them; in this matter we must trust the experts,” they are virtually renouncing their sovereignty to the professionals. It does not matter whether or not they formally delegate their powers to legislate or not. At any rate the specialists outstrip them. The bureaucrats carry on.

The plain citizens are mistaken in complaining that the bureaucrats have arrogated powers; they themselves and their mandatories have abandoned their sovereignty. Their ignorance of fundamental problems of economics has made the professional specialists supreme. All technical and juridical details of legislation can and must be left to the experts. But democracy becomes impracticable if the eminent citizens, the intellectual leaders of the community, are not in a position to form their own opinion on the basic social, economic, and political principles of policies. If the citizens are under the intellectual hegemony of the bureaucratic professionals, society breaks up into two castes: the ruling professionals, the Brahmins, and the gullible citizenry. Then despotism emerges, whatever the wording of constitutions and laws may be.

Democracy means self-determination. How can people determine their own affairs if they are too indifferent to gain through their own thinking an independent judgment on fundamental political and economic problems? Democracy is not a good that people can enjoy without trouble. It is, on the contrary, a treasure that must be daily defended and conquered anew by strenuous effort.

Conclusion

The analysis of the technical characteristics of bureaucratic management and of its opposite, profit management, provides a clue for a fair and unbiased valuation of both systems of doing things under the division of labor.

Public administration, the handling of the government apparatus of coercion and compulsion, must necessarily be formalistic and bureaucratic. No reform can remove the bureaucratic features of the government’s bureaus. It is useless to blame them for their slowness and slackness. It is vain to lament over the fact that the assiduity, carefulness, and painstaking work of the average bureau clerk are, as a rule, below those of the average worker in private business. (There are, after all, many civil servants whose enthusiastic fervor amounts to unselfish sacrifice.) In the absence of an unquestionable yardstick of success and failure it is almost impossible for the vast majority of men to find that incentive to utmost exertion that the money calculus of profit-seeking business easily provides. It is of no use to criticize the bureaucrat’s pedantic observance of rigid rules and regulations. Such rules are indispensable if public administration is not to slip out of the hands of the top executives and degenerate into the supremacy of subordinate clerks. These rules are, moreover, the only means of making the law supreme in the conduct of public affairs and of protecting the citizen against despotic arbitrariness.

It is easy for an observer to indict the bureaucratic apparatus for extravagance. But the executive with whom the responsibility for perfect service rests sees the matter from another angle. He does not want to run too high a risk. He prefers to be on the safe side and to be doubly sure.

All such deficiencies are inherent in the performance of services which cannot be checked by money statements of profit and loss. Indeed we would never have recognized that they really are deficiencies if we were not in a position to compare the bureaucratic system with the operation of profit-seeking enterprise. This much-abused system of the “mean” striving for profit made people efficiency conscious and eager for the utmost rationalization. But we cannot help it. We must put up with the fact that one cannot apply to a police department or to the office of a tax collector the well-tried methods of profit-seeking business.

Yet the whole matter takes on a quite different meaning in view of the fanatical endeavors to transform the entire apparatus of production and distribution into a mammoth bureau. Lenin’s ideal of taking the organization of the government’s postal service as the pattern of society’s economic organization and of making every man a cog in a vast bureaucratic machine1 makes it imperative to unmask the inferiority of bureaucratic methods when compared with those of private business. The aim of such a scrutiny is certainly not to disparage the work of tax collectors, customs officers, and patrolmen or to belittle their achievements. But it is necessary to show in what essential respects a steel plant differs from an embassy and a shoe plant from a marriage license bureau, and why it would be mischievous to reorganize a bakery according to the pattern of the post office.

What is called in a very biased terminology the substitution of the service principle for the profit principle would result in an abandonment of the only method making for rationality and calculation in the production of necessities. The profit earned by the entrepreneur is expressive of the fact that he has well served the consumers, that is, all the people. But with regard to the performance of bureaus no method for establishing success or failure by calculation procedures is available.

In any socialist system the central board of production management alone would have the power to order, and everybody else would have to carry out the orders received. All people except the production czar would have to comply unconditionally with instructions, codes, rules, and regulations drafted by a superior body. Of course every citizen might have the right to suggest some changes in this immense system of regimentation. But the way from such a suggestion to its acceptance by the competent supreme authority would at best be as far and onerous as the way is today from a letter to the editor or an article in a periodical suggesting an amendment of a law to its passage by the legislature.

There have been in the course of history many movements asking with enthusiasm and fanaticism for a reform of social institutions. People fought for their religious convictions, for the preservation of their civilization, for freedom, for self-determination, for the abolition of serfdom and slavery, for fairness and justice in court procedure. Today millions are fascinated by the plan to transform the whole world into a bureau, to make everybody a bureaucrat, and to wipe out any private initiative. The paradise of the future is visualized as an all-embracing bureaucratic apparatus. The most powerful reform movement that history has ever known, the first ideological trend not limited to a section of mankind only but supported by people of all races, nations, religions, and civilizations, aims at all-round bureaucratization. The post office is the model for the construction of the New Jerusalem. The post-office clerk is the prototype of future man. Streams of blood have been shed for the realization of this ideal.

In this book we are discussing not persons but systems of social organization. We do not mean that the post-office clerk is inferior to anybody else. What must be realized is only that the straitjacket of bureaucratic organization paralyzes the individual’s initiative, while within the capitalist market society an innovator still has a chance to succeed. The former makes for stagnation and preservation of inveterate methods, the latter makes for progress and improvement. Capitalism is progressive, socialism is not. One does not invalidate this argument by pointing out that the Bolshevists have copied various American innovations. So did all oriental peoples. But it is a non sequitur to deduce from this fact that all civilized nations must copy the Russian methods of social organization.

The champions of socialism call themselves progressives, but they recommend a system which is characterized by rigid observance of routine and by a resistance to every kind of improvement. They call themselves liberals, but they are intent upon abolishing liberty. They call themselves democrats, but they yearn for dictatorship. They call themselves revolutionaries, but they want to make the government omnipotent. They promise the blessings of the Garden of Eden, but they plan to transform the world into a gigantic post office. Every man but one a subordinate clerk in a bureau, what an alluring utopia! What a noble cause to fight for!

Against all this frenzy of agitation there is but one weapon available: reason. Just common sense is needed to prevent man from falling prey to illusory fantasies and empty catchwords.

The typeface used in setting this book is Electra, designed in 1935 by the great American typographer William Addison Dwiggins. Dwiggins was a student and associate of Frederic Goudy and served for a time as acting director of Harvard University Press. In his illustrious career as typographer and book designer (he coined the term “graphic designer”), Dwiggins created a number of typefaces, including Metro and Caledonia, and designed as well many of the typographic ornaments or “dingbats” familiar to readers.

Electra is a crisp, elegant, and readable typeface, strongly suggestive of calligraphy. The contrast between its strokes is relatively muted, and it produces an even but still “active” impression in text. Interestingly, the design of the italic form—called “cursive” in this typeface—is less calligraphic than the italic form of many faces, and more closely resembles the roman.

This book is printed on paper that is acid-free and meets the requirements of the American National Standard for Permanence of Paper for Printed Library Materials, z39.48–1992. (archival)

Book design adapted by Erin Kirk New, Watkinsville, Georgia, after a design by Martin Lubin Graphic Design, Jackson Heights, New York

Typography by Newgen

Printed and bound by Worzalla Publishing Company, Stevens Point, Wisconsin

[1. ]Cf. G. M. Trevelyan, A Shortened History of England (London, 1942), p. 510.

[2. ]Georg Friedrich Knapp in his Presidential Address, delivered on May 1, 1891. This speech was published in many reprints. The words quoted are to be found on p. 86 of the 1909 edition of Die Landarbeiter in Knechtschaft und Freiheit.

[* ]Cf. Lenin, State and Revolution (1917; in 1932 edition of International Publishers, New York), pp. 44, 83, and 84.

[* ][Editor’s note: The Prussian king’s top adviser was respected as the “Official Chief Privy Counselor.”]

[1. ]W. E. Woodward, A New American History (New York, 1938), p. 808. On the jacket of this book we read: “Any right-thinking parent today, conversant with all the facts, would probably find Benedict Arnold in general far more satisfactory than Lincoln as a pattern for his son.” It is obvious that those who hold such views will not find any fault with the un-Americanism of bureaucracy.

[2. ]See below pp. 96–97.

[3. ]Cf. Marshall E. Dimock and Howard K. Hyde, Bureaucracy and Trusteeship in Large Corporations, TNEC Monograph No. 11, p. 36.

[4. ]Cf. Dimock and Hyde, loc. cit., p. 44, and the articles quoted by them.

[5. ]This is not an essay on the social and economic consequences of taxation. Thus there is no need to deal with the effects of the inheritance taxes, the impact of which has already been perceptible in this country for many years, while the above-described effects of the income tax are a recent phenomenon.

[* ][Editor’s note: L’Ancien Regime (1856); The Old Regime and the Revolution, ed. François Furet and Françoise Mélonio, trans. Alan S. Kahan (Chicago: University of Chicago Press, 1998).]

[1. ]These observations do not imply any criticism of the prewar policies pursued by the British and American authorities. Only a man who had knowledge of the military events of 1941–43 many years before they occurred would have the right to blame other people for their lack of foresight. Governments are not omniscient, as the planners would have us believe.

[2. ]Wilhelm Meister’s Apprenticeship, Book I, chap. X.

[1. ]This is not a definition of democratic government but a description of the administrative technique of democratic government. The definition of democratic government is: A system of government under which those ruled are in a position to determine, directly by plebiscite or indirectly by election, the exercise of the legislative and executive power and the selection of the supreme executives.

[2. ]J. M. Juran, Bureaucracy, a Challenge to Better Management (New York, 1944), p. 75.

[3. ]Juran, loc. cit., pp. 34, 76.

[* ][Editor’s note: Mises frequently cited Lenin’s plan “to organize the whole national economy like the postal system,” as he did in the Preface to the 1962 paperback edition (p. xvi of this book). See Lenin’s State and Revolution (1917; New York: International Publishers, 1932, pp. 44, 83, and 84).]

[1. ]For a more searching treatment of this primordial problem, see Mises, Socialism: An Economic and Sociological Analysis, translated by A. Kahane (New York, 1936; Yale, 1951; Liberty Fund, 1980), chapter 5, section 3; chapter 6, section 2; and appendix; Mises, Nationalökonomie (Geneva, 1940), pp. 188–223, 634–45. In Mises’s Human Action (1949 and later editions), see Part 3, “Economic Calculation.” See also Hayek, Collectivist Economic Planning (London, 1935); Hayek, “Socialist Calculation: The Competitive Solution” (Economica VII, 125–49), reprinted in Individualism and Economic Order (London, 1949), 181–208. [Citations have been updated. Ed.]

[2. ]Mises, Omnipotent Government (New Haven, 1944), pp. 55–58.

[* ][Editor’s note: Harold L. Ickes, U.S. secretary of the interior from 1933 to 1946.]

[1. ]The New York Times Magazine, January 16, 1944, p. 9.

[1. ]Such is the political interpretation of the issue. For the current economic interpretation see below pp. 96–97.

[2. ]Cf. Laband, Das Staatsrecht des Deutschen Reiches (5th ed. Tübingen, 1911), I, 500.

[* ][Editor’s note: Gustav Stresemann served as chancellor of Germany in 1923 and as minister of foreign affairs 1923–29.]

[3. ]Cf. Pohle, Die gegenwärtige Krise der deutschen Volkswirtschaftslehre (2d ed. Leipzig, 1921).

[4. ]Sidney and Beatrice Webb, Soviet Communism: A New Civilization? (New York, 1936), II, 1000.

[1. ]As quoted by W. H. Chamberlin, Collectivism, a False Utopia (New York, 1937), p. 43.

[2. ]Thus the files of the police departments of many European cities provide full information for the last hundred or even hundred and fifty years concerning every resident’s or visitor’s sojourn and all his changes of address. A priceless and well-exploited source of knowledge indeed for biographers.

[3. ]It seems curious to Americans that in many European trials the jury was asked to answer two questions like this: First, is the defendant guilty of having murdered the victim? Secondly, is the defendant guilty of not having duly reported his change of address?

[1. ]It may suffice to quote two of the most brilliant books of this class: The New Despotism by Lord Hewart of Bury, Lord Chief Justice of England (New York, 1929), and Our Wonderland of Bureaucracy by James M. Beck, former Solicitor General of the United States (New York, 1932). It is noteworthy that the latter book was published before the inauguration of the New Deal.

[2. ]Laski, Democracy in Crisis (London, 1933), p. 87. For a masterful refutation of Laski’s anti-democratic ideas cf. Rappard, The Crisis of Democracy (Chicago, 1938), pp. 213–16.

[3. ]Cf. the brilliant article of James Truslow Adams, “Planners See Where Planning Leads” in Barron’s National Business and Financial Weekly of January 31, 1944, p. 3.

[4. ]Ibid.

[5. ]Joan Robinson, Private Enterprise or Public Control (Handbooks for Discussion Groups, published for the Association for Education in Citizenship by the English Universities Press Ltd.), pp. 13–14. It is strange that in the Preface to this booklet the Association declares “we advocate democracy” and points out that its objective is to train the citizens “in respect for the equal rights and freedoms of others.”

[6. ]J. G. Crowther, Social Relations of Science (Macmillan, 1941), pp. 331, 333.

[1. ]Lenin, State and Revolution (1917; New York ed., 1935), p. 44.
Back to Top
4: H.B. Acton, The Illusion of the Epoch: Marxism-Leninism as a Philosophical Creed [1955]

H.B. Acton, The Illusion of the Epoch: Marxism-Leninism as a Philosophical Creed (Indianapolis: Liberty Fund, 2003).

Accessed from oll.libertyfund.org/title/877 on 2008-03-05

© 1962 by H. B. Acton. The copyright to this edition, in both print and electronic forms, is held by H.B. Acton’s estate. It is reproduced here by permission and may not be reproduced in any form without written permission.

Preface

The following work arose from a Seminar which I gave in the University of Chicago in the summer of 1949. I am grateful to my wife for her help in removing obscurities, to Mr. R. N. Carew Hunt for generously putting his Marxist scholarship at my disposal and for reading and commenting on the major part of the manuscript, and to Professor E. E. Turner, F.R.S., for advice in connection with Part One, Chapter II, Section 7. The Aristotelian Society has been good enough to allow me to reproduce a passage that originally appeared in their 1951–52 Proceedings.

For this second impression I have corrected some misprints and expanded footnotes and references when new editions and translations of the books referred to have made this necessary.

Mr. Emile Burns’s remark in The Marxist Quarterly (October 1955) suggesting that Engels did not regard equality as the chief element of the morality of the future raises the question of the importance of equality of reward in Marxism-Leninism. Marx applauded the Paris Commune for paying a working-man’s wage to all revolutionary functionaries no matter how important, but he also said that during the period of socialism (as distinct from the ultimate communism) payment would vary in accordance with output. Lenin regarded differential rewards as unwelcome and temporary necessities. Stalin, however, said it was un-Marxist to advocate equality of incomes during the period prior to communism (see S. Dobrin, “Lenin on Equality and the Webbs on Lenin,” Soviet Studies 1956–57). The conclusion I draw is that on the Marxist-Leninist view equality of incomes is impracticable before the advent of communism and unnecessary afterward, when there will be enough to satisfy all needs. Marxist-Leninists who live in non-Marxist societies will, of course, as Engels says, advocate equality “as an agitational means in order to rouse the workers against the capitalists on the basis of the capitalists’ own assertions” (Anti-Dühring).

Mr. John Plamenatz (The British Journal of Sociology, June 1956) makes two interesting criticisms of what I wrote. He says that Marxists are not necessarily committed to “total planning,” but only claim to have knowledge which would enable the planners to decide what to control and what to leave alone. In practice this may be so (though even democratic governments find that their plans have to take in more and more of human life), but in principle I think the Marxist ideal requires nature to be wholly tamed and humanized. Mr. Plamenatz also criticizes my view that the Marxist distinction between basis and superstructure requires what are really inseparable factors to act causally upon one another. Social factors, he says, which may be distinguishable but incapable of existing in isolation, may be related to one another in such a way that some are more fundamental than others. There is not space for me to discuss this interesting point here. All I can say is that insofar as aspects are abstractions, they are fundamental or derivative in a logical sense, according to which what is not fundamental is what is logically derivative. Discussion of this topic, therefore, takes us into the realm of sociological concepts and their logical relationships.

Since the first impression of this book, the Foreign Languages Publishing House, Moscow, has published translations in English of The Holy Family (Moscow, 1956, Lawrence and Wishart, London, 1957), and of the Economic and Philosophic Manuscripts (Moscow, no date, Lawrence and Wishart, London, 1959). Reference should also be made to Osnovy Marksistskoj Filosofii (Moscow, 1958), the joint work of a number of Soviet philosophers. A summary and brief discussion of it may be read in J. M. Bochenski’s Die Dogmatischen Grundlagen der Sowjetischen Philosophie (Reidel, Dordrecht, Holland, 1959). The Foreign Languages Publishing House, Moscow, has also published (no date given) Fundamentals of Marxism-Leninism, Manual (described as translated from the Russian and as edited by Clemens Dutt). This is also a joint work, but by a different set of Soviet authors. I do not think that either of these books renders necessary any alteration of my account of the Marxist-Leninist philosophy.

H. B. Acton
Bedford College, July, 1961

Introduction

Marxism is such an important influence in the contemporary world that there is no need to apologize for trying to understand and assess it. In Great Britain the tendency has been to consider it primarily as a body of economic and social doctrine, and to concentrate attention on such parts of it as the accounts of surplus value, historical materialism, the class struggle, the alleged decline of capitalism, the struggle for markets and imperialism. This is natural enough, since these are the elements of Marxism that are most obviously relevant to policies of action. Marxism, however, is much more than a system of social and economic doctrines. It is also, in a wide sense of the word, a philosophy. When we talk about a philosophy in this way we mean a system of thought and conduct comprising views about the most general and significant features of the universe, and about the principal purposes of human life. In the German language the word Weltanschauung is used for such a system, but the translations “world-outlook” or “world-view” do not seem to have established themselves in English, so that we had better continue to use the word “philosophy,” which is, indeed, widely understood in this sense. It will be seen that a philosophy comprises views about the most general and significant features of the universe. Such views are often called metaphysical, and the study of them metaphysics. A philosophy, in the sense we are considering, also comprises an account of the principal purposes of human life, and this is its ethical part. Thus a philosophy consists of a metaphysics and an ethics that is generally supposed to depend on it. Some philosophies are fundamentally religious, and people may thus talk of the Christian or the Buddhist philosophy. Some philosophies, again, have been carefully reasoned out and defended by arguments, as were those of Plato, for example, or of Epicurus or Spinoza. Marxism is an anti-religious philosophy first formulated by Marx and Engels, who did not, however, attempt such a closely reasoned account of their view as a whole as Plato or Epicurus or Spinoza did of theirs. The economic and social doctrines of surplus value, historical materialism and the rest are believed by Marxists to gain in depth and significance by belonging to such a system, and in countries where they can decide what is taught in schools and universities Marxists see to it that their philosophy informs the whole curriculum. It is this philosophy in its most general terms as metaphysics and as ethics that I wish to discuss in language that presupposes no technical training in philosophy.

Contemporary British philosophy is not at all sympathetic toward philosophical systems of any kind, and is especially opposed to those of them that provide reasons for policies of individual or social action. Metaphysical theories according to which, for example, the universe is all matter, or all mind, or both, or neither, are criticized on the ground that their propounders unwittingly misuse language and appear to be saying something important about the world when they are really talking nonsense, or recommending a peculiar vocabulary, or following a linguistic trail that ends up in the wilderness, or stressing an analogy that other people may not wish to stress. It is further argued that, even if metaphysical theories about the universe as a whole were not fundamentally misconceived, they could still provide no grounds for one sort of social policy rather than another. The philosophers who accept these views believe, therefore, that they have exposed the illegitimacy of all metaphysical theories about the universe as a whole, and of all practical policies in so far as they are supposed to be based on such theories. The result is that, though they are themselves called philosophers, many of them do not very often discuss philosophies in the sense in which I have been using the word. Even if they do, it is usually by the way and in very general terms, so that Marxism, as one of them, is thus left to be dealt with by economists, social theorists, or historians. I think it is possible that some economists, social theorists, and historians might welcome an attempt on the part of a philosopher to discuss the philosophy of Marxism in some detail instead of merely stigmatizing it as one disreputable member of a thoroughly disreputable class. In any case, the educated public are entitled to expect that some philosopher will try to interpret this philosophy on its merits, with a view to its consistency and suggestiveness, in case there are things of importance to be said about it apart from the criticisms that apply no more to it than they do to other metaphysico-ethical systems.

Now the writings of Karl Marx, and of his faithful supporter Friedrich Engels, form the basis of two socialist movements that are bitterly opposed to one another, the reformist Marxists on the one hand, who are often known today as Social Democrats, and the Communist Party Marxists on the other hand, who regard the government of the U.S.S.R. as the chief vehicle and director of Marxist policy. It is this latter form of Marxism that I shall discuss. There has been, so to say, an apostolical succession from Marx and Engels themselves, through Lenin to Stalin and the spokesmen who have succeeded him. The exponents of this form of Marxism call it “Marxism-Leninism.” Indeed for a time, I believe, they contemplated calling it “Marxism-Leninism-Stalinism,” but were happily deterred by the cumbrousness of the expression. But whatever we call it, its exponents are right, it seems to me, in regarding it as based on and continuous with the doctrines and directives that Marx and Engels handed on. Certainly both Lenin and Stalin were most assiduous in using the writings of Marx and Engels as their chief theoretical guide. It is not inappropriate, therefore, to give the name “Marxism” to the whole tradition that Marx and Engels inaugurated and which Lenin and Stalin have continued. Indeed it has on occasion an advantage over the term “Marxism-Leninism” in that it enables us to avoid the awkwardness of calling Marx and Engels “Marxist-Leninists” before Lenin had been born.

I have not dealt with the doctrines of the Marxist philosophy in the historical order in which they were published. What I have called the Marxist metaphysics, and what they themselves call Dialectical Materialism, is regarded by Marxists as fundamental, and I have therefore given over the first part of the book to a discussion of it, leaving the social theory and ethics, which they call Scientific Socialism, for the second part. Nor have I been concerned to keep a historical order within each part, but have chosen those statements of a view that seemed best designed to introduce it, whether they were by Marx, Engels, Lenin, or Stalin. I have frequently referred, however, to such early writings as the Holy Family, the German Ideology, and the Paris Manuscripts. These are the writings that philosophers are likely to find of most interest because in them Marx—and in the Holy Family and German Ideology Engels also—discusses philosophical issues raised by Hegel and Feuerbach. Marx’s doctoral dissertation was on the philosophies of Democritus and Epicurus, and at one time he had hoped to become a professor of philosophy. In these early writings we can sometimes see fundamental features of Marx’s thought more clearly than in the later ones. I agree, therefore, with those scholars who have used these works to throw light on the argument of Capital. Their influence on later Marxism was, of course, only via Marx and Engels themselves, since the Paris Manuscripts and the German Ideology were only published in their entirety in the nineteen-thirties, and the Holy Family was extremely rare until it was republished about the same time. These early writings, then, are valuable as aids to the interpretation of the general drift of the Marxist philosophy, and that, as well as their intrinsic interest, is what has led me to refer to them so often.

In a work of this sort it is essential to base one’s interpretations on detailed references to the texts. When I know of English translations I have referred to them, and have generally, though not always, used them in quoting. I have had to make my own translations of passages from works that have not been translated into English. This documentation of the Marxist classics has led to so many footnotes that I have been very sparing with other references. I have not, for example, given references to those views of Fourier which, I believe, must have greatly influenced the Marxist ethics. Nor, again, have I discussed the views of other expositors and critics of Marxism at the length that they deserve, so that the number of my references to the writings of Hans Barth, Karl Popper, Hook, and Bober, to mention only a few—all of them writers on Marx himself rather than on Marxism in the sense in which I am using the word—is small in proportion to their importance and to the benefit to be derived from them. In brief, I should say that the chief aim of this book is to expound and interpret the philosophy of Marxism, that the next aim is to criticize it, and that a subsidiary aim is to show its kinship with some other philosophies.

The book commences, then, with an account of Dialectical Materialism. The word “materialist” is often used by preachers and others to stand for someone whose life is spent in the pursuit of material wealth for his own satisfaction. In this moral sense of the word a materialist is a selfish seeker after comfort and luxury. I need hardly say that it is not in this sense of the word that Marxists regard themselves as materialists. Nevertheless, there is an important connection between their moral beliefs and their materialist theory. For while they advocate the pursuit of objects more valuable than food and drink, they put great stress upon the ways in which higher values are rooted in such essential physical needs. Thus, while their opponents sometimes accuse Marxists of having low aims, Marxists, for their part, are apt to reply that the idealism of their critics is impracticable or even hypocritical. This, however, is a matter that must be left over for discussion in Part Two. In the meantime it is sufficient to say that “materialism” is not primarily understood in the moral or rhetorical sense just indicated.

Involved in their description of themselves as materialists there are, I think, three main contentions. In the first place, Marxists hold that material things exist independently of perception of, or thought about, them. This is the view which philosophers call Realism. In the second place, they hold that matter existed before minds existed, and that minds have developed out of matter. This is a view about the world that philosophers have sometimes called Naturalism. In the third place, they hold that matter is not adequately understood in mechanical terms, but needs to be understood in dialectical terms. This is the main respect in which Marxist materialism differs from other forms of that philosophy. In Part One I shall discuss each of these views in turn.

Part One

Dialectical Materialism

I

Marxist Realism

1.

Idealism and Phenomenalism

“‘Naïve realism,’” writes Lenin, is “the instinctive, unconscious materialist standpoint adopted by humanity, which regards the external world as existing independently of our minds.”1 He also says: “The ‘naïve realism’ of any healthy person who has not been an inmate of a lunatic asylum, or a pupil of the idealist philosophers, consists in the view that things, the environment, the world, exist independently of our sensation, of our consciousness, of our self, and of man in general. . . . Materialism deliberately makes the ‘naïve’ belief of mankind the foundation of its theory of knowledge.”2 From these sentences it is clear that Lenin believed it was important to say that a physical world exists independently of any single mind, and independently of all human minds.

To say these things, however, is to say what everyone (apart from a few Christian Scientists and perhaps some visionary philosophers) regards as obvious. Is it not quite certain that mountains, seas, and nebulae exist whether anyone is observing them or not? It is true, of course, that there are some material things, such as bridges and spoons, which owe many of their features to the men who made them. But surely they, no less than things which men have had no part in shaping, exist, once they are made, independently of their being perceived? Indeed, once this question is raised, the simple answer seems to be that what distinguishes perception from imagination or hallucination just is that what we perceive is something independent of our perceiving, whereas what we imagine or are deceived about somehow depends on some activity or defect within ourselves. We are thus inclined to say that unless the object perceived is something that exists independently of our perception, we are not really perceiving at all. Perceiving (which includes seeing, hearing, touching, tasting, smelling, or a combination of these) just is becoming aware of something independent of the perception.

This is taken for granted by the vast majority of people, but by Marxists and by other philosophers who hold a realist theory of perception it is proclaimed as an important truth. It is almost as though someone were to make a parade of enunciating some such platitude as that fishes live in water. It would only be worth while asserting this if someone had denied it, and the reason for asserting the realist platitude is that in modern times some men of obvious ability and seriousness have denied it, or have appeared to do so. The non-Marxist realists are mainly concerned to show that the denial of this platitude is an error. Marxists endeavor to show that its denial is not only mistaken as a matter of theory but is practically harmful too.

The circumstances in which the realist platitude came to be denied may be briefly described as follows. In the seventeenth century a number of writers, of whom Thomas Hobbes was the ablest and best known, inspired, in part, by the growth of mathematical physics, revived in a modified form the materialism which had been advocated in the ancient world by Democritus and the Epicureans. These ancient materialists had held that the physical things that to sight and touch appear solid and undivided are really composed of large numbers of ultimate, indivisible particles. In the heavier bodies the particles, which were called atoms, were closely packed together; in the lighter ones there was more empty space between them. They also held that souls were composed of similar but smaller atoms capable of slipping in between the larger atoms that composed living bodies. At death, both the atoms that formed the body and those that formed the soul became disarranged and at last dispersed, forming new bodies and new souls. These philosophers combined with their materialism a moral and psychological theory known as hedonism, according to which all living beings necessarily sought pleasure and avoided pain, the moral terms “good” and “bad” being therefore names for the pleasant and painful respectively. Thus, on their view morality consisted in the intelligent pursuit of pleasure and avoidance of pain. Materialists of the seventeenth century thought that this system of ideas, which in ancient times had been mainly a brilliant speculation, was supported by the mathematical physics of their own day. They believed that the behavior of things like rivers and billiard balls depended upon the nature and arrangement of the minute physical parts that composed them, so that an understanding of the larger scale things depended upon a knowledge of these material elements. As views such as these spread from scholars to the wider educated public, there were some who came to talk as though the sole realities were atoms and the space in which they moved, and everything else mere appearance or illusion. Heat was really a certain sort of agitation of particles, sound was really a movement of the air, and there was good authority for maintaining that even light was corpuscular in nature. Some of “the wits” of the time associated with this view about nature a cynical version of the morality of pleasure quite foreign to anything that Epicurus had taught, but nevertheless based on his views. Free-thinkers, atheists, and men of the world thus found a philosophy on which could be supported their denials of the existence of God, of the immortality of the soul, and of the freedom of the will.

It was in refutation of views of this sort, as well as in refutation of the skepticism that prepared the way for them, that Berkeley constructed his “idealist” philosophy. This may be seen in his Philosophical Commentaries, the notes and arguments he recorded in preparation for his first books. Entry number 824, for example, reads: “My Doctrine rightly understood all that Philosophy of Epicurus, Hobbs, Spinoza etc. wch has been a declared enemy of Religion Comes to ye Ground.” The sub-title of his Treatise concerning the Principles of Human Knowledge runs: “Wherein the chief causes of error and difficulty in the Sciences, with the grounds of Scepticism, Atheism and Irreligion, are inquired into.” That of the Three Dialogues between Hylas and Philonous begins: “The design of which is plainly to demonstrate the reality and perfection of human knowledge, the incorporeal nature of the soul, and the immediate providence of a Deity.” His Alciphron or the Minute Philosopher, written later in life, enlarged the scope of the argument to take in the hedonism and egoism of Mandeville, the cynical author of the Fable of the Bees. Throughout Berkeley’s life it was “the modern free-thinkers” he had in mind, “the very same with those Cicero called minute philosophers;3 which name admirably suits them, they being a sort of sect which diminish all the most valuable things, the thoughts, views and hopes of men; all the knowledge, notions, and theories of the mind they reduce to sense; human nature they contract and degrade to the narrow low standard of animal life, and assign us only a small pittance of time instead of immortality. . . .”4 The master strokes in Berkeley’s idealist arguments were his denial of “material substance” and his assertion that the existence of the objects of sense experience was not distinct from their being perceived. The significance of this assertion may be seen from entry number 799 of the Philosophical Commentaries, which reads: “Opinion that existence was distinct from perception of Horrible Consequence it is the foundation of Hobb’s doctrine etc.” The arguments by which he hoped to establish idealism are complex and subtle, but for the purposes of our discussion of Marxism it must suffice to enumerate the following main contentions.

(i) It may well be, Berkeley argues, that whenever we feel something hot there is normally a rapid movement of material particles in the hot thing. If, however, we attend to our experience of heat it will be seen that it is quite a different sort of thing from the movement of invisible particles. In order to attach any meaning to the view that heat is a movement of invisible particles we must first have had experience both of visible things in motion and of sensible heat, i.e., of the heat we feel when we touch something hot. So also with the movements of air which come to be called physical sound, and the movements of corpuscles which Newton held to be the basis of our experience of colors. Berkeley thus distinguished between the temperatures, sounds, and colors which we directly experience, and any entities, such as invisible particles, not directly experienced that may be regarded as their basis. The former he called “sensible qualities” (today they are generally called “sense data”), and the alleged unexperienced basis of them—not the atoms or particles themselves, but the entities supposed to have the size, shape, and motion of the particles—he called “corporeal substance.” His first contention is that, so far from the former being illusory or doubtful by comparison with the latter, any knowledge we may have of the latter can only be by means of the former.

(ii) From what has been said it is clear that sense experiences cannot be dismissed as mere illusions whose reality is to be found in a hidden world of ultimate material substances. Having established that the existence of sense data is certain, Berkeley’s next task is to determine what sort of thing they are. On his view they depend on minds and are incapable of existing apart from them. His use of the word “idea” marks this dependence, although others before him had used the word in this way. His arguments for the view that ideas, i.e., sensible qualities or sense data, cannot exist, as he put it, “without the mind,” are difficult to summarize, but considerations such as the following weighed with him. Things existing independently of perceivers would have characteristics that did not vary with the position and condition of the perceiver. At any given time a liquid would have to have some definite temperature, a building some definite size and shape. In fact, however, a liquid may feel warm if the hand we plunge into it is cold, and cold if the hand we plunge into it is warm. Again, when, as we say, we look at a tall round tower on a distant hill, what we directly see is something small and flat. The same liquid cannot simultaneously be hot and cold, neither can the same tower be simultaneously big and small, round and flat. Berkeley showed, by a detailed analysis of each of our senses, that the nature of our sense experience varies with changes in ourselves. Perspectival distortions, mirror images, microscopes and telescopes, drugs and intoxicants, were all adduced by him to support the view that there is something in the very nature of sensible qualities that unfits them for existing apart from minds. (In recent years this interpretation of Berkeley’s meaning has been denied by eminent scholars, but there is no need for me to discuss this, since the interpretation I have given is that of most of Berkeley’s readers, and is that of his realist and materialist critics.)

(iii) It might be suggested, however, that sense data are mental existences caused in us by independently existing physical objects. If this were so, sense data, as the mental effects of physical causes, would be incapable of existing outside minds and so could be rightly called “ideas,” but would nevertheless presuppose non-mental existences that were not sense data. Berkeley considered that such a supposition was meaningless. He challenged his readers to make clear what such non-sensible things “without the mind” could be, and thus set them the task of describing something that had no color, hardness, shape, size, speed, etc., that is, he set them the task of describing the indescribable. A “corporeal substance” that had no sensible temperature, taste, color, hardness, or shape, could be neither large nor small, rapid nor slow. Any definite characteristics attributed to it could only be described in terms of one or more of the senses, and so in terms of something that cannot exist “without the mind.” In order to avoid such attributions recourse must be had to indefinite characteristics, and it then becomes necessary to talk of something or other that has no color, no shape, no size. This, Berkeley held, was to talk to no purpose. To attribute wholly indefinite characteristics to matter was to imply that matter was nothing at all. To say that matter has characteristics that belong to sense data is to say that matter has characteristics that cannot exist “without the mind,” and this is to deny that there is any matter at all.

(iv) Berkeley also argued that the notion of something existing independently of mind was a contradictory notion. For, in order to conceive of something existing independently of mind, we must conceive of it, and this, he considered, was the same thing as to conceive of something that is not conceived of, and that is contradictory.

(v) The four preceding contentions make up what is sometimes referred to as Berkeley’s “immaterialism,” i.e., his denial of the existence of matter. But although Berkeley denied the existence of matter, he was not so foolish as to deny that such concrete things existed as stars, stones, animals, and fruit. These, he held, were not inaccessible nothings behind the scenes, but were the very things we saw, touched, smelled, and tasted. A cherry, for example, was not some recondite whirl of featureless atoms, but something round and red that is seen and tasted. It is not, of course, revealed in any single view, or touch, or taste; we are only entitled to say there is a cherry when we know there is a whole series of such sense data to be expected. To say there is a cherry on the tree in the garden is to say that someone who goes into the garden will see certain colored shapes and will be able to enjoy certain tastes and smells. The cherry just is the whole group (Berkeley called it a “congeries”) of sense data that we say belong to it. And in general terms the view is that material things are certain classes or series of sense data.

(vi) We have so far considered Berkeley’s theory of “ideas,” but minds we have only mentioned as those things on which “ideas” depend, as those things that “ideas” must be in, since they cannot exist “without” them. It was his view that each of us has direct knowledge of mind in the experience he has of himself. Such experience is quite different from the experience we have of “ideas,” in that “ideas” are passive objects whereas mind is experienced as active subject. Apart from minds and their “ideas” there is nothing else, according to Berkeley, that we can conceive of.

(vii) Nevertheless we cannot possibly deny that a world exists independent of human minds, and that parts of it continue to exist when no human minds are conscious of it. There are, for example, things buried in the earth or carried in the stars which no human being has ever been aware of. Berkeley believed that once it has been established that nothing can conceivably exist except minds and “ideas,” it follows that the parts of nature that are not “ideas” in the minds of human beings or of other finite creatures must be “ideas” in the mind of an Infinite Being. In this way, he held, the existence of God could be proved in a way not hitherto thought of. He held further that, since the only conception we have of activity is the conception we have of a mind’s acts of will, and since there can be no cause without activity, “ideas,” not being minds but merely depending on them, cannot be causes at all. What is not caused by the acts of will of finite minds can, therefore, only be caused by God’s activity. Hence, the regularities of nature are the regularities of God’s acts of will, so that as we extend our knowledge of nature we gain an indirect knowledge of the Divine decrees. According to Berkeley, therefore, just as we gain a knowledge of other men’s minds from what we see of their behavior, so we gain a knowledge of God from our exploration of the natural world. Hence the experimental sciences do not undermine religion, but continually vindicate and enrich it.

We may now summarize this summary as follows. According to Berkeley, (i) there is a class of directly perceived passive entities which we may call sense data. (ii) Sense data would not exist unless minds existed, but (iii) cannot depend for their existence on non-sensible beings independent of minds since no conception of such “corporeal substances” can possibly be formed. (iv) The conception of “corporeal substance,” indeed, is self-contradictory. (v) Nevertheless, such things as stars, stones, and cherries do exist, but are not “corporeal substances,” but groups of sense data. (vi) Minds are known to exist by the direct knowledge we have of our own. (vii) The system of nature distinct from human minds is a system of “ideas” willed by God.

Now Berkeley developed these views in criticism of men who, priding themselves on accepting nothing as true which experience did not guarantee, regarded matter as the sole reality and mind and sense experience as somehow illusory. Berkeley agreed that the appeal should be to experience, but thought he could show that whereas the views of materialists went beyond what experience could justify, a resolute refusal to go beyond it leads to the conclusion that matter does not exist, and that minds, both human and divine, do. For matter, as distinct from what is seen, felt, heard, etc., is a meaningless conception, whereas we know our own minds directly, and gain a knowledge of God by analogy. Thus Berkeley held that a resolute attachment to experience leads, not to materialism and atheism, but to immaterialism and theism. He has thus been regarded as a founder of the philosophical movement known as idealism.

Many subsequent philosophers, however, have distinguished between Berkeley’s policy of refusing to go beyond what experience can justify, and the idealistic and theistic conclusions he thought resulted from it. They have distinguished, that is, between his attempted justification of Christian theism, and his careful analysis of experience. The latter, they have said, was the cleverest attempt hitherto made to show precisely what we refer to in experience when we talk about “things,” “perception of things,” “illusions,” “mere imaginations,” “causes,” “general ideas,” and the like. The former, however, they think does not fit in very well with the latter, if indeed it is compatible with it at all. Thus they distinguish between the empiricism in Berkeley’s philosophy, that is, the aspect of it that is an attempt to base all knowledge on experience, and the theism in it, and this latter they ignore or reject.

The essence of his empiricism is that no conceptions or principles of explanation are to be admitted which refer beyond experience to something that could not be experienced. In so far as matter is something distinct from any sense datum or group of sense data, and distinct also from the minds on which they depend, it is something that could not be experienced, and therefore, according to Berkeley, nothing at all. Nevertheless, things such as stars, stones, and trees certainly exist, but they are not distinct from sense data but are rather groups of them. Any meaning that words such as “atom,” “force,” and “infinitesimal” may have must be in terms of the sense data we experience rather than in terms of matter lying beyond them. According to Berkeley, therefore, the knowledge gained in the natural sciences is a knowledge of how sense data or groups of sense data accompany one another or are signs of one another. This view of the nature of science according to which there is no matter beyond sense data, and according to which natural science is a knowledge of the regular associations and sequences of sense data, is today called phenomenalism. We may say that phenomenalism is the working out of the implications of propositions (i), (iii), and (v) above, although some phenomenalists may accept propositions (ii) and (iv) as well. Most phenomenalists would reject proposition (vi), since they would hold that, just as physical things are groups of sense data, so minds are another sort of group of sense data with which are connected feelings, feelings being a different sort of experience from sense data. All phenomenalists would reject proposition (vii), since they would hold that “God” does not stand for anything that could be experienced. If “matter” is meaningless if understood to stand for some unexperienced basis of experience, then, for the same reasons, “God” is meaningless if used to stand for some different unexperienced basis of experience. Phenomenalists have sometimes said that their view is consistent empiricism.

Perhaps the best known statement of phenomenalism is that contained in J. S. Mill’s Examination of Sir William Hamilton’s Philosophy, where the existence of matter is not denied but where Berkeley’s view is upheld by defining matter as “a Permanent Possibility of Sensation.”5 On this view, to say that a physical object, say a chair, exists even when no one is observing it, is to say that in such and such circumstances, for example, by entering the room and turning on the light, it can be observed. So long as it remains possible to observe it, so long the physical thing may be said to exist. In effect, the phenomenalist defines matter as the “congeries of ideas” that Berkeley substituted for the materialists’ “material substance.” Phenomenalism is regarded as the necessary outcome of the intellectual policy of refusing to go beyond what experience guarantees. If phenomenalism is true, then the task of science is to explore the regularities of actual and possible experiences and feelings. We might say that when God and active mind are subtracted from Berkeley’s philosophy the result is phenomenalism.

2.

Marxist Criticisms of Idealism and Phenomenalism

A detailed discussion of these matters from a Marxist point of view is to be found in Lenin’s Materialism and Empirio-Criticism. An account of how this book came to be written is contained in chapter 4 of the Soviet History of the Communist Party of the Soviet Union, as well as in Lenin’s own preface to the first edition (1909), and Professor Deborin’s preface to volume 13 of the 1927 edition of the English translation of Lenin’s Collected Works. In brief, it appears that a number of members of the Russian Social Democratic Party had been reading books by Ernst Mach and Richard Avenarius in which, under the name of “empirio-criticism,” a phenomenalist account of matter was advocated. These Russian socialists became convinced both that phenomenalism was true and that it was compatible with Marxist materialism. Lenin considered they were wrong on both counts, and thought it most important to convict them of error. Thus he says that he wrote Materialism and Empirio-Criticism “to seek for the stumbling block to people who under the guise of Marxism are offering something incredibly baffling, confused and reactionary.”6 Lenin worked on the material for this book in the British Museum in 1908.

In Materialism and Empirio-Criticism Lenin touches on many topics in a highly controversial manner. It seems to me, however, that he argues for four main positions which may be summarized as follows:

(a) Phenomenalism cannot be detached from idealism. Since, therefore, the function of idealism is to provide philosophical support for religious faith (called by Lenin “fideism”), phenomenalism too is religious in its tendency, whatever its supporters may say about it.

(b) Phenomenalism is false. Lenin thinks he can show its falsity, in the first place by reference to practice or action, and in the second place by showing that if it were true, then well-attested scientific theories to the effect that the world existed for a long time before living beings inhabited it, would have to be denied.

(c) The denial of phenomenalism involves the assertion that matter exists, in the sense of a reality that is neither sense datum nor mind. Matter, according to Lenin, is “the objective reality which is given to man by his sensations, and which is copied, photographed and reflected by our sensations, while existing independently of them.”7 He also says: “To regard our sensations as images of the external world, to recognize objective truth, to hold the materialistic theory of knowledge—these are all one and the same thing.”8

(d) At the end of the book Lenin argues that there is no foundation for the view that materialism is being rendered untenable by new discoveries in physics, and in particular by “the electrical theory of matter.” In his view, new physical discoveries such as those that led to the abandonment of the “billiard ball” view of matter, can only lead us to the discovery of new characteristics of matter, not, as had been held by some, to its “disappearance.”

In the following sections of this chapter I shall discuss the first three of these contentions.

3.

Phenomenalism, Idealism, and the Religious Outlook

In effect, what Lenin (and subsequent Marxist writers) maintain is that the proposition that there can be no “material substance” (which I labelled (iii) on page 7), and the proposition that inanimate things such as tables are groups of sense data (which I labelled (v) on page 8), and which together comprise the essentials of phenomenalism, are inseparable from the other parts of Berkeley’s philosophy, so that once we accept them we open the way to theism and religion. Now this may be understood in two ways. In the first place it may be suggested that in fact phenomenalism is a step on the road to idealism and religion. On this view, what is being suggested is that whether or not idealism follows from phenomenalism and theism follows from idealism and religion follows from theism, those who accept the phenomenalist arguments either themselves pass on to idealism, theism, and religion, or at any rate encourage others to do so. In the second place it may be suggested that phenomenalism, idealism, theism, and religion are logically connected, so that were the first true, the second, third, and fourth would also have to be true. I think that Lenin held both of these views, and in this section I shall say something about each of them.

First, then, as to the view that phenomenalism is in fact connected with idealism, theism, and religion. Lenin, following Engels,9 believed that idealism and materialism were the only two philosophies that counted, that idealism was a system of thought that constantly endeavored to put the best possible face on what Marx (following Feuerbach) had called the “mystifications” of priests and other agents of the ruling classes, and that the revolutionary working class must base their thought and action on materialism if they are to succeed in freeing themselves from the bonds which their masters have fastened on them. Idealism, Lenin wrote, “is merely a subtle, refined form of fideism, which stands fully armed, commands vast organizations and steadily continues to exercise an influence on the masses, turning the slightest vacillation in philosophical thought to its own advantage.”10 His objection to phenomenalism is a social one. The emergence of phenomenalism as a philosophical theory which criticizes both idealism and materialism confuses the clear-cut issue which Lenin is intent on establishing. Who is not for the working class movement is against it. Idealism, theism, and religion, Lenin thought, are obviously against it, and any other view that is not wholeheartedly materialistic, although it may not be openly and consciously against it, is so in tendency, and perhaps covertly also. Thus he concluded: “The objective, class rôle played by empirio-criticism entirely consists in rendering faithful service to the fideists in their struggle against materialism in general and against historical materialism in particular.”11 Stalin allows these thinkers even less credit than Lenin when, in chapter 4 of the History of the Communist Party of the Soviet Union, he writes: “In reality, they were hostile to Marxism, for they tried to undermine its theoretical foundations, although they hypocritically denied their hostility to Marxism and two-facedly continued to style themselves Marxists.”12

I cannot hope to deal, at the present stage, with all the issues that would need attention if this view were to be discussed fully. In particular, it will be seen that Lenin thinks it relevant to criticize a philosophical theory about perception on the ground of its possible social and political repercussions. On the face of it, this may not seem defensible, since a true theory might conceivably have bad political results, and a theory which had good political results might conceivably be false. However that may be—it is a theme discussed on page 191 below—Lenin’s generalization that phenomenalism is allied with idealism and religion is much too narrowly based. He refers to a few Russian Social Democrats who flirted with empirio-criticism and suggested that some form of religious organization was desirable in which God was equated with the social good, and also to some associates of Mach and Avenarius who were willing to be called philosophical idealists. In the history of European thought as a whole, however, the exponents of phenomenalism have generally been indifferent, if not hostile, to religion. We need only mention such thinkers as Protagoras, Hume, Bentham, James Mill, J. S. Mill, and Karl Pearson. It is worth noting that J. S. Mill, a few sentences after he has given his phenomenalistic definition of matter, writes: “But I affirm with confidence that this conception of Matter includes the whole meaning attached to it by the common world, apart from philosophical, and sometimes from theological theories.”13 It is difficult to resist the conclusion that Lenin’s attitude to phenomenalism is that of the revolutionary administrator, for whom clear-cut decisions were essential. The revolutionary workers needed a this-worldly philosophy of matter to arm them against the enervating influence of religion, and Lenin felt that those who departed from the materialist simplicities were unreliable palterers.

We now pass to the contention that idealism, theism, and religious belief follow logically from the doctrine of phenomenalism. According to the phenomenalists, the only terms or expressions (apart from those of logic) that can have meaning are those which refer directly or indirectly to sense-experiences, among which, of course, are included experiences of pleasure and pain, of effort, resistance, and the like. Thus the term “matter,” if it is not used to refer to actual or possible sense-experiences, is meaningless, and the term “mind” is meaningless also, unless it is used to refer to actual or possible feelings associated with actual or possible sense-experiences. Now the term “God” is generally held to refer to an infinite, active, non-sensible spirit who transcends the natural world. Most phenomenalists, I think, would argue that meaning cannot be attached to such a term, that they cannot conceive what it would be like to experience God, and that therefore what religious people call “the worship of God” cannot be what they take it to be. If phenomenalism is true, and if God is held to be a being that could not be directly or indirectly experienced by the senses, then the existence of God cannot be meaningfully asserted or denied. To argue thus that the notion of God is meaningless is, it seems to me, to oppose the religious view of things much more radically than even atheists do. The atheist has common ground with the theist in so far as he admits that the theist’s belief has point, whereas the phenomenalist regards the dispute between them as insignificant, and when he says so both parties are disturbed.

We may conclude, therefore, that this part of Lenin’s attack on phenomenalism is less effective as a social tactic than he himself supposed. For, whereas phenomenalism, by denying meaning to any conceptions except those based directly or indirectly on sense-experience, consigns both God and material substances to a common and irrelevant grave, materialism, by asserting the reality of material substances beyond sense-experience, allows also the possibility of a God that transcends sense-experience too. Phenomenalism excludes God but appears committed to some sort of idealism. Materialism excludes phenomenalism but only at the expense of making God appear a possibility. The revolutionary tactician cannot afford to ignore this dilemma.

To be offset against the atheism of phenomenalism is, however, its alleged conflict with natural science. This made Lenin particularly suspicious of it, since he considered that the natural sciences provided the detailed content of materialism. Our next step, therefore, must be to consider his direct arguments against a phenomenalistic, and in favor of a realistic, theory of perception.

4.

Lenin’s Criticisms of Phenomenalism

Marxists hold that religion is used by the rich as a means of reconciling the poor to their poverty, and that idealism (with which, as has already been explained, they associate phenomenalism) is a deliberate attempt to reinforce this policy in the face of the religious unbelief that the natural sciences encourage. There is no doubt that they think that idealism is a dishonest view. They feel that, however subtle the arguments in its favor, it is fundamentally unbelievable. A man may deny the reality of matter with his lips, but his life and actions belie what his lips have uttered. For most men life has been a losing struggle against scarcity and disease, and for everyone the end is death. The few fortunate have material things at their command, the many unfortunate are the slaves of circumstance. Rich men and their clients, therefore, may affect to despise material things, and may even employ their leisure in demonstrating that there are none. But their ability to do these things depends upon there being food and shelter and leisure at their disposal. If they reflected on how the majority of men lived, they would realize that ingenious idealist speculations are frivolous insults to suffering mankind.

It is in the light of such considerations, I think, that Lenin’s attack on phenomenalism is to be understood. In the first chapter of Materialism and Empirio-Criticism he suggests that it is characteristic of contemporary (i.e., Marxist) materialism to hold that “arguments and syllogisms alone do not suffice to refute idealism, and that here it is not a question of theoretical argument.”14 Further on he writes: “The standpoint of life, of practice, should be first and fundamental in the theory of knowledge, and it inevitably leads to materialism, brushing aside the endless fabrications of professorial scholasticism.”15 Again, in his Philosophical Notebooks Lenin comments on a passage in Hegel’s History of Philosophy in which the great idealist philosopher criticizes Epicurus for not having gone beyond “the common human understanding.” Lenin’s comment is: “Slanders against materialism. . . . Its [i.e., Idealism’s] non-agreement with ‘the common human understanding’ is the lazy whim of the Idealists.”16 Lenin also quotes with approval Feuerbach’s remark that before we can perceive we must be able to breathe and feel. He does not do so, but he might have quoted the following passage from Feuerbach’s Preliminary Theses towards the Reform of Philosophy (1842) which had undoubtedly impressed Marx: “The denial in metaphysics of the reality of space and time in the very nature of things has the most injurious practical consequences. Only a man who everywhere bases himself on time and space can achieve tact in living and practical understanding. Space and time are the basic criteria of practice. A people which excludes time from its metaphysic, which bows down before eternal existence, that is, abstract existence cut off from time, excludes time also from its politics and bows down before an anti-historical principle of stability that is contrary to right and reason.”17 In section 33 of his Foundations of the Philosophy of the Future (1843) Feuerbach had also written: “. . . Love is the true ontological proof of the existence of an object outside our heads, and there is no other proof of existence except love, and sensation in general.”

From Lenin’s statements, and from those of Feuerbach from which they derive, we may extract the following main positions. (i) Even though an individual could not, from mere observation of his own sense-experiences, prove the existence of a material world existing independently of him, all his actions, as distinct from his theorizing, demonstrate in a practical way the truth of the realist platitude. (ii) Even though we were unable to find satisfactory counter-arguments to the arguments of the idealists, it would be right for us to prefer to the most brilliant of such arguments the naïve realism which we presuppose when we eat our meals and associate with our fellows. (iii) To accept the conclusions of elaborate philosophical arguments rather than what is presupposed in our dealings with the world and other men is socially disastrous and unjust.

Before we consider these arguments, it should be mentioned that they are not new. In the ancient world the Stoic philosophers, seeking to uphold the practical moral certainties against the subtle arguments of the Skeptics, argued in somewhat similar terms. Zeno of Citium, the founder of the School, had spoken of the “grasp” by which real things were certainly known. Cicero, in reproducing Zeno’s view, writes: “Therefore those who assert that nothing can be grasped deprive us of these things that are the very tools and equipment of life. . . .”18 The following passage from the Moral Discourses of Epictetus stresses the superiority of practice to speculation. “Let the followers of Pyrrho or of the Academy [i.e., the Skeptics] come and oppose us. Indeed I, for my part, have no leisure for such matters, nor can I act as advocate to the commonly received opinion. If I had a petty suit about a mere bit of land, I should have called in someone else as my advocate. With what evidence, then, am I satisfied? With that which belongs to the matter in hand. To the question how perception arises, whether through the whole body, or from some particular part, perhaps I do not know how to give a reasonable answer, and both views perplex me. But that you and I are not the same persons, I know very certainly. Whence do I get this knowledge? When I want to swallow something, I never take the morsel to that place but to this;19 when I wish to take bread, I never take sweepings, but I always go after the bread as to a mark. And do you yourselves, who take away the evidence of the senses, do anything else? Who among you when he wishes to go to a bath goes to a mill instead? Ought we not to the best of our ability to hold fast also to this—maintain, that is, the commonly received opinion, and be on our guard against the arguments that seek to overthrow it?”20 In this passage we may particularly note (a) the scorn with which Epictetus says he has “no leisure for such matters,” thus suggesting that Skepticism is the fruit of irresponsible idleness; (b) the claim that practical certainty rightly overrides theoretical perplexity; and (c) the weight given to “the commonly received opinion.” In chapter 5 of the same book Epictetus had discussed the skeptical argument that there is no certain means of distinguishing between dreaming and waking, and had asserted that a man who persists in maintaining this argument is devoid of shame and modesty, and is like a drunk man who says whatever comes into his head. It would be tempting for the Marxist to say that it was because he was a slave that Epictetus came to express, eighteen hundred years ago, a view so very like the Marxist one. This temptation, however, should not be yielded to, since Epictetus was restating views which had been expressed long before his time by Stoic philosophers who were not slaves.

In the eighteenth century, Thomas Reid, the philosopher of Common Sense, maintained a similar point of view. In his Inquiry into the Human Mind (1764) he wrote: “The belief of a material world is older, and of more authority, than any principles of philosophy. It declines the tribunal of reason, and laughs at all the artillery of the logician.” In his Essays on the Intellectual Powers of Man (1785) he included among his Principles of Common Sense the proposition: “That those things do really exist which we distinctly perceive by our senses, and are what we perceive them to be.” He also argued that, although Berkeley did not intend it, his philosophy would lead each individual, if he were to be consistent, to believe that he could be certain only of his own existence and must be doubtful of that of others. “It stifles every generous and social principle.”21 In our own day, Professor G. E. Moore has said that, in order to prove that there are at least two external objects, it is sufficient for a man to hold up both his hands to his own view and that of other people. In the face of the arguments of idealist philosophers, it is appropriate, he holds, to restate the realist platitude with a number of supporting explanations.22

It will be seen that Epictetus, Reid, Feuerbach, and Lenin are all, in their different ways, concerned lest certain subtle philosophical arguments should turn men from their social duties by raising doubts about the existence of matter and of other people. Epictetus had in mind those Skeptics who argued that the result of admitting their skeptical conclusions should be a holding back from human affairs, a refusal to commit oneself in the uncertainties of social life. What effects, however, could the acceptance of the skeptical or idealist arguments have on anyone’s attitude to what they had previously taken to be material things and other people? Could anyone ever seriously say: “I have been reading Hume, and have been convinced by him that there are no satisfactory grounds for believing in the independent existence of material things or of people other than myself. I shall therefore cease to eat and drink, and I shall take no further interest in such doubtfully existing beings as other people.” Hume’s own conclusion was very much less dramatic. “I dine,” he wrote, “I play a game of backgammon, I converse, and make merry with my friends; and when after three or four hours’ amusement, I wou’d return to these speculations, they appear so cold, and strain’d, and ridiculous, that I cannot find in my heart to enter into them any farther.” Arguments to show that the existence of a material world and of other people is doubtful, carry conviction, if at all, only while they are being propounded and attended to, and are overwhelmed by the ordinary affairs of living. We may compare someone in doubt whether the substance he sees before him is cheese or soap, with someone else in doubt whether cheese or soap or any material thing really exists at all. The doubt of the first man can be set at rest by smelling or tasting or in some other obvious way. It is the sort of doubt that can be fairly readily removed after a few tests have been made. The doubt of the second man is rather different, since no amount of looking or tasting will get rid of it. One reason for this is that he considers that it is always possible that some new experience will arise to conflict with what the previous tests have established. These tests, he reflects, have only been applied up to now, so that we cannot be quite sure what they will reveal when next they are made. But such a doubt, surely, is never relevant in the sphere of action, since if it were, action could never take place, but would remain ever poised on the brink of an ever receding penultimate test. If we are to act at all, we must be willing to use tests which establish reality in a finite number of moves. The skeptic’s doubts, therefore, are not of practical relevance in a world where, as we know, doubts have to be, and frequently are, brought to a settlement. Furthermore, were a skeptic to use his sort of doubt as reasons for not troubling about the material needs of other people—“if there is no matter and if there are no other people with material needs, then I need not trouble about them”—and were he to continue attending to his own material needs we should say that he was dishonest as well as irrelevant. I cannot suppose that anyone ever has argued in quite this way, but Marxist thinkers may well have believed that something of the sort was the philosophical counterpart to the wealthy Christian’s advice to the poor man to seek for heavenly rather than for earthly treasures. We can now see that there is some point in Lenin’s favorable view of the common human understanding. Skeptics and idealists must act as if they were fully assured of the existence of matter and of embodied mankind.

These considerations, however, have not disposed of phenomenalism. For phenomenalism is not the view that there is no material world, nor the view that the existence of the material world is problematical, but the view that the material world is nothing but actual and possible sense data. It will be remembered that Berkeley was careful to say that he did not deny the existence of cherries; his view was that cherries are what can be seen, touched, and tasted when, say, someone goes into the garden. On his view, a cherry is the whole group of sense data that we say “belong” to it. Now arguments about practice can be used to overthrow the view that the existence of matter may be doubted or denied, but they do not succeed, as Lenin thought they did, in disposing of the view that matter just is actual and possible sense data. The sort of practical activity that Feuerbach and Lenin cited in refutation of phenomenalism were such things as loving, eating, and breathing, but these, and other practical activities, can be accounted for by the phenomenalist within his scheme. According to the phenomenalist, the activity of eating would consist of certain feelings of effort and of pressure, along with the visual, tactile, and taste sensations which link the eating with the thing that is being eaten. Similarly, in terms of what is being experienced, breathing consists of certain visual sensations of movement (e.g., the observed movements of the chest), certain auditory sensations which we describe as the sound of breathing, and, in the breather, the feelings he has when he attends to his breathing or when something interferes with it. What especially seems to be involved in action is sensations of effort meeting with some resistance. The phenomenalist will say, however, that both the effort and the resistance to it are only describable in terms of sensation. If phenomenalists were to confine their descriptions to the data of the so-called five senses, then, of course, practice would be a notion that could not be comprised in their theory. Once, however, the notion of sense-experience is extended to include pleasure and pain and the bodily feelings called “organic sensations,” practice presents the phenomenalist with no insuperable theoretical difficulties. He would claim to be giving a different account of what material things are and of what practice is from that assumed by the realist, and he would also claim that his account is superior to that of the realist, since the realist believes in things-in-themselves which are never directly experienced and transcend all possible experience, whereas the phenomenalist brings into his theory only such entities as are or could be directly experienced and cannot therefore be questioned. It does not seem to me, therefore, that the Marxist can, by appealing to practice, refute the phenomenalist who sets out to give an account of matter in purely empirical terms.

We may briefly restate the argument as follows. The phenomenalist says that a material object, say a cherry, is “a permanent possibility of sensation.” The Marxist replies that we know of the existence of cherries, not by merely experiencing sense data, but by picking and eating and other such deeds. It is absurd, he may continue, to suggest that we can pick and eat permanent possibilities of sensation, and therefore practice shows that it is cherries—material things, not sense data—that are the objects of our perception. It seems to me, however, that the phenomenalist has a thoroughly satisfactory answer to this. The absurdity of talking about picking and eating permanent possibilities of sensation, he will say, depends upon giving the analysis of cherries in terms of sense data and at the same time refraining from giving the analysis of picking and eating in similar terms. If matter is reducible to actual and possible sense data, then action is reducible to actual and possible feelings and sense data. The argument from practice, therefore, has force against the doubter and denier of matter, but not against the phenomenalist, who is not really doubting or denying matter but claiming to say what it is.

Let us then see whether Lenin’s other main line of criticism succeeds in refuting phenomenalism. This other line of criticism has already been briefly indicated as the view that if phenomenalism were true, then well-attested scientific theories according to which the world existed for a long time before there were living beings would have to be denied. Lenin argues23 that if the material world consists of sense data, and if, as seems to be scientifically established, sense data depend upon the existence of suitably equipped living organisms, then the material world could not have existed before there were living organisms. (Lenin writes in terms of “sensations” rather than of sense data, but this makes no difference to the argument, since sense data, like sensations, are supposed to be inseparable from percipients.) Yet the combined evidence of geology, physics, chemistry, and biology is to the effect that living organisms could not have existed in the earliest stages of the world’s history, but have evolved as favorable physical conditions developed. Avenarius had tried to avoid this difficulty by introducing the notion of an imaginary spectator, and phenomenalists in general have argued that to say there was a material world prior to the existence of beings that could be conscious of it is to say that had there been such beings they would have had such and such sensations. Lenin abusively asserts that this view is only a particularly unplausible form of idealism. His exposition is aided by quotations from philosophers who had tried to bolster up the phenomenalist position by referring to the experiences of ichthyosauruses and even of worms. “The philosophy of Mach the scientist,” he writes in another part of the book, “is to science what the kiss of the Christian Judas was to Christ.”24

Sir John Percival, a friend of Berkeley, wrote to Berkeley on 26 August 1710, just after the publication of the Principles of Human Knowledge, as follows: “My wife, who has all the good esteem and opinion of you that is possible from your just notions of marriage-happiness, desires to know if there be nothing but spirit and ideas, what you make of that part of the six days’ creation which preceded man.” Lady Percival, like Lenin, felt that there must be some incongruity in holding that ideas depend on spirits, that seas and mountains are groups of ideas, and yet that seas and mountains exist before the spirits do. But Berkeley had an answer that the modern atheistic phenomenalist cannot utilize. “. . . I do not deny,” he said, “the existence of any of the sensible things which Moses says were created by God. They existed from all eternity in the Divine intellect, and then became perceptible (i.e. were created) in the same manner and order as is described in Genesis. For I take creation to belong to things only as they respect finite spirits, there being nothing new to God. Hence it follows that the act of creation consists in God’s willing that things should be perceptible to other spirits, which before were known only to Himself. . . .”25 The ichthyosauruses and worms mentioned by Lenin were ludicrous substitutes for God, and Berkeley’s polite comments on Lady Percival’s argument (“. . . she is the only person of those you mentioned my book to, who opposed it with reason and argument”) may, with due allowances, be transferred to Lenin’s analogous objections.

Lenin, I think, saw certain essential weaknesses of phenomenalism, although he did not have the patience to probe them fully and unexcitedly. Present-day phenomenalists, however, sometimes reply that their account of matter is not and is not intended to be a scientific theory at all; that as philosophers they are not concerned to make scientific statements, but rather to clear up the meaning of such notions as cause, thing, and matter, which are accepted uncritically by common sense and science alike; and that therefore, since it is not a scientific theory, it cannot conflict with any scientific theory, and hence no scientific theory can be adduced to refute it. In my opinion this argument will not do at all. For phenomenalism is a philosophical theory which has been developed in modern times largely in order to give a consistent account of that attention to experience which is held to be the fundamental feature of modern science. Phenomenalism is advocated as consistent empiricism, as the ultimate codification of the natural scientist’s instinctive procedures. The phenomenalist’s rejection of any conception of matter that goes beyond actual or possible sensations, is the philosophical counterpart of the natural scientist’s distrust of untestable hypotheses. Of all philosophical theories, therefore, modern phenomenalism, which is openly parasitic on natural science, must guard against giving an account of matter that fails to square with any important class of propositions belonging to natural science. It is not only scientific statements that can clash with other scientific statements; it is possible for a suggested analysis of the notion of matter that is held to be in accord with common sense and natural science, not in fact to be so. Therefore the objection that phenomenalism is inconsistent with certain scientific theories cannot be initially ruled out of court.

The point that was worrying Lenin was this. If phenomenalism were true, then talk about the world as it was prior to the emergence of consciousness would be talk about what a potential observer would have observed had he been there to observe, although in fact he was not there at all, and could not have been there in any case since the conditions for life were not yet in existence. This view evokes immediate dissatisfaction for the following reasons. In the first place, the notion of a possible observer is not very helpful. The first difficulty concerns the term “observer.” To say that the world prior to living creatures is what living creatures would have observed had they existed before they did exist, seems to be a quite useless tautology. For to observe involves both an observer and what he observes, and if this is so, then to say that the world prior to life is what would have been observed if there had been living creatures is merely to say that if there had been observers they would have observed whatever was there to be observed. The whole question of independent existence is wrapped up in that of an observer, so that the introduction of observers, whether actual or possible, does nothing to clarify the issue. In the second place, we cannot think of a possible something without thinking of the something. If, therefore, in order to say what matter is we have to say something about possible observers, we have to say or imply something about observers. Thus, when matter is defined in terms of possible observers or possible sensations, the notion of “observer” or the notion of “sensation” is contained in the definition. Now if “father” is defined as “a male parent,” it is self-contradictory to say that someone is a father but not male. And similarly if matter is a permanent possibility of sensation, or what would be observed if an observer were in a position to observe it, it is self-contradictory to say that matter could exist apart from all possibility of sensation or observation. It might be said that even the most fervent realist would hardly wish to maintain the existence of matter that could not possibly be observed, and this is true if we interpret “possibly” widely enough. But it does not follow from this that “possibly observed,” i.e., “would be observed if . . .,” is part of the definition of “matter,” any more than it follows from the fact that it is possible for some men to jump seven feet in the air, i.e., “would jump seven feet in the air if . . .,” that that is part of the definition of “man.” By bringing observers or sensations into their definition, even if indirectly, phenomenalists are giving to observation or sensation an importance by relation to “matter” that ordinary users of the term are unwilling to confirm. This is the point at which phenomenalism is in conflict with the “ordinary human understanding,” and thus fails to do what it sets out to do, viz., to show what people mean when they speak or think about material things.

However, these are matters that I cannot claim to settle in a paragraph. It must be clear, from what has already been said, that further discussion of it would require us to consider the nature of the hypothetical or if-then connection involved in saying that a material thing is what would be, or would have been, observed if an observer were to be, or had been, in a position to observe. In our own day, the problem of phenomenalism, like so many other philosophical problems, has been discussed in terms of language, in this case in terms of the merits and defects of the “physical object language” on the one hand, and the “sense datum language” (the one preferred by phenomenalists) on the other. An advantage of this approach is that it calls attention to the possibility that philosophers, in talking of sense data, are not referring to recondite entities the existence of which is unsuspected by non-philosophers just as the existence of viruses was unsuspected by everyone in the seventeenth century and by ignorant people today, but are introducing a terminology in order to make their discussion of perspectives and illusions more precise. Whether those who hold this sort of view are right in their contention that phenomenalism, in this sense, does not imply idealism is a problem I do not propose to discuss here as it would take us too far from our main subject. For the present it is sufficient to say that the sort of phenomenalism or consistent empiricism that Lenin was criticizing appears on the one hand to render meaningless the notion of a God who transcends experience, and yet appears also to require there to be some Observer (not necessarily God, but perhaps merely a Sensitive Gas) to make sense of the conception of the world that existed before the coming of animal or human life.

There are other objections to phenomenalism that, with a certain amount of good will, can be extracted from Lenin’s Materialism and Empirio-Criticism, but I think that enough has been said to show that he was on pretty strong ground when he concluded it was not true.

5.

The Marxist Account of Perception

According to Marxists, then, matter can be known to exist, and is not reducible to actual and possible sense data. We have now to consider their positive view of it, in so far as this concerns their theory of perception. Lenin wrote that matter is “the objective reality which is . . . copied, photographed and reflected by our sensations, while existing independently of them,”26 and he considered that this was also the view of Marx and Engels. Engels had written: “The influences of the external world upon man express themselves in his brain, are reflected therein as feelings, thoughts, instincts, volitions. . . .”27 That present-day Marxists have adopted this view of sensations as “reflecting” external realities can be seen from Professor V. Adoratsky’s Dialectical Materialism, where he writes: “Our knowledge contains an absolute (unconditional and unquestionable) truth, viz. that it reflects the external world.”28 In his next sentence Professor Adoratsky writes: “The truth of our knowledge is tested and confirmed by practice.” This last also was the view of Engels and Lenin. Engels emphasized the importance of practice in perception, notably in the introduction to Socialism, Utopian and Scientific, and Lenin followed suit when he wrote: “. . . things exist outside of us. Our perceptions and ideas are their images. Verification of these images, differentiation between true and false images, is given by practice.”29 In the course of a long footnote in which he compares William James’s Pragmatism with Mach’s Phenomenalism, Lenin obviously holds it against James that he had denied that science provides an “absolute copy of reality.”30 The suggestion, therefore, is that being a reflection or copy and being verified by practice are both of them conditions of perceiving correctly. Lenin also quotes with approval the second of Marx’s Theses on Feuerbach (1845) in which Marx had written: “The question whether objective truth is an attribute of human thought is not a theoretical but a practical question. Man must prove the truth, i.e. reality and power, the ‘this-sidedness’ of his thinking, in practice.”31 In the Soviet Russian Handbook of Philosophy by Rosenthal and Yudin we read, in the article “Sensation”: “As against mechanical materialism, which tended to conceive sensation as a passive reflection in the mind of things outside, Marxism insists on sensation as an active process arising through the efforts of the organism to satisfy its needs.”32

It will be noticed that some of these quotations refer to perception or sensation, and that others appear to be concerned with the truth of theories. Now these are very different things, since theories are, at the very least, very much less elementary than perceptions or sensations are. We very much more often describe statements or theories as true than we do perceptions or sensations. It is Marxists themselves, however, who group these things together and maintain that copying and practice are involved in both, so that the expositor and critic must commence by following suit. The Marxist view of sensation, therefore, appears to be that there are material things, that among these material things there are organisms with brains, that the material things that surround the organisms with brains act on them, thus producing reflections, impressions, copies, or images, and that the reflections, impressions, copies, or images are verified or rejected as a result of practical activity. Now this view seems at first sight to be liable to an obvious objection that has very often been made against so-called “copy” theories of perception. If the percipient never has direct access to the material realities that exist outside him, but only to the copies that they produce in him, then he can never know which copies are true copies and which ones false, which are like and which are unlike their originals. He is like a Martian who has never seen a human being and is asked to pronounce on whether Gainsborough painted good likenesses.

Now clearly if the Marxist theory is to escape this difficulty it must be by means of the conception of practice, and this, it seems to me, must be the importance of Lenin’s dictum: “Verification of these images, differentiation between true and false images, is given by practice.” The attempt appears to be made in two rather different ways.

The first and most obvious way may be developed by means of an example. While I am very weary and thirsty, I see, as I think, the water of a mountain stream. On the Marxist view this amounts to my having an image, reflection, copy, or impression. Is it a mirage, or is it real water? I approach, dip my hand in the stream, and feel the water running through my fingers. The visual sensation is corroborated by sensations of touch, and I drink and am satisfied. I have not only touched but I have made use of the water. The copy, therefore, was a true one and my deed has proved it. There is the initial sensation, there are expectations, and there is the active putting oneself in a position to obtain sensations that corroborate or disappoint the expectations. Someone who is good at this sort of thing survives and gets pleasure from his life. Those who too often fail are miserable or die. But is there any stage in the process at which I can be said by practice to have broken through the screen of images, reflections, copies, or impressions? It may be answered that I do this when I move toward what I hope is the water. Certainly, when I move to investigate I am not passively receiving sensations, but am deliberately seeking for them. But this deliberate seeking is, on the view we are considering, something that must be terminated in more sensations, not something that enables me to reach beyond them to some material object that is not a sensation. Once Marxists accept the view that perception is by means of images, then there is nothing to distinguish their view from phenomenalism except the wish that it were not.

The other way in which the notion of practice may be thought to function in the Marxist theory of perception can be seen if we suppose the theory to be that there are no mere reflections or mere copies at all, but that each separate sensation is itself active as well as passive. This view, which seems to be suggested in the passage I have quoted from Rosenthal and Yudin, might be recommended for its “dialectical” character. Activity, however, is not necessarily the same thing as practice. The opposite of activity is passivity, the merely being affected by something else, and it is possible to be active without being practically active. A being that is practically active makes changes in the world outside him by means of his practical acts. But it is possible to be theoretically active without making changes in the world by means of the theoretical acts. It is obvious that thinking is something that we do, but it seems equally obvious that, although it may lead to the sort of doing that changes things besides the doer, it is not, in itself, that sort of doing. Now seeing, hearing, and perceiving are activities of living creatures, but they are more like thinking than they are like practical activity, in that they do not consist in changing what is seen, heard, or perceived. No doubt when a creature perceives, changes go on in its body, but these are not activities and therefore not practical activities.

It may be objected at this point that, having accepted the Stoic and Marxist view that skeptical doubts about perception have no practical relevance, I ought also to accept the Marxist view that perception involves practice. The two positions, however, are quite distinct. It is one thing to say that no one in fact doubts the existence of the material world in any way that is relevant to practical action, and quite another thing to say that practical action is involved in perception itself. In the Marxist theory of perception there is a notion that is altogether repugnant to common sense, viz., the notion that we directly perceive the images or copies of things rather than the things themselves. The notion of practice is then introduced in an attempt to overcome the difficulties in this philosophical theory. If it were not being argued that in perception we directly apprehend the images or copies of things, there would be no need to say that it is in practice that we know whether the copies are true ones. The same word “practice” may be used for (a) the difference between a purely theoretical argument and an argument that carries the sort of conviction that emerges in practical action, and (b) an alleged passage from mere awareness of sense data (images, photographs, copies, reflections, etc.) to the perception of independently existing physical things, and it is with (b) that the philosophical difficulties arise.

Some contemporary Marxist writers appear desirous of abandoning the “copy” element in the Engels-Lenin theory of perception while retaining the emphasis on practice. Thus, Mr. Cornforth, in his Science versus Idealism,33 writes that “the objects of sense-perception, the objects known through the senses, are material objects, objects of the objective external world,” and goes on to suggest that we should not suppose “a set of special non-material sense-objects, private to the sentient mind—whether these are called ‘sense-impressions,’ ‘ideas,’ ‘sensations,’ ‘elements,’ or whatever they are called by the philosophers who invented them.” It should be mentioned, however, that in Materialism and Empirio-Criticism Lenin went out of his way to insist on this “copy” relationship. The physicist Helmholtz had suggested that the sensations that physical objects cause in the percipients of them need not be copies of their causes but only non-resembling natural signs or symbols. Lenin, however, would not accept this view (which he called “hieroglyphic materialism”34 ) and wrote: “If sensations are not images of things, but only signs or symbols, which do not resemble them, then Helmholtz’s initial materialist premise is undermined; the existence of external objects becomes subject to doubt; for signs or symbols may quite possibly indicate imaginary objects, and everybody is familiar with instances of such signs or symbols.”35 In support of this, Lenin cites the authority of Engels: “Engels speaks neither of symbols nor hieroglyphs, but of copies, photographs, images, mirror-reflections of things.”36 This would seem to suggest that Lenin believed that the sensations by means of which we perceive material objects are exactly like them, but he goes on to say: “It is beyond doubt that an image cannot wholly resemble the model, but an image is one thing, a symbol, a conventional sign, another. The image inevitably and of necessity implies the objective reality of that which it images. ‘Conventional sign,’ symbol, hieroglyph are concepts which introduce an entirely unnecessary element of agnosticism.”37 This passage shows that Lenin realized that there are different sorts of copy, and different degrees of likeness, and the question therefore arises of the sort and degree of likeness that he thought there must be between a sensation and a physical object. Soviet philosophers generally answer this by referring to the following passage in Materialism and Empirio-Criticism: “This is how science views it. The sensation of red reflects ether vibrations of a frequency of approximately 450 trillions per second. The sensation of blue reflects ether vibrations of a frequency of approximately 620 trillions per second. The vibrations of the ether exist independently of our sensations of light. Our sensations depend on the action of the vibrations of ether on the human organ of vision. Our sensations reflect objective reality, i.e. something that exists independently of humanity and of human sensations.”38 On the face of it, ether vibrations and sensations of color are very different from one another, so that it seems odd to suggest that sensed colors are copies, photographs, or mirror-images of vibrations. Soviet philosophers have given some attention to this problem; they reject the “naïve realism” according to which there would exist in the physical world colors and sounds exactly like the colors we see and the sounds we hear, but they have nothing clear to say about what sort of copy or what degree of likeness is involved.39 Lenin was more concerned to proclaim the independent existence of the physical world than to explain how sensations can copy it, and has bequeathed to his followers some pretty intractable material. However that may be, both Lenin and the Soviet philosophers who follow him distinguish between physical occurrences on the one hand and sensations that copy or reflect them on the other, so that Mr. Cornforth must have been expounding his own opinion rather than the accepted Marxist view in the passages I have just quoted.

It is no great reproach to Lenin that he should have failed to put forward a coherent view about a problem that still puzzles scientists and philosophers. I suspect that his difficulties arise from his agreeing so far with his idealist and phenomenalist opponents that in perceiving we must become aware of entities (images, copies, sense contents, sense data) which are not the physical things themselves. Now we all begin by taking it for granted that it is physical things that we directly perceive—that we see and touch and hear such things as mountains, rocks, and thunderstorms. But as the result of two main lines of argument some people come to believe that what we directly perceive are entities the very existence of which we had not hitherto suspected. The first line of argument arises from considering the things that go on in and about our bodies when we perceive. Living beings, or at any rate animals, perceive, but metals, crystals, and machines do not. For in order to perceive, a suitable bodily equipment is necessary (eye, nerves, brain, etc.), and perception takes place when this bodily equipment is acted upon by some external object. It is possible, however, for something that is at any rate very like perception to take place even though there is no external object that affects the perceptive organs. For example, as Descartes pointed out, a man who has no foot may feel as though he still has a foot. This is thought to be because what finally and directly causes a perception is the nerves and brain, and these may be brought into the condition that causes perception either by an external object or by some condition within the body. Thus the perception of a tree normally arises from an organism’s being acted on by a tree, but it may on occasion arise from some injury to the brain causing a perception as if it had been caused by a tree. It is thought that what finally counts in bringing about a perception is the last link in a chain of causation running normally from a stimulus outside the body, but sometimes commencing in some other way. It is therefore concluded that what is directly perceived is never a thing like a tree, nor even a set of wave-frequencies, but something quite different, viz., a sense datum that has for its immediate cause a state of the percipient’s body. This is one line of argument to show that what we directly perceive is sense data. The second line of argument—called by philosophers “the Argument from Illusion”—briefly is that the direct objects of perception must be something other than material things, since the former frequently have properties which do not belong to the latter. For example, as I look at a penny I see, from most angles, various sorts of colored ellipse. The penny, however, is circular, and as what is elliptical cannot be at the same time circular, what I see cannot be a circular penny, but must be an elliptical sense datum. Philosophers who argue in this way then go on to consider how sense data can be related to material things. It will be seen that the common conclusion that the immediate objects of perception are sense data is reached by two different arguments, but this should not lead us to overlook their common preoccupation with illusions. A very important difference, however, is that the word “sense datum” is, in the first argument, defined in terms of physical causes, animal organisms, and their interactions, whereas in the second argument it is, as it is said, ostensively defined as what you see, hear, smell, touch, etc., quite apart from any theories about sense organs and the rest. That is to say, in the second argument “sense datum” is alleged to be defined in such a way that there could not possibly be any doubt that there are such things, since there cannot possibly be any doubt that colored shapes are seen, sounds are heard, and so on.

Some form of the first argument seems to have been accepted by Engels and Lenin, so let us see where it is likely to lead us. As I have just said, in order to say, for the purposes of this argument, what a sense datum is, reference has to be made to material objects, animal organisms, and sense organs. Sense data are entities that arise when certain physical conditions are fulfilled. It would therefore be contradictory to say within the framework of that argument that, while sense data certainly existed, material things were doubtful or non-existent—just as it would be contradictory to say, in ordinary discourse, that gifts certainly existed but that the existence of donors and recipients was a matter for doubt or denial. This is not a play on the derivation of the word “datum,” but a plain statement of how the expression “sense datum” is introduced into the sort of argument we are considering. Marxists, therefore, may be regarded as making the valid point that “sense data” or “sensations” are, in this context, terms that bear their meaning by relation to other terms such as physical stimuli, animal organisms, etc., and so could not, without contradiction, be regarded as sole denizens of the world. Another feature of the argument is that perception of physical things must be indirect because it takes place after a series of causes has come into play commencing with the external object and ending with some supposed physical modification of the brain. But why should perception be regarded as indirect just because the brain’s connection with the external stimulus is indirect? It seems to me that there may well have been confusion between the indirect connection that holds between the first and last members of a chain of physical causes on the one hand, and some allegedly indirect perception on the other. It makes sense to apply the word “indirect” to some sorts of knowledge. I may be said to know a man indirectly when I know someone who knows him but have never met the man myself, and knowledge gained by inference, hearsay, or reading may be called indirect by comparison with perceptual knowledge or with acquaintance generally. But in all these cases I might possibly have had direct knowledge; I might have met the man myself, or have gained the knowledge without inference or hearsay. But direct perception is apparently quite impossible, and this suggests, although it does not prove, that the notion of indirect perception is not a clear one. Such difficulties arise, I think, because we think of a chain of causes that runs as follows: external (physical) object—sense organ—nerves—brain—change in brain cell—sense datum—perception of sense datum. The first five members of this series are physical, and then there is a jump to entities of a different status, to sense data and perceptions. And it is hard to resist the conclusion that there is a jump of this sort, since becoming conscious of something seems to be quite different from any series of merely physical changes. Sir Charles Sherrington is surely right when he says: “It is a far cry from an electrical reaction in the brain to suddenly seeing the world around me . . .,”40 but this is no reason for concluding that we see sense data rather than physical objects. Consciousness is not made any less mysterious by introducing objects of a special, half-way type for it to be directly concerned with.

The second line of argument, the Argument from Illusion, raises rather different problems, and were I to dwell on them I should stretch this already long chapter beyond reasonable bounds. There is one aspect of it, however, on which I should like to comment briefly. The crux of the Argument from Illusion is that it must be sense data, objects distinct from physical objects, that are directly apprehended, since what is directly apprehended usually has features—shapes, sizes, colors, etc.—which are not features of the physical object being perceived. The elliptical shape I see cannot, according to this argument, be the circular penny; the yellow color I see when sick with jaundice cannot be the color of the white walls of my bedroom; the image of it in the mirror is not the penny in my hand; there is no stream the other side of the sandhill—what we saw was a mirage; the mad miser scratching for coins on the pavement was obviously seeing something, but it could not have been real pennies. But perhaps it is a mistake to treat all these cases in the same way. In the first place, mirages and hallucinations appear to involve illusions in a more intensive degree than do perspectival distortions, mirror images, or even jaundice. Indeed, the extension of the term “illusion” to perspectival distortions is probably due to philosophers anxious to discredit sense experience in favor of something else. So far is the word “illusion” from being apt to describe the case of the elliptical appearance of the circular penny, that we may well ask whether we could form any conception of what it would be to perceive a penny or any other physical object without perspectival distortion. How could anything look exactly the same from all sides and distances? What would it be like to see all things the same size no matter how far off they were? Again, it is very difficult to form any notion of what it could be to perceive all the surfaces of something at once, especially if the shape of each surface is always to remain the same. It would seem that physical things are essentially things that reveal themselves differently from different distances and points of view. In the second place, it is misleading in the extreme to regard mirror images as analogies for the perspectives or appearances of physical things. For whereas we can, and frequently do, see at the same time both the object itself and its reflection in a mirror, we can never at the same time see both the penny’s elliptical appearance and its circular shape. Furthermore, perspectival distortions are seen in the mirror, and are for this reason too a different type of thing. Mirrors add to the ways in which physical objects may appear, but there could be physical objects without mirrors, although physical things could not conceivably appear without appearing in different ways from different places. The mirror’s power of multiplying has fascinated the tellers of stories from Ovid to Carroll and Cocteau, and philosophers too have fallen under its spell when they allow it to dominate their account of perception. I suggest, in the third place, that hallucinations should be linked with mental images and with dreams rather than with the sort of case already mentioned—unless, indeed, some mirages are collective hallucinations. For the miser seeing imaginary pennies is like a man dreaming with his eyes open rather than like a man seeing things in a mirror. Nor is he like the man with jaundice, for unlike him he sees what is not there rather than what is there wrongly. When we close our eyes and remember or call up things that we have seen, some representative of it is, as we say, before our minds, and sometimes this representative is a sort of copy like those we experience in dreams. Thus Turner, when a boy, trained himself to form visual images of the prints he saw in shop windows so that he could draw them when he got home. Such images are, so to say, disconnected from their sources in a way in which perspectives and mirror images are not. It is one thing for an object to seem or to appear in a certain way, or even to seem what it is not, and quite another thing for a representative or image to be observed instead of its original. Those who hold that sense data are involved in all perception, and still more those who talk of “copies” or “images,” have been influenced by the spell of the enchanted mirror, and seek to describe waking life in terms of dreams and the dreamlike. I do not think it is out of place to quote, in illustration of this, the following remarks made by d’Alembert about Berkeley’s Three Dialogues between Hylas and Philonous: “At the beginning of the French translation there has been placed an allegorical engraving that is both clever and unusual. A child sees its face in a mirror, and runs to catch hold of it, thinking he sees a real being. A philosopher standing behind the child seems to be laughing at its mistake; and below the engraving we read these words addressed to the philosopher: Quid rides? Fabula de te narratur. (Why are you laughing? The story is being told about you.)”41

That Engels and Lenin held that there were sense data, and that sense data were a sort of reflection, copy, or image of physical things, cannot in the light of the texts be doubted, and I very much doubt whether Marxists today really wish to deny this. However that may be, the view that the immediate objects of perception are sense data is difficult, if not impossible, to reconcile with a realist account of perception. Thus I do not think that Engels and Lenin succeeded in putting forward an adequate account of the sort of view they wished to establish. They saw that a realist account of perception was a first step in establishing a materialist philosophy, but in stating it they did not get much beyond assertions and wishes. There is little point in repetition of the realist platitude by people who are not really interested in the arguments that have led to its denial. We can easily turn away from philosophical problems, but we can only clarify or solve them by philosophical argument.

There are two historical observations I must make before concluding this chapter.

(1) In the Theses on Feuerbach (which were not written for publication), and in the German Ideology (which was not published until long after Marx and Engels were dead), there are some remarks about perception of the physical world which appear to give the outlines of a theory. In the first of his Theses on Feuerbach Marx says that in all materialism up to his time, including that of Feuerbach, the object apprehended by the senses is understood “only in the form of the object or of perception (Anschauung); but not as sensuous human (sinnlichmenschlich) activity, as practice (Praxis), not subjectively.” And he goes on to say that in his Essence of Christianity Feuerbach had considered only man’s “theoretical behavior” as truly human, and had dealt with practice “only in its ‘dirty Jewish’ manifestation.” Again in the fifth of the Theses he wrote: “Feuerbach, not satisfied with abstract thought, wants perception (Anschauung): but he does not grasp our faculty of perception (Sinnlichkeit) as practical, human-sensuous activity.” This, I suggest, may be read along with passages in the German Ideology (written about the same time) in which Marx and Engels criticize Feuerbach for not seeing how the “sensible world around him is not a thing given from all eternity, ever the same, but the product of industry and of the state of society,” and go on to say that “unceasing sensuous labor and production” have made nature into something very different from what it was before man came into it. These passages are obscure, and the last one not a little foolish, but the following appear to be the points that are of importance for our present purpose. Feuerbach, whose Essence of Christianity (1841) greatly influenced Marx and Engels, had criticized Hegel for depreciating the knowledge we gain through our senses and for preferring philosophical thought to it. Furthermore, in his Essence of Christianity Feuerbach maintained that the characteristics that men attribute to God are really human characteristics in an idealized form. In particular he had said the Jewish notion of God as creative will indicated a lower stage of human development than the Christian notion of God as contemplative mind. (The phrase “dirty Jewish” does not occur in the book.) Marx appears to be saying, in his discussion of all this, that Feuerbach was right to see that perception could not be superseded by mere thought but that he should have gone further and concluded that practical activity cannot be superseded by mere theoretical contemplation. A thorough-going materialist, he is suggesting, should not admit the existence of any purely theoretical activity in human beings, since this would presuppose some disembodied spiritual force that in fact could not exist. At first sight it seems ridiculous to criticize anyone for not considering how human practical activity has changed the natural world, for it is so very obvious that it has, and we naturally suppose that work on the one hand and awareness or consciousness on the other are very different things. But Marx, in these passages, appears to assert that awareness or consciousness is somehow (he does not say how) inseparable from physical manipulation of the material world. Some Soviet Marxists in the late twenties interpreted Marx as meaning that consciousness just is behavior, but this view has not remained in favor. Nevertheless, Marx does seem to be saying that whatever consciousness may be, it is inseparable from the manipulative activities of organisms. Views of this sort are not, of course, confined to Marxists, and in recent years interesting theories have been developed in which perception is regarded as a sort of practical achievement. Marx, however, did not elaborate his suggestions, and Marxists have been faced with the necessity of making the most of the “copy” theory that they have inherited from Engels and Lenin.42

(2) In chapter 7 of the Holy Family Marx gave a brief account of the growth of modern materialism, and particularly of the French materialism of the Eighteenth Century.43 He considered Bacon44 to be the founder of the movement and went on to show how Locke’s Essay concerning Human Understanding was a decisive influence in the minds of the men who created and led the French Enlightenment, a movement which Marx described as both an attack on the Church and its doctrines and a criticism of the metaphysical thinking that had been so prominent in the preceding century. It was within this movement that the materialist views of Diderot, Helvétius, and d’Holbach were developed. Marx, in this chapter, is concerned primarily with the social bearings of French materialism, and so has no occasion to refer to views about the perception of the material world. I think, however, that a very brief account of what was said about this by the leading French thinkers of the period will throw some light on the Marxist theory. Marx, like Feuerbach, thought that the leading thinkers of the French Enlightenment had “seen through” metaphysics, and it is reasonable to suppose that they took much the same attitude to idealist accounts of perception. Now Locke had said that all our knowledge is based on “ideas.” Ideas became naturalized in France as “sensations.” But it soon became apparent that simple-minded theories about sensations and their “external causes” were liable to the criticisms that Berkeley had brought against Locke. Diderot, in his Letter on the Blind for Those Who Can See (1749), wrote: “Idealism is a system which, to the shame of the human mind and philosophy, is the most difficult to overcome, though the most absurd of all.” He therefore urged Condillac to undertake the refutation of idealism on the basis of the current empiricism, and Condillac’s Treatise on the Sensations (1754) contained the most notable attempt to do this. In effect, Condillac argued that it is by means of touch that we become aware of an external world, and he tried to show how this happens by reference to the double sensation we have when we touch some part of our own body and the single sensations we have when we touch something external to our body. “Touch,” he wrote, “teaches the other senses to judge about external objects.” This, of course, is no answer to Berkeley’s idealism, and Condillac, not very happy about it, later thought that the sensation of a resisting obstacle provided a better defense of realism. D’Alembert, too, was puzzled by the apparent conflict between empiricism and realism, and, distinguishing the question how we get knowledge of external objects from the question whether such knowledge is demonstrative, answered the first question much as Condillac had done, and the second in the negative. The existence of matter, he said, should be regarded as known to us “by a sort of instinct to which we should abandon ourselves without resistance . . . sensations were given us in order to satisfy our needs rather than our curiosity; in order to make us aware of the relation of external beings to our own being, and not to give us knowledge of those beings in themselves.” Turgot, who in 1750 thought he could refute Berkeley, subsequently gave, in the article in the Encyclopédie entitled “Existence,” a brilliant account of the phenomenalist view. In general, the empiricism of these thinkers led them to phenomenalist conclusions which they mitigated by off-hand references to instinct and practice. The little I have been able to find in the writings of Helvétius and d’Holbach that bears on this matter does not distinguish them from their more eminent contemporaries. All this suggests to me that when Marx and Engels regarded idealism as refuted by practice they meant by “practice” touching and manipulating and the survival value of discriminative sensations, much as their eighteenth century forerunners had done.

II

Marxist Naturalism

1.

Basic Ideas of Marxist Naturalism

Just as Marxist realism is the denial of the idealist theory of knowledge put forward by Berkeley, and of its phenomenalist offshoots, so Marxist naturalism arises from criticism of Hegel’s speculative idealism. Hegel believed that it could be shown, by the dialectical method, that the universe as a whole is a rational mind within which matter and mere vegetative and animal life are dependent abstractions. On this view, someone who said that the world is material would be neglecting most of its most significant features, someone who said that it was alive would be neglecting many, but not quite so many of its most significant features, and someone who said, with understanding of what was implied in it, that the world is a mind, would be saying what is true and would not be denying that it had material and animal features too. Hegel claimed that his speculative idealism was the most complete philosophy that had hitherto been put forward, that it did justice to what there was of truth in previous philosophies, and that it was superior to Berkeley’s in that it put sense knowledge in its proper, rather subordinate place. The arguments are elaborate, and difficult to summarize, but their principle is that all views other than the view that the world is Absolute Spirit can be shown to involve contradiction, whereas the theory of Absolute Spirit retains all that is true in each of the more limited views without being itself limited in any important way. Hegel thus thought he had established a sort of philosophical religion, for he held that the Hegelian philosophy was the definitive rational expression of the truths which in Christianity, the highest form of religion, were expressed in imaginative terms only. The element of this view that is most important for our present purposes is the claim to establish by philosophical argument, that is to say by speculation, that all conceptions short of the Absolute Idea involved contradictions, and that nature is not an independent being but a moment or aspect of Spirit. “Nature,” Hegel wrote in the Encyclopedia (§ 248), “in itself, in its concept, is divine, but exists in such a way that its mode of being does not correspond to its concept; on the contrary, nature is the unresolved contradiction. . . . Nature appears as the primary, as immediate being, only to that consciousness which is itself external and immediate, that is, only to the sensuous consciousness.”

Now in opposition to all this Marxists argue that nature not only appears to be primary, as Hegel had said, but that it really is primary, and that there is nothing fundamentally misleading in our sense perceptions of it. In his Ludwig Feuerbach, Engels argued that there are at bottom only two main philosophies, idealism and materialism. According to the idealists, mind in some form or another is the primary being from which everything else has sprung, while according to the materialists matter is the primary being from which mind has taken its origin. Engels goes on to say that the group of philosophers known as the Young Hegelians turned “back to Anglo-French materialism” in order to develop their criticisms of the Hegelian system, and that the appearance of Feuerbach’s Essence of Christianity (1841) was decisive in giving form to the materialist outlook of Marx and himself. “Enthusiasm was general; we all became at once Feuerbachians.”1 Now in this book Feuerbach had upheld the two theses mentioned above, viz., that sense experience is trustworthy and reveals nature to us, and that nature is the source of mind and consciousness and stands in no need of a supernatural Creator. More particularly he argued that speculative philosophy is the form that theology takes in an age when natural science has discredited it, and that the explanation of theological doctrines is to be found in the needs and desires of men. “Man,” wrote Feuerbach, “—this is the mystery of religion—projects his being into objectivity, and then again makes himself an object to this projected image of himself thus converted into a subject; he thinks of himself, is an object to himself, but as the object of an object, of another being than himself. . . . Thus, in and through God, man has in view himself alone. It is true that man places the aim of his action in God, but God has no other aim of action than the moral and eternal salvation of man; thus man has in fact no other aim than himself. The divine activity is not distinct from the human.”2 From all this a number of closely related topics emerge: (a) It is held that sense perception is reliable, and reveals an independently existing material world. (b) It is held that nature stands in need of no supernatural Creator, but is itself the source of men and minds. (c) It is held that we can improve our knowledge of nature by employing the methods of the natural sciences, but that the methods of theology and speculative philosophy do not lead to knowledge of anything supernatural. (d) It is held that a natural account can be given of the religious beliefs of men, and that, in particular, God is an imaginative projection of human needs and desires.

We need spend no longer on (a), since we have treated this topic fairly fully in the preceding chapter. But it is important to see how (b), (c), and (d) are connected. Clearly (b) is considered to follow from our scientific knowledge, so that the fundamental questions are whether scientific knowledge is to be preferred to theology and speculative philosophy, and whether these latter give any knowledge of the world at all. Thus (c) is logically prior to (b). (c), however, is also logically prior to (d). For (d) purports to be a psychological (or, as Feuerbach put it, an “anthropological”) account of belief in God, and could only be regarded as not “explaining away” such belief if God’s existence could be proved by theology or speculative philosophy or (contrary to (b) above) by some scientific procedure other than that of psychology or “anthropology.” Thus, if the theological and speculative methods are valueless, and if the only way of getting knowledge of the world is by means of the methods of the natural sciences, then belief in God is unfounded unless scientific methods establish it—and the assertion of (b) is that they do not—and religious beliefs and practices have to be accounted for in psychological or sociological terms. Let us, then, first discuss (c), the Marxist view that the scientific methods are supreme.

2.

Science, Philosophy, and Practice

Marx’s opposition to speculative philosophy is particularly apparent in his early writings, such as the Holy Family and the German Ideology. In the former of these writings (chap. 5, sect. 2, “The Mystery of Speculative Construction”) there is a vigorous passage, quite in the vein of Feuerbach, in which the speculative philosopher is depicted as arguing that the substance or reality of apples, pears, strawberries, and almonds is fruit itself, an organic identity in difference which develops itself in the forms of the different species of fruit. “While the Christian religion recognizes only one unique incarnation of God, for speculative philosophy there are as many incarnations as there are things; in this way it sees in each sort of fruit an incarnation of the substance, of the absolute fruit. The main interest of the speculative philosopher consists, therefore, in producing the existence of real fruit, and in saying, in a mysterious manner, that there are apples, pears, etc. But the apples, the pears, etc., that we discover in the world of speculation, are only the appearances of apples, of pears, etc., for they are the manifestations of fruit, of the rational abstract entity, and are thus themselves rational, abstract entities. Thus the pleasing thing in speculation is finding in it all the real fruits, but as fruits with a higher mystic value, as fruits sprung from the aether of your brain and not from the natural world, incarnations of fruit, of the absolute subject.”3 Anything of value that there is in the Hegelian philosophy—and Marx thought that there was a good deal—was thus the result, not of Hegel’s speculative arguments, but of his great knowledge of history, politics, and art. Speculative philosophers, according to Marx, give the appearance of adding to our knowledge by importing into their systems facts and principles derived from elsewhere. Generalities and abstractions are based on experienced particulars, but the speculative philosopher thinks he can reach to a knowledge of real things by manipulating abstractions whose basis he has forgotten. Marx’s objection to speculative philosophy is, therefore, that it falsely claims to obtain important knowledge of the world by reasoning that is not openly assisted by observation and experiment. He and Engels go even further than this, however, and pronounce the ineffectiveness of any form of philosophy that claims an independent status. “When reality is depicted,” they write in the German Ideology, “philosophy as an independent branch of activity loses its medium of existence.”4 Developing an epigram of Feuerbach, they write in another part of the same work: “Philosophy and the study of the real world are related to one another as are onanism and love between the sexes.”5 The position is made clearer by Engels in the Anti-Dühring when he writes: “As soon as each separate science is required to get clarity as to its position in the great totality of things and of our knowledge of things, a special science dealing with this totality is superfluous. What still independently survives of all former philosophy is the science of thought and its laws—formal logic and dialectics. Everything else is merged in the positive science of nature and history.”6 In brief, then, Marxists maintain that the growth of the empirical sciences demonstrates the fruitlessness of the speculative method, that the validity of scientific thinking is tested by sense experience, and that the sole task of philosophy is to indicate the nature of scientific thinking (“formal logic and dialectics”). As to scientific thinking itself, the first and fundamental character is its practical nature. According to Engels, it is in practice that our views about the world are confirmed or refuted. Referring to those who raise skeptical doubts about human knowledge, he writes: “The most telling refutation of this as of all other philosophical fancies is practice, viz., experiment and industry. If we are able to prove the correctness of our conception of a natural process by making it ourselves, bringing it into being out of its conditions and using it for our own purposes into the bargain, then there is an end of the Kantian incomprehensible ‘thing-in-itself.’”7 In the paragraph from which these words are quoted, Engels gives two examples of how practice can assure us that we have genuine knowledge of the real world. We really understand the chemistry of a coloring-matter hitherto only found ready-made in nature when we know how to manufacture it by artificial means. Again, the truth of the Copernican system was proved when, the position of a hitherto unknown planet having been calculated in terms of the Copernican theory, the planet was actually found to be there.

The reader with some knowledge of the main trends of modern philosophy will be inclined to say that the view so far expounded is pretty much what in England, France, and the United States is known as positivism. Positivism it certainly is, in its depreciation of theology, its linking of metaphysics with theology, its acceptance of the methods of the natural sciences as the sole means of acquiring genuine knowledge, and in its belief that the scientific method is the method of practice and industry. The substance of Comte’s Law of the Three Stages is repeated by Marx, Engels, and Feuerbach, inasmuch as they all believed that in the modern era theological ideas were being dressed up in speculative terms and would be superseded by the positive scientific mode of thinking. Engels’ phrase “positive science of nature and history” shows even a verbal similarity. The emphasis on practice is also common to positivism and Marxism, for Bacon’s dictum “knowledge is power” is accepted in each. The following passage from Comte’s Course of Positive Philosophy sets out his position on this matter: “. . . While the common reason was satisfied to grasp, in the course of judicious observation of diverse occurrences, certain natural relations capable of guiding the most indispensable practical predictions, philosophical ambition, disdaining such successes, was hoping to obtain the solution of the most impenetrable mysteries by means of a supernatural light. But, on the contrary, a healthy philosophy, substituting everywhere the search after effective laws for the search after essential causes, intimately combines its highest speculations with the most simple popular notions, so as finally to build up—apart from the difference of degree—a profound mental identity, which no longer allows the contemplative class to remain in its habitual proud isolation from the active mass [de la masse active—the acting masses].”8 But Marx himself would not admit any value in the work of Comte. Writing to Engels on 7 July 1866 he says: “I am also studying Comte now, as a sideline, because the English and French make such a fuss about the fellow. What takes their fancy is the encyclopedic touch, the synthesis. But this is miserable compared to Hegel. (Although Comte, as a professional mathematician and physicist, was superior to him, i.e., superior in matters of detail, even here Hegel is infinitely greater as a whole.) And this positivist rot appeared in 1832.”9 And in a letter to Professor Beesly of University College, London, dated June 1871, he writes: “I as a Party man have a thoroughly hostile attitude towards Comte’s philosophy, while as a scientific man I have a very poor opinion of it.”10 One would hardly suppose, from these attacks, that Marx and Comte were fully agreed in rejecting speculative philosophy, and that Hegel was the leading speculative philosopher of modern times. Marx, of course, differed from Comte on important matters, notably on politics and dialectics—though even here, as we shall see, the differences between Comte and the Marxists are not as great as the latter maintain—but it is worth considering for a moment why it is that Marxists so vehemently deny this manifest kinship. The Marxist writings are largely polemical, but the objects of attack are not, for the most part, representatives of the orders of society that the Marxists wish to destroy, but rival radicals whose competition they fear. Thus the Holy Family is directed against Bruno Bauer and other radical Hegelians; the German Ideology is critical of Feuerbach, Max Stirner, and certain socialists of the eighteen forties; the Poverty of Philosophy is an attack on Proudhon, whose socialist views had been held up to admiration in the Holy Family; Eugen Dühring, who because of his criticisms of the Hegelian elements in Marxism, was so fiercely attacked by the kindly Engels, was a determined opponent of speculative philosophy and of the current orthodoxies; Lenin’s Materialism and Empirio-Criticism was directed against members of his own party who considered they were supporting a scientific view of the world; and in our own day Marxists are busy criticizing Logical Positivism and kindred views with which they clearly have much in common. I have already pointed out that Lenin’s attitude toward the philosophy of Mach is in part that of the party administrator who wishes to be disencumbered of what he regards as distracting subtleties. It is important to bear in mind, however, that it is a Marxist view—which will be considered in Part Two—that philosophical theories are the expression of class interests. It is therefore never safe to welcome a set of philosophical views on the ground that they fit in with those that one has independently come to regard as true. For they may be linked with other views which reflect different class interests, so that approval of them may weaken the Marxist philosopher’s exclusive devotion to the working class and its Party. Marx’s opposition to a philosophy with which he had so much in common was thus mainly due to his dislike of Comte’s political and social doctrines, which made it inopportune to admit the kinship. In the Soviet Union today, the procedure thus followed by Marx, Engels, and Lenin is vigorously advocated in leading circles. Thus the late Mr. Zhdanov, in his speech to the philosophers about Professor Aleksandrov’s History of Philosophy (which had been awarded the Stalin prize) referred to “the passive, meditative, academic character” of the book, and criticized it for its “absence of party spirit,” rhetorically asking “. . . did not Lenin teach us that ‘materialism carries with it, so to speak, party spirit, compelling one, in any evaluation of events, to take up directly and openly the viewpoint of a definite social group’?”11 Incidentally, Mr. Zhdanov defined philosophy, much as a positivist would, as “the science of thought and its laws, including epistemology.”

The efficacy of the scientific method of hypothesis, observation, and experiment is no longer a matter of controversy, although much remains to be said about how its various features are related to one another. There still is controversy, however, concerning the applicability of the method to human affairs, and this question will have to be touched on in Part Two. Must it also be admitted that there is no longer any place for speculative philosophy, or as it is more often called today, metaphysics? Hegel himself made the obvious reply to the opponents of metaphysics when, in § 38 of the Encyclopedia, a section devoted to empiricism, he wrote: “The fundamental mistake of scientific empiricism is always this, that it makes use of the metaphysical categories of matter, force, one, many, universality, of the infinite, etc., and furthermore draws conclusions under the guidance of these categories, at the same time presupposing and applying the forms of inference, yet with all this it does not recognize that it contains and pursues a metaphysics of its own and is making unconscious use of those categories in a thoroughly uncritical manner.” Present-day “scientific empiricists” would not admit that they use such categories uncritically; on the contrary, they would claim that they are able to give an account of them that accords well with their point of view. This raises one of the major questions of modern philosophy, and we cannot here do more than indicate some very general grounds for not accepting the empiricist-positivist point of view as a presupposition of philosophical good faith as some of its exponents seem to require. In the first place, it seems to me that insufficient attention has been given to the question what sort of theory positivism, or any other philosophical view, must be. Clearly philosophical theories are not confined to particular aspects or areas of the world as scientific theories are, but are in some way about science and common sense. This is what the idealist philosophers of the nineteenth century meant when they said that philosophy is reflective, and it has been recognized, in one way or another, ever since Plato. Furthermore, there are bodies of thought such as history and law that have reached a high level of elaboration without being regarded as parts of science or as mere common sense, and these too need to be embraced in philosophical theory if it is not to remain one-sided or incomplete. Law, of course, is practical, and in many ways akin to morals, and we thus see that philosophical thinking must enquire into the connections of theoretical rational activities with practical rational activities. We may say that philosophy must be thinking in its most self-conscious form, and that such thinking must necessarily be very different from the thinking that is directly immersed in particular enquiries. We should not assume that it must be like the thought of mathematicians or physicists. As one or another special science becomes prominent, however, philosophers will tend to be influenced by their understanding—which may not always be adequate—of the notions current in it, and there will be mathematicizing periods, psycho-analyzing periods, and so on. In our day, many philosophers have been influenced by the conceptions of symbolic logic, and have sought to make use of them in dealing with the traditional problems of philosophy. There is much to be gained by trying out such specialized notions in the philosophical sphere, but it must always be done tentatively, with no more zeal than is necessary to carry such trains of thought effectively forward, since anything beyond this is an example of the very dogmatism or unselfconsciousness that philosophy is meant to correct. In the second place, then, I think that many people expect or claim an unreasonable degree of confidence for philosophical views. There are two main reasons why philosophy should not be considered an exact science. One is that the rules to be followed in thinking about thought (or talking about talk) are not—apart from the rules of formal logic—as obvious or as settled as are the rules of the primary thought activities. We are hardly entitled to have, for example, the degree of confidence in a theory about the nature of deductive inference as we may have in the validity of a particular deduction. The second reason is that, in so far as philosophy is concerned with matters more fundamental than those of any single science or range of activity, an element of what may be called judgment must enter in, as, say, the moral or historical point of view is related to the biological or physical in such a problem as that of free-will or of the nature of mind. Something akin to tact or taste is bound to be required, and it is this, I believe, that Hegel had in mind when he criticized the rigid categories of the Understanding by contrast with the more flexible ones of the Reason. (Hume seems sometimes to think of the Imagination in similar terms.) It is proper that many philosophers should be reluctant to say such things, since they rightly feel that, if dwelt upon, they could lead to a renewal of the uncontrolled speculation, the quasi-intellectual whims, of German “romantic” philosophy. It is right that rigor should be sought, but not right to impose it on unsuitable material. A third point to bear in mind is that we live at a time when scientific activity is more influential than ever before, so that philosophers, if they are to avoid deception by what Marx called “the illusion of the epoch,” must take special care to distinguish between the power of science to discover and its power to impress. The age being as it is, our ideas of what is reasonable in these highly abstract regions of thought are likely to be influenced more than they should be by the might rather than by the rationality of science. It is useful, therefore, on occasion, to correct the bias somewhat, and to regard with perhaps exaggerated skepticism the arguments of those numerous thinkers who are positivists by inclination or as a practical principle. It is all the more important to do this if, as I have suggested above, the grounds for deciding between possible views at the highest level of philosophical abstraction are rational in a sense that has affinity with taste or tact as well as with formal logic. In such matters the barrier between reason and prejudice must be very thin.

Earlier in this section I mentioned Engels’ view that scientific theories are established by “practice, viz., experiment and industry,” along with his suggestion that we have full knowledge of something only when we make it. Now it is quite clear that both positivists and Marxists oppose practice to speculation. Speculation is the “arm-chair” activity of mere thinking. Speculative thought consists of such activities as imagining, considering, defining, and concluding. The man who engages in this sort of thinking does not test his conjectures or conclusions by reference to what goes on out of sight of his arm-chair. His line of argument rather is: “That is how things must be really, however they may appear to be.” With him is to be contrasted the man who, perhaps also from an arm-chair, puts forward a view about how things work, but who, having done this, gets up from his chair and traverses ground to look or touch or listen, so as to ascertain whether the things work as he has said they do. He, or his agents, must walk, climb, lift up stones or make holes in the ground, pull things to pieces or mix them together, take measurements, look through microscopes or telescopes, whereas the speculator, like the mathematician, does not need to do these things. The things that the mere thinker does not do and that the other man does do may quite appropriately be called “practice.” This is the sort of practice involved in the second of Engels’ examples. Someone who accepts the Copernican hypothesis calculates on its basis the existence of a planet, but this remains mere calculation, unpractical paper-work, until the existence of the planet has been verified by someone who sees it through a telescope. “Practice” here means the verifying of hypotheses, that is to say, of suggested theories, emphasis being placed on the need for someone to bestir himself physically, to move or arrange things, or to use instruments of observation. Thus Engels’ second example illustrates the “union of theory and practice” by reference to the generally accepted methods of the empirical sciences. There is nothing in all this that would not be accepted by any educated person—though there is room for a good deal of discussion about the precise rôle of the observation or experiment—and the critic of phenomenalism will be glad to point out that verifying is something that involves moving and manipulating and the use of physical means, so that it would be circular to use the notion of verifiability, as some phenomenalists have done, in analyzing the notion of a physical object. “Verifying,” when used in the phenomenalist theory, is a philosophical, not a common sense, word, and requires us to give a clear meaning to the term “sense datum,” which is far from easy.

Engels’ first example, however, may be taken to suggest that a theory is not fully established until the things it is about can actually be made by human beings. Thus the practice necessary to complete mere theory would be manufacture as well as verification. From this it would follow, for good or ill, that theories about planets could never be as adequate as theories about dyes (Comte thought this, though for a rather different reason), since the latter can be made whereas it is unlikely that planets will ever be produced by human beings. It would hardly be maintained, I imagine, that ability to manufacture is in itself a proof of adequate knowledge, for if it were, then an intuitive cook or peasant distiller would know more than a physiologist or chemist. Can it, then, be reasonably held that physical things and processes are only incompletely understood until they have been or could be manufactured? In a perfectly trivial sense this may be admitted, since until the knowledge of how to make a thing has been acquired knowledge of it is, to that extent, defective. In the same way, knowledge of carrots is defective until the weight is known of all the carrots in the world, though it has to be admitted that knowledge of how to make something is generally more closely linked with a scientific understanding of it than such knowledge of carrots is linked with a scientific understanding of them. Scientific understanding often, but not always, shows the way toward manufacture. The knowledge of how to make them is extremely useful knowledge to have of things that we want to have, and therefore great efforts are made to discover how to make them. In this way, human desires have led to mechanical inventions and the setting up of industrial plants. Scientific knowledge is then used to improve these industrial plants, and the plants can often be used to produce instruments which help the advance of scientific knowledge. Thus there is set up a process in which industry serves science and science serves industry. But this is far from demonstrating that science is an offshoot or sub-species of industry. Science has been developed by men whose aim was to understand rather than to make, and their activity is more like that of the consumers of industrial products than that of their makers. The plant used by the scientist supplements his sense organs, whereas that of the industrialist supplements his muscles. A scientist is not a practical man in the same sense that an industrialist is, for, if the scientist makes, it is in order to know, whereas the industrialist uses his knowledge in order to make.

In our discussion of the Marxist theory we have now distinguished four meanings of “practice.” The first was that in which it stood for the common sense which cannot be shaken by fine-spun skeptical argumentation. The second meaning of the word was an alleged passage, in perception, from an “image” or “copy” to a real grasp of an independently existing physical object. In its third sense the word meant the process of verifying hypotheses by means of observation and experiment. Fourthly, the word was used to stand for that mode of manufacture which, by completing the process of verification, linked science with industry. To conflate these together in the slogan “union of theory and practice” is to invite and spread confusion. To distinguish them is to enable the true to be separated from the false. We have seen that it makes good sense to say that practice refutes skepticism about material things, and that empirical science is a practical activity by comparison with mathematics and mere speculation. The “practice,” however, that is supposed to take us from “image” to material thing, is an expedient required to patch up an incoherent theory of perception, and the attempt to identify science and industry is only a plausible sophism.

3.

Science and the Supernatural

We must now briefly consider the Marxist view that nature stands in need of no supernatural Creator, but is itself the source of everything, including men and minds. According to Marxists, theism is a form of idealism, since idealism is the view that matter depends on spirit, and theism is the view that matter and created minds depend on a divine spirit that gave them being. Now although Marxists have not, as far as I am aware, examined the arguments for the existence of God in any detail, I think it is fairly clear that when they hold that nature is not a creation of spirit but its source, they base their view on the assumption that the empirical sciences reveal nothing of the existence and operations of God but show that mind is dependent on certain types of physical organism which have arisen comparatively late in the evolution of the world. Thus they hold (i) that the only way of finding out about what exists is by experience and the methods of the empirical sciences, and (ii) that the empirical sciences do not reveal a supernatural cause of nature. In addition, however, they hold (iii) that the scientific study of man and his situation shows how the illusory belief in God’s existence has arisen. Engels in Ludwig Feuerbach argues as if Feuerbach’s account of the origin of belief in God, and Tylor’s animistic theory of religion, were sufficient to show that belief in God is untenable. But in themselves “anthropological” and psychological accounts of how men come to believe in God do not disprove the existence of God. For such accounts may be regarded as descriptions of the natural origins of belief in God which supplement but do not disturb the metaphysical proofs of natural theology. It might be argued both that man “projects” his conception of an ideal man, and that the traditional arguments for the existence of God are singly or collectively successful. Engels, however, like Marx and Feuerbach, regarded the traditional arguments for the existence of God as speculative thinking, so that their rejection of speculative philosophy—today generally called metaphysics—was a fortiori a rejection of natural theology. On their view, that is, the methods of the empirical sciences are the only effective ones for exploring the world. Thus Marxist atheism is a consequence of Marxist positivism, and the central and decisive thesis of the Marxist philosophy is the denial of all forms of speculative philosophy in favor of the methods of the empirical sciences. This is a feature of Marxism which, in a world where the natural sciences are so obviously influential, has emphasized its accord with the spirit of the time. Positivism is the orthodoxy of a technological age, and the positivistic component of Marxism is sufficient to recommend it to a very wide public.

Must we then accept the view that the empirical sciences do not reveal a supernatural cause of nature? Such a cause would have to be either one of the objects studied in those sciences or else a hypothesis which they rendered more or less probable. It would be agreed by all parties that no such being is among the observed objects of the empirical sciences, as are trees, rocks, and stars. These are objects of the common sense world, and stand in need of no scientific argumentation in order to be accepted as parts of the real world. Objects such as genes and electrons do not appear in the common sense world of trees, rocks, and stars, and are only believed to exist as the result of complex though convincing argumentation. A supernatural first cause, however, does not figure among such objects either, for it would be more recondite than they, and their source no less than the source of the things in the world of everyday common sense. If, therefore, a supernatural cause of nature were to enter into the considerations of men of science, it could only be as a rather desperate hypothesis reluctantly employed to account for some very general feature of the world. It is idle, I suggest, to speculate further on this aspect of the matter, since it is only within the context of detailed scientific enquiry that such a hypothesis could take on definite shape. On the face of it, however, it appears less improbable that some form of theistic hypothesis involving creation might be called for in the cosmological enquiries of astronomers than elsewhere. To call such a hypothesis “theistic” is, perhaps, going too far, since it is most unlikely that a hypothesis framed in such circumstances would point to a being with the personal and moral characteristics usually attributed to God. Indeed, the more the hypothesis was bound up with specifically scientific conceptions (e.g., electrons or nebulae), the less connection it would have with such conceptions as benevolence or forgiveness.

It is very important to notice that being empirical is not necessarily the same thing as being scientific. An argument or notion may be based on experience, and have all the authority that such a basis can lend, and yet not form part of any recognized empirical science. This is the case with most of the notions and arguments of everyday life. A large part of our empirical knowledge is in terms of the common objects we live among, the objects of human concern, whether natural, such as trees and hills, or artificial, such as houses and roads. Now whereas some of the arguments of natural theology are highly technical, and employ unusual terms such as “necessary” and “contingent,” others are empirical, i.e., based on experience, but do not fall within the ambit of any empirical science. The Argument from Design and the various Arguments from Moral Experience are of this nature. In the former the argument is from alleged similarities between the results of human workmanship on the one hand, and the structure of the physical world, or of parts of it not fashioned by human beings, on the other. In the latter, the moral beliefs of men are taken as data. In neither case is there any need, in formulating the argument, to refer to objects or conceptions that are specifically “scientific,” although some people have thought that the Argument from Design can be strengthened by so doing. Thus, the general, positivistic rejection of speculative philosophy or metaphysics on the ground that it is an attempt to conjure conclusions about matters of fact from baseless premises, does nothing, in itself, to shake the strength of such empirically based arguments. The arguments in question may not be satisfactory, but they are not idle or senseless, and can claim to be empirical in spite of not forming part of any of the empirical sciences.

Granted that astronomy or some other natural science might conceivably need to make use of the hypothesis of an extra-natural cause of nature, and granted also that empirical arguments that do not form part of any special science might conceivably lead to theistic conclusions, we may still ask the further question: “Could there conceivably be a science of the supernatural comparable with the natural sciences in its objectivity and predictive power?” It is certainly the lack of such a science that leads many people to consider that theological enquiry is not worth the trouble of attention. They think that if anything could be found out about such matters, agreed findings would already have been reached and methods found of making predictions. The prophet would be believed if he correctly foretold the results of horse races, and when he protests that God is not interested in horse races, the doubters feel that a winning sequence would nevertheless increase their faith. The whole topic is rendered particularly obscure because of the implications of our vocabulary. Very largely as a result of the growth of science and the spread of the positivistic outlook, the expressions “science” and “the supernatural” tend to be regarded as mutually exclusive, so that the phrase “science of the supernatural” comes very near to being self-contradictory. This is because we tend to regard as part of nature whatever is discovered by the methods of the natural sciences. Thus we tend to regard “psychical research” as the attempt to bring to light hitherto insufficiently confirmed natural occurrences rather than as the search for the supernatural. This may be an effect of using playing-cards and statistical techniques in the study of telepathy and precognition. If the occurrence of such things were established by these methods, and if the conditions of their occurrence could be ascertained, we should be inclined to say that our knowledge of nature had thereby been extended. It would be as if a magician’s formula were after all found to work, not only once and for some specific occasion, but always under given conditions. Magic verified would become science, in accordance with Frazer’s dictum: “Magic is a false system of natural law as well as a fallacious guide of conduct; it is a false science as well as an abortive art.”

If this were all, however, we should have to say that a science of the supernatural could only be understood as a science of what is unusual and particularly difficult to verify. But clearly we should not say this, for it is only certain sorts of unusual or latent things that would be regarded as supernatural. Positrons, for example, were difficult to discover, and manatees are rare, but neither is a class of supernatural being. To be classed as supernatural a being would have to be some sort of mind, not embodied in a normal manner, and capable of effecting changes in the natural world by means not available to humans or animals. Thus a supernatural being would be a disembodied or abnormally embodied personal being whose modes of operation in the physical world were not confined to the human or animal ones. If it were to be established that human beings can foresee the future, know telepathically, and move distant objects by merely willing to do so, then manifestations of these powers would only be called supernatural if they were the work of disembodied spirits, or of unnaturally embodied ones, such as talking trees. If a man were to dream of his dead father, to feel himself impelled to write an automatic script, and to find that this script, in his father’s characteristic style, enabled him to discover some matter that only his father could have known, it would be evidence, though not conclusive evidence, that his father’s mind had survived bodily death. If all the inhabitants of the British Isles woke up one morning recollecting an identical dream, and if the dream were to the effect that, unless they all refrained from drinking water until midday, Mount Snowdon would be split in half at midday precisely; and if some people were widely known to have drunk water before midday, and if Mount Snowdon was observed to split in half at midday precisely, this would be pretty strong evidence for the existence of a powerful being capable of communicating a threat or warning and of carrying out a spectacular task without the normal means. If such striking things happened from time to time, so as to render improbable any suggestion of coincidence, then we should feel there were strong grounds for believing in the existence of a powerful supernatural being. In a society where a great deal is known of the normal operations of nature, the type of event that would be taken as evidence for the supernatural would have to be extremely peculiar. It would weaken the force of the “miracle,” for example, if Mount Snowdon split in two in the course of a severe earthquake, for then, in mid-twentieth-century England, natural causes would be widely presumed. Further, the prophecies or warnings would have to be in unmistakable terms. A disembodied superhuman being would have to adopt different methods to manifest itself in Detroit from those that would suffice in Calcutta or Killarney. Again, inasmuch as supernatural beings would be minds, our knowledge of them would have to be of the same general nature as our knowledge of human minds, for unless there were some analogy from the behavior of human minds, we should have no ground whatever for belief in disembodied minds. Thus, if there were to be a science of the supernatural, it would have to be analogous to the sciences of mind rather than to the natural sciences. The contrast between the social sciences and the natural sciences is not, of course, the same contrast as that between the supernatural and the natural, but it would be a complete misconception of what is possible to condemn theology for not being like the natural sciences. Furthermore, as it is obvious that it is the more mechanical and habitual aspects of human behavior that are amenable to experimental-scientific treatment, so a science of the supernatural would be more readily built up as a science of any subhuman supernatural there might be than of superhuman beings with high moral or aesthetic capabilities. If psychical researchers ever came to investigate spirit messages of a high intellectual, moral, or aesthetic value, psychical research would be becoming experimental theology.

We are now in a position to deal briefly with Lenin’s view, already mentioned in Chapter I, Section 2, that “the electrical theory of matter” is perfectly compatible with materialism and does nothing to render it unacceptable. Lenin had in mind philosophers and physicists who, when it had been shown that the basis of the physical world is not atoms moving in space but something describable rather in terms of waves and energy, concluded that “matter” has disappeared and that materialism is therefore false. According to Lenin, all this is beside the point. For on his view, “the sole ‘property’ of matter—with whose recognition philosophical materialism is bound up—is the property of being an objective reality, of existing outside our mind.”12 Indeed, Lenin considers that the electro-magnetic theory of matter gives greater support to dialectical materialism than does the atomic theory.13 Lenin’s phrasing here is loose and unguarded, for it would imply that whatever was discovered by use of the scientific methods must be material, that “matter” just means “whatever has objective reality—whatever can be established as really existing.” It would follow that if ghosts were verified by fully satisfactory tests, then they would be material things, and that human minds are necessarily material because we have unassailable evidence that they exist. I think that there is a certain impetus in our language toward using the word “matter” in this very wide sense, so as to regard as material anything that common sense and the natural sciences accept as real. This impetus is due to the fundamental character of physics in the hierarchy of the natural sciences, and to the constant success that has resulted from extending physical and chemical conceptions into the biological realm. The tendency may be seen in the following remark of Engels: “The real unity of the world consists in its materiality, and this is proved not by a few juggling phrases, but by a long and protracted development of philosophy and natural science.”14 To use the word “material” as equivalent to “real” or “objective,” however, is to invite all sorts of confusion. In particular, it tends to blind us to the extraordinary difference there is between intelligent and purely mechanical or inanimate behavior. The main reason why the electro-magnetic theory of matter does not disprove materialism is that the behavior of electrons, protons, neutrons, etc., while not reducible to that of solid atoms in empty space, is still not, as far as can be judged, the manifestation of mind or soul. Scientific research could only lead to the “dissolution of matter” in any non-tautological and interesting sense of the word, by showing some form of intelligence at work in things. Natural science could only reveal the supernatural by becoming a moral science too. And as the very notions involved in accurate discussion of the sub-atomic world are so very remote from such conceptions as “person,” “will,” “purpose,” etc., it is not very likely that signs of intelligence and purpose will be found in that quarter. For our notions of mind and spirit are, as I have already indicated, framed in terms of the common-sense world of people, trees, and mountains, not in terms of recondite physical conceptions.

4.

Marxist Dialectics

It is a remarkable feature of the Marxist philosophy that, although it discards Hegel’s speculative idealism, it retains at least some of the terminology of his dialectical method. Marxists must therefore think that the dialectical method is compatible with the methods of the empirical sciences, even if not actually identical with them. Yet it is perfectly clear that Hegel does not use the methods of the empirical sciences in his major discussions of nature, man, and society. Fortunately, however, Stalin, in the fourth chapter of the History of the Communist Party of the Soviet Union,15 has given a general account of the Marxist theory of dialectics which goes some way toward solving the puzzle. According to Stalin, “dialectics is the direct opposite of metaphysics.” Now the word “metaphysics” is today most often used to mean the same as “speculative philosophy,” so that it would be natural to suppose that Stalin, in this sentence, is opposing dialectics to speculative philosophy as practiced by Hegel or Leibniz. If this were so, then dialectics would be linked with the scientific method in opposition to what is regarded as idle thinking that evades control by experience. I have no doubt that this association helps to recommend dialectics in some “progressive” circles, but in fact Stalin’s usage is taken from Engels’ Anti-Dühring, in which the following passage occurs: “To the metaphysician, things and their mental images, ideas, are isolated, to be considered one after the other apart from each other, rigid, fixed objects of investigation given once for all. He thinks in absolutely discontinuous antitheses. His communication is ‘Yea, yea, Nay, nay, for whatsoever is more than these cometh of evil.’ For him a thing either exists, or it does not exist; it is equally impossible for a thing to be itself and at the same time something else. Positive and negative absolutely exclude one another; cause and effect stand in an equally rigid antithesis one to the other. At first sight this mode of thought seems to us extremely plausible, because it is the mode of thought of so-called sound common sense. But sound common sense, respectable fellow as he is within the homely precincts of his own four walls, has most wonderful adventures as soon as he ventures out into the wide world of scientific research. Here the metaphysical mode of outlook, justifiable and even necessary as it is in domains whose extent varies according to the nature of the object under investigation, nevertheless sooner or later always reaches a limit beyond which it becomes one-sided, limited, abstract, and loses its way in insoluble contradictions. And this is so because in considering individual things it loses sight of their connections; in contemplating their existence it forgets their coming into being and passing away; in looking at them at rest it leaves their motion out of account; because it cannot see the wood for the trees.”16 Taking this use of the word “metaphysics” for granted, Stalin, in the work just cited, mentions four ways in which the Marxist dialectic is opposed to metaphysics. In the first place, whereas in metaphysics things are regarded as joined in “accidental agglomeration” and as “unconnected with, isolated from, and independent of each other,” according to the Marxist dialectic things are “organically connected with, dependent on, and determined by each other,” and can only be properly understood as such. In the second place, according to the Marxist dialectic nature is in “continuous movement and change,” so that a proper understanding of things requires them to be grasped “from the standpoint of their movement, their change, their development, their coming into being and going out of being.” The implication is that according to metaphysics nature is in a state of “rest and immobility, stagnation and immutability.” The third proposition of Marxist dialectics mentioned by Stalin is that “the process of development” is one in which there is passage “from insignificant and imperceptible quantitative changes to open, fundamental changes, to qualitative changes; a development in which the qualitative changes occur not gradually, but rapidly and abruptly, taking the form of a leap from one state to another; they occur not accidentally, but as the natural result of an accumulation of imperceptible and gradual quantitative changes.” The implication is drawn this time that according to metaphysics processes of development take place “as a movement in a circle,” as “a simple repetition of what has already occurred” (see page 69 below). Finally, Marxist dialecticians hold that “internal contradictions are inherent in all things and phenomena of nature,” and that “the struggle between these opposites, the struggle between the old and the new, between that which is dying away and that which is being born, between that which is disappearing and that which is developing, constitutes the internal content of the process of development, the internal content of the transformation of quantitative changes into qualitative changes.” By implication, therefore, the view of metaphysics is that struggle and contradiction are not inherent in everything.

Summarizing, we may say that according to metaphysics, as expounded by Marxists, things are independent of one another, both static and gradual, and non-contradictory, whereas according to Marxist dialectics they are organically interconnected, dynamic, sudden, and contradictory.

It is, of course, obvious that these contentions are of special importance in the social sphere. Marxists, however, believe that they are basic principles that apply to inanimate nature as well as to human societies. In the next following sections I shall be concerned with their general bearing on nature as a whole rather than with their bearing on the merely human part of it.

5.

“Metaphysics”

As I have already indicated, the word “metaphysics” is generally used to mean (a) philosophy itself, as the study of first principles, and (b) speculative philosophy, i.e., the philosophy which claims to reach conclusions about the world by a priori argument. But the use of the word which Stalin takes over from Engels differs from both of these, and I will now make some suggestions about its sources.

Both Marx and Engels learned philosophy from men who had studied in the Hegelian school, and we should therefore first turn to Hegel for the origin of this piece of nomenclature. Engels makes this clear when in his Ludwig Feuerbach he refers to “the old method of investigation and thought which Hegel calls ‘metaphysical,’ which preferred to investigate things as given, as fixed and stable.” Now Hegel used the word “metaphysics” in the two ordinary senses already mentioned, and maintained that those philosophers who disclaim belief in any first principles or in any unverifiable truths must nevertheless presuppose a metaphysic into which they do not enquire. Thus in § 98 of the Encyclopedia he says that in modern times a good many political philosophers presuppose an atomistic metaphysics: and in the notes to this section he remarks that, since everyone who thinks must have some metaphysics, the important thing is to have the right one. In fact Hegel believed that in his system logic and metaphysics were shown to be one. In his Science of Logic, however, and in the logical part of the Encyclopedia, he writes about “the former metaphysics” (die vormalige Metaphysik). By this he meant such pre-Kantian metaphysical systems as that of Christian Wolff, in which the attempt had been made to establish definite conclusions as to the nature of being in general (Ontology), the soul (Pneumatology), the world (Cosmology), and God (Natural Theology), by means of rigorous deductions from propositions the terms of which had been clearly defined. This form of metaphysics, Hegel thought, was an attempt to apply mathematical or quasi-mathematical methods of reasoning to subjects they were not fitted for. This procedure, he agreed with Kant, was improperly dogmatical, and, again in agreement with Kant, he held that it was characteristic of the Understanding as distinct from the Reason. The categories of the Understanding are rigidly distinguished from one another and are accepted, in this sort of reasoning, pretty much at their face value from “popular conceptions.” A critical examination of them shows, however, that they are not disconnected but can only be adequately grasped in their connection with one another. Thus, for example, according to the Understanding the world is either finite or infinite; but according to the Reason the notions of finite and infinite are not exclusive of one another. On Hegel’s view, accordingly, the dialectical method of speculative philosophy “carried out the principle of totality.” In § 80 of the Encyclopedia he writes: “Thought, as Understanding, remains with the firm and definite distinctions of things one against the other; it treats this form of limited abstract as having real existence.” In § 81 he writes: “The Dialectical stage is that in which these finite characters are superseded and pass into their opposites.” In § 82 he writes: “The Speculative stage, or stage of Positive Reason, apprehends the unity of properties in their opposition, the affirmation that is contained in their dissolution and transition.” That Engels used the word “metaphysics” to mean something like Hegel’s “former metaphysics” may readily be seen by referring back to the passage from the Anti-Dühring quoted in the previous section.

But of course Engels does not, as Hegel did, condemn abstract metaphysics in terms of a more satisfactory speculative philosophy. The more satisfactory thing with which Engels compares it is a dialectics of nature that is at the same time empirical and materialistic. Here, I suggest, he may well have been influenced from other quarters. As early as the seventeenth century, the adjective “metaphysical” had been used (by Bossuet among others) in a pejorative sense to mean “too abstract,” and analogously the noun “metaphysics” had been used to mean the misuse of abstract terms. In the nineteenth century this use of the term was taken over by Comte and turned into a technical term of his philosophy. According to Comte, human thought had passed through two preparatory phases, and was about to enter upon a third and final one. The preparatory phases were the theological, in which explanations of natural events were in terms of gods, and the transitional metaphysical phase, in which gods were replaced by abstract principles. At the positive stage—Hegel, it will be recalled, had used the word “positive” for the highest stage of speculative thinking—explanations were in terms of laws based on the facts themselves, and not in terms of causes, whether gods or hypothetical principles. Positive, i.e., genuinely scientific, knowledge, is, furthermore, always regarded as relative, i.e., as provisional. Whereas at the metaphysical stage of knowledge the claim is made to know some things absolutely, anyone who has advanced to the positive stage is aware that any single scientific proposition is modifiable in the light of further discoveries. Thus, where positive knowledge is relative, metaphysical pseudo-knowledge is abstract and absolute. Comte gave as examples of metaphysical theories the theory of natural rights, and the individualistic laissez-faire economic science of the early nineteenth century. The exponents of these theories, he held, not being concerned with real individuals but with abstractions invented by themselves, falsely believed that individuals could be understood in abstraction from their society and the stage of civilization it had reached, and that the laws of economics were independent of the more complex laws of society as a whole. Central to Comte’s use of the word “metaphysics,” therefore, is the notion of thought which errs by isolating what is in fact joined and by fixing what is in fact fluid. The likeness to Hegel’s “the former metaphysics” is apparent, but whereas Hegel’s contrast was between abstract metaphysical thinking and concrete metaphysical thinking, Comte’s was between abstract metaphysical thinking and positive thinking that was not metaphysical in any sense at all. The Marxist view is that genuinely empirical and scientific thinking is dialectical, so that it is possible to think dialectically without falling into the quicksands of speculation. We may see in the Marxist view, indeed, an exaltation of the methods of the empirical sciences by applying to them epithets which had previously added distinction to the higher flights of Hegelian speculation.

A further point to be observed in the Marxist notion of “metaphysics” is that it is not a consistent view. For the implication of the second characteristic of dialectics is that according to metaphysics nature is in a state of “rest and immobility, stagnation and immutability,” whereas the third characteristic of dialectics implies that according to metaphysics things develop “as a movement in a circle,” as “a simple repetition of what has already occurred.” But clearly if nature is immobile and immutable, it does not move at all, whether in circles or by repetition, and if it moves in circles or repeats itself then it is not immobile or immutable. No one with any intelligence, therefore, who reads Stalin’s account of it could possibly consider “metaphysics” worth subscribing to.

6.

Nature’s Changefulness

In order to bring out the logical structure of the Marxist dialectics of nature, I will start my discussion of it with the principle that Stalin mentions second, namely with the principle that “nature is not a state of rest and immobility, stagnation and immutability, but a state of continuous movement and change,” etc. Anyone unfamiliar with philosophical literature will be surprised, perhaps, that it should be necessary to deny that nature is at rest and immutable, for it seems to be as plain as anything could be that changes are constantly going on. At the present moment, for example, the reader is running his eye down the page and thus losing sight of part of it and bringing another part of it into view, and this is surely a sort of change. Speculative philosophers, however, have written poems and books in which they have argued that change is impossible and that whatever is real is eternal, that is to say, outside time altogether. I think we may take it, therefore, that, when Marxists assert that nature changes, one of the things they are doing is denying this form of speculative metaphysics, just as they are denying idealism when they repeat the realist platitude. And just as the realist platitude has point only as a counter to idealism, so the assertion of change has point only as a counter to such metaphysicians as Parmenides and Bradley. Now whatever these metaphysicians say, things seem to change. Rivers seem to flow and fires seem to flicker. But according to the metaphysicians we have mentioned rivers do not really flow, fires do not really flicker, and it is only seemings or appearances that really flow and flicker. Thus it would appear that on their view appearances change but realities do not. Are there then appearances? If there are, then appearances are real and realities can change. If there are not, then rivers do not even seem to flow, and fires do not even seem to flicker. If the metaphysician accepts the first alternative, he abandons his assertion that there is no change; if he accepts the second, either he flies in the face of all experience, or he means something very different by “rivers,” “fires,” “flows,” and “flickers” from what is ordinarily meant by these words. For ordinarily we mean by these words the flowing rivers and flickering fires that appear to us, not some recondite reality that only philosophers talk about. Unless the metaphysician is prepared to argue that it is always false to say such things as that rivers flow and fires flicker, his assertion that reality is changeless is not quite what at first sight it seems to be, and is compatible with the changefulness that is so obvious. In so far as Marxists mean to say something like this, it seems to me that they are correct to assert the reality of change.

A second point that Marxists may have in mind when they assert the reality of change is that the physical basis of the world we live in is the changeful, sub-microscopic world of electro-magnetism, of quanta and positrons, in which speeds and movements occur which are enormously greater and smaller than anything we meet with at the macroscopic level. That is, the Marxist accepts the scientific view of the physical world according to which what is behind the ordinary appearances of things is something much more labile than the appearances themselves. The Platonists had held that behind the appearances there were changeless forms. Contemporary physics holds that behind the appearances there is something even more changeful than they. Marxists claim to accept the view of modern physics. (It is interesting to note here another parallel between Marxism and ancient Stoicism. “The Stoics,” writes M. Bréhier in his book on Chrysippus, “transformed the whole of logic into dialectic.” In particular, they argued against the Platonic view that all movement is degrading, and refused to reduce activities, such as “walking,” to states of the agent.)

In the third place, however, Marxists appear to hold the view, first put forward in Ancient Greece by Heraclitus, that only change is real and that rest is a mere appearance. Perhaps we may go so far as to say that the notion of absolute permanence or immutability does not refer to anything we could experience, but is rather an ideal limit. Lightning flashes are impermanent by comparison with houses, but houses are impermanent by comparison with mountain ranges. We always assess changes by reference to backgrounds of permanence, but we find that these backgrounds are themselves subject to change by reference to some further background. We can find no changeless physical thing. The everlasting hills are everlasting only by comparison with the generations of men. We may say with the Marxists, therefore, that the attempt to discover the laws of natural processes is the attempt to understand things “from the standpoint of their movement, their change, their development, their coming into being and going out of being.” It does not follow from this, however, that nothing endures, that all things flow, unless we are using the word “endure” to mean “absolute permanence,” and the word “flow” in a sense in which stagnant pools and mountains flow. It is one thing to say that absolute permanence is not found in nature, and quite another thing to suggest that all nature is equally changeful. It would be absurd to call a man who is a hundred years old a young man just because a range of mountains has existed for hundreds of thousands of years. When, therefore, someone says that nature is changeful, we may agree that this is true, and that it is a useful thing to say to someone else who had said that nature is changeless. But if what is meant is that there is no rest or permanence in nature in the ordinary meanings of “rest” or “permanence,” then the statement is misleading in a way that has something in common with the misleadingness of the statement that change is not real. For it is obvious that, even though everything changes, some things change more than others. Just as, therefore, to say that nothing changes is to deny the manifest differences among things, so to say that everything changes may at any rate draw the mind away from these manifest differences. There is an absurdity in the suggestion that nothing changes because the very attempt to suppose it necessarily appears to involve change—as we strain our attention and reflect—and therefore does involve change in the ordinary sense of the word. There is not this absurdity in the suggestion that nothing moves, since the immobility of the things concerning which it makes sense to say that they move is quite consistent with changes in our thought about them, and quite consistent with changes in intensity, as with the intensities of heard sounds or seen colors. But there is no absurdity in the supposition that everything changes, and that what seems to be permanence is really very slow change. Nor is there any absurdity in the notion that everything about which it makes sense to say that it moves does really move, and that what seems to be immobility is really very slow movement. The reason for this difference is that whereas changelessness and immobility are absolute notions that admit of no degree—not changing is just not changing, and any departure from that must be a change, must be something opposed to changelessness—change and movement are relative notions that admit of degree, and therefore allow a place for changelessness and immobility as very small degrees of change or of movement. If this is so, it follows that metaphysical systems like that of Leibniz which make use of fundamental notions such as activity that admit of degree are superior to systems like those of Parmenides, Spinoza, or Bradley, in which the emphasis is on an absolute unchanging being. That is to say, metaphysical systems cannot be all rejected out of hand for defects that exist only in one class of them. I do not think, therefore, that the Marxist metaphysics is, as metaphysics, as objectionable as the metaphysics of changelessness to which it is opposed.

7.

The Law of the Transformation of Quantity into Quality

Granted that nature is changeful, what forms do its changes take? The Marxists hold that they have discovered the law in accordance with which the changes of nature occur. They call this law “the Law of the Transformation of Quantity into Quality and vice versa.”17 In what follows we shall discuss the transformation of quantity into quality and neglect the reverse operation, since this is not a matter that Marxists give much attention to. According to this law, as we have already seen, “the process of development” is (a) one in which a number of insignificant and gradual changes in the quantity of something are abruptly succeeded by a marked change in its quality, and (b) one in which these abrupt changes are not accidental but are “the natural result” of the preceding quantitative changes. In the passage from which I have already quoted, Stalin also says (c) that these changes of quality are “an onward and upward movement,” (d) that they are a “development from the simple to the complex,” and (e) that they are “from the lower to the higher.” With this sort of change is contrasted the sort of change that nature is held not to undergo, namely gradual changes, “movement in a circle,” “simple repetition of what has already occurred.” Stalin quotes Engels to the effect that Darwin had helped to prove this law by showing that the organic world had evolved from the inorganic, and refers to the following illustrations of it given by Engels: the sudden change of water into steam when the temperature is raised, and to ice when the temperature is lowered; the melting points of metals; the critical points of temperature and pressure at which gases are converted into liquids, etc. Engels had also cited, as examples of the law, the fact that chemical combination takes place only when the combining substances are in the proper proportions—“Chemistry can be termed the science of the qualitative changes of bodies as a result of changed quantitative composition”18 —and Marx’s statement that to become capital a sum of money must be more than a certain minimum. Incidentally, in this passage Marx says: “Here, just as in the natural sciences, we find confirmation of the law discovered by Hegel in his Logic, that at a certain point, what have been purely quantitative changes become qualitative.”19

It will thus be seen that this is another notion that Marxists have adapted from Hegel. In his discussion of the category of “measure” Hegel gives the following examples of the transformation of quantity into quality across what he calls “nodal lines”: (1) The series of natural numbers is formed by the addition of units, so that each number has the same relation to its neighbors that any other number has. But nevertheless, according to Hegel, the series also generates at various points along it different, new relations, such that some numbers are the squares, or square roots, of others. (2) The notes of a musical scale ascend gradually, the interval between any two successive notes being the same as that between the first of them and the note that preceded it. At a certain point in the scale, however, the regular ascension is variegated by a sudden return, with a difference, to the keynote from which the series of notes began. Thus there is a gradual ascension from low C until the next higher C, at which point there is an abrupt return and a relationship to the starting note which the intervening notes did not have. (3) In chemical combination the substances that combine do so in certain definite proportions. Thus only from certain combinations of Oxygen and Nitrogen do the various oxides of Nitrogen result. (4) Water suddenly becomes ice when the temperature is lowered to freezing point. That is, water is gradually cooled down to freezing point—a nodal line—and then suddenly changes from the liquid quality to the solid quality. (5) Birth and death are each of them sudden changes succeeding the gradual changes of growth and decay. (6) By a sudden transition beyond a certain point, carelessness becomes crime, justice becomes injustice, virtue becomes vice. (7) The population of a state may gradually increase without causing any fundamental change in the character of the state. But if the population gets above a certain level the old institutions cease to be adequate, and the state changes its form. “The state,” writes Hegel, “has a proportion relative to its size, such that if it grow beyond this it becomes unstable and collapses under the very constitution which, with another range of size, brought to it happiness and strength.” This is illustrated in the note to § 108 of the Encyclopedia by the constitution of a Swiss canton which “does not suit a great kingdom.” (8) In the note to § 108 of the Encyclopedia Hegel also refers to puzzles about the number of grains it takes to make a heap, and the number of hairs that have to be plucked from a horse’s tail to make it a bald-tailed horse. It is by these examples that Hegel illustrates his principle.20

Before we discuss the Marxist view, it will be as well, I suggest, to look at these examples a little more closely, since they differ from one another quite a lot. They are not easy to classify, but may conveniently be grouped into four classes.

The first class comprises (4) and (5), and, a little less obvious perhaps, (1) and (2). These are the examples that most clearly correspond to those employed by Marxists. In all these cases there is a series of regular changes, of temperature, of growth and decay, of number and of pitch, and at some point in each of the series a member emerges which is not merely the next in the series but has some peculiar characteristic over and above that of being next that differentiates it from the preceding ones. The water gets colder and colder and then, suddenly freezing, becomes a solid; the sleeping embryo wakes up and breaks from the mother; the man’s body gradually decays and then collapses in death; the number 4 is not merely the one that follows 3 but is also the square of 2; the next higher note is not merely the one that follows B but is also the higher C. The general formula seems to be as follows: something has properties A, B, and C; the quantity of C is gradually changed and as a result A or B becomes D. (If the conception were to be fully analyzed we should have to distinguish between unspecific properties like color or physical state and specific ones like scarlet or solid, and between intensive quantity like the loudness of a noise and extensive quantity like size or population. But the scale of our work does not allow of such detailed treatment of this matter.)

The second class is exemplified by (3), the case of chemical combination. Here the notion is not that of a series of gradual changes leading to a sudden jump. Instead there are two (or more) substances which can be combined in all sorts of ways and proportions and yet retain their separate identities; but there is a definite proportion and way of combining them which results in their losing their separate identities and becoming a different sort of substance. Just as water suddenly becomes ice at 0°C, so a mixture of Hydrogen and Oxygen suddenly becomes water when sparked under the requisite conditions. The general formula appears to be: A has properties P and Q, B has properties R and S; mechanically combined they retain their separate identities, but chemically combined they become C, with properties X and Y (or with properties P, S, and X, etc.).

Example (8), it seems to me, makes up the third class, although (6) could conceivably be grouped with it too. A few grains are not a heap, and a million grains are; hairless Harry is bald, and hirsute Horace is not; and so we suppose that there must be a definite number of grains beyond which a heap is attained, and a quantity of hair beyond which baldness lies. But in fact this sort of case is quite different from the first two. With them the “leap” was a leap in nature, from liquid to solid, from mechanical mixture to chemical compound. But with the present case the point of transition calls for human legislation, and it is for us to decide how little hair a man must have if he is to be called bald. If Horace loses a few hairs a day for a long period a time will come when his friends will say: “Horace is bald.” But baldness did not flash on to his head in the way in which his wet hair might have frozen in the cold. There is an intermediate stage when some of his friends might have said he was bald and others might have said he was not.

The fourth class comprises the moral and political examples, i.e., (6) and (7). (7) might have been included in the first class, as the gradual increase of population is analogous to the gradual decrease of the temperature of the water. The “nodal line,” however, is not nearly as definite in the political example. In normal circumstances water freezes at 0°C, but we have no such knowledge of an exact level of population beyond which the constitution fails to operate. There are various reasons for this. The breakdown of a constitution is not something that can be apprehended by the senses, as the transformation of a liquid into a solid can be. Indeed, there is no very definite criterion of the failure of a constitution to work which could be correlated with the fairly definite notion of the population of a state. Temperature and freezing are notions with the same possibilities of precision, whereas the fairly precise notion of population does not consort very well with the rather rough notion of a constitutional breakdown. That Hegel’s comparison of the two cases is suggestive cannot be denied, but it would be misleading (even within the confines of the Hegelian philosophy) to regard them as closely analogous. The importance of thus distinguishing between these different levels of precision (as we may call them) for the philosophy of the social sciences need hardly be emphasized.21 The moral examples given in (6) are even less susceptible of quantitative treatment. It is not by the accumulation of quantitative changes that carelessness becomes crime and virtue becomes vice. It is true that there may be a transition from carelessness to negligence, and from negligence to criminal negligence, but it is not any amount of carelessness that leads to this transition but rather the circumstances in which it takes place and the precautions that might have been taken. There is a slight similarity with (8), since what constitutes criminality is in part a matter of legislation. But the legislation is not the fixing of a quantity, since there is no quantity such as numbers of grains or hairs on which the legislation is based. (Unless it be de minimis non curat lex.) Again, we say that providence is a virtue, but it becomes meanness or miserliness, not when the provident man gets more and more provident, nor when he saves more and more money, but when he saves what he ought to spend or give away. (This is the sort of criticism that is brought against Aristotle’s doctrine that virtue is a mean between two extremes, a doctrine that Hegel, no doubt, had in mind when writing the section we are now discussing.)

We may now return to the Marxist interpretation of the Law of the Transformation of Quantity into Quality. The Marxists chiefly have in mind changes such as those exemplified in the first group of cases given by Hegel, in which there are natural jumps across “nodal lines.” The first question we have to ask is: To what sort of natural changes is this law applied—to the evolution of nature as a whole, or to the changes that take place within the various parts of nature? If the intention were merely to say that some of the changes that take place in the world conform to this law, then it could hardly be contested, for water does freeze and boil. Some Marxists, perhaps, have been content with this, and have thought that if it be granted that such sudden changes occur in inanimate nature it follows that human societies must necessarily undergo revolutionary transformations. But there is no force in this argument. If some natural changes are across “nodal lines” and others are not, some special reasons must be given to show that social changes are of the sort that do occur across “nodal lines.” Apart from such special reasons, all that can be legitimately concluded is that since some physical changes are of this nature, and since human society is a part of the physical world, it is conceivable that some of the changes that take place in human societies conform to this pattern. If all physical changes exemplified this law, there would be slightly more reason for expecting it to be of relevance to human societies, though again the inference would be shaky enough, since it might well happen that the human parts of nature are subject to different laws of change from those that apply in the purely physical parts. But it can hardly be maintained that everything in the physical world changes in the way that water changes into ice or steam. It is characteristic of glass, for example, that on being heated it reaches the liquid stage gradually, and can therefore be manipulated and molded in a way that ice cannot be. In advance of detailed enquiry, the melting of glass might just as well be regarded as a model of social change as the freezing or boiling of water.

The Marxist view appears to be, then, that the law in question is exhibited in the development of nature as a whole. Stalin, in the passage from which I have quoted, refers the laws of dialectics to “nature,” and uses the phrase “the process of development” when he writes specifically of the Law of the Transformation of Quantity into Quality. If we turn to Engels’ Dialectics of Nature we find that Stalin has been faithful to his tradition, since Engels writes: “It is, therefore, from the history of nature and human society that the laws of dialectics are abstracted. For they are nothing but the most general laws of these two aspects of historical development. . . .”22 The scheme presented by the Marxists commences with a universe in which there was only one type or only a few types of physical substance. Changes in the temperature or density or some other quantitative feature of this prime material resulted in the emergence of a greater variety of physical substances until life and mind and human societies have come into existence. This is the evolutionary picture of things that has been familiar since the middle of the last century. What differentiates the Marxist version is the emphasis on sudden leaps as, for example, liquid is considered to have brusquely distilled into a previously gaseous universe and so instituted a new type of being. From time to time something new emerges that is not merely a change of order or arrangement, that is no mere stirring up of the old ingredients.

At this stage we can see how the Law of the Transformation of Quantity into Quality combines the first two classes of example given by Hegel. The change of water into ice exemplifies the acquisition of new properties by the same chemical substance, whereas in chemical, as distinct from mere mechanical, combination, new substances with new properties are produced. In either event, materials come into the world that had not been there before. We can now see why Stalin, in language reminiscent of Herbert Spencer, says that there is a development “from the simple to the complex.” The world is regarded as acquiring physical and chemical variety through stages of mere repetition punctuated by leaps into the hitherto non-existent. The new types of substance are “the natural results” of their components and predecessors, in the sense that we regard freezing and chemical change as normal and natural. The universe gets more various in as natural a way as water turns to steam. What can be meant by saying, then, that the more complex beings are “higher,” and that the evolutionary movement is “onward and upward”? I do not wish now to discuss the tendency we have to prefer variety to monotony, but I have no doubt that we do all tend, other things being equal, to prefer a rich and varied world to one with little in it, and this, no doubt, is the explanation of the use of the word “higher” in this connection. Furthermore, inasmuch as human beings are the most complex of things, and the only ones that frame theories about the development of the world, they may take themselves as standards by which to judge the rest, both out of pride and convenience. Either the evolution of the universe is directed toward the production of man, who is thus the favorite, if not yet the lord, of creation, or else, man, once he has emerged, decides to use his species as the standard of the world’s development. Clearly a Marxist would have to prefer the second alternative.

The view here summarized is substantially that which, in English philosophy, has come to be known as the theory of Emergent Evolution. On this view, there is no need to postulate a Creator of the world; the change and variety of things can be accounted for by supposing that new qualities have emerged from combinations and concentrations of a few original ones by processes we can come to recognize. Exponents of Emergent Evolution, like Marxists, stigmatize as “mechanistic” any attempts to maintain that complex beings are really only groups of simple ones to which they may be reduced. The process of the world is not, according to them, a combining and re-combining of the old elements in manifold ways, but is rather a constant development of types of being that have not existed hitherto. The key word is “novelty.” Thus on this view, life and mind are not merely certain re-arrangements of matter, but something that emerges when these re-arrangements take place. But for these re-arrangements there would be no life and mind, but life and mind cannot be reduced to them. Dr. John Lewis, the Marxist philosopher, gave several pages of his introduction to A Textbook of Marxist Philosophy to showing how Dialectical Materialism and Emergent Evolution are at one on this issue.23 If, however, we turn to the part of this work that is translated from the Russian, we find what looks like vacillation. Mechanism, we are told, “arrives at an absolute monotony of nature,”24 and this is what we should expect; but we are a little surprised to read a few pages later: “Breaks are never absolute.”25 Other Marxists have turned against Emergent Evolution with considerable emphasis. Thus Mr. Caudwell, in his Further Studies in a Dying Culture, writes: “Thus, instead of a world of becoming in which all unfolds itself with complete determinism, because all phenomena are materially real, we have a world unfolded in time and space by the Jack-in-the-box appearance of new and unpredictable qualities. Such a philosophy is incompetent to explain society or the generation either of itself or other philosophies.”26 A similar critical attitude toward Emergent Evolution is adopted by Mr. Cornforth in his Dialectical Materialism and Science.

The reason for this modification of attitude is easy to see. Marxists wish to emphasize two things, the occurrence of sudden leaps in nature, and the possibility of a science of society that will allow social predictions to be made. They hold both that sudden leaps occur and that they can predict what the future form of human society will be. These two views, however, do not easily go together, as I shall now endeavor to show. Both Marxists and Emergent Evolutionists criticize mechanists for not allowing that there is genuine novelty in nature. Now there is a sense of “new” according to which there is something new whenever any change has taken place. In this sense of the word there would be something new if some already existing elements were merely re-arranged. What is new would be the re-arrangement, and someone who knew what the elements were and had had some experience of their being re-arranged could conceive of all sorts of possible re-arrangements that had never in fact existed. But someone might say: “There is nothing really new when old elements are being merely re-arranged. I mean by ‘new’ something of a sort that has never existed before at all.” In this second sense of the word, there is only something really new when something occurs which could not have been conceived of in advance of its occurrence. Nothing that a blind man smells or touches can give him, in advance of seeing, any idea of what the color green is like, and therefore if a man born blind comes to see, he will be seeing things new to him each time he sees a color for the first time. It is possible that a man who has knowledge of some elements and of their re-arrangements will be able to predict how they will be re-arranged in the future, for he knows at least what it would be like for them to be re-arranged in certain ways. But no one could possibly describe in advance of its occurrence a color or a sound which no one had ever yet experienced. If something is new in this second sense it cannot be predicted because no one is able to make or to understand the prediction. Now it is clear that changes leading only to new arrangements of the old units are the sort of change that Stalin describes as “a movement in a circle” and as “a simple repetition of what has already occurred.” It is such changes, however, which can obviously be understood in advance of their occurrence. It is not so obvious that predictions could be made of occurrences that (a) are not mere re-arrangements of elements that already exist, and (b) have never been experienced before. If such predictions are impossible, then two major theses of the Marxist philosophy, the thesis of sudden qualitative “leaps,” and the thesis that at least one qualitative “leap” in the transformation of human society, viz., the transition to Communism, can be foreseen, are in contradiction with one another. This is probably the reason why the Leningrad philosophers say: “Breaks are never absolute,” and why Mr. Caudwell refuses to accept aid from Emergent Evolutionists.

We must distinguish, I suggest, between qualitative leaps or breaks which have been observed on many occasions, like that of water to ice, and those major breaks with the past, like the emergence of liquid or life, which, according to the Marxist theory of evolution, have occurred on specific occasions. There was a time, we may suppose, when there was only gas, and then the first liquid emerged; there was a time when there was only matter, and then life emerged. Once liquids and life have come, it is possible that predictions will be made about when new liquids will emerge and about when new forms of life will emerge—for the man making the predictions will know in a general way what it is that he is predicting. It is conceivable that before such new things first came into existence someone might be able to predict that something very peculiar was about to happen—there might be circumstances analogous in some ways to those that preceded some earlier cosmic “leap”—but he could not, before it occurred, say what sort of thing it was going to be. If this be so, and if Communist society is a qualitatively different type of society from Capitalist society, then it is only possible to predict it if other societies have turned into Communist societies just as water has before now turned into ice. But Marxists do not believe that other societies in the past have turned into Communist societies. They think, rather, that the Communism of the future will be a break through to something that has not existed before. If, therefore, the “Communist quality” of the future society is a new sort of break with the past across a nodal line that we have not yet reached, we can have no idea of what is peculiar to it, and talk about it is talk about our ignorance. It may be said, of course, that according to Marxists there has been a Communist society in the past, viz., Primitive Communism, which is alleged to have existed before classes were instituted. If this were to be granted, then it could be said that prediction of the Communism of the future was comparable to prediction of some new liquid by someone who already has knowledge of liquids. This objection has some point, but it is in fact difficult for a Marxist to uphold, since the Communism of the future is, according to his theory, at several removes from Primitive Communism, and like it only to the extent that it would have no private property and no classes. These formal features cannot constitute what is new in the Communism of the future.

Marxists, it should be mentioned, rest their case in part on the fact that Mendeléeff, in the nineteenth century, was able, on the basis of his Periodic Table, to predict not only that certain hitherto unknown elements probably existed, but also what their properties would be. But Mendeléeff was not able to predict the discovery of properties that nothing had ever had before. The elements that were subsequently discovered (Gallium, Germanium, etc.) possessed, not properties that had never before been known of, but different groupings of qualities possessed by other already known elements as well. If, therefore, this conception is to be applied to the Communist society of the future, all that could be predicted would be that certain properties, A, B, and C, which had never before belonged to any single society, would co-exist in the future Communist society. But this would surely be “simple repetition of what has already occurred, a mechanistic or metaphysical circular change. For the dialectical change that Marxists sponsor is more than a re-arrangement of already existing entities, whether they be already existing units or already existing qualities.

In conclusion, it is perhaps worth pointing out that it is easy to confuse the emergence of new qualities with something that is quite different. The confusion arises when we fail to see the difference between Hegel’s example that on page 75 I numbered (8)—the example about the number of grains it takes to make a heap—and his example about water changing to ice when the temperature is lowered to freezing-point. In the second case there is a marked observable difference; first there is liquid, and then there is solid. In the first case, however, there is no such marked difference at the point of transition, since there is an element of choice about whether we call a set of grains a heap or not. The addition of grain after grain is gradual and remains so, but in some circumstances (e.g., if we were buying or selling sand by the heap) we may have to decide quite definitely between what is a heap and what is not a heap. Now I am not at all sure that all of the “leaps” implied in the evolutionary picture of the world are of the water-into-ice sort rather than of the not-heap-to-heap, or bald-to-hirsute sort. If the world began as a gas, then the emergence of liquidity could be compared to the sudden freezing of water. But it is possible that the emergence of life has been no such abrupt occurrence. For it may be that the natural changes have been gradual, that we feel no hesitation in saying that certain things are without life and that others are clearly alive, but that the point at which we draw the line is one that we have to choose, not one that the facts press upon us in unmistakable fashion. Strictly speaking, indeed, every observable change is a change of quality. Each coldness that we experience as the water approaches freezing-point is a distinct coldness, though we have no separate name for each of them. This may be illustrated by the distinction we make between “warm” and “hot,” for which there would seem to be no precise analogies in the degrees of coldness. Where there are very marked qualitative differences, we feel that a distinct name is needed, but it is unwise to assume that every different name for the stages in a transition corresponds to some marked leap or break.

Now the last paragraph needs to be supplemented by a further complication. Although the transition from grains to heap is one that allows us to draw the line between the two at various, more or less arbitrary points, the distinction has some analogy with the sudden transition from water to ice. For when the grains of sand are added, one after the other, a point is reached when the “look,” of the grains becomes different. First there was a plurality of grains, and then, after a while, we see them as a whole. To begin with we should describe ourselves as adding grains to grains, and then as adding grains to the heap. Psychologists give the name “form quality” to the “look” that wholes have as distinct from the separate appearance of each of their parts. For example, if we look closely at the liquid in a glass we may see small particles swimming about in water, but if we look at it from further away we should say that the water is turbid. In this case turbidity is a form quality analogous to the form quality of being a heap rather than a collection of grains. These are qualities that can no more be described before they have been experienced than hitherto unseen colors could be, and they may thus be regarded as a sort of emergent quality. That they are different from transformations of quantity into quality of the chemical combination sort or of the water-to-ice sort may be seen from the fact that the grains of some substance that does not combine chemically with water, and is not even soluble in it, may have a turbid “look,” though in fact they remain separate. However, there is no need here to take this matter further, now we have seen how unduly simplified the Marxist theory is.

8.

Contradiction and the Negation of the Negation

We have now seen that, on the Marxist view, everything is changing, and that periods of gradual change are interspersed with sudden changes in which new types of being come to birth. Marxists regard it as a merit of their theory that it is also capable of explaining why nature changes at all. They hold that the driving force behind all change is an inherent contradiction in things. This is the fourth of the propositions in which Stalin summarizes the essentials of Dialectical Materialism. In expounding this view, he quotes the following phrase from Lenin’s Philosophical Notebooks: “In its proper meaning dialectics is the study of the contradiction within the very essence of things.” We may supplement this with a rather fuller statement from the same work of Lenin’s: “The identity of opposites . . . is the recognition (discovery) of the contradictory, mutually exclusive, opposite tendencies in all phenomena and processes of nature (including mind and society). . . . Development is the ‘struggle’ of opposites. Two basic (or two possible? or two historically observable?) conceptions of development (evolution) are: development as decrease and increase, as repetition; and development as a unity of opposites (the division of the one into mutually exclusive opposites and their reciprocal correlation). . . . The first conception is lifeless, poor, and dry; the second is vital. The second alone furnishes the key to the ‘self-movement’ of everything in existence: it alone offers the key to the ‘leaps,’ to the ‘break in continuity,’ to the ‘transformation into the opposite,’ to the destruction of the old and the emergence of the new. The unity (the coincidence, identity, resultant), of opposites is conditional, temporary, transitory, relative. The struggle of mutually exclusive opposites is absolute, just as development and motion are absolute.”27 Engels had argued that the fact that things moved at all was proof that contradiction was to be found in nature. “Motion itself,” he wrote, “is a contradiction: even simple mechanical change of place can only come about through a body at the same moment of time being both in one place and another place, being in one and the same place and also not in it.”28 Other examples of “contradiction within the very essence of things” given by Engels and Lenin are: the plus and minus signs in mathematics, positive and negative electricity in physics, the class struggle in the social sphere.

All change, then, takes place through contradiction, opposition, struggle. What makes it evolutionary or progressive is that it proceeds by “the negation of the negation.” Process A is opposed by its contradictory not-A, and, let us suppose, is succeeded by not-A. Not-A, in its turn, however, will be the pole of a further opposition, and so will be succeeded by its opposite, A. This second A, however, will not be merely the first A reinstated, for the first A was the opposite of a not-A that had not yet replaced it, while the second A is the opposite of a not-A which has already replaced the original A. Engels gives the example of a grain of barley planted in the ground. This is “negated” by the plant that succeeds it. This, in its turn, however, is negated (the negation of the negation) by its own decay. From its seeds, however, many new plants may arise. “As a result of this negation of the negation we have once again the original grain of barley, but not as a single unit, but ten, twenty or thirty fold.”29

There is a great deal that might be said about all this, but as much of it would be more relevant to the theory of social development, I shall confine my remarks now to a few fundamental matters.

Dühring himself, and subsequent critics of Marxism, have criticized the whole view on the ground that contradiction and negation are logical notions which cannot be transferred without absurdity to the context of natural processes. The proposition “I am writing” is, for any given individual at any given moment, the contradictory of the proposition “I am not writing,” such critics will say, but the process of writing is itself something happening in the world that cannot conceivably be in contradiction with anything else. On this view, contradiction is a logical, not a natural notion, and it does not make sense to say that one thing or event contradicts another. Such an objection, of course, would have to be elaborated in detail if it were to be pressed against Hegel, since Hegel, in his Science of Logic, held that logic and speculative philosophy were essentially one, and hence that logic is somehow involved in the world that exists beyond human thought. Furthermore, if the Marxist “copy” theory of truth were to be pressed, it might well be concluded that our contradictory notions must copy contradictory things, just as Lenin, in his On the Question of Dialectics, held that our ideas of “causality, necessity, natural law, etc.” were “reflections in the human mind of the laws of nature and of the external world.” My own view is that the Marxist theory of nature is anthropomorphic, and has become so by quite a natural, though misleading, sequence of ideas. It is true that the words “contradiction,” “contrary,” “opposition,” etc., are used by logicians in ways that have to be explained to the plain man. For example, it is not immediately obvious to the plain man that the contradictory of “some men are not mortal” is “all men are mortal.” But the ordinary senses of these logical words are nevertheless closely linked with social conceptions. If one man asserts a proposition and another man denies it, the logical relation of contradiction between propositions will be accompanied by conscious disagreement between men, and this may well arouse an opposition between them that is social as well as logical. Social opposition may show itself in more than merely verbal disputing, and then it becomes a maneuver, a struggle or a fight. Again, a frequent cause of struggle is that two people want the same thing and this thing is something that cannot be shared. One man’s having it, we then say, is incompatible with another’s having it, and in so saying we use a word which has logical as well as social import. Furthermore, if there is a struggle between two men, then if one has defeated the other, the other cannot have defeated the one. Logic settles this, but does not settle the issue of the fight. Such phrases as “incompatibility of temperament” and “contradictory aims” show how natural it is to describe human affairs in words that have logical senses. By a further analogical extension, however, it becomes possible to describe physical processes as “struggling,” “opposing,” and the like, as in Lenin’s phrase “struggle of opposites.” Thus, too, colliding or impinging particles may be described as opposing one another, and so there arises a vague picture of their being opposed in the way that men may be. According to Lenin, in a passage we have already quoted, if nature were free from contradiction it would be “lifeless, poor, and dry”; but since it is contradictory, it is “vital.” (The German text has lebendig.) Now “vital” means “alive,” and in thus opposing it to “lifeless” Lenin talks of nature as if it were a living being. This is not to be wondered at, since he borrows so much of his terminology from Hegel, who undoubtedly thought that there is no such thing as matter utterly divorced from mind. It should be noticed, in this connection, that one of the reasons that Lenin gives in his Philosophical Notebooks for holding that nature is always in movement and struggle is that if it were not self-moved, it would have to get its movement from God. He writes: “Linear procedure and onesidedness, woodenness and ossification, subjectivism and subjective blindness, voilà the epistemological roots of Idealism. Priestcraft (= Philosophical Idealism) nevertheless has naturally gnoseological roots, is not without some basis, is incontestably a sterile flower, but a sterile flower, the blooms on the living tree of the living, fruitful, true, powerful, omnipotent, objective, absolute human knowledge.”30 Elsewhere in the same work he comments: “Intelligent Idealism (der kluge Idealismus) is nearer to intelligent materialism than unintelligent (dumme) materialism. Dialectical idealism instead of intelligent; metaphysical, undeveloped, dead, crude, immovable instead of unintelligent.”31 (I take it that in this last sentence Lenin is saying “Substitute ‘dialectical’ for ‘intelligent’ and ‘metaphysical, etc.’ for ‘unintelligent.’”) What remains when such figures of speech are allowed for is that, according to Marxists, there is nothing in nature that remains changeless, and this may very well be true.

We must next observe that Engels thought that the existence of movement proved that there are contradictions in nature, since if something moves it must be in one place and the next adjoining place at the same moment of time. Now the passage from the Anti-Dühring to this effect that I quoted on page 86 follows very closely what Hegel writes in his Science of Logic, book 2, section 1, chapter 2, C, which is headed “Contradiction.” Here Hegel says: “External sensible motion is itself an immediate fact. Something is moving, not while it is in this now here, and in another now there, but while it is here and not here in the same now, while it both is and is not in the same here. We must grant to the ancient dialecticians the contradictions they showed in movement; but it does not follow from that that there is no movement, but rather that movement itself is an existing (daseiende) contradiction.” Hegel is here referring to Zeno of Elea, who argued that to occupy place A a moving thing has to be at rest there, and to occupy the adjacent place B, it has to be at rest there, and that therefore the thing cannot be in movement at all. In his Lectures on the History of Philosophy Hegel says that Zeno is not to be regarded as denying the existence of movement; movement is as real as elephants. “The question concerns rather its truth; movement is untrue, for its idea contains a contradiction; thus he was intending to say that movement has no true being.” It is therefore obvious that when Hegel says that movement is an existing (daseiende) contradiction he means something very different from what Engels means. When Hegel says that something exists, has Dasein, he is claiming very little for it, for he uses the word Dasein for what has immediate, merely finite being, not for what is ultimately real. Engels, therefore, has taken an argument from Hegel’s speculative philosophy, and used it as if it could be comfortably housed in the Marxist anti-speculative philosophy. But it cannot, surely, belong there, for it is as clear as anything could be that things move, but to say that there could be no movement unless there was contradiction in the realm of fact is to draw a conclusion about matter of fact from a particular conception or notion of what movement must be. We observe things moving, and therefore, according to Engels, we must observe them contradicting one another. Could Dühring’s phrase “arabesques of ideas” find a more striking application?

The notion of “the negation of the negation” is, in the Marxist system, primarily of social significance. It is easy to see that when movements of thought come into conflict with their predecessors the victorious system may well take up into itself features of the defeated system, just as legislation in the English Parliament is frequently (though not always) influenced by the criticisms of the Opposition. Thus, much of the paganism that the early Christians deplored has found its way into Christian thought and ritual. However this may be, the spectacle of such an intelligent Marxist philosopher as Plekhanov disputing whether it is the stalk of the barley, or the whole plant, or “the fertilized ovum,” that is the negated negation of the barley seed, is one that can only arouse embarrassment. It is with some relief, therefore, that we read that barley (or is it oats?) will grow “according to Hegel,” whether the sequence is triadic (seed, plant, seed) or tetradic (seed, stalk, flower, seed).32

9.

Status of the Dialectical Laws

We have not so far discussed the proposition that all things are “organically connected with, dependent on, and determined by each other.” That things are not so connected is the thesis of “metaphysics,” in Engels’ sense of the word. What sort of unity of the world, then, do Marxist philosophers assert? It is easy to see that, on their view, nature is one, inasmuch as it is fundamentally material—there is nothing in nature that is not based in matter. A further suggestion of the view is that everything, including human societies, is subject to natural laws. Again, Marxists believe in universal determinism. Perhaps it is believed that all the sciences form a single continuous system, within which all scientific laws are of the same fundamental type. (Yet this would hardly be consistent with the theory of emergence.) “Dialectical materialism,” writes Mr. Mitin, “is against one-sidedness in science, it insists on the examination of natural phenomena in all their connections and interactions.”33 The practical bearing of such a statement would seem to be that scientists should interest themselves in borderline problems, and aim at comprehensive views. Marxist philosophers also hold—as do non-Marxists too—that no single scientific truth is absolute, but is subject to modification in the light of later scientific developments. On the face of it, this might seem like Hegel’s theory that “the truth is the whole,” that only when Reason has completed the structure of philosophy can the partial truths of departmental knowledge be seen in their proper perspective. Hegel, however, was a speculative philosopher, and Marxists reject speculative philosophy. It is difficult not to conclude, therefore, that Marxists have used the language of speculative philosophy to express the methodological commonplace that any statement of empirical science is subject to the possibility of correction.

There is no doubt as to the Marxist account of the status of the laws of dialectic—the Law of the Transformation of Quantity into Quality, the Law of the Interpretation of Opposites, and the Law of the Negation of the Negation. The Marxist view is that these laws are scientific laws of a high degree of generality. According to Engels, “Dialectics is nothing more than the science of the general laws of motion and development of Nature, human society and thought.”34 “Nature,” he also says, “is the test of dialectics.”35 That this continues to be the Marxist view may be seen from a recently compiled outline for a Soviet History of Philosophy where the “three laws of dialectics” are described as “Marx’s and Engels’ generalization on the data of natural science.”36 This being so, one would have thought that these laws would be subject to revision as the sciences progress, just as other generalizations are. One does not get the impression, however, that this is likely to happen. On the contrary, they appear to have got so deeply imbedded in the Marxist terminology that any future discoveries in the natural sciences would have to conform to them. This is not surprising when we consider the extremely wide range of cases to which the laws are already alleged to apply. The Law of the Negation of the Negation is already general almost to the point of evanescence when it is applied to such very different things as the formula −a × −a = a², and the growth and reproduction of barley. When it is extended to include the passage from capitalist to communist society the only point of likeness appears to be the words employed. Indeed, it seems to me that the important thing about these laws is that they are formulae which may be used to express any state of affairs that it is desired to bring within their ambit. They are thus modes of expression rather than generalizations, etiquette rather than science. But they are a peculiar sort of etiquette, not of the drawing-room, nor even of the laboratory, but of the scientific journal or, more important still, of the scientific conference. Once these formulae are adopted as modes of speech which men of science are expected to use, then science itself may come to be regarded as absorbed into Marxist society. The conquest of a people’s language becomes a conquest of their thought as etiquette develops into custom and custom into morals. Allez à la messe; prenez de l’eau bénite. Repeating the formula may transform scoffers into devotees.

10.

Marxism and Formal Logic

I will conclude this chapter with some very brief remarks on the Marxist view of logic. In Section 2 of the present chapter (page 48) I quoted a passage from Engels’ Anti-Dühring in which he puts forward the positivist thesis that, as the various special sciences develop, all that is left to philosophy is “the science of thought and its laws—formal logic and dialectics.” From this we may conclude that “formal logic and dialectics” are fairly respectable sciences and that they are distinguishable from one another, at any rate in thought. If, as seems very likely, “dialectics” consists of the sort of consideration we have just been examining in connection with the three “laws of dialectic,” then formal logic would appear to be something different. Further on in the Anti-Dühring Engels says that “Even formal logic is primarily a method of arriving at new results, of advancing from the known to the unknown—and dialectics is the same, only in a much more important sense, because in forcing its way beyond the narrow horizon of formal logic it contains the germs of a more comprehensive view of the world.”37 In the same passage Engels goes on to say that “almost all the proofs of higher mathematics” go beyond formal logic into the realm of dialectics. In his Dialectics of Nature Engels contrasts dialectical logic with “the old, merely formal logic,” saying that the former is not content with merely enumerating the forms of thought and “placing them side by side without any connection,” but “it derives these forms out of one another instead of putting them on an equal level, it develops the higher forms out of the lower.” He then goes on to give an outline of Hegel’s account of the forms of judgment, and concludes the discussion with an attack on those who make a sharp contrast between deductive and inductive logic instead of recognizing that deduction and induction are not exclusive and opposite types of inference.38

We may notice four main points here. (a) Engels allows that formal logic is a part of philosophy that survives the overthrow of speculative philosophy. (b) Hegel had argued that where there is no development or advance in knowledge from premises to conclusion there is no inference at all. On Hegel’s view, that is, a mere tautology would not be a genuine inference. With these views in mind, Engels argues that since formal logic contains inferences it leads to new knowledge. (c) Like Hegel also, however, he holds that formal logic is somehow incomplete, and points the way to dialectical logic. In particular he complains that in formal logic the various types of judgment are regarded as fixed and as rigidly distinguished from one another, instead of being shown to be continuous and fluid. It would therefore be natural to conclude from this part of Engels’ argument that he supposed formal logic to be (in his sense of the word) “metaphysical,” and therefore false. He certainly considered that formal logic belonged to the domain of the Understanding and of the ability to abstract and to experiment which (he says) is common to men and animals, and that the dialectical procedures of the Reason are peculiar to mankind.39 (d) It looks as if Engels would have approved of a sort of logic like that of Bernard Bosanquet or of some contemporary philosophers of “ordinary language” in which, for example, instead of the distinction being between, say, categorical and hypothetical judgments, it is between categorical and hypothetical aspects of them; or instead of there being a separate discussion of deductive and of inductive inference, the two are shown to be very intimately involved with one another; and so on for other well-known logical contrasts.

It will be seen that Engels left his Marxist successors with rather a difficult task, for on the one hand formal logic appears to have his support, and on the other hand he appears to stigmatize it as inferior to dialectics and as “metaphysical.” In the Soviet Union the latter view was fashionable for some time, but since the Second World War formal logic has been defended by Marxist philosophers and its teaching re-introduced into Soviet high schools. Indeed, a textbook of the Tsarist period was re-published for this purpose. Soviet philosophers have in recent years been discussing whether there is one logic only, or whether there are two, formal logic and dialectical logic. From the passages I have referred to it will be seen that Engels contrasted formal logic with “dialectics” and with “dialectical logic,” so that precise guidance cannot be obtained from him. However that may be, new textbooks of formal logic are now being produced in the Soviet Union in which it is stated that there are four basic principles of formal logic, the Principle of Identity, the Principle of Contradiction, the Principle of Excluded Middle, and the Principle of Sufficient Reason, and in which the Square of Opposition, the Syllogism, and the other parts of the traditional formal logic are treated in the traditional way. Thus by “formal logic” the Soviet philosophers mean the modified Aristotelian tradition that held sway in Europe and America until the innovations of Boole, de Morgan, Venn, and Peirce led to the development of what is now called symbolic or mathematical logic. It appears that the writings of Hilbert, Tarski, and other mathematical logicians have been circulated in the U.S.S.R., but they do not seem to have influenced Soviet philosophers (who have labelled them as “idealist”), whatever their influence on Soviet mathematicians may have been. It should be noticed, however, that there is no suggestion on the part of Soviet philosophers that self-contradiction is a feature of the dialectical thinking that they favor or that consistency and rigor are not desirable in all thinking. They consider that the laws of logic somehow copy or “reflect” the real world, and appear committed to this view so long as the writings of Lenin are accepted as authoritative, for in the Philosophical Notebooks he wrote: “The laws of logic are reflections of the objective in the subjective consciousness of men.”40

Part Two

Scientific Socialism

I

Historical Materialism

1.

Anti-metaphysical, Positivistic Aspect of Historical Materialism

We have now examined the most fundamental notions of the Marxist philosophy, and have seen what is meant by the assertion that Marxism is both a materialistic and a dialectical view of the world. We have seen, in particular, that Marxists deny the efficacy of speculative thinking and assert the all-sufficiency of scientific thinking in which theory and practice are conjoined. Now considered in its most general aspect, the Marxist version of Historical Materialism is the view that a scientific understanding may be—indeed has been—obtained of the development of human society. It is thus one of the several attempts at constructing a “science of history” that were made in the middle years of the nineteenth century and aroused those controversies that are associated with the names of Buckle, Froude, Spencer, and Droysen. That Marx recognized some kinship between his view of history and the “scientific” view expounded by Buckle in his History of Civilization in England (1857) may be seen from the letter—best known for the discussion of Darwin contained in it—he wrote to Engels on 18 June 1862. Referring to the announcement of the death of Buckle, he says: “Poor Buckle, whom a ‘friend’ slanders in today’s Times by means of a testimonium pietatis.” The friend was Mr. J. S. Stuart Glennie, who had been with Buckle when, a few weeks before, he had died in the Middle East (the letter is written from Beyrout), and the testimonium pietatis, I suppose, is Mr. Glennie’s hope that Buckle was “now enjoying that immortality without the hope of which, as he once said to me with tears in his eyes, ‘life would be insupportable,’ and in the more immediate presence, and with deeper knowledge of that God in whom he firmly believed.” Mr. Glennie, however, goes on to summarize Buckle’s “science of history” in the following terms: “(1) Political economy—the science of wealth—is the deductive science through which the investigation of natural is connected with that of social phenomena, and thus the way is prepared for one universal science. (2) The laws of society are different from those of the individual; and the method of averages, with which has to be compared the mathematical theory of probability, is that by which the former are to be investigated. (3) In social phenomena the intellectual, in individual the moral, laws are chiefly or alone to be considered: all moral social changes are thus preceded by intellectual changes.”1 Although this is very different from the Marxist view, such points of kinship as the importance attributed to economics and the secondary character attributed to morals are striking enough. Buckle, too, like Marx, associated his “science of history” with an attack on speculative philosophy, which he calls “metaphysics.” “In no other department,” he had written, “has there been so much movement, and so little progress,”2 but his conclusion was that as there are no means of settling the dispute, there would always be supporters of the two parties, “sensationalists” and “idealists.”

Let us, then, make our transition from the fundamental notions of the Marxist system to the theory of Historical Materialism by considering the positivist, anti-metaphysical foundations of the latter. Marxists claim to give a scientific account, not only of the development of human society, but also of the human propensity to engage in theological and metaphysical speculation. That is, those who accept the theory of Historical Materialism both deny the theoretical efficacy of metaphysical speculation and also claim to show how it is that men come to misdirect their thinking by vacuously speculating instead of observing and experimenting. Perhaps it should be pointed out at this stage that to give a “scientific” account of how men come to adopt religious ideas and to work out theologies and metaphysical theories is not the same thing as to refute the religious, theological, and metaphysical theories in question. For these theories might be true even though men came to adopt them for some such reason as that belief in them rendered their lives more bearable. If such “scientific” accounts of religious and metaphysical theorizing are also to be refutations of it, then it must also be shown that metaphysical speculation is incapable of revealing truths about the world, that the methods of the empirical sciences are the only methods by which the world can be understood, and that these methods can be successfully applied to human and social affairs. Thus the fundamental Marxist thesis is identical with that of positivism, viz., that nothing can be known but what sense perception and the methods of science reveal. If this were rejected, then it would be possible to hold both that the Marxist account of the human origin of religion and theology was correct, and that certain religious, theological, or metaphysical propositions were true. That the Marxists unquestionably regard their account of the social origin of religion, theology, and metaphysics as showing the illusory character of religious, theological, and metaphysical “truths,” is an added indication that they accept the positivist view about metaphysical speculation. Psychologists who give somewhat similar accounts of religious belief sometimes guard themselves against criticism by saying that they are speaking only as psychologists, not as theologians or metaphysicians. But on the positivist view, to speak as a theologian or metaphysician (i.e., as a speculative philosopher) is to speak idly, pointlessly, misleadingly. The theory of Historical Materialism is held to unmask the deception, but it can only claim to do so on the basis of the positivist theory of science.

It will be remembered that I illustrated Marx’s positivism by reference to his jibe that metaphysical or speculative thinkers—he had Hegel particularly in mind—suppose that the particular things of the world are manifestations of the Idea, as if the various species of fruit such as apples and pears and strawberries were manifestations of Fruit Itself.3 In the technical language of the philosophy of his day, Marx accused the metaphysicians of mistaking the predicate for the subject, the general characteristic (“fruitness”) for the real thing (the particular apple). Now Marx accused Hegel of making this same mistake in his theory of politics. In § 263 of his Philosophy of Right (1821) Hegel had written: “The actual Idea is mind, which, sundering itself into the two ideal spheres of its concept, family and civil society, enters upon its finite phase, but it does so only in order to rise above its ideality and become explicit as infinite actual mind. It is therefore to these ideal spheres that the actual Idea assigns the material of this its finite actuality, viz. human beings as a mass, in such a way that the function assigned to any given individual is visibly mediated by circumstances, his caprice and his personal choice of his station in life.”4 This is extraordinarily obscure, and we need not enter upon a detailed interpretation. But from the context it appears that Hegel is asserting (among other things) that it is the Absolute Idea as manifested in the State which provides the rational explanation of the family and the economic organization of society—if we may thus roughly designate what Hegel called “civil society”—and that without these manifestations the Absolute Idea would not be infinite and real.

In commenting on this passage, Marx writes: “In this passage his logical, pantheistic mysticism shows itself very clearly. . . . The real relation of the family and civil society to the State is conceived as their inner imaginary activity. The family and civil society are preconditions (Voraussetzungen) of the State; they are the genuinely active beings, but in speculation it is the other way round . . . [in fact] the family and civil society form themselves into the State. They are the active element (Sie sind das Treibende). But according to Hegel they are made by the actual Idea; it is not their own life that unites them into the State, but it is the life of the Idea which has made them from itself (die sie von sich dezerniert hat) . . . the fact is that the State emerges from the masses (aus der Menge—from the individuals?) as they exist as members of the family and of civil society, but speculation announces this fact as a deed of the Idea, not as the Idea of the masses, but as the deed of a subjective idea different from the fact. . . . The fact that serves as a point of departure [for Hegel] is not conceived as such but rather as a mystical consequence.”5 Again, in commenting on § 270 of the Philosophy of Right Marx describes Hegel’s method as follows: “The real interest is not the philosophy of right but logic. The work of [Hegel’s] philosophy is not to embody thought in political determinations but to dissipate existing political determinations into abstract conceptions. The philosophical moment is not the logic of the real fact but a mere matter of logic (. . . nicht die Logik der Sache, sondern die Sache der Logik). Logic does not serve to prove the State, but on the contrary the State serves to prove logic.”6 The next year Marx was to write in the Paris Manuscripts: “Sense experience (die Sinnlichkeit) (see Feuerbach) should be the basis of all science. Science is not real science unless it sets out from sense experience in its double form, sense awareness and sensed need (des sinnlichen Bedürfnisses)—unless therefore it sets out from nature. . . . The natural sciences will finally subordinate to themselves the science of man, just as the science of man will finally subordinate the natural sciences to itself; the sciences will thus become one.”7

We have here to deal with a number of obscure comments on a very obscure author, but it is clear at least that Marx rejects the Hegelian plan of explaining certain facts of human society in metaphysical terms. Now in his Preface to the Philosophy of Right Hegel had written: “This book then, containing as it does the science of the State, is to be nothing other than the endeavour to apprehend and portray the State as something inherently rational.”8 Rationality, according to Hegel, is displayed in a whole the parts of which are intimately related with one another so that the whole is implicit in each part and each part is essential to the whole. Thus, his Philosophy of Right was, among other things, an attempt to show that families and civil society are not rational wholes of this nature, but that the State, and particularly a constitutional monarchy, is nearer to being a whole of this nature. Aristotle had attempted something of the same sort when, in Book I of the Politics, he had argued that individual men, families, and villages were incomplete beings by comparison with the city-state. It will be seen that Hegel’s method is not only based on his metaphysical view of rationality, but is also one in which judgments of value are aimed at, for the less rational forms of social organization are judged to be defective by reference to the more rational ones, however unavoidable the defects may be. It is this whole metaphysical-evaluative method that Marx rejects in the writings that I have just quoted from. He is asserting that society should be studied by the methods of the empirical sciences. The facts of social life should, therefore, first be ascertained by observation (“sense experience”); among these facts will be the actual needs of men (“sensed needs”); the value of social institutions should then be assessed in terms of these empirically ascertained “sensed needs” rather than in terms of some logical or metaphysical ideal; and then it will be found that the nature of real men and their “sensed needs” will throw light on the ideal society and on the nature of metaphysical thinking, rather than vice versa.

Such, it seems to me, is a principal theme of these early essays of Karl Marx, a theme which already points toward what later came to be known as the Materialist Conception of History. The rejection of metaphysics leads to a demand for the “scientific” examination of human society, and this, in its turn, leads to the claim that any assessments or valuations of human institutions should be in terms of needs that can be ascertained by scientific methods of examination. Theories about human society, it is argued, should be based on observed facts (“sense experience”), and social institutions should be assessed in terms of human desires (“sensed need”). Social institutions may thus be observed with a view to finding more effective means of satisfying human needs, and since both natural and social science are human concerns for the satisfaction of human wants, both are really subordinate to a fundamental science of human wants which is social science par excellence. These, I might say, were also the views of Auguste Comte, which had been published in Paris in the form of lectures between 1829 and 1842.

Now there is a difficulty in this whole conception which we should notice before we pass on to further aspects of the Marxist view. The difficulty arises from a certain vagueness in the word “need.” A man’s needs may be understood in the sense of everything he desires. To satisfy his needs would then be to satisfy as many of his desires as possible. But what one man wants may conflict with what another man wants, and so the problem arises of deciding which wants of which men shall have precedence. It would be generally supposed that one man’s desire to torture another one is a desire that ought not to be fostered, and we generally take it for granted that social science should find means for satisfying, not any and every desire, but legitimate desires. If this is taken for granted, then the notion of a “need” is not a purely empirical one based solely on “sense.” On the contrary, it conceals a moral assessment behind its apparently purely factual façade. Anyone, therefore, who claims to show that men’s moral ideals arise from their “needs,” in this sense of the word, is misleading himself and others, since the “needs” on which moral ideals are allegedly based are already charged with moral meaning.

A second sense of the word “need” is that in which a man’s needs are what he must have in order to keep alive (his “necessities”), as distinct from the luxuries and superfluities of his life. On this interpretation, to satisfy men’s needs is to secure their necessities. Now the line of demarcation between a necessity and a luxury is a shifting one that varies, as Marx well knew, with the state of civilization. The cigarette that was a luxury in 1900 becomes, it is said, a necessity in 1950. Man’s basic physical structure, however, has not changed during that period, so that the food and warmth and shelter that would have sufficed to keep a man alive in 1900 would also do the same in 1950. If by “being alive” we just mean “not dying,” then the means that would just succeed in keeping men alive are fairly constant. But, of course, when we talk of “keeping alive,” we often assume that living is living at the standard of life customary to the individuals in question. Thus this notion of “needs” generally relates to a standard of life regarded as customary or decent. Indeed, many people feel that it is wrong for anyone to fall below a certain level of life, so that a man’s needs are the means to a standard of life in the determination of which moral considerations have played an essential part. Here again, therefore, the notion of a “need” is far from being the purely “scientific” or morally neutral conception that it was held out to be.

It might be argued that these difficulties which are, of course, commonplaces to students of economics,9 can be avoided by assuming that the function of social science is to ascertain the means of satisfying most wants, or of satisfying the maximum of want in society as a whole. Now in the first place such a programme requires a means of counting and measuring wants. Methods would have to be devised, for example, to show whether, or the extent to which, freedom to act on the desire to hurt someone else in fact leads to a diminution of the satisfactions of other people as a whole. In general, some instrument would have to be constructed for measuring the rise and fall of satisfaction in a society. This is not the direction that Marxist thought on social science has taken. In any case, there is a second difficulty in the view we are considering. “Why,” the critic may ask, “should social scientists aim at increasing the number or amount of satisfied needs?” If the answer given to this is that it is right that they should do so, then social scientists are not mere scientists after all, but moralists as well, and so morality has not been reduced to science. If the answer given is that everyone in fact does aim at the maximum amount of satisfied need, then the answer is probably false. I say “probably false,” because it is not at all clear what could be meant by “maximum amount of satisfied need.” I say “probably false,” because many people appear to prefer their own satisfactions to anything even remotely resembling the satisfaction of society as a whole.

We may conclude from this discussion that much of what we say about human beings, even when, on the face of it, it appears to be purely factual, contains implicit evaluations of them and their conduct. This should not surprise us, for human beings are normally regarded as capable of choice, as free, responsible agents whose conduct may be good or bad. Thus, when we talk about ourselves and our kind we usually assume that we are concerned with such free moral agents. This assumption is so ingrained in us that words that were originally coined for scientific use, such as “fixation” or “sublimation,” rapidly acquire a moral flavor when they are constantly employed. We can, of course, set before us the ideal of extruding all moral assessment from some of our discussions of human beings. We should then find that we were discussing them as if they were animals unable to act freely or morally. We could, for example, discuss them in biological terms, as organisms or as a species that maintains itself. In this way many true things may be said about men, things of a character common to them and other living creatures. But such a manner of speech is singularly ill adapted to describe and explain what is specifically human. When, for example, the same word “response” is used for a moth’s movement toward the light and a man’s answer to a question, very little indeed is being said about the man’s behavior.

If what I have just said is correct, then, whatever may be the case with the extrusion of metaphysics from it, the extrusion of ethical considerations from social science is seen to be fraught with difficulties.

We must now pass on to consider how the Marxist rejection of religion, theology, and metaphysics, and the Marxist account of what they are, arose from Feuerbach’s treatment of the same theme. In doing this we shall, I hope, prepare the way for a more specific grasp of the Materialist Conception of History. The view that we are to discuss is the view that men’s religious, theological, and metaphysical views are not true in the way that their adherents suppose them to be, but are fantasies and illusions based on their circumstances and experienced needs. According to the Marxists, the dogmas of religion and theology and the theories of metaphysics should not be discussed as if they were genuine views with evidence to support them, but should be traced back to the human wishes and desires from which they spring. Marxists do not normally argue against the religious and metaphysical theories of their opponents, but claim to “unmask” them as the expressions of class interests or socially determined wishes. Marxists do not, for example, give detailed “refutations” of the arguments put forward by theologians and philosophers to prove that God exists, or that the world is fundamentally spiritual, or that there are two main types of essentially different being, the physical and the mental. Instead of doing this sort of thing, they argue that this or that theological or metaphysical theory was developed in order to support this or that class interest. This is a feature of Lenin’s discussion of phenomenalism that non-Marxist philosophers find both puzzling and disquieting. As we have seen, this method of discussion can only be accepted as a result of first accepting the positivist view that the sort of reasoning used both by theologians and their anti-theological but metaphysical opponents is beside the point and cannot possibly lead anywhere. It is a method that is obviously most unsettling for those against whom it is used. To be told not merely that your point of view is unacceptable, but that it is not even worth discussing in the way that you have been used to discuss it, is to be treated as a somewhat comic figure. The character in the comedy thinks, let us suppose, that he is doing his duty with dignity and authority, but he is laughed at by an audience that sees the real point that, in being hidden from him, makes him ridiculous. Religious persons, theologians, and metaphysicians cannot but feel that they are being made to appear absurd when they are told that all their arguments count for nothing in themselves, but are a sort of squeaky noise given out by the grinding of their own axes.

Let us then see how the Marxist theory of “ideologies” arose out of Feuerbach’s theory of the nature of religion, theology, and metaphysics expounded chiefly in The Essence of Christianity (1841), Preliminary Theses towards the Reform of Philosophy (1842), and Foundations of the Philosophy of the Future (1843).

2.

Feuerbach’s Theory of Religion and the Marxist Theory of “Ideologies”10

Fundamental to Feuerbach’s argument is the proposition that to say something exists is not merely to say that it can be thought or conceived, but is to say that in addition to being thought or conceived it can also be perceived or sensed. “Existence, empirical existence,” he wrote in The Essence of Christianity, “is proved to me by the senses alone.”11 It follows from this, Feuerbach argued, that God’s existence can never be proved by arguments that do not lead up to some perception of him. Hence the arguments of natural theology fail because they remain mere arguments, mere thoughts, and do not lead to the only sort of situation in which existence can be proved, viz., perception. This is the foundation of the whole view.

“The fundamental dogmas of Christianity,” wrote Feuerbach, “are realized wishes of the heart.”12 Belief in God, he held, arises from man’s tendency to compare particular, imperfect human beings with the general notion of the highest conceivable human perfection. This latter conception, which is constructed from the particular admirable men we are acquainted with, is then “projected” outside the human sphere altogether, as though there really were a single particular being to which all the scattered human excellences belonged.13 Human predicates are thus attributed to a divine subject, whereas subject and predicate are really both of them human. “The identity of subject and predicate is clearly evidenced by the progressive development of religion, which is identified with the progressive development of human culture. So long as man is in a mere state of nature, so long is his God a mere nature God—a personification of some natural force. When man inhabits houses, he also encloses his Gods in temples. The temple is only the manifestation of the value which man attaches to beautiful buildings. Temples in honour of religion are in truth temples in honour of architecture. . . .”14 When they thus project or objectify human characteristics as a non-existent God, men frequently deny themselves real satisfactions and indulge instead in imaginary ones. The monk or nun who refrains from sexual enjoyment receives substitute satisfactions on an ideal plane: “. . . The sensuality which has been renounced is unconsciously restored, in the fact that God takes the place of the material delights which have been renounced. The nun weds herself to God; she has a heavenly bridegroom, the monk a heavenly bride . . . and thus in reality, whatever religion consciously denies—always supposing that what is denied by it is something essential, true, and consequently incapable of being ultimately denied—it unconsciously restores in God.”15 In a somewhat similar manner, Feuerbach goes on, belief in immortality and in the divine justice established in heaven compensates man in an imaginary fashion for the lack of justice in human affairs: “. . . The other world is nothing more than the reality of a known idea, the satisfaction of a conscious desire, the fulfilment of a wish”—and he illustrates this by quoting St. Augustine’s moving epigram: Ibi nostra spes erit res.16 (“There our hope will be a reality.”) Feuerbach, indeed, maintained that there is an important affinity between religious belief and dreams. “Feeling is a dream with the eyes open; religion the dream of waking consciousness; dreaming is the key to the mysteries of religion.”17 But it is not only dreams that throw light on the nature of religion, for according to Feuerbach the aberrations of religious fanatics and the religious extravagances of savages call our attention to what is at the core of the most developed forms of civilized religions.18 “The mystery of theology,” he wrote in the Preliminary Theses towards the Reform of Philosophy, “is anthropology.”19 That is, religion and the more or less naïve theorizing of it that is theology, can be seen for what they are if we come to understand how they emerge from the emotional and imaginative life of man. Once he understands this, and sees his religious imaginings for what they really are, man will no longer be obsessed by them, and will cease to be divided in his nature, with his ideals in one world and his failures in another: “. . . only the perception of things and natures in their objective reality makes man free and devoid of all prejudices,”20 he wrote in the Preliminary Theses, and in the Essence of Christianity he calls this freedom “the identity of the human being with itself.”21

According to the speculative philosophy of Hegel, the Absolute Spirit is self-conscious spirit, and self-conscious spirit is free. Feuerbach, it will be seen, gave a naturalistic, materialistic version of this theory. The free man, according to Feuerbach, is the man who has no illusions about himself. To man’s systematic study of his own nature Feuerbach gave the name “anthropology”—today we call it psychology—and Feuerbach’s view was that as men came to know more about themselves religion would lose its hold on them and cease to play any part in their ordinary calculations. In the Preface to the second edition of the Essence of Christianity he claimed “that Christianity has in fact long vanished not only from the Reason but from the life of mankind, that it is nothing more than a fixed idea, in flagrant contradiction with our Fire and Life Assurance companies, our rail-roads and steam carriages, our picture and sculpture galleries, our military and industrial schools, our theatres and scientific museums.”

This is by no means an adequate account of Feuerbach’s views on religion, but it is sufficient, I hope, to show their importance, both in preparing the ground for the Marxist theory of ideologies, and in setting in motion the naturalistic psychology that was later to undermine the religious faith of whole generations. It is important to notice, in the first place, how, in Feuerbach’s hands, certain of Hegel’s metaphysical conceptions were transformed into allegedly empirical ones. I have already indicated that Hegel’s conception of the free self-consciousness of the Absolute was the basis of Feuerbach’s conception of the free man who had cured himself of religious illusions. It should also be noticed that Hegelian conceptions form the basis of Feuerbach’s view that men attempt to cure their personal and social ills by unconsciously providing for themselves a projected compensatory world of imaginary satisfactions. Feuerbach talks of God as man “objectified” (vergegenständlicht). He says that religious satisfactions result from the “externalization” (Entaüsserung—literally “alienation”) of feelings. And he stigmatizes the division in man between his real needs and their imaginary fulfillment as human self-estrangement (Selbstentfremdung). There can be no doubt that the origin of these notions is in Hegel’s conception of nature as the Absolute Idea alienated from itself. Thus, in the Logic (Book III, I, i, B) Hegel refers to nature as “the ‘outside-itself-ness’ of the Notion.” He also uses the conception in a more detailed manner in the Phenomenology of Spirit, where he writes of the individual mind which is conscious of its self-estrangement (Selbstentfremdung) when it sees the effects of human thought and effort in the products of human culture. The individual is here regarded by Hegel as a mind confronted by an objective world in which it seems to recognize something that is both akin and alien to it. The resulting tension, Hegel holds, can only be removed by absolute knowledge in which the divorced aspects of mind are re-united. Whereas for Hegel man’s self-estrangement was ended in an experience that was rationally religious, for Feuerbach it was ended when religion was seen to be self-estrangement and was replaced by a clear-sighted recognition of the earthly tasks to which embodied human beings were committed. Marx, in the Preface to the second edition of Capital, said that he had turned Hegel’s dialectic, which had hitherto been standing on its head, the right way up, but Feuerbach had preceded him in this task.

No one who is acquainted with Freud’s account of religion in The Future of an Illusion can fail to be impressed by the similarities between it and Feuerbach’s views. There is the same refusal to believe that the existence of God—or of anything else—could be based on anything but the evidence of the senses. Like Feuerbach, too, Freud stresses three main tasks of religion: that of relieving men from their fear of natural forces they do not understand, that of reconciling them to their miseries, and that of “making amends for the sufferings and privations that the communal life of culture has imposed upon man.”22 Like him, again, Freud argues that as knowledge of nature develops, it is the last of these tasks that assumes the greatest importance. He is as unwilling as Feuerbach to accept the imaginary or substitute compensations that religion offers, and thinks that men could free themselves from this “universal obsessional neurosis” if they listened to the voice of the intellect—“in the long run nothing can withstand reason and experience.” At the end of the essay, indeed, Freud more than once refers to “our God Λόγος.” I suggest that these likenesses may even indicate that Freud was directly influenced by Feuerbach’s writings on this subject. “I have said nothing,” writes Freud, “that other and better men have not said before me in a much more complete, forcible and impressive way. The names of these men are well known . . . I have merely added a certain psychological foundation to the critique of my great predecessors.” Whether or not Feuerbach was one of these “great predecessors” that Freud had in mind, there can be no doubt that Feuerbach’s theory of religion contains ideas that adumbrate certain features of Freud’s system of psychology. There is the suggestion that the ravings of insane people and the beliefs of savages may provide clues that help us to understand the workings of more civilized and normal minds; there is the idea of the satisfaction in imagination of essential desires of which the individual is unconscious; there is the association of this process with dreaming; and there is the governing principle that when someone comes to know himself more fully, he will be less obsessed with thoughts of an imaginary world, and will be able to deal more adequately with the real one. Feuerbach’s observation that theology is pathology hidden from itself23 is most significant in the light of later theories. It should also be observed that notions such as that of “projection”24 and that of “self-consciousness” were metaphysical before they became scientific. Their history would suggest, therefore, not a metaphysical level of thinking followed by quite a distinct scientific level, but rather a development of one into the other. This, in its turn, suggests that perhaps science and metaphysics are more closely bound together than some positivists have allowed.

There is a further aspect of Feuerbach’s view which should be emphasized before I pass on to show how the Marxist theory of “ideologies” is formed from it. I said above that according to Feuerbach men who worship God and believe in his providence are in fact (a) unconsciously glorifying the highest achievements of mankind, and (b) obtaining imaginary satisfactions for needs that are real. Now Feuerbach did not think that (a) and (b) involved quite the same sort of illusion. He thought that (b) was just the mistaking of the shadow for the substance, but (a) was the misplacing of values that were real. Feuerbach had no doubts whatever about the genuineness of the human values themselves, but thought that people deceived themselves when they projected them on to a supernatural being. He emphasized this in The Essence of Christianity by saying that the true atheist is not the man who denies God as subject (i.e., the man who denies that there is a being with the divine predicates), but the man who denies the genuineness of the moral predicates that have been falsely attributed to God. “He alone is the true atheist to whom the predicates of the Divine Being—for example, love, wisdom, justice—are nothing; not he to whom the subject of these predicates is nothing. . . . It does not follow that goodness, justice, wisdom are chimaeras, because the existence of God is a chimaera, nor do they become truth because God exists.”25 Indeed, Feuerbach says, somewhat rhetorically perhaps, that when the divine predicates are seen to be really human ones, humanity is more deeply revered and human actions are sanctified. Feuerbach advocated disillusionment as regards God, immortality, and divine justice in heaven, but only so as to achieve a clearer insight into what love, goodness, justice, and wisdom are here below. He does not apply the method of disillusionment to our moral notions. On the contrary, he thinks that the destruction of religious faith will lead to a heightened sense of human worth and possibility.

Marx and Engels, as I have already pointed out, became enthusiastic admirers of what Feuerbach published in 1841–43. Marx’s “Criticism of Hegel’s Philosophy of Right: Introduction,” which appeared in the Deutsch-Französische Jahrbücher in Paris in 1844, is obviously written in this spirit. It is in this article that religion is described as “the opium of the people.” The whole sentence, however, reads as follows: “Religion is the sigh of the hard-pressed creature, the heart of a heartless world, the soul of soulless circumstances. It is the opium of the people.” It is clear from this that Marx thought that religion was the opium of the people in the sense that they use it to help them to bear their misfortunes, not in the sense that their rulers deliberately keep them quiet with it. In this article, too, Marx refers to the religious viewpoint as a “transposed (verkehrte) consciousness of the world,” and argues that it is thus misleading. “The criticism of heaven transforms itself into a criticism of the earth, the criticism of religion into a criticism of law, the criticism of theology into a criticism of politics.” “It is evident,” he goes on, “that the weapons of criticism cannot take the place of criticism of weapons; material force can only be overcome by material force, but theory becomes itself transformed into material force once it penetrates the masses. . . . The criticism of religion ends with the doctrine that man is, for man, the supreme being. It ends, therefore, with the categorical imperative of overturning all the relationships in which man is debased, enslaved, abandoned, contemptible. . . .” The lesson to be drawn, therefore, from the criticism of religion is the need for a revolution in the social conditions that produce the religious illusion, and in this article Marx asserts that it is the proletariat, a class which is “the complete loss of man, and cannot reconquer itself except through the complete victory of man,” which will carry out this revolution. “Revolutions,” he continues, “need a passive element, a material basis. A theory is realized in a people only in so far as it is the realization of the needs of that people. . . . It is not enough for thought to seek (drängen zur) realization, but reality itself must seek the thought.” And so he concludes: “Just as philosophy finds in the proletariat its material weapons, the proletariat finds in philosophy its intellectual weapons.”26

Now Feuerbach had recognized that a consequence of his view of religion was that men should concern themselves with improving their life on earth rather than with hopes of a divine justice hereafter. In 1842 he had written: “Only when you have given up the Christian religion do you get, so to speak, the right to a republic: for in the Christian religion you have your republic in heaven, and therefore do not need one here. On the contrary, here you must be a slave, otherwise heaven would be superfluous.”27 According to Marx, such revolutionary observations, although they do occasionally occur in Feuerbach’s writings, “are never more than isolated surmises,”28 and in the event Feuerbach devoted most of his subsequent career to the “anthropological” analysis of religious belief, to uncovering its human and social origin, in the hope, presumably, that this would lead to greater moral enthusiasm in the affairs of this life. The passages just quoted from Marx’s article of 1844 show a very different attitude, since the emphasis is on transferring the criticism of religion from the intellectual to the social sphere. The argument is that the thinker who has “seen through” the religious illusion must find allies among those who, because they suffer most, have the strongest motive to press for real rather than for merely imaginary alleviations. Philosophers will never achieve justice by merely pulling off the illusions that are draped over injustice. They must transmit their instructions to the men who will push it away. Thus the proletariat was to be the “passive element,” the “material basis,” for the realization of a just social order. The passage in question almost suggests that the proletariat happened to be the most convenient agency for the philosophical ambition of destroying religious illusion. The expressions used by Marx here give the impression that he felt that the proletariat was a likely instrument for the exercise of philosophical reform. I do not know that he expressed himself in this way elsewhere, but Lenin in What is to be Done? (1902) wrote: “We said that there could not yet be Social-Democratic consciousness among the workers. This consciousness could only be brought to them from without. The history of all countries shows that the working class, exclusively by its own effort, is able to develop only trade union consciousness. . . . The theory of Socialism, however, grew out of the philosophic, historical, and economic theories that were elaborated by the educated representatives of the propertied classes, the intellectuals.”29

We have not so far made use of the word “ideology”—for the use of the word itself, as well as for discussion of the thing, we have to turn to The German Ideology, which Marx and Engels wrote in 1845–46, but which remained unpublished until 1932. What we have so far seen is that according to both Feuerbach and Marx religious and metaphysical ideas convey false views of the world, but that these false views arise from the aims and desires of men and from the social arrangements which prevent these aims and desires from being realized. Feuerbach thought that, once this was clearly recognized, men would free themselves from their obsession with another world, and would endeavor all the more strongly to realize love, justice, goodness, and wisdom in the human world. Marx, in 1844, held further that the instrument by which freedom from religious illusion and the resulting improvement in human living would be achieved was the proletariat, a class which, if its material strength were fortified with a correct philosophy, would change the conditions in which they and most men were forced to live lives that were “debased, enslaved, abandoned, contemptible.” At this time both Feuerbach and Marx held that religion resulted from human failure both in the intellectual and moral spheres, but that it was no delusion that men with physical bodies live on this earth trying to achieve ideals of human perfection. In The German Ideology Marx and Engels not only used the word “ideology,” but also passed a long way beyond Feuerbach’s conception of the thing it stood for. This was because they had by this time definitely established their materialist conception of history. In this book they criticize Feuerbach, and by implication themselves too, for having falsely supposed that there is such a thing as “man” in the abstract rather than the different sorts of men who exist at different times and places. Men, they argue, are social beings whose nature changes with the sort of life they lead, and the sort of life they lead changes according to the way in which they get their living, according to the tools and organization of labor they employ to get food and shelter and to satisfy their other needs. As men have improved their tools, a division of labor has developed, so that some men live in towns, others on the land, some organize production and others carry out manual tasks under the supervision of masters. The division of labor leads to class divisions, and at different times different classes have dominated human societies in accordance with whatever was the predominant mode of production. For what the mode of production is and what sort of division of labor this requires determine which class shall dominate. There is also a division of labor between material and mental work. When this division has taken place within a dominant class, there will be a sub-class who specialize in the production of ideas. Since these ideas are produced from within the dominant class, they will be imposed upon the whole society. They will in fact be expressions of the needs and aspirations of the dominant class, though they will seem, both to those who frame them and to many others too, to be of universal significance. It is not only religious and metaphysical ideas, therefore, which reproduce a false consciousness of things, but other ideas, too, produced by specialists at the behest of a given class or within the framework of a given historical epoch. A given historical epoch is a period during which a given mode of production prevails. “If in all ideology men and their circumstances appear upside down as in a camera obscura, this phenomenon arises just as much from their historical life-process as the inversion of objects in the retina does from their physical life-process.”30 That is, it is in the nature of things that men should get distorted views of the world, just as it is in the nature of things that they should receive inverted images on the retina.

The following passages may serve to illustrate the notion of an “ideology” developed in The German Ideology. On page 14, Marx and Engels refer to “morality, religion, metaphysics, all the rest of ideology and their corresponding forms of consciousness”; on page 16, they say that the French and the English, though they have been “in the toils of political ideology, have nevertheless made the first attempts to give the writing of history a materialistic basis by being the first to write histories of civil society, of commerce and industry”; on page 20, they say that the division of mental from material labor leads “to the formation of ‘pure’ theory, theology, philosophy, ethics, etc.”; on page 23, they write that “all struggles within the State, the struggle between democracy, aristocracy and monarchy, the struggle for the franchise, etc., are merely the illusory forms in which the real struggles of the different classes are fought out among one another. . . .”; on page 30, they say that those who endeavor to understand any epoch of history in terms of political and religious issues “share the illusion of the epoch”; on page 40, they refer to the “active, conceptive ideologists” of a class “who make the perfecting of the illusion of the class about itself their chief source of livelihood”; on page 43, they write of “the illusion of ideologists in general, e.g. the illusions of the jurists, politicians (of the practical statesmen among them, too)” and to “the dogmatic dreamings and distortions of these fellows”; and on page 80, in criticizing the “true socialists,” Marx and Engels say that those theorists of socialism “have abandoned the realm of real history for the realm of ideology.”

The first feature that emerges from these passages is that Marx and Engels regarded ideologies as systems of misleading or illusory ideas. But no one can justifiably describe something as misleading or illusory except by comparison with something he thinks is not misleading and not illusory. What, then, according to Marx and Engels, is it that is not misleading and not illusory? In The German Ideology they state quite clearly what they think it is. “We set out,” they say, “from real active men, and on the basis of their real life-process we demonstrate the development of the ideological reflexes and echoes of this life-process. The phantoms formed in the human brain are also, necessarily, sublimates of their material life-process, which is empirically verifiable and bound to material premises.” On the next page they say: “Where speculation ends—in real life—there real, positive science begins: the representation of the practical process of development of men.”31 That is to say, there is, according to Marx and Engels, a system of ideas (“the representation of the practical process of development”) about man, his religions and his societies, which is not illusory, which is not ideology. This system of ideas is the positive science of man and society, a science based on observation of men as they really are in their day-to-day concerns. Thus the positive science of man in society is contrasted with “ideological reflexes.” This is, of course, quite in accordance with Feuerbach. In his opinion, the only way to discover what exists is by means of sense observation, and since this does not lead rationally to a revelation of God, heaven, or immortality, the religious view of things needs to be explained in terms of what the senses reveal. Marx and Engels accept this, but proceed to argue that an empirical science of man must trace back all his other activities to the ways in which he gains a living, and to the social organization involved in this. This contrast between “ideologies” on the one hand, and “real, positive science” on the other, is clearly based, as was Comte’s contrast between positive science and theologico-metaphysical thinking, upon a distinction between what is held to be unverifiable and what is believed to be verifiable. And lest it be urged that The German Ideology, an early work, was later superseded in this respect, I refer also to the famous Preface to Marx’s A Contribution to a Critique of Political Economy (1859)—frequently cited by Marxists as fundamental for an understanding of the Materialist Conception of History—where we find the view of The German Ideology repeated as follows: “In considering such revolutions the distinction should always be made between the material revolution of the economic conditions of production which can be accurately substantiated in the manner of the natural sciences, and the legal, political, religious, artistic or philosophical—in short ideological forms, in which we become conscious of this conflict and fight it out.”32 It should be noticed that the phrase I have translated by “accurately substantiated in the manner of the natural sciences” is, in the German naturwissenschaftlich treu zu konstatierenden and thus gives the idea of an accurate, honest natural-scientific procedure. “Ideology” was used in this sense right to the end of Engels’ life, since he wrote to Mehring on July 4, 1893: “Ideology is a process accomplished by the so-called thinker consciously indeed, but with a false consciousness. The real motives impelling him remain unknown to him, otherwise it would not be an ideological process at all.”33 The fundamental idea is of a scientific procedure that enables its users to show what are the real aims of men who are conscious only of their own apparent aims.

A second important feature of the Marxist theory is that the “ideological” thinker is held to be not only theoretically, but also practically, misleading and misled. Feuerbach, Marx and Engels argued, was too sanguine about the results of unmasking the religious illusions. His books and lectures, they considered, opposed the religious false consciousness in a purely theoretical manner, whereas the only effective way of opposing it was to overthrow in deed as well as word the social conditions that give rise to it. I have already discussed, in Part One, the Marxist view that genuine science is a practical as well as a theoretical activity. Just as, on the Marxist view, the sciences of nature involve practice, in the form of experimentation and manufacture, so the science of society, properly understood, involves the transformation of human society, as well as understanding how it works. It should here be observed that one of the problems that caused the most puzzlement to nineteenth-century thinkers was how the methods and teachings of empirical science fitted into a society that had hitherto seemed to be based on religious belief and Christian morality. Some of the theories of the natural sciences—in geology, for example, and in biology—appeared to conflict with Christian dogmas, while the technological changes associated with scientific advance seemed to weaken the whole religious attitude, causing many people to adopt spontaneously the view that nature must be a self-regulating mechanism. Thus the question arose whether the science which was undermining the Christian view of things could also provide standards for human conduct. Comte and his followers thought that science itself was a moral enterprise; the qualities that led to successful scientific research were moral qualities of humility and disinterestedness that would also lead to the regeneration of human society. Marx and Engels did not share this view, but they did believe that, as a scientific understanding of physical processes was at the same time a mastery over them, so a scientific understanding of human society would involve the subjection of social forces to human control. On their view, pure theory is an abstraction, not something that could really exist and be true. Genuine theory, on the other hand, they held to be at the same time a practical mastery over events. Thus Feuerbach’s exposure of religion and metaphysics was, they held, an abstract, merely contemplative exposure, and therefore not fully scientific in the way in which the Marxist theoretical-cum-practical exposure is. It is clear, of course, that this view involves morality with empirical science as Comtism does, though in a different way, but before I can discuss the matter further, there are some other features of the Marxist theory of ideologies that need to be brought out.

A third aspect of the Marxist theory of ideologies concerns what is to count as an ideology. We began this account of the theory of ideologies with an exposition of the religious-theological-metaphysical one. The passages I have quoted from the writings of Marx and Engels show that they also included as ideologies, that is, as forms of “false consciousness,” “morality,” “ethics,” “political ideology,” and “legal,” “artistic,” and “philosophical” ideologies. We may suppose that the philosophical ideology is the same as the metaphysical, and that no important distinction is being drawn between morality and ethics. We must then ask in what sense ethics or morality, art, law, and politics are forms of false consciousness. The language used would suggest that we are as deluded when we make moral, aesthetic, legal, or political judgments as, on the Marxist view, we are when we make religious and metaphysical judgments, that, for example, the differences between right and wrong, beautiful and ugly, legal and illegal, constitutional and unconstitutional, are merely imaginary, and hide from us some real experienced need or desire. Feuerbach rejected God and heaven in favor, as he thought, of human love and justice, and for this was jibed at as “a pious atheist.”34 But Marx seems to have thought that moral ideas themselves were a sort of illusion the reality of which was something more fundamental in human life; and so too for art, law, and politics. People are only free from illusions, on this view, when their pronouncements on matters of morality, art, law, and politics are consciously related to the scientifically ascertainable realities which they reflect. But we cannot go further into this until we have looked more closely at the Marxist account of social reality.

Before we turn to this, however, there is a fourth aspect of the Marxist theory of ideologies that must be referred to. We have seen that Marx and Engels use the word “ideology” to refer to misleading or false views about the

The Online Library of LibertyA project of Liberty Fund, Inc.

About Liberty Fund:

Fair use statement:

Ian Dunois’ Free Market foundations

This List Is By:

Print this List

Table of Contents

1: Israel M. Kirzner, The Economic Point of View [1960]

Foreword

Introduction to the Second Edition

Author’s Preface

Acknowledgments

1

On Defining the Economic Point of View

The Economic Point of View and the Scope of Economics

The Multitude of Economic Points of View

The Controversy Over the Utility of Definition

An Interpretation of the Controversy

The Economists and Their Definitions: the Classical Economists

The Economic Point of View: the Background of the “Methodenstreit”

Twentieth–Century Economic Points of View

2

The Science of Wealth and Welfare

The Emergence of Political Economy as the Science of Wealth

The Science of Material Wealth

The Science of Subsistence

The Science of Wealth Retained

Man Against Nature

From Wealth to Welfare

The Science of the Lower Side of Human Nature

3

The Science of Avarice; Getting the Most for the Least

The Science of Avarice

The Economic Principle

The “Economic Impulse”

Selfishness and “Non-Tuism”

Economics and Mechanics

4

Economics, the Market, and Society

Economics and Catallactics

Exchange and the Propensity to Truck

Exchange and the Division of Labor

The “Purely Formal” Concept of Exchange

Exchange and the Economic System

Economics, the Economy, and the “Volkswirtschaft”

Economy and Society

5

Economic Affairs, Money, and Measurement

Money, Wealth, and Exchanges

Money as the Measuring Rod

Money as a Universal Measuring Rod

Measurement and Economics

Money and Price-Economics

Money as an Economic Institution

6

Economics and Economizing

The Economics of Professor Robbins

Scarcity and Economics

Economizing and Maximization

The Character of Robbins' Definition

A. the “breadth” of robbins' definition

B. the “formalism” of robbins' definition

The Nature of Ends and Means

“Given” Ends and Means

Single End and Multiple Ends

Economics and Ethics: the Positive and the Normative

The Nature of Economic Science and the Significance of Macroeconomics

7

Economics as a Science of Human Action

I

The Sciences of Human Action

The Emergence of the Praxeological View of Economics

Max Weber and Human Action

Acting Man and Economizing Man: Mises and Robbins

II

Praxeology and Purpose

Praxeology and Rationality

The Assumption of Constant Wants—the Praxeological Context

Praxeology, Apriorism, and Operationalism

The Economic Point of View and Praxeology

The Online Library of Liberty
A project of Liberty Fund, Inc.

LIBERALISM

The Classical Tradition