The Online Library of Liberty

A project of Liberty Fund, Inc.

• 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 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.

[[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.