Research in the History of Economic Thought and Methodology, Volume 24 A: A Research Manual

RESEARCH IN THE HISTORY OF ECONOMIC THOUGHT AND METHODOLOGY A Research Annual i RESEARCH IN THE HISTORY OF ECONOMIC ...

Author: Samuels W.J. (ed.) | Emmett R.B. (ed.) | Biddle J.E. (ed.)

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RESEARCH IN THE HISTORY OF ECONOMIC THOUGHT AND METHODOLOGY A Research Annual

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RESEARCH IN THE HISTORY OF ECONOMIC THOUGHT AND METHODOLOGY Series Editors: Warren J. Samuels, Jeff E. Biddle and Ross B. Emmett Recent Volumes: Volume 23A:

Research in the History of Economic Thought and Methodology: A Research Annual; Warren J. Samuels, Jeff E. Biddle and Ross B. Emmett; 2005

Volume 23B: Research in the History of Economic Thought and Methodology: Documents from F. Taylor Ostrander; Warren J. Samuels; 2005 Volume 23C:

Research in the History of Economic Thought and Methodology: Further University of Wisconsin Materials and Further Documents of F. Taylor Ostrander; Warren J. Samuels; 2005

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RESEARCH IN THE HISTORY OF ECONOMIC THOUGHT AND METHODOLOGY VOLUME 24-A

RESEARCH IN THE HISTORY OF ECONOMIC THOUGHT AND METHODOLOGY A Research Annual EDITED BY

WARREN J. SAMUELS Department of Economics, Michigan State University, East Lansing, MI 48824, USA

JEFF E. BIDDLE Department of Economics, Michigan State University, East Lansing, MI 48824, USA

ROSS B. EMMETT James Madison College, Michigan State University, East Lansing, MI 48825, USA

Amsterdam – Boston – Heidelberg – London – New York – Oxford Paris – San Diego – San Francisco – Singapore – Sydney – Tokyo JAI Press is an imprint of Elsevier

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JAI Press is an imprint of Elsevier The Boulevard, Langford Lane, Kidlington, Oxford OX5 1GB, UK Radarweg 29, PO Box 211, 1000 AE Amsterdam, The Netherlands 525 B Street, Suite 1900, San Diego, CA 92101-4495, USA First edition 2006 Copyright r 2006 Elsevier Ltd. All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone (+44) (0) 1865 843830; fax (+44) (0) 1865 853333; email: [email protected]. Alternatively you can submit your request online by visiting the Elsevier web site at http://elsevier.com/locate/permissions, and selecting Obtaining permission to use Elsevier material Notice No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein. Because of rapid advances in the medical sciences, in particular, independent verification of diagnoses and drug dosages should be made British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN-13: 978-0-7623-1349-5 ISBN-10: 0-7623-1349-8 ISSN: 0743-4154 (Series) For information on all JAI Press publications visit our website at books.elsevier.com Printed and bound in The Netherlands 06 07 08 09 10 10 9 8 7 6 5 4 3 2 1

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CONTENTS LIST OF CONTRIBUTORS

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EDITORIAL BOARD

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ACKNOWLEDGEMENTS

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FORMAL MODELLING VS. INSIGHT IN KALECKI’S THEORY OF THE BUSINESS CYCLE Daniele Besomi

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CONFERENCE REPORT NOTES ON THE FIFTH SUMMER INSTITUTE FOR THE PRESERVATION OF THE STUDY OF THE HISTORY OF ECONOMICS Warren J. Samuels

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REVIEW ESSAYS Dimand and Nyland’s THE STATUS OF WOMEN IN CLASSICAL ECONOMIC THOUGHT ‘‘Pray clear the way, there, for these – ah – persons’’: The Status of Women in Classical Political Economy Sandra J. Peart Reconsidering the Place of Women in Classical Economics Jennifer Ball v

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CONTENTS

Pelikan’s INTERPRETING THE BIBLE AND THE CONSTITUTION Interpreting the Bible, the U.S. Constitution, and the History of Economic Thought Warren J. Samuels

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Porta, Scazzieri and Skinner’s KNOWLEDGE, INSTITUTIONS AND THE DIVISION OF LABOR An Analysis of Some Essays in the Histroy of Economic Thought Leonidas Montes

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Ghazanfar’s MEDIEVAL ISLAMIC ECONOMIC THOUGHT Salim Rashid

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Bevir and Trentmann’s MARKETS IN HISTORICAL CONTEXTS Market Embeddedness and the History of Economics Roberto Romani

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Pullen and Parry’s MALTHUS’ UNPUBLISHED PAPERS AT KANTO GAKUEN UNIVERSITY New Light on Malthus: The Kanto Gakuen Collection A.M.C. Waterman

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Heyer’s HAROLD INNIS Postmodernism, H.A. Innis, and the Media of Communication Robin Neill

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Harris’s SICK ECONOMIES Was Shakespeare an Economic Thinker? Douglas Bruster

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Contents

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Corry’s DAVID HILBERT AND THE AXIOMATIZATION OF PHYSICS Getting Hilbert Right E. Roy Weintraub

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Freeman, Kliman and Wells’s NEW VALUE CONTROVERSY The New Value Controversy Fletcher Baragar

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Montes’s ADAM SMITH IN CONTEXT Jeffrey T. Young

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Mirowski’s EFFORTLESS ECONOMY OF SCIENCE? Throwing Down the Gauntlet on a Neoclassical Economics of Science Aaron M. McCright

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Brakman and Heijdra’s MONOPOLISTIC COMPETITION IN RETROSPECT Humberto Barreto

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NEW BOOKS RECEIVED

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LIST OF CONTRIBUTORS Jennifer Ball

Department of Economics, Washburn University, USA

Fletcher Baragar

Department of Economics, University of Manitoba, Canada

Humberto Barreto

Department of Economics, Wabash College, USA

Daniele Besomi

Independent researcher, c.p. 7, 6950 Gola di Lago, Switzerland

Douglas Bruster

Department of English, University of Texas at Austin, USA

Aaron M. McCright

Lyman Briggs School of Science and Department of Sociology, Michigan State University, USA

Leonidas Montes

School of Business, Universidad Adolfo Ibań˜ez, Chile

Robin Neill

Department of Economics, University of Prince Edward Island, Canada

Sandra J. Peart

Department of Economics, Baldwin-Wallace College, USA

Salim Rashid

Department of Economics, University of Illinois, USA

Roberto Romani

Faculty of Political Sciences, University of Teramo, Italy

A.M. C. Waterman

St. John’s College, University of Manitoba, Canada

E. Roy Weintraub

Department of Economics, Duke University, USA

Jeffrey T. Young

Department of Economics, St. Lawrence University, USA ix


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EDITORIAL BOARD William Breit Trinity University, USA

Alon Kadish Hebrew University of Jerusalem, Israel

Bruce J. Caldwell University of North Carolina, Greensboro, USA

S. Todd Lowry Washington and Lee University, USA

A. W. Coats University of Nottingham, UK and Duke University, USA

Howard Sherman University of California, Riverside, USA

John B. Davis Marquette University, USA and University of Amsterdam, The Netherlands

Andrew S. Skinner University of Glasgow, UK

Craufurd D. Goodwin Duke University, USA

Vincent J. Tarascio University of North Carolina, Chapel Hill, USA

Robert F. He´bert Auburn University, USA

John C. Wood Edith Cowan University, Australia

Abraham Hirsch Brooklyn College, USA

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ACKNOWLEDGEMENTS The editors wish to express their gratitude for assistance in the review process and other consultation to the members of the editorial board and to the following persons: Cihan Bilginsoy David Colander Robert Dimand Sheila Dow Roger Garrison Malcolm Sawyer Philippe Steiner Gianni Vaggi

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FORMAL MODELLING VS. INSIGHT IN KALECKI’S THEORY OF THE BUSINESS CYCLE Daniele Besomi Si on veut, pour concevoir la crise, aller au-dela` de l’ideé de perturbation, d’e´preuve, de rupture d’e´quilibre, il faut conce´voir la socie´te´ comme syste`me capable d’avoir des crises, c’est-a`-dire poser trois ordres de principes, le premier syste´mique, le second cyberne´tique, le troisie`me ne´guentropique, sans quoi la theórie de la socie´te´ est insuffisante et la notion de crise inconcevable. (Morin, 1976, p. 149)

1. INTRODUCTION Kalecki’s theory of the business cycle is rightly renowned for various reasons: in particular, besides itself providing an original contribution, it set the framework for Kalecki’s ideas on effective demand, for his anticipation of a number of Keynesian elements, and for the development of Kalecki’s related themes such as income determination and distribution. Although the secondary literature (both technical and descriptive) on this subject is immense, a specific aspect seems to deserve further reflection. Kalecki’s theory was expounded by means of a number of models couched in terms of functional equations (difference or mixed differencedifferential equations), the first of which (Kalecki, 1933a, 1935a, 1935b) was analytically resolved while the others were qualitatively discussed in an A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 1–48 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24001-X

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approximated fashion. These mathematical or geometrical representations were accompanied by extremely succinct statements supplying the author’s economic interpretation of the formal models. Yet Kalecki’s view, as emerging from these almost epigrammatic abstracts, does not always suit the properties of his models – or rather, his models do not always fully reflect Kalecki’s understanding of the cycle as expressed in his own words.1 The matter is intriguing, as Kalecki himself seems to have doubted, since his early formulations, that his models could capture some of the aspects of the working of the capitalist system in which he was interested; toward the end of his life these doubts seem to have taken over and led him to dedicate specific reflections to the implications of his ‘‘econometric models’’ as compared to his other source of inspiration as to the approach of economics, that is, a certain (rather mechanistic) view of Marxism. In the following section Kalecki’s intuitive interpretation of the cyclical phenomena is outlined. At first I focus on his emphasis on ‘‘paradoxes,’’ as referring to both theoretical statements and to the properties of capitalist economies: in the first sense, Kalecki distanced himself from orthodox economics and firmly established that business cycle theory should consider the economic system as a whole, as opposed both to what we would today call microeconomics and to the ‘‘disproportionality’’ theories of the cycle. In the second sense, Kalecki identified in the antagonistic and contradictory character of capitalism the causes of the cycle and of the long-run incapacity of capitalism to supply its own endogenous conditions for growth. In Section 3 Kalecki’s description of the cycle as ‘‘automatic’’ is examined, distinguishing between the use of the adjective as indicating the admitted determinism of his description and as expressing his belief that business fluctuations are a phenomenon intrinsically rooted in the capitalistic mode of production. In Section 4, I argue that while Kalecki’s models fully support the first meaning of ‘‘automatic’’ they fail to adequately represent his view that cycles are the form taken by the contradictions of capitalism: Kalecki either failed to provide a rigorous proof of the stability of the cycle when the model was endogenous or failed to provide an explanation of the cycle relying on the properties of the economic system, resorting instead to exogenous shocks to explain the persistence of fluctuations. The role of lags in Kalecki’s models as well as the introduction of elements extraneous to the ‘‘pure business cycle’’ setting in order to account for the asymmetry of the cycle is also discussed. Section 5 outlines Kalecki’s reflections on the inability of ‘‘econometric models’’ to represent in full the contradictions of capitalism relating to the long period, with particular emphasis on his interesting considerations on

Formal Modelling vs. Insight in Kalecki’s Theory

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the capitalist system’s reactions to the structural instability that occasionally arises, drawing out the implications regarding the short-period theoretical treatment of capitalistic dynamics. In Section 6 the above conclusions are set in historical perspective.

2. ON PARADOXES The word ‘‘paradox’’ and related terms and adjectives (such as ‘‘contradiction’’ and ‘‘antagonistic’’) frequently recur in Kalecki’s writings, from the early 1930s to the end of his career. The passages where such expressions occur are often quoted in the secondary literature: Kalecki, in fact, usually employed them to strongly characterize his conclusions, thereby offering distinctive aphorisms neatly summarizing the essence of his thought. Their central place in Kalecki’s exposition of his ideas makes for a convenient starting point for examining the core of his message. Kalecki used such terms in at least three distinct fashions of interest for his conception of the dynamics of capitalist economies.2 The first of these made use of the word ‘‘paradox’’ in its proper sense, that is, as referring to apparently contradictory, baffling or inconsistent statements or propositions. Kalecki was aware that some of his conclusions were incompatible with the conclusions of ‘‘orthodox’’ economics; he did not try to hide this fact, but rather aimed at resolving the paradox by stressing where his own point of view differed from mainstream economics.3 The reference to a paradox indicates a radical shift in the way of looking at a certain problem: in particular, on several occasions Kalecki stressed that issues such as the determinants of profits, the relationship of savings and investment, or the effect of the reduction of wages on employment required us to abandon the perspective of the individual capitalist and to adopt instead the viewpoint of the system as a whole.4 The following passage, concerning the relationship between profits and expenditure, illustrates this point: The conclusion that the increase in capitalist consumption in turn increases their profits contradicts the common conviction that the more is consumed the less is saved. This approach, which is correct with regard to a single capitalist, does not apply to the capitalist class as a whole. If some capitalists spend money, either on investment or on consumer goods, their money passes to other capitalists in the form of profits. Investment or consumption of some capitalists creates profit for others. Capitalists as a class gain exactly as much as they invest or consume. (Kalecki, 1933a, p. 79, emphasis added)

In the same essay Kalecki concludes, referring again to the passing of one capitalist’s expenditure into the hands of other capitalists as profits, that

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investment finances itself by giving rise to the profits, out of which a corresponding amount of bank deposits is generated (Kalecki, 1935b, p. 343; Kalecki also explains that the technicalities of the money market require a credit inflation, so that ‘‘at any time the corresponding bank account will be increased (per unit of time) by the amount I equal to the volume of orders allocated, and simultaneously decrease by an amount A spent on the production of capital goods’’).5 Based on similar reasoning, Kalecki argued that savings must be equal to investment: An individual capitalist may earn ‘‘money’’; the income of capitalists as a whole, in which mutual debits and credits cancel each other out, must equal the value of consumer goods for capitalists and capital goods. From this it follows that the saved income of capitalists as a whole corresponds to the output of capital goods. (Kalecki, 1932b, in 1990, p. 147)6

Kalecki stressed the change in the viewpoint (although without referring to paradoxes in this specific occasion) also when discussing the effects of a reduction in wages: One of the main features of the capitalist system is the fact that what is to the advantage of a single entrepreneur does not necessarily benefit all entrepreneurs as a class. If one entrepreneur reduces wages he is able Ceteris paribus to expand production; but once all entrepreneurs do the same thing, the result will be entirely different. (Kalecki, 1935c, p. 188)

The same kind of argument applies to the effect of a reduction of wages on profits, prices and production, and to the entrepreneur’s understanding of the process involved: An individual entrepreneur, even if growing stocks in his warehouses becomes a serious problem for him, does not understand that a reduction in prices is the result of the previous reduction in wages, to which he also contributed. He regards the ‘‘market’’ on which the reduction in prices took place as an external force, independent of him.7 So from the falling prices he eagerly draws the conclusion that he should reduce wages still further. Consequently, the stocks of unsold workers’ consumer goods increase once again, prices once again fall, etc. An even greater part of the social income will be tied up in stocks, the crisis will continue to deepen, and workers with their shrinking wages will be unable to take advantage of prices reductions to restore their previous standard of living. (Kalecki, 1932a, p. 43)

Much later, Kalecki discussed the implications of the individual vs. systemic viewpoint in relation to Say’s law, which interpreted the economic relationships in terms of ‘‘the experience of the individual,’’ consisting in the application to the economy as a whole of the experience of housekeeping where clearly less consumption means higher saving. But whereas the income of the individual is given, the national income is determined in a capitalist system by consumption and investment decisions, a fall in one of these components by no means leading automatically to a rise in the other. The individual experience does not correspond to the course of the economy as a whole. (Kalecki, 1964b, English translation 1997, p. 309)


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Kalecki pointed out that in this respect Say’s law resembled the Ptolemaic system, thereby implicitly describing his own ‘‘systemic’’ approach as a Copernican revolution.8 There is an obvious resemblance between these statements and Marx’s emphasis on ‘‘total capital’’ as distinct from ‘‘individual capitals’’: the latter are related to each other by competition, and competition turns all the economic laws upside down.9 Whether or not Kalecki took this point over from Marx, it is clear that here lies the foundation of his concern for macrodynamics.10 A different kind of usage of the expression ‘‘paradoxical’’ in Kalecki’s writings regards not propositions, but the properties of one of his objects of analysis – not just any object of analysis, but ‘‘the central pie`ce de re´sistance of economics’’: investment (Kalecki, 1968a, in 1971, p. 165). The relevant passages have often been quoted: We face here one of the most remarkable paradoxes of the capitalist system. The expansion of capital equipment, i.e., the increase in the national wealth, contains the seeds of a depression in the course of which the additional wealth proves to be only potential in character. For a considerable part of capital equipment is idle then, and becomes useful only in the next upswing. (Kalecki, 1935c, in 1990, p. 193)

And We see that the question, ‘‘What causes the periodical crisis?’’ could be answered shortly: the fact that investment is not only produced but also producing. Investment considered as capitalists’ spending is the source of prosperity, and every increase of it improves business and stimulates a further rise of spending for investment. But at the same time investment is an addition to the capital equipment and right from birth it competes with the older generation of this equipment. The tragedy of investment is that it calls forth the crisis because it is useful. I do not wonder that many people consider this theory paradoxical. But it is not the theory which is paradoxical but its subject – the capitalist economy. (Kalecki, 1937a, pp. 95–96; also 1939, p. 148)

These statements neatly summarize Kalecki’s view of what causes the business cycle. The ‘‘paradoxicality’’ consists in the fact that investment has a twofold effect: it increases the volume of aggregate profits, but at the same time it adds to the volume of capital. These influences have opposite effects on the current rate of profits, which is taken by entrepreneurs as a basis for estimating the expected profitability on which they base their investment decisions. In itself, there is nothing paradoxical in a variable behaving in such a way: almost any simple oscillating system in physics is the result of a similar process (the movement of a pendulum, for instance, is determined by the accelerating and decelerating action of mass as potential energy turns into kinetic energy and vice versa). What Kalecki wants to point out is that investment, by enhancing productive capacity, has the potential to fulfill

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human needs, but instead of doing so it causes widespread misery. This is Kalecki’s version of the Keynesian paradox of poverty in the midst of plenty (Keynes, 1973b, p. 377; see also Keynes, 1934), which is resolved if one conceives of the capitalist system not as aiming at the ‘‘satisfaction of the needs of its citizens’’ but at ‘‘secur[ing] profits for capitalists.’’ In fact, following the Marxist tradition (and in particular Tugan–Baranovsky) Kalecki does not conceive the capitalist system as a ‘‘harmonious’’ regime, but rather as an ‘‘antagonistic’’ one,11 for which it would not be absurd to produce machines for the only purpose of producing more machines12 (Kalecki, 1967, in 1971, pp. 146–148). In Kalecki’s view, therefore, the trade cycle is the form necessarily and automatically taken by this ‘‘antagonism.’’ Yet this is not all, because two additional ‘‘contradictions’’ – Kalecki is here again using Marxian language – are marring the dynamics of a capitalist economy, affecting its long-run development. The first is the insufficiency of effective demand: ‘‘the discrepancy between the development of productive forces and the markets for their products constitutes one of the main contradictions inherent in the capitalist system’’ (Kalecki, 1956, English translation, p. 87).13 Moreover, if technical progress causes productive capacity to increase more slowly than the accumulation of capital, i.e., if the capital intensity of production increases, there comes into the picture another contradiction of the capitalist system formulated by Marx in his law of the falling rate of profit. (Kalecki, 1945, p. 91)

Kalecki focussed on these contradictions from the early 1940s, when his pessimistic view of capitalism took the form of a theory of ‘‘stagnation,’’ consisting in the idea that capitalistic economic systems would not provide their own endogenous engines for growth but have to rely on semi-exogenous factors such as innovations (for instance Kalecki, 1943a, 1954, 1962, 1968a).14 This problem gradually superseded the cycle problem in the development of Kalecki’s thought Harrod observes rightly that his theory exhibits the basic ‘‘antinomy’’ of the system;15 he thinks that ‘‘antinomy’’ leads to fluctuations around the trend line. I believe that the antinomy of the capitalist economy is in fact more far reaching: the system cannot break the impasse of fluctuations around a static position unless economic growth is generated by the impact of semi-exogenous factors such as the effect of innovations upon investment.16 It is only in such a case that cyclical fluctuations do occur around the ascending trend line. (Kalecki, 1962, p. 134)

Kalecki went so far as to suggest that the more fundamental antinomy should be brought into the explanation of the fluctuations around the equilibrium position (whether it be the stationary state or the higher rate of


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growth induced by the semi-exogenous factors): ‘‘Whenever the top of the boom is reached a downswing follows, reflecting the inability of the system to expand in the long-run at a higher rate than fB [the equilibrium rate]’’ (Kalecki, 1962, p. 150). The issue of the trend, however, did not completely supplant the cycle and the contradictions to which it gives form, but only called for a new method of approach.

3. THE AUTOMATISM OF THE CYCLE Before discussing Kalecki’s approach to long-term dynamics and its relation to trade cycle theory it is expedient to examine his notion of the role of business fluctuations in capitalist economies. From his very first writings on cycles, Kalecki insisted on the automatic character of business fluctuations. In his Essay on the Business Cycle Theory, for instance, he wrote The aim of this study is to provide an explanation, indeed one of the possible explanations, of the automatic mechanism of business fluctuations in a closed economy y [T]he automatic mechanism of business fluctuations is defined here much more strictly than usual y: we want to set out a mechanism which would explain the relative regularity of business fluctuations. (Kalecki, 1933a, English translation, p. 66)

The regularity is only relative, and of course Kalecki admits the action of ‘‘disturbing factors,’’ such as crises of confidence. But, in order to outline the ‘‘pure’’ theory of the cycle, such disturbances are abstracted from (Kalecki, 1933b, p. 113). The above, however, is not the only meaning of ‘‘automatic.’’ Kalecki often contrasted the automatic business cycle due to the fluctuations of investment activity with the synthetic or artificial boom stimulated by government intervention. Significantly, when used in this sense the word ‘‘automatic’’ is synonymous with ‘‘natural’’ – he even wrote of an ‘‘automatic ‘natural’ adjustment process’’ (Kalecki, 1932c, in 1990, p. 53): the synthetic upswing is supposed to change into a natural one, with public investment ‘‘relieved’’ by private ones. (Kalecki, 1935e, in 1990, p. 185) The business upswing in the USA was generated, not synthetically, but naturally, i.e., under the influence of private investments. (Kalecki, 1934a, in 1990, p. 176) after some time private investment takes over from public investment: the ‘‘artificial’’ prosperity is replaced by a ‘‘natural’’ one – which, by the way, will sooner or later y come to a stop as a result of expansion of capital equipment. (Kalecki, 1935c, p. 194)

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The ‘‘natural state’’ of the system, therefore, consists in fluctuations: ‘‘prosperity, as we know, has its limits. Boom years are inexorably followed by crisis’’ (Kalecki, 1932a, p. 43). Capitalistic economies, unless they organize a synthetic stimulation of the upswing, are ‘‘at the mercy of the purely automatic forces of the mechanism of business upswing’’ (Kalecki, 1933c, p. 164).17 Albeit more frequent in Kalecki’s early writings, references to the automatic character of the cycle also occur in later writings. In the Theory of Economic Dynamics, for instance, a section is dedicated to ‘‘The automatic business cycle,’’ which occurs when the coefficients in the dynamic equation ‘‘are such as to cause an automatic halt to the rise of investment in the boom and to its fall in the slump’’ (Kalecki, 1954, pp. 123–127).18 The ‘‘automatic’’ cycle is caused by the twofold nature of investment: It is not, of course, the purpose of this essay to present a complete theory of business fluctuations. An attempt is made to give a general idea of the mechanism of a ‘‘natural’’ upswing, and in particular to clarify one of its aspects [the role of inventions]. It now becomes apparent that investment has a favourable effect upon the economic situation only at the time when it is executed and provides an outlet for additional purchasing power. On the other hand the productive character of investment contributes to the slackening of the upswing and finally brings it to an end. For it is the expansion of capital equipment that, in the light of the above analysis, causes the collapse of the boom. (Kalecki, 1935c, in 1990, pp. 192–193)

It is now clear that, for Kalecki, the cycle is the ‘‘natural’’ outcome of the antagonistic nature of capitalism: the ‘‘world in which we are living’’ is ‘‘queer and perverse,’’ but this ‘‘paradoxical and absurd character of ‘antagonistic systems’ ’’ (Kalecki, 1967, in 1971, p. 155) takes the form of a relatively regular alternation of phases of prosperity and of depression, each one breeding and eventually replacing the other.19 This is not to say that Kalecki believed that the dynamics of capitalist systems is fully ‘‘automatic’’ in the above sense. First, while the ‘‘natural’’ forces set in motion by investment determine a tendency to cyclical development, he acknowledged the existence of disturbing factors, from which however he abstracted in order to isolate a ‘‘pure’’ cycle. Secondly, Kalecki recognized that in particular situations, such as the world slump in 1929–1932, the system could become ‘‘stabilized at the bottom of the depression at a very low level of economic activity,’’ with investment well below the replacement requirements (Kalecki, 1935c, pp. 190–193). In such cases, the automatic mechanism would bring an upswing only after a considerable time, and the system would need some help from semi-exogenous factors such as innovations or from an artificial stimulation by the government in order to set the upswing in motion: all these factors which affect the course of the crisis [namely, ‘‘those components of the mechanism of the capitalist economy which could form a foundation for overcoming the


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crisis,’’ of which ‘‘the contraction of capital caused by the decline of investments (and also by the running down of stocks) should be in the first place’’] do so only after a long time. Former crises as a rule have ended sooner – on account of the intervention of some ‘‘external’’ factors, such as the conquest of new markets, or a wave of technological innovations. (Kalecki, 1932c, in 1990, p. 52)20

Thirdly, the long-term component of economic dynamics essentially incorporates a factor ‘‘rooted in past economic, social and technological developments’’: the institutional settings (Kalecki, 1964a), and on the other hand semi-exogenous development factors such as innovations. Kalecki strongly stressed the difference between the long-term and the cyclical components of the dynamics of a capitalist system: while the former incorporates history, the short-term dynamics is ‘‘determined fully by the coefficients of our equations’’ (Kalecki, 1968a, in 1971, p. 183). The latter point reflects some of Kalecki’s most interesting methodological considerations on dynamics, but in order to appreciate them in full (see Section 5 below) it is necessary to examine first how the analytical structure of Kalecki’s models of cycles reflects his vision of the phenomenon.

4. MODELS AND CYCLES Kalecki thus interpreted the cycle as the dynamic form expressing the intrinsic antagonism of capitalism. His theory is formulated by means of models that are meant to translate the causes of the cycle identified by him into a ‘‘mechanism of the business cycle.’’21 These models have a common basic structure: there is a fundamental equation representing the factors affecting investment decisions (profitability in the first attempts in 1933–1939, to which internal saving was added in later versions), coupled with other equations expressing the relationships between investment decisions and actual outlay of capital goods, and between the other factors involved (aggregate profits, the amount of capital, saving) in terms of present and past investment or increase in investment. These equations are assembled together into a single functional equation, whose unknown is a function representing the unfolding of investment over time. The various versions of Kalecki’s mechanisms differ in how the various factors are involved and related to each other, in the number of time-lags involved, in the kind of functional relationship in the main equation, expressed as a mixed difference-differential equation up to 1943 and as a difference equation from 1954 onward. There exists an abundant literature concerned with the comparison with other formulations22 and the analysis of the formal properties of these

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models,23 and there is therefore little to add to it. I will therefore only focus on how well Kalecki’s approaches reflect his intuitive perception of the phenomenon, that is, on the extent to which Kalecki’s equations are a faithful rendering of the words written between the equations and of his other commentaries on cycles and crises as expressed in nontechnical (and often admittedly political) writings. A first (rather un-original) observation is that Kalecki’s models certainly portray the automatism of the cycle, in the sense of the capability of explaining the regularity of fluctuations. Kalecki explicitly accepted Ragnar Frisch’s characterization of dynamics as a theory that explains how one situation grows out of the foregoing. In this type of analysis we consider not only a set of magnitudes in a given point of time and study the interrelations between them, but we consider the magnitudes of certain variables in different points of time, and we introduce certain equations which embrace at the same time several of these magnitudes belonging to different instants y. Only by a theory of this type we can explain how a situation grows out of the foregoing. This kind of analysis is basically different from the kind of analysis that is represented by a system of Walrasian equations; indeed in such a system all the variables belong to the same point of time. (Frisch, 1933, p. 171)24

Kalecki’s models all explain how one situation results from the unfolding of the previous state of the system following a precise law expressed by the functional relationships: given an initial condition (that is, the state of the system at a certain point in time or during a certain interval), the whole past and future of the system are entirely determined. In this sense automatism is synonymous with determinism. Occasionally Kalecki pushed this view to its extremes by denying capitalists the faculty of making autonomous decisions,25 as for instance in the following passage: capitalists, as a whole, determine their own profits by the extent of their investment and personal consumption. In a way they are the masters of their fate. But how they master it is determined by objective factors, so that the fluctuations of profits appear after all to be unavoidable. Capitalist consumption is a function of gross accumulation. The gross accumulation, which is equal to the production of investment goods, is determined by investment orders which in turn were undertaken in a past period on the basis of the profitability in that period, i.e., on the basis of the gross accumulation and the volume of capital equipment in that period. (Kalecki, 1933a, English translation, pp. 79–80)

On the other hand, he was frequently at pains to stress that this mechanistic view could not capture the complexity of the phenomenon: besides his reservations cited at the end of Section 3 above, he pointed out that ‘‘the overcoming of the crisis by capitalism is inseparably linked to the position taken, and the political actions pursued, by the working class,’’ and that the


11

‘‘decisive factor here is obviously not the economic but the social one – the position taken by the working class’’ (Kalecki, 1932c, in 1990, pp. 50, 53. See Section 5 below for further discussion of this aspect of his work). If automatism in the sense of mechanical determination is overemphasized by Kalecki’s analytical models, the same cannot be said as to the other aspect of ‘‘automatism’’ considered in the previous section, namely, the cycle as the form taken by the antagonism intrinsic to capitalism. Most of Kalecki’s models describe damped fluctuations around a line of stationary equilibrium and rely for the persistence of fluctuations on exogenous shocks; moreover, all of them crucially depend for cyclicality upon one or more reaction lags. 4.1. The Stability of Equilibrium and the Persistence of the Cycle The problem of the persistence of fluctuations troubled Kalecki since the formulation of his first model in 1933 (Kalecki, 1933a, 1935a, b).26 There, the mechanism of the business cycle was represented in terms of a linear delayed differential equation, of order one and with one lag (the ‘‘gestation period’’ of any investment). Kalecki came to that equation after a series of approximations, a number of which consisted in linearization of the basic relationships.27 This procedure implied that his equation could only give rise to exploding, damped or constant amplitude fluctuations, depending on the value of the parameters.28 Kalecki originally discussed the case of constant fluctuations: a case ‘‘of a particular importance as it appears to be the nearest to actual conditions,’’ for ‘‘in reality we do not observe any regular progression or degression in the intensity of cyclical fluctuations’’ (Kalecki, 1935b, p. 336), which would indeed represent the cyclical form of the paradox of the double nature of investment. But – as Frisch was quick to point out – the borderline between the areas of stability and instability is nothing but a mathematical abstraction, since it requires the coefficients to take some very specific values for which there is no empirical or theoretical justification. We now know that this is a consequence of the assumption of linearity:29 a linear functional equation only admits as solutions oscillating functions combined with an exponential term, thus giving rise to a stationary state (the most trivial case), to exponential growth or decay, or to constant, damped or exploding cycles; the case of constant fluctuations is structurally unstable, as the slightest change in the coefficients would shift the system into either the area of stability or the area of instability.30 This, however, was not common knowledge in the early 1930s, and nonlinear systems are

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(with a few exceptions) algebraically intractable. The only solution at hand was therefore that offered by Frisch in 1933: persistent fluctuations could be interpreted as the result of the superposition of random exogenous shocks upon a damped system.31,32 Kalecki readily recognized that there was a ‘‘metaphysical’’ problem,33 but at first he was not enthusiastic about this way out and suggested the following alternative: Let us suppose that m [the coefficient relating investment decisions and the constant part of capitalists’ consumption plus gross accumulation: Kalecki, 1935b, p. 331] has a slightly smaller value than that given above [the value determining a cycle of constant amplitude]; it is easily seen that this results in damped oscillations and in a short time the business cycle will practically disappear. But the requirements of liquidity of banks and enterprises will become less stringent and the disappearance of cyclical fluctuations will have the effect of an increase in reserves. The credit system will become more elastic and a given rise of price and production will call forth a less marked advance in the rate of interest. [But] the more elastic the credit system, the greater m will become, and, therefore, the damping of oscillations will lead to an increase in m and thus create a tendency towards return to fluctuations with a constant amplitude. (Kalecki, 1936, p. 360)

This approach (probably unknown to Kalecki) tackled the problem at its roots: it eliminated the assumption of linearity by treating the coefficient m as subject to positive feedback. Something, however, must have convinced Kalecki that such a solution could not be easily integrated within his line of approach. Perhaps he was overwhelmed by the analytical difficulties, or he may have realized that incorporating the credit system in his model would have required him to bring the rate of interest back into the main equation.34 The latter would have become much more complicated: Kalecki, in fact, while admitting that investment decisions depend on the rate of interest, eliminated this variable from his equation arguing that it varies in the same direction as the other determinant of investment, the gross yield: thanks to the ‘‘commonly known’’ fact that, ‘‘except for financial panic (the so-called crises of confidence), the market-money rate rises and falls according to general business conditions’’ so that one can assume that ‘‘The money rate y is an increasing function of the gross yield’’ (Kalecki, 1935b, p. 330). Whatever the reason, in the following version of his model he accepted Frisch’s solution: Clearly it is an arbitrary and even unlikely assumption that the moving point comes back to its initial position E – the trajectory [in the phase space] may well be a spiral and not a closed curve. If the fluctuations produced by our mechanism have a tendency to subside, this means that the spiral converges towards point B, and in this way the system tends to attain long-run equilibrium. But as shown by the investigations of Professor Frisch, this is prevented by the existence of ‘‘erratic shocks.’’ Since the relationships represented by f and f are in reality not quite stable functions, the actual dynamic process may be


13

imagined as the resultant of the operation of the mechanism described above and of random shocks. Now Professor Frisch has shown that if the basic mechanism produces slightly damped fluctuations the existence of shocks establishes a state of relatively regular undamped fluctuations with an average period similar to that of the fluctuations created by the ‘‘basic mechanism.’’ (Kalecki, 1939, p. 148n, with reference to Frisch, 1933 and unpublished writings)35

Kalecki thus seems prepared to accept that the system, if left to itself, would tend to a point of stationary equilibrium, and is only prevented by the existence of erratic shocks from settling into a position of simple reproduction where investment just replaces the worn-out capital. Yet this footnote is appended to the paragraph immediately preceding the passage, already cited above, where Kalecki attributes the cause of the cycle to the paradoxical nature of the capitalist economy: in spite of his claim that ‘‘We do not y seek to determine the automatic restoration of equilibrium which has been distorted by disproportions of development’’ (Kalecki, 1933a, English translation, p. 66), Kalecki’s apparatus – abstracting from exogenous shocks – leads precisely to the restoration of the long-run equilibrium if, for any reason, the system is disturbed. The system is only kept in motion by a repetition of the disturbance, not by the paradoxical character of investment: this is reduced to an ancillary role, as it can only explain why the erratic shocks are transformed into a semi-regular movement, but does not account for the movement itself. The erratic component, conversely, instead of summarizing the factors one cannot take into account in the explanation of the basic mechanism, becomes the complex of causes of movement.36 This is tantamount to saying that the movement remains largely unexplained. Kalecki’s view of capitalism as an antagonistic system marred by contradictions and paradoxes leading to a cycle of recurrent crises and temporary recoveries is therefore turned upside down by his own analytical apparatus, which accounts instead for a system tending to long-run equilibrium except for temporary perturbations originating from outside the main mechanism. The issue of the persistence of fluctuations kept bothering Kalecki, perhaps also thanks to a criticism by Kaldor who pointed out that Kalecki’s model with stable short-period equilibria required a number of special assumptions in order to keep the system in motion while his own (otherwise very similar) model characterized by unstable short-period equilibria was free of this difficulty.37 At some point Kalecki started doubting that Frisch’s solution was a suitable one. An important point about any trade cycle theory is whether the cycle may be damped down or not. Indeed, the course of the cyclical fluctuations as determined by the fundamental equation may be such that the amplitude diminishes from cycle to cycle so that

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DANIELE BESOMI the system gradually approaches a state of equilibrium. It is true that it has been shown that a combination of a damping mechanism with erratic shocks (due to the fact that the economic relations as represented by the fundamental equation are rather loose) produces cycles with an amplitude which has no tendency to decline. But if damping is strong such cyclical movements would be of extremely irregular character. Thus, because it is difficult to prove why the coefficients of the fundamental equation should be such as to exclude strong damping, these theories have a serious loophole. (Kalecki, 1943a, p. 73)

His first alternative proposal tackled the problem at its root. The fundamental relationship is formulated as a first-order differential equation with two lags in the argument; but while in the earlier versions of Kalecki’s (1933a, 1935a, 1935b) model the equation was linear, in the Studies in Economic Dynamics the coefficients change in the course of the cycle, in particular the one measuring ‘‘the strength of the influence of the change in real profits upon investment’’ (Kalecki, 1943a, p. 70); the equation is therefore nonlinear. Kalecki maintains that this feature frees his model from the difficulties related to the persistence of the cycle, without having to resort to external shocks:38 ‘‘It may be shown that the type of variations assumed for the coefficient a prevents the cycle from being damped down’’ (Kalecki, 1943a, p. 73).39 Unfortunately Kalecki only gives a qualitative discussion of how his coefficient fluctuates in the course of the cycle,40 without supplying an analytical proof that such a system gives rise to a stable limit cycle.41 The lack of precise formal specifications and the mathematical difficulties involved in such an equation seem to have prevented commentators (both contemporary and later) from exploring the matter further, and Kalecki himself soon abandoned this path. In the following, and last, discussion of this issue, Kalecki returned to a linear model but amended Frisch’s approach – without, unfortunately, commenting upon the reasons for renouncing nonlinear analysis. In the Theory of Economic Dynamics the fundamental equation is no longer differential but is a difference one, with two time-lags (for a thorough discussion of this model, see Sordi, 1989). Besides the unlikely borderline case of constant amplitude oscillations, Kalecki discussed both explosive and damped fluctuations. In his previous attempts he had not considered the former possibility, which was however brought to his attention by Hicks (1950),42 who conceived of an unstable system kept within bounds by a ‘‘ceiling’’ and a ‘‘floor.’’ Kalecki considered ‘‘risky’’ the assumption that the mechanism is explosive and fluctuations are halted and reversed by limited resources, for ‘‘there is no confirmation for the theory that the ‘ceiling’ is usually reached in the boom’’ (Kalecki, 1954, p. 139). This is consistent with the view frequently expressed by Kalecki that productive equipment and labor are rarely used at full capacity, even during the boom.43


15

As to damped fluctuations, Kalecki reiterated the argument that on the one hand ‘‘It is impossible to assume that the coefficients of the ‘business cycle equation’ are necessarily such as to produce mild damping’’, and on the other hand Frisch’s solution is not suitable in case of heavy damping, for in such a case the evenly distributed erratic shocks considered by Frisch lead ‘‘to a rather irregular cycle with a small amplitude.’’ He concluded that ‘‘we arrive, therefore, at a sort of impasse’’ (Kalecki, 1954, pp. 139, see also p. 129). The new way out consisted in assuming that the erratic shocks are subject not to a uniform distribution, but to a normal frequency distribution. This was justified on the basis of the Laplace–Liapounoff theorem, according to which the sum of random error is normally distributed, and on the ‘‘reasonable assumption’’ that large errors are less frequent than small ones (Kalecki, 1954, p. 140). Kalecki did some rough experimenting with such errors, and concluded to his satisfaction that ‘‘even with relatively heavy damping such shocks generate fairly regular cycles’’: This result is of considerable importance. It shows that a semi-regular cycle may be in existence even though the ‘‘business cycle equation’’ involves substantial damping. It thus dispenses with the necessity of accepting the explosive cycle which we considered unrealistic. (Kalecki, 1954, p. 142)

After this remark, Kalecki does not seem to have taken up again the issue of the persistence of the cycle. His last words were thus concerned with rejecting the idea, intrinsic in the notion that equilibrium is unstable, that capitalist economies are subject to systematic troubles springing out from the antagonism and the paradoxical character of investment, and with discussing instead the conditions that the shocks have to respect in order to produce fluctuations when the system shows a strong tendency to reach a state of equilibrium. Curiously, the burden of the explanation has shifted from the determinants of investment decisions to the behavior of erratic shocks, that is, of phenomena not accounted for by the theory, whether because they are truly erratic, or exogenous, or left out of account because it is deemed to be unimportant as compared to the ‘‘basic’’ explanation of the cycle.44 4.2. Lags and Fluctuations All of Kalecki’s models (including the ‘‘geometrical’’ 1937–1939 ‘‘Theory of the Business Cycle’’) rely on one or more lags for their functioning. The basic one is the gestation lag, that is, the time necessary for the construction and delivery of industrial equipment; this is incorporated in all models, and is the only one considered in the 1933–1935 version of Kalecki’s theory.

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Other lags were later also taken into account, such as the time necessary for the factor affecting investment decisions to exert their effect, or the delay between income and the investment giving rise to it. What is the role of lags in these models?45 Kalecki’s own summaries of the causes of the cycle tend to identify as the culprit the factors affecting investment decisions and their paradoxical character; only occasionally are a few words devoted to lags. A first statement is dated 1932: commenting on the perspectives opened by ‘‘new industries’’ in overcoming the crisis, Kalecki wrote that as in business fluctuations in general, a major role is played here by the time taken to construct industrial plants. While factories that are to produce new articles are under construction, such articles have not yet appeared on the market, whereas investments have already caused an overall increase in employment and an expansion of the domestic market. (Kalecki, 1932d, p. 54)

Although Kalecki is here concerned with a comparison of the situations in the ‘‘new’’ and ‘‘old’’ products industries, the argument is easily extended to any kind of investment undertaken in a situation of crisis: during the time necessary to construct industrial equipment new demand is created, but the products necessary to satisfy it are not yet on the market, thus opening new perspectives for producers and inducing them to push their investment plans further. In this case, the role of the gestation lag is to deceive producers into thinking that additional investments are needed to satisfy the existing demand, while this demand is created by the very fact of investments having been undertaken in the first place. The lag is thus part of a cumulative mechanism, which remains in place until some other factor slows down investment (Kalecki of course located this factor in the fact that investment, besides creating new demand, also increases the volume of capital equipment, thereby unfavorably affecting profit rates). A further statement, rather less self-explanatory, is to be found in the concluding paragraph of Kalecki’s essay on ‘‘Three Systems.’’ After having examined how equilibria are reached according to three different economic conceptions (the classical view based on Say’s law, a first relaxation admitting changes in the velocity of circulation of money and thereby ‘‘creation’’ and ‘‘destruction’’ of purchasing power, and finally the introduction of a reserve army of the unemployed) under the assumption that the capital equipment was given at the outset, Kalecki mentioned that normally the process of reaching equilibrium requires the adaptation of capital equipment, which in turn affects the new position of equilibrium. The resulting movement through a series of equilibria would continue ‘‘until the final


17

equilibrium is attained, i.e., a position in which investment activity no longer changes the volume and structure of capital equipment.’’ The situation, however, would be quite different if the gestation lag is taken into account. Indeed, this is not the only possibility, if we still consider the time of construction of new investment goods. Then it may also turn out that the movement through a series of successive quasi-equilibria will be cyclical, and hence the position of final equilibrium will never be attained. In my opinion these are proper business fluctuations. (Kalecki, 1934b, pp. 218–219)46

In this passage Kalecki does not explain why the insertion of a lag turns a more or less uniform movement toward a long-term equilibrium into a persistent cyclical motion. He refers, however, to his 1933 ‘‘Essay on the Business Cycle Theory,’’ where the lag comes into play to prevent the system from being stabilized in the equilibrium position where investment is exactly sufficient to replace the worn out and obsolete machinery. Mathematically, this is achieved by turning Kalecki’s fundamental equation from a firstorder differential equation, whose solution consists of exponential growth or decay, into a mixed difference-differential equation, the solutions of which also contain an oscillatory component.47 More intuitively, lags come into play during the phases of the cycle when the line of investment crosses the replacement (i.e. the equilibrium) level, recovery and recession. By recovery we understand here the phase of the cycle of length n [the construction period] during which investment orders exceed the level of replacements requirements; capital equipment, however, has not yet begun to expand because deliveries of new equipment are as yet lower than the replacement requirements yDuring recession, investment orders are below the level of replacement requirements. The volume of capital equipment, however, is still expanding because deliveries of new equipment are higher than this level. (Kalecki, 1933a, English translation, pp. 77–78)48

The lags are not called to play any part in determining the lower and upper turning points of the cycle: the inversion of the direction of movement is dictated by the fact that as investment proceeds profits increase, while capital only grows after the replacement level has been passed. Only at that point does the ratio of profits to capital (which entrepreneurs take as an index for expected future profitability) begin to slow down, at first reducing the pace of increase of investment (and therefore also of profits) and eventually stopping it altogether. Kalecki stresses that the system cannot be stabilized at that level, because investment is still positive and, therefore, the volume of capital still increases and depresses the rate of profit. The depression is brought to a halt by the same change operating in a symmetric way. The lags explain instead why the system cannot stabilize at the replacement level: without the lag, investment decisions would immediately bring about the corresponding

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change in the volume of capital, and as soon as the replacement level was reached the requirements of capital would be satisfied, while profits in turn would have no tendency to change and accordingly the (expected) rate of profit would correspond to the actual level of investment decisions. Kalecki’s treatment of lags therefore matches the remainder of his analytical construction: the basic picture is that of a system tending toward equilibrium but prevented from settling there by a delay in the adjustment timing.49 Again, there seems to be a discrepancy between this representation and his interpretation of the deep causes of the cyclical phenomenon. It has been pointed out that the gestation lag reflects the assumption that producers of investment goods do not anticipate the demand for their products, but only produce to order (James & Beltz, 1938, p. 159n):50 this is a rather flimsy basis for maintaining that the cycle is an intrinsic feature of capitalism reflecting its paradoxical character and antagonism. Kalecki’s 1937–1939 ‘‘geometric’’ model is a sequence analysis51 based on the lag t between investment decisions and the income generated by them, which includes the gestation period and the time span necessary for investment to produce income (about 3–6 months and 4 months, respectively, in Kalecki’s estimate). The diagram consists of two curves, one representing investment decisions as a function of present income (taken as determining the income of capitalists), given the volume of capital, and the other representing the income generated by investment decisions after the lag. Their intersection represents a stable ‘‘conditional’’ equilibrium, toward which the system tends in a cumulative process, characterized by investment decisions producing a level of income that induces entrepreneurs not to alter the previous investment decisions.52 But as the movement toward equilibrium implies a change in the volume of capital (including, at a certain point, crossing the line representing the replacement level), thereby affecting profitability, the investment decisions function shifts up and down. The system’s dynamics is generated by the interplay of the movement toward conditional equilibrium and the shifting of the curve, with the corresponding change in the equilibrium position. Kalecki has high claims for his lags. Many writers who have constructed simplified models of the Keynesian theory have focussed their attention on the ‘‘equilibrium’’ represented by the point B [the conditional equilibrium]. This was due to the fact that they did not distinguish between investment decisions and investment. They were therefore unable to conceive of the system being in a position different from that presented by the point B. (Kalecki, 1939, pp. 139–140)53

The point he wants to stress is that as the adjustment to equilibrium takes time, meanwhile conditions may change – in particular, the volume of


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capital equipment varies: ‘‘the process of reaching this equilibrium will in general be spread over many periods. Thus it is interesting to know what determines the rate of investment during the process’’ (Kalecki to Keynes, 4 April 1937, in Kalecki, 1990, p. 525).54 Lags do not explicitly come into play in the description of the events during the four critical points in the cycle. When investment is at the wear and tear level, the system is prevented from settling there by the tendency to move toward the conditional equilibrium; it cannot settle at the upper and lower points of the boom and depression, for there the investment decisions function tends to shift as industrial equipment is above or below the replacement level (Kalecki, 1939, pp. 144–147). The only full and stable equilibrium position is at the intersection of the investment decisions function and the replacement level: in such a case, the system would remain stationary in a position of simple reproduction. Kaldor’s criticism of Kalecki is relevant in this connection. In an appendix to his 1940 pioneering nonlinear model of the cycle Kaldor pointed out that Kalecki’s model assumed, as a matter of course, the stability of the conditional positions of equilibrium, for the investment decisions curve crosses the income function line from below (Kalecki later admitted he had failed to consider the opposite case, on which Kaldor’s model is based, but argued that it was equally difficult ‘‘to advance any satisfactory a priori reasons for this shape’s being necessarily such as he assumes’’: Kalecki, 1943a, p. 74n). According to Kaldor, the system is prevented from settling in the conditional equilibrium position by the time-lag: He assumes, however, that the time-lag between investment decisions and the corresponding income is large relatively to the rate at which the amount of equipment is increasing – i.e., the movement along a f curve and the movement between f curves are of comparable speed – in which case the movement towards a stationary equilibrium may ‘‘overshoot the mark’’ – i.e., the rate of investment decisions can continue to fall, even after it is less than what corresponds to replacement, simply because the fall in income lags behind. (Kaldor, 1940, p. 91)

Kaldor also argues that, in order to prevent the system from being strongly stable, with movement quickly petering out, Kalecki also has to introduce other tacit assumptions: (i) that the effect of current investment on total equipment should be relatively large, so that the equipment added during the period of the time-lag has a considerable influence on the rate of profit, and hence on investment decisions; (ii) that the angle enclosed by the f and f functions should be small. (Kaldor, 1940, p. 91)

The first line of Kaldor’s criticism puts Kalecki’s model at par with the cobweb theories of fluctuations:55 Kalecki’s approach (as well as Tinbergen’s) is

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DANIELE BESOMI based on the assumption of statically stable situations, where equilibrium would persist if once reached; the existence of the cycle was explained as a result of the operation of certain time-lags which prevented the new equilibrium from being reached, once the old equilibrium, for some external cause, had been disturbed. In this sense all these theories may be regarded as being derived from the ‘‘cobweb theorem.’’ The drawback of such explanations is that the existence of an undamped cycle can be shown only as a result of a happy coincidence, of a particular constellation of the various time-lags and parameters assumed y. Moreover, with the theories of the Tinbergen–Kalecki type, the amplitude of the cycle depends on the size of the initial shock. (Kaldor, 1940, pp. 91–92)56

These observations are partly misdirected. Kaldor’s criticism is aimed at the lag theories, but actually only concerns the linear ones.57 Indeed, it applies to Kalecki’s 1933–1935 model where (as discussed above) the role of lags is that of causing the system to overshoot the mark of the simple reproduction equilibrium and reproducing (in reverse) the disequilibrium state responsible for keeping the system in motion. It also depicts well the role of lags in Aftalion’s theory of the cycle, the working of which (as explained in footnote 51 above) has some strict analogies with Kalecki’s previous model. But in Kalecki’s diagrammatical 1937–1939 model the investment-decisions function is not a straight line, and moreover it does not make sense to consider this curve in itself (i.e., to focus on the ‘‘conditional equilibrium’’), for it continuously shifts (and Kalecki did not specify the speed at which it shifts, which may therefore not be proportional to the volume of capital). The system’s dynamics must be considered in its entirety, and in such a case the ‘‘conditional’’ equilibria are not equilibria at all (unless, of course, they happen to fall on the replacements line). What matters is, therefore, whether the whole system is stable, that is, whether the ‘‘long period equilibrium’’ (the simple reproduction state) is an attractor state. Kalecki did not discuss this aspect of the problem, but only affirmed that nothing guarantees that his diagram represents a closed line rather than a spiral (Kalecki, 1939, p. 148; the passage is cited in full in p. 13). Yet there is much in Kaldor’s argument: if the dynamics of the system is stable, the only way of explaining the existence of some kind of movement is to assume either that the establishment of equilibrium is systematically prevented by the occurrence of exogenous shocks or forces (but in such a case the disturbances or external factors become the main explanation of the cycle), or that the advance toward equilibrium is obstructed by some kind of friction or maladjustment.58 The later developments of nonlinear dynamics vindicated Kaldor’s point, for it turned out that in 2-dimensional systems cyclical behavior is represented by stable limit cycles surrounding an unstable steady state (see for instance Gabisch & Lorenz, 1989, pp. 122–135,


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and in particular for the reference to the Poincare´–Bendixon theorem and related results, pp. 129–132). Kaldor’s second set of observations is more to the point. The cyclical behavior of Kalecki’s model depends on the assumption that the effect of investment on the volume of capital goods is of the same order of magnitude as the effect of investment on profits, so that the rate of profit – on which investment decisions depend – is significantly affected by both variables (as described by Kalecki in the passage cited in Section 2 above).59 Kalecki, however, did not specify the conditions guaranteeing such a result.60 Although his 1937–1939 model enjoys the advantage of not being as rigid as the 1933–1935 one, where all relationships were spelt out explicitly at the price of requiring a number of specific simplifying assumptions and linearization, his intuition on the ultimate causes of the cycle does not find a suitable formal representation.61 4.3. Symmetry Breaks As the solution to Kalecki’s linear models consists in a combination of an exponential term (determining whether the amplitude of the cycle is increasing, constant or decreasing) and of a sine curve, the oscillations described by the investment function are strictly symmetric, both in their graphical representation and in the causal structure. Kalecki himself explained several times that the course of the depression is the precise reversal of the development of the boom phase, as well as the causes of the change in the direction of movement.62 Although Kalecki seemed to believe that the ‘‘pure cycle’’ can (and perhaps should) be described as fully symmetric, on several occasions he raised doubts as to the suitability of such an approach. In his early formulations, Kalecki did not bother to justify the symmetry in the upward and downward phases of the business fluctuations: he probably accepted the ideas as intrinsic to a mechanism operating cyclically and automatically, as is the case for most oscillators described by the simplest systems in physics. Indeed, the symmetry in the amplitude of the fluctuations is implied in his formulation in terms of deviations from the average (i.e., in the case of the pure cycle, the level of wear and tear): ‘‘The negative investment in the slump may be just as large as the positive investment in the boom. In fact, if you consider the deviation from the trend line, the positive and negative deviations are of necessity equal’’ (letter to Joan Robinson, 26 July 1951, in Kalecki, 1991, p. 541).63 A rationale for postulating symmetry was only supplied later, probably as a reaction to the publication of Hicks’s Trade Cycle with its

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emphasis on the ‘‘ceiling’’ as a cause for the downturn: ‘‘Speaking generally, I think that a reasonable theory of the business cycle should permit [us] to explain the fluctuations without assuming any bottle-necks. The end of the slump is then pretty symmetrical with the end of the boom’’ (letter to Joan Robinson, 26 July 1951, in Kalecki, 1991, p. 541).64 Kalecki’s doubts that the cycle is really symmetric are more cogent than this. His first reflections originate from the observation of the difficulties experienced in recovering from the Great Depression. In Kalecki’s writings in the first half of the 1930s there are several references to the factors stimulating a synthetic recovery from which the natural movement would eventually depart, perhaps at a slow pace. The implication is that the system would have found great difficulty in recovering if it had to rely only on the automatic mechanism of the cycle (see Section 3 above).65 In Studies in Economic Dynamics, Kalecki addresses the ‘‘apparent contradiction’’ between the mechanism of the cycle which ‘‘seems to imply that there is always a recovery from the slump’’ and the concrete possibility that ‘‘investment activity can persist over long periods at its minimum level’’ (Kalecki, 1943a, pp. 74–75). Kalecki argued that ‘‘a situation is conceivable in which the factors causing a recovery from the slump in our business cycle model will prove inadequate.’’ If investment activity is at the minimum level defined by the rate of profits reaching a critical threshold at which no investment plans appear profitable, it can remain there (or nearby) for a considerable time, for it would not engender noticeable changes in the rate of profit. In fact, although the volume of capital diminishes (minimum investment being below the replacement level), profits are very low and remain so for some time, and the slowly changing part of capitalist consumption would fall, reducing profits further down and offsetting the positive influence of the decline in capital (ibid., pp. 57–58, 75). Kalecki’s reasoning thus relies on one of his trend components. In the Theory of Economic Dynamics Kalecki sees a different role for the trend. There are two arguments for asymmetry. One is that while investment in fixed capital has a lower limit (it cannot fall below zero), ‘‘there is no analogous limit to disinvestment in inventories. Thus, when gross investment in fixed capital reaches the zero level, the slump may be slowed down but not halted since disinvestment in inventories may gather momentum’’ (Kalecki, 1954, p. 127). The other argument is that ‘‘the effect of capital destruction upon investment decisions during the slump is much weaker than that of capital accumulation in the boom because the equipment ‘destroyed’ in the slump is frequently idle in any case. As a result, slumps may be very long’’ (Kalecki, 1954, p. 126).66 As a counterargument, Kalecki pointed out that if


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the economy is on a long-run trend, at the bottom of the slump the level of activity is increasing, as well as profits, while capital is still below the replacement level, and this is enough to increase the expectations of profits and restart the cycle. The interesting point to notice is that Kalecki was aware that his model, even independently of the trend, could account for an asymmetric cycle, but only at the price of introducing a symmetry break in the original fundamental equation: ‘‘in such a case [the coefficient representing the influence of the change in the volume of capital on investment decisions] is smaller y in the depression than in the boom’’ (Kalecki, 1954, p. 126n). Again, Kalecki seems to have perceived a discrepancy between his ideas and the rigidity of his models. He wanted (in deference to realism, and consistently with his pessimistic outlook on economic systems) his models to be able to represent asymmetric situations, with the depression lasting longer than the boom and the possibility of the system ‘‘bumping along the bottom,’’ but he could only do so by referring to factors extraneous to his ‘‘pure cycle’’ setting or by renouncing the assumption of fixed coefficients implied by the assumption of linearity.

5. TRENDS, STRUCTURAL STABILITY, AND THE CRUCIAL REFORM While Kalecki’s first models were only concerned with the ‘‘pure cycle,’’ from 1943 he abandoned the assumptions explicitly introduced to make the system trendless. Initially, his approach to the trend consisted in adding a long-run component to the business cycle equation, which incorporated all the factors that were postulated as constant for the study of the pure business cycle: the long-term component of capitalists’ consumption, rentiers’ savings, the rise in population and productivity, and the effect of innovations (Kalecki, 1943a, 1954, 1962). These were assumed to be slowly changing over time, under the influence of the previous development of the system and in turn affecting its future evolution. Some time after the publication of the ‘‘Observations on the Theory of Growth’’ in 1962, Kalecki seems to have dedicated some thought to the Marxist foundations of a number of his propositions strictly concerning dynamics67 as he wrote articles on the Marxian equations of reproduction (Kalecki, 1968b), on the implications of the debate on crises and the development of capitalism between Tugan–Baranovsky and Rosa Luxemburg (Kalecki, 1967; Kalecki & Kowalik, 1971), and on ‘‘Econometric Model and

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Historical Materialism’’ (Kalecki, 1964a). The latter is of great interest, for a certain dissatisfaction emerges with the method of ‘‘econometric modeling’’ – that is, the description of the system’s dynamics by means of mathematical models based on functional equations. In truth, from his very first writings Kalecki had accompanied some of his theoretical statements with warnings that his conclusions should not be taken literally but weighed against a number of other considerations, the most important of which were of a political nature. Some reservations, dating from 1932, regarding the ‘‘automatism’’ of the recovery have already been cited in Section 3 above. In 1937, after pointing out that the theoretically most effective form of taxation for stimulating business and employment should affect capital, he stressed that this would be impossible to implement because it undermined the principle of private property (Kalecki, 1937b). In ‘‘Political Aspects of Full Employment’’ he indicated reasons why capitalists are against policies aiming at creating and maintaining full employment in spite of their direct interest to the contrary (Kalecki, 1943b), while in ‘‘Full Employment by Stimulating Private Investment’’ he hinted that the economics of full employment is a rather different issue from the politics of full employment (Kalecki, 1945, p. 92). In the essay on ‘‘Econometric Model and Historical Materialism,’’ however, Kalecki went much further than before, as he discussed the intrinsic limits of the analytical instruments he had used for analyzing cycles and growth. These ‘‘econometric models’’ crucially assume that the functional relationships linking variables to their present and past values or rates of change are invariable in time. This hypothesis is rather far reaching. For it presupposes that economic development determined by [such] equation[s] does not cause such transformation in the sphere of natural resources, productive relations of the superstructure that would in turn make for the change in the shape of the relationships between economic variables y. In particular the abstraction of the interdependence between economic development and productive relations makes for the mechanistic character of the econometric model. This does not detract from its being a useful tool of analysis provided these limitations are kept in mind. (Kalecki, 1964a, p. 234)

Generally speaking, one should take into account that the function describing, for instance, investment decisions, is not strictly constant. In the short run it is subject to small changes due to random elements, while in the long run the development of the economic system itself brings about changes in institutions, in the availability of natural resources and in productive relationships, which in turn affect the structural relationships determining the future course of the growth path. But what do such changes imply for the dynamics of the system?


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Kalecki’s answer raises the problem of the structural stability of the model68 A question arises here whether the small random changes in the parameters lead to corresponding small changes in the economic variables in question or whether the effect is disproportionately large. We may call these two alternatives a stable and an unstable process respectively. In an unstable process a small change in the parameters results in the system’s changing brusquely its path. This leads finally to a new stable process and it is this process that represents the actual development while the unstable process considered is ephemeral. For should it have ever existed it would have been supplanted under the impact of random disturbances by the stable process referred to above. (Kalecki, 1964a, p. 234)

In Kalecki’s view, a structurally unstable system can only exist for a very short time: if a small change in the equation’s form suffices to determine a radical metamorphosis of the system’s behavior,69 the system switches to a new state or degenerates toward a ‘‘system y continuously subject to wild swings’’ – what would be termed today a chaotic motion. In the short run, any actual system can therefore be supposed to be structurally stable, as unstable states are ephemeral. In the long run, however, matters are rather different. The system’s evolution brings in a number of small changes in its structure. Most of these are rather innocuous, but from time to time their accumulation brings the system near to a structurally unstable configuration, where it is no longer immune from the catastrophic effects of further small changes It may be therefore concluded that ft is normally a function of such a type that small changes in its shape do not lead to major changes in the economic variables; but in certain critical periods which do not last long it may not exhibit this characteristic. In such periods, the path of economic development will alter abruptly and sometimes the system may show for some period extreme instability of economic conditions. (Kalecki, 1964a, p. 237)

If the superstructure (i.e., the institutional setting) proves inadequate to the new productive relationships, the consequence of the change in status would be a revolution ‘‘in which both productive relations and the superstructure undergo a violent transformation.’’ Nevertheless, often a process of more or less radical reform suffices to cope with the situation. In Kalecki’s view, this was the case in the Great Depression: Sometimes the reform caused by poor performance of the system may even not change basically the productive relations or the form and composition of the government. It may consist merely of implementation of government policies which, however, have an important bearing upon the economic dynamics of the system. To quote an example of a recent period: The Great Depression of the ‘thirties shook capitalism to its foundations. What resulted from it, however, was merely a technique of government anti-slump intervention which barely scratched the surface of the capitalist system but nevertheless affected significantly the pattern of the business cycle. (Kalecki, 1964a, p. 238)

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The above summary is somehow ambiguous, for Kalecki sometimes refers to the structural (in)stability of the model, at other times to the instability of the actual economic system, and again to the dynamic instability of equilibrium in his model, without keeping the three matters sufficiently distinct.70 It is however clear that he believed that capitalist economies occasionally fail to absorb strains, undergo wild swings to which they react either by subverting their structure or by incorporating reforms that make it capable of resisting similar tensions.71 Correspondingly, models must reflect these properties. This makes it expedient to distinguish between short- and long-period considerations. As a structurally unstable system would soon turn into something else, the case is not worth considering. For the purpose of short-run analysis one can therefore assume that the system is structurally stable, while for the study of long-run dynamics one should account for changes in the structure of the system of equations – at least for the structurally stable regions. Kalecki adopted this guideline when elaborating his last model of the trend and the cycle – and actually went a bit further in our approach the rate of growth at a given time is a phenomenon rooted in past economic, social and technological developments rather than determined fully by the coefficients of our equations as is the case with the business cycle. This is, indeed, very different from the approach of purely ‘‘mechanistic’’ theories (based frequently on such fallacious a priori assumptions as a constant degree of long-run utilisation of equipment), but seems to me much closer to the realities of the process of development. To my mind future inquiry into the problems of growth should be directed not towards doing without such semi-autonomous magnitudes as A(t) and B(t) but rather towards treating also the coefficients used in our equations y as slowly changing variables rooted in past development of the system. (Kalecki, 1968a, in 1971, p. 183)

Kalecki is thus treating the short-run configuration not only as structurally stable, but also as invariant. Although when he wrote that the course of the business cycle is ‘‘fully determined’’ by the equation Kalecki probably aimed at bringing home the claim that his result is less mechanistic than those obtained when analyzing the ‘‘pure business cycle’’ (Kalecki, 1968a, in 1971, p. 165), rather than really meaning that the latter is fully deterministic, the distinction is neat. While for long-run purposes a mechanistic kind of analysis is not possible, such an approach is admissible instead so far as one is concerned with the ‘‘pure’’ theory of the cycle abstracting from political and other practical considerations.72 Such a fiction, however, does not seem to be appropriate. In his last article, written with Tadeusz Kowalik and published posthumously, Kalecki elaborates on the political implications of his views on structural stability73 with respect to the debates among the German Social


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Democrats at the beginning of the twentieth century. The authors argue that the disharmony in the development of superstructure and productive relations originates in the ‘‘contradiction between production and realization in capitalism’’ (Kalecki, 1971, English translation, p. 467 and passim). Nothing ensures that all that is produced can be profitably sold: this gives rise to the cycle in the short run, and to a tendency to stagnation in the long run, unless some ‘‘external market’’ provides additional outlets for products and helps the realization of profits. The ‘‘crucial reform’’ that affected capitalism after the Great Depression, and especially after the Second World War, consisted precisely in government intervention in support of demand becoming systematic. This has radically changed the nature of capitalism: ‘‘the laisser faire capitalism is dead because of widespread government intervention. y[T]he present state of capitalist economies is an offshoot of a somewhat chaotic interplay between the laissez faire tendencies and of a government action’’ (Kalecki, 1970, p. 313). Kalecki claimed that economic dynamics should not refer to laissez-faire capitalism but ought to reflect the fact that ‘‘the institutional framework of a social system is a basic element of its economic dynamics and thus of the theory of growth relevant to that system’’ (Kalecki, 1970, p. 311). Kalecki’s solution, however, is not fully satisfactory: in his last model (Kalecki, 1968a) institutions are only incorporated as a semi-exogenous factor, slowly changing over time, reflecting preceding developments and the history of the system. History, however, is not really integrated into the model: it is only superimposed on it.74 The structural instability of the system helps to explain the occurrence of revolutions or crucial reforms, but it is not, in turn, explicitly explained by Kalecki, except for the intuitive reference (and here we come back to the starting point) to the basic contradiction of capitalism lying in its incapacity ‘‘of finding a market for its products at full utilization of resources’’ (Kalecki, 1970, p. 311).

6. CONCLUSION The question ‘‘What did Kalecki think business cycles actually are?’’ does not seem to have a simple and straightforward answer. The view he expressed in words, which I think may fairly be summarized as the idea that cycles are the form taken by the antinomies intrinsic in capitalism, conflicts with the representation emerging from the actual working of his analytical models, which (except the 1943 version) describe economic systems as tending toward a long-run equilibrium position that they cannot reach because of

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lags and exogenous shocks. These conceptions could not be further apart:75 indeed, Keynes drew the dividing line between the ‘‘orthodox’’ economists and the ‘‘heretics’’ (among whom, of course, he included himself): On the one side are those who believe that the existing economic system is, in the longrun, a self-adjusting system, though with creaks and groans and jerks, and interrupted by time lags, outside interference and mistakes. y These authorities do not, of course, believe that the system is automatically or immediately self-adjusting. But they do believe that it has an inherent tendency towards self-adjustment, if it is not interfered with and if the action of change is not too rapid. On the other side of the gulf are those who reject the idea that the existing economic system is, in any significant sense, self-adjusting. They believe that the failure of effective demand to reach the full potentialities of supply, in spite of human psychological demand being immensely far from satisfied for the vast majority of individuals, is due to much more fundamental causes. (Keynes, 1934, pp. 486–487)

If it is arguable that Keynes’s dichotomy fails to capture other aspects of orthodoxy and heresy and that its language is more intuitive than analytical,76 it is hardly disputable that he depicted the essential distinction so far as the approaches to cycles and crises are concerned. How then could these contradictory views coexist in Kalecki’s writings? Kalecki’s interpretation of the business cycle in words (dating from 1932) pre-dates the publication of his first mathematical model in 1933, although the precise sequence of the writing stages of the latter cannot be established, in particular regarding a possible public discussion of it in Autumn 1931 (Osiatyn´ski, 1990, p. 437). The chronology cannot, therefore, help in deciding whether Kalecki first developed his vision and later worked out his mathematical equation to model it, or whether the formal treatment came first and was given an ex post economic interpretation by the author. The former case, however, seems more likely, for Kalecki stuck consistently to his view of the cycle being a phenomenon intimately connected with the capitalist mode of production, while the analytical formulation underwent drastic changes. His political beliefs, of course, are also likely to have played a part in his interpretation of economic phenomena. The problem is therefore that of the inconsistency between Kalecki’s view of the cyclical development of economic systems and the mechanism depicted by his models.77 More precisely, a good part of it lies in an inappropriate choice of mathematical tools: Kalecki’s linear equations are simply not capable of describing persistent cycles without the help of exogenous shocks.78 By adopting this language, Kalecki had to renounce explaining fluctuations in terms of some fundamental properties of capitalist economies, relying instead on the occurrence of events essentially extraneous


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to the basic mechanism. Certainly one knows that no model can capture all aspects of reality (if it did, it would be as useful as a one-to-one map), and therefore any model has to incorporate a term summarizing what is left out. But a model of the cycle should enable one to interpret the basic features of the phenomenon, leaving to errors, omissions and special events the explanation of the deviation from the theoretical norm. In Kalecki’s vision the ‘‘normal’’ behavior of the system consists in fluctuations, the actual course of which may be modified due to political or other circumstances; in his models, on the contrary, the norm (the state to which the system tends) is equilibrium, and the cycle consists in accidental deviations from the theoretical norm. Kalecki’s view has been illustrated by means of the analogy with the closed systems of physics Perhaps an appeal to system theory may help some readers to appreciate this view. The closed systems of physics always tend to come to a rest (an equilibrium) owing to the second law of thermodynamics. To evolve a system and keep it moving it must be stimulated from outside. The pure [trendless] business cycle, if it is damped, and as long as no shocks are introduced, does indeed come to rest in a stationary state in the same way as the closed systems of physics. To keep up the cycle random shocks have to be introduced. To get evolution (a trend) in addition to the latter more systematic influences from outside have to be brought in. (Steindl, 1981, p. 132)79

This analogy is surely suitable to describe Kalecki’s models, but is certainly not compatible with his perception of the phenomenon. Kalecki’s models indeed represent closed systems, isolated from the external world but for exogenous shocks in the short run, and semi-exogenous factors such as innovations in the long run. The representation of ‘‘pure’’ business cycles abstracts not only from the trend, but also from all extraneous interferences; the cycle, in other words, fully depends on the handful of factors listed among the determinants of investment decisions. Kalecki’s reflections on ‘‘econometric models’’ take off from the recognition that the economic system interacts with the state of natural resources and with the institutional setting. Although in the 1960s Kalecki argued that the cycle can be approximated in deterministic terms (see Section 5 above), probably because he thought that the interaction with noneconomic spheres can be taken to be slow, his earlier thoughts on the political conditions for the success of government intervention (Kalecki, 1943b, 1944, 1945) point in a different direction: the economic system is subject even in the short run to (at least) a twofold kind of interference from the external world, public expenditure (the systematic nature of which is induced by ‘‘a strong pressure of the

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masses’’: Kalecki & Kowalik, 1971, English translation, p. 467) on the one hand and the entrepreneurs’ discontent on the other. Kalecki’s view would thus better be described (if we want to retain the analogy with system theory) by means of a dissipative structure: a system open to continuous exchanges with the external word, not only in terms of more or less systematic shocks but also in terms of the resources and the institutional framework enabling the conflicting tendencies constantly generated by the system and interacting with it to organize the un-coordinated actions of individual entrepreneurs into an orderly behavior taking the form of a semi-regular cycle. This requires giving room to positive feedbacks capable of maintaining the system far from equilibrium, rather than letting negative feedback dominate and bring the system toward equilibrium. Equilibrium, in other words, must be unstable, as Kaldor – and, before him, Harrod – had clearly perceived. Kalecki’s argument against the assumption of instability was twofold. On the one hand, he countered Hicks’s special version of a cycle based on instability. Kalecki saw no evidence that the cycle regularly hits the ceiling of full employment of labor or resources, and thought instead that such a condition was rather rare (Kalecki, 1954, pp. 126–128).80 His reasoning overlooks the possibility that other kinds of controls intervene to endogenously determine a reversal of the movement.81 For instance (to elaborate on a suggestion by Kalecki himself, in 1943b) the entrepreneur’s aversion to full employment could be modelled by making investment decisions sensitive to the rate of unemployment, so that when a certain threshold is reached, investment is slowed down, profits falter while capital keeps increasing, profitability declines and the turning point is reached without necessarily hitting the ceiling of full employment. Conversely, the existence of a large reserve army of unemployed may somehow offset the depressing effects of low perspectives of profits. Kalecki’s 1943 model is an instance of an endogenous, nonlinear regulating system, for in some phases of the cycle the values of the coefficient act as a positive feedback accelerating movement, while in other phases they act as a negative feedback retarding it, and eventually permitting turning points. Kalecki’s other argument was that there is no empirical reason for assuming that the functions have the specific shape making equilibrium unstable. Indeed, Kaldor and Harrod did not rely on empirical facts, but resorted to an epistemic argument: if we want our description to account for cycles, we have to introduce into our system at the outset the possibility of the persistence of a disequilibrium state. In other words, we have to construct the model in such a way that equilibrium is unstable (Kaldor,


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1940, p. 91; Harrod, 1934, pp. 465–470).82 Kaldor’s and Harrod’s approach was less concerned with realism than with the logical steps necessary to build their model.83 This formally translates as follows: What is required is that the equilibrium must be unstable, so that the system will never be found there or be found approaching it. For large values of the variable the system must be asymptotically stable. It follows then that there must be at least one closed orbit separating the stable from the unstable region. One thus has a stable equilibrium motion, towards which the system is always tending and which is a generalisation of the idea of a stable equilibrium point (the notion had been developed long ago by Poincare´). (Goodwin, 1989, p. 250)

Kaldor’s and Harrod’s intuition soon proved to be correct, although neither of them was aware of the relationship between their chosen starting point and the properties of the nonlinear relationships they were using.84 Other authors also were concerned with understanding under what conditions crises and fluctuations are possible at all: Marx and Tugan–Baranovsky, for instance, insisted that the possibility of crises should be examined before attempting to explain the phenomenon (see Besomi, 2006). It is therefore to be regretted that Kalecki failed to draw inspiration from these authors on this point. This is not to say, however, that Kalecki’s baby has to be thrown out along with the bath water. His last reflections on the methodology of dynamics should perhaps be considered in this light, as indicating that the formal model should be opened to the interaction with the noneconomic spheres, rather than simply superimposing the effect of history in a broad sense (summarized by an unspecified slowly changing function) onto the economic system – both in the long-run and in the short-run. Joan Robinson wrote that ‘‘Though Kalecki liked to express his ideas in neat formulae, he was always conscious of the limitations of that style of exposition, and set his arguments against the background of history, politics, and institutional change’’ (Robinson, 1977, p. 17).85 This, however, was not sufficient, as he eventually himself claimed: history and institutions should not stay in the background, but should be incorporated in economic modelling as well as in the perception of economic relationships.

NOTES 1. This discrepancy does not seem to have been examined in the literature, except for occasional remarks. Steindl, for instance, noticed (without elaborating further) that Kalecki’s last model provided an interesting mathematical treatment of the trend which, however, ‘‘does not fully reflect Kalecki’s ideas’’ (Steindl, 1981, p. 133, with reference to Kalecki, 1968a).

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2. Kalecki’s usage of words is somehow loose in this respect (contrary to his very precise language in expounding his analytical arguments): perhaps the translators or editors have slightly altered the original meaning. My grouping of Kalecki’s different usages does not reflect the whole range of dictionary meanings, but three specific features of Kalecki’s cycle theory: his adoption of a systemic vs. an individual viewpoint, the double character of investment, and the difficulties in the realization of profits. 3. Keynes used the term in a similar way, for instance when explaining to Hobson the paradox that ‘‘saving in excess of investment involves in itself no sacrifice whatever to the standard of life of the consuming and saving class.’’ Keynes as well thought this result to be paradoxical for ‘‘the minds habituated to other channels of thought’’ (letter to Hobson, 1 November 1931, in Keynes, 1973a, pp. 335–336). 4. The paradoxical character of the systemic law if judged from the viewpoint of an individual’s experience is, of course, the other side of the fallacy of composition, consisting in applying to the whole the laws valid for individuals only while neglecting the interactions among individuals. 5. It is worth recalling that Keynes seems to have followed an essentially similar line of thought: ‘‘My contention that for the system as a whole the amount of income which is saved, in the sense that it is not spent on current consumption, is and must necessarily be exactly equal to the amount of net new investment has been considered a paradox and has been the occasion of widespread controversy. The explanation of this is undoubtedly to be found in the fact that this relationship of equality between saving and investment, which necessarily holds good for the system as a whole, does not hold good at all for a particular individual. There is no reason whatever why the new investment for which I am responsible should bear any relation whatever to the amount of my own savings. Quite legitimately we regard an individual’s income as independent of what he himself consumes and invests. But this, I have to point out, should not have led us to overlook the fact that the demand arising out of the consumption and investment of one individual is the source of the incomes of other individuals, so that incomes in general are not independent, quite the contrary, of the disposition of individuals to spend and invest; and since in turn the readiness of individuals to spend and invest depends on their incomes, a relationship is set up between aggregate savings and aggregate investment which can be very easily shown, beyond any possibility of reasonable dispute, to be one of exact and necessary equality’’ (Keynes, 1939, pp. xxxii–xxxiii). 6. Analogously, two decades later Kalecki argued that, due to the equality between saving and investment, ‘‘capitalists’ savings ‘lead’ profits. This result may appear paradoxical. ‘Common sense’ would suggest the opposite sequence – namely, that savings are determined by profits’’ (Kalecki, 1954, p. 55). 7. This passage bears a striking resemblance to Marx’s understanding of the role of competition in imposing the laws of capital in general upon individual capitalists: ‘‘Free competition brings out the inherent laws of capitalist production, in the shape of external coercive laws having power over every individual capitalist’’ (Marx, 1974, Vol. 1: III, Chapter 10, Section 5, p. 270); ‘‘competition makes the immanent laws of capitalist production to be felt by each individual capitalist, as external coercive laws.’’ (Marx, 1974, Vol. 1: VI, Chapter 24, Section 3, p. 592); ‘‘Competition executes the inner laws of capital; makes them into compulsory laws towards the individual capital’’ (Marx [1939] 1973, p. 752).


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8. Marx also refers to the Copernican view as paradoxical, if ‘‘judged by every-day experience, which catches only the delusive appearance of things’’ (Marx [1898] 1928, p. 54). 9. ‘‘So as to impose the inherent laws of capital upon it as external necessity, competition seemingly turns all of them over. Inverts them’’ (Marx [1939] 1973, p. 761). 10. The word ‘‘paradoxical’’ was also used in one of Kalecki’s (1929, 1990, p. 17) earliest contributions, referring to an unexpected, but nevertheless correct, result in social accounting (for an account of Kalecki’s early macrodynamics see Chapple, 1993, 1995b). 11. It has been claimed that Kalecki’s frequent references to paradoxes testifies to the Marxian background of his ideas (for instance Osiatyn´ski, 1990, pp. 2–3, 440; Lipinski, 1977, pp. 72–73). It should be noticed, however, that while Kalecki certainly shares Marx’s vision of capitalism as an antagonistic system (see e.g. Zenezini, 1978, p. 134), there is no trace in his writings (nor in Tugan–Baranovsky’s, for that matter) of anything like Marx’s dialectics: the ‘‘contradictions’’ are interpreted in a rather mechanistic way (see D’antonio, 1978, p. 41, and Besomi, 1988). 12. Conversely, the stimulation of business could take place via the production of useless goods, as in the following example (where, incidentally, both the first two usages of the word ‘‘paradox’’ are employed at once): ‘‘Let us assume, as often happens in the USA, that two competing railway lines run between two cities. Traffic on both lines is weak. How does one deal with this? Paradoxically, one should build a third railway line, for then materials and people for construction of the third line will be transported by the first two. What should be done when the third one is finished? Then one should build a fourth one and a fifth one y. This example, as we warned, is paradoxical, since unquestionably it would be better to undertake some other investment near the first two railway lines rather than to build a third one; nevertheless, it perfectly illustrates the laws of development of the capitalist system as a whole’’ (Kalecki, 1933c, in 1990, p. 161). 13. Andrzej Dudzinsky points out to me that in the Polish original Kalecki uses the word ‘‘divergence’’ instead of ‘‘discrepancy,’’ as he did in his comment on Baran (Kalecki, 1965, p. 59). For an earlier instance see Kalecki (1945, p. 91), while for posthumous statements see Kalecki and Kowalik (1971), where there are multiple references to the ‘‘contradiction between production and realization.’’ 14. It has been noted that there is a point of contact between Kalecki’s results on trends and cycles: the equations describing the short-term dynamics and long-period development have some parameters in common, for the coefficient ‘‘promoting’’ growth does at the same time diminish the damping of fluctuations, so that growth is paid for by additional instability (Lange, 1970a, pp. 140–141; Steindl, 1952, pp. 193–195; both cited in Osiatyn´ski, 1991, pp. 554–556). 15. Andrzej Dudzinsky points out to me that the words ‘‘antinomy of the system’’ were later translated into Polish as ‘‘contradiction inherent to the system.’’ It is unclear, however, whether Kalecki personally checked the Polish translation. 16. It should be noted, however, that while Kalecki had confirmed that the positive growth rate representing Harrod’s moving equilibrium is unstable, he assumed as a matter of course that the other solution of his equation, representing an equilibrium at a lower level (either stationary or determined by the semi-exogenous

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factors), is stable. Further research showed instead that such a solution is only stable under certain conditions, in particular that ‘‘the investors react slowly to any change in profits y or y that the past changes in profits that they take into account for the purpose of current investment decisions are those over a rather long period of time’’ (Gomulka, Ostaszewski, & Davies, 1990, p. 532). 17. The perception that for Kalecki the cycle was intrinsic to capitalism is, of course, quite widespread (though rarely qualified with precision). Osiatyn´ski (1991, p. 588) for instance, came to the conclusion that ‘‘the cyclical nature of capitalist reproduction was for Kalecki undebatable, and resulted from the very essence of the capitalist mode of production.’’ 18. The following are other examples of Kalecki’s reference to the ‘‘automatic’’ character of the business cycle and to other factors affecting the upswing: ‘‘In the course of a ‘normal’ upswing the increase in profits is due to the rise of the component ‘investment’. y The higher profitability of existing establishments, which result from [a surplus of exports over imports], acts as a stimulus to investment activity; the upswing resulting from a new surplus in foreign trade thus leads to a ‘normal’ boom’’ (Kalecki, 1933d, in 1990, pp. 165–166). ‘‘[T]he upswing’s being ‘natural’ or ‘artificial,’ i.e., caused by government intervention’’ (Kalecki, 1935d, in 1990, pp. 196–197). ‘‘[T]he ‘self-stimulating process’ y and the change in the capital equipment y create together an automatic business cycle’’ (Kalecki, 1939, p. 144). 19. Sebastiani summarizes Kalecki’s view as follows: ‘‘The causa causans of the instability of capitalism is, therefore, an intrinsic feature of accumulation, which marks its limit and internal contradiction – the productive character of the investment’’ (Sebastiani, 1994, p. 115). 20. The asymmetry of boom and depression is further discussed in Section 4.3. 21. The expression is taken from the title of a section of Kalecki’s (1933a) Essay on the business cycle theory and of chapter 11 of his Theory of Economic Dynamics (1954); similar wordings, however, recur frequently in Kalecki’s writings. 22. Feiwel (1975, Chapter V, in particular pp. 131, 135, 138) for instance, focusses on the increasing realism of models. 23. See in particular Steindl (1981), whose classification of Kalecki’s trade cycle theories into three versions (1933–1939; 1943a–1954; and 1962–1968a) was largely accepted in the literature. It should be noted that Steindl’s categorization is based on the form and content of the respective investment functions. In what follows focus instead on the stability properties of the various models. The grouping thus gives different results: for instance, the 1943 nonlinear model describing a stable limit cycle is intrinsically different from the 1954 linear version describing damped fluctuations sustained by exogenous shocks. Feiwel (1975, pp. 143–148, 171–173) hints at the related problem of the semi-exogenous character of the fluctuations described by Kalecki’s models, without, however, distinguishing among different formulations or following the argument through its ultimate implications. 24. Kalecki defined his first model as ‘‘A Macrodynamic Theory of Business Cycles,’’ explaining that ‘‘The term ‘macrodynamic’ was first applied by Professor Frisch in his work ‘Propagation problems and impulse problems in dynamics’ y to determine processes connected with the functioning of the economic system as a whole, disregarding the details of disproportionate development of special parts of that system’’ (Kalecki, 1935b, p. 327). It is interesting to observe that Kalecki’s


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interpretation of macrodynamics as disregarding disproportions does not have a counterpart in Frisch’s article, but probably aims instead at better defining Kalecki’s view of the cycle, not as a phenomenon arising from disturbances in the proportionate growth generalizing to the whole system (such as in Tugan-Baranovsky’s approach or in Bernstein’s view: see, respectively, Kalecki, 1967 and Kalecki & Kowalik, 1971, in Kalecki, 1990, p. 467) but as the result of a more fundamental antinomy. 25. This is also reflected in Kalecki’s rather mechanistic treatment of expectations: although nominally the determinant of investment decisions was the expected profitability of investment, Kalecki approximated these factors by the recorded profit rate, arguing that capitalists evaluate the expected profitability on the basis of the current rate of profits; this variable is then taken, without provisos regarding changes in expectations, as the determinant of decisions to invest (Kalecki, 1933a, pp. 73–74). 26. For brief overviews of Kalecki’s approach to this problem see Sawyer (1996, pp. 96–97,1985, pp. 57–58); the implications of the linearity of Kalecki’s models (except the 1943 version) and its relationship to the stability of equilibrium are not, however, discussed by Sawyer (nor elsewhere in the literature) to the extent they deserve. 27. In particular the basic equation, representing the determinants of investment decisions per unit of existing capital in terms of the gross yield of capital, is assumed to be linear (for instance, Kalecki, 1935b, p. 331); similarly, capitalists’ consumption is decomposed into a constant part and a part proportionate to current profits (Kalecki, 1935b, p. 327). For a discussion of the simplifications and assumptions underlying Kalecki’s model see Baxley and Moorhouse (1991), where it is stressed that Kalecki’s assumption of continuity, essential for derivation, ‘‘requires that the investment decision function has held for all time and that none of the parameters of the model have ever changes’’ (p. 99). 28. The characteristic equation associated with Kalecki’s fundamental equation actually admits an infinity of solutions, only one of which, however, has period larger than the gestation lag. This was proved by Frisch and Holme (1935) on Kalecki’s request. 29. See, however, the cautionary remark in note 61. 30. ‘‘In the Kaldor model the cyclic behavior is represented by a limit cycle in the phase space. Whereas in the Kalecki theory basing on linear time-delay equations the cyclic behaviour is represented by quasi-periodic solutions. As it is well known limit cycles are structurally stable whereas quasi-periodic behavior is destroyed by small perturbations of the right-hand side of the dynamical system’’ (Szydlowski & Krawiec, 2000, p. 391, with reference to Kaldor (1940) and Kalecki, 1935b). Kaldor’s solution to Kalecki’s problem is discussed in Section 4.2. 31. Frisch commented that ‘‘it is more correct, I think, to be prepared to accept any damping which the empirically determined constants will entail, and then explain the maintenance of swings by erratic shocks. This would be explained along the lines indicated in my paper in the Cassel Volume’’ (Frisch & Holme, 1935, p. 225, with reference to Frisch, 1933). 32. Alternatively, one could suppose that the system is unstable but oscillations are kept in boundaries determined by a ‘‘ceiling’’ and a ‘‘floor.’’ This solution was propounded by Hicks (1950), but was rejected by Kalecki in 1954 (see below in this section and, for a comment, see Section 6).

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33. ‘‘Frisch and Holme object to the above assumption of constant amplitude. They are right, for it is by no means sufficient to say that an assumption is correct just because it is confirmed by the conditions of real life. It must be made clear why real life is like that, otherwise the particular predilection it shows for a constant amplitude might appear metaphysical’’ (Kalecki, 1936, pp. 359–360). 34. Although Kalecki verbally discussed the credit issue (see note 48 for references), he never really incorporated it in his models. Even his celebrated ‘‘principle of increasing risk’’ (Kalecki, 1937c) was only expressed in terms of internal savings as a determinant of investment decisions in the models from 1943 onward. 35. This chapter is a reprint of Kalecki (1937a), where this footnote does not appear. 36. Although this falls outside the scope of the present article, one can hardly fail to stress that the contemporary equilibrium business cycle theory are subject to similar difficulties. M. Lines (1990a, b), however, specifies that equilibrium business cycle theory logically resembles the approach propounded by Slutsky (1927) rather than Frisch’s (and Kalecki’s): the former relies on purely random shocks upon which some filters were applied in order to produce autocorrelation, while the latter superimposes shocks onto a linear dynamic model with damped fluctuations. For a general discussion of these two approaches see for instance Gabisch and Lorenz (1989, in particular Chapters 2 and 3). 37. Kaldor’s criticism (of which Kalecki was aware: see Kalecki, 1943a, p. 74n) is partially misdirected, as it focuses on the role of lags; it will therefore be examined in Section 4.2. 38. A nonlinear system giving rise to a stable limit cycle describes persistent oscillation, and is robust to external perturbations. While it does not need external shocks to keep it in motion, considering such random events would do it no harm (unless their magnitude were such as to shift the system outside the area where the cycle is an attractor): the course of the cycle would be perturbed, but would return to its customary pattern after some time. Steindl was therefore misled when, responding to Goodwin’s (1989) eulogy for nonlinear dynamics, he argued in defense of Kalecki’s apparatus that the shocks are there in any case, you have no need to drag them in forcibly. You have to take them into account in any case, and I think it is most important to keep a theory of the cycle flexible so that it will be capable of accommodating all the exogenous influences: the history, the accidents, and all that a simple endogenous model cannot possibly take into account. I think that the problem of the business cycle should really be put like this: the question is, how does the system react to shocks coming from the outside, and is there a general pattern in this kind of reaction? Kalecki’s theory can be regarded as an answer to this. (Steindl, 1989, p. 312)

Kalecki’s own reflections on the robustness of a model under perturbation, however, were much more complicated than this: see Section 5 below. 39. For an early appreciation of the role of nonlinearity in Kalecki’s new argument for the persistence of the cycle see Scitovsky’s (1946) review, where he pleaded for ‘‘a more complete discussion of all the factors that tend to keep the amplitude of the cycle stable’’ (pp. 451–452).


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40. Shackle found Kalecki’s explanation of doubtful value. He reports Kalecki’s remark that at a certain point during the recovery ‘‘the entrepreneurs have not much of the boom behind them and therefore a does not fall strongly’’ (Kalecki, 1943a, p. 73), and comments: ‘‘This reasoning credits the entrepreneurs with an awareness of the cycle and a confidence in its regularity which can perhaps hardly be attributed to them before 1930, and could even now be forgotten, or ignored by a new generation’’ (Shackle, 1944, p. 218). 41. The same approach and the same flaw were anticipated by Harrod’s (1936) Trade Cycle (for a discussion of the role of nonlinearities in Harrod’s trade cycle theory, see Pugno, 1998). 42. As Hicks (1950, pp. 6–7) himself admitted, this approach was anticipated by Harrod (1936, 1939). Harrod had even anticipated the terminology of the ‘‘ceiling’’ (Harrod, 2003, Vol. 3, p. 1198). 43. This is one of the recurrent topics in Kalecki’s writings. In his early pieces he referred to the changes in the degree of utilization of capital to reject the principle of acceleration (see for instance Kalecki, 1939, pp. 64–66; further references are given in footnote 49 below), in his later contributions he examined the long-term determinants of the degree of utilization (Kalecki, 1962, pp. 150–153, and 1968a, in 1971, pp. 181–182). 44. In Goodwin’s words, the fact that ‘‘continuing and irregular cycles’’ generated by the random shocks in an auto-regressive model ‘‘look very much like the same sort of thing as trade cycles’’ ‘‘does not establish that they are trade cycles’’ (Goodwin, 1956, p. 509). Lange reported that it was said that Napoleonic wars, taken as exogenous shocks, could be the ultimate cause of Kalecki’s cycles (Lange, 1970b, p. 352n). It has been argued that resorting to external shocks makes Kalecki’s model less mechanistic (see for instance Sardoni, 1995, p. 199, and Tichy, 1994, pp. 444–445, who take up Steindl’s (1981, p. 137) reflections on shocks: ‘‘The proposed marriage of exogenous and endogenous causes of the trend leave ample room for the role of history while at the same time admitting that the impulses coming from outside are seized and molded by the inherent mechanism of the economic dynamics’’ (see also the passage from Steindl quoted in note 38). Shocks, however, engender themselves a deterministic response: in a linear model such as Kalecki’s, each shock eventually determines the amplitude of the cycle, and its effect lasts until a further shock supervenes and adds its stimulus that what remains of the cumulative effect of previous shocks. Far from being non-mechanistic, such an approach simply renounces finding the cause of the cycle in the working of the system and attributing it to what was left out of account in the formulation of the main equation. 45. Among the roles of lags not of direct interest to this paper one should mention that of introducing a causal direction in the identical equality between profits and capitalists’ expenditure: Kalecki argues in fact that the latter is the determinant of the former, for ‘‘investment and capitalist consumption in the short period considered are the outcome of decisions taken in the past, and thus should be considered as given. With regard to investment, this follows directly from the time lag dependent on the period of construction. But changes in capitalist consumption also follow those in profits with some delay. Now, sales and profits in a given period cannot be a direct outcome of past decisions: the capitalists can decide how much they will invest

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and consume next year, but they cannot decide how much they shall sell and profit. The independent variables in a given period are investment and capitalist consumption’’ (Kalecki, 1968b, in 1991, p. 461). 46. The interest of this paper by Kalecki, titled ‘‘Three Systems,’’ extends far beyond the cited remark on lags, as it anticipates many ingredients of a Keynesian model of a closed economy (see Chapple, 1991, 1995a). The theme of the anticipation of Keynes’s effective demand theory is further discussed by Chapple (1993) also with reference to Kalecki’s business cycle theory. 47. It actually contains an infinity of oscillatory components, only one of which, however, is relevant (see note 28). 48. It is worth pointing out that the presence of a construction lag implies that ‘‘business fluctuations are strictly connected with credit inflation.’’ From the fact that capitalists as a whole earn what they spend (on the assumption that workers spend what they get), Kalecki concludes that ‘‘the saved income of capitalists as a whole corresponds to the output of capital goods’’; there is therefore no problem of funding of investment. But saving ¼ investment decisions is an equilibrium condition, for it implies that investment decisions ¼ the output of capital goods at the end of the period. Entrepreneurs, however, can decide to invest more than what they currently save, for their plans depend on expected profitability rather than on previous profits: there is therefore a problem of finance of investment during the construction period. For investment decisions to be larger than current savings it is in fact necessary that the credit system creates the additional purchasing power (Kalecki, 1932b, pp. 147–148; Kalecki, 1933a, in 1990, pp. 80–81; Kalecki, 1935b, pp. 343–344, 1935a, p. 298). 49. This view, as well as the argument referred to above that the construction lag creates false estimations of the capacity of capital equipment to satisfy the actual demand for products, was developed before Kalecki by Aftalion. This author argued that the construction time interferes with the adjustment between demand and supply, for entrepreneurs order their equipment on the basis of the price level while by the time the equipment is delivered and put to work the demand conditions have altered; entrepreneurs only realize this when they try to sell their newly produced goods, meanwhile acting on wrong expectations. Were it not for the gestation lag, prices would suggest the correct policy in the face of demand and supply conditions, and the system would tend to equilibrium (Aftalion, 1913, Vol. 2, pp. 354–392). Apparently Kalecki was not aware of Aftalion’s theory, but promptly acknowledged the similarity when he was told (Osiatyn´ski, 1990, p. 440); however, rather than stressing this point he referred to Aftalion’s acceleration principle, which he criticized for assuming a given and constant degree of utilization of capital (Kalecki, 1933a, in 1990, pp. 104–105, and Kalecki, 1935a, p. 305; see Chapple 1993, pp. 122–123). 50. This assumption reflects Kalecki’s attitude towards expectations (see note 55 for a comment). 51. Kalecki remarked that ‘‘past investment decisions determine the present national income, which of course influences current investment decisions; and these will in their turn influence the national income in the future. This conception is the basis for the type of treatment which Mr. Lundberg has called ‘model sequencies’ ’’ (Kalecki, 1939, p. 127), pointing out that the method was applied in the original version of the same essay (1937a) which appeared about the same time as Lundberg’s.


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52. ‘‘Equilibria’’ are ‘‘positions in which the rate of investment has no tendency to change’’ (Kalecki to Keynes, 4 April 1937, in Kalecki 1990, p. 525, with reference to Kalecki, 1937a). Kalecki described the process as follows: We have shown y that a cumulative process with constant equipment leads to a state in which investment decisions remain in the following t-periods at a constant level. Now we see that this ‘‘equilibrium’’ is disturbed by the change of capital equipment. After the upward cumulative process has come to an end, the rise of equipment capacity at the top of prosperity causes a downward cumulative movement, which in turn is followed by an upward process started with the contraction of capacity at the bottom of the depression. The dynamic process consists thus of a series of upward and downward cumulative processes following each other. In other words, it forms a business cycle. (Kalecki, 1937a, p. 94)

53. The ‘‘many writers’’ refers to Hicks, 1937, Meade, 1937 and Lange, 1938. Kalecki also adds that ‘‘They did not consider the influence of changes in capital equipment’’ (Kalecki, 1939, pp. 139–140). In the version of this chapter printed earlier in the Review of Economic Studies, Kalecki argued that the differences with Keynes in the determination of the rate of investment ‘‘are due to the important roˆle played y by the time-lag between investment decision and investment production, and also to a different treatment of the question of the inducement to invest’’ (Kalecki, 1937a, p. 77). 54. See also his remark: ‘‘It is true that y the system always moves towards the point B, but it may, of course, take several t periods to come close to it. Thus the time of adjustment is considerable (t is more than half a year)’’ (Kalecki, 1939, p. 140). Keynes did not think much of this approach: ‘‘your argument seems to me a version of Achilles and the tortoise, and you are telling me y that even thought Achilles does catch the tortoise up, it will only be after many periods have passed by. y I feel that you are making too much of a discontinuity between your periods’’ (letter to Kalecki, 22 April 1937, in Kalecki 1990, pp. 525–526). 55. The interpretation of time lags as a limitation on the speed of adjustment mirrors the observations on the cobweb theorem as expressed in Kaldor (1934, pp. 132–134). It should be noted that the construction lag cannot be interpreted simply as a kind of ‘‘friction,’’ as in the case of retarded reactions to changes in demand. The existence of the lag depends on the incapacity of the producers of capital goods to immediately supply the machinery requested by other entrepreneurs. If Kalecki’s implicit assumption that these goods are only produced to order is rather drastic, the opposite hypothesis would be equally extreme: the lag reflects the capital goods producers’ strategy in face of the uneliminable uncertainty of the market. Kalecki’s approach to this problem, however, does not depart from his mechanistic attitude reducing uncertainty to some form of calculable behavior, such as for instance when he substitutes realized profit rates for expected profitability in his equation for the determinants of investment decisions. 56. This interpretation fully matches Harrod’s view on the ‘‘time-lag theories of the cycle’’: ‘‘The introduction of a lag into an otherwise smoothly working system may set up an oscillation. Tinbergen (1935) reviews a number of theories of this sort. Kalecki, Lundberg and others have been working on them. I think it is really only doing systematically and with the help of a sine curve what Dennis [Robertson] does

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laboriously with his day by day analysis’’ (Harrod to Keynes, 18 September 1938, in Harrod, 2003, p. 865). 57. This lack of precision is of course pardonable, considering that Kaldor was pioneering in nonlinear modelling without probably having understood in full the implication of the assumption of linearity. For a partial account of the relationship of Kaldor’s model and Kalecki’s, focussing on the instability of equilibrium and the persistence of fluctuations, see Assous (2003). 58. Again, this view was shared by Harrod – and indeed his criticism of the timelags theories of the cycle is based on these epistemic considerations (see, for a full discussion, Besomi, 1998). 59. The point was also stressed (in different terms) by Tinbergen with reference to the first formulation of Kalecki’s model. Questioning the role of fluctuations in the volume of capital, in particular in the reversal of the downward movement, Tinbergen (1935) commented: ‘‘Although profits are still decreasing, it is by the decrease in capital that percentage profits increase and in Kalecki’s argument investment is stimulated again. Is this sufficiently realistic?’’ (p. 269n). 60. Eventually Kalecki downgraded the importance of this factor, as he recognized that changes in the volume of capital in the course of the cycle are small, in percentage terms, and hence the fluctuations in the rate of profits (Kalecki, 1954, p. 104n; for a comment see Steindl, 1981, p. 127). 61. Recently the role of lags in the generation of cycles has been revalued in the literature on dynamics. Kalecki (and Aftalion before him) treated lags as a sort of friction or maladjustment, preventing the system from settling into an equilibrium position. Such an interpretation seems to have been quite widespread at the time, as witnessed by Kaldor’s interpretation of Kalecki (cited in the text) and Harrod’s interpretation of Tinbergen (see note 56 above, and Besomi, 1998, pp. 112–115). Yet, delays can also be interpreted as feedback mechanisms (Asea & Zak, 1999, p. 1157), capable of dampening or amplifying fluctuations depending on the system’s dynamic and the structure of parameters. Accordingly, it has been recently noted that the application of the now standard (but unknown at Kalecki’s time) analytical techniques to Kalecki’s 1933–1935 model may indeed give rise to a sub-critical Hopf bifurcation for certain values of the coefficients and if the time to build is larger than a given threshold; in such a case, the system’s dynamics switches from a stable steady state to a stable limit cycle (Szydlowski, 2002; it should be noted, however, that the mathematics of delay differential equations remains a largely unexplored area, the simplest systems excepted). These developments are applicable only to Kalecki’s first model. They do not affect the argument presented here, as the incongruence remains intact between his interpretation of the cycle as reflecting the contradictions of capitalism and his acceptance of damped fluctuations kept alive by exogenous shocks. 62. ‘‘The process of collapse of the boom is the reverse of that of that starting the upswing from the bottom of depression’’ (Kalecki, 1935c, p. 192; see also Kalecki, 1933a, in 1990, pp. 77–78; Kalecki, 1939, pp. 144–147; Kalecki, 1943a, pp. 69–71 – in this version, the fluctuations in the coefficient determining the non-linearity is also symmetric; Kalecki, 1954, pp. 123–126). 63. The amplitude of fluctuations is not, of course, the only factor to be considered for determining the symmetry, the other being the speed of recovery and of depression.


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The reflection of early theorists of crises on the suddenness and violence of the crisis as opposed to the gentleness and regularity of the recovery do not find a place in Kalecki’s writings, except perhaps by implication in his sparse references to financial panics. 64. Strictly speaking, this argument is invalid: see Section 6 below, where the reasons advocated by Kalecki for rejecting the instability of equilibrium are discussed. 65. Kalecki’s later observations on the crucial reform associated with the world slump (discussed in Section 5) are fully consistent with his early interpretation of the events. 66. A similar argument was advanced in a brief article in the early 1930s, where Kalecki argued that recovery in a sector previously run down is slowed down by the fact that factories and machinery are not actually destroyed in the depression, but left idle and ready to be utilized again without much additional investment in the early stages of the recovery (Kalecki, 1932d, 1990, p. 55). 67. The question of whether Kalecki was inspired by Marx or other Marxist authors at the time of writing his first essays, or whether these are ex-post rationalizations, is not important in the present context. 68. Kalecki’s reflections on the structural stability of ‘‘econometric models’’ do not seem to have been noticed in the literature. The omission is rather striking in Webster’s interpretation of Kalecki’s method as a Ceteris paribus dynamics: having correctly remarked that non-systematic forces and exogenous factors are assumed away by Kalecki ‘‘to remove complicated details,’’ Webster fails to point out that Kalecki was aware that such an elimination may cause a radical change in the system’s behavior, and that he discussed the case. Kalecki’s discussion of the limitations of ‘‘econometric models’’ is thus interpreted as reflecting the distinction between theoretical and applied models (Webster, 1999). 69. Consistently with this awareness, Kalecki knows that his simplifying assumptions, most of which consist in a slight alteration of the form of the structural equation (e.g. by ignoring some terms, or linearizing an equation), must not involve ‘‘a distortion of the dynamics of the system.’’ This is the deepest sense of his celebrated aphorism ‘‘we do make drastic simplifications to concentrate the attention of the reader on the most essential issues without, however, throwing out the baby along with the bath water’’ (Kalecki, 1968a, in 1971, pp. 166–167; the term ‘‘distortion’’ is used three times in this connection in just over a page of text). Such considerations, however, only emerged in the 1960s, while earlier Kalecki was mainly concerned with the realism of his assumptions. 70. After having defined the (structural) instability of the system in terms of the large effect of a small perturbation in the parameters, Kalecki cites as an example the (dynamic) instability of the (Harrodian) growth rate, with reference to his own argument that the growth equation gives two results, the highest of which is unstable (Kalecki, 1964a, pp. 234–235, referring to Kalecki, 1962). 71. The presence of regime-switching in Kalecki’s analysis, with reference to his political business cycle article (Kalecki, 1943b) has already been noted by Ferri and Greenberg (1992, pp. 120–121). 72. Kalecki’s (1968a, in 1971) claim that ‘‘the long-run trend is but a slowly changing component of a chain of short-period situations’’ (p. 165) should be seen in the context of his view of structurally stable short-period positions mechanistically chained together except in the rare occasions when a certain threshold is reached and the system becomes structurally unstable and undergoes a regime change.

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73. Kowalik recollected that this article originated from the authors’ discussions concerning ‘‘Econometric Model and Historical Materialism’’ (Kowalik 1991, p. 614). 74. The conclusion drawn by Baxley and Moorhouse (1991, p. 100), that Kalecki’s first model of the business cycle ‘‘has no roots in the history of the economy’’ and that therefore ‘‘the cycles generated by the model are, in a real sense, arbitrary and disembodied’’ also applies to Kalecki’s later writings. 75. An indirect proof is the similarity of the dictum implied in Kalecki’s formal models and the conclusions reached by equilibrium business cycle theories, if instead of ‘‘random’’ shocks one reads ‘‘undesirable government interference.’’ 76. The choice of an intuitive term such as ‘‘self-adjusting’’ partly reflects the fact that this proposal was formulated in a radio talk rather than in an academic publication. But there is more in this choice: Keynes believed that orthodox theory had constructed in a century a strong citadel of ‘‘organized economic thinking and doctrine,’’ while the heretics had only ‘‘survived as isolated groups of cranks’’ who could only argue that facts do not conform to the theory. He maintained that to defeat the citadel it had to be assailed from inside, and at that point ‘‘no successful attack [had] been made’’ (Keynes, 1934, pp. 488–489), but he was himself not yet ready for the final assault. 77. For a general discussion of the non-neutrality of the formalism used to express a theoretical conception see Chick and Dow (2001). 78. See note 61 for a proviso. It should be noticed that, on grounds of Kalecki’s own observations on simplifying assumptions (see note 69), one should be careful when introducing linear approximations, as these do indeed alter the behavior of the system. 79. Steindl also resorted to an analogy with a pendulum with friction: if left on its own, the movement dies out. If, however, the peg on which the pendulum is suspended is subject to random movements, these determine an oscillatory motion; and if the random movements have a preferred direction, they determine a trend as well as fluctuations (Steindl, 1989, p. 311). 80. Shortly after the publication of Hicks’s (1950) book Kalecki criticized Joan Robinson for not having considered that the boom may not last indefinitely because the parameters of the investment function were such as to make the process convergent. He explained: ‘‘My idea y serves merely to show why every boom has to reach a stage where the process is convergent, so that there should be no need for any specific assumption on the parameters of the investment function’’ (Kalecki to Robinson, 26 July 1951, in Kalecki 1991, p. 540). This is analogous to Kalecki’s notion that ‘‘conditional equilibria’’ are stable in 1937–1939 (see the passage cited in note 54 above): there must be a cumulative process responsible for movement, but it should be convergent in order not to overshoot the mark, which would require us either assuming for the parameters, the values giving rise exactly to a cycle of constant amplitude, or to rely on a ceiling to explain the turning point. 81. The same argument applies to Kalecki’s reasoning in favor of a symmetric representation of the cycle reported in Section 4.3 above. 82. On the origin and context of Harrod’s approach to instability see Besomi (1999, Chapters 1 and 7; 2002). 83. This aspect does not seem to have been appreciated in the literature: Lange, for instance, argued that ‘‘in the absence of empirical evidence to the contrary, Mr. Kalecki’s theory seems preferable to that of Mr. Kaldor because it does not need


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to assume inherently unstable equilibria’’ (Lange, 1941, p. 193). A relevant exception is Goodwin’s observation that the crucial distinction between linear and nonlinear dynamics, ‘‘which eluded Kalecki, was arrived at from sheer logic by Kaldor, in total innocence of the awesome difficulties of non-linear dynamics’’ (Goodwin, 1989, p. 250). 84. Harrod, moreover, also failed to produce a consistent model: in his 1936 book he only gave an intuitive idea of the kind of relationships involved, while in the subsequent models an assumption was missing regarding the connection between different states of the system, so that the analysis was confined to a single instant. 85. Kalecki’s use of mathematics, as against his awareness of the limits of this language for the use to which he put it, seems to have struck a number of commentators, who could not fail to ‘‘perceive the presence of life’’ and ‘‘the moral purpose’’ behind it (Lipinski, 1977, p. 70; Worswick, 1977, p. 28, respectively).

ACKNOWLEDGMENTS A preliminary version of this paper benefited from comments of Victoria Chick, Nicolo` De Vecchi, Andrzej Dudzinsky, Geoff Harcourt, John King, Claudio Sardoni, Jan Toporowsky, the participants in the Louvain-La-Neuve conference on the History of Macroeconomics (January 2005) and two anonymous referees of this journal, to whom I am most grateful without involving them in any responsibility for remaining errors or omissions. I am especially indebted to Giorgio Colacchio, with whom I had lengthy exchanges regarding, in particular, the properties of delay differential equations.

REFERENCES Aftalion, A. (1913). Les crises pe´riodiques de surproduction. Tome I: Les variations pe´riodiques des prix et des revenus Les theóries dominantes. Tome II. Les mouvements pe´riodiques de la production. Essai d’une theórie. Paris: Marcel Rivie`re. Asea, P. K., & Zak, P. J. (1999). Time-to-build and cycles. Journal of Economic Dynamics and Control, 23, 1155–1175. Assous, M. (2003). Kalecki’s contribution to the emergence of endogenous cycle theories: An interpretation of his 1939 essays. History of Economic Ideas, 11.1, 113–128. Baxley, J. V., & Moorhouse, J. C. (1991). The mathematics of Kalecki’s early macrodynamics: A research note. History of Economics Review, 16(Summer), 97–101. Besomi, D. (1988). Michal Kalecki: la dinamica economica tra materialismo e meccanicismo. Economia Politica, 5(3), 343–368. Besomi, D. (1998). Harrod and the ‘‘time-lag theories of the cycle’’. In: G. Rampa, L. Stella & A. P. Thirlwall (Eds), Economic dynamics, trade and growth: Essays on Harrodian themes (pp. 107–148). London: Macmillan. Besomi, D. (1999). The making of Harrod’s dynamics. London: Macmillan.

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Besomi, D. (2002). Lo¨we’s and Hayek’s influence on Harrod’s trade cycle theory. European Journal of the History of Economic Thought, 9(1), 42–56. Besomi, D. (2006). ‘‘Marxism gone mad’’: Tugan-Baranovsky on Crises, their possibility and periodicity. Review of Political Economy, 18(2), 1–25. Chapple, S. (1991). Did Kalecki get there first? The race for the general theory. History of Political Economy, 23, 243–261. Chapple, S. (1993). Kalecki’s theory of the business cycle and the general theory. History of Economics Review, 20, 120–139. Chapple, S. (1995a). The Kaleckian origin of the Keynesian model. Oxford Economic Papers, 47(3), 525–537. Chapple, S. (1995b). Effective demand in Kalecki’s early macroeconomics. History of Economics Review, 24(Summer), 43–54. Chick, V., & Dow, S. C. (2001). Formalism, logic and reality: A Keynesian analysis. Cambridge Journal of Economics, 25, 705–721. D’antonio, M. (1978). Kalecki e il marxismo. Studi Storici, 19(January–March), 17–43. Feiwel, G. R. (1975). The intellectual capital of Michal Kalecki. A study in economic theory and policy. Knoxville: University of Tennessee Press. Ferri, P., & Greenberg, E. (1992). Wages, regime switching and cycles. New York: Springer. Frisch, R. (1933). Propagation problems and impulse problems in dynamic economics. In: Economic essays in honour of Gustav Cassel (pp. 171–205). London: Allen & Unwin. Frisch, R., & Holme, H. (1935). The characteristic solutions of a mixed difference and differential equation occurring in economic dynamics. Econometrica, 3, 225–239. Gabisch, G., & Lorenz, H. W. (1989). Business cycle theory. A survey of methods and concepts (2nd ed.). Berlin: Springer. Gomulka, S., Ostaszewski, A., & Davies, R. O. (1990). The innovation rate and Kalecki’s theory of trend, unemployment and the business cycle. Economica, n.s. 57(November), 525–540. Goodwin, R. M. (1956). Review of Economic Change. Selected Essays in Business Cycles, National Income, and Economic Growth by S. Kuznets; and Theory of Economic Dynamics by M. Kalecki. Economic Journal, 66(September), 507–510. Goodwin, R. M. (1989). Kalecki’s economic dynamics: A personal view. In: M. Sebastiani (Ed.), Kalecki’s relevance today (pp. 249–251). New York: St Martin’s Press. Harrod, R. F. (1934). Doctrines of imperfect competition. Quarterly Journal of Economics, 48(May), 442–470. Harrod, R. F. (1936). The trade cycle. An essay. Oxford, UK: Clarendon Press. Harrod, R. F. (1939). An essay in dynamic theory. Economic Journal, 49(March), 14–33. Harrod, R. F. (2003). The Collected Interwar Papers and Correspondence of Roy Harrod (3 Vols). D. Besomi (Ed.). Cheltenham: Elgar. Hicks, J. R. (1937). Mr. Keynes and the classics. Econometrica, 5(April), 147–159. Hicks, J. R. (1950). A contribution to the theory of the trade cycle. Oxford, UK: Clarendon Press. James, R. W., & Beltz, M. H. (1938). The influence of distributed lags on Kalecki’s theory of the trade cycle. Econometrica, 6(2), 159–162. Kaldor, N. (1934). A classificatory note on the determinateness of equilibrium. Review of Economic Studies, 1(2), 121–136. Kaldor, N. (1940). A model of the trade cycle. Economic Journal, 50(March), 78–92. Kalecki, M. (1929). On activating the balance of trade. Przemsyl I Handel 10/30 (in Polish). English translation in Kalecki 1990.


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Kalecki, M. (1932a). Reduction of wages during crises. Przeglad Socjalistyczny 2/2 (in Polish). English translation in Kalecki 1990. Kalecki, M. (1932b). The business cycle and inflation. Polska Gospodarcza (in Polish). English translation in Kalecki 1990, (32). Kalecki, M. (1932c). Is a ‘‘capitalist’’ overcoming of the crisis possible? Przeglad Socjalistyczny 2/10 (in Polish). English translation in Kalecki 1990. Kalecki, M. (1932d). ‘‘New’’ industries and the overcoming of a crisis. Polska Gospodarcza (in Polish). English translation in Kalecki 1990, (31). Kalecki, M. (1933a). Proba teorii koniunktury. Warsaw: IBKGG English translation ‘‘Essays on the business cycle theory’’ in Kalecki 1990. Kalecki, M. (1933b). ‘‘Critical remarks on one of the mathematical theories of the business cycle’’ by Aleksander Rajchman: A Rejoinder. Kwartalnik Statystyczny 10(4) (in Polish). English translation in Kalecki 1990. Kalecki, M. (1933c). Stimulating the world business upswing. Polska Gospodarcza 14(37) (in Polish). English translation in Kalecki 1990. Kalecki, M. (1933d). On foreign trade and domestic exports. Ekonomista 3 (in Polish). English translation in Kalecki 1990. Kalecki, M. (1934a). The business cycle and welfare. Polska Gospodarcza 15(50) (in Polish). English translation in Kalecki 1990. Kalecki, M. (1934b). Three systems. Ekonomista 3 (in Polish). English translation in Kalecki 1990. Kalecki, M. (1935a). Essai d’une theórie du mouvement cyclique des affairs. Revue d’Ećonomie Politique, 2, 285–305. Kalecki, M. (1935b). A macrodynamic theory of the business cycle. Econometrica, 3(July), 327–344. Kalecki, M. (1935c). The essence of the business upswing. Polska Gospodarcza 16(43) (in Polish). English translation in Kalecki 1990. Kalecki, M. (1935d). The business upswing and the balance of payments. Polska Gospodarcza 16(45) (in Polish). English translation in Kalecki 1990. Kalecki, M. (1935e). The business cycle and armaments. Polska Gospodarcza 16(22) (in Polish). English translation in Kalecki 1990. Kalecki, M. (1936). Comments on the macrodynamic theory of business cycles. Econometrica, 4, 356–360. Kalecki, M. (1937a). A theory of the business cycle. Review of Economic Studies, 4(2), 77–97. Kalecki, M. (1937b). A theory of commodity, income and capital taxation. Economic Journal, XLVII(September), 444–450. Kalecki, M. (1937c). The principle of increasing risk. Economica, n. s. 4(November), 440–447. Kalecki, M. (1939). Essays in the theory of economic fluctuations. London: Allen & Unwin. Kalecki, M. (1943a). Studies in economic dynamics. London, UK: Allen & Unwin. Kalecki, M. (1943b). Political aspects of full employment. Political Quarterly, 4, 322–331. Kalecki, M., Burchardt, F. A., Worswick, G. D. N., Schumacher, E. F., Balogh, T., & Mandelbaum, K. (1944). Three ways to full employment. In: University of Oxford Institute of Economics and Statistics, The economics of full employment (pp. 39–58). Oxford, UK: Blackwell Kalecki,, M. (1945). Full employment by stimulating private investment? Oxford Economic Papers, 7(March), 83–92. Kalecki, M. (1954). Theory of economic dynamics. London: Allen & Unwin.

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Kalecki, M. (1956). The economic situation in the United States as compared with the Pre-War period. Ekonomista 4, 3–13 (in Polish). English translation in: The Last Phase in the Transformation of Capitalism. New York: Monthly Review Press, 1972, pp. 85–97. Kalecki, M. (1962). Observations on the theory of growth. Economic Journal, 72(March), 134–153. Kalecki, M. (1964a). Econometric model and historical materialism. In: On political economy and econometrics. Essays in honour of Oskar Lange (pp. 233–238). Warsaw: PWN. Kalecki, M. (1964b). Pourquoi l’ećonomie n’est-t-elle pas une science exacte? Polish Perspectives 9, 73–76. English translation ‘‘Why Economics is Not an Exact Science?’’ in Kalecki 1997. Kalecki, M. (1965). On Paul Baran’s political economy of growth. Monthly Review (November), 58–60. Kalecki, M. (1967). The problem of effective demand with Tugan-Baranovski and Rosa Luxemburg. Ekonomista 2 (in Polish). English translation in Kalecki 1971. Kalecki, M. (1968a). Trend and business cycles reconsidered. Economic Journal, 79(June) Reprinted in Kalecki 1971. Kalecki, M. (1968b). The Marxian equations of reproduction and modern economics. Social Information, 6, 73–79 Reprinted in Kalecki 1991. Kalecki, M. (1970). Theories of growth in different social systems. Scientia (May–June): 311–316. Kalecki, M. (1971). Selected essays on the dynamics of the capitalist economy, 1933–1970. Cambridge: Cambridge University Press. Kalecki, M. (1990). Collected Works of Michal Kalecki. Volume 1: Capitalism: Business Cycles and Full Employment. J. Osiatyn´ski (Ed.). Oxford: Oxford University Press. Kalecki, M. (1991). Collected Works of Michal Kalecki. Volume 2: Capitalism: Economic Dynamics. J. Osiatyn´ski (Ed.). Oxford: Oxford University Press. Kalecki, M. (1997). Collected Works of Michal Kalecki. Volume 7: Studies in Applied Economics 1940-67; Miscellanea. J. Osiatyn´ski (Ed.). Oxford: Oxford University Press. Kalecki, M. & Kowalik, T. (1971). Osservazioni sulla ‘‘riforma cruciale.’’ Politica ed Economia (June), pp. 189–196. English translation in Kalecki 1991. Keynes, J. M. (1934). Poverty in plenty: Is the economic system self-adjusting. The Listener, 21 November 1934. Reprinted in Keynes 1973a: 485–492. Keynes, J. M. (1939). Preface to the French edition of the general theory of employment, interest and money. In: The collected writings of John Maynard Keynes, Vol. VII. London: Macmillan. Keynes, J. M. (1973a). The General Theory and After, Part I: Preparation. Vol. XIII. The Collected Writings of John Maynard Keynes. London: Macmillan. Keynes, J. M. (1973b). The General Theory and After, Part II: Defence and Development. Vol. XIV. The Collected Writings of John Maynard Keynes. London: Macmillan. Kowalik, T. (1991). Rejoinder to Pesenti in Kalecki 1991 (pp. 613–615). Lange, O. (1938). The rate of interest and the optimum propensity to consume. Economica, 5(February). Lange, O. (1941). Review of business cycles: A theoretical, historical and statistical analysis of the capitalist process, by J. A. Schumpeter. Review of Economic Statistics, 23(4), 190–193. Lange, O. (1970a). Introduction to economic cybernetics. Oxford, UK: Pergamon Press. Lange, O. (1970b). Michal Kalecki’s model of the business cycle. In: Papers in Economics and Sociology (pp. 343–362). Oxford: Oxford University Press.


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Lines, M. (1990a). Modelli di equilibrio e cicli economici. Le ipotesi di Frisch e Slutsky. Ricerche Economiche, 44.1(January–March), 29–50. Lines, M. (1990b). Slutzky and Lucas: Random causes of the business cycle. Structural Change and Economic Dynamics, 1(2), 359–370. Lipinski, E. (1977). Michal Kalecki. Oxford Bulletin of Economics and Statistics, 39(1, February Special issue: Kalecki Memorial Lectures), 69–77. Marx, K. ([1898] 1928). Value, price and profit. London: Allen & Unwin. Marx, K. ([1939] 1973). Grundrisse: Foundations of the critique of political economy. Harmondsworth: Penguin. Marx, K. (1974). Capital: A critique of political economy. London: Lawrence and Wishart. Meade, J. E. (1937). A simplified model of Mr. Keynes’s system. Review of Economic Studies, 4.2(February), 98–107. Morin, E. (1976). Pour une crisologie. Communications, 25, 149–163. Osiatyn´ski, J. (1990). Introduction and editorial notes to Kalecki 1990. Osiatyn´ski, J. (1991). Editorial notes to Kalecki 1991. Pugno, M. (1998). Harrod’s economic dynamics as a persistent and regime-changing process. In: G. Rampa, L. Stella & A. Thirlwall (Eds), Economic dynamics, trade and growth: Essays on Harrodian themes (pp. 152–178). London: Macmillan. Robinson, J. (1977). Michal Kalecki on the economics of capitalism. Oxford Bulletin of Economics and Statistics, 39(1, February Special issue: Kalecki Memorial Lectures), 7–17. Sardoni, C. (1995). Interpretations of Kalecki. In: G. Harcourt, A. Roncaglia & J. C. R. Rowley (Eds), Income and employment in theory and practice: Essays in memory of A. Asimakopulos (pp. 185–204). London: Macmillan. Sawyer, M. (1985). The economics of Michal Kalecki. London: Macmillan. Sawyer, M. (1996). Kalecki on the trade cycle and economic growth. In: J. E. King (Ed.), An alternative macroeconomic theory: The Kaleckian model and post-Keynesian economics (pp. 93–114). Boston: Kluwer. Scitovsky, T. (1946). Review of studies in economic dynamics. Economic Journal, 56(September), 450–452. Sebastiani, M. (1994). Kalecki and unemployment equilibrium. London, UK: Macmillan. Shackle, G. L. S. (1944). Review of studies in economic dynamics. Economica, n.s. 11(November), 217–218. Slutsky, E. (1927). The summation of random causes as the source of cyclic processes. In: Problems of Economic Conditions, Vol. 3, No. 1. Moscow: Conjuncture Institute (in Russian). Revised English version in Econometrica 5 (1937), 105–146. Sordi, S. (1989). Some notes on the second version of Kalecki’s business-cycle theory. In: M. Sebastiani (Ed.), Kalecki’s relevance today (pp. 252–274). New York: St Martin’s Press. Steindl, J. (1952). Maturity and stagnation in American capitalism. New York: Monthly Review Press. Steindl, J. (1981). Some comments on the three versions of Kalecki’s theory of the trade cycle. In: N. Assorodobras-Kula, C. Bobrowski, H. Hagemejer, W. Kula & J. Los (Eds), Studies in economic theory and practice: Essays in honor of Edward Lipinski (pp. 125–133). Amsterdam: North Holland. Steindl, J. (1989). Reflections on Kalecki’s dynamics. In: M. Sebastiani (Ed.), Kalecki’s relevance today (pp. 309–313). New York: St. Martin’s Press.

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Szydlowski, M. (2002). Time-to-build in dynamics of economic models: I. Kalecki’s model. Chaos, Solitons and Fractals, 14(5), 697–703. Szydlowski, M., & Krawiec, A. (2000). The Hopf bifurcation in the Kaldor–Kalecki model. In: S. Holli (Ed.), Issues in computational economics and finance (pp. 391–396). Amsterdam: Elsevier. Tichy, G. (1994). Steindl on instability and stabilization policy. Review of Political Economy, 6(4), 441–449. Tinbergen, J. (1935). Annual survey: Suggestions on quantitative business cycle theory. Econometrica, 3(3), 241–308. Webster, E. (1999). Kalecki’s ceteris paribus dynamics. Review of Political Economy, 11(1), 19–32. Worswick, G. D. N. (1977). Kalecki at Oxford, 1940–1944. Oxford Bulletin of Economics and Statistics, 39(1, February; Special issue: Kalecki Memorial Lectures), 19–29. Zenezini, M. (1978). La teoria economica di Michal Kalecki. Critica Marxista, 16.4, 133–162.

CONFERENCE REPORT


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NOTES ON THE FIFTH SUMMER INSTITUTE FOR THE PRESERVATION OF THE STUDY OF THE HISTORY OF ECONOMICS Warren J. Samuels I was invited by Sandra Peart and David Levy to take part in the Summer Institute held from 26 to 30 July 2004 at George Mason University. After some discussion I agreed to give two lectures, on my project on the use of the concept of the invisible hand and on the theory of economic policy of Lionel Robbins and Friedrich Hayek, and to participate in a public ‘‘conversation’’ with James M. Buchanan before the same group. Subsequently, I accepted Buchanan’s invitation to have a videotaped private interview by him. The purpose of the Institute is to reverse the decline in professional interest in the history of economics by offering a forum and learning experience by students at George Mason University and elsewhere. The final written program for the Institute listed the following authors and topics: – James Buchanan: Saving the Ideas – Sandra Peart and David Levy: Edgeworth, Darwin & Capacity for Happiness – Neil Niman: Economics & Evolutionary Science – Philip Mirowski: It’s the Markets that Evolve, Not Cognition A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 51–57 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24020-3

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– – – – – – – – – – – – – – – – – –

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Tim Leonard: Loss of Memory of Eugenics Philip Mirowski: 20th Century Philosophers (Dewey) Claudia Sunna: Keynes on Population & Economic Development Roy Weintraub: Autobiography & History of Economics Ali Khan: Huxley and Keynes on Population and Development Sam Fleischacker: Sympathy & Adam Smith Warren Samuels: Invisible Hand Sandra Peart and David Levy: Imagery & Sympathy Bridget Butkevich: Adam Smith in the Lab: The Proverbs Project Tucker Hughes: Hayek & Dewey James Buchanan and Warren Samuels: A Conversation Sandra Peart and David Levy: Theory of Economic Policy in Classical British Economy Maria Pia Paganelli: Buchanan & Musgrave on Knaves Warren Samuels: Robbins & Hayek Pete Boettke: Hayek & Proverbs Andrew Farrant: Road to Serfdom, a Majority Report Ali Khan: Reflections on Hayek Kevin McCabe: Working for Self or Working for Others

Not all the listed papers were presented. Several of the papers had been given at the 2004 History of Political Economy Conference at Duke University in April on the economic role of government in the history of political economy. At a point in the planning stage, after agreeing to a conversation in public with Buchanan on the general topic of politics as exchange, I indicated to Levy that ‘‘My only concern is that such is not ‘history of economic thought (HET)’’’ and the program was supposed to be HET. Peart’s reply was that ‘‘it’s history of thought in the making.’’ As I recall, she made that point in comments at the start of the program. The notes that follow are more casual than is usually the case with me, for three reasons: the casual nature of many of the presentations, the fact that I had read and heard several papers at the 2004 History of Political Economy conference, and having no expectation of possibly publishing a report. I publish the notes because I think they will be of some interest. I include very little of my own participation, largely because the Buchanan–Samuels ‘‘conversation’’ and my lecture on the invisible hand will be included in a volume to be published. On the other hand, some of the comments are mine and not the particular author’s. (1) Buchanan’s talk, on ‘‘Saving the Ideas,’’ dealt with saving the ideas of classical liberalism. He recounted Warren Nutter’s objective of reestablishing

Notes on the Fifth Summer Institute

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Adam Smith’s approach to economics in the context of the University of Chicago economic ideology being a function of the Cold War; and that when at the University of Virginia, Nutter promoted the Thomas Jefferson Center as a structure for the study of political economy and political philosophy. Nutter, in effect, was endeavoring to ‘‘save the books.’’ Buchanan mentioned Hayek’s Road to Serfdom and the work of the Mont Pelerin Society in the effort to save the principles and precepts of classical liberalism. He also mentioned ‘‘Economic Journal Watch,’’ a project in which he and others are involved that provides critique of the producer (author) and content of economics journal articles as to how they provide information, knowledge, and interpretation of the sense of the whole systemic structure of the market economy. Their aim is interpretive, not technical, given that knowledge is an imposed order. I am skeptical of such conservative thought policing. Mentioning Max Weber on ideal types, Robert Sugden on credible models, and Friedrich Nietzsche on looking on the same world through different windows, i.e., all three emphasizing plural types, models, and windows, Buchanan emphasized that the multiplicity of perspectives implied and rendered important one’s choice of perspective. This was a theme to which he returned later in the conference. His point was that he deliberately chose a particular moral window, whereas I opted for one that was as positivistically objective – non-normative – as possible, a choice he considered both impossible and subversive. Contrasting natural and social science, Buchanan argued that there was no behavioral characteristic to the natural but there was to the social, namely trading behavior. Although I did not mention it, I recorded in my notes my recollection of the picture of cowboys making a payment to Indians in the frontispiece of one of Al Schmid’s books. He used the picture to say that from the picture alone one could not tell if the payment were due to property rights, ergo a fee, or extortion, i.e., a matter of institutions. Buchanan, I believe it was, mentioned the feedback of ideal types regarding the real world through how people act. Buchanan also emphasized how one chose one’s perspective, or window. recorded him saying that ‘‘dismissal of normative status is absurd.’’ The purpose is to improve the world, to make it better. My answer was/is that knowing the world objectively, or as objectively as possible, is necessary in order to make it better, in contrast to adopting one moral perspective, or window, with its opportunity cost; and that one could form a matrix of all such normative perspectives in order to know more fully the identity of the moral issues on which positions were being taken. Jim’s reply was that one should look at laws as they might be, and that looking via

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one perspective is the only moral approach. My response was that each perspective was a contribution to the process of working things out. (I thought then and I think now that in politics and in religion the insistence on only one perspective is a formula likely to lead to absolutism, monism, and totalitarianism. In my mind I envision Hayek’s complexity theory, pattern models, composite choice, and even his insistence on the rule of law, as recognition of both the fact and the desire for plural perspectives.) In the formal discussion period, I recorded a number of points: – Save which books? – What about Coase et alia and New Institutional Economics (apropos a different window). – Someone (possibly Buchanan) saying that economics can involve a religious conversion – as it did in his case, in a course with Frank Knight. – The importance of constitutional choice to constrain further choice – a device of the old Establishment to check the working class having the right to vote. – Having a normative political economy with a moral element is the equivalent of Adam Smith being professor of moral philosophy – a point made, I believe, by Buchanan with which I disagree. – Taking man as he should be rather than as he is, is socialist and against classical liberalism – Buchanan, conflicting with what he is recorded above as having said about laws. He acknowledged a tension here, possibly in relation to Knight’s point that the chief product of the economy is man. – Buchanan’s view of me, agreeing with the matter of tension, is that I, like him, may have taken one perspective or view too far. – (On some related matters, see the ‘‘Conversation’’ between Buchanan and me.) (2) The first Levy and Peart presentation dealt with the question of going from cardinal to ordinal analysis in regard to Darwin and the question of differential capacity for happiness. Among the points that seemed worth jotting down in my notes were: – The transition from Smithian equality to Edgeworthian hierarchy in economics, via Darwin, regarding perfection and happiness. – Education implies a deeper and wider perspective. – Emphasis on commodities narrows interests. – Lord Chatterly, in Lady Chatterly’s Lover, queries whether, if the people in a Manchester-like city had the advantages they enjoyed, would they have grown up to be like them.


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– A piece on scope and method in the Economic Journal in the 1930s discussed whether tax policy should treat the nouveau riche the same as the old rich if the former did not have the same capacity to derive utility from income. – Is it racist to say that blacks are better athletes than whites? Integration was advanced due to the contribution of black athletes. – Apropos of large families of the poor, is it a function of insurance for parents’ old age, hence okay, or is it a function of the inability of the poor to regulate births, hence not okay? Is all this a function of rationality being due to institutional structure? (3) Niman’s paper argued that the modern synthesis in economics is based on biology, hence is an evolutionary economics. He noted that Marshall required biology for his second volume but the biology was not available. The model is essentially Darwinian: variation through mutation, then selection. (4) Mirowski’s first paper argued that markets, not cognition, evolve. He identified three phases of the relation of Neoclassical economics to science: (1) Pure mechanical analogy – the analysis found in More Heat Than Light. There was no concern with the individual, only with generic equilibrium. (2) The agent as informational process – Machine Dreams. (3) Market structures as algorithm. Biology, though with no single line of evolution, plus theories of computation. He further argued that Neoclassicism was never about money. Markets are synonym for exchange. Nothing regarding alternative structure and operation of particular markets; such is about the nature of the mind. Arrow and Hahn argue for taking markets for granted: less on individual as informational process, more on market as algorithm. Markets work, a function of algorithm, not agent intelligence. Computer design of markets. Neoclassicism not about individuals; i.e., no differences among individuals. (5) Tim Leonard presented the same paper he gave at the HOPE conference, on the loss of memory of eugenics in the discipline. Belief in social control meant the priority of the state over the individual; this was fact and ubiquitous. Henry Carter Adams and John R. Commons objected: state action reflected the necessity of collective decision-making in such respects as determining relative rights and giving effect to social purpose and interest. Even Classical political economy included social control, in the form of molding the individual to the needs of the group, in opposition to that of the ruling class. Emphasis on activities is the same as political psychological motivation.

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(6) Mirowski’s second paper was on ‘‘Scientific Dimensions of Social Knowledge.’’ It focused on conflicts within Philosophy of Science, especially about taking ‘‘society’’ as unproblematic, in contrast to the grand theory of social thinkers such as Comte, Mill, Peirce, Jevons and others. Argues that (a) the determination of ‘‘science’’ is interactively decided with the determination of ‘‘society.’’ (b) Structuring science and society is heavily influenced by who pays for science. (c) Dominant social theory sets the parameters for the kinds of answers philosophy can give. (d) ‘‘Left’’–’’right’’ politics can be deceptive. (e) Problem of relation of science to democracy. Focus on Dewey’s solution and its corruption starting in 1930s and exacerbated during the Cold War, e.g., operations research, and by developments in Philosophy of Science centering on Hans Reichenbach and in economics centering on RAND; role of Philip Kitcher. (7) Sunna’s paper was on Keynes on population and economic development. No notes taken. (8) Weintraub’s ‘‘Autobiographical Memory and the Historiography of Economics’’ argues that economists are too taken with autobiographical materials. Such materials are not unproblematic; they were written to some purpose, which are not obvious, and they reflect a number of issues which they help illuminate but which shape and reflectively are shaped by such accounts. The autobiographical words do not speak for themselves; more is going on than is obvious. People have decreasing absorptive capacity; the acquisition of human capital levels off. Being self-perceptive implies continuity with, and therefore continuity of, early self-perception. (9) Kyu Sang Lee’s presentation on rationality and Vernon Smith struck me as arguing that Vernon Smith has a governing metaphor, namely, conservation field. (10) Sam Fleischacker, speaking on Adam Smith and sympathy, made several points: Sympathy per se is not a matter of moral judgment. Sympathy functions within the system of moral judgment; it is a step on the way to moral judgment. To approve is to sympathize with. The sympathy of the Impartial Spectator. Shared feelings. To sympathize with is to (a) agree with or (b) understand feelings but neither agree nor disagree. Moral approval is agreement in my role as Impartial Spectator. Both are based on private language. (11) Next came my presentation on the invisible hand. (12) Peart and Levy’s second paper, ‘‘Imagery and Sympathy’’ argued that agents make choices, doing so through images, and are transformed by doing so; therefore they merit sympathy. They discussed consumer sovereignty as coupled with the stability of personal identity and endogenous


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preferences, and so on. The key dichotomy is that between institutions and human nature, whether or not the latter is malleable. They cite John Ruskin to illustrate the chemical analogy. Although political economy assumes that human nature is given, they favor the study of making and remaking man. (13) Britget Butkevich presented a wide-ranging account of the work of Vernon Smith, which amounts to a laboratory treatment of Adam Smith. She emphasized the promise of the growing field of neuroeconomics. (14) Hughes’s paper on Dewey and Hayek, in my view, accurately pointed to Hayek’s deepest concluding analysis. That analysis emphasizes interaction and aggregation, selective perception, complexity, pattern modeling, composite choice, and the process of working things out. (15) Next was the conversation between Buchanan and me. (16) I presented my lecture on Robbins and Hayek. (17) Peter Boettke next discussed Hayek and Proverbs, juxtaposing science and wisdom. I did not take further notes. (18) Farrant gave his paper on the Road to Serfdom. I did not take notes. (19) Ali Khan next presented his reflections on Hayek. I jotted down the following notes: The conflict over whether security can be absolute or only limited. That people are in submission to impersonal forces. That competition implies coercion, non-pejoratively defined. The development of language is not solely a non-deliberative affair; people who consider themselves its guardians also work on the development of language. That income should be or is a function of the market, and not a privileging hierarchic structure.


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Dimand and Nyland’s THE STATUS OF WOMEN IN CLASSICAL ECONOMIC THOUGHT ‘‘PRAY CLEAR THE WAY, THERE, FOR THESE – AH – PERSONS’’: THE STATUS OF WOMEN IN CLASSICAL POLITICAL ECONOMY Sandra J. Peart A review essay on Robert Dimand and Chris Nyland, eds., The Status of Women in Classical Economic Thought. Cheltenham, UK: Edward Elgar, 2003. ix+315 pp. ISBN 18440644788. Focusing on the relatively unstudied status of women in classical political economy, this important collection of essays will inform, delight, and even surprise the reader. The essays provide testimony both to the intellectual richness of the period, as well as the extraordinary social and political events of the time. The most striking unifying theme of the work is how social and political contexts served to generate the economic ideas of and about women. Chris Nyland begins the collection by situating the thought of Poulain de la Barre within the rationalist reaction to scholasticism. De la Barre’s analysis, Nyland argues, challenged the assertion of biological differences A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 61–69 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24002-1

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between men and women, and suggested that the subordinate position of women resulted not from natural difference, but from socially constructed ‘‘prejudice’’ (p. 21). John Locke’s analysis of gender relations is then situated in the broader context of a liberal critique of regal absolutism (p. 40). Biology also enters into the analysis: Locke’s justification for the subordination of women to men, Nyland argues, followed from a claim that males are innately stronger than women (p. 44). Nyland links Locke’s thought on the role of women in marriage to his theory of property. Partners in marriage possess natural freedom equally (p. 52), but they bring different and unequal productive strengths to the marriage. Women were lesser partners in marriage, Locke holds, because men enjoyed a natural advantage when bargaining over the provisions of the marriage partnership because women were physically weaker (p. 55). Nyland emphasizes the significance of biology for Montesquieu as well, for whom biology and the environment shape gender relations (p. 63). While men and women are said to share an equal right to liberty, life, and ownership (p. 64), women naturally depend on their husbands because of their weaker physical and, Montesquieu adds, intellectual status (p. 65). Nyland rightly stresses that, for Montesquieu, these inherent physical differences were culturally modified. In the following chapter, Nyland examines the contributions to this sort of reasoning by Adam Smith. Again the social and economic context and biological difference figure prominently, but Nyland recognizes that the relative importance of biology vs. technology altered with Smith, who developed the idea that technological change modifies the status of women by reducing the significance of physiological differences between the sexes (p. 86). Nyland recounts a ‘‘stage theory’’ of economic development in Smith: women are disadvantaged early on, but as societies progress through stages, the innate differences between sexes tend to become less important. So, Smith develops a systematic explanation for the role of women over time in society, one which emphasizes the role of economic arrangements – the extent of trade – and technology in determining what that role will be (pp. 100–101). By integrating economic analysis with biological observations, Smith was able to proceed farther, Nyland argues, than Montesquieu’s climate explanation. The ongoing significance of Smith’s thought is evident in Robert Dimand’s essay on the Quaker philanthropist, Priscilla Wakefield. Women were, she held, obligated to be useful members of society (engaged in Smithian productive labor) and to make proper use of their capacities (p. 198). On the grounds of enabling women to realize their capacities to discharge their responsibilities to society, Wakefield advocated

‘‘Pray Clear the Way, There, for These – Ah – Persons’’

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sweeping reforms, including the expansion of educational and employment opportunities for women (p. 202). In an essay that proposes to take the economics of Harriet Martineau ‘‘seriously’’ (p. 262), David Levy examines yet another context that influenced economic analysis of the period: slavery. Levy recognizes that historians have failed to take Martineau seriously. By demonstrating her stunning originality in applying classical economic analysis to the problem at hand (slavery), he shows that Martineau’s reputation for lack of originality has been undeserved. An argument made by those who favored slavery was that it produced stability and morality – the relative infrequency of brothels and prostitution being ‘‘evidence’’ of this claim. Martineau demolished this ‘‘evidence’’ by making the case that slaves were low-cost substitutes for prostitutes (p. 264). Levy also considers what the pro-slavery advocates said in response to Martineau’s argument, including some horrific attacks on her and her motives (pp. 265–267). The significance of the French, and the industrial, revolutions is inescapable both for the period taken as a whole and specifically as related to ‘‘the woman problem,’’ as it was called by contemporaries. As the essays unfold, we come to understand how the French and industrial revolutions served both to generate and to create resistance to new economic arguments concerning the laboring poor and the rights of women within democratic societies. In another contribution, entitled, ‘‘Women’s Progress and the ‘End of History,’’’ Nyland argues that by the end of the 18th century the demands of the dispossessed for forms of equality that the middle/upper classes saw as unacceptable, proved a barrier to the further improvement of women’s status (p. 109). On the positive side, Nyland locates Condorcet, Godwin, and Wollstonecraft, who dreamed of unending progress and insisted that human rights belonged equally to both sexes (p. 110). The case is made, in some detail, for Condorcet, in Peter Groenewegen’s essay that follows. In 1790, Condorcet makes the point that philosophers and legislators had treated the issue of rights in terms of violations of natural rights of men only, thereby neglecting the rights of women (p. 132). So, Condorcet’s proposal for public education was to include women as well as men. Annie Cot argues that Jeremy Bentham, too, made the ‘‘radical’’ case that an ethical system based on equality must logically extend to women, as well as men (p. 165). For Bentham, Cot argues, the situation of inferiority of women was socially constructed. James Mill’s contention that, since women’s political interests were adequately represented by their husbands, the franchise need not be extended to them, was, Bentham argued ‘‘heresy’’ (p. 182). In 1789, on

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‘‘practical’’ rather than principled grounds, Bentham would suggest that women’s suffrage was premature (p. 183). In her essay on the role of sympathy in Sophie Condorcet’s thought, Evelyn Forget demonstrates how ideas developed in one context (that of Adam Smith), are transmitted and adapted to fit a different but related context (post-revolutionary France). The real significance of Sophie’s essays, Forget argues, is that they constitute her attempt to address social problems in a world stripped of the institutions that hold society together (p. 145). Educators who take responsibility for nurturing social behavior by cultivating sympathy are essential to a functioning civil society (p. 155). By contrast, marriages founded on property rather than love, are said to encourage spouses to behave poorly toward one another (p. 157). Social reform can remove institutions that nurture the sentiments of egoism and vanity and which snuff out sympathy (p. 159).1 While I would not wish to claim that all the details are in consort,2 at least as far as the summary here is concerned, there is much in common between this notion of sympathy and that of J. S. Mill. For Mill, agents are motivated by sympathy in addition to monetary gain, and taxpayers may be willing to pay for reform because they are willing to give something up to make a perceived evil go away. Benefits might also accrue in terms of sympathy, as individuals recognize that effecting a just reform yields improved moral standing.3 In an essay on the post-revolutionary economist, Jean-Baptiste Say, Forget argues that Say’s vision was informed by a patriarchal analysis of gender and a popular justification for a market economy. Say was, she argues, willing to purchase political and social stability at the cost of denying women an independent social or economic existence social or economic (p. 210). Say holds the family is the fundamental unit of society, responsible for maintaining social order, a school of civic virtues (p. 212). The division of labor between sexes is economically beneficial; women receive subsistence in return for household labor that benefits the family (p. 213). Forget reminds us that social and political events have their counterparts in economic analysis; but the analysis survives even when the social context changes. Nyland and Tom Heenan also stress the significance of the French Revolution for the thought of two reformers, William Thompson and Anna Doyle Wheeler (pp. 241–242). A Benthamite utilitarian influenced by Saint-Simon and Robert Owen, Thompson held that universal education should engender reason and progress, raise the moral tone of workers, increase happiness, and improve social values (pp. 243–246). When Utilitarians failed to condemn James Mill’s argument that women’s interests were


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sufficiently represented by their husbands, Thompson and Wheeler published a response which advocated for the franchise to be extended to women, collectivism, and women’s right to divorce (pp. 252ff). On the negative side – in which reactions to social and political events are said to have generated arguments against extending equal rights to women – Nyland argues that Thomas Robert Malthus is a key figure. According to Nyland, Malthus developed an analysis to support the status quo and to end the hopes of women who dared to dream about the destiny of their sex (p. 110). Nyland focuses on the work of John Millar and William Alexander, examples of 18th century conservatives with respect to sexual equality, men who were satisfied with their world and who feared an alteration of the status quo. They needed a story that applauded wealth accumulation while making it clear that progress beyond the status quo was impossible (p. 122). In Nyland’s account, ‘‘Godwin was a brilliant target for an opportunistic marketer’’ (i.e. for Malthus) (p. 122). Malthus’ analysis was then used by conservatives, and economics was transformed from being a ‘‘progressive to a dismal science whose proponents saw their field as the study of scarcity’’ (p. 125). Only when socialist ideas took hold, were women again able to hope for equality. There are, of course, many who paint Malthus with a similar broad brush. I am not one of those. Instead of the ‘‘opportunistic marketer,’’ I find an analytical mind, taking people as they are, with an eye on incentives and institutional change that might improve their lot in life. More generally, the issue of equality – sexual or otherwise – does not always or neatly line up with conservative or liberal politics. Socialist schemes – in both the 19th and the 20th centuries – sometimes offered more rather than less inequality for women. Second, ‘‘progressives’’ of the time were not always advocates of equality; sometimes, they advocated severe inequality such as racial slavery. In fact, the ‘‘dismal science’’ phrase was first applied to political economists by Thomas Carlyle because they advocated for people of color to be able to work for wages, instead of slavery.4 Finally, as noted above, classical economists from Smith through J. S. Mill worked with a notion of sympathetic – rather than purely selfish – agents. Sympathy constrains individuals from being purely selfish and provides moral motivation in classical analysis.5 Not until later in the century – post-Darwin – do economists such as W. S. Jevons begin to conceptualize pure selfish individuals. Robert Dimand presents a more balanced view of Nassau William Senior, but one which suggests that Senior also was reactionary. Pointing out that Senior had stronger and more direct influence on policy than other classical economists (p. 224), Dimand recognizes that his views on women are

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revealed in passing remarks, not in a treatise (p. 225). In the Poor Law Report of 1834, Senior and Edwin Chadwick attempted to eliminate the dependence of unwed mothers on poor relief and to strengthen the ties of family. Unlike J. S. Mill, Senior took restricted property rights of women for granted (p. 226). In contrast with his Two Lectures on Population, in the Poor Law Report, Senior treats the laboring classes as rational decision makers who respond to incentives (p. 233). No work on the status of women in classical thought would be complete without an essay on John Stuart Mill and Harriet Taylor. Evelyn Forget takes on the difficult task of attempting to disentangle the relative contributions of Mill and Taylor. She suggests that the common contention that Harriet Taylor was the more radical of the two is an anachronism (p. 285). At least after his debate with Auguste Comte, Mill accepted that gender roles were socially rather than biologically constructed (p. 286). Forget argues that the tendency to treat Mill–Taylor in isolation from other social/ intellectual movements has been unproductive, resulting in ‘‘who did what’’ sorts of questions (p. 306). Mill characterized the relationship as a partnership, and Forget finds he did so correctly (p. 307). Taken as a whole, the unmistakable lesson from this work is that social and political events shape ideas, methods, and theories in both positive and negatives ways – providing both the seeds for changes, as well as the reasons for conservatism. The essays suggest much in the way of resistance among those who have rights, to widening the set of persons to whom such rights – political or economic – accrue. That resistance targeted two groups. As Levy’s paper suggests, those such as Martineau, who advocated for (black, enslaved) women, were targets. Second, those who were being advocated for – women as a whole or a subset, such as those who wished to obtain the vote or jobs – were also likely targets. A systematical examination of such responses would be wonderfully informative. We might, for instance, learn about how the ideas were spread (or not) by examining the reception of those who attempted to spread them. Did the resistance, as is occasionally suggested in the volume, increase as women obtained or nearly obtained various rights? A glance at the Victorian magazine, Punch, for the first half of 1867 (when the Reform Bill agitation centered on the inclusion of women), reveals a large number of articles with titles such as ‘‘Shall Lovely Woman Vote’’ (May 4, 1867, p. 179); and ‘‘A Certain Person to Mr. Mill’’ (June 1, 1867, p. 224). A ‘‘Letter to Mr. Punch’’ of June 8, 1867, entitled ‘‘Female Suffrage’’ ends: ‘‘One can hardly fancy a Woman in Opposition!’’ and is signed ‘‘An Old and Ugly M. P.’’ (p. 239). Mill was variously attacked in Punch for his support of the extension of the franchise; as in the cartoon


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mocking his use of the de-gendered ‘‘persons’’ that appears at the head of this essay.

Such attacks occurred not simply in the popular press but also within the scientific community. In 1876, Francis Galton moved to have Economics removed from Section F of the British Association for the Advancement of Science. One of the complaints – though not the only one – in the scientific community at the time, was against the attendance of women at such meetings. At the Adam Smith Centennial Dinner of the Political Economy Club the following year, the discussion following dinner became acrimonious. Following the dinner, the Pall Mall Gazette reported that ‘‘the natural philosophers have been frightened out of their wits by the ladies who flock to the Section of ‘Economic Science and Statistics’ and who insist on reading papers and starting discussions which are not only not scientific but which savour of the singular antipathy to science for its own sake common to all the feminine movements of the day’’ (Jevons, 1972–1981, Vol. 4, pp. 272–273). As women increasingly entered the labor market to work in factories late in the century, W. S. Jevons’ 1882 Contemporary Review piece advocated for

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state intervention to prevent childbearing women from obtaining work. The suggestion prompted an enormously important and protracted discussion on the issue in the Guardian and elsewhere.6 And this leads to a final reflection on the collection. As an examination of the role of women in classical economics, the collection understandably ends with Mill and Harriet Taylor. It would, however, be wonderfully interesting to compare the treatment at mid-century with that at the end of the century, the positions of classical economists with those of their neoclassical counterparts. In so doing, one might discover that the analysis by Jevons is at least as ‘‘conservative’’ as, perhaps more than, that of Malthus or Senior.

NOTES 1. Interestingly, especially in the light of the links in the collection to the question of population growth, Herbert Spencer speculated that misery and suffering served to deaden sympathy: To those whose fellow feelings were too keenly alive to the miseries of the great mass of their kind – alive not only to such miseries as they saw but to such miseries as they heard of or read of, and to such miseries as they knew must be existing all around, far and near, life would be made intolerable: the sympathetic pains would submerge not only the sympathetic pleasures but the egoistic pleasures. (Spencer, [1893] 1978, pp. 328–329)

And therefore life is made tolerable, even to the higher among us at the present time, by a certain perpetual searing of the sympathies, which keeps them down at such level of sensitiveness as that there remains a balance in pleasure in life. (Spencer, [1893] 1978, p. 329)

2. In particular, there is the issue, alluded to in the essay, of whether sympathy is akin to empathy, or something more subtle like a projection. David Levy and I have argued that the divide in Britain comes between Hume and Smith (Levy & Peart, 2004). 3. In this case, the benefits of reform need not be restricted to a resulting material gain, and there may be more parties involved than material gainers and material losers (Peart & Levy, 2005). 4. The case is made in detail in Levy (2001). A more accessible version appears at Levy and Peart (2001). 5. Mill attributes wide-ranging reform to the acquisition of the capacity for sympathy, ‘‘of apprehending a community of interest between himself and the human society of which he forms a part’’ (Mill, [1861]1969, p. 248). The entire history of social improvement has been a series of transitions, by which one custom or institution after another, from being a supposed primary necessity of social


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existence, has passed into the rank of an universally stigmatized injustice and tyranny. So it has been with the distinctions of slaves and freemen, nobles and serfs, patricians and plebeians; and so it will be, and in part already is, with the aristocracies of colour, race, and sex. (Mill, [1861]1969, p. 259)

On the means by which habituated sympathy generates reform, see Peart and Levy (2005). 6. The range of the discussion suggests how complex were the positions: some ‘‘progressives’’ – at least avowedly pro-women – favored intervention to ‘‘teach’’ women that they need not enter the labor force because their proper place was in the home rearing children. See Peart (2003, Vol. 2, pp. 69–114).

REFERENCES Jevons, W. S. (1972–1981). In: R. D. Collison Black (Ed.), The papers and correspondence of W. S. Jevons (Vol. 4). London: Macmillan. Levy, D. M. (2001). How the dismal science got its name: Classical economics & the ur-text of racial politics. Ann Arbor: University of Michigan Press. Levy, D. M., & Peart, S. J. (2001–2002). Secret history of the dismal science. www.econlib.org/ library/Columns/LevyPeartdismal.html Levy, D. M., & Peart, S. J. (2004). Sympathy and approbation in Hume and Smith: A solution to the other rational race problem. Economics and Philosophy, 20, 1–20. Mill, J. S. ([1861]1969). Utilitarianism. In: J. M. Robson (Ed.), Collected works (Vol. 10, pp. 205–259). Toronto: University of Toronto Press. Peart, S. J. (Ed.) (2003). W. S. Jevons: Critical responses. London: Routledge. Peart, S. J., & Levy, D. M. (2005). A discipline without sympathy: The happiness of the majority and its demise. Canadian Journal of Economics, 38(August), 937–955. Spencer, H. ([1893]1978). The principles of ethics. Indianapolis: Liberty Press.


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RECONSIDERING THE PLACE OF WOMEN IN CLASSICAL ECONOMICS Jennifer Ball A review essay on Robert Dimand and Chris Nyland, eds., The Status of Women in Classical Economic Thought. Cheltenham, UK: Edward Elgar, 2003. ix+315 pp. ISBN 18440644788. Seven authors contributed to this well-edited volume that explores the publications, lectures, public comments, and correspondence of several welland lesser-known classical thinkers regarding women’s role in society, politics, and the economy. The dual goals of the work as stated by the editors are to ‘‘show that the classical economists did concern themselves with gender analysis’’ and to illustrate that the classical school developed a ‘‘sophisticated response to the question, why is it that in all human societies women have suffered a lower status than that enjoyed by men?’’ (p. 2). This response includes three elements: the inalienable rights of all human beings, the unchanging biological differences between men and women, and the varying historical contexts in which men and women find themselves. The intersection of these three factors affects how and why women’s status changes across space and over time. The goals of the volume are met to a great extent, and anyone interested in gender scholarship and/or economic thought will find the collection interesting and long overdue.

A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 71–78 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24003-3

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The inclusion of several lesser-known thinkers is an interesting aspect of this work. To be sure, the likes of Adam Smith, Jean-Baptiste Say, and Nassau Senior are also represented, but it is difficult to find even a cameo appearance of Francois Poulain de la Barre, Sophie Condorcet, or Harriet Martineau in a traditional history of economic thought text such as Blaug (1997), Landreth and Colander (2002), and Ekelund and Hebert (2004). However, these individuals are featured in this work. This of course begs the question, who do we, as economists today, consider to have been important thinkers of the past? A related issue is how, as this book shows, even many well-known classical economists had expressed themselves regarding the question of women’s status, but it is the rare economist today who knows about such expressions. So we must also ask, what topics to which classical economists applied themselves were considered important enough to record and continue exploring? Dimand and Nyland’s collection helps us answer these questions. I will begin with a discussion of scholars who are less well known to economists, and then move on to those with whom we are quite familiar. I am emphasizing one of the more interesting themes of the volume, that many scholars may be obscure to economists due only to their choice of topic, and some analyses of well-known classical economists are relatively unknown for the same reason. Generally, as Chris Nyland points out, a scholar’s place in the history of economic thought is determined by both her/his contribution to economic theory, method, or analysis, and her/his influence on other scholars (p. 35). By these criteria, Nyland argues convincingly that Poulain de la Barre (1647–1723) should be recognized as an important contributor to and influence on the advancement of economic methodology, the economic analysis of gender, and the debate regarding women’s status in the 18th century. Educated as a scholastic, Poulain converted to Cartesianism and used the deductive method to explore women’s inferior social status in his Equality of the Sexes. He concluded women’s relative position was a result of their reproductive capacity and therefore disadvantaged economic position. By using historical conjecture, Poulain argued that women’s status would vary depending on social, political, and economic contexts. As an early Cartesian, Poulain was one of the first to apply the deductive method to an economic question, and his relativism clearly had an influence on later thinkers such as Montesquieu. Nyland suggests the reason Poulain’s analysis has not been considered important in the history of economic thought is not because his work was devoid of economic substance, but because the topic he explored has been largely ignored by scholars of economic thought.

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Two other thinkers who analyzed women’s status and its connection to economic systems were the Marquis de Condorcet (1743–1794) and his wife, Sophie de Grouchy (1764–1822). Peter Groenewegen reminds us that Condorcet was one of the utopian thinkers against whose ideas Robert Malthus argued in his essay on population. Traditional history of economic thought texts tend to introduce Condorcet in this context, and then move on to other economists. However, Groenewegen points out that Condorcet also offered an economic analysis of women’s status based on stages of economic development in his Sketch for the Historical Picture of the Progress of the Human Mind, in which he argued the end to women’s oppression was a necessary step in the perfection of the humanity. In all of his work, Condorcet was a champion of equal rights for women, and for all races and religions; he also advocated strongly for universal education as a natural right of women and as a means to promote equality. Sophie de Grouchy’s feminism had undoubtedly influenced her husband and she was also a promoter of universal education. However, Evelyn Forget asserts it was de Grouchy, in the essays on the subject of sympathy that accompanied her translation of Smith’s Theory of Moral Sentiments, who suggested women’s emancipation was linked not only to political rights and education, but also to a redistribution of wealth. Economic inequality that led to a leisured class, according to de Grouchy, allowed a class of people to spend much of their time seducing one another and resulted in marriages based on wealth rather than love and respect. Such inequality was also responsible for the failure of the rich and the poor to understand each other; implying that women would have a difficult time recognizing their common interests across classes. Harriet Martineau (1802–1876) is a name today’s economists might recognize, but as a popularizer of classical liberal economic thought rather than as an economist. David Levy argues there are two reasons to ‘‘take Harriet Martineau seriously as an economist y . One is historical: she was taken seriously by her contemporaries. Another is textual: there are interesting and important economics in her writing’’ (p. 262). The latter reason is illustrated cogently in Levy’s discussion of Demerara, Martineau’s novel in which economic reasoning and methods were used to make several arguments against slavery. One example is the author’s use of the observation that there was less demand for prostitution in slave versus free states as evidence that female slaves were being used sexually by their owners (which slavery proponents conceded). Another example is the argument that slavery was inefficient for several reasons, including the following: the lack of wage incentives for a slave’s labor, the uncertainty of long-term contracts (the promise of freedom at some date in the future), and asymmetrical

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information in the market for slaves (the selling of undesirable slaves to unknowing buyers). Another interesting point Levy makes in this essay is on bias. He suggests that while Martineau’s admitted bias against slavery may be one reason she is not recognized by economic historians, this reason is weak for a few reasons. First, bias is not confined to qualitative work (or ‘‘travelers’ reports’’ in this case); researchers using quantitative data and statistics can also choose which outcomes suit them best. Second, we need not rely only on unbiased reports; a reader can evaluate a biased argument based on its merits (the example given is of expert witnesses on both sides of a court case). Third, by admitting her bias, Martineau negates the ethical issue (as does research that uses openly biased estimators). I emphasize this discussion because, while Levy uses it as an explanation for elevating Martineau’s work, it is relevant to all economic research on gender done by feminists (who are often accused of bias). Poulain de la Barre, Condorcet, de Grouchy, and Martineau are some examples of scholars with whom most economists who read this book will become acquainted in any depth for the first time. These and other thinkers in the collection meet the criteria of originality and influence, yet they have been largely ignored by economic historians. One might ask how it is possible for a scholar to have influence on others and to also be ignored. This seems to have occurred at least partly because the influence of these thinkers was not always on economists but on those in other disciplines, and on feminist reformers/activists. The point is that most economists have not found these scholars – who made important contributions to the question of women’s status and its connection to economic institutions, stages of development, and class – to be worth studying. But it is really little wonder this is the case, considering the best-known classical political economists such as Adam Smith, Jean-Baptiste Say, and Nassau Senior let their views on women’s status be known, yet little attention has been given to these ideas either. It would surprise most economists, I believe, to find that Adam Smith (1723–1790) had a fairly detailed theory of women’s status. Smith’s analysis was undoubtedly influenced by Montesquieu’s and was also an improvement upon it. Chris Nyland discusses both thinkers in a chapter on each. Montesquieu (1689–1755) believed women were naturally inferior to men in strength, intellect, and reason, but the importance of such inferiority – and thus also women’s status – varied with the natural and social environment, especially the climate and the form of government. In his Spirit of the Laws, Montesquieu examined the status of women in several societies and thus added an empirical element to a debate that had been, until then, largely abstract. As Poulain’s relativism had influenced Montesquieu, Montesquieu’s


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empirical and comparative work influenced Smith. Smith’s theory, in his Lectures on Jurisprudence, moved beyond the static nature of the earlier works to add a dimension of progress. Nyland suggests that Smith’s lack of a statement asserting women’s intellectual inferiority is evidence that he did not share Montesquieu’s belief in this regard, and while I think this may be a bit generous, it is also in keeping with Smith’s general philosophy that humans were inherently equal at birth and differences in individual outcomes were a result of wealth, class, education, and other social determinants. However, Smith did clearly agree with Montesquieu that women were naturally physically weaker than men and that the significance of this physical inferiority varied in different societies. Where Montesquieu had concentrated on geographical and political contexts at a given point in time to explain such variations, Smith asserted that a society’s history and class structure would offer a better explanation. Smith thus offered a theory based on four distinct stages of economic development: the hunting stage, the pastoral stage, the agricultural stage, and the commerce stage. While he believed that women’s relative position in society had not progressed upward at each stage, he did argue that the thencurrent level of economic development – the commerce stage – had elevated women to a level that had not been attainable in other stages. This was due to the combination of the waning importance of war for ensuring subsistence and the greater ease by which women could accrue wealth. Nyland points out that Smith did not believe that either of these societal characteristics would be sufficient, by themselves, to advance women’s status. Both were necessary, and this combination occurred only in the commercial stage of development. As well as suggesting that the mode of subsistence played an important, and arguably the most important, role in determining how women fared in society relative to men, Smith’s theory also added the aspect of progress. As societies moved from one stage of economic development to another – with commercialism being the last-known stage – women’s status would improve, and this implied that women’s subordinate position was not necessarily permanent. It may seem somewhat surprising that this theory of Smith’s has not received more attention. Nyland and Dimand offer a partial explanation – that Smith’s Lectures were not as widely read as his Wealth of Nations because the former were basically lost for a century after Smith’s death. While this is undoubtedly true, the Lectures have been available to historians of economic thought for over 100 years at this point, yet very few economists are familiar with this theory on gender. Obscure sources are not generally a major impediment to historians, so I favor the other part of the explanation proposed in this work as to why gender analysis in liberal

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economic thought has largely been ignored. Forget and Dimand, in their respective essays on Jean-Baptiste Say (1767–1832) and Nassau Senior (1790–1864), suggest that influential economists’ conservative views on women’s role in society had the effect of separating the issue from liberal political economy. As Forget says: By the time the social context that generated Say’s analysis of gender changed, the analysis itself had become so much a part of the way in which economists think that it disappeared from conscious consideration and exerted its influence behind the scenes. Gender is, for many economists, simply not a matter of economic analysis. (p. 207)

As the first chairs of political economy at prestigious universities – Say at the Colle`ge de France and Senior at Oxford – these scholars had significant power over the direction of thought in their recently defined discipline. Say’s widely read textbook and Senior’s political and journalistic careers cemented their influence. Unfortunately, Say’s analysis of gender placed women squarely in the domestic realm, and Senior basically ignored women in his academic work (but not in his policy prescriptions). A common element in these scholars’ works regarding women’s place in society was the notion that public policy should be engineered in such as way as to promote the traditional family with an income earning husband/father and a wife/mother working (unpaid) in the home. Forget, with a tone of apology, provides evidence that Say’s argument for women’s natural domesticity resulted at least partly from his fear of the feminist activism of the time, which had ties to the French Revolution and its terrible aftermath. Be that as it may, Say believed the fundamental unit of society to be the family, and asserted if a woman was impoverished it was because she was outside a family unit. The logical solution, therefore, was to ensure that women could rely on their families’ economic support. If they must work, some jobs should be reserved for them, as men and women should not work together, and so that women would not become prostitutes. Say also encouraged the development of industrial convents as a kind of state-provided family. As Forget says, ‘‘It is useful to remember that economics, politics, and ‘family values’ have a rather long relationship, and not necessarily the ‘natural’ one that dominates popular discourse’’ (p. 220). Senior also believed women’s place was in the domestic sphere, as Dimand illustrates in his examination of the scholar’s work on the Poor Law Report of 1834. In the report, Senior made policy prescriptions for disallowing child support for unwed mothers and repealing all laws punishing the fathers of children born outside of marriage. The purpose of such advice was of course to assign the responsibility of such children to women to an even greater degree, and presumably to discourage


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them further from engaging in sex outside of marriage. (Dimand points out that increasing the responsibilities of the fathers of these children would have had the same effect, yet the Poor Law Report did not suggest this.) Other than in this work women are mentioned only in passing throughout Senior’s lectures, and without much consistency. Unfortunately for the advancement of gender analysis in liberal economic thought, Say relegated women to the private sphere of the household, while Senior almost completely ignored them. Of course, other thinkers such as William Thompson (1775–1833) and Anna Doyle Wheeler (1785–1850), and J. S. Mill (1806–1873) and Harriet Taylor (1807–1858), continued to consider women’s status, but they had less influence than Say and Senior on liberal economic thought. This was partly due to the professional positions of Say and Senior outlined above, and also because Thompson and Wheeler were rather more socialist than liberal thinkers, and J. S. Mill’s work on women was primarily published outside his work on economics (although his Principles of Political Economy did address women’s issues in several areas). By the middle of the 19th century, classical liberal political economy had been defined as a discipline without genders. There are more and very interesting essays in this collection – those on Thompson and Wheeler, and Mill and Taylor, as well as John Locke, Jeremy Bentham, and Priscilla Wakefield. I will leave these to the reader to discover. Readers will find that the question of women’s status was addressed again and again by scholars of political economy in the classical era, and that many of these thinkers were quite progressive. Unfortunately for feminists, however, these were not the thinkers with the greatest influence in the discipline. While one can always take issue with particular arguments made by the authors, I found the collection overall to be very informative and insightful. I would say it is a book every economist and serious student with an interest in the history of thought and/or gender analysis should read, and of course it will also beneficial for historians of feminist thought. As a teaching tool, it will make a useful companion to a traditional history of economic thought text, or works such as Mahowald (1994) and Coole (1993) in the area of feminist thought.

REFERENCES Blaug, M. (1997). Economic theory in retrospect (5th ed.). Cambridge: Cambridge University Press. Coole, D. (1993). Women in political theory: From ancient misogyny to contemporary feminism (2nd ed.). Boulder: Lynne Rienner.

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Ekelund, R. B., Jr., & Hebert, R. F. (2004). A history of economic theory and method (4th ed.). Long Grove, IL: Waveland Press. Landreth, H., & Colander, D. C. (2002). History of economic thought (4th ed.). Boston: Houghton Mifflin. Mahowald, M. B. (Ed.). (1994). Philosophy of women: An anthology of classic and current concepts (3rd ed.). Indianapolis, IN: Hackett.

Pelikan’s INTERPRETING THE BIBLE AND THE CONSTITUTION INTERPRETING THE BIBLE, THE U.S. CONSTITUTION, AND THE HISTORY OF ECONOMIC THOUGHT$ Warren J. Samuels A review essay on Jaroslav Pelikan, Interpreting the Bible and the Constitution. New Haven: Yale University Press, 2004. 240 pp. ISBN 0300102674. The modern mind affirms the possibility of truth, objectively and empirically verified. Modernism replaced what we might call metaphysics, which affirmed the possibility – inter alia – of theological absolutes. Post-modernism (1) affirms that while there are (or that one can presume that there are) objects with respect to which statements claiming truth status may be made, one cannot be certain which statements are in fact true; and (2) cautions against the undue privileging of any statement. Among the reasons for the post-modernist position are the fact of multiple specifications and the absence of meta-criteria by which to choose among the multiple statements. It may not be that in some ultimate sense ‘‘anything goes,’’ but in practice ‘‘anything does go.’’ $

I am appreciative of comments by Gary Mongiovi on an earlier version of this review essay.


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This means that the objects of study in economics are deeply interpretive. Consider the multiplicity of interpretation of each of the following: the fundamental nature of the Western economic system; the nature of mercantilism; the Ricardian theory of value; the causes of the Great Depression; cost; coercion; freedom; Keynesian macroeconomics; the nature of demand (curves); the causes of the American Revolution, the U.S. Civil War, and the French Revolution; the nature of the enlightenment; what Adam Smith or Keynes or Marx really meant; the identity and function of the invisible hand; the causes of war, especially world wars; and so on. Some people, those who require closure and determinacy, are very displeased and uncomfortable with multiplicity of interpretation. Others, those who are more comfortable with ambiguity and indeterminacy, are not much bothered by multiplicity of interpretation. I recently told a small group that a book I was then reading – the one under review here – dealt with problems of interpretation common to the study of the Bible and the Constitution. One person, who apparently believed that both documents, especially the Bible, had one true reading, was obviously upset by the thought that these documents had interpretive problems.1 Multiple interpretation is a fact; a fact perhaps due to error, but nonetheless a fact. So too is historical interpretation: interpretation has a history, the subject of Pelikan’s more recent book (Pelikan, 2005). Jaroslav Pelikan (1923), Sterling Professor Emeritus of History at Yale University, is an eminently distinguished specialist in the history of biblical interpretation. He has authored over three dozen books on Christian thought, including The Christian tradition (5 volumes, 1971), Jesus through the centuries (1985), Credo: Historical and theological guide to creeds and confessions of faith in the Christian tradition (2003), Faust the theologian (1995), The illustrated Jesus through the centuries (1997), The mystery of continuity (1994), The vindication of tradition (1984), Bach among the theologians (1986), The Christian intellectual (1965), Divine rhetoric (2001), Historical theology: Continuity and change in Christian doctrine (1971), The melody of theology (1988), and The spirit of medieval theology (1985). He is undoubtedly as knowledgeable in his branch of intellectual history as anyone might aspire to be. In 2003, Pelikan gave a series of four lectures co-sponsored by the Yale Law School and the Yale Divinity School on the common problems of interpretation in the histories of biblical and constitutional interpretation. The resulting book is dedicated to Edward H. Levi and the dedicatory quote from Levi’s An introduction to legal reasoning includes the following: ‘‘A constitution cannot prevent change; indeed by permitting an appeal to the

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constitution, the discretion of the court is increased and change made possible’’ (Pelikan, 2004, p. i).2 Pelikan, as a historian of Christian doctrine, did not need to retool himself as a constitutional lawyer; he found in constitutional law ‘‘a continuity of interest and even of methodology’’ (p. 1). In this review essay, I first take up Pelikan’s approach to interpretation and the problems of interpretation common to both of fields. I then extend the discussion to problems of interpretation in the history of economic thought.

PELIKAN’S ANALYSES Chapter 1 is entitled ‘‘Normative Scripture – Christian and American.’’ Here Pelikan considers the normative status of the two documents. Though their texts were ‘‘originally composed under very specific circumstances,’’ illumined by later scholarship, they have been ‘‘adopted by a community as its normative Great Code y occupying a position that in some profound sense stands beyond its own history’’ (pp. 4–5). That normative status is based on the assumption that it can be applied to any and all of the radically changed situations of later times, many of which the writers who originally framed it could not themselves conceivable have foreseen y. Therefore its words and phrases have for centuries called forth meticulous and sophisticated – and sometimes painfully convoluted – interpretation, as well as continual reinterpretation. y a massive corpus of authoritative, if often controversial, commentary. (p. 5)

Yet, the texts themselves neither prescribe the method of interpretation, nor identify the authoritative agency for determining binding interpretation, ‘‘much less for revising it’’ (p. 5). Even particular words have meanings both independent of the documents and dependent upon their use in the texts (p. 6). Both the 10 amendments of the Bill of Rights and the 10 commandments of the Decalogue now serve ‘‘the unifying function of a national civil religion’’ (p. 8, quoting Thomas C. Grey), i.e., as instruments of social control. Pelikan considers neither the Bible nor the Constitution to be the literal word of God. He is sensitive to the unchanging believer in unchanging religious dogma and to the doubting secular humanist. He points to the institutions that serve as ‘‘official and decisive interpreter’’ (p. 2). He acknowledges both the many and varied historical sources of law and of doctrine, and the ‘‘danger of confusing ‘words’ with ‘reality’ ’’ (p. 9). Above all, Pelikan quotes Robert Burt on the ‘‘parallels between the secular authority of the Constitution in the polity and the divine authority of the Gospels in religious belief, and between the exegetical role of judges and of

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priests and prophets’’ (p. 10). Both documents provide a linguistic definition of reality, an authoritative framework of meaning. But ‘‘from the first,’’ says Pelikan, ‘‘there have had to be interpretations of both of these texts,’’ and the interpretations have generated controversy, eliciting such claims as ‘‘tortured construction,’’ excessively ‘‘strict and literal,’’ ‘‘strained, confused, and obscure,’’ ‘‘narrow and artificial,’’ and ‘‘elusive at best’’ (p. 11). Though the attribution of ultimate meaning to God finesses the problem for some people, there is no independent test, no single meta-criterion. A superficial difference between the two codes is the possibility of amending the Constitution, whereas no church act could be seen as amending Holy Scripture. Still, the New Testament has been added to the Old Testament. A fundamental difference, in Pelikan’s view, is that ‘‘the Bible is meant to be prayed and believed, and only therefore acted upon’’ (p. 15), not so the Constitution. Pelikan notes that the Holy Scriptures of Judaism and Islam ‘‘are – or at any rate can be, and at times have been, and in some places still are – political ‘law’ and even ‘constitutions’ in a way that the New Testament has been within Christendom only in rare experiments’’ (p. 18). Calvin’s Geneva, Cromwell’s England, and Puritan New England are mentioned, but these, it seems to me, are selected on an overly narrow basis. Sacred books, as ‘‘written revelation,’’ like written constitutions (p. 15), are instruments of social control, used to regulate the lives of individuals and the life of the community, whatever their political status. The term ‘‘American Scripture’’ is used to refer to the normative and theistic content of the Declaration of Independence and possibly also Lincoln’s Gettysburg Address of 1863 and the 15th, 17th, and 19th amendments (pp. 18–19). Pelikan stresses that though America’s national holiday celebrates the signing of the Declaration of Independence, ‘‘Nevertheless, it still is the Constitution, and not the Declaration of Independence, that functions as the normative American Scripture’’ (p. 21). The two penultimate sections of Pelikan’s Chapter I are most relevant to the problem of interpretation. The first deals with ‘‘the power of an interpretive community to constitute the objects upon which its members y can then agree’’ (p. 22). For both codes, the four chief interpretive communities are (1) ‘‘We the people;’’ (2) the academic scholars of the professoriate; (3) the professional and certified practitioners; and (4) the hierarchy. The key issues are personal qualifications, fallibility, discipline, and whether or not law and morals are to be treated as absolutes or relatives, i.e., as a domain of efficiency and autocracy versus experimentation and protection from arbitrary power (pp. 22–33). The result, in both spheres, is a history of interpretive ‘‘constructions’’ (p. 33). Pelikan takes up questions of text and


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context. He argues for taking ‘‘serious ideas seriously,’’ while not reifying ‘‘ideas in themselves.’’ Ideas are not ‘‘self-standing agencies in history’’ (pp. 33–34); we need to recognize that ‘‘political, social, cultural, and psychological factors’’ profoundly influence how the two Codes are read (p. 34). Finally, we should not reduce ‘‘textual and doctrinal debates to a mere rationalization,’’ but treat them as valid and profound acts of interpretation (p. 35). Pelikan’s question, therefore, is: ‘‘What are the means and methods by which official interpreters read their normative texts?’’ – quite independent of any ‘‘direct intervention in the fray of the current exegetical debates, whether biblical or constitutional’’ (pp. 36, 37). Chapter 2 examines what Pelikan calls ‘‘cruxes of interpretation’’ by which he means linguistic constructions presenting interpretive imperatives: ‘‘words that are difficult or impossible to understand,’’ passages raising ‘‘seemingly insuperable doctrinal difficulties,’’ and so on, where some search for meaning/interpretation is a necessity (p. 38). Such a search is a biblical command (p. 42) and a legacy of the Constitutional Convention. The question, therefore, is how to proceed. One answer is philological, seeking understanding through grammatical and linguistic analysis, a ‘‘retrospective hermeneutics’’ (p. 44). A distinction can be drawn between ‘‘ ‘interpretivist’ methods of arguing from the Constitution on the basis of its history and text and ‘noninterpretivist’ methods on the basis of philosophical and moral doctrines’’ (p. 45). That no one method of interpretation has emerged victorious may be less important than the continuing struggle between those who insist on the necessity of interpretation and those who are suspicious of interpretation, period, who oppose insistence on the subjectivity of interpretation, and who insist on there being one true and therefore normative meaning/interpretation (pp. 46–47). Pelikan concludes that in neither field is it possible to maintain an ‘‘ ‘antiinterpretive tradition of interpretation,’ because the experience of textual interpretation y demonstrates that the only real alternative to hermeneutics is bad hermeneutics. Therefore y a full-fledged exposition of hermeneutical method’’ is called for (p. 48). In constitutional theory, quoting Holmes, the central question is not ‘‘what the legislature meant; y only what the statute means’’ (p. 48) and the same for the Constitution. Pelikan notes the problem of balancing between freewheeling judicial textual manipulation and judicial constraint, the latter if only in requiring what Justice White called ‘‘textual support in the constitutional language’’ itself (p. 49). Holmes was wrong, at least not right, in rejecting what authors meant in favor of what the text means. But Pelikan’s proposal for a taxonomy of

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five kinds of constitutional argument is like any proposal for plural criteria or principles, to wit: a necessity of choice without metacriteria or independent test. The taxonomy of five posits arguments (1) from the plain, necessary, or historical meaning of a text; (2) about authorial intent; (3) of constitutional theory that reason from hypothesized purposes of particular provisions or the entire text; (4) based on judicial precedent; and (5) asserting claims about justice or social policy (p. 49). The author of this proposal – Richard H. Fallon – suggests a model of interpretation in which ‘‘these five forms of argument interact to form an interconnected whole’’ (p. 50). Pelikan quotes Richard Posner that the result of the legal battles over interpretation ‘‘comes down to two propositions:’’ first, interpretation is always relative to a purpose that is not given by the interpretive process itself but that is brought in from the outside and guides the process

and second, interpretation is not much, and maybe not at all, improved by being made self-conscious, just as one doesn’t become a better reader by studying linguistics. (p. 50)

Pelikan is not convinced by the first proposition, querying whether it does not ‘‘border on historical reductionism, ‘‘as though this were ‘always’ the decisive element, or even perhaps the only element, in the interpretation of a text’’ (p. 50). He is correct, but being correct should not obfuscate the fact that the decision in a case is driven by some purpose not given by the interpretive process itself, but by some notion of justice, of social or economic policy, of ideological presumption, or of whose interest should count. One can be preoccupied with the idea that some decision must be reached, for such is the function of the courts; but which decision is reached is what the parties and the rest of us must live with. And it is the basis for the decision actually reached that is imported by the judiciary. One can say that conventional, or orderly, interpretation must make sense of what is being interpreted by retaining the most viable of each conflicting principle or interpretation. Or one can say that the task of interpretation, especially by authoritative agencies, is to choose between interpretations. When Chief Justice Taney argued in 1837 that the court must guard both the rights of property and those of the states, he was doing several things: employing harmonistic language, giving property and state-equivalent ontological and normative status, neglecting the conflicts within the category of property and between the categories of property and state, and giving effect to the proposition that it is the duty of the court through judicial review to decide (p. 57).


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Pelikan observes that both the Bible and the American Constitution ‘‘present their interpreters with a confusing array of ambiguities when addressing any issue’’ (p. 61). He favorably quotes Justice Frankfurter, in part, that ‘‘Words being symbols do not speak without a gloss’’ (p. 61). But Pelikan’s starting point is not everyone’s. Many Christians believe that the Bible is not fundamentally ambiguous, that it is the literal word of God, and that there are no conflicts in the Bible (in reliteralness versus signification, see, p. 66 and passim). Some supporters of the Constitution believe likewise. For Pelikan, therefore, there is the ineluctable problem of deciding which of several texts to apply to any issue and therefore of ‘‘explaining and reconciling apparently contradictory passages’’ (quoting from a church document); indeed, there may be nothing ‘‘apparent’’ about it. In support of his view Pelikan gives examples from both the Bible and the Constitution and of the common practice of trying to harmonize contradictory passages. In each instance, provisions in texts overlap or conflict, somehow run into each other; harmonization frequently means interpreting ‘‘one of them in such a way as not to run afoul of the other’’ (p. 64). These examples do not merely illustrate ambiguity; they also illustrate that both documents ‘‘lack any explicit prescription for the correct method of interpretation’’ (p. 65). Another common interpretive problem is that of the conflict between those who believe in ‘‘absolute and universally binding principles’’ and those who would use these principles only in the sense of ‘‘contemporary community standards’’ (pp. 66–67). Many, for example, are the tests and differentiating criteria that the Supreme Court has applied in cases it decides, thereby writing them, as it were, into the Constitution (p. 67). Given the naturalism of modern religion and both the Declaration of Independence and the Constitution, questions inevitably arise juxtaposing ‘‘eternal, objective, and universal law’’ (p. 69), to which substantive content somehow is adduced, to something less absolute. Frank Knight tried to embody both positions in his notion of relatively absolute absolutes. The final common extraordinary interpretive issue concerns ‘‘which specific entity possesses the authority to provide the definitive interpretation of the normative Scripture’’ (pp. 70–71). Apropos of this are the vast histories of conflict over whose interpretation of Bible or Constitution ultimately counts. Pelikan, it seems to me, adopts the only factually accurate position, referring to ‘‘the relation between the authority of the original text and the authority of developing doctrine in the ongoing life and history of the community’’ (p. 75). In other words, these conflicts of interpretation, and these tensions between continuity and change, between freedom and control, and between hierarchy and equality, must be worked out. Most people,

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however, want (or pretend there is) something more definitive as to content – when content is precisely the point at issue. Where does this leave us? Shall we agree to disagree that any interpretation is as legitimate as any other? Do we need to agree or individually insist that some particular reading is correct, or that one is wrong in the sense, say, that the original writer would not recognize his or her ideas in it? Do we need such definitive closure? Would the choice not depend on who had voting rights in the not-so-invisible college? Can we not get along with pluralism and open-endedness? The overall common problem is that interpretation cannot be based on a foundation that is invisible or nebulous (p. 81). Efforts to resolve interpretive problems have elicited ‘‘appeal to the higher judgment of primitive authority, original intent, and the sensus literalis’’ (p. 84) – these are part of the problem for which interpretation is often thought to offer a solution but they remain the problem. The problems are those of the hermeneutic circle and the absence of meta-criteria. Texts speak only through the interpretation given them, which is to say by a combination of authorial wording (which raises other problems, such as translation) and reader interpretation. Chapter 3 is entitled ‘‘The Sensus Literalis and the Quest for Original Intent.’’ The former term presumes that words have fixed meanings, when in fact they are varied and changing social constructions. The latter term assumes that the founders had an original intent, that each of them had the same intent, that they did not consciously adopt words they could live with in order to paper over remaining conflicts. But in fact they did not have either an original intent or the same intent, and they did postpone to others in the future the task of resolving as best they could issues that they themselves could not. Moreover, the founders remembered their discussions differently, changing their views on the issues in pursuit of later immediate objectives, and so on (see the literature summarized in Samuels, 2002). The common problems of interpretation include, in addition to those noted in the preceding paragraph (which are partly my doing), the following. Should we proceed according to the letter or the spirit? The difficulties include the likelihood that, as exasperating as is proceeding by the letter, proceeding by the spirit is much more so. When all, or substantially all, the evidence we have is written, how does one discern the spirit of the matter? We are trying to understand what the document says, but it does not say as much as we would like; understanding the spirit of the document requires some understanding of the document – the problem with which we started. After all, the document may sustain, or provide evidence for, all or some notions of its spirit. Interpreting spirit in order to understand the document


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involves circularity when the only evidence of spirit is the document itself. The invocation of radiations, penumbras, allegories, and analogical extensions is predicated on the belief that ‘‘strict textualism and inentionalism are not synergistic, rather mutually antagonistic approaches to interpretation’’ (p. 79, quoting Paul Brest). Here, the effort is to determine how a particular provision can be ‘‘extended to situations that are not identical but clearly analogous’’ (p. 79). Knowing that any two provisions are not identical is not always a simple matter. Since a text has words to which more than one different signification may be attached (p. 89), one cannot choose between interpretations on the basis of signification. Another common problem is that ‘‘Both the New Testament and the Constitution are set within historical periods that are endowed with a special aura by their traditions and that carry a unique authority for their communities’’ (p. 85). The special aura is both legitimation and the result of legitimization, but in and of itself can offer no noncircular solution to problems of interpretation. Still another common problem results from determining results on the basis of one’s private beliefs. A pianist or violinist can endeavor to play so as to present to the audience the intentions of the composer. Yet Pelikan gives as an example Igor Stravinsky, who himself conducted his ‘‘Rite of Spring’’ with different readings of the score with respect to tempi, tone, and crescendos – leading to the problem of composer intention. There are also differences due to changes in the musical instruments being used, as to tone, etc. And, of course, different performers tend to give different readings of the composer’s score, for example, Vladimir Horowitz playing Sebastian Bach as if the composer ‘‘was a musician of the Leopold Stokowski type,’’ or Brahms as ‘‘a sort of flippant Gershwin,’’ or Chopin as ‘‘a gypsy violinist’’ (p. 97, quoting from a review by Virgil Thomson). The Bible and the Constitution can also be played (read) with varying premises and intentions. Pelikan also finds as a common problem ‘‘the constant danger of substituting pedantry for living experience’’ (p. 98), in matters of originalism. He quotes H. Jefferson Powell who has questioned whether the ‘‘original intent’’ relevant to constitutional discourse that counts, ‘‘as understood by its late eighteenth and early nineteenth century proponents was not that of the framers, but rather that of the parties to the constitutional compact – the states as political entities’’ (p. 99). This would, of course, be even more difficult to ascertain. Then there is the problem of distinguishing and weighing original accounts relative to private interpretations. To seek the understanding of a document’s terms by ascertaining the understanding of

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ancient and even much more recent authors, not to mention commentators, may only transfer the hermeneutic problem to a different domain. A further common problem is that of the definitions of words. Pelikan quotes Chief Justice John Marshall tellingly: Such is the character of human language, that no word conveys to the mind, in all situations, one single definite idea; and nothing is more common than to use words in a figurative sense. (p. 105)

Not only are constitutions being made through their interpretation, but the definitions of words are being made through their use. If John Marshall was ahead of his time in anticipating the modern linguistics of Ludwig Wittgenstein, Justice John Marshall Harlan seems to have been question-begging in his insistence that in the interpretation of constitutional provisions ‘‘full effect be given to the intent with which they were adopted’’ (p. 108).3 Chapter 4 is entitled ‘‘Development of Doctrine: Patterns and Criteria.’’ Here, Pelikan makes it clear that ‘‘alongside the authority of their original charters and in continuous interaction with that authority, the ongoing and cumulative interpretations of the Great Code in the form of tradition and precedent have come to occupy a privileged position of authority in their own right’’ (p. 115). The logical and historical consequence is conflict between statements of original intent and statements of interpretation as well as conflict over the meaning of ‘‘a privileged position of authority.’’ Thus, Pelikan notes that ‘‘such assertations of continuity would seem to bear a rather paradoxical relation to the realities of historical change’’ (p. 117), takes up the problem of when an interpretation involves an addition and when an amplification (p. 118), and quotes Chief Justice John Marshall’s argument that ‘‘ ‘not only from the nature of the instrument, but from the language’ that ‘it is a constitution we are expounding,’ and Chief Justice Charles Evans Hughes that ‘it is no answer y to insist that what the provision meant to the vision of that day it must mean to the vision of our time’ ’’ (p. 118). In other words, Great Codes are not given and absolute; they are, inevitably, matters of interpretation, matters of developing doctrine: Therefore ‘‘development of doctrine’’ is no longer confined to the history of Christian doctrine, where it arose, but seems to have also established itself as a quasi-technical term in the study of the Constitution. Together with such a term as ‘‘evolving doctrine,’’ it serves as a more ‘‘organic’’ metaphor to describe doctrinal change, which is also the function it performs for the history of Christian doctrine. Development of doctrine (or something very much like it) is an empirically demonstrable fact of both the history of Christian Scripture and the history of American Scripture. (p. 120)


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Ceteris paribus problems of translation, the text is given – and may be treated as Truth – but its perception and disclosure are matters of gradual development (p. 121) and inevitably relate to both origins and developing environment. Pelikan reiterates the lesson through a quote from Justice Oliver Wendell Holmes Jr.: When we are dealing with words that also are a constituent act, like the Constitution of the United States, we must realize that they have called into life a being the development of which could not have been foreseen completely by the most gifted of its begetters. It was enough for them to realize or to hope that they had created an organism; it has taken a century and has cost their successors much sweat and blood to prove that they created a nation. The case before us must be considered in the light of our whole experience and not merely in that of what was said a hundred years ago. (p. 121)

Pelikan obviously considers the matter not solely as an ought, i.e., normative, but also as factually unavoidable. Pelikan concentrates on the harmony of new insights with the old, perhaps through the adding of phrases deemed implicit in the original. However expressed, it is all a matter of the development of doctrine through interpretation (pp. 122–124). But what if the people, or the authorities, change their mind? Original intent may be found repugnant or ill-suited to contemporary conditions and thinking. Provisions regarding slavery come readily to mind as also do capital punishment and even freedom of the press. (The Founders likely would have countenanced the banning of sexually explicit literature, images, etc. that nowadays is generally thought to be constitutionally protected – though this, too, is a matter of interpretation and subject to change.) The problem of change is exacerbated by absolutist formulation: the grounding of legitimacy and continuity in the claim that text is divine in origin or somehow has an independent and transcendental existence. Thus, Pelikan quotes John Henry Newman (a favorite source of his) that ‘‘one cause of corruption in religion is the refusal to follow the course of doctrine as it moves on, and an obstinacy in the notions of the past’’ (p. 125). The fundamental point, never quite stated by Pelikan but resonating throughout his text, is that religion is one institution employed to monitor the conflict between continuity and change, while at the same time the conflict of continuity and change is present in religion. Preservation of ideas and of principles may require, under changed circumstances, change of what are deemed the principles of natural justice and of what is and what is not assimilated into a growing body of law (pp. 134–137). Pelikan also takes up the idea of logical sequence that a certain interpretation is a matter of the ‘‘logical dictate of prior cases’’ (p. 139, quoting Justice Tom Clark). Without saying so, Pelikan thus echoes the claims of

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analytical jurisprudence, although, because of conflicting precedential sequences, logic alone will not suffice. Antecedent normative premises, typically implicit, as to which or whose interests are to count, drive cases. These premises are what determine which precedential sequence is presented in the decision as the logical sequence. Pelikan quotes Newman that ‘‘developments are in great measure only aspects of the idea from which they proceed, and all of them are natural consequences of it’’ (p. 140), and raises such issues as maturity, legitimacy, error, and reception, and such problems as the ‘‘dialectical pattern’’ of anticipation and development. He notes that ‘‘a development can sometimes be seen as the reversal of an earlier reading of the authoritative text’’ (p. 141), that an addition or changed interpretation may be useful in preserving the past force of a doctrine (p. 143), that deduced implications may be enlarging or restraining in character (p. 146), and so on. But ‘‘natural consequences of it?’’ Pelikan says of Brown v. Board of Education that the decision – vis-a`-vis Dred Scott and Plessy v. Ferguson and other cases – ‘‘did in fact establish itself as an accepted and permanent part of the legal and political landscape, fulfilling the early anticipations of it in the Bill of Rights and the Fourteenth Amendment, ‘vague and isolated’ though these may have seemed to me’’ (p. 142), and of ‘‘the belated but decisive extension to all citizens of the rights originally reserved for some’’ (p. 148). ‘‘Establish itself?’’ Such a view either derives from a harmonistic ontological view of law or is intended to serve the social control and psychic balm functions of law. It does not, however, elicit any sense of the conflictual social, ideological, and political processes from which the decisions emerged. Nor does it elicit the fundamental conflicts pervading law and jurisprudence, one of which is between that view of property which renders it antecedent to government, so that any police-power regulation tends to constitute a taking, and that view which treats it as a function of the police power and therefore not a taking. If law is to preserve the past under new circumstances, what of the past is it to preserve: its hierarchical or its egalitarian elements? If one thinks of law as the domain of solved political (conflictual) problems and economics as the domain of economic transactions, given those solved political problems, then such obscures the fact that political problems ‘‘are never ‘solved’ once and for all’’ (Sturn, 2004, p. 328). Much the same can be said of the problems of the applicability of the Commerce Clause to manufacturing, the meaning of ‘‘due process of law,’’ and, inter alia, the meaning of ‘‘equal protection’’ in matters of school district per capita spending. For none of this is there an independent test, a test independent of the problem of the hermeneutic circle. It all must be worked out.


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INTERPRETATION AND THE HISTORY OF ECONOMIC THOUGHT For a long time the jurisprudential community meant by ‘‘law’’ the principles of the Common Law articulated by judges, especially at the appellate level. Legislation was understood to comprise inputs into the judicial decision-making process, not an independent corpus of law with equal status. Judges, however, often had to construe legislation in order to make sense of it for their purposes. There emerged, therefore, principles of judicial construction of statutes. These principles did not treat statutes as law in the same sense, or with the same status, as Common Law; as a general rule, the principles interpreted statutes in such a manner as to minimize the impact of statute law upon Common Law. The 20th century differed in part from the 19th century in that courts came to treat statute law as law. The relevant insight provided by that and other experience should be clear: principles of construction or interpretation do not float in the air, ready to be picked. There are competing alternative principles each representing a point of view, each having its own base. In the history of economic thought, interpretation is ubiquitous. Every concept, every doctrine, every theory, every model is given a meaning from some point of view. Consider the doctrines of classical political economy: the labor theory of value, the theory of rent, Say’s law of the market, the theory of international trade, the idea of a surplus, the Cambridge controversy, and so on. Each of these has been given different readings, different meanings, and different applications to policy. On the one hand, interpretation has varied between paradigms on the basis of fundamental conceptualizations; on the other, interpretation has varied within paradigms on the basis of subordinate conceptualizations. Accordingly, efforts have been made to establish what an author ‘‘really meant,’’ a task increasingly superceded by efforts to unpack and deconstruct the process of attributing meaning. It is almost as if a commonsensical statement cannot be made, such as that the meaning of a text is a function of what an author provides a reader combined with what the reader brings to and gets out of her reading. Throughout the history of economic thought, most dramatically since the 18th century, there have been competing schools of economic thought. Each school projects a fundamental paradigm within which the economy is understood. One level of meaning is that of fundamental paradigms. If there are five schools of thought, five paradigms, A, B, C, D, and E, their respective paradigms stand in conflict, ceteris paribus what they share more or less in common. But each paradigm can be understood in terms of both its

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devotees and its opponents: A’s view of A, B’s view of A, and so on. It is not clear that A’s view of A must trump all other views of A, and so on; for that to be the case, one must assume that the devotee of a school is more correct about it than the devotee of another school, an assumption that privileges each school in interpreting itself.4 It may well be that C’s view of E is deemed, by some criterion, more meaningful than any other view of E (the whole problem can be projected on to this level, and the next one, et. seq.). On this level, therefore, we have all the schools’ view of themselves and of each other. But no school is homogeneous; every school, identified by agreement on certain fundamental paradigmatic conceptualization, tends to be divided into conflicting camps because of differences about subordinate issues and subordinate conceptualizations. Neoclassical economics has divisions based, for example, on partial versus general equilibrium, pure versus actual markets, flexible versus fixed prices, and so on. Keynesian economics has divisions based, for example, on the significance and treatment of price flexibility, liquidity preference, monetary variables, effective demand, expectations, and so on. Austrian economics has divisions based, for example, on the treatment of cost, subjectivism, economic aggregates, and so on. Institutional economists differ over the Veblenian dichotomy, deliberative versus nondeliberative decision-making, the nature and status of evolution theory, the definition of institution, and so on. As a result, there is not only A’s view of B, for example, but, because there are A1, A2, and A3’s view of A, there is A2’s view of B, and so on. The result is a matrix comprised of all such views, a matrix which forms a different level of meaning. Apropos the Virgil Thomson review quoted above, I have several times heard musicians play the same (short) piece as if performed by musicians from different musical genres. Given that premier credit for originality must be given the original composer, there is no reason why one cannot prefer a version of a piece other than that presumably of the original composer and no reason why one cannot contemplate a matrix of different musical readings of the same piece. (Of course, music is different from social science, which purports to explain some objective reality.) Accordingly, one may hazard the proposition that every doctrine, theory, etc. held by an economist is a matter of interpretation. In a neoclassical world, the sense in which the labor theory of value is understood will reflect both the form and purpose given of the labor theory and the neoclassical paradigm on the basis of which it is understood. Different economists can interpret the labor theory differently and the truly inquiring mind can, in part, focus on the matrix of interpretations – and do so without preventing the inquirer from having a favorite.


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Absent from Biblical and Constitutional interpretation seems to be the view that history is the history of error and that the only correct or true interpretation or view is the current one. Some historians of economic thought, and others, have this view. One would be surprised to find no one with that view in the two fields examined by Pelikan in his book. Undoubtedly, in all three fields may be found people who would view the past in terms of the present or who think the past was like the present or who would project their view of the past on to the present. The three fields of Biblical study, Constitutional law, and economics represent one level of interpretation – of moral rules and theology, legal rules, and the economy, respectively. The scholars who interpret those interpretations represent a second level of interpretation (Pelikan writes of ‘‘a need to ‘interpret the interpretations’ ’’ (pp. 50–51). The second-level interpretations of the first-level interpretations may also be studied, forming a third level of interpretation. Biblical and Constitutional Codes are forms of social control (and psychic balm) that have institutionally established authoritative interpreters. These agencies deal directly with moral and legal rules, respectively, and with the definition(s) of reality, which forms their penumbra. Economic thought is also a form of social control (and psychic balm) but it has no such authoritative agencies or interpreters, though it has within it its internal system of social control, operative through training, testing, hiring, promotion, publication, etc. In all three domains, the purpose of interpretation is given by the interpretive process itself (p. 52), but ultimately (is there such a thing?) by individual interpreters. The conduct of interpretation may vary, from looking at the internal order of the text to looking for the context in which the text operates, and from giving effect to a healthy respect to interpretation to denigrating the felt need for interpretation in the face of putative truth. In all three domains, interpretive decisions give effect to transcendental a priori principles – or at least are typically worded in terms of such principles. Religion and law may be radically innovative and subversive, but more typically they are formed by the conservative and the mysterious (cf. p. 54). Some schools of economic thought are radical and subversive, but most are also conservative and mysterious (think of economic problems as settled political conflicts (Sturn, 2004, pp. 328–329) and of the ‘‘invisible hand’’). Religion and law have their Scriptural texts; the closest mainstream economics comes to having such a text is Adam Smith’s Wealth of nations (for some it is Karl Marx’s Capital). And unless one does give infallible Scriptural status to Smith’s magnum opus, there is in economics no conflict between Scripture and tradition as there is in Christianity; in economics, the

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conflict is over canonical views of the economy and over canonical interpretations of those views, all arguable within the tradition of the discipline.5 Of course, economics, like religion, has those who are seen to be heretical and subversive; in both cases, they may be excommunicated, excluded (not hired, not published), or ostracized. They may be called heretics, revisionists, heterodox, and so on. Not only are there many paradigms available for Smith interpretation, each paradigm can be given numerous articulations and meanings. One paradigm is the Enlightenment. But every facet of that paradigm has been given multiple meanings, the author of each claiming priority for her own (Outram, 1950). The authors that matter are not only those who produce ‘‘original’’ texts, but also those who give ‘‘original’’ interpretations. Pelikan argues, we have seen, that both the Bible and the Constitution ‘‘present their interpreters with a confusing array of ambiguities when addressing any issue’’ (p. 61). Economics as a modernist science shares, or tends to share, with those who believe in religious Truth that there is an object of inquiry and study, and that one true (True) account of that object is possible. But why assume that only one interpretation, one true explanation, a single narrative, etc. is likely correct and, as a corollary, that the fact of multiple interpretations, explanations, or narratives is wrong and deplorable? Several answers seem, if ironically, possible. An individual may psychologically require closure and determinacy. An individual may at some point, perhaps at an early age, have been imbued with one particular interpretation. The one interpretation may be common and honorific among the individual’s reference group (those with whom he or she mixes and identifies). Some or all other interpretations do not ‘‘make sense’’ or are ‘‘uninteresting’’ to the individual. The individual may accept multiplicity of explanations for some reason, yet in the present matter finds that one is much more persuasive than the others, that it is correct. The fact is that many texts have language that permits multiple readings or interpretations. Because we want to believe that a text should or can have only one correct reading, we seek to find it. Actually we make it, not find it, and do so typically through our private reading. This latter is a relevant point but not the one I desire to emphasize. My point is that we should be prepared to accept open-endedness and ambiguity by tolerating both the fact of multiple interpretations and the fact that to settle upon one interpretation is to make a choice. Typically this choice is problematic; if it were not, likely there would be no problem of multiple interpretations. Leonida Montes makes a number of points that are relevant here. One point is that Smith’s understanding of certain terms and their present-day


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understandings ‘‘are different matters.’’ Our understandings ‘‘cannot fully determine the meanings and intentions of an author,’’ nor can his indicate ours (Montes, 2004, p. 3). Second, ‘‘what is said involves why and how it was said’’ and such requires ‘‘a serious understanding of the context, and the meaning of the text’’ (p. 4). Of course, if one cannot fully determine the meanings and intentions of an author, one likewise will not find it possible fully to determine context and meaning. Third, although Montes properly rejects the view of Michael Foucault as to the death of the author, he accepts Jacques Derrida’s view that there is no one meaning of a text, only different readings (p. 4). Fourth, different authors and different books use different methodological approaches each with its own vantage point, and therefore with each raising different issues of Smith interpretation (p. 8). Fifth, narrow versus broad understandings of such concepts as sympathy, civic humanism, virtue, harmony, and so on, profoundly affect the interpretation given by Smith (p. 13). The problem of continuity versus change pervades the economy, but it also pervades the work of the historian of economic thought, the circumstances to which economic doctrines and texts are applied, and the work of interpreting the interpretations. What, for example, drives the history of economic thought? In addition to the well-studied conflict between internalist and externalist theories, what efforts to influence the economic role of government, and the distributions of opportunity, power, wealth, and income, and what of the influence of cultural frameworks of thought? What is the analogue in the history of economic thought to multiple precedential sequences in law? Those who think relatively little of the biography of economists as a source of insight, raise the proposition that the truth of a theory is separable from the life and reputation of its author or devotee. By the same token, authorial intent is separable from the meaning or truth status of an author’s theory. One parallel in economics to the conflict between analytical jurisprudence and legal realism in law, is the conflict between pure deductive theory, with its use of pure abstract a-institutional conceptions, and institutional and other approaches to analysis, with their premise that institutions matter. The mainstream of economists seeks unique determinate optimal equilibrium solutions and does so only by assuming away the problems and variables which contradict such a protocol. Both analytical jurisprudence and mainstream, neoclassical economics postulate much more closure and determinacy than is evident in actual economies, in actual legal systems, and in any actual legal–economic nexus. Economic transactions may presume settled political conflicts, but in any actual legal–economic nexus two processes

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are simultaneously at work: that of reaching optimal economic solutions, given the structure of rights, and that of redetermining whose interests are to count as rights because questions of rights are in fact not ‘‘solved’’ once and for all. These issues continually arise at the microeconomic level as political, technological, social, and economic transformation takes place. These issues arise at the macroeconomic or systemic level as larger scale transformations take place – as they did when Western economies gradually changed from rural, agricultural, landed-property systems to urban, industrial, nonlanded property systems. No wonder that multiple conflicting interpretive bases, and multiple interpretations, of almost everything exist. The meanings of property, due process of law, equal protection, and so on are interpretive problems in jurisprudence. They are also, therefore, interpretive problems for economics. So too are the meanings of the labor theory of value and of the various theories of cost and the uses to which they may be put as well as the definitions of the scope of economics, freedom, industry, power, competition, and so on. Law, it would appear, is more receptive to a variety of inputs than is economics. The political scientist George Young told a class that the older philosophers ‘‘tell us what they thought in their time – not about our own time’’ (Ostrander, 2006, p. xxx). Insofar as the world has changed, from monarchical to democratic government and from rural, agricultural, landed-property societies and economies to urban, commercial, and industrial, nonlanded property societies and economies, one cannot expect ancient, medieval, and premodern philosophers to enable us to construct theories pertinent to our day from their theories. Yes, one can sense that the fundamental problem of principles of authority, freedom, and order is universally and timelessly relevant. But the language in which they are expressed, especially the definitions built into the words themselves, will reflect the preconceptions of their day and not ours. The same is true of economics. Mainstream, neoclassical economists prefer to think that economic agents have given, unchanging preferences and that the economic theory of today can be applied to any period, the logical equivalent of assuming that the economic system is unchanging. Different ages have different, as well as common, interpretive problems. The definitions of words – like property and liberty – change over time, in part as economic experience and ideology change. These changes of definition introduce further problems of interpretation for the jurist and the economist. The nature and significance of property changes – even though the word remains the same – when property no longer conveys participation in government, although it now raises questions of participation in governance.

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Returning for a moment to the quotation from George Young, one further point has two facets. The point concerns continuity. When Plato and Aristotle tell us about their time, it is clear that they react differently to the same experience: Plato the Idealist, and Aristotle the Realist. The first facet is that a given reality or status quo can be, and likely will be, interpreted differently on the basis of different perspectives; e.g., a given reality can elicit different pictures of utopia. The second facet is that Idealism and Realism are two perspectives, which are common throughout history. When Adam Smith writes in the Wealth of nations of the invisible hand, his wording uses ‘‘public interest,’’ the interest of ‘‘the society’’ and ‘‘the public good’’ (he also writes of the advantage of society). Later, economists have used such terms as economic efficiency, socially efficient, social interest, social welfare, Pareto efficiency or optimality, maximum or optimal output, and public interest. Are they to be understood as having either copied or echoed or revised or substituted for Smith’s meaning? For none of this, too, is there an independent test, a test independent of the problem of the hermeneutic circle. Some say that there is no one test, but there are evaluative criteria. But ‘‘evaluative criteria’’ not only involves a test, but ‘‘criteria’’ is plural. It is all interpretation. It all must be worked out.

NOTES 1. I should point out that in high school I was made aware of conflicting interpretations of U.S. history, both at the time events took place and afterward; and in college my study of U.S. constitutional history convinced me of the elastic interpretive nature of constitutional provisions and interpretation. By some unknown time, I had the same view of the Bible. 2. The quote also claims that constitution and constitution worship ‘‘gives great freedom to a count .y It is a freedom greater than it would have had if no such document existed .y A written constitution must be enormously ambiguous in its general provisions.’’ The latter is clearly correct. I am not sure about the former claim. 3. Pelikan takes up the problem of original intent in scriptural matters in regard to translation from the original Hebrew and Greek as it applies to the various versions of the Old and New Testament (pp. 110–112). The further problem is, which original text? 4. Although it is easy to assume that A’s adherents must be deemed authoritative on what A meant to say, it is not entirely convincing. A’s adherents interpret A through their own interpretive prism, no less than do B and C through their own. 5. Some may believe that nowadays no serious person assigns scriptural status to the Wealth of nations or Das kapital. I suspect that my files on the use of the invisible hand contain some instances in which commentators are explicit about it or come very close. The matter turns in part on the meaning assigned to ‘‘serious.’’ Most Marxists seem prepared to acknowledge that Marx does not have the last word on Capitalism.

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REFERENCES Montes, L. (2004). Adam Smith in context: A critical reassessment of some central components of his thought. New York: Palgrave, Macmillan. Ostrander, F. T. (2006). Notes from George Young’s review of economic theory, Political Science 4, Williams College, Spring 1930. Research in the history of economic thought and methodology, 24-B, 209–311. Outram, D. (1995). The enlightenment. New York: Cambridge University Press. Pelikan, J. (2005). Whose Bible is it? A history of the scriptures through the ages. New York: Viking. Samuels, W. J. (2002). The rule of law and the capture and use of government in a world of inequality. In: Review of Warren J. Samuels, Economics, governance and law (pp. 61–79). Northampton, MA: Edward Elgar. Sturn, R. (2004). Review of economics, governance and law. European Journal of the History of Economic Thought, 11(2), 328–330 by Warren J. Samuels.

Porta, Scazzieri and Skinner’s KNOWLEDGE, INSTITUTIONS AND THE DIVISION OF LABOR AN ANALYSIS OF SOME ESSAYS IN THE HISTORY OF ECONOMIC THOUGHT Leonidas Montes A review essay on Knowledge, Social Institutions and the Division of Labour. Pier Luigi Porta, Roberto Scazzieri and Andrew Skinner (Eds.). Cheltenham, UK: Edward Elgar, 2001. 367 pp. ISBN 1840643358. This volume, sponsored by the European Society for the History of Economic Thought, was shaped at the University of Bologna where earlier drafts of the 16 essays it contains were presented at a Conference on institutions, markets and the division of labor. Like any collection of essays, especially if they come after a conference, the quality of the contributions varies, but it must be said that the average exceeds the usual standard. Moreover, although the title ‘‘Knowledge, Social Institutions and the Division of Labour’’ is broad enough to accommodate a diversity of subjects, there is a degree of congruity among the different contributions. The book is divided in three parts, ‘‘Rationality, Communication and Connecting Principles’’ (comprising four essays), ‘‘Social Interaction and Moral Sentiments’’


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(comprising five essays) and ‘‘Division of Labour, Patterns of Interdependence and Social Institutions’’ (comprising seven essays). Regardless of the latter division, Adam Smith is the obvious winner, with essays by Andrew Skinner (‘‘Adam Smith, the Philosopher and the Porter’’), Jeffrey Young (‘‘Adam Smith’s Two Views of Markets’’), Amos Witzum (‘‘Division of Labour, Wealth and Behaviour in Adam Smith’’), Roberto Censolo (‘‘The Moral Micro-Foundations of Adam Smith’s Concept of Industry’’), Jean Cartelier (‘‘Division of Labour and Money: Some Comments on Steuart, Smith and Their Legacy’’), Gloria Vivenza (‘‘The Division of Land and the Division of Labour. Analogies and Differences Between Ancient and Modern Times in Adam Smith’s Thought’’), Stefano Fiori and Enzo Pescirelli (‘‘The Asymmetrical Relation Between Personal Incentives and the Division of Labour in Smith’s Stadial Perspective’’). Other prominent figures in the history of economic thought are present, like David Hume (‘‘Hume: A Reassessment,’’ by Sheila Dow), Sir James Steuart (‘‘The Formation and Development of Commercial Society in the Economics of James Steuart,’’ by Dominique Caboret) and an essay on John Maynard Keynes and Friedrich von Hayek (‘‘Individuals, Public Institutions and Knowledge: Hayek and Keynes,’’ by Anna Carabelli and Nicolo` De Vechi). In addition, there is a brief essay by Robert Heilbroner, entitled ‘‘Vision and Analysis in the History of Economic Thought,’’ two essays on the relationship between game theory and institutional economics (‘‘From the ‘Standards of Behaviour’ to the ‘Theory of Social Situations’: A Contribution of Game Theory to the Understanding of Institutions,’’ by Christian Schmidt; and ‘‘Oskar Morgenstern and the Origin of the Game-Theoretic Approach to Institutional Economics,’’ by Nicola Giocoli), a general essay on institutions (‘‘Notes on Institutions, Political Economy and Economics,’’ by Heinrich Bortis), and one article on economic history (‘‘Comparing Two Urban Industrial Districts: Bologna and Lyon in the Early Modern Period,’’ by Carlo Ponti). Most of the contributors are well-known scholars in the field of history of economic thought, and their contributions focus principally on their area of expertise. There has been an increasing interest in Smith’s legacy since the publication of The Glasgow Edition of the Works and Correspondence of Adam Smith. This volume reflects this interest, devoting an important portion to the ‘‘father of science.’’ Although there is a significant tradition before and behind Adam Smith, the formation of political economy was underpinned by serious consideration regarding social institutions. The Scottish Enlightenment had a distinctive approach to what we might, today, label social sciences. Adam Smith, David Hume, Adam Ferguson, Lord Kames, Lord

An Analysis of Some Essays in the History of Economic Thought

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Mondboddo, John Millar, Dugald Stewart, Thomas Reid, among others, shared a common mission in this respect. After the Act of Union in 1707, Scotland witnessed not only the advantages of economic progress, but also an intellectual resurgence that was rather unique. It was not a mere coincidence that the Newtonian revolution took hold in Scotland, becoming a methodological inspiration for the pursuit of the ‘‘science of man.’’ The influence of the Gregory family, who held different chairs at St Andrews and Edinburgh almost continuously from 1660s to the 1720s (Guerrini, 1986), was so pervasive that few scholars remained outside of Newton’s influence.1 Newton’s last paragraph of his popular and influential Opticks (1717)2 states, in his query 31: ‘‘[a]nd if Natural Philosophy in all its Parts, by pursuing this Method, shall at length be perfected, the Bounds of Moral Philosophy will be also enlarged’’ (Newton, 1979 [1704], p. 405). This statement was taken seriously at the time. But what is really remarkable is that Newton’s impact was rapidly and more fully assimilated in Scotland. Colin Maclaurin’s (1748) An Account of Sir Isaac Newton’s Philosophical Discoveries became one of the most popular expositions of Newtonianism during the Enlightenment. One could argue that ‘‘science’’ was public in Scotland during the Enlightenment. In this intellectual setting, Newton significantly shaped the Scottish Enlightenment. Adam Smith was no exception in this environment, but what is really exceptional is his command of what Newtonianism actually is. The latter is a methodological point that has been rather neglected, but the editors and some contributors take their stance on its consequences, especially on the widely held view that Smith would be a forebear of general economic equilibrium theory. For example, at the outset, Andrew Skinner insists upon this point in his brief preface when he states ‘‘It is the complexity of Smith’s psychological assumptions which enables one to distance Smith from traditional general equilibrium theory of the Walrasian type’’ (p. ix). Moreover, it is duly underlined by the editors that Smith considered the market to be ‘‘a rather open, and not fully determined, set of conditions, under which the economy, through its autonomous functioning, would produce a higher level of social welfare than would otherwise be attainable under the (necessarily) misguided attention of government’’ (p. 15). This vision of ‘‘the model of civil society’’ (p. 15) is pervasive throughout this volume, and its implications for the current state of economics are latent. If, nowadays, the picture of Adam Smith as the theoretical ancestor of general economic equilibrium theory, a` la Schumpeter, has been questioned,3 Smith’s lessons on markets and institutions remain a rich source of controversy for the current debate.

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Smith’s laissez-faire, as suggested in various essays throughout this collection, should be taken cum grano salis. It is a complex issue, and though nowhere does Smith fully deny or minimize the role of government, as some libertarians might have wished, he is certainly against excessive government intervention. Political issues and the social and economic context in general are very important in this respect. Indeed, Smith’s approach to politics is at least controversial,4 and his views on political economy can be interpreted as an important context that shaped his position on many other important issues. Politics and economics are intertwined, but the latter acquires an unprecedented significance. The ‘‘system of natural liberty’’ gives pre-eminence to the person who wants to decide how she will face the market, but there is an important underlying social and institutional framework. Human beings behave not only like individuals who might pursue their self-love, but they also behave as members within a community. Indeed, Smith shares an Aristotelian view of human beings as social beings that is underlined in some essays in this volume. In terms of agency-structure dialectic, Smith’s position has an important component of Weber’s voluntarism, together with a dose of Durkheim’s determinism. This agency-structure combination is quite Smithian from an institutional point of view. Our neoclassical homo oeconomicus, as it is already well known, is a simple caricature compared with Smith’s complex view of human nature. This reality conforms to the broader aim of this volume, which is to uncover the importance of social knowledge for economics, through an institutional approach that considers society and members of society alike. A recovery of the Smithian tradition is always a refreshing experience. Therefore, not surprisingly, nowadays the canonical understanding of the invisible hand, e.g. Arrow and Hahn (1971), is challenged by a multiplicity of different interpretations.5 The question about the ‘‘classical’’ invisible hand still remains: whether and how selfinterest produces socio-economic progress, going back to Mandeville’s famous subtitle Private Vices, Publick Benefits. The editors request some additional points to be borne in mind ‘‘to complete a frame of mind which we [Porta and Scazzieri] feel strictly parallel to the purpose of this collection of essays’’ (p. 16). They refer to a call for Smith’s political economy, which combines the philosopher of ‘‘expediency’’ with the philosopher of ‘‘sympathy.’’ Somehow this theme is present in most contributions. In Coase’s own words ‘‘exchange takes place without any specification of its institutional setting. We have consumers without humanity, firms without organization, and even exchange without markets’’ (p. 11). It was Marshall who, before retiring in 1908, finally won the battle to establish economics as an independent subject of study. Within this


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‘‘political economy’’ versus ‘‘economics’’ debate, a recovery of what political economy actually is seems at odds with Heinrich Bortis’s ‘‘Notes on Institutions, Political Economy and Economics.’’ He works out a distinction between political economy and economics, and pre-assumes that Adam Smith is the forebear of the latter and Quesnay of the former. Actually, he concludes that ‘‘political economy founded by Francois Quesnay is more fundamental than economics initiated by Adam Smith’’ (p. 262). First of all, well before his Principles (1920), Marshall had made the case for using economics instead of political economy; second, Bortis attributes to Smith an interpretation that seems contradictory with the general view of this volume, i.e. that neoclassical economics is ultimately derived from Adam Smith. However, his distinction relies on a particular interpretation of institutions and a peculiar reading of Smith that ignores his broader project. Hannah Arendt (1998 [1958], p. 29) perceptively clarified that political economy would have been a contradiction in terms for the Greeks, as whatever economics meant, it was a non-political term related to the individual; a household affair par excellence. From this stance of the public versus the private, the debate between economics and political economy becomes more complex if we bring back to the discussion the vestiges of classical republicanism that can still be found in Smith’s works.6 Andrew Skinner, an authority to Smith scholars, if not ‘‘the’’ authority, begins this collection of essays with a paper entitled ‘‘Adam Smith, the Philosopher and the Porter.’’ Based on the egalitarian stance on which Smith builds his system, Skinner investigates the simple and deep difference between the philosopher and the street porter, which ‘‘seems to arise not so much from nature, as from habit, custom and education’’ (Smith, 1981 [1776], p. 29). Relying on different sources of Smith’s legacy, Skinner analyzes the philosopher’s behavior. First of all, he duly underlines the importance of social admiration (Smith, 1984 [1759]), and then the art of persuasion (Smith, 1985). But Skinner broadens his thesis to the methodological realm relying on Smith’s famous essay ‘‘History of Astronomy’’ (Smith, 1982). The triad of ‘‘surprise, wonder and admiration’’ is an important psychological underpinning to understand Smith’s conception of philosophy of science. Elsewhere Skinner has called our attention to a Kuhnian simile, but for this volume he recalls Shackle’s view of science (see also Skinner, 1979), which is interpreted as an extension of Smith’s philosophy of science. The search for a ‘‘few connecting principles’’ underlies the scientific attempt of the ‘‘system-builder’’ (Skinner, 1976). But, according to Skinner, this search, which is a philosophical, psychological and aesthetical pursuit, does not ‘‘discount the role of a genuine desire for truth’’ (p. 47).

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Along Skinner’s line of thought, I would like to emphasize that Smith presents a philosophical realism that is noteworthy. It will suffice to remember that not even the greatest system of Sir Isaac Newton is free of scientific improvement; simply, it ‘‘now prevails over all opposition’’ (Smith, 1982, p. 104). In Smith’s own words, this system is part of the philosophical quest to ‘‘lay open the concealed connections that unite the various appearances in nature’’ (Smith, 1982, p. 51). Smith’s realism does not deny the ‘‘transfactual’’ that distinguishes between what it is and what simply happens as a manifest outcome. As Skinner suggests, the desire for truth in Smith is all-encompassing. Sheila Dow, in her ‘‘Hume: A Reassessment,’’ provides further evidence against the traditional reading of Hume as a forebear of logical positivism. Moreover, although she has contributed to ‘‘critical realism,’’ Dow argues that critical realists have failed to appreciate Hume’s realist methodology. In keeping with the tradition initiated by Norman Kemp Smith (1941), and followed by Wright (1983) and Strawson (1989), Dow provides additional evidence for Hume’s realism, considering the intellectual context surrounding Hume’s writings.7 For this purpose, Dow expands on her previous findings about the ‘‘distinctiveness’’ of the Scottish Enlightenment and shows how Smith can also be interpreted as a realist because of his idea of an open and evolving system. The latter is a methodological feature that has important implications for economics (see Dow, 2002, pp. 141–143). Readers are familiar with Robert Heilbroner’s important contributions, and his political argument in The Crisis of Vision in Modern Economic Thought (Heilbroner & Milberg, 1995). This paper reinforces his point by calling the attention of historians of economic thought to their importance within the future of economics as a discipline and to the current state of economics as detached from social reality. On the latter, much water has gone under the bridge, but Heilbroner’s concern about formal modeling and the ‘‘virtual mathematization of economic analysis itself’’ (p. 53) is persuasive. Our graduate students must not forget that Debreu once formally suggested that future PhDs in economics should require a PhD in mathematics. In terms of history of ideas, according to Heilbroner, if the physiocrats and the mercantilists held an important image of the state, almost like the Leviathan engraved in Hobbes’s 1651 edition, it was the vision of classical economists to change this focus to ‘‘government’’ and, to a larger extent, to the elusive but all-encompassing modern notion of ‘‘society.’’ Additionally, Heilbroner presents some provocative points on what capitalism is and how it has evolved, pinpointing how politics and ideology have deeply influenced our vision of economics. He concludes with a declaration


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of faith: as analysis rests on insightful vision, our profession should be aware of ‘‘this dependency in developing a point of view appropriate to the tasks it will have to face’’ (p. 63). It is refreshing reading, with suggestive passages and a clear but provocative message. Nicola Giocoli, in his ‘‘Oskar Morgenstern and the Origin of the GameTheoretic Approach to Institutional Economics,’’ broadens the scope of his investigations on the evolution of modern decision theory and rationality in economics. The common view on Morgenstern’s lack of mathematical training and von Neumann’s determinate influence in the shaping of their famous 1944 Theory of Games and Economic Behaviour (TGEB), is put in perspective by Giocoli. Although Morgenstern did not have the necessary background to develop TGEB, it is suggested that he triggered a revolution in economic theory, even anticipating rational expectations. Furthermore, TGEB could be read as a revolutionary book attacking neoclassical theory. By reading previous papers by Morgenstern, the author exposes many insights about this economist, whose contributions have been overshadowed by TGEB and the mathematical genius of his co-author, John von Neumann. Well before TGEB, Morgenstern had a clear sense that mathematical economics of the period were in ‘‘lamentable condition’’ (p. 173); therefore, TGEB’s appearance in this respect marked a turn by breaking away from the mechanistic view of economics that was being developed after the introduction of differential calculus in economics. Through Karl Menger, Morgenstern visualized the formal mathematical model he was going to develop with von Neumann, but he also shared many of the Austrian school’s concerns with methodological issues, a theme Christian Schmidt later develops. In addition, Morgenstern was clear about the irreconcilability between perfect foresight and economic equilibrium. By underlining Morgenstern’s forward-looking character of economic models, the author argues not only that he was a forebear of rational expectations, but also that his position in terms of perfect foresight was more stringent. But an important question in this setting, recalling Heilbroner’s concern, is whether this approach to economics, notwithstanding its many applications, also became responsible for an increasing formalism in economics. In his contribution, Christian Schmidt expands Giocoli’s concern. The author explores the relationship between the ‘‘accepted’’ standards of behavior and the ‘‘established’’ social order. According to Schmidt, if Morgenstern shares Menger’s subjectivism, he is in clear opposition to Hayek, as Morgenstern tends to view social organizations as physical phenomena in which ‘‘social order arises from logical properties of its own consistency’’ (p. 163). It is a suggestive thesis, as the author develops the tension between

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Menger’s Austrian subjectivism and the ‘‘objectivity of the logic of knowledge’’ (p. 163). Moreover, it is argued that ‘‘the standards of behavior belong to the von Neumann and Morgenstern solution as an essential component and not as one of its possible interpretations’’ (p. 164), so the author concludes that stability, as an ethically neutral concept, allows a ‘‘reconciliation of the subjectivity of the players with the objectivity of game theory’’ (p. 166), which was at the core of Morgenstern’s dilemma. In ‘‘Individuals, Public Institutions and Knowledge: Hayek and Keynes,’’ Anna Carabelli and Nicolo` De Vechi explore Hayek versus Keynes on public institutions. While Keynes understood spontaneity to imply the ‘‘absence of deliberation’’ (p. 231), Hayek saw institutions as spontaneous social practices. Keynes saw public institutions as providing a remedy against unemployment; Hayek, acknowledging an active role of the public sector, confined their purpose to defending the freedom of each individual to choose his own project. These differences lead the authors to conclude: ‘‘Keynes’s collective agents socialize altruism, while Hayek’s public sector only tends to protect and safeguard the individual’’ (p. 244). In other words, Keynes was aware of the importance of self-love; even more, ‘‘he remained an egoist all his life’’ (p. 244). Therefore, for the purpose of constraining selflove and promoting social justice, we would need public institutions. Elsewhere the authors had argued for Keynes more individualistic approach to decision-making compared to Hayek’s more rule-following scheme (Carabelli & De Vecchi, 1999), but this essay stretches this argument, suggesting that Keynes’s individuality could also be interpreted as another rather instrumental reason for his notion of public institutions. Moving back to the 18th century, in ‘‘The Formation and Development of Commercial Society in the Economics of James Steuart,’’ Dominique Caboret presents an account of Steuart’s commercial society as a ‘‘desire to articulate an economic analysis upon a political analysis within a theory of history’’ (p. 266). Men, as ‘‘slaves to their own wants,’’ determine the meaning of commercial society in terms of commodity relations, but the author attempts to uncover political and historical issues that influence Steuart’s views of commercial society. It is well known that Adam Smith did not mention Steuart in his Wealth of Nations,8 but in contrasting Steuart with Smith’s so-called ‘‘Newtonian ambitions’’ (p. 276), the author misinterprets Smith, as according to her, his natural and progressive view of economic development presupposes ‘‘the autonomy of the economy from the other aspects of human society’’ (p. 276). Moreover, in addition to this determinism, she applies to Smith a broad ceteris paribus clause, declaring: ‘‘Smith abstracts from conditions (social, institutional or psychological)


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external to the economy and treats them as constants’’ (p. 276). In my view, both judgments are far from the real Smith, and not even endnote 27 (p. 282) can justify this argument. If history is supposed to be relevant to the development of this essay, I feel its strength resides in its political arguments. Neither James Steuart’s role in the Jacobite Restoration nor his 18 years of exile on the Continent, which might have shaped his advocacy for state intervention, are even mentioned. But the presence of the statesman and his significance is duly treated. The idea that Steuart’s thought is ‘‘both concrete and inductive’’ could have been elaborated further, as it seems an interesting methodological point. The essay concludes by underlining the importance of commercial society as a new reality for Steuart, and how this, in terms of civil liberty and acquisitive economics, underpins his political economy. It investigates the idea of commercial society in Steuart’s system, but appears to underestimate that to him, political action matters in terms of economic progress. There are six more essays on Adam Smith, covering different aspects of the father of the science. Particularly interesting and original is Gloria Vivenza’s ‘‘The Division of Land and the Division of Labour: Analogies and Differences Between Ancient and Modern Times in Adam Smith’s Thought.’’ Her treatment of this difficult issue is quite illuminating. Although she has already treated the influence of the classics in Smith’s division of labor (Vivenza, 2001), in this essay she delves into some relatively ignored issues, especially regarding Smith’s understanding of the relation between landed property and labor. Beginning with a look at the difference between Roman and Christian understandings of landed property, and various classical agrarian laws, Vivenza argues that 17th and 18th century scholars did not misunderstand the Gracchan reform (p. 339). Rather, private property was well ingrained in 18th-century thought, though redistribution was promoted through readings of some classical republicans. It will suffice to remember that Smith (1981 [1776], p. 715) said ‘‘civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.’’ Notwithstanding, labor, as Vivenza clearly demonstrates, ‘‘is the thing to be divided and distributed’’ (p. 347) for Smith, and the latter has obvious Marxist implications in terms of labor as private property. The Roman proletarii, those who owned nothing, became owners of their only commodity. In ‘‘Adam Smith’s Two Views of Markets,’’ another well-known Smithian scholar, Jeffrey Young, presents two different outcomes on the emergence and evolution of trade. On the one hand, the so-called ‘‘benevolent model’’

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represents commercial society grounded on the ‘‘system of natural liberty.’’ Individual initiatives, through the working of the ‘‘canonical’’ invisible hand, produce a positive and increasing social outcome. In other words, self-interest produces public benefit. On the other hand, the dark side of politics applied to economic functioning could devolve into a zero-sum outcome as a result of the influence of interest groups. Rent-seeking behavior of powerful agents may hamper economic progress in the so-called ‘‘malevolent model.’’ The latter is clear in all those famous Wealth of Nations passages that attack the mercantile system. The former corresponds to the natural functioning of the market that relies on a model of social cooperation in which Smith’s Theory of Moral Sentiments plays a foundational role. Moreover, Young argues that this benevolent model would exhibit ‘‘interdependent utility functions such that they would evaluate the payoffs differently from the way modern theory presents the game’’ (p. 107). Much experimental research is currently being carried out attempting to apply Smith’s conception of human nature, especially regarding his concept of sympathy, to human behavior, and Young points toward that direction. In ‘‘Division of Labour, Wealth and Behaviour in Adam Smith,’’ Amos Witzum poses a new interpretation to overcome two alternative stances on the relationship of the division of labor and its consequences. On the one hand, West (1964, 1996) finds an apparent contradiction between the benefits of the division of labor of Book I and the often-quoted negative effects of Book V that would hamper growth. On the other hand, Rosenberg (1965, 1990) would see no problem, as Book V would refer to the long run; therefore, the negative effects of the division of labor will not necessarily affect economic growth. Moreover, according to Rosenberg, a sympathetic process in which workers emulate the prudent behavior of their employers will harness the disparaging consequences of the division of labor, but West does not agree as, according to him, its effects have to influence productivity. This apparent contradiction had also been clearly pinpointed by Albert O. Hirschman in his already classic The Passions and the Interests: Political Arguments for Capitalism before its Triumph. In his own words: ‘‘Smith’s ambivalence toward nascent capitalism was not limited to this instance [invisible hand]. Its most famous manifestation is perhaps his treatment of the division of labor, which he celebrates in Book I, only to castigate it in Book V’’ (Hirschman, 1977, p. 105). Witzum attempts to circumvent this debate, a sort of petit Adam Smith Problem, by linking our ‘‘desire to better our condition’’ to the social and moral approbation


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of this phenomenon. He concludes, ‘‘that the universal desire to better our condition has different manifestations depending on an individual’s income and education’’ (p. 151), in which the poor will find sympathy in those close to them. The latter is a point that has been treated by Nieli (1986), and more recently by Otteson (2002), but as I have argued (Montes, 2004, p. 41, n. 48), Smith, well aware of the classics, might have relied on Hierocles’s account of the concentric circles to develop his concept of sympathy. Another question that has been an active source of debate is that of Smith’s religious beliefs. He was very careful about his private life and also about his public image. At a time when religious dissent could seriously undermine an intellectual’s career (as in Hume’s case), public opinion mattered. As there is no evidence of Smith’s personal religious beliefs but rather only some testimonies that are sources of debate and speculation, it is easy to sympathize with Fleischacker’s judgment that if Smith were a Christian, he ‘‘is certainly no conventional Christian’’ (2004, p. 71). Roberto Censolo, in his ‘‘The Moral Micro-Foundations of Adam Smith’s Concept of Industry,’’ too readily presupposes a particular universalistic religious position for Smith in order to develop a challenging thesis. By distinguishing a minor virtue, like frugality, which, through savings, leads to social economic welfare, and by showing that the invisible hand can be viewed under the same structure, i.e. as virtuous as long as it produces a positive outcome, Censolo attempts to bridge the gap between the Theory of Moral Sentiments and the Wealth of Nations. We witness another partial solution to the Das Adam Smith Problem. Finally, in his ‘‘Division of Labour and Money: Some Comments on Steuart, Smith and Their Legacy,’’ Jean Cartelier investigates the institutional differences underlying the different concepts of money in Steuart and Smith. The division of labor precedes any theory of money in Smith, but Steuart ‘‘tries to deduce from the mere existence of money the emergence of a large variety of wants and commodities’’ (p. 288), considering money a precondition of modern society. The former would be a naturalistic approach, the latter structuralist. The author concludes that, by underlining the precedence of money, Steuart paves the way to Keynes and shows some connections with Simmel’s Philosophy of Money (1907). In summary, this volume presents a diversity of themes under one broad title. The diversity and quality of the essays suggest a challenging conference, which can inform a variety of research programs in the history of economic thought.

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NOTES 1. However, it must be underlined that Lord Kames and Lord Mondboddo had serious differences with Newtonianism. 2. Opticks was first published in English in 1704, with only 16 queries. A second edition in Latin was published in 1706 with seven more queries (numbered 25–31), followed by a second English edition in 1717 with eight more queries (numbered 17–24). 3. For example see Winch (1997), who convincingly argues against those who still want to see Smith as a precursor of general economic equilibrium theory; and for a similar view arguing, in addition, that Smith understood Newton better than we do, see Montes (2003). 4. Recently, Fleischacker has argued that ‘‘the truth in the libertarian reading of Smith comes from his cynical, dismissive view of politics’’ (Fleischacker, 2004, p. 229). 5. Although Grampp (2000) only detected 10 different meanings of the invisible hand, Warren Samuels has been researching dozens of interpretations. 6. Brown (1994) claims a division between a moral TMS (dialogic) and an amoral WN (monologic), and bluntly dismisses any kind of public virtues in Adam Smith. Recently, Fleischacker (2004) has taken a similar position, especially regarding classical republicanism. However, I believe one can still find vestiges of civic humanism in Smith’s thought. In my view, Smith represents the twilight of this tradition, but not its complete dismissal. The standing army debate and his use of vir virtutis discourse would, in my view, support this assertion (see Montes, 2004, Chapter 3). 7. In Dow (2002), the author expands her argument about Hume by adopting Quentin Skinner’s methodological stance with reference to the importance of context for our understanding of the history of ideas. The approach initiated by Quentin Skinner began with his influential essay ‘‘Meaning and Understanding in the History of Ideas’’ (1969) and a very much improved version can be found in the first volume of his collected essays (see Skinner, 2002, pp. 57–89). In my personal opinion, historians of economic thought have not fully appreciated the importance of Skinner’s methodological position. 8. In a letter to William Pulteney (1772), Smith writes: ‘‘Without once mentioning it (Steuart’s Inquiry into the Principles of Political Economy), I flatter myself, that every false principle in it, will meet with a clear and distinct confutation of mine’’ (Smith, 1987, p. 164).

REFERENCES Arendt, H. (1998 [1958]). The human condition. Chicago: The University of Chicago Press. Arrow, K. J., & Hahn, F. (1971). General competitive analysis. San Francisco: Holden-Day Inc. Brown, V. (1994). Adam Smith’s discourse; canonicity, commerce and conscience. London: Routledge. Carabelli, A., & De Vecchi, N. (1999). Where to draw the line? Hayek and Keynes on knowledge, ethics and economics. European Journal of the History of Economic Thought, 6(2), 271–296.


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Dow, S. (2002). Interpretation: The case of David Hume. History of Political Economy, 34(2), 399–420. Fleischacker, S. (2004). On Adam Smith’s wealth of nations: A philosophical companion. Princeton: Princeton University Press. Grampp, W. D. (2000). What did Smith mean by the invisible hand. Journal of Political Economy, 108(3), 441–465. Guerrini, A. (1986). The Tory Newtonians: Gregory, Pitcairne and their circle. Journal of British Studies, 25, 288–311. Heilbroner, R., & Milberg, W. (1995). The crisis of vision in modern economic thought. Cambridge: Cambridge University Press. Hirschman, A. O. (1977). The passions and the interests: Political arguments for capitalism before its triumph. Princeton: Princeton University Press. Maclaurin, C. (1748). An account of Sir Isaac Newton’s philosophical discoveries. London: A. Millar. Montes, L. (2003). Smith and Newton: Some methodological issues concerning general economic equilibrium theory. Cambridge Journal of Economics, 27(5), 723–747. Montes, L. (2004). Adam Smith in context. A critical reassessment of some central components of his thought. London: Palgrave-Macmillan. Newton, I. (1979 [1704]). Opticks: Or, a treatise of the reflections, refractions, inflections and colours of light. London: William Innys. Nieli, R. (1986). Spheres of intimacy and the Adam Smith problem. Journal of the History of Ideas, 47(4), 611–624. Otteson, J. R. (2002). Adam Smith’s marketplace of life. Cambridge: Cambridge University Press. Rosenberg, N. (1965). Adam Smith on the division of labour: Two views or one. Economica, 33, 127–139. Rosenberg, N. (1990). Adam Smith and the stock of moral capital. History of Political Economy, 22(1), 1–17. Skinner, A. S. (1976). Adam Smith: The development of a system. Scottish Journal of Political Economy, 23(2), 111–132. Skinner, A. S. (1979). Adam Smith: An aspect of modern economics. Scottish Journal of Political Economy, 26(2), 109–125. Skinner, Q. (2002). Visions of politics: Regarding method. Cambridge: Cambridge University Press. Smith, A. (1981 [1776]). An inquiry into the nature and causes of the wealth of nations. In: R. H. Campbell & A. S. Skinner (Eds). Indianapolis: Liberty Fund. Smith, A. (1982). History of astronomy. In: W. P. D. Wightman & J. C. Bryce (Eds), Essays on philosophical subjects (pp. 33–105). Indianapolis: Liberty Fund. Smith, A. (1984 [1759]). The theory of moral sentiments. In: D. D. Raphael & A. A. Macfie (Eds). Indianapolis: Liberty Fund. Smith, A. (1985). Lectures on rethoric and belles lettres. In: J. C. Bryce (Ed.). Indianapolis: Liberty Fund. Smith, A. (1987). Correspondence of Adam Smith. In: E. C. Mossner & I. S. Ross (Eds). Indianapolis: Liberty Fund. Smith, N. K. (1941). The philosophy of David Hume: A critical study of its origins and central doctrines. London: Macmillan. Strawson, G. (1989). The secret connexion: Causality, realism and Hume. Oxford: Oxford University Press.

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Vivenza, G. (2001). Adam Smith and the classics: The classical heritage in Adam Smith’s thought. New York: Oxford University Press. West, E. G. (1964). Adam Smith and his legacy for modern capitalism. Oxford: Oxford University Press. West, E. G. (1996). Adam Smith on the cultural effects of specialization: Splenetics versus economics. History of Political Economy, 28(1), 83–105. Winch, D. (1997). Adam Smith’s problems and ours. Scottish Journal of Political Economy, 44(4), 384–402. Wright, J. P. (1983). The sceptical realism of David Hume. Manchester: Manchester University Press.

Ghazanfar’s MEDIEVAL ISLAMIC ECONOMIC THOUGHT Salim Rashid A review essay on S. M. Ghazanfar’s Medieval Islamic Economic Thought: Filling the Great Gap in European Economics. London: Routledge, 2003. 304 pp. ISBN 0415297788. This book is important for demonstrating a significant lacuna in our current view of the history of economic thought. It reflects many years of research, and of struggle with established views, on the part of the editor and principal author, S. M. Ghazanfar, who is to be congratulated for having thus carried his program to fruition. He has been ably aided by A. A. Islahi and Hamid Hosseini in this venture. I am reminded of the introduction to Maria Rosa Menocal’s (1987) book on The Arabic role in medieval literary history where she poses the question of ‘‘courtly love’’ and thus, indirectly, of chivalry, for Medieval Europe. What is the origin of the troubadour, the bearer of songs of courtly love? A simple solution presents itself in the Arab word ‘‘tarab,’’ or song, from which troubadour seems to follow naturally. Nonetheless, the suggestion was dismissed out of hand because troubadour ‘‘could not’’ have arisen from a society which oppresses women! We should be more concerned with the facts than with our preconceptions about societies. Many scholars who have examined the general worldview of Muslim civilization and its impact upon the West have been convinced that a substantial debt to the Muslims is due. Ghazanfar quotes three such scholars A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 113–120 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24006-9

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(p. 250) and one should add W. M. Watt (1994), himself a Christian clergyman, to this list. But the argument needs more careful illustration and documentation for economics. I begin by a direct review of the Ghazanfar volume and the lacuna it points to. Given the current role of ‘‘political Islam,’’ it is worth probing the reasons for this lacuna to exist, how it might link up with the economic history of Islam, and with prospects for future research. Joseph Schumpeter wrote in his marvelous volume on the History of economic analysis about the brief treatment of the 2,000 years preceding 1800 that ‘‘so far as the purposes of this history are concerned, many centuries within that span are blanks’’ (Schumpeter, 1954, p. 52). Later, he gives short shrift to Charlemagne and then says ‘‘we may safely leap over 500 years to the epoch of St. Thomas Aquinas’’ (Schumpeter, 1954, p. 74). These are exactly the centuries when Muslim empires were supposedly dominant. So Schumpeter definitely espoused what is called the ‘‘Great Gap’’ thesis about economic analysis. What Ghazanfar has done for the Arab writings and Hosseini for the Persian ones is to provide specific examples which suggest the contrary. Let me go over some quotes and describe their import. Al-Ghazali is excellent on social and economic interdependence and on the use of barter but fails on store of value. You should know that the plants and animals cannot be eaten and digested as they are. Each needs some transformation, cleaning, mixing, and cooking, before consumption. For a bread, for example, first the farmer prepares and cultivates the land, then the bullock and tools are needed to plough the land. Then the land is irrigated. It is cleared from weeds, then the crop is harvested and grains are cleaned and separated. Then there is milling into flour before baking. Just imagine – how many tasks are involved; and we here mention only some. And, imagine the number of people performing these various tasks, and the number of various kinds of tools, made from iron, wood, stone, etc. If one inquires, one will find that perhaps a single loaf of bread takes its final shape with the help of perhaps more than a thousand workers. (quoted on p. 32) Creation of dirhams and dinars [gold and silver coins] is one of the bounties of God. All economic transactions are based on these two kinds of money. They are metals, with no benefits in themselves. However, people need them, to exchange them for different things – food, clothing, and other goods. Sometimes a person needs what he does not own and he owns what he does not need. For example, a person has saffrom but needs a camel for transport and one who owns a camel does not presently need one but he wants saffron. However, there must be a measure of the two objects in exchange. (quoted on p. 33)

However, Ghazali attributes only the function of a medium of exchange any normative worth and is furious about the use of the precious metals as plate or jewelry (p. 35). Ghazali notes how competition is a natural effect of social life, and distinguishes between three kinds – obligatory, necessary and permissible – according to their moral impact.

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When people live in a society and their desires for different things develop, there tends to be a struggle in fulfilling those desires y. There is competition, but balance can be maintained by the exercise of authority and maintenance of justice y. Obligatory competition pertains to religious duties in pursuit of salvation. Desirable competition relates to the acquisition of necessities and comforts, as well as spending on others’ needs. Permissible competition relates to acquisition of luxuries.’’ (quoted on pp. 32–33)

Ibn Taimiyah shows considerable clarity on the functioning of the market and the impersonal nature of demand and supply. Rise and fall in prices is not always due to injustice [zulm] of some people. Sometimes its reason is deficiency in production or decline in import of the goods in demand. Thus, if the desires for the good increase while its availability decreases, its price rises. On the other hand if availability of the good increases and the desires for it decrease, the price declines. This scarcity and abundance may not be caused by the action of any people; it may be due to cause not involving injustice, or, sometimes, it may involve injustice. (quoted on p. 59)

A little later on we find that Ibn Taimiyah is also aware of the factors affecting market demand (which is how to read ‘‘desires’’ below). People’s desire [al-raghabah] is of different kinds and varies frequently. It varies according to the abundance or scarcitiy of the good demand [al matlub]. A good is much more strongly desired when it is scarce than when it is available in abundance. It varies also depending on the number of demanders [tullab]. If the number of persons demanding a commodity is large, its price goes up against when their number is small. It is also affected by the strength and weakness of the need for the good and by the extent of the need, how great or small is the need for it. If the need is great and strong, the price will increase to an extent greater than if the need is small and weak. [The price also varies] according to [the customer] with whom exchange is taking place [al mu’awid]. If he is well-off and trustworthy in paying debts, a smaller price from him is acceptable [to the seller] which [price] would not be acceptable from one known for his insolvency, delay in payment or refusal of payment due.

These quotes should suffice to make the point: Muslim social thought was well aware of market forces and Muslim thinkers did try to explain the workings of demand and supply. Hosseini points out the material conditions, which would make the Muslims tend to such analysis. Islam sprang from a mercantile society; commercial activity grew tremendously during the Islamic golden age; Islam placed an emphasis upon the economic aspects of life; Islamic nations expanded to include highly cultured Hellenic and Persian territories; and Islam tried to incorporate and internalize Hellenic and Iranian thought.

One can add that Muslims owe much to trade; the prophet of Islam engaged in trade, Caliph Omar is said to have claimed that he was happiest while

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tending to his shop, and two great early theological figures, Abu Hanifa and Imam Bukhari, were both merchants. Having agreed that Schumpeter was mistaken about Muslim economic thought, it is necessary to go back and ask why such a great scholar showed a blind spot. What were the great achievements of Schumpeter? To me the most important quality of Schumpeter is that he was not afraid to provide independent evaluations of the Medieval period. For philosophy, for science and for economics, Schumpeter provided a refreshing change from the prevailing orthodoxy, so much so that he was been accused of undue partiality for his Catholic childhood. In the section immediately following the Great Gap thesis, Schumpeter points out the decisive role played by the catholic Church in unifying Europe, in providing a common language, Latin, for all the educated elite, in enabling merit a path to the top and in providing free rein to all thoughts that were not directly circumscribed by dogma. Decades of subsequent research have shown that Schumpeter was indeed in the right. How did Schumpeter become so prescient? My guess is that Schumpeter began by assuming that medieval thinkers were just as intelligent as anyone else and then asked, ‘‘how would intelligent individuals placed in such circumstances and facing such problems react?’’ Answering this question required some knowledge of both the economic history and the ambient philosophy of the Middle Ages. Schumpeter was willing to engage in this effort on behalf of the Catholic Church, but failed to do so for the Muslims. This despite having access to several of the sources noted above, he did have access to the texts according to p. 11, notes 3, 6, 8 (see also p. 86 note 10). I do not blame him. He blazed a trail showing what questions should be asked and the most fruitful lines of answer. This is worth more than all the specific ideas he espoused. Some indication of the courage of Schumpeter is suggested by the treatment of Pierre Duhem and medieval science given by historians of Science – an area where one would think that ideology and bias played a lesser role than in economics. A short critical comment by Paul Oslington is to be found early in this collection. It indicates well one of the filters, which prevents proper appreciation of the Muslim medieval thinkers. ‘‘For Ghazanfar and Islahi’s alGhazali, the scriptures are no more than decorative. This view of al-Ghazali is not plausible given a careful reading of the texts’’ (pp. 46–47). In my view, one does not have to be familiar with al-Ghazali to see why this is irrelevant. What does it matter if 90% of the Muslim texts speak about nothing but prayer; if for their remaining 10% they observe demand and supply and elasticity correctly, that is enough. What has Ghazali’s theology necessarily


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got to do with his economics? Is this not the very point that Schumpeter struggled to show – apparently to no effect. Why would we expect any economic theory from the early Islamic scholars? The answer must lie in the nature of the Islamic economy. Let me make some assertions about the Islamic economy, which I cannot of course back up adequately here. The Islamic economy is basically what we now call a welfare-based, free-market economy. Moderns are unaware of the fact that the ‘‘Invisible Hand’’ which Adam Smith popularized was a reference to the actions of God in guiding human society – a reference the 18th century readily understood. Just so, there is no paradox in the claim that Islam provided a religious basis for the market mechanism. Private property and the benefits of the market are its first principle. That public good could arise from individual selfishness is firmly accepted by Muslims and the Quran contains what seems to be the earliest adumbration of the Invisible hand in ‘‘Sura Quraysh’’ (Rashid, 1988). The excesses of the market need to be controlled and hence interference with the market was left theoretically open by the claim that property was only held in trust by man, it actually belonged to God. An early attempt by Abu Dhar Ghaffari, who made an impassioned plea for the State to enforce equity, failed. Legitimizing expropriation seems to have occurred very rarely in the history of Islam. To support the poor and the disabled, there was the constant exhortation to charity and the requirement that individuals pay a wealth tax. If we ignore the specifics of the tax rates and their administration, this balanced view, where free markets are guided by supervising laws with provision for public services, is very much the basis of the Welfare state.1 Perhaps the best indication that the institutions of Islam were right for a market economy comes in the address of the Caliph Ali to his governor on the proper manner of administering his charge (Alam, 1976). The pro-market view of Islam is not only clear from the texts, but the social history of the period suggests the same. The Arab tribes were very much a decentralized nation and even after the military victories of the Muslims, getting and holding on to any form of Central power was a rare and difficult thing. This was deepened by the irreligious nature of many caliphs. Most jurists took an anti-state view of legal and economic matters2 – this actually opened the grounds for ‘‘privacy’’ arguments in Muslim countries. The famous theologian Ghazali is so negative about the state that he seems to encourage tax revolts by speaking of most taxes collected by the princes as ‘‘unlawful’’ and his advice that citizens should ‘‘avoid payment’’! (p. 39). It should be noted that the authors, Ghazanfar in particular, wishes to deal with those who not only are from the Muslim world but also display

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faith in Islam. This will account for the neglect of say, Razi’s marvelous quote on the division of labor, whose wording actually suggests Hellenic origins (see Waines, 2002). The presumption that economics needs great thinkers is mistaken because is very much an everyday subject – all its basic truths are exemplified by mankind in the ‘‘ordinary business of life’’ to use Alfred Marshall’s famous phrase. Since the problems arise in the conduct of daily affairs, the solutions should be presumed to have an equally pragmatic air (see Backhouse, 2002). When the early Muslims heard about the Persian practices of bookkeeping, they adopted them – why not accept that which is beneficial? The early Kharji followed a radical democratic ideal and espoused the idea of a ‘‘compact’’ between the people and its leader. If this idea can have arisen from the circumstances of the desert, why cannot other ideas also have done so? Thus, the appointment of a muhtasib, or supervisor of the market, is sufficiently explained by noting that it is a function required of an efficient market – whether the idea had Hellenic or Sasanian roots or was independently derived is immaterial. The Muslims saw a need and satisfied it according to their circumstances. Having said that economics is a subject where it is entirely plausible that good ideas keep reappearing according to circumstances, I should point out that this does not mean that borrowing is absent and that we should not be aware of its possibility, even probability. Ghazanfar has been quite conscious of the probable link between the Muslim and the Christian worlds and gives a persuasive set of reasons for studying this possibility further. 1. Travel by European scholars (for example, Constantine the African, Adelard of Bath, and other) to Arab countries 2. Students from various European countries attending Muslim seminaries to study mathematics, philosophy, medicine, etc. and then upon return, adding to the faculties of first Western universities established after the pattern of Muslim seminaries 3. Mass translations of Arab–Islamic works from the eleventh through the fourteenth centuries (the ‘‘age of translations’’) 4. Oral transmission between Muslims and Christians over some eight or more centuries, providing cultural interaction and continuity 5. Contacts through trade and commerce 6. Cultural diffusion of institutions and practices, including economic ones (p. 85). One needs a school, institutions, funding and followers (‘‘students’’) for the simplest truths to become common knowledge.


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Some shortcomings of the book must be noted, first among which is the repetition of Schumpeter’s Great Gap thesis before documenting why it is false for some time or person. If the essays could have been rewritten to avoid this repetition, the reader would have been greatly helped. The diffusion of awareness among the Muslims is not fully explored: Davani is quoted (pp. 119 and 122), but our author does not note how closely these quotes follows Ghazali, and are therefore probably dependent upon him. Abu Yusuf’s canons of taxation could have had a little more elaboration, particularly since Ibn Khaldun’s use of the ‘‘Laffer curve,’’ indicating that higher tax rates can produce lower tax revenues, is really due to Abu Yusuf. Misprints are very few and I caught only one for a proper name (Otto Langholm for Odd Langholm, on p. 87). The book of Ghazanfar should give cause for careful study of the early texts of the Muslim world and the corresponding economic history. (Todd Lowry’s fine introduction points in the same direction.) If such work exists, alas, it does not seem to be available in English. Instead of vague references to the glory of early Islam, it still remains for Muslim scholars to break out of the negativity of reaction and assert what can be well-founded about the history of Muslim economic thought. Here is an arbitrary set of questions I would like to pose and see if others can answer them by relating them to the age, its polity and its economy. The first substantial book on finance was by Abu Yusuf, who was a judge – the first important appointed Qadi. Was it not more natural for the vizier, the caliph’s minister, to have written such a volume? (Instead, the vizier, Ibn al Muqaffa writes a treatise on maintaining political power.) What intellectual milieu provided this outcome? The most important, and perhaps most manageable, need is to integrate more with economic history – what was the exact nature of the trade with garrison towns between 640 and 750? What were the financial instruments used by the Makkans at this time which ensured the rise of Makkan wealth by exchange and banking? How were the enormous agricultural projects planned and financed and what were the consequences? When al Mansur designed Baghdad, what technical and economic considerations, if any, motivated him? When millions of dinars were distributed as booty to common soldiers did this create substantial economic ripples, or even waves? (see Dixon, 1971; Morony, 1984, 2003; Shaban, 1971). Somehow, the extant literature does not suffice to create a world in which a sophisticated division of labor and technological adaptation took place. The long and contentious discussion on the role of religion on economics, made famous by Max Weber, has lacked a structural economic focus because of a failure to specify in advance the factors that should ‘‘create’’

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economic growth. Elsewhere, I have posited five structural criteria that are logically necessary to a growing economy: the rule of law; a work ethic; the desirability of consumption; encouragement of science; and the support of networks for those unemployed or disabled. Any ideology, be it religious or secular, must find a way to meet these structural requirements if the economy is to be embedded in a supportive society. Since each of these features finds strong support in Islam, one needs to both document the flourishing (or otherwise!) nature of the economy under Muslim rule and to study the seeds of its demise. A failure to understand the importance of systemic features in deciding characteristics of civilizations has led scholars such as Bernard Lewis to shallow, yet pontifical remarks. This is the research agenda for the future.

NOTES 1. It is a Marxist, Maxim Rodinson (1978), who provides some of the clearest understanding of this issue. 2. The indirect but real legacy of anti-state feeling and the securing of privacy are noted by Michael Cook (2000).

REFERENCES Alam, S. (Ed.). (1976). A classic administrative policy letter of Hazrat Ali (RA). In: Nahjul Balagha. Lahore: Shaikh Gholam Ali. Backhouse, R. E. (2002). The ordinary business of life: A history of economics from the ancient world to the twenty-first century. Princeton: Princeton University Press. Cook, M. (2000). Commanding right and forbidding wrong in Islamic thought. Cambridge: Cambridge University Press. Dixon, A. A. (1971). The Umayyad Caliphate. London: Luzac. Menocal, M. R. (1987). The Arabic role in medieval literary history: A forgotten heritage. Philadelphia: University of Pennsylvania Press. Morony, M. (1984). Iraq after the Muslim conquest. Princeton: Princeton University Press. Morony, M. (2003). Manufacturing and labour. In: The formation of the classical Islamic world (Vol. 12). Burlington, VT: Ashgate. Rashid, S. (1988). Sura Quraysh. American Journal of Islamic Social Science, 5(1), 129–134. Rodinson, M. (1978). Islam and capitalism. Austin: University of Texas Press. Schumpeter, J. A. (1954). History of economic analysis. New York: Oxford University Press. Shaban, M. A. (1971). Islamic history: A new interpretation. Cambridge: Cambridge University Press. Waines, D. (Ed.) (2002). Patterns of everyday life. Burlington, VT: Ashgate. Watt, W. M. (1994). The influence of Islam on medieval Europe. New York: Columbia University Press.

Bevir and Trentmann’s MARKETS IN HISTORICAL CONTEXTS MARKET EMBEDDEDNESS AND THE HISTORY OF ECONOMICS Roberto Romani Review essay on Mark Bevir and Frank Trentmann’s (eds.) Markets in Historical Contexts: Ideas and Politics in the Modern World. Cambridge University Press: Cambridge, 2004. Pp. 246. ISBN 0521833558.

HISTORICAL DISCOURSES ON MARKETS In the first of the eleven essays making up this book, Bevir and Trentmann state the perspective unifying them. Against the rise of a ‘‘neo-liberal discourse’’ idealizing the market as a beneficial coordinating mechanism, Bevir and Trentmann point to the embeddedness of markets.1 In particular, they assert their cultural embeddedness, arguing that ‘‘how precisely any particular state or market operates will depend on how it is governed by a host of beliefs, discourses, practices, and institutions’’ (p. 10). The first goal of the volume is to provide historical case studies illustrating the richness of past conceptualizations of the relationship between society, markets, and the state (p. 2). The second goal is to reconsider the role played by ‘‘agency’’ in the history of capitalism.2 The editors argue against Karl Polanyi that liberals have not always been in favour of markets irrespective of social and environmental A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 121–139 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24007-0

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concerns, and that peasants and rural elites have not always defended traditional forms of social coordination. The general point is conveyed by the following passage: ‘‘The question was, for all these groups, not simply one of support or resistance to markets but about how markets should be embedded within social and political contexts. Social groups and intellectual traditions that were ambivalent about markets also helped to shape the contours and dynamics of capitalist societies’’ (p. 4). In other words, liberal market economies ‘‘arose as embedded within the context of particular types of civil society, which were themselves a contingent product of European history’’ (pp. 7–8). Hence, Bevir and Trentmann continue, the focus of the essays collected in the volume is on ‘‘economic governance.’’ This concept is more comprehensive than markets and makes room for the role of agency, beliefs, and circumstances in social coordination. Then the editors, with some fanfare, elaborate on governance as a way of overcoming the dichotomy between state and market. They distinguish between an ‘‘interpretive’’ approach to governance, where actions are explained ‘‘by reference to the beliefs and desires of the actors,’’ and the ‘‘positivist approaches,’’ which relate actions to class membership or institutional location. The authors of the essays are ‘‘interpretivists,’’ who emphasize cultural complexity and in particular the role of traditional values and norms (p. 20). In allowing for agency as a creative force in history, this approach contrasts with the view of globalization as an inexorable process of liberalization of markets (pp. 23–24). In short, Bevir and Trentmann argue that since markets have resulted from peculiar cultures they require situated forms of governance. An aspect of this introductory essay is worth stressing: the authors’ viewpoint encompasses both history and the social sciences, inasmuch as the book is said to contribute to ‘‘a dialogue between the historians and social scientists’’ (p. 5). As mentioned, Bevir and Trentmann specify that their approach is different from Polanyi’s, an author to whom the concept of embeddedness is often traced back. Polanyi’s ‘‘passionate dislike of market society’’ (p. 4) rested on the view that the self-regulating market was imposed on society by ‘‘external’’ forces, namely state policies and liberal ideology. Whereas Polanyi distinguished sharply between market and society and accordingly identified a ‘‘double movement’’ by which the expansion of markets was later met by social protection measures, the core of Bevir and Trentmann’s stance is that capitalism resulted from the continuous interaction of market and social forces (Polanyi, 1944).3 For the two historians, capitalist markets have always been embedded in social and political contexts and have been shaped by various types of modern rationality (pp. 3–4). However, a similarity between the two perspectives can be found in a shared humanist inspiration, with Polanyi’s

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concern with ‘‘the conservation of man and nature’’ being transformed into a focus on people’s ‘‘traditions’’ owing much to Michel Foucault. Summarizing at some length the editors’ essay was necessary in view of the disparate subjects addressed by contributors. There are four essays devoted to the history of economic ideas: one by Richard Whatmore on Say in the context of French political thought from Rousseau to Constant; one by David Eastwood on the Tory vision of market, 1800–1850; one by Donald Winch on J. S. Mill and Ruskin as environmentalists; and one by Axel Scha¨fer on American progressivism since the 1880s. These essays are relatively homogeneous, not only because their subject matter belongs to the history of economic thought but also because of a common ‘‘intellectual history’’ approach. The remaining contributions deal with topics as diverse as the role of peasants in the transition to capitalistic agriculture (James Livesey), the guilds according to Gierke and Durkheim (Heinz-Gerhard Haupt), To¨nnies’s sociology (Jose Harris), consumer politics in Britain, Japan, and the United States (Patricia MacLachlan and Frank Trentmann), political legitimation and economic reform in India (Rob Jenkins), and the embeddedness of contemporary financial markets (Saskia Sassen). (All essays are summarized in the final section of this review.) As usual, some contributions fit into the editors’ framework better than others. Arguably, the essays in which the editors’ thesis is more fully applied are those in which discursive agency has a recognizable place – possibly the essays by Eastwood, Livesey, MacLachlan and Trentmann, and Jenkins. Apart from Eastwood’s contribution, trade policies are not specifically dealt with in the book. This reviewer sympathizes with the embeddedness view, and shares with editors and contributors a belief in the potentiality of history for the understanding of contemporary societies. Granted that the editors’ piece is very rich and intriguing, on average the other essays are first-class, as far as I can venture an opinion on works which in some cases deal with topics largely outside my expertise. However, judging from the viewpoint provided by the editors’ essay, the book as a whole is disappointing. There are two major problems. The first is that the essays do not seem to develop an identifiable common discourse, basically because of the great generality of the thread that according to the editors should link them. How many social, economic, and political topics are not correlated in some way with market institutions? More precisely, is there a social discursive tradition that has no links with social coordination? Add to this the project’s interdisciplinary nature, the consideration of both facts and ideas, the length of the span covered, and the lack of geographical limits. Contributors occasionally pay lip-service to the editors’ methodological perspective but do not elaborate on it. In the absence of any

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attempt to delimit the scope of the book, the huge variety of potential subjects gives an impression of excessive generality and hence fuzziness. Clearly enough, a complete treatment was impossible, so that the plan of the book might have turned out differently; other stories, with other protagonists and other plots, may equally be on the mark. But the criterion accounting for the choices made is not spelled out by the editors. The second problem concerns the combination of history and the social sciences characterizing the project. The book is chiefly historical in nature and its declared goals are equally historical, but it makes sense only as a set of polemical arguments against ‘‘positivist’’ social sciences and economics in particular. The editors’ introduction is punctuated with polemical strictures against liberal market fundamentalists and positivist social scientists (pp. 1, 3, 5, 11, 12, 16, 19, 20, 21, 23–24). In my opinion it is doubtful whether the overall message of the book can find an audience. On the one hand, there is no need to remind historians of the embeddedness of markets, the power of agency, and the role of discourses and traditions.4 On the other, although social scientists would benefit from reading a book like this, they are unlikely to do so because the bulk of it has only a slight link with contemporary social scientific issues. Eventually, the book amounts to a set of essays in intellectual history. As far as economics is concerned, Bevir and Trentmann’s target seems to be the neo-classical representation of market: ‘‘a spontaneous co-ordinating mechanism that operates for the public good provided only that individuals are left to exchange freely with one another’’ (p. 1). The book could be regarded as a critique of the ‘‘essentialist’’ visions of markets; that is, the assumption that different markets share some essential nature such that one can engage in a general discussion of the features and effects of the market (O’Neill, 1998, pp. 7–15). Seemingly, the book draws a contrast between the economic (neo-classical) approach to market – an approach meant to be universally applicable and scientific in nature – and historical narratives, which are of necessity situated and political. The problem with this interpretation is that Bevir and Trentmann criticize all ‘‘positivist’’ social sciences and not economics in particular. Accordingly, Bevir and Trentmann regard the market as a mode of governance and not as an instrument of trade. Now, the polemical power of the embeddedness argument is relevant insofar as it is addressed against (mainstream) economics, but it loses much of its strength when levelled at other, more ‘‘social’’ and less formalized, social sciences. Positivist or not, a sociologist views market institutions as something more complex and problematic than an orthodox economist does. At the same time, the latter regards markets


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primarily as mechanisms for the efficient allocation of resources rather than for social coordination. The point is whether it is fruitful to group together under the umbrella of ‘‘positivism’’ social sciences whose treatments of market are very different. An underlying difficulty is that the introductory piece lacks a thorough definition of positivism in social sciences, in spite of its centrality to the editors’ perspective. It seems that the term should be taken as the opposite of a focus on discursive practices and agency, namely, as a methodology reifying social coordination. This is why ‘‘positivism’’ generates a belief in the inevitability of the outcomes of socio-economic forces. Needless to say, the economic methodologists’ debate on positivism has centred around other themes (for a concise treatment, see Boland, 1991).5 Bevir and Trentmann’s essay has the merit of raising a number of big questions. The following two sections take up market embeddedness in the light of the history of economic thought, this discipline being an interface between history and economics.

EMBEDDED HISTORY AND DISEMBEDDED ECONOMICS In contrasting history and embeddedness with ‘‘positivism’’ the editors draw attention to an issue that is particularly hot in today’s politics. At the time that the neo-liberal, ‘‘structural adjustment’’ policies implemented by the Bretton Woods institutions in developing countries come under attack from various quarters, the disembeddedness view has assumed a straightforward political form. With the waning of the communist alternative, the twin notions of market economy and representative government have gradually become supernatural truths capable of universal application, irrespective of social circumstances, cultures, and religions. The Western roots of these institutions as well as their vicissitudes are forgotten by an anti-historical pattern of thinking that makes market economy and democracy freely exportable goods. Bevir and Trentmann’s advocacy of ‘‘governance from below’’ via traditions and agency flies in the face of this approach to world problems. In particular, the ideal of pure and perfect markets has turned into a piece of political ideology as the current decade is witnessing a new wave of conservative fundamentalism after the Reagan and Thatcher era. Bevir and Trentmann’s project of reformulating Polanyi’s problem of embeddedness is therefore topical, a stimulating framework for historians to have a say in the current political debate.

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Clearly enough, in the wake of the fall of the Berlin Wall history failed to shape political culture – the enthronement of disembedded thinking is inevitably associated with the demise of history. Conversely, the mechanical models of postwar economic analysis, stripped of social or historical contents, have done much to establish a faith in decontextualized values. As Robert Solow put it in 1986: My impression is that the best and brightest in the profession proceed as if economics is the physics of society. There is a single universally valid model of the world. It only needs to be applied. You could drop a modern economist from a time machine y at any time, in any place, along with his or her personal computer; he or she could set up in business without even bothering to ask what time and what place. (Solow, 1986, pp. 25–26)

It is tempting to draw an irreconcilable contrast between economics as the most refined form of disembedded knowledge and history as a pattern of thinking emphasizing the social, the situated, and the specific. But such a contrast would ignore the history of economics, which abounds with authors who (i) criticized the alleged disembeddedness of economics and (ii) attempted to construct types of economics embedded in institutional arrangements. In view of their strategic position as eyewitnesses of the disembedded discipline par excellence, historians of economics can raise crucial questions by providing genuinely problematic reconstructions. For instance, the Methodenstreit between Menger and Schmoller did not entail a sharp separation between the two camps. As is well known, major examples of criticisms unveiling the unavoidable embeddedness of economics can be found in Schmoller and other nineteenth-century historical economists, including Marx and Weber. As a recent interpreter puts it, Schmoller was after the ‘‘visible hand’’ operating markets, in the belief that institutions and cultures have always moulded self-interest.6 Scha¨fer begins his contribution to Markets in historical contexts with an account of the transfer of ideas from German historical economists to American progressives, focusing on Schmoller’s relativistic and evolutionary understanding of morality of which a revaluation of Smith’s moral philosophy was part. Against the ‘‘Manchester’’ interpretation of Smith, Schmoller argued that Smith had embedded competition in moral restrictions and social customs (pp. 151–154). The point to note is that the historical economists’ concern with institutions was shared by their archenemies, the Austrians. The two approaches were conspicuously different, but the Austrians’ work on institutions is to be placed within a tradition of economic thought initiated by Germans like Stein, Roscher, and Scha¨ffle, a tradition which Menger took up in both the Grundsa¨tze and the Untersuchungen (Pearson, 1997; Caldwell, 2004, p. 78). The difference


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between the Austro-German milieu and that of, say Britain or Italy was that institutions were not only a suitable economic subject, but the central one. Hayek in particular, carried over this approach into the twentieth century, in the company of scholars as diverse as Spiethoff, Sombart, Wieser, and Eucken. An exclusive focus on the differences between the methodological individualism of Menger’s school and the holism of historical economists obscures the common broadening of the economic subject matter, as well as certain shared assumptions and conclusions (on which see Pearson, 1997; Romani, 2004). Together with other elements like the influence of Marshall’s perspective and the slow progress of mathematical economics, this connection between Austrians and Germans suggests that embeddedness rather than disembeddedness characterized economic thought up to the 1930s, at least in Europe. Notwithstanding the calls for the mathematization of economics coming from Jevons, Walras, Pareto, and Fisher, it was only in the 1940s that ‘‘economics was transformed from a ‘historical’ discipline to a ‘mathematical’ one’’ (Weintraub, 1992, p. 3). Therefore it is unfortunate that the book under review gives the impression that after the times of the Says and Mills only unorthodox economists adopted an embeddedness viewpoint. Marginalism did not automatically entail disembeddedness. To escape the gospel of disembodied values and predetermined outcomes a long-run perspective is necessary because, by placing ideas and approaches in their historical contexts, it shows the relativity of current articles of faith. For instance, the long run makes it plausible to regard the centrality of axiomatization procedures and general equilibrium analysis after 1945 as foreign to the main line of development of economic science. Maybe we are just living within an axiomatization bubble, which is bound to burst sooner or later. In these difficult times, the history of economics is like astronomy to Adam Smith: it addresses itself to the imagination by generating ‘‘surprise’’ and ‘‘wonder’’ (Smith, 1980, i.1–ii.12). Suppose an economics student who discovers that from the 1930s to the 1970s the orthodoxy was that markets were generally unable to provide full employment and macroeconomic stability. The discovery that there are more things in heaven and earth than in his or her textbook would possibly shock our student, but, as Smith knew, surprise would be soon followed by wonder, a sentiment involving a feeling of discomfort, which gives rise to curiosity and eventually stimulates thought. A famous example of historical narrative challenging stereotypes is Hirschman’s unearthing of the eighteenth-century view that ‘‘some features of market society make for social integration rather than the opposite’’ (Hirschman, 1982, p. 1472; see also Hirschman, 1977). Briefly, what historians of economics can do to reaffirm the unavoidable social

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contextualization of ideas is to eschew writing Whig histories. As a distinguished interpreter of Smith puts it, ‘‘it is the peculiar duty of intellectual historians to patrol the boundary between historical and analytical (or merely fashionable) reconstructions, pointing out where the latter are masquerading as the former’’ (Winch, 2000, p. 88). Basically, Bevir and Trentmann oppose the economists’ market as an ideology. So far so good, but economic thought is a highly complex affair these days. If on the one hand the Walrasian market has become a tool of mass politics, on the other even the World Bank argues that markets only work their wonders if coupled to suitable institutions. That is to say, historians should not be content with a simplistic view of contemporary economics. This is not a criticism of Bevir and Trentmann, who are aware that it includes various unorthodox approaches (p. 1), and what is more do not limit the scope of their attack to economics. The fact is that even among orthodox economists Chicagoan arrogance is not the single approach on offer. There is also Frank Hahn rebuking advocates of general equilibrium analysis who ‘‘say much more than even the pure theory allows them to say, and infinitely more than the applicability of that theory permits’’ (Hahn, 1982, p. 20). In tune with Hahn’s attitude, the Arrow–Debreu model – the grandest of all disembedded conceptualizations in social thought – has been constantly reworked with the aim of upgrading its realism, for example by introducing sequential equilibria and imperfect information. Bevir and Trentmann’s arguments point to the social nature of economics. But the two historians (understandably) fail to address what seems to me the crucial question, namely the economists’ substantial success in denying that social nature. To the extent that a general statement can be made, economists do not acknowledge that the concepts they use are inevitably value-laden, and their claim to be neutral has been taken seriously. Of course it is impossible here to detail the causes of this extraordinary historical outcome, from which various effects have ensued.7 Some of these effects have to do with the ‘‘beliefs,’’ ‘‘practices,’’ ‘‘institutions,’’ and ‘‘regimes of power’’ evoked by Bevir and Trentmann taking up Foucault’s epistemology. Namely, the fact that economics nowadays basks in the aura surrounding the hard sciences has shaped its ‘‘discursive’’ features. Most remarkably, there is a single international community of economists that is a piece of Enlightenment in modern garb, a forum where focused debates on society are carried out in a common language. Other tribes of social scientists (not to mention historians) lack an environment as unified and effective as that enjoyed by economists. Its criteria for success and failure can be questioned but its value as an institution – a collective and unofficial think-tank – is a fact. Therefore Bevir and Trentmann’s plea for


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‘‘local’’ thinking could be profitably discussed in relation with the virtues of its opposite, a worldwide community of researchers testing and assessing each other’s work.

POLICY AND POLITICS Needless to say, the history of economic thought can be written in various ways. It follows that market embeddedness can be missing from historical reconstructions as it often is from theory. Recent additions to the historical literature on free trade and protection adopt divergent methods. Douglas Irwin’s successful Against the tide (1996) lacks contextualization so completely that the book may lead the inattentive reader to believe that Western industrialization occurred under a free trade regime. Irwin is a staunch advocate of free trade who deals with ‘‘the economic analysis of free trade’’ (Irwin, 1996, p. 8) and claims that context ‘‘is generally not required to assess the quality and durability of economic thought and analysis as logical propositions,’’ in the belief that ‘‘economic analysis is simply a principled conceptual framework for understanding various economic phenomena and evaluating the effects of various economic policies’’ (Irwin, 1996, p. 6, italics added). His review of past debates aims to demonstrate that the theoretical case for free trade, despite repeated criticisms, ‘‘has remained intact.’’ By declaring his adherence to a ‘‘quite Schumpeterian’’ approach, Irwin manages to write a book on free trade theory that eschews not only economic history but also trade policy.8 Unlike Schumpeter, Irwin never leaves the plane of abstract analysis, although here and there drops a hint about the ‘‘policy implications’’ of the theories he deals with.9 But the book in fact amounts to a disguised plea for the implementation of free trade in the real world, as the final chapter reveals. Here Irwin calls into play the ‘‘practical importance’’ of models and their capability to capture ‘‘true economic relationships’’; empirical evidence on the beneficial effects of free trade is succinctly cited; and the ‘‘strong practical arguments against protection’’ are reviewed (Irwin, 1996, pp. 223, 224, 227–229). The problem is that one cannot consider pure ideas in fourteen chapters and almost subliminally recommend a policy in the fifteenth because there is a gulf between models and their application, as Terence Hutchison for one masterfully showed (Hutchison, 1964). Bridging this gulf requires what Irwin excluded from his research: particular and contingent social circumstances, institutional contexts, rough quantitative judgements, and political will and sensitivities. Reasonable policy makers cannot ignore the lessons of history, but there are historians who say they can.

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A book by Leonard Gomes, The economics and ideology of free trade (2003), is a good antidote to Irwin’s. Gomes too is in favour of free trade, but he does not see it in black-and-white terms. His treatment integrates a contextualized history of analysis and the debates, policies, and events that marked the controversy over free trade and protection. Patiently, he often draws on economic history literature to assess the merits of economic theories. This approach has made it possible to document the large extent to which economic thought on free trade and protection depended on specific circumstances. For example, both Irwin and Gomes analyse ‘‘the Australian case for protection’’ of the 1920s.10 To the former, the Australian setting is immaterial: that kind of protectionist stance could be conceived in any country whose economic circumstances were similar to those characterizing Australia at the time. The Australian debate is viewed as an introduction to the welfare effects of free trade: ‘‘if some individuals or economic classes are worse off under free trade, can economists really argue that free trade is superior to protection on a scientific basis without making an implicit value judgement about income distribution?’’ (Irwin, 1996, p. 179). Curiously, Gomes’s historical treatment indicates that the Australian tariff was supported by all classes (substantial trade liberalization was undertaken only after 1983) and that it was ‘‘hugely successful,’’ since in the 1920s and 1930s ‘‘Australia possibly had the highest per capita income in the world’’ (Gomes, 2003, pp. 134–135). Gomes wonders whether the Australian authorities had feasible alternatives for attaining their goals – redistribution of income towards labour and an increasing population – and his answer is no (Gomes, 2003, p. 141). One has the impression that free trade is a means to Gomes and an end to Irwin. Irwin takes the pains to show that tariffs can never be first-best policy options, but he carefully avoids checking the historical record, as if policy could lend itself to a ‘‘pure’’ kind of examination.11 Gomes’s balanced and cautious treatment pays special attention to the relationship between trade theory and the ‘‘concerns of the real world.’’ To him realism is a major criterion for assessing models, and he is aware of the ever-limited applicability of theoretical representations to real cases. To continue the comparison, Irwin gives the impression that he is putting an entrenched science to work, while Gomes conveys the feeling that research is in progress, and is developing in tune with changes in actual economic life. His discussion of globalization and the possibility of a globalization backlash is exemplary in this respect (Gomes, 2003, pp. 248–327). Generally speaking, Gomes shows the power of a method integrating history, economics, and the history of economic thought.12


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Bevir and Trentmann’s essay eventually advocates the incorporation of politics into conceptualizations of social coordination. As indicated, the editors embrace political action from below aimed to affirm traditional values and norms. (The political argument usually linked to markets is of a different kind: markets and especially free markets are desirable because they enhance both liberty and peaceful cooperation among countries.) Possibly Bevir and Trentmann overlook the vagueness and complexity of ‘‘tradition.’’ Not only may a tradition be problematic to identify but also it may be in conflict with other traditions existing in a society. To put it differently, making traditions the starting point of politics involves exactly the kind of value judgements that democratic assemblies tend to avoid these days. Conversely, disembedded market outcomes are impersonal and ‘‘automatic,’’ and therefore they are or may appear ‘‘just’’ irrespective of value judgements. At bottom, this is why disembedded politics views the market order as the template of society, as Hayek pointed out: the Great Society ‘‘is merely means-connected’’, and therefore ‘‘it makes agreement on ends unnecessary and a reconciliation of divergent purposes possible’’ (Hayek, 1976, pp. 3–4, 109–11). This point is related to the skepticism of government’s handling of trade policy. Many economists, including Marshall for example, have favoured free trade because protection is open to political mismanagement (Irwin, 1996, p. 221; Gomes, 2003, p. 106). According to this argument, politicians simply cannot be credited with the skill and integrity necessary for the implementation of a rational protective policy. But, pace Marshall, free trade too does not mean ‘‘the absence of any device’’ insofar as it involves political decisions (Marshall, 1979, p. 394). It is significant that the antiglobalization movement opposes free trade on the grounds that multinational corporations cannot be trusted. That is to say that today the big political issue concerning markets is the desirability of global free trade and the power of the interests supporting it, and not universal marketization per se. My view is that if trade policy questions are left aside, as Bevir and Trentmann do, the attempt to debunk the ideological import of disembedded markets as types of social coordination requires something more precise and conceptually structured that an appeal to people’s traditions.

TEN ESSAYS Some essays of the book highlight the peculiar features that market conceptions assumed in various political and social discourses. In ‘‘The politics of political economy in France from Rousseau to Constant,’’ Whatmore

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applies Pocock’s and Skinner’s republicanism to the French debate. Whatmore distinguishes between ‘‘modern republicans’’ like Constant, who wanted to limit popular rule, and ‘‘democratic republicans’’ like Say. Both writers were in favour of a laissez-faire approach to markets, but this similarity obscures the different political and moral bases of their political economies. The ‘‘ideological fraternity’’ between Constant and Say presumed by many historians vanishes once the French debates from which their stances originated are considered: the debate on the relative strength of Britain and France, that on commerce in a republican state, that on physiocracy, and that on republican manners. Whatmore depicts Say as bent on the theorization of ‘‘a large state that was commercial yet just towards the poor’’ (p. 67). Say aimed to reduce inequality, eschew luxury, and promote social virtues. He believed that commerce could teach people self-rule, providing that government was representative, aristocracy banned, and clerical control of education checked. In contrast, the anglophile Constant did not share Say’s faith in public virtues; to Constant, free markets were naturally associated with liberalism in the British sense. Social hierarchy being necessary, he advocated a constitution along British lines. Eastwood’s ‘‘Tories and markets: Britain 1800–1850’’ addresses High Tory political economy, which after 1815 was proposed as an alternative to Ricardo’s marketized economics. Tory political economy was an organicist form of social knowledge, which ‘‘did not repudiate the idea of a technical language of economic analysis but re-engineered this to serve quite different prorities’’ (p. 74). To the poets Coleridge and Southey, to Michael Sadler who denounced Malthus, or to the journalists of Blackwood’s Edinburgh Magazine the market was neither self-contained nor unfettered. Market operations, they argued, should be subordinated to moral and political priorities. The Poor Laws were defended on the grounds of the duties they forced on the rich and the social stability they guaranteed, while the Corn Laws were seen as a bulwark against the rise of the middle classes. Trade policy should be thought of in terms of imperial markets, with imperial preference elevated over free trade. Monetary policy was vehemently debated and in particular the issue of small notes aroused controversy. Tory critics argued in favour of paper currency issued by country banks, which facilitated the operations of local markets; they opposed convertibility and the centralization of currency policy in the Bank of England. Peel’s repeal of the Corn Laws drew to a close High Tory discourse and with it the perspective of subordinating ‘‘the market to the constitution’’ (p. 89). Harris’s essay is entitled ‘‘To¨nnies on ‘community’ and ‘civil society’: clarifying some cross-currents in post-Marxian political thought.’’ Harris


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objects to the use of ‘‘community’’ and ‘‘civil society’’ as virtual synonyms by present-day theorists and political actors, and looks at To¨nnies’s Gemeinschaft und Gesellschaft to prise apart this conflation. In fact To¨nnies famously appraised Gemeinschaft (community) and Gesellschaft (civil society) as two distinct analytical models or ideal types, although, Harris notes, in To¨nnies’s view the attitudes and arrangements that Gemeinschaft and Gesellschaft exemplify ‘‘would always coexist and compete with each other in any historical or institutional setting’’ (p. 141). Basically, the actors of community are linked together by ties of kinship, neighbourhood, culture, and history, whereas those of civil society are ‘‘fragmented, freely choosing, goal-oriented’’ individuals, who are led to create a government by the imperatives of exchange and commerce. A ‘‘company-law model of the structure of the state’’ embodied in To¨nnies’s view the essence of national political constitution in market-based civil societies (p. 140). Since there is antagonism between the two systems of thought and practice, the advance of civil society necessarily undermines community. Scha¨fer’s ‘‘German historicism, progressive social thought, and the interventionist state in the United States since the 1880s’’ first considers the generation of Albert Shaw, Henry C. Adams, and Albion W. Small. These writers called for more state intervention and a ‘‘moral reform’’ of market capitalism. With the following generation of reformist writers, which included Veblen and Dewey, the intellectual scenario changed. There developed an evolutionary approach, which, in accordance with Schmoller’s views, ‘‘regarded the ethical community as no longer based on fixed moral norms’’ (p. 154). A relativistic conception of ethics led the progressives to challenge natural rights philosophy and as a result to forsake the defense of civil rights; the suffrage and race issues were ignored. Generally holding a favourable view of industrial society, the progressives did not advocate large-scale bureaucratic intervention as is often maintained. Rather, their goal was to overcome market society through a ‘‘democratic social ethics’’ generated by new public institutions and wide-ranging democratic decision-making. However, Scha¨fer argues that the current of progressive thought that actually succeeded in shaping American policy was the ‘‘distributive’’ current, emphasizing ‘‘the democratization of leisure and consumption, rather than of industrial relations’’ (p. 163). The post-1945 transition ‘‘from producer to consumer capitalism’’ rested on the progressive idea that individual identity results from social interaction, with the effect that ‘‘poverty was defined as a problem of insufficient socialization, rather than as a problem of economic exploitation and inequality’’ (p. 167).

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Other contributions address the relationship between market economies and various social issues. Haupt’s essay, ‘‘Guild theory and guild organization in France and Germany during the nineteenth century,’’ examines the ‘‘historical paradox’’ that liberal authors like Gierke and Durkheim advocated guilds (p. 91). A definition of liberalism is not provided, but it seems that Haupt labels ‘‘liberals’’ those ‘‘who defended the principles of the French Revolution’’ (p. 92). An introductory survey of opinion on guilds in France and Germany in the first half of the nineteenth century indicates that guilds were elements of a liberal discourse concerned with social polarization and the destructive powers of the market.13 To escape the dichotomy between the state and the individual, Otto von Gierke favoured the principle of the free association of producers (both workers and masters) integrating the individual and defying the arbitrary power of the state. Not unlike Gierke, Emile Durkheim remarked that market capitalism led to anomie and lack of social cohesion. The groupements professionels he advocated were public institutions whose goal was predominantly moral, as they were meant to infuse discipline and solidarity and establish a professional ethos. The environmental concerns of two eminent Victorians are the subject of Winch’s ‘‘Thinking green, nineteenth-century style: John Stuart Mill and John Ruskin.’’ Arguably, coupling Ruskin with Mill serves to show that the former, in spite of all his abhorrence of political economy (‘‘the most cretinous, speechless, paralysing plague that has yet touched the brains of mankind,’’ p. 105) and of Mill in particular (‘‘the root of nearly all immediate evil among us in England,’’ p. 105), in fact owed much of his environmentalist stance to the latter. Among the views Ruskin borrowed from Mill are a dislike for a world exclusively devoted to competitive striving, the advocacy of a stationary-state society focused on the quality of life, a favour for petite culture, and the preservation of commons. Winch’s point is that ‘‘Mill provides a prominent example of how a critique of economic growth could be mounted from within a tradition normally thought to be wedded solely to an exploration of the internal logic of market-led development’’ (p. 107). Mill’s environmentalism was neo-Malthusian, argues Winch, who accordingly qualifies the influence of the Lake poets on the economist. Malthus had pointed to the pressures exerted on resources by population growth, thus originating Mill’s stress on environmental limits. The essay features a concluding section on Marshall, whose welfare economics is regarded by Winch as a response to the critique of capitalism put forward by Ruskin and other ‘‘romantics.’’ Maclachlan and Trentmann’s ‘‘Civilizing markets: traditions of consumer politics in twentieth-century Britain, Japan, and the United States’’ adopts a


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comparative approach to demonstrate that distinct national traditions shaped the politics of organized consumer groups. Needless to say, consumer groups well exemplify the notion of agency featuring in Bevir and Trentmann’s essay. At the turn of the twentieth century consumption became politicized in both Britain and the United States, but the movement took different routes. Given that in Britain consumer politics established a close link with agitation for free trade, consumers’ interests were identified with cheap prices of foodstuffs. In the United States consumer groups had a close affinity with the labour movement, so that ‘‘consumer interests were rarely separated from producer interests’’ (p. 177). In Japan consumer organizations formed much later – after World War II – because of the negative overtones associated with consumption at a time of rapid industrialization and war. Maclachlan and Trentmann show how these national movements developed, voicing new demands and extending their conceptions of the role of the consumer in ever more affluent societies. According to the authors the crucial factor shaping the evolution of these movements was not economic; rather, it should be found in their ability ‘‘to connect with and contribute to national definitions of citizenship and the public good’’ (p. 201). The book also includes a contribution reassessing a major thesis in economic history. In ‘‘Improving justice: communities of norms in the Great Transformation,’’ Livesey focuses on the ‘‘rational peasant’’ insofar as he maintains that in Western Europe rural communities were not the object of the marketization of agriculture but the agents of it. Agrarian history has regarded peasant households economies as antithetical to the capitalist transformation of agriculture; as Livesey puts it, the peasantry in all these accounts ‘‘were indeed a sack of potatoes that had to be dragged or pushed to the market’’ (p. 27). The essay deals with eighteenth-century agricultural societies, which elaborated a ‘‘rural scientific sociability as a communication between elite and subaltern worlds’’ (p. 34). Livesey provides examples of subaltern knowledge combining with gentlemanly science, an interaction that was particularly marked in the promotion of new agricultural machinery. The author’s conclusion is that agricultural societies acted as ‘‘sites of transformation’’ where peasants learned their particular culture of modernity, generating the cognitive skills necessary for market behaviour. The two final essays testify to the wide scope of the book project, for they do not deal with historical topics but with present-day issues. Jenkins’s ‘‘The ideologically embedded market: political legitimation and economic reform in India’’ explores why it has been so difficult for the market to take root politically in India. Jenkins holds that many neo-liberal economists have

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come to agree that markets depend on existing patterns of social interaction; the Indian case shows that this acknowledgement should include the role of beliefs and traditions alongside that of social and power relations. The essay focuses on the relationship between the notions of market circulating in India and swadeshi, a peculiarly Indian version of economic nationalism. Jenkins analyses the attitudes towards market of four ideological traditions: Mandir, Mandal, Movement, and Market. The first three tendencies are influenced by the idea of swadeshi, describing ‘‘a variety of political assertion that insists upon the value of the local or indigenous over the remote’’ (p. 212). As the author shows, swadeshi engages with key ideas associated with the market: competition, exchange, inequity, impersonality, etc. The political legitimacy of market-oriented policies will depend, Jenkins argue, on the battle between competing conceptions of swadeshi. Sassen contributes an essay entitled ‘‘The locational and institutional embeddedness of electronic markets: the case of the global capital markets.’’ The neo-classical representation of market might be regarded as a fairly accurate description of electronic capital markets, where information is universally available to millions of participants and frictions are minimal; furthermore, these markets are largely deregulated and supposedly largely disembedded from society. But, Sassen contends, even this type of market is conditioned by ‘‘non-market and non-digital dynamics, agendas, contents, power’’ (p. 225). She points to the locational concentration of major firms in a few financial centres, where firms have easy access to corporate services and information and where cross-border mergers and alliances can be arranged without delay. Sassen points to an incipient denationalization of business agendas, rules, and practices. But, at the same time, global capital markets require ‘‘a thick world of national policy and state agencies’’ (p. 243), a world ruled by criteria which these markets themselves help to shape.

NOTES 1. In Granovetter’s words, the argument of embeddedness is the argument that ‘‘the behavior and institutions to be analysed are so constrained by ongoing social relations that to construe them as independent is a grievous misunderstanding’’ (Granovetter, 1985, pp. 481–482). 2. Bevir and Trentmann’s agency is not to be understood with reference to the economists’ agency theory but in terms of political action. 3. For a criticism of Polanyi’s conceptual separation between the forces originating the self-regulating market and those opposing it see also James Livesey’s contribution (p. 27).


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4. As regards trade policy, it has been observed that historians are well aware that ‘‘trade policy can be as much about rivalry, power, prestige, self-respect – indeed simply about ‘winning’ – as it can be about exchange values, welfare, and growth’’ (Marrison, 1998, p. 10). 5. One could say that economists are not positivist enough because they often ignore evidence contradicting their models. To make an example, which is relevant here, the advocates of one big market resulting from globalization neglect the fact that the convergence towards a single world price for any given product is not taking place to a significant extent. See Baker, Epstein, and Pollin (1998, pp. 13–15). 6. Grimmer-Solem (1998, pp. 138, 161). See also Grimmer-Solem and Romani (1999, pp. 343–345), and, for an overview of the historical political economy 1870–1900, see Grimmer-Solem and Romani (1998). 7. To reconstruct the rise of postwar neo-classicism and axiomatization, Ingrao and Israel (1990) and Morgan and Rutherford (1998) are essential reading. 8. In this book theories feed upon themselves, but Irwin makes an exception in the case of mercantilism (Irwin, 1996, pp. 26, 28–29, 31, 53). 9. Curiously, natural law can serve vested interests but economics cannot: ‘‘Of course, a Spanish insistence that free trade is a dictate of natural law in the sixteenth century when Spain was a great maritime power, like the same Dutch insistence in the seventeenth century when the Netherlands was a great maritime power, can be dismissed as reflecting pure national self-interest’’ (Irwin, 1996, p. 21). 10. Australian economists and in particular J. B. Brigden advocated high import duties on most categories of goods with the aim of minimising income inequality. The main theme of the semi-official Brigden Report (1929) was ‘‘the use of the tariff as a tax on the rent from rural exports to increase employment in the manufacturing sector without reducing real wages. The income to support a greater number of workers was therefore extracted from landlords and capitalists’’ (Gomes, 2003, p. 139). Gomes and Irwin come to different conclusions concerning the validity of the Australian economists’ stance. 11. For a comparison between Irwin and Gomes along different lines see Meardon (2004). On Irwin’s book see Magnusson (2004, p. 8). 12. The idea that the past can provide important suggestions about the complexities of economic governance is corroborated by Muller (2002). Muller has surveyed the arguments concerning markets of a host of European thinkers (ranging from Voltaire to Marcuse and Hayek) who sought somehow to reconcile markets with social institutions, although the balances they struck between the two elements varied dramatically. 13. Haupt writes ‘‘Louis Wolinski’’ – instead of ‘‘Wolowski’’ – and has a ‘‘Sismond de Sismondi’’ who authored Mouvements principes d’ećonomie politique (pp. 92–93).

REFERENCES Baker, D., Epstein, G., & Pollin, R. (1998). Introduction. In: D. Baker, G. Epstein & R. Pollin (Eds), Globalization and progressive economic policy (pp. 1–34). Cambridge: Cambridge University Press.

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Boland, L. A. (1991). Current views on economic positivism. In: D. Greenaway, M. Bleaney & I. Stewart (Eds), Companion to contemporary economic thought (pp. 88–104). London: Routledge. Caldwell, B. (2004). Hayek’s challenge. Chicago: University of Chicago Press. Gomes, L. (2003). The economics and ideology of free trade: A historical review. Cheltenham, UK: Edward Elgar. Granovetter, M. (1985). Economic action and social structure: The problem of embeddedness. American Journal of Sociology, 91, 481–510. Grimmer-Solem, E. (1998). The science of progress: The rise of historical economics and social reform in Germany, 1864–1894. Oxford: Oxford University Press. Grimmer-Solem, E., & Romani, R. (1998). The historical school, 1870–1900: A cross-national reassessment. History of European Ideas, 24, 267–299. Grimmer-Solem, E., & Romani, R. (1999). In search of full empirical reality: Historical political economy, 1870–1900. European Journal of the History of Economic Thought, 6, 333–364. Hahn, F. (1982). Reflections on the invisible hand. Lloyds Bank Review, 144, 1–21. Hayek, F. A. (1976). Law, legislation and liberty. Vol. 2: The mirage of social justice. Chicago: University of Chicago Press. Hirschman, A. O. (1977). The passions and the interests: Political arguments for capitalism before its triumph. Princeton: Princeton University Press. Hirschman, A. O. (1982). Rival interpretations of market society: Civilizing, destructive, of feeble? Journal of Economic Literature, 20, 1463–1484. Hutchison, T. W. (1964). ‘Positive’ economics and policy objectives. London: George Allen & Unwin. Ingrao, B., & Israel, G. (1990). The invisible hand. Cambridge: MIT Press. Irwin, D. (1996). Against the tide: An intellectual history of free trade. Princeton: Princeton University Press. Magnusson, L. (2004). The tradition of free trade. London: Routledge. Marrison, A. (1998). Editor’s introduction. In: A. Marrison (Ed.), Free trade and its reception 1815–1960 (pp. 3–11). London: Routledge. Marshall, A. (1979[1903]). Memorandum on the fiscal policy of international trade. In: J. M. Keynes (Ed.), Official papers by Alfred Marshall (pp. 365–420). Westport, CT: Greenwood Press. Meardon, S. (2004). On the history of trade principles and politics (with present-day polemics). History of Economic Ideas, 12, 89–95. Morgan, M. S., & Rutherford, M. (1998). American economics: The character of the transformation. In: M. S. Morgan & M. Rutherford (Eds), From interwar pluralism to postwar neoclassicism (pp. 1–26). Durham: Duke University Press. Muller, J. Z. (2002). The mind and the market: Capitalism in modern European thought. New York: Knopf. O’Neill, J. (1998). The market: Ethics, knowledge and politics. London: Routledge. Pearson, H. (1997). Origins of law and economics: The economists’ new science of law. Cambridge: Cambridge University Press. Polanyi, K. (1944). The great transformation. New York: Holt, Rinehart & Winston. Romani, R. (2004). Hayek and historical political economy. History of Economic Ideas, 12, 37–65. Smith, A. (1980). The history of astronomy. In: W. P. D. Wightman & J. C. Bryce (Eds), Essays on philosophical subjects. Oxford: Clarendon Press.


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Solow, R. E. (1986). Economics: Is something missing? In: W. N. Parker (Ed.), Economic history and the modern economist (pp. 21–29). Oxford: Basil Blackwell. Weintraub, E. R. (1992). Introduction. In: E. R. Weintraub (Ed.), Toward a history of game theory (pp. 3–12). Durham: Duke University Press. Winch, D. (2000). A very amusing book about old times. In: A. E. Murphy & R. Prendergast (Eds), Contributions to the history of economic thought: Essays in honour of R. D. C. Black (pp. 73–95). London: Routledge.


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Pullen and Parry’s MALTHUS’ UNPUBLISHED PAPERS AT KANTO GAKUEN UNIVERSITY NEW LIGHT ON MALTHUS: THE KANTO GAKUEN COLLECTION A. M. C. Waterman A review essay on J. M. Pullen and Trevor Hughes Parry (Eds), 1997, 2004. T. R. Malthus: The Unpublished Papers in the Collection of Kanto Gakuen University. Cambridge: Cambridge University Press, two volumes. Volume 1: 164 pp. ISBN 0521581389; Volume 2: 360 pp. ISBN 0521588715.

I ‘‘Bob’’ Malthus, the Revd T. Robert Malthus (1766–1834), had only one son, Henry (‘‘Hal’’) who like his father became a clergyman and married, but died childless in 1882. Malthus’s older brother ‘‘Syd,’’ Sydenham II (1754–1821), inherited the family property in Albury, Surrey on the death of their father Daniel in 1800, and transmitted it to three more generations of descendents: Sydenham III (1806–1868), Sydenham IV (1831–1916), and the last Robert (1881–1972) who married but died childless. Some time between Daniel’s death and that of his younger son – perhaps upon the death of Sydenham II – the bulk of the family library appears to have passed into Robert’s possession. At any rate he himself added to it and bequeathed it to his own son who also added to it, and upon whose death it A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 141–151 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24008-2

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returned to the senior line of the family, housed after 1871 in a mansion called ‘‘Dalton Hill’’ built on the family estate. Both James Bonar, Malthus’s first biographer, and Maynard Keynes visited Dalton Hill in the 1920s and examined the library, which Bonar had catalogued in 1891 (Harrison, 1982; James, 1982). As early as 1887, Bonar had edited and published letters of Ricardo to Malthus, and in his monograph Malthus and his Work made use of letters in possession of the Malthus family at that time (Bonar 1887, 1885, 1924). When the last Robert Malthus retired, he and his wife were no longer able to keep up Dalton Hill. They moved to the Isle of Wight and left the library in the care of the brothers Reginald and Sir Edward Bray, descendents of the Edward Bray who had married into the Malthus family in 1790 and whose family seat was in the neighborhood. In 1949, the Brays presented the books – 1,421 titles in 2,215 volumes – to Jesus College, Cambridge, where they are now suitably housed in the Old Library in which Malthus had worked as an undergraduate and a resident BA two centuries before. Meanwhile the family manuscripts, which originally must have formed part of the collection, were lost sight of. The late Patricia James, a devoted Malthus scholar who labored assiduously for more than two decades to prepare the first complete and now standard biography of Malthus (James, 1979) was aware of letters young Bob had written to his parents while at school, for most had been alluded to or cited briefly by Bonar (1924), to whom she refers as her source. ‘‘Colonel Sydenham Malthus, the father of the present owner, put them at Dr Bonar’s disposal’’ wrote Keynes in 1933 (Keynes, 1972, p. 78, n. 2). Moreover, William Otter must have been given access to the manuscripts by his son-in-law, the Revd Henry Malthus, nearly a century before, for he quotes four letters in full and alludes to two others in his biographical memoir printed in the second edition of Malthus’s Principles (Malthus, 1836, pp. xiii–liv). William Empson (1837) cited three in his obituary article in the Edinburgh. But by 1979, Mrs James, who had been kindly received by the last Robert Malthus in his retirement and who dedicated her book to his memory, had to record that ‘‘it is exasperating that young Robert’s letters home are lost’’ (James, 1979, p. 21). But they were not lost. The last Robert Malthus had taken the manuscripts with him when he quitted Dalton Hill and, seemingly unaware of their importance, had not disclosed their existence to Mrs James. In 1986, a former domestic of Robert Malthus, who was his residual legatee, Jane Catchpole, died without heirs. When her chattels were auctioned for charity, a ‘‘Box of Old Documents’’ was acquired by a London bookseller. The box contained a large collection of manuscripts relating to the Malthus family,

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beginning with documents of property transactions signed by John Malthus in 1581, and ending with a letter to the last Robert Malthus in 1916 with the executor’s account of his father’s estate. The collection included 80 letters (1779–1830) to or from T. R. Malthus and his immediate circle, 42 from his school and university years, and a chronological list of these letters compiled in Bonar’s hand. There were approximately 50 other letters to and from various members of the ever expanding and much intermarried Malthus connexion, including several from the flourishing New Zealand diaspora (Pullen & Parry, 2004, Vol. II, pp. 285–290). And there were many other hitherto unsuspected treasures: detailed notes by Malthus on the bullion trade and the unpublished draft of an article for the Edinburgh Review on foreign trade, notes relating to his course on English History at the East India College, his own diary of a tour of the Lake District, and his wife’s diary of a tour in Scotland; and perhaps most revealing of all, four sermons by the much reviled Parson Malthus whose clerical profession Bonar (1924, p. 6) had been at some pains to minimize. Between 1986 and 1990 attempts were made to find a suitable purchaser for this important collection. In 1991, it was acquired by Kanto Gakuen University in Ota, Japan, a small and relatively new university about two hours by train from Tokyo, which specializes in economics, administration, and law. It is greatly to the credit of the governing Board of that university and in particular to Professor Takeo Satoh, then Head of Library and subsequently President, that they should have purchased these manuscripts; and that ‘‘from the outset ... it was the intention not to jealously guard the papers in a secret vault, but to make them available to the world-wide community of Malthus scholars and researchers’’ (Pullen & Parry, 1997, Vol. I, p. xii). The collection is housed in a purpose-built, climate-controlled library, and well equipped with display cases and worktables. A courteous and efficient staff affords the visitor every assistance. And in addition to the Malthus manuscripts, the library now houses Patricia James’s research notes: more than 10,000 pages of manuscripts and other documents that she had bequeathed to Donald Winch at her death in 1987 and which he prudently decided would find their safest home at Kanto Gakuen. An important part of the plan to make the Malthus papers widely available was to have them transcribed and published. Trevor Hughes Parry, then a Lecturer in English at Kanto Gakuen, undertook the transcription. The university secured the editorial services of John Pullen, a leading Malthus scholar from Australia, in supplying introductory and explanatory notes. It was decided at the outset to confine publication to those documents directly relating to T. R. Malthus. Donald Winch arranged for the Royal

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Economic Society to sponsor publication by Cambridge University Press. Volume I, containing 75 letters, was published in 1997. Volume II, containing the remainder of the published papers, a list of the manuscripts not published (Appendix A), two unpublished ‘‘Letters to David Ricardo’’ probably by John Cazenove c. 1821–1823 (Appendix B), and an Index to both volumes, was published in 2004. The volumes are handsomely produced and superbly edited (allowing for one or two minute and almost inevitable copyediting slips), and are entirely worthy both of the intrinsic value of the material and of the perennial importance of ‘‘Population’’ Malthus’s controversial doctrines. What do we learn from these papers? From the narrow standpoint of the history of economic analysis, not very much. From the broader standpoint of intellectual history, a great deal.

II The following material relates to what would have been thought of at the time as ‘‘political economy’’ and which we now call ‘‘economics:’’ 17 letters in Volume I (letters 52, 53, 55–63, 65, 66, 68, 71–73) dealing variously with Poor Laws, demographic calculations, emigration, bullion, Corn Laws, general gluts, and value theory; and in Volume II, 84 pages of detailed statistical and arithmetical notes on bullion trade transactions with extremely helpful explanatory notes by the editor (Pullen & Parry, 2004, Vol. II, pp. 56–140), an incomplete and unpublished draft of an ‘‘essay on foreign trade’’ – actually an analysis of the causes of international bullion movements – intended for the Edinburgh and dating from 1811 (Vol. II, pp. 141–158), and eight brief miscellaneous items referring to colonies, taxation, ‘‘frugality and expense,’’ agricultural protection, and international monetary movements (Vol. II, pp. 275–284). Of the ‘‘economic’’ letters in Volume I, Bewicke Bridge’s six letters to Malthus (letters 57–62) are tedious arithmetic or elementary algebra, two are unmailed draft letters to an unnamed correspondent c. 1825–1828 that relate to the futile controversy between Malthus and Ricardo over the best ‘‘measure of value,’’ and one (in German, with the sender’s own English translation) is by Karl Heinrich Rau purporting to support Malthus in his dispute with J.-B. Say over stagnation yet asserting that ‘‘I have felt it necessary to contest the possibility of a General Glut of Commodities’’ (Vol. I, p. 127). The letter of Francis Jeffrey to Malthus of 12 May, 1814 (Vol. I, pp. 117–119) congratulates Malthus (1814, 1815) on his Observations


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on the Effects of the Corn Laws that took a generally anti-protectionist position as against the earlier protectionism of the Essay, reaffirmed the following year in his notorious Grounds of an Opinion but abandoned again before the end of his life: a fluctuation of opinion that has been definitively documented by Samuel Hollander (1997, pp. 807–871). Malthus’s letter of 1830 to Wilmot-Horton on emigration (Vol. I, pp. 103–105) provides a characteristically guarded and judicious response – reminiscent of his cautious reaction to Thomas Chalmers’s similarly reductionist and confident assertions – to the claim that the removal of ‘‘redundant population’’ by emigration would not ‘‘have a tendency to stimulate the increase of the remainder.’’ The two remaining ‘‘economic’’ letters in Volume I (pp. 108–115), Malthus to Francis Horner (1810) and Francis Jeffrey to Malthus (1811), date from the years, and deal with the subject, with which almost all the ‘‘economic’’ matter in Volume II is concerned: the political and theoretical controversy arising out of the suspension of sterling convertibility in 1797 and the report to Parliament of the Bullion committee in June 1810. Horner had been chairman of the Bullion committee and Malthus’s letter to him concurs with the committee’s finding that the sterling exchange rate was causally linked to the note issue of the Bank of England. Jeffrey was a friend of Horner and editor of the Edinburgh which had published an article by Malthus on the paper currency in February 1811. His letter to Malthus of April 1811 solicited ‘‘another article upon Bullion and paper’’ (Vol. I, p. 114). Such an article appeared in the August 1811 number. A question therefore arises about the unpublished draft (Vol. II, pp. 141–158), seemingly written in 1811 and destined for the Edinburgh. Pullen offers a number of sensible conjectures, the most likely of which seems to be that Jeffrey ‘‘was not prepared to accept an article on the more academic aspects’’ of the currency debate (Vol. II, p. 142). For in this fragment, we find Malthus, who entirely agreed with the Bullionists on ‘‘the general question,’’ criticizing Ricardo’s claim that international monetary movements are caused by ‘‘a comparative redundancy of currency’’ (Vol. II, p. 144). Malthus claimed that his own monetary doctrine followed ‘‘from the general principles of supply and demand which are unquestionably the foundation on which the whole superstructure of Political Economy is built’’ (Vol. II, p. 147, my italics). Though Ricardo may have been brought to agree in this particular case, the assertion is historically important. For it maintains that Smithian conception of economic science that ‘‘won out ultimately’’ (Schumpeter, 1954, p. 482) over the so-called ‘‘alternative,’’ now heterodox value theory that Marx and the Sraffians learned from their reading of Ricardo. The two

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continued the debate in private correspondence and meetings, which inaugurated their intimate though disputatious friendship. ‘‘Redundancy of Currency’’ crops up again in two very brief, undated fragments at the end of Volume II (pp. 280–282), together with two even briefer notes on foreign trade and the bullion report (pp. 283–284). By far the longest set of ‘‘economic’’ papers in Volume II appears to date from between 1813 and 1816, and contains detailed arithmetical notes and tables relating to the bullion trade between London and other European centers, especially Amsterdam and ‘‘Hamburgh.’’ Some of the calculations refer to two tables Ricardo sent Malthus during the Christmas holidays of 1813–1814, and therefore are evidences of their joint interest in highly technical aspects of international monetary movements (Vol. II, p. 57). These notes would be unintelligible without Pullen’s excellent explanatory commentary. It would appear from this therefore that most of the narrowly ‘‘economic’’ material in the Kanto Gakuen collection may be regarded as footnote illustrations of the accounts of Malthus’s engagement in monetary economics supplied by Patricia James (1979, Chapter VI) and Samuel Hollander (1997, Chapter 13). It illuminates the picture here and there, but does not change it appreciably.

III More than half of the entire collection printed in these two volumes contains little, if anything, to do with ‘‘political economy,’’ however, broadly construed. It is this material, I believe, that will most interest the intellectual historian, for it tells us much about three vital components of the context of Malthus’s thought: education, the church, and society. Young Robert grew up in a world in which the sons of the nobility and gentry, and even to some extent of the bourgeoisie, were educated in the Latin and Greek classics. Ancient wisdom, it was supposed, would fit the next generation of clergymen, magistrates, and legislators to perform the duties of their station in life. But the public secondary schools established for this purpose two or three centuries before were at a low ebb in the later 18th century: municipal grammar schools small and decaying, the great collegiate foundations such as Eton and Winchester plagued by rebellions of turbulent and disorderly pupils, and feared by many parents as breeding grounds of immorality and vice. The prudent, such as Daniel Malthus, preferred to place their sons with a reputable clergyman as private tutor. Not until Thomas Arnold reformed Rugby after 1828 and reinvented the


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‘‘public school’’ did public secondary education largely replace the private tutor. The first 17 letters in Volume I give us many glimpses of Robert’s tutorial education: four years (1778–1782) with Richard Graves, who like Jane Austen’s father and many other learned clergymen of that day, housed private pupils in his spacious rectory at Claverton, near Bath; and two further years (1782–1784) with Gilbert Wakefield, a former Fellow of Jesus College, Cambridge, who had quitted the church on becoming a Socinian. Wakefield taught Classics at the Dissenting Academy at Warrington until its dissolution in 1783: hence Robert spent 1782–1783 at Warrington and the following year at Wakefield’s residence near Nottingham before going up to Cambridge. At Claverton, ‘‘Master Bob’’ read Terence, Juvenal, Virgil, Cicero, and Sallust with a keen ‘‘sense of the beauties of an author’’ by the time he was 14, and was beginning ‘‘to write tolerable Latin ... tho’ now & again ... he may be guilty of a solecism.’’ He also learned French; and ‘‘as for reading English, by way of amusement’’ he had ‘‘almost exhausted’’ his tutor’s library. He was ‘‘tolerably well acquainted with the Roman history (for his years)’’ (Pullen & Parry, 1997, Vol. I, pp. 2–7). At Warrington, Robert continued his Latin with Longinus, Lucretius, and Horace, began the study of Greek and of mathematics – Euclid and algebra – and attended William Enfield’s lectures on ‘‘Philosophy’’ and ‘‘Commerce.’’ Since Enfield had reviewed Wealth of Nations for the Monthly Review seven years before, this episode is almost certainly the origin of the precocious and highly unusual interest in political economy evinced by Malthus as an ordinand six years later (Waterman, 1991, pp. 94–95). During his year at Bramcote, Robert continued his reading of the Greek historians, began Aristotle (Rhetoric), read Virgil, Horace, and ‘‘Latin translations’’ (of Greek authors); and worked at algebra, Euclid and conic sections ‘‘so as to be able to understand some of Sir Isaac Newtons Principia.’’ He read French and English literature for amusement (Vol. I, pp. 8–26). Even by the stringent standards of his own day, Robert Malthus was well educated at the age of 17: incomparably better educated than any 17-year-old in present-day England or America. For bodily recreation he boxed, skated, played cricket, and shot. Of the 25 letters from Robert’s Cambridge years, 11 were cited by Bonar and 4 (letters 25, 26, 35, 42) reported in full by Otter. In the mid-1980s Pullen (1986) discovered Bonar’s transcriptions of 40 family letters, together with his unpublished ‘‘Life of Thomas (sic) Malthus’’ (Bonar, 1941), in the library of the University of Illinois at Urbana-Champaign. Subsequent biographers have made good use of this second-hand material, and the 12 that

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have never been seen in full before (letters 18, 21, 22, 24, 27–29, 31, 33, 34, 37, 41) add relatively little to what we already know about Cambridge education at that time. Undergraduates were obliged to attend college (not university) lectures which ‘‘takes up a good deal of time;’’ ‘‘differential calculus’’ or ‘‘fluctions’’ are essential for ‘‘natural Philosophy & Newtons principia;’’ candidates for ‘‘an honourable degree’’ were required to take part in five public disputations, in Latin, conducted according to Aristotelian syllogistic logic, upon theses assigned from Newton, Locke, and Paley; which were supplemented by a ‘‘Senate House examination’’ – the first written university examination in the world – on mathematics and ‘‘natural philosophy’’ (Pullen & Parry, 1997, 2004, Vol. I, pp. 33, 41, 42, 49). Then as now, fathers exchanged letters with their sons about money (Vol. I, pp. 27, 29–35). From an educational standpoint, the most powerful impression we receive from all of these letters including the newly published ones is that Robert Malthus’s chief and most important teacher, from first to last, was his father. Daniel’s letters to his gifted younger son show a detailed and expert knowledge of the literary and scientific culture of that age, and an assiduous concern that Robert should open his mind to as much of it as possible that must have been as rare in the 1780s as it would be today. As a younger son, Robert had to earn his own living. By April 1784 at the latest he had decided on the church as his profession and had expressed the desire to ‘‘take a degree either at Oxford or Cambridge’’ (Vol. I, p. 23). But until John Pullen (1987) took the trouble to consult the records, there was almost universal ignorance concerning Malthus’s career as a clergyman. Even his college friend Otter was wrong about the year of his ordination. Even Bonar had to be informed by Keynes that Malthus held the living of Walesby from 1803 to his death. Several manuscripts in the Kanto Gakuen collection throw vivid new light on the clerical Malthus, the most important of which are four sermons (Pullen & Parry, 1997, 2004, Vol. II, pp. 4–24). The first of these was delivered at Okewood chapel on 19 July, 1789, six weeks after his diaconal ordering, and was repeated on at least eight more occasions at Okewood and elsewhere down to September 1800. The second also dates from 1789 and was repeated until October 1793. In these two, especially the first, we see the young curate expounding Adam Smith’s (1976, Vol. II, p. 793) ‘‘pure and rational religion’’ to his rustic flock. In the first, ‘‘our saviour’’ is mentioned twice, in the second, not at all. For the object is to expound ‘‘all the known social duties’’ common to ‘‘all sects & distinctions of men.’’ The golden rule of Jesus that Malthus takes as his text for the first sermon (Matt 7: 12) is meant to ‘‘make that principle of self


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love ... the means of pointing out & prompting us to acts of honesty, humanity & justice’’ (Vol. II, pp. 4, 5). The detached and speculative spirit of 18th-century theology surfaces in the last two chapters of Malthus’s first Essay; and letter 49 (Vol. I, pp. 73–77) gives us a fascinating report by E. D. Clarke, at times verbatim, of a lively dinner-table debate among four Cambridge dons in August 1798 immediately after its publication, as to whether Malthus really was a ‘‘Materialist’’ and whether ‘‘he admitted the Doctrine of Annihilation.’’ While on vacation in the Lake District in July 1795, Malthus – who was by now a priest – spent four successive Sundays in strenuous touring without any mention of churches or church services (Vol. II, pp. 27–54). Very shortly after, however, the Church of England underwent a sea change. Shock and horror at the after effects of the French Revolution – seen as a frontal attack on Christianity – prepared the ground for William Wilberforce’s Practical View (1797), which converted the ‘‘Higher and Middle Classes’’ to that (Cambridge) evangelicalism of Charles Simeon and the Clapham Sect that remained intellectually dominant in England until its mutation into the (Oxford) Tractarian movement three or four decades later. Virtually all of Malthus’s clerical brethren at the East India College were Cambridge Evangelicals, and in letter 67, Clarke to Malthus, 1812 (Vol. I, pp. 116–117) we see Malthus implicated in an Evangelical campaign to found a Cambridge branch of the British and Foreign Bible Society in opposition to the High Churchman Henry Marsh, Lady Margaret professor of divinity (James, 1979, pp. 223–224). The increasingly ‘‘serious’’ commitment of Robert Malthus to Christianity was attested by Otter and others. The latest of the four sermons, composed for Good Friday 1827, repeated on Good Friday 1832, is a sombre and extended reflection on the sacrificial death of Christ, scriptural, liturgical, Christocentric, and deeply orthodox (Pullen & Parry, 2004, Vol. II, pp. 12–19). We are a world away from those facile Enlightenment certainties of David Hume and Adam Smith that the newly ordered deacon had expounded, just five days after the fall of the Bastille, 43 years before. On six successive Sundays in the Summer of 1826, the Malthuses faithfully attended church services on their tour of Scotland, ranging from ‘‘Mass 11 am cathedral service – music very good’’ in Durham, to ‘‘Sacrament in the kirk’’ with open-air Gaelic sermon in the Highland village of Callender (Vol. II, pp. 216–241). In a more general way, the remainder of these documents, and indeed the history of the accumulation and transmission of the entire collection down to 1916, is a valuable part of the context in which Robert Malthus’s thinking, and that of his contemporaries in what we now think of as ‘‘classical

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political economy,’’ were formed. We get hundreds of tiny glimpses of that intellectual and social world created through the gradual assimilation by the landed gentry, after the Restoration of 1661, of five or six generations of successful merchants, physicians, lawyers, and bankers. It was neither quite ‘‘upper class’’ nor really ‘‘middle class’’ in the present-day sense of these terms, but it was decidedly ‘‘elite:’’ best described by Adam Smith as a ‘‘natural aristocracy’’ (Smith, 1976, Vol. II, p. 622), more grandiloquently by Keynes (1972, p. xix) as ‘‘the High Intelligentsia of England.’’ The clergy of the Established Church, and the two ancient universities that informed and sustained its culture, were the most important component of that ‘‘Intelligentsia.’’

ACKNOWLEDGMENTS The author is indebted to Samuel Hollander and Donald Winch for their helpful comments.

REFERENCES Bonar, J. (1885). Malthus and his work. London: Allen & Unwin. Bonar, J. (Ed.) (1887). Letters of David Ricardo to Thomas Robert Malthus, 1810–1823. Oxford: Clarendon. Bonar, J. (1924). Malthus and his work. Second edition, with notes and expanded biography. London: Allen & Unwin. Bonar, J. (1941). Life of Thomas Malthus. Unpublished typescript in Rare Book Room, Library of the University of Illinois, Urbana-Champaign. Empson, W. (1837). Life, writings and character of Mr. Malthus. Edinburgh Review, 64, 469–506. Harrison, J. (1982). Introductory essay. In: The Malthus library catalogue: The personal collection of Thomas Robert Malthus at Jesus College, Cambridge. New York: Pergamon Press. Hollander, S. (1997). The economics of Thomas Robert Malthus. Toronto: University of Toronto Press. James, P. (1979). Population Malthus: His life and times. London: Routledge & Kegan Paul. James, P. (1982). Introductory remarks. In: The Malthus Library catalogue: The personal collection of Thomas Robert Malthus at Jesus College, Cambridge. New York: Pergamon Press. Keynes, J. M. (1972). Essays in biography. In: The collected writings of John Maynard Keynes (Vol. X). London: Macmillan. Malthus, T. R. (1814). Observations on the effects of the Corn laws. London: Murray. Malthus, T. R. (1815). The grounds of an opinion on the policy of restricting the importation of foreign corn. London: Murray.


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Malthus, T. R. (1836). The principles of political economy, considered with a view to their practical application. London: Murray. Pullen, J. (1986). Correspondence between Malthus and his parents. History of political economy, 18(1), 133–153. Pullen, J. (1987). Some new information on the Rev. T. R. Malthus. History of Political Economy, 19(1), 127–140. Pullen, J. M., & Parry, T. H. (Eds). (1997, 2004). T. R. Malthus: The unpublished papers in the collection of Kanto Gakuen University (2 volumes). Cambridge: Cambridge University Press. Schumpeter, J. A. (1954). History of economic analysis. New York: Oxford University Press. Smith. A. (1976). In: R. H. Cambell, A. S. Skinner & W. B. Todd (Eds), An inquiry into the nature and causes of the wealth of nations (2 Volumes). Oxford: Oxford University Press. Waterman, A. M. C. (1991). Revolution, economics and religion: Christian political economy, 1798–1833. Cambridge: Cambridge University Press. Wilberforce, W. (1797). A practical view of the prevailing religious system of professed Christians, in the higher and middle classes of this country, contrasted with real Christianity. London: Cadell.


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Heyer’s HAROLD INNIS POSTMODERNISM, H. A. INNIS, AND THE MEDIA OF COMMUNICATION Robin Neill A review essay on Paul Heyer’s Harold Innis. Critical Media Studies: Institutions, Politics, and Culture. Oxford: Rowman and Littlefield, 2003. 152 pp. ISBN 0742524833.

A QUESTION NOT ASKED Paul Heyer is to be commended for producing a very informative book on Harold Innis’ history of communications. It pulls together the communications elements in Innis’ wide-ranging works, and presents the result in an account that an otherwise uninformed reader can digest. The book is unique. Donald Creighton’s biography of Innis is about the man, primarily, and only secondarily about his contribution to economic history (Creighton, 1957). Indeed, it is more about Creighton’s own interpretation of Canadian history than about much that Innis had to say. My own intellectual biography of Innis (Neill, 1972) is a labored presentation that fails in at least one respect in which Heyer has not failed so badly. Heyer’s Harold Innis is a neat, readable presentation of something Innis had to say. Of course, Heyer has been limited by his commission. In a contribution to a series of books on A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 153–166 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24009-4

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‘‘Key Thinkers in Critical Media Studies,’’ Innis’ broad interest in many aspects of economic activity and his obsessive concern with the state of economics itself had to be relegated, more or less, to comments in passing. Still, it is Heyer who notes that Innis’ book of essays, Political economy in the modern state (Innis, 1946) ‘‘is pivotal’’ in his thought, though not given much attention by his interpreters, among whom I must include myself. The essays in Political economy in the modern state are pivotal in answering a critical question: in Innis’ The bias of communication (Innis, 1951), what is the object on which the media of communication impose a ‘bias’? Although he perceives the essays as a turning point in Innis’ thought, Heyer neither raises nor answers this question directly. To Innis, himself, the answer was perhaps painfully obvious and did not need to be spelled out. It has not been obvious to Heyer. A temptation to repeat Innis’ words, rather than to extract from them a recurring significance, – a temptation to which most, if not all of Innis’ other interpreters also have succumbed – proved too much for Heyer (see Chapters 4–6). But, we have Heyer’s own admission that the origin and intent of Innis’ interest in media of communications escapes him. Early in his account he repeats a frequently given, though unsatisfactory, explanation of the turn in Innis’ interest. If the study of staples led him to touch upon the importance of transportation and communication, the study of one of those staples, pulp and paper, opened a door to the newly emergent field of communication studies. He simply followed pulp and paper through its subsequent stages: newspapers and journalism, books, and advertising. (p. 30)

Still, Heyer is not sure of this nor of the significance of the studies, for later he states: ‘‘Indeed, it is not even entirely clear when [Innis] embarked on his so-called turn toward communications, and how the massive [unpublished] ‘‘history of communications’’ document fitted into his later work’’ (p. 110). I addressed the question of the significance of the communication studies in a paper that Heyer, unfortunately, seems not to have encountered (Neill, 1988). ‘‘Unfortunately,’’ because if he had he may very well have asked and answered the question directly. In that paper I asked the question, but I did not conjecture a direct answer. It was not until I had read into late twentieth century literature describing disruption and change in economics, history, and literary criticism over the decades from 1930 to 1960 that an answer came to me. And why, then, would it not? Harold Innis’s contribution to social science was contemporary with an intellectual revolution that produced the postmodern era in all branches of arts and sciences.

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I was on the cusp of an answer when I used the phrase ‘‘informational environment,’’ but I was not yet there. I think a phrase used in earlier literature with much the same intent was ‘‘climate of opinion.’’ Late nineteenth century, German economic historians used the term ‘‘zeit geist’’ or, perhaps, ‘‘weltanshauung.’’ A more appropriate term is the postmodern ‘‘episteme.’’ It carries the necessary connotation for understanding ‘‘what’’ the communications studies were about, because it was the reaction of Innis’ intellectual circle to the emergence of the postmodern mind-set in economics and economic policy that prompted him to turn to the history of communication media. More specifically, it was the epistemological assertions at the base of the postmodern mind-set that generated the information shock,which set Innis on his path. Even so, the term ‘‘episteme’’ is also inadequate. To describe the object biased by media of communication needs Thomas Kuhn’s ‘‘paradigm,’’ because the object was not just a mind-set or a particular constellation of information reference points. It was also the community having the mind-set, and the nature of the science, the policies, and the institutions with which that community was associated. What animated many of Innis’ contemporaries in the 1930s was the fact that in the postmodern epistemological context, none of these things were to be accorded the status of stable, objective realities. They were not ‘‘truths,’’ and that was the shocking thing. That was what Frank Knight struggled against, Innis would not accept, and J.J. Spengler probed.

THE POSTMODERNIST THREAT Marshall McLuhan’s aphorism, ‘‘The Medium is the message,’’ capsulizes the essence of postmodernism. It points to the derivative and dependent nature of the content of the message. It asserts the tentative nature of what in the postmodern epistemic paradigm passes for ‘‘truth.’’ There is no point in recounting here the opinions of Jean Francois Lyotard, Jacques Derrida, or Jan Baudrillard, or any other popular philosophe associated with postmodernism. Their attempts to delineate the contours of the postmodern mind have made it easier to see what Knight, Innis, and Spengler were reacting to, but for the three economists the importance of postmodernism – a term they never used – lay not in what it was, but in what it was not. They were aghast at the passing of modernism. Modernism was the mind-set that created those ‘‘grand narratives’’ in which reason and science undermined the beliefs, morals, and institutions of the Age of Faith. Modernism replaced revelation, theology, and the will of

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god with observation, rational philosophy, and natural science. The change in epistemological grounds was great, but not complete. Local heresies and dissident movements notwithstanding, in both epistemes fairly clear reference points, thought to be the correct directives for personal behavior and the formation of institutions, were in place. Indeed, they were firmly in place because underpinning the information environments of both faith and reason was an assurance that objective truth was accessible. Modernity was rooted in the belief that there was an objective reality to which the mind could conform. The postmodern mind sees reality only ‘‘through a glass darkly.’’ Reason, limited by ignorance and driven by passion, is an unreliable guide. Accordingly, the epistemological foundations of the Age of Reason have been no more satisfactory to the makers of the postmodern mind than were the epistemological foundations of the Age of Faith to the makers of the modern mind. Perhaps Friedrich Nietzsche was the first to voice the complete postmodern discontent. God was dead, and reason was the plaything of emotion and creative imagination. Modernism did not give way easily before Nietzsche’s seeming rants. In the first half of the twentieth century, there were at least two bridging tendencies in the climate of opinion. In literature and art there was an attempt to make a new unity, to delineate a new morality, a new ‘‘reality.’’ One thinks of Shaw, Joyce, Hemingway, the Impressionists, and Picasso. In philosophy, there was a movement to find a foundation for objective truth in scientific observation – the positivism of the Vienna School. By the middle of the twentieth century, art and literature had given up on unity and on a new finished picture of ‘‘reality.’’ They pursued dispersal, multiformity, and the process of art rather than the finished object of art. Much the same happened in science, because science offered no modernist philosophical justification for itself. There was only a postmodern Pragmatic justification – the Pragmatic justification by results. If something was useful, if it fitted into the environment of contemporary thought and things, then it was as good and as true as could be. Science ceased to seek the uniformity of an objective ‘‘nature,’’ and sought what would work best. It became ‘‘performative.’’ With science and art set on the same foundation in this way, the difference between them disappeared. What was disturbing to Knight, Innis, and Spengler, was the entailment that any presumed Apollonian–Dionysian distinction between social science and politics was false. In the postmodern conception, as Innis put it, ‘‘nature copies art.’’ They were virtually alone in their reaction. Most of the economics profession took another position. Perhaps wisely they clung to a grand narrative


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(illusion?) justifying a positivist position with respect to ‘‘natural’’ science and economic ‘‘science.’’ In the postmodern view, objectively real ‘‘nature’’ was not accessible to the mind and economics was not a ‘‘science.’’ What Knight, Innis, and Spengler saw or thought was that the economics profession was being drawn, unwittingly, into this mind-set – protesting a false positivism and practicing a false pragmatism.

AN INFORMATIONAL SHOCK A shock was registered in the Euro-American informational environment during, and in fair measure because of, the First World War and the 1929– 1939 economic depression. It was felt in the social sciences as much as in art, literature, and politics. Frank Knight put the matter most forcefully. On the nature of the current political trend, most of what can be said with confidence is negative. It is something different, change, revolution. A break-down of the old system and of the theory and ideology on which it rested y. The nineteenth-century liberal system is played out, and the world of West-European civilization, based on political ‘‘democracy’’ and economic ‘‘freedom,’’ will go through a drastic revaluation of its ‘‘modern’’ ideas and values y. Yet the problem is a new one, as the idea of social direction by popular discussion is new. It was created in the first place by the printing press and then by modern civilization, which drew the whole population, willy nilly, into the discussion of questions previously reserved for specialists. (Knight, 1934, pp. 408, 411, 426)

Knight’s repeated theme was the changed role of intelligence in determining economic policy – the move from rationalism to emotionalism. It was taken up by E.J. Urwick the Head of the Department of Political Economy, at the University of Toronto where Innis held a position. The Age of Reason justified Democracy; it gave us utilitarianism; it cursed us with behaviourism (and liberalism); it muddled us with Evolution; it made some of the stupidest people the most cocksure .y Objectivity becomes a joke .y Discussion is not really a logical process, though it must assume the garb of logic. It is, fundamentally, a display of feeling, and very little else. (Urwick, 1935, pp. 65, 69, 75)

FRANK KNIGHT’S RESPONSE From one point of view, the epicenter of the shock was located in the implications for democracy of the enlarged role of ‘‘planning’’ in the formation of social and economic policy. Would democracy survive the discretionary forces at play in Fascism, Nazism, Russian Communism, and in

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the ideology of the New Deal in America? This was the question that raised Knight’s concerns about the ‘‘role of intelligence’’ and the nature of ‘‘discussion.’’ Knight showed a preference for open discussion, but seemed to despair of its being organized in a way that would produce satisfactory results. He despaired of its consequences for economics. Knight rejected both positivism and pragmatism as a basis of economic truth and policy, and, perhaps, never found anything with which to replace them. His rejection of positivism in social science was evident as early as 1924, when he asserted that the subject of economics – human behavior – was essentially unpredictable, and therefore could not be formulated into immutable laws (Knight, 1999 [1924]). There were people who agreed with him in this, but who took the matter in a direction in which he would not go. With no empirical assurance about how the economic system would work, these others proposed to experiment with policy – to impose it, test its correctness, and bear, or have others bear, the costs of mistakes. In the upset time of two world wars and a catastrophic economic depression, the experimental approach was understandable, but, to Knight, shocking. Consider the following, again: [T]he current political trend y is something different, change revolution, a break-down of the old system and of the theory and ideology on which it rested y. [A] new type of leadership y does not claim to know, or make its appeal on grounds of knowledge or reason, but rather advocates action as such, the following of an emotional direction or frank experimentation .y The nineteenth-century liberal system is played out, and the world of West-European civilization, based on political ‘‘democracy’’ and economic ‘‘freedom,’’ will go through a drastic revaluation of its ‘‘modern’’ ideas and values. This change leads backward historically, toward some combination of nationalism – though a nationalism different from that of the post-Renaissance centuries – and to a quasireligious intellectual absolutism, comparable to, yet different from that of the Middle Ages. (Knight, 1934, pp. 408, 411)

What Knight meant by ‘‘nationalism’’ was the new forms of government that were appearing in Russia, Germany, Italy, and even in America. But, at this point, the matter touches upon Innis. In 1935, Innis chaired a session on economic nationalism at the meetings of the American Economics Association (A.E.A.). Knight spoke. It was not Innis’ first contact with Knight. The two had been in touch for a number of years. Innis had participated in group discussions that included Knight, J.M. Clark, and Morris Copeland when he was a graduate student at Chicago, and he had maintained contact with Knight and Copeland by mail. And, it must be remembered, Knight was still a force at the University of Chicago when Innis was invited to join the faculty there in the late 1940s. Following the session at the A.E.A.


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meetings in 1935, Knight expanded on the position he had taken in a lengthy article (Knight, 1935). In it he moved his argument forward to the question of how in practice policy was to be determined. Policy would be determined by ‘‘discussion’’ among those who knew, but, in Knight’s view, how that was to be arranged was problematic. Domination will rest upon some mixture of ‘‘force’’ in the narrow sense of a threat of violence, with ‘‘psychological technique,’’ ‘‘propaganda’’ or, in plainer language, deception, fraud, ‘‘humbug.’’ In this connection the modern developments of technology in the field of social communication and of the ‘‘science’’ (a quasi-natural science) of psychology have together created a new basis for tyranny on the part of a group which once gets in a position to monopolize and control the press, radio, etc. (Knight, 1935, p. 19)

Subsequently, Knight explicitly rejected John Dewey’s postmodern view that the crisis should be addressed by ‘‘experimentation’’ to see if something would work. Knight could not see how discussion in democracy as then constituted in the United States could get to anything that would be objectively true (Knight, 1936, 1999 [1940]; see also Hickman, 2001). A few years later, reviewing a book by Thomas Hutchison, he again rejected the positive approach in economics.

INNIS’ RESPONSE Innis responded to his colleagues’ confused worries over the possibility of objective social science with a Veblenian assertion that there could be objective study of human behavior to the extent that external factors shape subjective thought. The adjustment of social science to current demands has been facilitated by improved methods of communication, such as the radio, which strengthen the influence of lower levels of intelligence .y The habits or biases of individuals which permit prediction are reinforced in the cumulative bias of institutions and constitute the chief interest of the social scientist. (Innis, 1935a, pp. 282, 283)

And, really, this is the whole story. Innis began his study of the influence of media of communication on the climate of opinion by countering the shocked dismay of some and the bold surrender of others from among his contemporaries. Innis responded that there was yet some room for reason, objectivity, and science in the formation of social and economic policy. Intelligence in the social process is, therefore, seriously confined in its attempts to predict general trends, but in so far as the ‘‘sediment of experience’’ becomes deeper its task becomes at once easier and more difficult. (Innis, 1935a, p. 285)

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Assertions that social science should be, or unfortunately was subjective, and Innis’ counter assertion continued through the last years of the depression and into the early years of the 1939–1945 war. According to A.R.M. Lower, [W]e stand at the end of an era, or indeed at the end of two eras – at the end of nineteenth century individualism, sometimes called liberalism, and at the end of the longer period of individualism ushered into the world by the Renaissance and Reformation .y The social sciences, in other words, and certainly social scientists, can never be completely detached, unprejudiced observers .y [T]he social scientist in these pregnant days and in this malleable society of ours, cannot, if he is to exist, be a mere spectator, a mere dissector of society: he must also be a formative agent in society. (Lower, 1941, pp. 2, 7, 13)

Innis replied, to the contrary, that the social scientist can make his most effective contribution to the maintenance of morale on the home front, to the advancement of his interests, and to the solution of problems of democracy by showing confidence in the traditions of his subject and minding his own business .y In a young country with its insistence on nationalism, in a period of depression and war with its insistence on activity and intervention of the state, the scholar is under tremendous handicaps .y At least this much should be understood after one war which made enormous demands on scholarship, [and] after an interlude in which an interest in scholarship was threatened and undermined continuously by the widening influence of the press and the radio y. (Innis, 1941, pp. 118–120)

This is the whole story, indeed. According to Innis, contemporary discussion expressed in the press and over the radio was polluted by the ignorance and prejudice of special interests. The information environment was biased. He was explicit about the telegraph, the telephone, radio, and the press being the effective causes (Innis, 1935b, pp. 403–404). Further, he was explicit about social scientists, economists in particular, being the unwitting victims of ‘‘the change in the character of discussion’’ (Innis, 1935b, pp. 405–406). As early as 1935, Innis’ had made his point. The media of communication had shaped the differently contoured information environments of history. Accordingly, he did not look for objective truth at the level of contemporary popular or even academic discussion, because they were shaped by the media. Nonetheless, he thought it possible to give some objective account of the reference points in succeeding constellations of subjective assertions by observing how they had changed under the influence of technical advances in the media of communication.


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J.J. SPENGLER’S RESPONSE The point with respect to Spengler is not that he influenced Innis. Indeed, the point is that there was little direct connection between the two, and yet they shared a concern over conditions in the information environment. It was only obliquely that Spengler detailed the importance of Innis’ insight with respect to the current state of and the history of economics. Innis and Spengler came independently from the atmosphere of doubt and confusion that pervaded American economics in the 1930s, but they arrived at interests so similar that the common root of their research projects cannot be doubted. The nature of that common root illuminates the significance of Innis’ history of communications. Four years later than Innis and Knight, Spengler set out from the same point – a discussion of the nature of economics and New Deal economic policy at a meeting of the A.E.A. The topic was the influence of Marxist economics on the New Deal. Spengler’s comments exhibited his belief that ‘‘the old economic orthodoxy’’ could not take into account the consequences for economic behavior of changes in the sociopolitical milieu. He specified the elements in question: the relative power of classes, the relationship between the two, and ‘‘the extent to which, if at all, these relationships emerge in nature.’’ It was important to know, he said, the role of elites in determining policy, and how the democratic process could be shaped to exclude the technically incompetent from political and economic power (Spengler, 1938, pp. 20–22). Spengler was as yet not in shock over the subjective character of postmodern economics. Rather, he was just certain that ‘‘the old economics’’ did not encompass the determinants of economic behavior. [E]conomic science must take as its object not only the interconnected price, demand, and supply variables which, when expressed in terms of appropriate equations, are resolvable into quantities that are simultaneously determinable and determinate. This object must be expanded to take into account (a) such non economic variables as are significantly interlinked with the economic variables enumerated, and upon which the values of the latter are contingent: (b) the more important trends of tendencies immanent in the broad culture complex of which the economic variables constitute parts. In proportion as economic theory is thus expanded it will be freed of the palsying illusion of concreteness that now afflicts it; and it may be reoriented in ways that will make it much more useful to statesmen and decision makers than it is at present. (Spengler, 1940, p. 157)

This ‘‘broad culture complex’’ that Spengler thought economics should take into account was the object of study in Innis’ history of the media of

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communication. In 1953, Spengler was still on this point when he commented on Karl Pribran’s ‘‘patterns of economic reasoning.’’ He lists the causes of change in Economic theory: (1) historical events and the appearance of new problems, (2) changes in the extent to which humankind believes its propositions to represent reality, (3) changes in weltanschauung, (4) changes in the intellectual and scientific climate, and (5) the internal logical development of ideas. In this instance, however, he was writing abstractly about economics. He had yet to express the shock and dismay that Knight and Innis had expressed with respect to the implications of what he was saying for the ‘‘truth’’ content of the discipline and for its role in the formation of public policy. Spengler’s expression of dismay came in 1968, some time after Innis death. By then however, he was in fully aware of postmodern trends in intellectual history. He conceded that economics evolved under the force of external factors, and that these external factors affected primarily the mindset of economists. As the insight that economic ‘‘science’’ was in practice subjective came home to him, Spengler’s reaction was close to that of Innis. The situation was bad, but there was room for hope. Today, Western society is undergoing an intellectual sundering. At least two cultural worlds are emerging; that of the scientist, which no longer is being interpreted to the underlying mass, and that of an underlying mass which draws its constructs mainly from media which (in keeping with a universal Gresham’s Law) are replacing the book. It is possible that viewing economics and other science as cultural forms susceptible of interpretation by poets, essayists, philosophers and publicists might re-establish more effective communication between these worlds and avert the ascendancy of both scientism and factualism. (Spengler, 1968, p. 30)

Spengler’s awareness of the nature and implications of postmodernity, of the implications of the role of language in forming thought, and of the importance of Innis’ history of communications for social science, was fully evident by 1970 (Spengler, 1970, p. 140). His dismay at the consequences for economics and economic policy was in full bloom by 1972, when he worried about ‘‘licensure, monopoly, and thought control in the institutionalization of and widespread employment of ever more social scientists’’ (Spengler, 1972, p. 7). But citations indicating Spengler’s reaction to the state of contemporary economics could be multiplied beyond need. The point is that Innis’ communication studies grew directly out of a turn in the evolution of economics that was perceived by a number of economists in the middle years of the twentieth century. The causes of the turn were both external and internal to the informational environment, and, through Knight, Innis, and Spengler, the history of economics recorded this. They


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perceived the nature and referents of thought not to be what they had been. They reacted to this reformation with shock and dismay at the evaporation, not only of economics as they understood it, but also of the very foundation of thought on which economics as they understood it had been built. Innis approached the matter as he had approached the study of economic phenomena – with a Veblenian emphasis on cumulative causation associated with technical and institutional conditions. The communications studies were not an extension of an account of the role of transportation technique in Canadian history. They were a reaction to changes in the nature of economics as seen by some in the United States and in Canada. They were continental American, even Euro-American, rather than simply Canadian, and they were exercises in intellectual history and historiography, rather than economic history as such.

POLITICAL ECONOMY IN THE MODERN STATE The topic that preoccupied ‘‘the later Innis’’ was economics in the informational environment of his time, and, by extension, economics in the informational environments of earlier times. A number of essays presented in Political Economy and the Modern State are substantially excursions into the history of economics. They record Innis’ turning toward the influence of media of communication on an informational environment that fathered changing perceptions within social science, particularly economics. His insights were not his alone. They were ‘‘in the air.’’ Certainly, the notion that the press and the radio, the means of communication, were somehow the cause of ‘‘decline’’ in the nature and ‘‘role of intelligence’’ in the governance of the state was present in the pronouncements of Knight, Urwick, Lower, and eventually Spengler. What distinguished Innis was his focusing on this external factor in the history of economics and of Western civilization. But even in that he may not have been entirely alone. He read everything that Mark Pattison wrote relevant to the matter, and was completely captivated. The essay ‘‘Political economy and the modern state’’ is a pastiche of citations from Pattison’s works. Still, it was Innis who wrote the citations into a capsule history of economics. In our concern with the problems of modern scholarship we are faced with the prospect of a new Dark Ages .y Political economy flourished with political, economic, and religious freedom. It withered with subordination to mathematical abstractions and science, and became the handmaid of centralized power in the modern state .y The Marxist solution, the Keynesian solution, or any solution, cannot be accepted as final if the universities are to continue and civilization is to survive. (Innis, 1944, pp. 138, 140, 141)

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Knight, Innis, and Spengler obsessed on change in the information environment. Neither the fundamentalism of positivists nor the relativism of postpositivists was acceptable to them. They belonged, it would seem, to an intellectual elite defending some superior ground in the understanding of social science, in particular, and of civilization, in general. In their view, the generality of ‘‘the profession,’’ as Harry Johnson would have put it, had been swamped by the force of an information environment characterized by subjectivity, short-time horizons, and a preference for government agency. Once the case is seen, the evidence appears thick upon the ground. Innis’ communication studies rose from the shock of mid-1930s perception of the contours of the postmodern episteme. Political economy in the modern state, published in 1946, was the product of studies that took place over a number of years. No doubt personal matters had a role to play. There were internal struggles in the Department of Political Economy and in the Faculty of Arts at Toronto in the mid- to late 1930s that fed into his concerns. His antipathy toward Urwick, Head of his Department, over his own personal advancement, and his differences with the socialist historian, Frank Underhill, sharpened his awareness of change in the climate of opinion. Further, by the late 1930s his general account of Canadian economic development was finished, and he was ready to turn his attention toward broader concerns. The object of his interest during the mid-1940s was evident in his 1948 Beit Lectures, published as Empire and Communications (Innis, 1972). Influenced by Mark Pattison and C.N. Cochrane, and by new departures in the study of classical civilization at Toronto, he brought all of Western history into his conjectures about the influence of media of communication on values, on institutions, and in the tendencies of different civilizations’ to survive, expand, and collapse. After 1948, he expanded into a more eclectic choice of subjects, depending, in part, on the circumstances in which he was invited to speak. The history of economics then became only an element in much broader concerns.1 Perhaps, for him it was never more than that.

HEYER’S INNIS Heyer’s book is good. It goes some distance in tying the personal biography written by Donald Creighton into the intellectual biography that I attempted. I recommend it to anyone who is unfamiliar with Innis’ work. Its limitations are a consequence of its focusing on the communication essays apart from the totality of Innis’ thought, and of its seeing Innis in a Canadian rather than a Euro-American context. Beyond this I perceive only


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Pecadillos on Heyer’s part. For example, because he emphasizes only one aspect of Innis’ thought, Heyer insinuates a mono-causal economic interpretation of history into Innis’ work, repeatedly pointing to what he calls the ‘‘Marxian’’ tenor of Innis’ assertions (e.g. pp. 25, 38, 53, 70). In fact, Innis was one of those ill-defined institutionalists who characterized American economics in the 1920s and 1930s. The importance of his connections with Veblen, Chester Wright, Frank Knight, Morris Copeland, and J.M. Clark cannot be denied. His antipathy toward essential aspects of the socialist vision cannot be denied. Because he focuses on only one element in Innis’ thought, Heyer fails to uncover the roots of that element. He does not tell his readers that the phrase ‘‘bias of communications’’ is a figure of speech – metonymy. It is not the media of communication that are biased. It is something affected by the media – the climate of opinion, the episteme, the paradigm – that is biased.

NOTES 1. See the essays in Innis, (1952), including ‘‘The press, a neglected factor in the economic history of the twentieth century,’’ (Innis, 1952, pp. 77–108).

REFERENCES Creighton, D. (1957). Harold Innis: Portrait of a scholar. Toronto: University of Toronto Press. Hickman, L. A. (2001). Pragmatism as post-modernism. In: E. L. Khalil (Ed.), Dewey, pragmatism, and economic methodology (pp. 87–101). London: Routledge. Innis, H. A. (1935a). The role of intelligence: Some further notes. Canadian Journal of Economics, 1, 280–287. Innis, H. A. (1935b). Discussion in the social sciences. Dalhousie Review, 15, 401–413. Innis, H. A. (1941). The social sciences in the post war world. Canadian Historical Review, 22, 118–120. Innis, H. A. (1944). Political economy in the modern state. Proceedings of the American Philosophical Society, 87, 323–341. Innis, H. A. (1946). Political economy in the modern state. Toronto: Ryerson Press. Innis, H. A. (1951). The bias of communication. Toronto: University of Toronto Press. Innis, H. A. (1952). Changing concepts of time. Toronto: University of Toronto Press. Innis, H. A. (1972). Empire and communications. Toronto: University of Toronto Press. Knight, F. H. (1934). Social science and the political trend. University of Toronto Quarterly, 3(July), 407–427. Knight, F. H. (1935). Social science and social action. International Journal of Ethics, 46, 1–33. Knight, F. H. (1936). Pragmatism and social action. International Journal of Ethics, 46, 229–236.

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Knight, F. H. (1999[1924]). The limitations of scientific method in economics. In: R. B. Emmett (Ed.), Selected essays by Frank Knight (Vol. 1, pp. 1–39). Chicago: University of Chicago Press. Knight, F. H. (1999[1940]). What is Truth in economics? In: R. B. Emmett (Ed.), Selected essays by F.H. Knight (Vol. 1, pp. 372–400). Chicago: University of Chicago Press. Lower, A. R. M. (1941). The social sciences in the post-war world. Canadian Historical Review, 22, 1–13. Neill, R. (1972). A new theory of value: The Canadian economics of H.A. Innis. Toronto: University of Toronto Press. Neill, R. (1988). Rationality and the informational environment; a reinterpretation of Harold Innis. Journal of Canadian Studies, 22, 78–92. Spengler, J. J. (1938). The significance of Marxian economics for current trends in government policy: Discussion. American Economic Review, 28(1), 20–22. Spengler, J. J. (1940). Sociological presuppositions in economic theory. Southern Economic Journal, 7, 131–157. Spengler, J. J. (1968). Economics: Its history, themes, approaches. Journal of Economic Issues, 2, 5–30. Spengler, J. J. (1970). Notes on the international transmission of economic ideas. History of Political Economy, 2, 131–151. Spengler, J. J. (1972). Social science and the collectivization of hubris. Political Science Quarterly, 87(1), 1–21. Urwick, E. J. (1935). The role of intelligence in the social process. Canadian Journal of Economics and Political Science, 1(1), 64–76.

Harris’s SICK ECONOMIES WAS SHAKESPEARE AN ECONOMIC THINKER? Douglas Bruster A review essay on Jonathan Gil Harris’s Sick Economies: Drama, Mercantilism, and Disease in Shakespeare’s England. Philadelphia: University of Pennsylvania Press, 2004. Was Shakespeare an economic thinker? To Karl Marx, who freely quoted the playwright in confirmation of various assertions in Capital, at least Shakespeare’s characters were. Prior to claiming that money is a ‘‘radical leveler y [that] does away with all distinctions’’ (Marx 1967, I, p. 132), for instance, Marx famously cites Timon’s diatribe on gold from Timon of Athens (1607): Gold, yellow, glittering, precious gold! Thus much of this, will make black white; foul, fair; Wrong, right; base, noble; old, young; coward, valiant. y What this, you gods? Why, this Will lug your priests and servants from your sides; Pluck stout men’s pillows from below their heads; This yellow slave Will knit and break religions; bless the accurs’d; Make the hoar leprosy ador’d; place thieves, A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 167–180 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24010-0

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And give them title, knee and approbation, With senators on the bench; this is it, That makes the wappen’d widow wed again: y Come damned earth, [Thou] common whore of mankind.

Elsewhere Marx calls upon Shylock (from The Merchant of Venice [1596]) and Dogberry (from Much Ado About Nothing [1598]) in general (sometimes humorous) support of his analyses. But surely finding convenient phrases and speeches in a playwright is not the same thing as saying that such an artist is engaged in a larger project we could recognize as economic thought. This is the difference, perhaps, between someone citing the proverb ‘‘Nothing ventured, nothing gained’’ and an analyst devoting years to the study of venture capital. Obviously few of us expect a playwright to do more than write plays. Aristotle’s six-fold division of plot, characters, verbal expression, thought, visual adornment, and song establishes a sufficiently broad and demanding horizon of expectations for both dramatists and their publics. With the exception of those who willingly attend the presentation of hortatory ‘‘thesis’’ dramas, playgoers often take any meaningful ‘‘thought’’ – certainly to the extent that it could be considered a ‘‘theory’’ – as purely a bonus when it accompanies a satisfying theatrical experience. Shakespeare’s plays are indeed full of small thoughts: quips, proverbs, riddles, maxims, retorts, self-reproaches, and rhetorical questions, to name a few forms. And one only has to look to various monologues, soliloquies, debates, and character conflicts to see that many of his plays stage ideas and positions in open competition with each other. But is this the same thing as saying he is an X-thinker, whether we choose to fill in the blank with such terms as ‘‘religious,’’ ‘‘cultural,’’ ‘‘philosophical,’’ ‘‘political,’’ and so on? Is the presence of thematic material – however abundant – enough to indicate that Shakespeare was an economic thinker? During the past several decades, critics have been increasingly willing to see the plays of Shakespeare’s era as commodities (in addition, that is, to the aesthetic and cultural objects they had long been considered to be). At the same time, these plays were clearly concerned with the very market forces that surrounded them and indeed gave them their being. One of the most significant developments in Shakespeare studies has come in relation to a ‘‘New Economic criticism’’ (Woodmansee & Osteen, 1999), which approaches the plays via an extensive range of economic models and assumptions. Following Jean-Christophe Agnew’s (1986) influential study,

Was Shakespeare an Economic Thinker?

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for example, such critics as Richard Halpern (1991), William Ingram (1992), Lars Engle (1993), McLuskie and Dunsworth (1997), Melissa Aaron (1998), Theodore Leinwand (1999), and Andrew Gurr (2004) – to name only these – have explored the ways in which economic forces both shaped the plays of Shakespeare’s England and were interpreted in and by those plays themselves. More recently still, a provocative anthology of critical essays edited by Linda Woodbridge, Money and the Age of Shakespeare (2003), has gathered a diverse array of critical voices on the topic announced in its title. Perhaps the most strenuous case for Shakespeare’s role as an economic thinker has come from Frederick Turner (1999), who argues that ‘‘Shakespeare was a key figure, perhaps the key figure, in creating that Renaissance system of meanings, values, and implicit rules that eventually gave rise to the modern world market and that still underpin it’’ (p. 11). Turner’s book is pitched to a popular audience, and therefore does not take advantage of the range of criticism mentioned in the preceding paragraph. A much richer monograph by Paul Cefalu (2004), which advances a ‘‘revisionist Shakespeare,’’ demonstrates that Shakespeare’s plays are not the unconscious reflections of historical forces (a position sometimes taken by critics), but rather documents that evidence a Shakespeare every bit as aware as later readers – perhaps more so – of the historical forces shaping his era. Thus was Shakespeare, in Cefalu’s argument, consciously staging and sometimes playing with the very themes and issues that scholars have ‘‘discovered’’ in the plays. Such a drama as The Merchant of Venice, for instance, is, in Cefalu’s reading, not only a brilliant if problematic comedy but also an extremely self-conscious essay of sorts on the changing nature of economic valuation (what his book would call a ‘‘transitional ideology’’) in an equally changeful society. Another extremely welcome addition to the New Economic criticism concerned with Shakespeare comes with Jonathan Gil Harris’s (2004) most recent study, Sick Economies: Drama, Mercantilism, and Disease in Shakespeare’s England. Harris’s book, a canny exploration of the way early modern plays and economic theorists alike defined economies in terms of a dialectic of health and disease, is my central object in the paragraphs that follow here. Because his study examines in great detail texts from pre-Enlightenment England, it necessarily involves a culture whose beliefs may seem alien to those reading this page. A few words devoted to the cultural and historical background may therefore be in order, especially because they may help a non-specialist better to understand this very valuable book. At the risk of repeating information that may already be familiar to the reader, I will offer a kind of condensed guide to some of the more important issues

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and distinctions behind the era explored in Harris’s book. Those who wish to go directly to an account of the book itself are encouraged to skip the following three paragraphs. Readers of Harris’s book will benefit from recognizing at least five things about Shakespeare’s era and his works. First, a point of nomenclature that is by no means trivial: critics sometimes call Shakespeare’s era the ‘‘English Renaissance,’’ and sometimes the ‘‘early modern’’ age. Both these labels were coined in the twentieth century, and each emphasizes something different about the era. To call the period the English Renaissance obviously stresses its connections with classical Greece and Rome, its civic humanism and delight in rhetoric; this label asks one to ‘‘look back,’’ as it were, toward what came before it. To call this the early modern age, in contrast, stresses a host of things that we define as ‘‘modern:’’ the advent of moveable-type printing, the discovery and exploration of the New World, the rising emphasis on science and scientific method, and a growing interest in individualism (including personal and political freedoms). Second, a reader will benefit from knowing that one of the dominant metaphors during this era was that of the nation-state as body. To look at the famous frontispiece to Hobbes’s Leviathan (1651) – in which the body of the monarch is made up of hundreds of smaller bodies of individual subjects – is to be confronted by a metaphor as old as Plato and Aristotle, one central to the way that early modern individuals conceived of such large entities as the nation-state. In the first scene of his tragedy Coriolanus (1608), for instance, Shakespeare has Menenius Agrippa deliver a ‘‘belly fable’’ to placate the mutinous citizens; his fable, which describes a body whose ‘‘members’’ rebel unwisely against their own stomach (which is of course responsible for maintaining them), draws upon a habit of thought absolutely pervasive during the period. Replicating the formula that Lakoff and Johnson (1980) employ in their famous study Metaphors We Live By, one could represent this metaphor as NATIONS ARE BODIES. Bodies and medical belief bring us to a third point that will be helpful to readers of Sick Economies. As Harris (1998) has shown, Shakespeare’s era witnessed a transition from one general belief about bodies (and, correspondingly, disease) to another. Briefly put, this was a transition from an older, classical model inherited from Galen (hence the ‘‘Renaissance’’ label) to a newer model influenced by the theories of Girolamo Fracastoro and the Swiss physician Paracelsus (both of whom we could call, without too much exaggeration, ‘‘early modern’’ theoreticians). In brief, the Galenic understanding of the body emphasized its internal dynamics: the proper balance of the body’s four ‘‘humors’’ was key to its health. The newer medical


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theories saw illness coming not from within but from without: disease was transmitted to a person from outside his or her body. Because it was natural for the era to think about the economy in terms of bodies, Harris’s book demonstrates that a change in conceiving how bodies stayed well or became ill necessarily affected writers’ economic models. Correspondingly, it is crucial to note that this was an era that routinely and freely applied elements from one domain of experience to what we would consider to be separate areas of experience. Ideas, words, things, and activities are, for lack of a better word, slipperier in early modern texts than they are in books written less than a century later. Nowhere is this more apparent than in Shakespeare’s attraction to puns and other instances of resonant verbal play. He is somewhat representative of his age in this, though he is exceptional in the extent to which he is drawn to the fruitful dynamics of wordplay. Thus we have a fourth point to consider in noting that a term such as ‘‘usury’’ in The Merchant of Venice (to mention only one example) is, famously or infamously, connected not only to the word ‘‘use’’ but to ‘‘Jew(s)’’ and ‘‘ewes’’ in the play as well (on which, see Shell, 1992). We live in an era where good writing equals clear writing, which in turn means unambiguous writing. We have to turn this belief on its head when it comes to Shakespeare’s plays, because the productivity of ‘‘slippery’’ words and phrases was clearly a goal of the playwright. A fifth point that will help readers with Harris’s book involves changes within Shakespeare’s plays themselves. Plays from the middle of his career – certainly by the time we reach Hamlet in 1600–1601 – are increasingly dominated by images of illness and bodily degeneration. Critics and biographers have often speculated about such images (holding, for instance, that Shakespeare became ill and/ or depressed at this point in his career, etc.), but more important than these unverifiable guesses is the sheer frequency with which Shakespeare’s middle plays thought about systems (in this case, bodily systems) out of balance, and therefore in need of being restored to a healthy equilibrium. In this, Harris’s book shows, the plays of Shakespeare and his contemporaries overlapped in significant ways with four early modern theorists of economy and trade. Few if any in this era were able to conceive of large systems without recourse to the body and its equilibriums. Whether penning economic pamphlets or plays for the commercial theaters, early modern writers turned again and again to the NATIONS ARE BODIES metaphor when conceiving such activities as exchange, evaluation, and acquisition. In seven chapters and an afterword Harris parallels economic and literary texts from Shakespeare’s day, showing how they share metaphors and other habits of thought when it comes to portraying the health or illness of an

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economic system. These texts pose many of the same questions; some of these include: How is an economy’s health to be evaluated? Does illness come from inside or outside economies? Is adding to economies, by either trade or consumption, a desirable goal? Does exchange impoverish economies? Should an economy seek to hoard its assets? It is one of the central discoveries of Harris’s book that these questions were invariably addressed (if not always answered) in relation to medical metaphors and theories. For better or worse, such early modern economic theorists as Gerard Malynes, Thomas Milles, Edward Misselden, and Thomas Mun thought medically when they thought of economic systems. Setting out the parameters of his inquiry, Harris’s opening chapter, ‘‘The Asian Flu; Or, The Pathological Drama of National Economy,’’ shows us that this habit is still with us. Readers skeptical of the potentially odd disjunction of topics announced by his work’s overall title (‘‘drama,’’ ‘‘mercantilism,’’ ‘‘disease’’) will quickly find any doubts they have, resolved by Harris’s careful treatment of his topic. Because it was an age of discovery, exploration, and increasingly international trade, the early modern era was under special pressure to explain systems of exchange. Harris makes it clear that the human body and its balances seemed to be a natural analogy for representations of exchange – both corporeal and economic – and that such representations themselves became routine. This was a two way street, of course. According to Harris, ‘‘Economic developments helped writers imagine disease as a foreign body y in turn, the new vocabularies of contagious or exogenous disease provided writers with the imaginative resources for an emergent discourse of national and global economy’’ (p. 18). One of the compelling insights of Harris’s study is that various diseases were conceived of in various ways: syphilis, for instance, had baggage that differed from the plague, consumption, canker, and so forth. Specific diseases therefore offered English writers (literary and economic alike) specialized equipment for thinking. Harris argues that ‘‘early modern debates about both the nature and the transmission of illness cannot be separated from the early modern emergence of economics as a discrete field of inquiry’’ (p. 27); further, ‘‘our modern notions of economy have a decidedly pathological provenance and y our modern notions of disease cannot be disentangled from the development of transnational capitalism’’ (pp. 27–28). The so-called ‘‘Asian flu’’ that afflicted economies throughout East Asia in late 1997 confirms Harris’s claim: it is still difficult to talk about economics without recourse to the vocabularies of the body, medicine, or disease. It is one of the often-repeated ironies of history that syphilis was routinely labeled as a disease from elsewhere. The English labeled it a Spanish disease,


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the French pox, or Neapolitan illness; the Portuguese called it the Castilian disease; in Portuguese-India they dubbed it the Portuguese disease; and in France it was called the disease of Naples. In what remains one of his book’s strongest chapters, Harris traces out various metaphors connected with syphilis in Shakespeare’s early farce, The Comedy of Errors (1592), demonstrating that when Shakespeare is thinking, in this play, about exchange – whether it be the trading of goods or bodily fluids – he necessarily does so within a metaphorical complex that analogizes sexual commerce with more conventional types of commercial exchange. Here Harris’s economic theorists are not the ‘‘four Ms’’ (Mun, Malynes, Misselden, and Milles) but the ‘‘two Ss:’’ Thomas Starkey (who wrote a Dialogue Between Reginald Pole and Thomas Lupset [late 1530s]) and Thomas Smith (A Discourse of the Commonweal of This Realm of England ([1581]). In their writings, Harris contends, we see a movement away from a medieval understanding of economics as a branch of Christian ethics and toward a more modern paradigm by which economies are bodily – and hence physical – rather than moral systems. Shakespeare, Harris argues, had both of these paradigms to draw on in writing The Comedy of Errors, which brims with the problematics of exchange, loss, and acquisition. In his reading, Egeon’s long monologue opening the play offers ‘‘conflicted conceptions of transnational commerce.’’ A few of the questions this play asks us to ask include: ‘‘Is [transnational commerce] healthy or is it pathological? Does it fall into the orbit of individual and domestic moral economy, or is it the bedrock of amoral systemic economy?’’ (pp. 38–39). Characteristically, Shakespeare addresses these questions by employing both a Galenic model of physiology (in which ‘‘unchecked appetite leads to incontinence, humoral disarray, and sickness’’ [39]), and, especially as it pertained to the play’s focus on syphilis, ‘‘a quite different conception of disease: y an external, implacable force that invades its hapless victim’’ (p. 40). Shakespeare tapped these potentially conflicting models because the question he was trying to answer – in essence, whether it is better to stay at home with your doors locked or to venture out into the world at large, with all its dangers – was not answerable in a satisfactory way by either paradigm alone. My summary of this chapter by no means does justice to it; it contains some of the most intelligent writing in a book that is always intelligently written. No one interested in The Comedy of Errors, or even in how literature ‘‘figur[es] new economic objects’’ (p. 51) can afford to overlook its argument. Shakespeare’s best-known treatment of economic themes and issues, The Merchant of Venice, provides the basis for Harris’s third chapter, ‘‘Taint and

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Usury: Gerard Malynes, The Dutch Church Libel, The Merchant of Venice.’’ In addition to Shakespeare’s problem comedy, Harris scrutinizes Malynes’s Saint George for England Allegorically Described (1601) and the so-called ‘‘Dutch Church Libel,’’ an anonymous 53-line poem tacked on the wall of a church for foreigners in London during a period of growing social and economic resentment toward ‘‘aliens’’ in May of 1593. While critics have commonly read The Merchant of Venice alongside contemporary indictments of usury, Harris’s goal in this chapter is to extend and complicate our understanding of this play, and its representation of economic dynamics, by examining how it ‘‘recode[s] the old crime of usury as a new economic phenomenon synecdochally associated with Jews: the alienability of money and identity across national borders’’ (p. 53). The connection with disease here is a less specific one than in The Comedy of Errors; instead of syphilis, that is, Shakespeare, Malynes, and the author of the Dutch Church Libel employ the trope of contamination – evident in such terms and concepts as ‘‘ ‘colour,’ ‘gangrene,’ ‘infection,’ [and] ‘taint’ ’’ (p. 53) – to represent the fears attendant upon ‘‘the systematic practice of commerce across national borders’’ (p. 58). Shylock is of course central to the play’s collocation of these fears. And although much scholarship has explored Shylock’s relationship to early modern representations of Jews and Jewish culture, Harris contends that, like the Libel, the play may gather within its figure of ‘‘the Jew’’ a host of ‘‘hybrid identities that were increasingly a feature of early modern Europe and its networks of transnational commerce’’ (p. 62). As Harris stresses, his goal is ‘‘not to suggest that Shylock is ‘really’ Dutch,’’ but rather to demonstrate that ‘‘ ‘the Jew’ is a far less transparent category of identity in the play than its readers have usually recognized’’ (p. 71). If early modern English writers found it impossible to imagine usury without Jews, Harris avers, they found it equally difficult to conceive of Jews without folding into their fantasies a variety of ‘‘foreign’’ identities. Value and valuation have always been seen as central to one of Shakespeare’s most difficult plays, Troilus and Cressida (1602). This is in part because of its famous debate between Troilus and Hector over whether Helen is ‘‘worth what she doth cost/The keeping’’ (2.2.51). Hector’s wellknown reply to Troilus’s rhetorical question – ‘‘What’s aught but as ’tis valued?’’ (2.2.52) – gives us a good indication of how notions of value, the will, and even disease come into conjunction in this play: But value dwells not in particular will, It holds his estimate and dignity As well wherein ’tis precious of itself


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As in the prizer. ’Tis mad idolatry To make the service greater than the god, And the will dotes that is attributive To what infectiously itself affects, Without some image of th’ affected merit. (2.2.53–60)

This debate offers more than a simple conflict between notions of ascribed (Troilus) and inherent (Hector) value. The wonderful phrase ‘‘infectiously itself affects,’’ for instance, hints at the notion of disease, and particularly of a diseased ‘‘will’’ (line 53) in the play. Harris’s fourth chapter, ‘‘Canker/ Serpego and Value: Gerard Malynes, Troilus and Cressida,’’ gives a specific cast to that disease by identifying it with canker and serpego, both creeping diseases of the skin. To buttress his case, Harris takes up Malynes’s The Canker of England’s Commonwealth, published in 1601 – most likely the same year Shakespeare was writing Troilus and Cressida. Malynes’s pamphlet, according to Harris, represents ‘‘a new phenomenon: the specialist economic text, borrowing from innovative economic writers on the Continent like Jean Bodin to explain in more precise, mathematical detail the exigencies of money and valuation’’ (pp. 90–91). Malynes’s goal in this pamphlet is to identify the source of England’s economic woes; he traces these woes to foreign bankers, whose unfair valuation of English currency is like a creeping canker or serpego on the body of England’s commonwealth. The logical bind that this puts Malynes in – believing, on one hand, that English money has an intrinsic value and, on the other, that foreign agents are capable of giving it a lower, extrinsic value – links his pamphlet, in Harris’s account, with the problems of valuation that Troilus and Cressida addresses. Shakespeare’s dark comedy features more images of disease than any other of his plays. Because England, as we have seen, was undergoing a shift from the Galenic (humoral) model of disease that stressed internal imbalances toward a model (from Fracastoro and Paracelsus) that allowed for external, invasive accounts of illness, we should not be surprised to find that both paradigms are operative in Shakespeare’s drama and in Malynes’s Canker of England’s Commonwealth. Like Malynes’s pamphlet, Troilus and Cressida ‘‘gestures toward an alternative model of value that is neither quite intrinsic to the object nor quite derived from the external imposition of the wills of multiple, potentially competing subjects’’ (p. 102). That alternative model, in Harris’s reading, can be located in Ulysses’ conception of a sovereign will as

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operative in his famous speech on degree (1.3). It is a measure of the play’s dark vision that even this will seems subject to the corrosive effects of foreign canker. From Shakespeare, Harris moves in his fifth chapter to Ben Jonson’s famous comedy, Volpone, or The Fox (1606). Harris is interested here in exploring the play’s relationship to the plague, to a half-serious vogue for Pythagorean theory, and to the works of two English writers from the era: Timothy Bright, a physician who issued a treatise Wherein is Declared the Sufficiencie of English Medicines, for Cure of All Diseases (1580), and Thomas Milles, a customs officer whose pamphlets repeatedly connect ‘‘England’s economic ills with the uncontrolled infiltration of its markets by exotic luxury goods’’ (p. 128). For Harris, Volpone and these other texts testify to a kind of turning point in the cultural imagining of trade and disease. Increasingly, writers imagined the body politic’s health as vulnerable to foreign agencies; even as illness in human bodies was coming to be accounted for in mechanistic ways that looked outside those bodies for the source of sickness, so was the national economy understood to be ‘‘potentially compromised or enhanced by the incorporation of foreign commodities’’ (p. 129). Bright and Milles offer up aggressive, even paranoid, arguments for the strict policing of boundaries, both medical and economic. Jonson’s Volpone, for its part, stages these issues in its reigning motif of ‘‘transmigration,’’ a motif foregrounded in its early and puzzling interlude of the grotesques, in its repeated reference to drugs and (foreign) disease, and in the various schemes proposed by one of its foppish characters, Sir Politic Would-Be, some of which involve foreign trade and the detection of plague. In the plot of Jonson’s play, Harris offers, we can behold the emergence of a new mode of conceiving England’s economy, broadly conceived, even as that economy was itself changing. The comedy’s emphasis on ‘‘transmigratory pathological matter,’’ Harris suggests, ‘‘is of a piece with the dawning universe of global, transoceanic economy’’ (p. 134). Bright’s ‘‘medicalized protectionism’’ (p. 123), that is, joins with Milles’s deep suspicion of foreign drugs and luxury goods and with Jonson’s interest in ‘‘things in motion’’ (the phrase is actually from Troilus and Cressida, 3.3.183) to underscore a new concern with ‘‘transmigration in its geopolitical sense’’ (p. 118). Harris’s connections among conceptions of disease, economic theory, and fantasies of trade and commerce in early modern drama seem most tenuously forged in his sixth chapter, which is titled ‘‘Hepatitis/Castration and Treasure: Edward Misselden, Gerard Malynes, The Fair Maid of the West, The Renegado.’’ This is in part because the links among these apparently disparate


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things are based largely in structural parallels. Harris begins by noting the coinage of the term ‘‘hepatitis’’ by Edward Misselden. The latter was hard pressed to absolve the Merchant Adventurers of responsibility for the nationwide business crisis of the early 1620s, and he inadvertently began a pamphlet war with Gerard Malynes over the reasons England’s economy was floundering. ‘‘Hepatitis,’’ in Misselden’s imagination, seems to have been not our disease but rather a wasting away of the nation-state’s ‘‘ ‘life blood,’ money’’ (p. 143). Malynes’s similar recourse to what he terms ‘‘Hepaties’’ appears in the following passage, which confirms Harris’s central insight concerning the inextricable connections between bodies and economies in the early modern imagination: ‘‘Considering the internal parts, they found the liuer [Money] obstructed, and the condinct pipes of Bullion and Moneys for importation stopt, whereby the Hepaties could not minister good bloud, with spirits sufficient to comfort the heart of (our natiue commodities) by a naturalle heate y.’’ (quoted on p. 144). Malynes’s tendency here to gloss his narrative (‘‘liuer [Money],’’ ‘‘the heart of [our natiue commodities])’’ is of course part of a world we have lost. The doctrine of correspondences, which unfolded in the practice of allegory, as Harris notes, everywhere underwrites theories of the economy and body politic in early modern England. While Harris’s exploration of the ‘‘hepatitis’’ trope in these pamphlets its intriguing – and certainly extends the central analysis of his study – it seems only loosely connected with the other topic of the chapter, which involves castration, early modern piracy, and the representation of these subjects in plays of the era. Harris rightly points out a kind of sea change in official English attitudes toward piracy. During the mid- to late-Elizabethan era, when English vessels often plundered their Spanish counterparts, piracy was sometimes seen as a kind of Robin Hood affair. Following King James’s peace treaty with Spain in 1604, however, feelings about piracy became more and more mixed, especially as Barbary pirates began to dominate the Mediterranean. Harris examines representations of piracy in Thomas Heywood’s Fair Maid of the West (ca. 1600) and in Philip Massinger’s The Renagado (1623) as a kind of foil to the Malynes/Misselden debate concerning bullion flow and the basis of commercial exchange. In Harris’s view, Heywood’s play falls down closer to Malynes’s positions; he aligns Massinger’s drama with Misselden in that it ‘‘obliquely fantasiz[es] a transnational Christian polity within which the accumulation of treasure is more the responsibility of ‘manly’ private merchants than of nation-states or their political and monetary institutions’’ (p. 157). This chapter has some fascinating material in it, but I felt that of all the chapters in this book it had to work the hardest to connect its various texts and topics.

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The repetition in the title of Harris’s seventh chapter, ‘‘Consumption and Consumption: Thomas Mun, The Roaring Girl,’’ plays on the two meanings of its central term, ‘‘consumption.’’ During the early modern era the word most frequently signaled not what we typically understand by consumption – acquiring, using – but rather the ‘‘hepatic or tubercular wasting of wealth and health alike’’ (p. 164). Holding that ‘‘early modern economic recuperations of ‘consumption’ almost invariably draw on its pathological meanings’’ (p. 165), Harris in this chapter examines the disease- and acquisition-centered definitions of the term as they relate to Thomas Mun’s Discourse of Trade (1621) and his famous treatise, Englands Treasure by Forraign Trade (written in the late 1620s, though not printed until 1664), and The Roaring Girl (1611), a celebrated city comedy by Thomas Middleton and Thomas Dekker. Harris concentrates on the economic depression that afflicted England in the early 1620s, a state of affairs that increased the pressure on the pamphlet-war Mun conducted with Misselden during that decade. Arguing that economic historians have given us only an impartial picture of Mun – ‘‘often y styled as a puritanical advocate for work and a fierce critic of fashionable luxury wares’’ (p. 170), Harris traces both a conventionally pathological account of ‘‘consumption’’ in Mun’s works and also a justification of upper-class consumption of luxury wares as a spur to the expansion of trade. Thus the term and even concept of consumption turn, in Mun’s mind and works, from poison to profit – where, Harris points out, it remains to this day. ‘‘Consumption’’ works similarly in an earlier play by Middleton, A Trick to Catch the Old One (1606), where it is a wasting illness that comes from within bodies (both physical and economic). In The Roaring Girl, Middleton’s collaboration with Dekker, however, ‘‘consumption’’ is being offered as something like the modern practice of conspicuous consumption. Indeed, Harris argues, so heavily does the play’s plot foreground shopping that it ‘‘might be interpreted as an early modern paean to the universal powers of retail therapy y [T]he play seems to offer a full-fledged depiction of a consumer society in which luxury items are the engines of both desire and identity’’ (p. 177). Harris rightly stresses the ‘‘consumer society’’ advanced by The Roaring Girl: it feels in almost every way like a ‘‘modern’’ story, complete with the celebrity of its titular heroine. Readers interested in following up Harris’s remarks here will find them supported by Janette Dillon’s (2000) recent work on the dramatic representation of this consumer society as well as Paul Yachnin’s theory of the ‘‘populuxe theater’’ as set out in his collaborative debate with Dawson and Yachnin (2001).


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Harris’s study concludes with an Afterword titled ‘‘Anthrax, Cyberworms, and the New Ethereal Economy.’’ It begins by glancing at an excerpt from John Donne’s ‘‘Tale of A Citizen and His Wife’’ that productively gathers nearly every major theme of Harris’s analysis. From this provocative passage Harris turns to the present, asking how different ‘‘news’’ about the economy is for us in comparison with the era of Shakespeare and Donne. His answer, unsurprisingly, is that we still understand economies in terms of bodies (‘‘pathology,’’ as he puts it). The primary difference, according to Harris, is that our major system of circulation is not sea but air. For Harris, the fear of various airborne diseases (anthrax, smallpox), of terrorism practiced against passenger jets, and of computer ‘‘viruses’’ speaks to the anxieties of ‘‘an age where the transnational movements of capital take place less upon the ocean than in the air – or its cybernetic and etymological equivalent, the ether’’ (p. 188). In its examination of how age-old habits of conceiving systems in terms of bodies are still with us, then, this stimulating study of early modern texts and thinkers has clear relevance for their modern-day counterparts as well. Was Shakespeare an economic thinker? Yes and no. If we hold his works over and against economic pamphlets from his or later eras, we will see that they have too many irons in the fire to conduct anything like an extensive or even consistent argument about economic matters. One would hardly expect otherwise: playwrights write plays, which, in order to succeed commercially in most venues, need to work harder at delighting their audiences and readers than at instructing them. Plot, character, language, and spectacle: all these took precedence over the ‘‘thought’’ of Shakespeare’s plays. But to the extent that such plays as The Merchant of Venice, Troilus and Cressida, and The Winter’s Tale (to name only these) inquire profoundly into the nature of valuation, exchange, the acquisitive impulse, possessiveness, rational as well as irrational modes of economic life, and even desire itself, they not only entertain us but offer some of the most penetrating analyses of economic behavior on record.

REFERENCES Aaron, M. (1998). Global economics: An institutional economic history of the Chamberlain’s/ King’s men and their texts, 1599–1642. PhD dissertation, Wisconsin. Agnew, J.-C. (1986). Worlds apart: The market and the theater in Anglo-American thought, 1550–1750. Cambridge (Cambridgeshire) and New York: Cambridge University Press. Cefalu, P. (2004). Revisionist Shakespeare: Transitional ideologies in texts and contexts. New York: Palgrave Macmillan.

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Dawson, A., & Yachnin, P. (2001). The culture of playgoing in Shakespeare’s London: A collaborative debate. Cambridge (Cambridgeshire) and New York: Cambridge University Press. Dillon, J. (2000). Theatre, court and city, 1595–1610: Drama and social space in London. Cambridge (Cambridgeshire) and New York: Cambridge University Press. Engle, L. (1993). Shakespearean pragmatism: Market of his time. Chicago: University of Chicago Press. Gurr, A. (2004). The Shakespearian playing companies. Oxford: Oxford University Press. Halpern, R. (1991). The poetics of primitive accumulation: English renaissance culture and the genealogy of capital. Ithaca: Cornell University Press. Harris, J. G. (1998). Foreign bodies and the body politic: Discourses of social pathology in early modern England. Cambridge (Cambridgeshire) and New York: Cambridge University Press. Harris, J. G. (2004). Sick economies: Drama, mercantilism, and disease in Shakespeare’s England. Philadelphia: University of Pennsylvania Press. Ingram, W. (1992). The business of playing: The beginnings of the adult professional theater in Elizabethan London. Ithaca: Cornell University Press. Lakoff, G., & Johnson, M. (1980). Metaphors we live by. Chicago: University of Chicago Press. Leinwand, T. (1999). Theatre, finance and society in early modern England. Cambridge (Cambridgeshire) and New York: Cambridge University Press. Marx, K. (1967). Capital (Vols. 3). New York: International Publishers. McLuskie, K., & Dunsworth, F. (1997). Patronage and the economics of theater. In: J. D. Cox & D. Kastan (Eds), A new history of early English drama (pp. 423–440). New York: Columbia University Press. Shell, M. (1992). Money, language, and thought. Baltimore: Johns Hopkins University Press. Turner, F. (1999). Shakespeare’s twenty-first-century economics: The morality of love and money. New York: Oxford University Press. Woodmansee, M., & Osteen, M. (Eds). (1999). The new economic criticism: Studies at the intersection of literature and economics. London and New York: Routledge.

Corry’s DAVID HILBERT AND THE AXIOMATIZATION OF PHYSICS GETTING HILBERT RIGHT E. Roy Weintraub A review essay on Leo Corry’s David Hilbert and the Axiomatization of Physics (1898 – 1918): From Grundlagen der Geometrie to Grundlagen der Physik. Archimedes: New Studies in the History and Philosophy of Science and Technology, edited by Jed Z. Buchwald. Kluwer: Dordrecht and Boston, 2004. xvii+513 p. ISBN 1-4020-2777-X. From the opening salvo of Benjamin Ward’s (1972) What’s wrong with economics to Henry Woo’s (1986) What’s wrong with formalization in economics to Mark Blaug’s (1999) ‘‘The formalist revolution or what happened to orthodox economics after World War II?’’ the specter of mathematician David Hilbert has haunted economists’s discussions of formalization and axiomatization. Briefly, if one looks upon formalized economics, or formalism, with a loathing built on fear (or a fear based on loathing), one demonizes Hilbert since the philosophical notion of formalism, in the history of metamathematics, is usually associated with Hilbert. That is, in the history of philosophy of mathematics, there appears to be a distinction between formalists and empiricists, on the nature of mathematical objects. The ontological reflections in that arcane literature have Hilbert holding the position that mathematics is simply a formal system, and its symbols are simply marks on paper. It is an easy step then to look for traces of David Hilbert in the development of mathematical economics in the 20th century. Seek, and ye A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 181–185 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24011-2

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shall find, and critics of mainstream economics have found Hilbertian connections in Vienna with Menger’s seminar. As a result Hilbert gets caught up in the origin stories of general equilibrium theory which lead all the way to von Neumann and the development of game theory. From Vienna and general equilibrium theory it is a short step, though a false one, to have Hilbert as the spiritual advisor to the Cowles Commission and thence to Arrow–Debreu. From there of course one can launch tirades about the formalist revolution in economics and have Hilbert bearing some of the blame for a misguided economics. This view of Hilbert is near total nonsense. Ewald (1996, p. 1106) said it best: ‘‘As for the term ‘formalist,’ it is so misleading that it should be abandoned altogether as a label for Hilbert’s philosophy of mathematics.’’ Moreover, the notion of Hilbert as formalist is often connected to his 1917 talk, then paper (Hilbert, 1918), on axiomatization, which leads the ‘‘It’s Hilbert’s fault’’ crowd to think of him as the father of Arrow’s (1951) Social choice and individual values and Debreu’s (1959) Theory of value. This too is nonsense. Serious historians of mathematics have long known that these characterizations of Hilbert, developed out of bad history of the philosophy of mathematics, misread Hilbert and his role in both physics and mathematics. Historians of economics have not seemed to understand these matters. The origin of the more comprehensive, and historically accurate, account of Hilbert’s work on axiomatization has its roots in work by several historians of mathematics, particularly David Rowe in a series of articles written in the past decade and a half (e.g. Rowe, 1997), and more directly with articles by Leo Corry in the 1990s, and now expanded and worked out in a great deal more detail in his new book, David Hilbert and the Axiomatization of Physics (1898–1918). Corry, an important historian of 20th century mathematics, begins his discussion of Hilbert and axiomatization with a period of time in the latter part of the 19th century when Hilbert was working both on matters of the foundations of geometry as well as the development of research tools in physics. Far from Hilbert’s being a mathematician primarily interested in axiomatization as foundationalist work in mathematics, Corry shows how Hilbert was, from the beginning of his career, fully involved with the role of mathematics in facilitating research in physics. A historian of economics cannot do real justice to the fine details of Corry’s narrative, but certainly in it one can admire Corry’s intensive archival research, his sympathetic comprehension of the large canvas on which Hilbert worked, and his demonstration of the benefits to the historian of understanding in detail all not only the ‘‘Hilbert-ian texts,’’ but the situation of all of these ideas in the particular times and places of their genesis. It is a

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model history of science. Nevertheless, there is a great deal here that touches, if only peripherally, on a set of issues that have concerned economists, specifically historians of mathematical economics, for a number of years. As is well known, Hilbert’s 23 problems from his 1900 World Congress lecture contained among them the 6th problem, concerning the appropriate axiomatization for physics. It is not as if people failed to understand that Hilbert was interested in axiomatization of physical theories, but rather, as Corry argues, that Hilbert’s concern with mathematics as an engine of discovery in science, particularly in physics, was pushed aside by historians of metamathematics more concerned with Hilbert as an ontological formalist. It is not only economists who reconstruct historical figures to make them allies in current controversies. Using Hilbert’s lecture notes from that 1900–1910 period, preserved at Go¨ttingen, Corry’s Hilbert emerges as an individual concerned with axiomatization because by axiomatizing the physical theories, one could locate exactly the strong and weak points of the physical argument. Put another way, one’s axioms are not chosen haphazardly, but an axiomatization must be based on real knowledge of the underlying physical models. That said, the view of axiomatization fixed in some economists’ minds, namely that axioms are ‘‘divorced from reality,’’ is absolutely wrong headed. This should have been clear from a close reading of Hilbert’s talk and paper (1918) ‘‘Axiomatisches Denken,’’ but apparently it was not. Corry suggests that: The most noteworthy feature of this talk is the demarcation introduced here for the first time between two kinds of systems of axioms that I will call, for want of a better name, pragmatic and foundational. Pragmatic axioms are those that underlie established fields of knowledge that have already become elaborate theories or network[s] of concepts. The axioms allowed deriving the main theorems of these theories y the role of the axioms is, then, to provide ‘an initial standpoint,’ and ‘the progressive development of the individual field of knowledge then lies solely in the further logical construction of the already mentioned framework of concepts.’ But then Hilbert stressed a new perspective that he had never mentioned so far in this context, at least not in this way: the solution provided by such axioms and grounding their respective fields of knowledge, he said, turns out to be only temporary, and they stand in need of being themselves further grounded. (pp. 396–397)

What Corry has achieved in this book is a repositioning of David Hilbert. No longer is he the simple figure of the metamathematician’s history, nor now even just a towering figure in the history of mathematics. Corry’s Hilbert emerges as a significantly more complex and ‘‘situated’’ figure. From Chapter 1, which locates Hilbert’s concerns in algebra and geometry, to a set of connections with physicists like Volkmann and Boltzmann, Corry moves

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to the connection of mathematics and physics by considering Hilbert and Felix Kline. The second chapter takes up the emergence of Hilbert’s views on axiomatization in both geometry and physics in his early lectures, and moves then to his 1893–1894 Grundlagen der Geometrie, which may be taken as a signal marker in the development of axiomatization in mathematics. Corry goes on to situate axiomatization both in mathematics and in physics in Hilbert’s 1900 problem list, and moves in Chapter 3 to showing, based on his recovery of Hilbert’s 1905 lectures, the roles axioms played for Hilbert in physical theories, specifically in mechanics, thermodynamics, the probability calculus, the kinetic theories of gases, insurance mathematics (!), electrodynamics, and psychophysics. That Hilbert continued to develop these ideas about axiomatization in physics is the concern of Corry in his Chapter 4, looking at his 1907–1909 work on relativity. In his Chapter 5, Corry examines the 1910–1914 discussions of the move from mechanical to electromagnetic reductionism. Both Chapters 6 and 7 concern the foundation of physics, and Chapter 8 presents Hilbert’s forays into the general theory of relativity. All of these concerns of course are associated with Hilbert’s program for axiomatization of physical theories. The David Hilbert that emerges in this detailed study was concerned in approximately the first two decades of the 20th century to establish ways in which research in physics could be moved forward. Recall that the issues of black body radiation, and relativity, were roiling the physics community. What was solid knowledge and what was discredited physics were open questions. For Hilbert, the role of axiomatization was to lay bare the structure of the known physical theory and the phenomena so that implications could be brought forward. Such a view makes Hilbert a sympathizer with those who wish to see economic models as ‘‘reality based.’’ However, for a model to be reality based does not mean that the model is nonmathematical, or necessarily presented in a nonaxiomatized version. Did Hilbert’s perspective change the way research in physics was done? Corry’s conclusion is circumspect here. Whether or not physicists should have looked more closely at Hilbert’s ideas than they actually did, and whether or not Hilbert’s program for the axiomatization of physics had any influence on subsequent developments in this discipline, it is important to stress in any case that a full picture of Hilbert’s own conception of mathematics cannot be complete without taking into account his views on physical issues and on the relationship between mathematics and physics. More specifically, a proper understanding of Hilbert’s conception of the role of the axioms in physical theories helps us to understand his conception of the role of axioms in mathematical theories at large. The picture that arises from such an understanding is obviously very far away from the once widespread image of Hilbert as the champion of the formalistic conception of the nature of mathematics. (p. 443)

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Corry’s book, while probably not much to the taste (or likely comprehension) of many economists, nevertheless is a signal achievement as it intertwines the history of mathematics and the history of mathematical physics. Now that Corry has exhibited the ideas about formalization, formal systems, and axiomatization in their natural habitat, economists can no longer ignore the implications of this connection between mathematicians’ ideas, specifically their changing ideas about axiomatization, and the concomitant changing ideas of economists about axiomatization and rigor.

REFERENCES Arrow, K. J. (1951). Social choice and individual values. New York: Wiley. Blaug, M. (1999). The formalist revolution or what happened to orthodox economics after World War II? In: R. E. Backhouse & J. Creedy (Eds), From classical economics to the theory of the firm: Essays in honor of D.P. O’Brien (pp. 257–280). Cheltenham, UK: Edward Elgar. Debreu, G. (1959). The theory of value. New York: Wiley. Ewald, W. (Ed.) (1996). From Kant to Hilbert: A source book in the foundations of mathematics. Volume II. New York: Oxford University Press. Hilbert, D. (1918). Axiomatisches Denken. Mathematische Annalen, 78, 405–415. Rowe, D. E. (1997). Perspective on Hilbert. Perspectives on Science, 5(4), 533–570. Ward, B. (1972). What’s wrong with economics. New York: Basic Books. Woo, H. K. H. (1986). What’s wrong with formalization in economics? An epistemological critique. Newark, CA: Victoria Press.


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Freeman, Kliman and Wells’s NEW VALUE CONTROVERSY THE NEW VALUE CONTROVERSY Fletcher Baragar A review essay of Alan Freeman, Andrew Kliman and Julian Wells’s (Eds.) The New Value Controversy and the Foundations of Economics. Cheltenham, UK: Edward Elgar, 2004. xx+319 pp. ISBN 1840645601. It is an open question whether the research and debates surrounding Marx’s theory of value are an indication of the health and contemporary relevance of Marxian economic theory or whether, on the contrary, they are manifestations of a moribund research agenda and a malaise that impairs meaningful advances in this branch of the discipline. What is evident, however, is that Marxian value theory continues to draw the attention and command the intellectual energies of a significant number of Marxist economists. Furthermore, notwithstanding its long history stretching back prior to the initial publication of Volume III of Capital (Marx, 1959 [1894]), the controversies surrounding Marxian value theory are showing no signs of either resolution or neglect. Indeed, in the last quarter of the 20th century and the early years of the 21st century, new research has fuelled the controversy and broadened the scope of the debate, resulting in a large outpouring of conference presentations and publications. Those directly involved have primarily been Marxist economists, but important contributions have been made by adherents of the Sraffian/neo-Ricardian school. These recent developments in value theory are also not without interest to historians of the history of economic thought. Specifically, significant components of the debates revert back to the A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 187–200 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24012-4

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challenge of ascertaining what Marx really meant. They also constitute an interesting chapter in the ongoing evolution of a well-defined school of thought. The rest of the economics profession, however, has hitherto been untouched and uninvolved by these developments, and this seems unlikely to change for the time being.

1. BACKGROUND For Marxists, the present controversies are rooted in Marx’s own development and exposition of the labor theory of value, especially its presentation in Volumes I (Marx, 1954 [1867]) and III of Capital. As is well known, in Volume I, Marx begins with his analysis of commodities, emphasizing the role of human labor in both its concrete and abstract aspects, and from that he develops (1) the concepts of (exchange) value, of socially necessary labor time, and of its expression in the form of money and the distinction between value and price; (2) the concepts of capital and of surplus value; and (3) the concept of the commodity labor power. With these concepts, his analysis of capitalist production lays bare the nature of capitalist exploitation and links the phenomenon of profit to surplus value (i.e., the unpaid labor time of productive workers). In Parts I and II of Volume III, Marx, explicitly allowing for the interplay of many different capitals, endeavors to show how surplus value is converted into profit, how the rate of surplus value is converted into the rate of profit, how the general rate of profit is formed, and how the values of commodities are transformed into prices of production. He claimed that the transformation preserved the following equalities: total value ¼ total prices; total surplus value ¼ total profits; and, the rate of profit ¼ the rate of surplus value. Marx’s presentation of this material in Volume III is, unfortunately, quite rough, since this material is comprised of manuscripts that he had prepared prior to the publication of Volume I in 1867. These manuscripts were not, however, in a final, finished state, and unfortunately Marx never got around to getting them ready for publication. Frederick Engels prepared the manuscripts for their 1894 publication. Shortly thereafter, readers identified what some took to be inconsistencies between Volumes I (where commodities exchange at prices proportional to their labor values) and III (where commodities exchange at prices which are not proportional to their values). Furthermore, Marx’s transformation of values into prices was deemed to be incorrect, since his examples appeared to have neglected transforming the input prices along with the transformed output prices. Defenders of Marx, beginning with Ladislaus von Bortkiewicz

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(1952 [1906, 1907]), duly produced corrections, but the resulting solutions which transformed inputs and outputs simultaneously could not satisfactorily achieve this, while maintaining all three of Marx’s aggregate equivalences. Thus, the so-called ‘‘transformation problem’’ was established as a prominent feature of the 20th century Marxian economics. Contributions to the literature on Marxist value theory tended to take one of two forms: (1) quantitative approaches to the transformation of values into prices, usually involving different normalization assumptions,1 or (2) qualitative approaches probing into the meaning and significance of Marx’s notion of value.2 The debates flared up again in the 1970s due in part to a growing awareness of the implications of Piero Sraffa’s (1960) work for the Marxian theory of value and price. The challenge was effectively crystallized with the publication of Ian Steedman’s book Marx After Sraffa (1977). Steedman’s central point is that although mathematical corrections can render Marx’s transformation process consistent, the procedure shows that prices and profit rates depend on real wages and the physical conditions of production, which is Sraffa’s point. Labor values of commodities can be calculated using this information, but, as Steedman emphasizes, there is really no need to engage in this exercise, which he deems redundant. Furthermore, ‘‘since the relationship between surplus labor and the existence of profits can be established quite independently of Marx’s concept of value’’ (Steedman, 1977, p. 15), there is no need to retain Marx’s theory of value for analysis of capitalist economies, and Marxist economists should stop wasting ‘‘time and energy’’ on value theory and ‘‘discussion of an intrinsically unimportant problem, the so-called ‘transformation problem’ ’’ (Steedman, 1977, p. 29). Ironically, Steedman’s critique induced an even greater expenditure of ‘‘time and energy’’ on value theory and the transformation problem,3 and some fresh perspectives on the value and transformation question subsequently emerged. One important perspective was the development of the ‘‘New Interpretation,’’ which was initially presented independently in articles by Ge´rard Dumeńil (1980, 1983) and Duncan Foley (1982). As Foley (2000, p. 20) has emphasized, a central feature of this approach is the notion of the monetary expression of labor time (MELT). It is based on the idea that the value created by productive labor in a given period of time in an economy is an economy’s net domestic product. The monetary valuation of this net product, or value added (which with some adjustments can be derived from national income accounts) divided by the amount of productive labor (working-years, or, alternatively, hours worked) yields a figure for MELT. The New Interpretation also conceptualizes variable capital as the money wage paid to the workers, rather than as the value of the commodity

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bundle that comprises workers’ consumption. This enables the rate of surplus value to be calculated at an aggregate level as the following ratio: (net product wages of productive workers)/wages of productive workers. The value of labor power is simply the money wage divided by MELT. As a result of these particular conceptualizations and definitions, a link is explicitly made between money and labor time. Marx’s equalities are not entirely retained in the New Interpretation. Instead of total output being equal to its labor content (which would include both past and present labor), value added (i.e., net domestic product) will (by definition) be proportional to the new (productive) labor expended. However, total surplus value will be equal to the total profit, and the rate of surplus value will be unchanged whether it is measured in terms of labor hours (the ratio of paid to unpaid labor) or in monetary form (the ratio of gross profits to wages). Supporters of the New Interpretation point to its operational tractability, especially for macroeconomic analysis, since it directly facilitates the use of national income accounts. The justification on theoretical grounds rests largely on its claim to preserve what Foley regards as ‘‘the key Marxian insight,’’ which is ‘‘the quantitative equivalence between capitalist gross profit and unpaid labor’’ (Foley, 2000, p. 22). Not all of the participants in the debates were satisfied or persuaded. Many remained faithful to traditional interpretations, or were inclined to take the Sraffian-based critiques to heart. The efforts of another set of scholars, however, resulted in the emergence of a new and more radical approach, labeled the Temporal Single System Interpretation (TSSI).

2. THE TEMPORAL SINGLE SYSTEM INTERPRETATION Important contributions to the early development of the TSSI include work by Ernst (1982), Carchedi (1984), Wolff, Callari, and Roberts (1982), and Kliman and McGlone (1988). The establishment of the International Working Group on Value Theory (IWGVT) and the collection of papers published in Freeman and Carchedi (1996) signaled the consolidation of the TSSI as a distinctive school within contemporary Marxist economics. The volume under review, which consists of papers arising out of the 1996 IWGVT mini-conference hosted by the Eastern Economics Association (Freeman, Kliman, & Wells, 2004, p. xvi), provides a sample of more recent research generated by supporters of the TSSI as well as a range of contributions from adherents of other perspectives in the Marxian value debates.


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A number of papers explicitly attend to the contested engagement between TSSI supporters and their critics, indicating that the value controversy has not abated. The central claim of the TSSI is that Marx did not err in his discussion and presentation of the transformation of values into prices in Volume III of Capital. Specifically, the TSSI position is that the inputs in the production process (i.e., constant and variable capital) are in fact already knowingly transformed, so Marx’s figures for constant and variable capital represent the money advanced to purchase those inputs prior to the production process itself. After production, the values of the newly produced output are transformed into their own market prices. In general, the input and output prices will not be the same since they exist in two distinct but sequential time periods; hence the emphasis on temporality of the transformation process, in contradistinction to the simultaneity of the traditional transformation procedures. Furthermore, the sharp duality between values and prices is dissolved since input prices are utilized in the formation of output values and prices. TSSI supporters defend their interpretation through their textual exegesis that purports to demonstrate that this is not only what Marx did, but what he intended to do. Furthermore, as Kliman emphasizes in Chapter 2 of The New Value Controversy, the TSSI can replicate all the important results of Marx’s value theory, including his three aggregate equalities. Consequently, TSSIers maintain that whatever merits the traditional Bortkiewicz–Sraffian simultaneous approaches to the value theory and the relation between values and prices may have, those approaches are not compatible with that of Marx, and that the defenders of those approaches, which encompass pretty much all of 20th century Marxism, should acknowledge that fact.

3. EXCHANGES AND DEBATES As the editors point out in their Introduction to The New Value Controversy, by the mid-1990s the terrain of Marxian value theory was occupied by a number of ‘‘paradigmatically distinct theories of value, and interpretations of Marx,’’ (p. xvi) and this terrain was contested. The IWGVT organizers sought to foster and sustain critical engagement between representatives of these distinct schools. They explicitly indicated that they wanted the engagement to not only recognize the distinct conceptual frameworks of the competing paradigms, but also to assess the claims of the paradigms through appeals to foundational texts (i.e., the writings of Marx) and empirical evidence drawn from actual economies. The New Value Controversy purports to capture some

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of the important exchanges and research stimulated by this paradigmatic plurality and engagement. According to the editors, the first 11 chapters directly bear on the issue of inter-paradigm exchange. The remaining chapters address ‘‘a range of new or under-debated questions’’ (p. ix) associated with Marx’s theory of value. The chapter by David Laibman, however, is the only one in the book, which explicitly articulates a critique of the TSSI. For Laibman, the latter approach is found wanting in its ability to explain prices. In the TSSI framework, input prices are given: ‘‘they were what they were’’ (p. 6). If techniques of production and outputs are changing, measurement of crucial variables such as output or the capital stock becomes ‘‘problematic,’’ price theory becomes impossible, and the ground upon which Marx presented his discussion of prices of production is completely swept away. Alternatively, if techniques of production and the composition of output are held constant, inter-sectoral equalization of profit rates can permit identification of the output price vector and economy wide profit rate for any given period, but, since input prices are different from output prices, the sequential path of prices and profit rates fails to approach any unique value. An infinite set of prices of production, each with their attendant rate of profit, is possible. Laibman contrasts this with the determination of prices of production through the more traditional dual simultaneous approach associated with 20th century Marxist orthodoxy. The prices of production, which emerge here are, instead, interpreted as points of gravitation to which actual prices would tend in the absence of further disruptive changes to the economy under consideration. As the participants in the controversy acknowledge, the fundamental issue here is a methodological one that centers on the appropriateness of equilibrium theorizing while recognizing that actual capitalist economies are characterized by disruption, change, and transformation. Andrew Kliman in his explicit TSSI response to Laibman, rejects the simultaneous package and its attendant use of equilibrium by making further appeals to Marx’s texts as well as by asserting the inapplicability of any equilibrium oriented framework to any real economy.4 Another response to Laibman is found in the chapter by Fred Moseley. Moseley articulates his own take on Marx’s transformation process, a reading which he had presented in an earlier article (Moseley, 1993). Moseley agrees with the core TSSI claim that Marx did not err in his presentation of the transformation process in Volume III. Moseley argues that the values of the inputs (constant and variable capital) are expressed in terms of the sums of money advanced, so that they are in fact the monetary expression of the value of the capital advanced. The similarity with the TSSI ends here, though, since


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in Moseley’s framework, the acquisition of inputs and the production and pricing of outputs occurs within a single time period, thereby making his system a simultaneous rather than temporal (i.e., sequential) one. Moseley acknowledges that his position is in fact quite close to that of the New Interpretation, except that the latter expresses only the value of labor power (variable capital) in terms of a sum of money advanced.5 Yet another interpretation for consideration is advanced in the chapter by Bruce Roberts. The distinctiveness of his approach is the role played by the sphere of exchange in the quantification and expression of values. Roberts argues that the determination of value of output and the value added in any particular sector of the economy cannot be calculated by directly processing the quantity of labor expended in that sector, since the visible, technical labor inputs are not necessarily the same as the socially necessary labor that Marx insists is required to determine the value of a commodity. Citing Marx, Roberts holds that individual concrete labor of producers only becomes social labor when the commodities produced enter relations of exchange with each other. Thus, ‘‘concrete labors become abstract labor only as a result of the exchange process’’ (p. 110). Drawing upon earlier work by Ulrike Krause (1982) and Ian Steedman (1980, 1985), Roberts undertakes a formalization of the determination of prices and values that allows for explicit specification of the process through which heterogeneous concrete labor determines socially necessary labor. For Roberts, the latter is essentially an average of different labors and is derived at an aggregate level. This social average is then applied to the disaggregated sectors to calculate sector specific values. A similar emphasis on the role played by the activities of exchange and circulation in the process of stamping individual private labor as social labor is presented in the contribution by Mario L. Robles-Baez, even though his treatment lacks the formality and explicitly rejects the simultaneity of Roberts’s framework. In regard to the latter, however, the difference seems to reside primarily in Robles-Baez’s rejection of equilibrium framework. A degree of simultaneity is in fact evident in Robles-Baez’s claim that the quantity of socially necessary labor time and the determination of abstract social labor and the value of a commodity ‘‘are realized at the same time that their prices of production are determined’’ (p. 164). The lack of formality may allow for a richer and broader exposition, but it would be interesting to see how maintaining a significant role for simultaneity in the determination of endogenous variables can be more formally achieved without reference to some type of equilibrium condition. The core TSSI position, however, rejects the role played by the sphere of exchange in the determination of value. As emphasized by McGlone and

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Kliman in their response to Roberts, a worker’s labor is abstract labor before market exchange. McGlone and Kliman argue that if labor becomes abstract only in the market, and if abstract labor is what creates value, then this cannot be reconciled with the fundamental Marxian claim, which Roberts shares, that value is created only in the sphere of production, not in exchange. Thus Roberts is tagged with the charge of internal inconsistency. McGlone and Kliman overstate their case here, since the labor is still expended in production. The key point is what role the market may play in determining whether or not some or all of that concrete labor should be counted as being socially necessary, and whether past expenditure of labor should be revalued if social conditions change. Another important aspect of the TSSI position on abstract labor and socially necessary labor time is that abstract labor is not simply a mental or theoretical abstraction, but that it in fact captures the real lived experience of workers under capitalist relations of production. This take on abstract labor is discussed by McGlone and Kliman, but is developed more extensively in the chapter by Massimo de Angelis. From this perspective, capitalist production entails an ongoing process in which the individuality of concrete laboring activity of workers, and the meaning and self-realization that work can have for those workers, is continually and progressively stripped away. For de Angelis, abstract labor is alienated labor and, by extension, it is also then forced labor (p. 171). This emphasis on the capitalist labor process reinforces the view that abstract labor is independent of activities in the sphere of exchange. The sphere of circulation and exchange, and the competition between capitals that is played out in that arena, penetrates into the sphere of production and the labor process through enforcement of a standard of work quality and intensity. For de Angelis, this determines the socially necessary labor time, but the latter is conceptually distinct from the notion of abstract labor. Additional claims about the arguable superiority of the TSSI paradigm vis-a`-vis its Marxist competitors are presented in the separate articles by Alejandro Ramos Martinez and Alan Freeman. Ramos Martinez uses the TSSI framework to critique the Okishio Theorem and its implication for Marx’s theory of the tendency of the rate of profit to fall in the wake of technical change. Ramos Martinez contends that there are two different profit rates: a nominal profit rate measured in terms of ‘‘symbol-money’’ and a real profit rate measured in terms of labor times. He argues that the Okishio critique applies only in terms of the former, whereas it is the labortime profit rate that is truer to Marx. In terms of the latter, the profit rate will fall with labor saving technical change, and this is a position that other


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TSSI practitioners have consistently espoused.6 This is unlikely to be the last word on the subject, and the effect of technical change on profitability is another much debated issue in Marxian theory. However, Ramos Martinez’s contention that a positive effect of a labor-saving innovation on the rate of profit would imply that profit would arise from another source other than human labor, and that therefore profit is not a form of exploited labor (p. 72) conflates profits with profit rates and is incorrect. Alan Freeman’s chapter makes some headier claims, including the claim that TSSI value theory can account for ‘‘mass world poverty in the midst of technical progress and recurrent crisis’’ and that the TSSI treatment is ‘‘simpler’’ than its competitors. This chapter, unfortunately, is one of the weaker entries in the collection. The numerical presentation and discussion of values and prices ‘‘as they appear in the world’’ is plagued with typos and incorrect equations. Furthermore, the demonstration of the falling profit rate consists of an example in which the employment level, wages, and the rate of exploitation are all exogenously given. Capitalists are assumed to invest their entire profit in additional capital goods and Say’s Law is implicitly assumed. Under these conditions, the rate of profit must fall, but given the restrictive assumptions, this demonstration is not likely to persuade anyone.

4. OTHER CONTRIBUTIONS Space constraints permit only a very limited discussion of the other contributions to The New Value Controversy. These authors are not devotees of the TSSI, and their papers do not explicitly engage in the inter-paradigm dialogue. As is typical for edited collections, and especially for collections which originate in non-refereed conference presentations, the quality is noticeably uneven. Worthy of commendation is the paper by Ann Davis. This superb piece provides a very clear, succinct, and critical overview of the feminist critique of Marxian economic methodology and value theory. Davis then develops an alternate model, using Marxian methodology and value theory to incorporate the household and the reproduction of labor power into a Marxian framework. The central elements are three interlinked circuits: (1) Marx’s money circuit of capital; (2) a commodity exchange circuit in which workers sell labor power and then use money wages to buy wage goods; and (3) a restoration of labor power circuit in which labor power is restored to its original value. The implications of these interconnected circuits are then explored in regard to the role of women in the private sphere of the household as well as in the larger economy, including the contradictory character of those roles. The analytical

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richness of this framework is then demonstrated with a necessarily brief but insightful historical excursus. This theory and scholarship is at its finest. Three of the chapters have the term ‘‘Empirical’’ or ‘‘Empirically’’ in their respective titles, and it is significant that authors have all earned their PhDs from the New School University. Edward Chilcote’s paper is an instructional step-by-step guide on how to calculate embodied labor values and operationalize Marx’s value categories, and especially how to make constructive use of modern input-output tables. Rebecca Kalman, drawing upon her 1993 dissertation, undertakes a comparative investigation of the rates of surplus value in the United States and Japan. One result of her research is that, at the level of the economy as a whole, levels and trends of the rate of surplus value will yield similar results regardless of whether the rate is calculated in price terms or in terms of labor values. The variations between the two measures are much larger at a disaggregated level, as the data for the manufacturing sector reveals. This latter result is interpreted as suggesting ‘‘a complex circuit of value transfers’’ among various sectors of the domestic economy, as well as internationally (p. 269).7 Paul Cooney’s paper argues for the importance of investigating these international value transfers, but does not really advance much beyond a discussion of some conceptual and classificatory issues. These papers, taken as a group, embrace the more orthodox approach to value theory with the emphasis on labor embodied, physical commodities, and a simultaneous transformation process, and are very much in the mould shaped by earlier work from Shaikh (1984), Shaikh and Tonak (1994), and Ochoa (1984). It is encouraging to see that this line of empirical work is alive, but it is too early to be able to assess its value in enhancing our understanding of contemporary capitalism. It does suggest, however, that as some of the newer paradigms mature, they also may spawn a new generation of researchers engaged in formulating new questions and producing new empirical work on capitalist economies. Is it possible that the value controversies and the paradigmatic engagements might move increasingly away from textual interpretations and exegeses toward empirically grounded comparative research? The above-mentioned debate (see note 7) between Paul Cockshott and Allin Cottrell, on the one hand, and Kliman on the other, may presage this sort of empirically oriented shift.

5. CONCLUSION The New Value Controversy constitutes a useful benchmark for some recent work in Marxian value theory. The newly emerging TSSI paradigm is well represented here, but claims that this collection adequately reflects the range of

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contemporary work in value theory are weakened by the absence of representatives of some other prominent traditions, such as the New Interpretation or the French Regulation School.8 The engagement between the TSSI and other paradigms that was sought by the editors has expanded since 1996. As a result, the delay until 2004 in publication of these conference papers now makes the material in the book somewhat dated. In the more recent literature, particularly noteworthy are the assessment of new developments in value theory by Duncan Foley (2000), and the trenchant critiques of the TSSI from the neoRicardian/Sraffian perspective (Mongiovi, 2002) and by leading exponents of the New Interpretation (Dumeńil & Le´vy, 2000, Mohun, 2003).9 Research emanating from each of the Marxian paradigms associated with the value controversies continues to be published and discussed. Competition between the paradigms is evident. However, given the scope for plurality concerning textual interpretation, fundamental differences in methodological stances, and the notorious difficulty of securing unambiguous refutation or reaffirmation of theoretical propositions by appeals to empirical evidence, the medium- and long-term prospects of the different paradigms may reside in sociological and institutional factors. Furthermore, much of the contemporary research in Marxian economics has been disengaged from the value debates and has focused instead on such concrete issues as international trade and development, money and finance, the business cycle, state policy and public finance, and of course, capital accumulation and economic crisis. Value theorists will need to demonstrate that their recent efforts provide the necessary underpinnings for, and can enhance the analytical insights of, this larger set of Marxist and radical economists.

NOTES 1. See, for example, Sweezy (1942), Seton (1957), Medio (1972), and Morishima (1973). 2. See, for example, Rubin (1973 [1928]), and Colletti (1972). 3. The resulting literature is too extensive to review here, but Fine and Harris (1979, Ch. 2) provide a good critical assessment of important contributions that were made in the 1970s. Also, the edited volumes by Steedman and Sweezy (1981) and by Mandel and Freeman (1984), each contain papers by some of the major participants in the debates. 4. Recall that the title of the Freeman and Carchedi (1996) collection of TSSI papers is Marx and Non-Equilibrium Economics. 5. See also Moseley (2000) where he expands further on the similarities between his position and the New Interpretation. He argues, of course, that the textual evidence in Marx favors his (i.e., Moseley’s) reading.

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6. See, for example Kliman (1988, 1996). 7. This result concerning the disaggregated variation constitutes a challenge to the position taken by W. Paul Cockshott and Allin F. Cottrell. Their theoretical position, which they restate in their chapter in The New Value Controversy, interprets the law of value as stating that, ‘‘value, understood as the labor time socially necessary to produce a commodity, is conserved in the exchange of commodities’’ (p. 233). They argue that this value conservation applies not just at the aggregate level, but also ‘‘in each particular exchange of commodities’’ (p. 234). Their chapter offers a formal geometric exposition of the notion of exchange-value and why this will operate in a commodityproducing society, but they claim that the value-conservation principle can empirically be supported by demonstrating that commodity prices are closely correlated with their respective embodied labor content. Cockshott and Cottrell (1997, 2003) present some empirical evidence for this claim. Kliman (2002) contests their results and especially the methodology underlying the 1997 paper. The dispute continues. See, for example, Cockshott and Cottrell (2005) and Kliman’s (2005) response. 8. Part of the chapter by Stavros D. Mavroudeas, however, contains a critique of Aglietta’s (a seminal figure in the Regulation School) approach to conceptualizing the ‘‘mode of existence’’ of abstract labor. Mavroudeas views Aglietta’s approach as a ‘‘forerunner’’ to the ‘‘New Interpretation’’ (p. 181). 9. An important element of the critiques by Mongiovi (2002), and Dumeńil and Le´vy (2000) is their defense of the use of an equilibrium framework, which echoes the objections raised against the TSSI by Laibman, as discussed above.

REFERENCES Bortkiewicz, L. (1952 [1906, 1907]). Value and price in the Marxian system. International Economic Papers, 2, 5–60. Carchedi, G. (1984). The logic of prices. Economy and Society, 13(4), 431–455. Cockshott, W. P., & Cottrell, A. F. (1997). Labour time versus alternative value bases: A research note. Cambridge Journal of Economics, 21(4), 545–549. Cockshott, W. P., & Cottrell, A. F. (2003). A note on the organic composition of capital and profit rates. Cambridge Journal of Economics, 27(5), 749–754. Cockshott, W. P., & Cottrell, A. F. (2005). Robust correlation between prices and labour values: A comment. Cambridge Journal of Economics, 29(2), 309–316. Colletti, L. (1972). From Rousseau to Lenin. London: New Left Review. Dumeńil, G. (1980). De la valeur aux prix de production. Paris: Economica. Dumeńil, G. (1983). Beyond the transformation riddle: A labour theory of value. Science and Society, 47(4), 427–450. Dumeńil, G., & Le´vy, D. (2000). The conservation of value: A rejoinder to Alan Freeman. Review of Radical Political Economics, 32(1), 119–146. Ernst, J. (1982). Simultaneous valuation extirpated: A contribution to the critique of the neoRicardian concept of value. Review of Radical Political Economics, 14(2), 85–94. Fine, B., & Harris, L. (1979). Rereading capital. New York: Columbia University Press. Foley, D. K. (1982). The value of money, the value of labour power, and the Marxian transformation problem. Review of Radical Political Economics, 14(2), 37–47.


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Foley, D. K. (2000). Recent developments in the labour theory of value. Review of Radical Political Economics, 32(1), 1–39. Freeman, A., & Carchedi, G. (Eds) (1996). Marx and non-equilibrium economics. Cheltenham, UK: Edward Elgar. Freeman, A., Kliman, A., & Wells, J. (Eds) (2004). The new value controversy and the foundations of economics. Cheltenham, UK: Edward Elgar. Kliman, A. (1988). The profit rate under continuous technical change. Review of Radical Political Economics, 20(2-3), 283–289. Kliman, A. (1996). A value-theoretic critique of the Okishio theorem. In: A. Freeman & G. Carchedi (Eds), Marx and non-equilibrium economics (pp. 204–224). Cheltenham, UK: Edward Elgar. Kliman, A. (2002). The law of value and laws of statistics: Sectoral values and prices in the US economy, 1977–97. Cambridge Journal of Economics, 26(3), 299–311. Kliman, A. (2005). Reply to Cockshott and Cottrell. Cambridge Journal of Economics, 29(2), 317–323. Kliman, A., & McGlone, T. (1988). The transformation non-problem and the non-transformation problem. Capital and Class, 35, 56–83. Krause, U. (1982). Money and abstract labour. London: New Left Books. Mandel, E., & Freeman, A. (Eds) (1984). Ricardo, Marx, Sraffa: The Langston Memorial volume. London: Verso. Marx, K. (1954 [1867]). Capital: A critique of political economy (Vol. 1). Moscow: Progress Publishers. Marx, K. (1959 [1894]). Capital: A critique of political economy (Vol. 3). Moscow: Progress Publishers. Medio, A. (1972). Profits and surplus value: Appearance and reality in capitalist production. In: E. K. Hunt & J. Schwartz (Eds), A critique of economic theory. Harmondsworth: Penquin. Mohun, S. (2003). On the TSSI and the exploitation theory of profit. Capital and Class, 81, 85–102. Mongiovi, G. (2002). Vulgar economy in Marxian garb: A critique of temporal single system Marxism. Review of Radical Political Economics, 34(4), 393–416. Morishima, M. (1973). Marx’s economics: A dual theory of value and growth. Cambridge: Cambridge University Press. Moseley, F. (1993). Marx’s logical method and the ‘‘transformation problem’’. In: F. Moseley (Ed.), Marx’s method in Capital: A reexamination. Atlantic Highlands, NJ: Humanities Press. Moseley, F. (2000). The ‘‘new solution’’ to the transformation problem: A sympathetic critique. Review of Radical Political Economics, 32(2), 282–316. Ochoa, E. (1984). Labor-values and prices of production: An interindustry study of the United States economy, 1947–1972. PhD dissertation, New School for Social Research. Rubin, I. I. (1973 [1928]). Essays on Marx’s theory of value. Montreal: Black Rose Books. Seton, F. (1957). The ‘‘transformation problem.’’ Review of Economic Studies, 24, 149–160. Shaikh, A. (1984). The transformation from Marx to Sraffa. In: E. Mandel & A. Freeman (Eds), Ricardo, Marx, Sraffa: The Langston Memorial volume (pp. 43–84). London: Verso. Shaikh, A., & Tonak, E. A. (1994). Measuring the wealth of nations: The political economy of national accounts. Cambridge: Cambridge University Press.

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Sraffa, P. (1960). Production of commodities by means of commodities. Cambridge: Cambridge University Press. Steedman, I. (1977). Marx after Sraffa. London: New Left Books. Steedman, I. (1980). Heterogeneous labour and ‘‘Classical’’ theory. Metroeconomica, 33, 39–50. Steedman, I. (1985). Heterogeneous labour and Marx’s theory. History of Political Economy, 17(4), 551–574. Steedman, I., & Sweezy, P. M. (Eds) (1981). The value controversy. London: New Left Books. Sweezy, P. M. (1942). The theory of capitalist development: Principles of Marxian political economy. New York: Monthly Review Press. Wolff, R., Callari, A., & Roberts, B. (1982). Marx’s (not Ricardo’s) ‘‘transformation problem’’: A radical reconceptualization. History of Political Economy, 14(4), 564–582.

Montes’s ADAM SMITH IN CONTEXT Jeffrey T. Young Review essay on Leonidas Montes’s Adam Smith in Context: A Critical Reassessment of Some Central Components of His Thought. New York: Palgrave Macmillan, 2004. xii+186 pp. ISBN 1403912564. This is a short, but pithy, book on certain philosophical aspects of Smith’s moral theory and scientific methodology. While Montes is primarily concerned with recovering Smith’s meaning, he does enlist Smith in Tony Lawson’s (1997, 2003) contemporary project of reconstructing contemporary economics on realist foundations. Thus, the book falls broadly into the genre of history of thought as critique of contemporary practice. The book is a revised version of the author’s doctoral dissertation from King’s College, Cambridge. Two chapters have already appeared in scholarly journals, and participants at recent professional meetings have been treated to presentations on some of the other chapters. Montes is one of a younger generation of talented Smith scholars. Those of us who have been around awhile will find new and insightful interpretations on a wide range of issues related to Smith. The book consists of six chapters. The first provides an introduction and road map to the book. Here Montes announces an ambitious program in which he intends to reconstruct Smith’s concept of sympathy as the foundation of his philosophy; provide a history of thought on the Adam Smith Problem and treat it as an exercise in the relationship between economics and ethics; A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 201–208 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24013-6

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show that the sympathetic process grants moral autonomy to the individual in a manner that anticipates Kantian ethics; examine the sources of Smith’s civic humanism and how Smith combines virtue discourse with rights discourse; examine Smith’s propriety as a philosophical concept; and show Smith’s roots in Newtonian method and distinguish Smith’s understanding of Newton from modern stereotypes. This is an ambitious agenda. Each chapter is thoroughly researched, and fresh interpretations and insights are found throughout. The heart of the book is a series of four chapters, which take up the Adam Smith problem, virtue and the role of civic humanist thought in Smith, the concept of propriety, and Newton and Smith’s scientific method, respectively. Others more qualified than me will have to weigh in on Montes’s interpretation of the classical texts, particularly his interpretation of the classical antecedents of Smith’s doctrine of sympathy, propriety, and the virtue of self-command. I should like to confine my remarks to two broad areas in which Montes’s interpretation has implications for modern practice, namely, the place of utilitarianism in Smith’s system and a set of methodological issues that arise in Montes’s fifth chapter on Newtonian methodology.

SMITH’S UTILITARIANISM Montes’s interpretations of propriety and of self-command, the master Smithian virtue, led him to place Smith’s ethics in the deontology camp with Immanuel Kant, clearly opposed to the utilitarians. This is an issue that is worth pursuing for two reasons. First, the relation between Smith and Kant has not been sufficiently explored in the secondary literature. Samuel Fleischacker (1991, 1996) has investigated the lines of influence from Smith to Kant. There is, for example, a striking mention of the impartial spectator in the form of ‘‘an impartial rational spectator’’ in the Groundwork of the Metaphysics of Morals (Kant [1785] 1997, 4:393, p. 7), yet it is impossible to tell exactly and to what extent Kant’s reading of Smith contributed to the development of his own thought. Be that as it may, there is, nonetheless, a logical consistency between Smith’s description of the operation of the conscience, as agents learn to construct the perspective of an ideal impartial spectator from which to accurately judge their own thoughts and actions on the one hand and the categorical imperative on the other. Smith’s emphasis on impartiality in judging and Kant’s emphasis on universality seem to

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be just different ways of getting at the transcendent nature of true moral character and action. In Smith, then, it is the virtue of self-command through which agents participate in the molding of their own character and stir themselves up for right action (as judged from this ideal perspective). As Montes argues, the spectator judges self-command in terms of the spectator’s sense of propriety, not through an analysis of the merit or demerit of an action. It is a deontological argument, not a consequentialist one. When properly understood, self-command entails the development of a morally autonomous agent, similar to Kant’s. Thus, Montes concludes: The philosophical meaning of propriety, underpinned by the virtue of self-command, and the role of the conscience introduced by the supposed impartial spectator, situates the sympathetic process within a philosophical tradition that seems closer to Kant than to utilitarianism. (p. 53)

And then again he states that his ‘‘thesis y is that there are more grounds to consider Smith as a deontologist, than as a proto-utilitarian’’ (p. 98). This brings me to the second reason why this is an important line of inquiry. The role of utilitarianism in Smith, I believe is a complex and original one, which Montes chooses to pass over. D.D. Raphael (2001) has already argued persuasively that Smith’s ethics are not utilitarian (see also Campbell & Ross, 1981, pp. 75–76). Yet when it comes to evaluating states of the world, Smith’s value premises are clearly utilitarian and consequentialist in character. Indeed, he tells us that when it comes to violations of ‘‘either civil police or military discipline’’ it is ‘‘a view to the general interest of society’’ that leads us to ‘‘punish and approve of punishment’’ (Smith, 1976a, TMS II.ii.3.11). Thus, the laws of police, which include commercial policy, are evaluated on utilitarian standards, and this pervades the Wealth of Nations. Is it possible to reconcile Smith’s use of utilitarian standards to evaluate social arrangements, including, but not limited to systems of political economy, with his non-utilitarian, deontological ethics? I have argued elsewhere (Young, 2006) that Smith’s normative evaluations actually involve some fairly complex interactions between three norms: justice, distributive equity, and utility. The concern for justice and distribution fall directly out of his moral theory as justice and benevolence are two of the main Smithian virtues. It is the principle of unintended consequences that renders justice consistent with utilitarian values, since its utility in promoting social order follows as an unintended consequence of the resentment a spectator feels for an injury inflicted upon a fellow. In similar fashion, distributive equity is also an unintended consequence of self-interested behavior under certain kinds of social arrangements. Thus, Smith can simultaneously advance a

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non-utilitarian theory of morals while nonetheless evaluating outcomes from a utilitarian perspective. The story is far more complicated than this, but I would argue this is the general pattern. There are important cases where this pattern breaks down, which give rise to certain positive functions of the state, such as the provision of public works. However, my concern here is not with analyzing these so much as it is with the perspective from which utilitarian judgments are made. A key tension, or dialectic, in Smith is that between the perspective of common life and the perspective of the philosopher, ‘‘whose trade it is, not to do anything, but to observe everything’’ (Smith, 1976a, WN I.i.9; emphasis added). In Smith’s theory ethical systems are built up in the interactions of common life from social experience as people learn acceptable behavior via the sympathetic process. Utilitarian judgments, however, are those of the philosopher who has a holistic perspective and can see the consequences of actions and of habits of thought and custom, which agents can neither see nor intend. David Levy (1995) has constructed an ingenious argument to the effect that Smith actually deploys the spectator theory to explain these utilitarian judgments. Specifically, for Smith economic growth is socially beneficial because it raises the standard of living of the median member of society: ‘‘It seems to me that Smith is relying on a belief that modestly informed spectators would reach a common judgment about the level of well-being of the median member of different societies to defend economic growth’’ (p. 313). A number of years ago I made a similar argument to the effect that an impartial spectator placed in the role of the philosopher, whose business it is to observe everything, would use a utilitarian standard. At that time I concluded that ‘‘the promotion of public opulence is the proper basis for policy because it is ‘reasonable’ when viewed from the perspective of an impartial spectator, i.e. one who is not swayed by y particular interest’’ (Young, 1986, p. 377). These are hardly complete arguments. They simply indicate, first, that Smith’s non-utilitarian ethics can be reconciled with his utilitarian approach to the evaluation of social states once we distinguish the perspective of the philosopher as distinct from that of agents as they go about the business of daily life. Second, placing the impartial spectator into the role of the philosopher, we can actually use the same principles of Smith’s ethical theory to argue that the spectator would adopt a utilitarian standard in such circumstances. Montes chooses not to enter into such issues. Given the thrust of his contribution, namely to recapture Smith’s original meaning in the concepts of propriety and self-command, this is understandable. However, it does give a false impression that Smith eschewed utilitarianism completely. This


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is not the case, and as I have tried to indicate, Smith did integrate utilitarianism into his system in a consistent, but complex, way.

SMITH’S NEWTONIANISM The penultimate chapter of the book takes up an issue that is relevant to current methodological debates in economics. Montes argues that mathematical formalism, general equilibrium theory, and the deductive method that came to dominate mainstream economics in the last century are rooted in a misinterpretation of Newtonian scientific method. Historically what Montes believes is a misreading of Newton took hold in France, so it is not surprising that the forerunners of the mathematization project were French. Once again, I must defer to those familiar with Newton’s texts, and refrain from passing judgment on the extent to which Montes’s argument depends on a proper understanding of Newton. However, I have my doubts. There is no question that a significant methodological divide separated French from British economic thought in Smith’s day. Smith’s disdain for the metaphysics of the Physiocratic school is well known (Smith, 1976b, WN V.ii.c.7). I have argued elsewhere that Smith’s substantive critique of the Tableau Economique in WN as well as his critique of the Physiocratic approach to policy are both rooted in the philosophical divide between French rationalism and British empiricism (Young, 2002/2003). Further, I have no doubt, for example, that both Smith and his friend David Hume believed they were following Newtonian method in their respective philosophical theories, and that they believed its hallmark was that it was empirical and experimental. One need only consider the subtitle of Hume’s Treatise to see this. However, I suspect that these philosophical differences were deeply rooted and that they account for the different readings of Newton as well as the different approaches to economics. Neither do I believe that mathematical formalism as a sort of rite of passage in contemporary mainstream economics can be uprooted by setting the record straight about Newton. In short, I see the correct interpretation of Newton as tangential to the debate. Having said this, I would like to consider briefly the propriety, or lack thereof, of treating Smith as a general equilibrium theorist. Andrew Skinner (1996), for example, is very careful about this as he prefers to view Smith as modeling a system of ‘‘the interdependence of economic phenomena’’ (pp. 176–177), and that, unlike the Physiocratic system, Smith’s circular flow model is not an equilibrium system at all, but a ‘‘spiral’’ (pp. 170–171). However, what are we to make of such statements as:

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If among a nation of hunters y it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer. It is natural that what is usually the produce of two days or two hours labour, should be worth double of what is usually the produce of one day’s or one hour’s labour. (Smith, 1976b, WN I.vi.1) The nature of things has stamped upon corn a real value which cannot be altered by merely altering its money price y The real value of every other commodity is finally measured and determined by the proportion which its average money price bears to the average money price of corn. The real value of corn does not vary with those variations in its average money price, which sometimes occur from one century to another. It is the real value of silver which varies with them. (Smith, 1976b, WN IV.v.a.23)

Is it anachronistic to suggest that both of these statements imply a mathematical structure of simultaneous equations to represent a general equilibrium of some sort? The first, is a two-good, two-person, one-factor economy where the prices of beaver and deer are simultaneously determined. The latter is a more complex system in which the nominal price of corn determines the price level. Changes in the money price of corn are always only nominal changes as they generate equal changes in the money price of all other goods, including labor time. Thus, Smith’s statement implies a simultaneous determination of all prices. The problem of the role of the price of corn in determining the price level greatly vexed Ricardo. The solution he proposed in the form of the inverse wage/profit relation became a central theorem of Ricardian economics. My point here is that, just as the distinction between deontological ethics and utilitarianism is not a neat and clean one in Smith, neither is the distinction between, say formalism and realism, quite as distinct as Montes, and other critics of modern formalism would like to have it. Thus, in enlisting Smith on the side of certain modern heterodox schools, particularly Tony Lawson’s critical realist reconstruction of economics, we forget that modern methodological orthodoxy can also find formalistic elements in Smith. Even though Smith did not present such elements mathematically, they certainly seem amenable to mathematical treatment. Indeed, as in the hands of Ricardo, the rigorous application of deductive logic to them yields important results, beyond what Smith himself could see. Mathematical/ deductive modeling has its place even in the evolutionary, historical approach Smith operated within. There are equilibrium systems operating within the larger evolutionary processes. There is room for both types of theory in economics, and Smith practiced both types. I do agree with the critics, though, that the mathematical/deductive should not be the single standard of appropriate practice.


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CONCLUSION While I believe there is more complexity to the story Montes tells about the place of utilitarianism in Smith and the role of formalistic modeling, this does not, in my view detract from the quality of the book. This is an impressive piece of scholarship, which offers new insights into the Adam Smith problem and into the meaning of such key concepts as sympathy, propriety, and self-command. The result is that Montes gives Smithian ethics a strongly Kantian flavor. This is an important contribution, which ultimately could shed more light on the extent to which Smith believed in the existence of absolute moral principles or whether his system was so context dependent that such absolutes could never be discovered. I think the Kantian connection is well worth further exploration. The penultimate chapter takes the story in a different direction into the realm of the philosophy of science and economic methodology. I tend to agree with the general thrust of the chapter. Certainly I find Smith more enlightening about the real world than the purely mathematical models that fail to touch down in any reality with which I am familiar. I also agree that Smith does fall within critical realism. However, as I indicated above, I do think the issue is a bit overdrawn as there is plenty of scope to apply formalistic techniques to Smith’s text in ways that help clarify and improve upon his logic. Even an evolutionary, historical economics has a place for mathematical formalism.

ACKNOWLEDGMENT I wish to thank Amos Witztum for valuable comments on the paper. The usual disclaimer applies.

REFERENCES Campbell, T. D., & Ross, I. S. (1981). The utilitarianism of Adam Smith’s policy advice. Journal of the History of Ideas, 42, 73–92. Fleischacker, S. (1991). Philosophy in moral practice: Kant and Adam Smith. Kant-Studien, 82(3), 249–269. Fleischacker, S. (1996). Values behind the market: Kant’s response to the Wealth of Nations. History of Political Thought, 17(3), 379–407. Kant, I. ([1785] 1997). Groundwork of the metaphysics of morals. Cambridge: Cambridge University Press.

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Lawson, T. (1997). Economics and reality. London: Routledge. Lawson, T. (2003). Reorienting economics. London: Routledge. Levy, D. M. (1995). The partial spectator in the Wealth of Nations: A robust utilitarianism. European Journal of the History of Economic Thought, 2(2), 299–326. Raphael, D. D. (2001). Concepts of justice. Oxford: Clarendon Press. Skinner, A. S. (1996). A system of social science: Papers relating to Adam Smith (2nd ed.). Oxford: Clarendon Press. Smith, A. (1976a). The theory of moral sentiments. In: D. D. Raphael & A. L. Macfie (Eds). Oxford: Clarendon Press (TMS). Smith, A. (1976b). An inquiry into the nature and causes of the wealth of nations. In: A. S. Skinner & R. H. Campbell (Eds). Oxford: Clarendon Press (WN). Young, J. T. (1986). The impartial spectator and natural jurisprudence: An interpretation of Adam Smith’s theory of the natural price. History of Political Economy, 18(3), 365–382. Young, J. T. (2002/2003). Adam Smith and the physiocrats: Contrasting views of the law of nature. History of Economic Ideas, 10, 7–28. Young, J. T. (2006). Unintended order and intervention: Adam Smith’s theory of the role of the state. In: P. Boettke & S. Medema (Eds), The role of government in the history of economic thought (history of political economy Supplement). Durham: Duke University Press.

Mirowski’s EFFORTLESS ECONOMY OF SCIENCE? THROWING DOWN THE GAUNTLET ON A NEOCLASSICAL ECONOMICS OF SCIENCE Aaron M. McCright A review essay of Philip Mirowski’s The Effortless Economy of Science? Durham: Duke University Press, 2004. While writing this review of Philip Mirowski’s The Effortless Economy of Science? (Duke University Press, 2004) I felt like how Dan Quayle would have felt had he been invited to a Mensa meeting – out of my league, just waiting to get cast aside as a cerebral lightweight. Sooner or later, I would be on the hot seat, spotlight glaring in my face, forced to spell the proverbial ‘‘potato’’ (in this case, evaluate the soundness of Mirowski’s interpretation of the collected economic works of William Thomas Thornton). Indubitably, my brief career as a serious scholar would be over, and I would not-sograciously begin my sojourn with Lieutenant Junior Grade Daniel Allistair Kaffee teaching typewriter maintenance at the Rocco Columbo School for Women. So, with a peppering of Woody Allen-esque neurosis and selfdoubt, please allow me to clarify my objectives and intentions for this review. As a relatively young scholar trained in political and environmental sociology, I have minimal background in the intellectual issues presented within this volume. To be sure, I am no philosopher or historian of economic A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 209–223 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24014-8

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thought. As such, I often found myself wandering aimlessly among Mirowski’s historical references to obscure economic thinkers of the 1800s. Indeed, throughout a good portion of this book, I was a 98-pound weakling getting sand kicked in my face by a muscle-bound Mirowski as he unleashed a veritable barrage of ‘‘smarty pants’’ words upon me like a rain of fire. Dross, ergodicity, fuglemen, proleptic, synecdoche. I can only surmise that Mirowski dutifully completed ‘‘It Pays to Increase Your Word Power’’ in the Reader’s Digest every month while growing up. Nonetheless, I made my way through this treacherous historical and terminological safari relatively unscathed, even to learn a useful thing or two y okay, actually more like 75. For those readers quite familiar with Mirowski’s work (especially those who have already read many of the original articles reprinted in this book), this review may seem quite pedestrian. I doubt if I will offer any insights that have not already been posited previously by far more learned scholars than me. I write this review as an intellectual ‘‘outsider’’ – someone not intimately familiar with the internal dynamics of the specific intellectual debates presented in this book. As such, this review may be of most benefit to individuals like me: people who are very interested in the history and philosophy of science and economic thought (especially as it bears on social science scholarship more generally) but who have yet to immerse themselves in the field. Having fulfilled my obligatory witty banter requirement, I will now say a few words about Mirowski’s objectives and goals (‘‘the forest’’) before succinctly reviewing each of the individual chapters in this collection (‘‘the trees’’). I will end my essay with a brief evaluation of the entire book. And since I am writing most of this review before going to my town’s July 4th fireworks celebration, I will conclude my endeavor with a few grand statements of sound and fury, signifying nothing.

THE FOREST By Mirowski’s own description, this book is a collection of essays that dwell in the interstices of scientific disciplines and established fields of inquiry: ‘‘this book sets out to explore that no-man’s land at the borders of science and economics with attendant emotions pitched somewhere beyond the thrill of spelunking and the delectation of trespass’’ (p. 4). With his body armor and some extra clips for his rifle, he charges headfirst into this no-man’s land with his sights set on what he calls ‘‘the twentieth century science-economy problematic’’ (p. 6). Some scholars often utilize economic principles (especially neoclassical ones) to characterize the structure and processes of science

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(ever heard of the ‘‘marketplace of ideas?’’) while pulling out all the stops in claiming economics to be a rigorous scientific enterprise (on par with the pinnacle – physics, of course). In short, Mirowski is troubled that critical analysis of such academic pursuits seems to be verboten. The resulting dearth of valuable scholarship in this area is disturbing given some of the dominant trends in American science and economics since WWII: the rise of ‘‘value free’’ ideology within science; the large expansion of military funding and the growth of Big Science; and the historical revisionism advanced by many neoclassical economists, attempting to create an ahistorical ‘‘rational choice’’ model based on the physical sciences. Yet, this paucity of scholarship is not caused by a conscious, intentional conspiracy or the idiosyncrasies of any one discipline. Instead, Mirowski (pp. 6–7) points to ‘‘the postwar state-military organization and the funding of science in the American context’’ on a more systemic level. ‘‘It is rather that the previously pertinent disciplines (philosophy, economics, science policy y ) in the American academy were thoroughly reconstituted in the period following the Second World War so as largely to exclude these concerns,’’ Mirowski (p. 6) explains. More recent changes in the science–economic nexus have convinced Mirowski further that the time is now for his type of critical examination. He is perhaps worried most about the increasing commercialization and privatization of science, with its concomitant features: the dissolution of the individual scientific author as the linchpin of inquiry and bearer of ‘‘credit,’’ the legal and conceptual reconstruction of intellectual property, the re-engineering of the institution of the university and the reconfiguration of previous disciplinary prerogatives, the outbreak of the science wars and the consequent loss of any sense of mutual reinforcement between the natural sciences, the social sciences, and the humanities, the unreflective treatment of information as a commodified ‘‘thing’’ and its obverse phenomenon, which is a contempt for the history of inquiry, and the ascendancy of postwar American neoclassical economics as the lingua franca of public justification of any and all of the above. (p. 8)

Yikes, I thought I smelled something rotten in the state of Denmark. Mirowski explains, ‘‘The initial impetus behind this collection y is a conviction that a number of profound alterations have been affecting science in the last two decades, and that we who are caught up in the groundswell possess a most inadequate vocabulary with which to understand them’’ (p. 8). In his best Shakespearean voice, Mirowski shouts, ‘‘Once more into the breach, my dear friends!’’ and enters the fray, seeking to make ‘‘a contribution to a field of inquiry which has yet to find a name’’ (p. 7). He clearly stakes out his contribution. Rather than examining the causes of the disappearance

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of this valuable scholarly work and our lack of adequate vocabulary, he rather makes his goal to ‘‘explain and understand the ensuing state of affairs’’ (p. 7). His most pervasive objective throughout this book is to debunk the claims of rival scholars that neoclassical economics can and should serve as a legitimating rationale for the practice and organization of science. Indeed, Mirowski (p. 9) identifies two major obstacles to a neoclassical economics of science: (a) neoclassical economics was patterned upon scientific principles from nineteenth-century energy mechanics that have since been debunked; and (b) the ambitions of neoclassical economists to produce ahistorical laws of behavior have crippled their ability to explain historical change, contextual effects, and unintended consequences. Relieving his audience of having to read between the lines, Mirowski (p. 11) opines, ‘‘neoclassical economics is primarily serving as a weapon of mass distraction, diverting attention from the causes and consequences of the vast contemporary reorganization of the scientific process, and not providing tools for understanding and discussing the emergent nature of science in the twenty-first century.’’ Mirowski is not shy about naming the names of those he believes are at the controls of these weapons of mass distraction. Without a doubt, his favorite whipping boy is Philip Kitcher, who gets slapped about the head and shoulders with the back of Mirowski’s gloved hand on page after page of multiple chapters in this collection. (Stay tuned for Chapter Five, a veritable beat-down of early Mike Tyson proportions.) Mirowski (p. 21) writes that Kitcher ‘‘needs to be understood as a recognizable member of the group of philosophers identified above who retail neoclassical economics under elaborate disguise because they conceive it as an adequate characterization of the political economy of science.’’ He claims that: Kitcher has grossly misinterpreted the social studies of science agenda (p. 21); Kitcher is only the latest in the politically conservative pantheon of Polanyi, Popper, and Kuhn (p. 22); Kitcher unreflexively and unsuccessfully recycles an ‘‘invisible hand’’ argument to explain the outcomes of science (p. 22); Kitcher hangs his hat on philosophical ideas described as ‘‘more than a little threadbare and outdated’’ (p. 23); Kitcher ‘‘can only manage to conceptualize the interplay of science and society in quasieconomic and, moreover, strictly neoclassical terms’’ (p. 23); and Kitcher’s social epistemology suffers from tautology and is also irrelevant (p. 25).

Tell us what you really think! Indeed, Mirowski goes so far as to insinuate that Kitcher is an unwitting mercenary for neoclassical economics and Big


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Science: ‘‘Kitcher’s flaw is that his ingrained disdain for history leaves him incapable of realizing that the hired gun ethos of the operations research can be readily discerned in his own work’’ (p. 25). Mirowski’s grand challenge to the encroaching ideology of neoclassical economics within science studies has its fish in a barrel: ‘‘the chapters in this book y constitute one long argument that the way forward lies with the social-studies-of-science camp, and not with the Kitcher-style social epistemologies’’ (p. 21).

THE TREES Mirowski divides his collection of essays into five parts that I shall take in order. I will only offer brief overviews of most chapters, since readers may already be familiar with them. (But more on that later.) Part One, ‘‘From Economics to Science Studies,’’ contains two chapters – two of the only four original essays in this collection. The initial chapter is your typical introductory chapter where the author lays out his/her objectives and provides overviews of the chapters to come. Oddly enough, Mirowski says almost nothing explicitly to preview Chapters Two through Six in Part Two (except for two sentences on page nine). Since I have already discussed much of the content of this chapter above, I will only say a few more words about this introduction. I found this initial essay to be intriguing in that it addressed a good number of the dilemmas plaguing twenty-first century science and the field of science studies. My curiosity was piqued by the discussion of commercialization and privatization in the first several pages, especially after reading Mirowski claim that this book is about understanding our current state of affairs. He writes, ‘‘This book seeks to create a space where we can get past the grand abstractions about Science, Truth, and Democracy [take that, Philip Kitcher!] and begin to talk about the ways that scientists live their lives on the ground today’’ (p. 35). Unfortunately, the bulk of the essays in this collection (except for Chapter Six) deal more with ‘‘how we got to this point’’ rather than ‘‘how we can make sense of things now.’’ Chapter One seems out of place in this collection of essays like a Christian rock group on tour with Eminem and 50 Cent. Mirowski uses autobiographical prose to explain who he is, what he is about, and why he does what he does. Unfortunately, it is all a little confusing, perhaps a trademark of Mirowski. The gem in this chapter is found in Endnote One (on page 403). This tells the reader a little about Mirowski’s playfulness (as well as his awareness of others’ perceptions of his work); it also confirmed my own

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initial reaction to his writing. I must admit that I enjoy Mirowski’s writing style at times (as evidenced in my homage of ‘‘noise’’ and obscure popular culture references in this very review), yet I easily can see how it can get in the way of a complete comprehension of his ideas. The title of Chapter One is ‘‘Confessions of an Aging Enfant Terrible,’’ yet one is hard-pressed to find any such confessions. Interestingly enough, on the 10th page of this 14-page chapter, Mirowski (p. 46) confesses that he has not yet confessed anything: ‘‘The titillating name of this chapter promises confessions, and I realize that I have only been writing little abstracts of my work until now, so here comes my effort to make good on the initial promise.’’ And what ultimately does he confess? Since he admits regularly to playing the role of the ‘‘outsider looking in’’ with many of the intellectual debates presented in this book, Mirowski (p. 46) confesses that he cannot always clearly identify his immediate audience, and he further worries whether his work therefore is having an influence on said audience. Is not this the worry of most scholars? In this age of reality television, I guess I was expecting a grittier, more raw, and perhaps sexier confession. Part Two, ‘‘Science as an Economic Phenomenon,’’ is a group of five essays through which Mirowski engages with the general literature on the philosophy of science. In Chapter Two, he begins his intellectual barrage on a neoclassical economics of science. Mirowski (p. 53) opens, ‘‘one of the most noteworthy developments of the last few years has been the self-conscious reintroduction of economics models and metaphors into the philosophy of science.’’ It is pretty clear that Mirowski is mad as hell, and he is not gonna take it anymore. Yet, he starts modestly in this chapter by taking on Michael Polanyi, who attempted to utilize market metaphors to explain the operation of science approximately 50 years ago. On one level, Mirowski seems to admire and respect Polanyi’s intellectual effort. Yet on another level, he does not pull his punches in writing that Polanyi ultimately got it wrong. As such, Mirowski (p. 54) characterizes Polanyi’s story as a cautionary tale: ‘‘by the end of his career Polanyi felt that his market defense of unfettered science had been a dismal failure. His experience may serve as a salutary warning to the numerous modern philosophical enthusiasts for the market metaphor.’’ Mirowski concludes this chapter with a brief discussion of how Polanyi, Thomas Kuhn, and Philip Kitcher have conceptualized the term ‘‘freedom’’ with reference to scientific inquiry. Here, (p. 54) he demonstrates that ‘‘when it comes to arguing about science, heuristic images of the economy have always been lurking nearby, half in the shadow, usually at stage right.’’


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In Chapter Three, Mirowski compares the ideas of two scholars from Central Europe whose work has overlapped economics and the philosophy of science: Michael Polanyi (of Chapter Two fame) and Friedrich von Hayek. He demonstrates that Polanyi and Hayek largely asked the same questions at the same time in their careers (and sometimes to each other), yet they produced different answers – especially by the late 1940s when Polanyi abandoned economics for philosophy. This leads Mirowski to raise the obvious question of ‘‘why Hayek has been lionized while Polanyi has largely been forgotten – except, of course, by a few philosophers’’ (p. 74). Unfortunately, that is about as far as Mirowski goes, as I never did read any convincing arguments for the divergent outcomes of Polanyi’s and Hayek’s careers. In Chapter Four, Mirowski practices a little philosophical history in critically reviewing Steve Fuller’s (2000) Thomas Kuhn: A Philosophical History for Our Times. Actually, he seems to use this opportunity to convey his own ideas on Kuhn’s legacy before turning his sights squarely on Fuller. An astute reader will probably anticipate that Mirowski characterizes Kuhn, like Polanyi and Hayek, as yet another guardian of the economic structure and elite status of science. Near the end of this chapter, Mirowski takes Fuller to task: ‘‘The above sketch tries to augment some of Fuller’s own efforts to contextualize Kuhn, but it also has some implications for his own project of a socialized epistemology which he may not like’’ (p. 94). Basically, Mirowski accuses Fuller of being naı¨ ve or at least short sighted in promoting the very type of social science he criticizes. To put Fuller out of his misery, Mirowski delivers an orchestrated one–two punch. Not only is Fuller’s research agenda shallow, but if it would ever be elaborated fully, then it would be little more than a souped-up neoclassical economics: I suspect that once Fuller’s research agenda and policy prescriptions are fully spelled out (which they are not in his book on Kuhn, nor indeed elsewhere), his social epistemology will turn out to resemble nothing so much as the OR[Operations Research]-inspired doctrines of the postwar period: in other words, it will be an ‘‘economics of science’’ not so different from a cognitively inspired version of neoclassical economics. (p. 95)

In the language of today’s youth, Fuller just got served! Which brings us to Chapter Five. [Dramatic pause here.] Reading Chapter Five is a lot like watching Ivan Drago viciously destroy Apollo Creed. Once it starts, you know it is going to end badly for Creed, but you have some sick desire to be there when it happens. I have already spent some of this essay detailing Mirowski’s beef with Philip Kitcher, so I will be brief.

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This chapter is largely a frontal assault on Kitcher’s (1993) The Advancement of Science, which received generally positive reviews. Yet, Mirowski (p. 97) writes, ‘‘the most striking thing about most of the reviews y is their evident inability or unwillingness to evaluate the project as a whole.’’ Without missing a beat, he (p. 97) claims, ‘‘it takes an economist’s perspective to adequately comprehend and evaluate what Kitcher is trying to do.’’ Mirowski then proceeds to dissect Kitcher’s argument piece by piece, producing a lengthy list of Kitcher’s transgressions (1) practicing a narrow kind of rational actor psychologism; (2) claiming theoretical ingenuity when all he was doing was reinventing the wheel (a wheel with a shaky future at best); (3) providing a shallow account of society that is found acceptable by mostly those sympathetic to his ideology; (4) promoting neoclassical economics by advancing an invisible hand argument; and (5) ignoring all the problems of neoclassical economics by treating economics as a black box. Ok, that’s enough. There is probably no one who is happier for the beginning of Chapter Six than Philip Kitcher, who can start to pick his tattered body up off the ground. Actually, I believe that most readers will thoroughly welcome this chapter. I found Chapter Six to be the most coherent essay in this collection, and it follows most clearly from the stated goal of this book (to understand the state of affairs in science and science studies at the beginning of the twenty-first century). In this chapter, Mirowski examines what has happened to historical paths to success (credit) in science: the copyright for the ‘‘romantic genius’’ (p. 120); the patent for the ‘‘applied tinkerer’’ (p. 121); and the employment contract for the ‘‘employee’’ (pp. 122–124). Mirowski’s ultimate goal is to identify the ways that changes in the structure of the economy and changes in the social structure of science are mutually constituted (p. 117). He points out that sweeping changes to copyright law and patent law since 1980 and the wholesale reengineering of the university toward commercialization has all but eradicated the first two paths to success noted in the previous paragraph. We are left with scientific employees with tenuous contracts at increasingly privatized universities, and this does not bode well for the institution of science. Part Three, ‘‘Rigorous Quantitative Measurement as a Social Phenomenon,’’ is a pair of essays on the social nature of quantitative measurement in science (Chapter Seven) and economics (Chapter Eight). In this section,


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Mirowski advances an ‘‘economics of science,’’ whereby he examines ‘‘how formal mathematics and the attribution of error interact to stabilize the numerical values of the physical constants, with the model of the process being compared explicitly to the operation of arbitrage in stabilizing prices’’ (p. 27). In Chapter Seven, Mirowski discusses the history of how physicists have socially constructed a small set of ‘‘dimensionless constants.’’ The social construction of quantity is old hat for scholars in the science studies field, and yet his contribution still produces some nice insights. In Chapter Eight, Mirowski turns his attention to econometric estimates of numerical constants. This chapter culminates in grand fashion with Mirowski comparing the Birge ratios (estimates of the reconciliation of error attributions) from a collection of constants in three fields: modern physics, modern experimental psychology, and modern neoclassical economics. As you might guess, the Birge ratios in economics dwarf those found in physics and psychology. Why is there such much inconsistency and error with the constants in economics? Or, more appropriately, why are the Birge ratios for physics and psychology so small? Mirowski answers the latter question convincingly. Both physics and psychology have well-established institutional mechanisms to negotiate and reconcile the error attributions of scientists. Mirowski’s answer to the former question rings clear. Economists simply have no such institutional mechanisms. And why is that so? He identifies a few related reasons: (a) professional socialization into economics cultivates antipathy toward social cooperation; (b) economists are quick to apply their free market ideology to their own profession; and (c) most neoclassical economists are quite skeptical of any external agency providing a collective good (pp. 190–191). Part Four, ‘‘Is Econometrics an Empirical Endeavor?’’ is a group of four essays that Mirowski sends with Luke Skywalker on his flight to explode the control center of the econometrics Death Star. In this section, Mirowski (p. 17) demonstrates ‘‘that statistical algorithms did not really solve many of the thorny problems of inductive inference as much as they shoved them under the rug, especially (but not exclusively) as they became used in postwar economics.’’ In Chapter Nine, Mirowski attempts to demonstrate that the ahistoricism of neoclassical economics can often prevent us from understanding the real behaviors of economic actors. He specifically challenges the assertion ‘‘that Cliometrics has made the study of history Scientific in its own terms’’ (p. 43). To do this, Mirowski examines the detailed business archives of the British brewery firm Truman, Hanbury, and Buxton from 1822 to 1846, during which time each partner wagered on the price of barley and hops at a

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year-end event. Mirowski’s results from standard Cliometric techniques are largely meaningless and confusing: ‘‘Depending upon which sequence of results excerpted from my personal econometric forage that I choose to report, and of how much freedom of auxiliary hypotheses I choose to take advantage, I can make any member of the Truman partnership appear as ‘rational’ or ‘irrational’ as I please’’ (p. 208). Mirowski then turns to a more traditional narrative historical account of these same events (albeit one that is only three pages long), and everything becomes clear: ‘‘Now that we are aware of some of the context, we can begin to reinterpret the meaning of the hops and barley wagers. They were indeed fundamentally about the ability of each individual to predict the costs of the business, but more than that, they were about signaling who should be running the business’’ (pp. 211–212). In Chapter Ten, Mirowski addresses the practice of replication in econometrics, responding to Dewald, Thursby, and Anderson’s (1986) finding that only 1.3% of the articles in their Journal of Money, Credit, and Banking sample were actual replications in their entirety. ‘‘How should advocates of Bayesian learning models, and indeed anyone interested in the state of economic science, interpret these results?’’ (p. 215). Mirowski’s response is relatively simple. Replication is quite costly for many involved in scientific research (potential replicators, authors of the original study, and journal editors), while extension and reproduction of an original empirical result offers considerable rewards for all involved. ‘‘The activity of replication (as opposed to reproduction) remains an ideal notable in the rarity of its realization. As such, it does not serve much of any regulative principle in the process of econometric research; and it is doubtful that it serves as a benchmark for any Bayesian learning process’’ (p. 227). The two remaining chapters in Part Four (Chapters Eleven and Twelve) tell the story of Benoit Mandelbrot’s challenge to the legitimacy of econometrics. Consistent with the themes of earlier chapters, Mirowski continues to point out that economics as a discipline would be a lot better off if more of its practitioners recognized that history matters. In the 1980s, many neoclassical economists perceived chaos theory to be the solution to the persistent problems within neoclassical theory. Yet, Mirowski (p. 230) explains, ‘‘economists have not sufficiently thought through the implications of the chaos literature for their discipline with adequate depth and rigor, because they are not yet ready to admit freely that history matters at all levels of discourse.’’ Awkwardly enough, Mandelbrot has mounted an impressive critique of orthodox economics that ultimately tears asunder almost every technique of neoclassical economics.


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Chapter Twelve details the two surges of reactions of econometricians to Mandelbrot’s economic work. In the late 1960s, Mandelbrot’s work was seen as a direct attack on econometrics, but in the late 1980s many economists became drawn to Mandelbrot’s ideas within chaos theory. Would it last? Mirowski (p. 252) tells us: ‘‘I had predicted in 1990 that the neoclassical orthodoxy y would find chaos theory and nonlinear dynamics indigestible, insalubrious, and inconsistent with its entire approach to economics; and I take no pleasure now in reporting my success in my prediction.’’ Really? Anyway, Mirowski then explains how this happened, pointing to the lack of theoretical guidance within neoclassical economics for expecting stochastic processes and an ideological commitment to deterministic models. The final section of this book, Part Five, contains four essays that engage with the history of the ‘‘laws of supply and demand.’’ With these, Mirowski examines controversies among earlier scholars on the nature of markets and the intellectual competition between ideas about supply and demand and neoclassical utility maximization. In Chapter Thirteen, the largest in the collection at a whopping sixty pages, Mirowski mines the collected economic works of William Thomas Thornton. Again, Mirowski points out that the ahistoricism of most economists produces unfortunate blind spots. According to Mirowski, Thornton was an influential scholar in Britain during the pivotal years of the 1860s and 1870s when neoclassical economic theory began to dominate British classical political economy. Mirowski provides ample documentation that Thornton’s works, especially his 1869 On Labour, successfully exposed the fiction of any ‘‘natural laws’’ of any generic market. Indeed, Thornton produced an insightful economic theory free from dependence upon ahistorical laws, yet his work was largely cast aside as later economists hung their hats on Alfred Marshall’s price theory. However, now that the Marshallian approach has fallen from grace within the neoclassical orthodoxy, Mirowski argues, the time is ripe to revisit Thornton’s insights. In Chapter Fourteen, Mirowski addresses the shattered history of Alfred Marshall in greater depth. In what I can now deduce is ‘‘typical Mirowski fashion,’’ he once more pulls the trigger with a lesser mortal in his crosshairs: ‘‘The (perhaps unpopular) point to be made here is that Marshall should not be regarded as a discoverer of anything, nor an original theorist of any stripe in the light of the history of neoclassical theory; he was y first and foremost a textbook writer, a popularizer and synthesizer of contradictory doctrines’’ (p. 354). As elucidated in the previous chapter, Thornton’s works delivered what might have been the death blow to orthodox economics in the 1870s. According to Mirowski, Marshall merely pieced

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together a makeshift ‘‘solution’’ to Thornton’s critiques – one that ultimately crumbled under the weight of its own weaknesses. Chapter Fifteen tells the story of Henry Ludwell Moore, a critic of the determinism prevalent within neoclassical economics during the first couple of decades of the twentieth century. Moore later found himself celebrated and widely embraced by orthodox economists who have claimed Moore as the father of econometrics. Mirowski notes that even Moore was perplexed by the reactions of these economists. Why did it happen? Mirowski explains: That Moore could be commandeered as the father of a movement which rejected his approach and which he most certainly would have repudiated is just another instance of the social function of the paternity suit: better to construct a formal fac- ade of One Big Happy Family than to confront the question of the intellectual coherence of modern econometric practices. (pp. 358–359)

So, that’s about it. Neoclassical economists once again fall prey to their own ahistoricism and just do not get it. Mirowski concludes this collection with Chapter Sixteen, titled ‘‘Refusing the Gift.’’ A reader can get a good sense of this chapter’s organization by reading Mirowski’s warning in his introductory chapter. We end the book with a chapter which may seem to rest uneasily under the rubric of the history of supply and demand of Part V, or worse, seem incongruous in both style and substance in the book as a whole. I again plead with you, dear reader, to temporarily withhold judgment so that the chapter’s place in the larger oeuvre might become clear. (p. 34)

Well, I am glad I am not the only one who thinks this chapter is a little out of place in this collection. If you can get past the choppy writing that jumps around more often than a frog on an asphalt road in August, then Mirowski’s point is simple. Those efforts by various scholars to characterize science as a gift-based economy (the opposite of market exchange) are doomed to failure because they ultimately allow neoclassical economics to creep back in. And it would not be a Mirowski essay if he did not open up a can on someone or something in the literature: The concept of ‘‘the gift’’ has been constitutive to any number of anti-neoclassical social theories in the last century, but all traditions that have relied upon it to explicate various forms of exchange have been ultimately vanquished qua social theory y . From this we may extrapolate that all further attempts to capitalize on the gift will go the way of their predecessors, and worse, attempts to base social theory upon it actually serve to strengthen the neoclassical orthodoxy. (p. 378)

So, what to do? Do not worry. Mirowski saves the day by unveiling his own social theory of value as an alternative to gift-based theories (and, more


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importantly, to neoclassical economic theories). Yet, the reader just gets a brief glimpse of this in the last four pages of this book.

THE FOREST RANGER Now for the sound and fury of those fireworks. I give this book an eight out of ten. It has a good beat, and I can dance to it. But seriously. As an outsider to many of the intellectual debates in this book, I have abstained from offering a critique of the substance of these essays. In this final section, I continue on my same trajectory. Let me start by making a few stylistic comments, with the understanding that style often affects the comprehension of substance. First, I often felt lost at times among the slang and technical jargon that peppered these essays. Some ideas and terms, such as ‘‘random walks’’ and ‘‘nightingales,’’ are not defined clearly enough (at least for me). Perhaps this just indicates that I am not part of that audience for which this book was published – an audience, as we learned in Chapter One, about which Mirowski is still unsure. Second, Mirowski’s text is a classic example of ‘‘Official style’’ with a large ‘‘lard factor’’ (Lanham, 1999). Mirowski regularly writes in the passive voice, often with excessive verbiage. He uses an utterly obscene amount of ‘‘It is y ’’ and ‘‘It has been y ’’ statements. For instance, at the beginning of Chapter Five, Mirowski (p. 97) writes, ‘‘It is the thesis of this chapter that it takes an economist’s perspective to adequately comprehend and evaluate what Kitcher is trying to do, in particular because it has already been attempted in economics decades ago.’’ A sentence in the passive voice and with a slow wind up. And there are many more where that came from. Third, a reader will expect much more coherence among these essays than Mirowski provides. There is a notable inconsistency in tone and style across these essays, and Mirowski even admits that the chapters do not seem to hang together quite as closely as they perhaps should. Indeed, these chapters are sometimes tied together by little more than continuous pagination. Some essays are packed with numerous illustrative examples and helpful citations, while others suffer from a notable deficit. In all, Chapters Two and Sixteen seem to be the weakest links of the volume (most in danger of getting voted off the island), while Chapter Six seems to be the only one where Mirowski delivers on his promise to help us understand the current state of affairs within science and science studies. I will now talk about that 2000-pound elephant in the living room – the one I have been largely avoiding from the onset of this review. This book is a

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kind of scholarship about which I am still skeptical and unsure – the collection of previously published works. Like most books of this type, it reads like you are listening to a ‘‘greatest hits’’ album from a contemporary rock band. This collection includes some of Mirowski’s ‘‘greatest hits’’ in the area of the history of economic and scientific thought, peppered with a few ‘‘new’’ articles. The introductory chapter is new, as are Chapters One, Twelve, and Thirteen. However, the remaining thirteen chapters are previously published articles and chapters reprinted in this volume. If you loved the hits the first time around, then you will love them again. But, if you have already read most of these essays (or at least have easy access to them already in print), then why is this book necessary? What is the value added of collecting all of these essays together within a single cover? Efficiency might be one reason. One book is easier to keep track of than some dozen or so photocopied journal articles and chapters in assorted books. Another reason is that you may genuinely care for the welfare of the employees of Duke University Press, and purchasing this book will continue to put food on the employees’ dinner tables. All jokes aside, let’s cut to the chase. I know of no other work that does what Mirowski does in his collection of essays. Thus, this is impressive in its totality, and it is a worthy collection to have in most respects. The ideology of neoclassical economics has been insidiously invading science and science studies and remaking them both in its own image, and Mirowski is one of the few scholars who mounts a sustained intellectual challenge to this process. And he does it better than anyone else I have read (even with all of his tangents and obscure references). So, who is the optimal audience for this book? Who would benefit most from reading this work? Mirowski identifies this audience himself: people who care about the scientific enterprise [who] will eventually want to know how we arrived at the modern state of affairs y [people who] will want to know something about the set of conditions which gave rise to the temporary configuration and conduct of university science after the Second World War, as well as the dubious ways in which science was then portrayed as transcending market operations. (p. 11)

I must abridge Mirowski’s audience pool by noting that the essays collected in this book were written somewhat narrowly for ‘‘those in the know’’ – that is, scholars within the history or philosophy of science or economics who are aware of many of the historical debates and controversies discussed in this collection of essays. As such, this collection of essays (or at least some selective chapters – like Chapter Six) is appropriate for graduate classes in the history or philosophy of science or economics.


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REFERENCES Dewald, W. G., Thursby, J. G., & Anderson, R. G. (1986). Replication in empirical economics: The journal of money, credit and banking project. American Economic Review, 76(4), 587–603. Kitcher, P. (1993). The advancement of science: Science without legend, objectivity without illusions. New York: Oxford University Press. Lanham, R. (1999). Revising prose (4th ed). Boston: Allyn and Bacon.


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Brakman and Heijdra’s MONOPOLISTIC COMPETITION IN RETROSPECT Humberto Barreto A review essay on Steven Brakman and Ben Heijdra’s (eds.) The Monopolistic Competition Revolution in Retrospect. Cambridge: Cambridge University Press, 2004. xiv+495 pp. ISBN 0521819911. This book contains the papers presented at ‘‘The Monopolistic Competition Revolution After 25 Years,’’ a conference held at the University of Groningen in October 2000. Experts in various fields, including macroeconomics, international trade theory, growth theory, and economic geography were recruited to honor Avinash Dixit and Joseph Stiglitz for their pioneering 1977 paper, ‘‘Monopolistic competition and optimum product diversity.’’ In addition to the papers presented at the conference, organized in the four fields mentioned above, the book contains two other sections. The section ‘‘Underground classics’’ contains a previously unpublished paper by Stiglitz and two earlier versions of the Dixit–Stiglitz paper. Brakman and Heijdra agree with Benassy who says that ‘‘especially the February 1975 version of the Dixit–Stiglitz paper ‘should become required reading for all serious students of the field.’ ’’ Thus, the editors explain that ‘‘By incorporating it (and its May 1974 precursor) in this book we hope to have significantly lowered the barrier to such students’’ (p. 28). The remaining section, ‘‘Current perspectives,’’ has three essays by the ‘‘intellectual founding fathers’’ of the model: Dixit, Stiglitz, A Research Annual Research in the History of Economic Thought and Methodology, Volume 24-A, 225–231 Copyright r 2006 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)24015-X

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and Wilfred Ethier. They reflect on the impact of Dixit–Stiglitz (1977), opine on the reasons for its success, and speculate on its future. Luckily for me, the standard review has already been written. Stephen Redding opens his evaluation by saying that, ‘‘This is an important book that should be read by all research economists and that will be of particular interest to those concerned with international trade’’ (Redding, 2005, p. 531). He is just as complimentary at the end: ‘‘This book is a tremendous tribute to the ‘second monopolistic competition revolution’ initiated by the path-breaking work of Dixit and Stiglitz (1977) y . One cannot help being inspired by this volume’’ (Redding, 2005, p. 537). In between, Redding summarizes each paper, following their order in the book. Consider this review then, a meandering hodgepodge of impressions and reactions from a historian of economics, who is not an expert in monopolistic competition (of either the first or second revolution). I will be more critical than Redding, but I do agree that this book is thought-provoking and worth reading.

THE FAILED FIRST REVOLUTION ‘‘The second attempt to model monopolistic competition was far more successful than the first, essentially because the second attempt introduced a formalization that had all the relevant characteristics of monopolistic competition but was still relatively easy to handle’’ (pp. 1–2). The story of the first revolution is that various precursors, such as Marshall, understood that the middle ground between perfect competition and monopoly was fraught with danger, so they avoided it. In the 1930s, Edward Chamberlin and Joan Robinson independently applied the marginal revenue curve to draw the now-familiar equilibrium position for a profit-maximizing, monopolistically competitive firm. However, the first revolution never really succeeded: ‘‘Given the elegance of the monopolistic competition model, it is surprising to see how little influence it had on economic theory’’ (p. 10). Several of the papers make reference to the failed 1930s monopolistic competition revolution without going into detail. It seems that it is an agreed upon fact. This failed-first-revolution is a paradoxical assertion – after all, if it failed that badly, it makes little sense to call it a revolution. More importantly, the claim triggered many questions and led me in several divergent directions. For example, how are we going to measure failure? The editors (p. 27) and Dixit (p. 124) point to citation searches to bolster the argument that Dixit–Stiglitz (1977) was quite successful. Even though I distrust citation evidence, I propose

Brakman and Heijdra’s Monopolistic Competition in Retrospect

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using this approach as a quick and rough way to judge the first revolution. Fig. 1 shows the results of a JSTOR search of the exact phrase ‘‘monopolistic competition’’ in articles and reviews in 16 journals that have been continuously published since 1930 until 1999. The impact of Dixit–Stiglitz is noticeable, but so is the effect of the first, 1930s revolution. Granted, by the early 1970s, ‘‘monopolistic competition’’ was not a heavily used term in these 16 prestigious journals, but this is hardly ground to assert failure. Clearly, the term had moved from frontier research in economics into the mundane world of the textbook. And speaking of textbooks, there is little doubt that Chamberlin’s The Theory of Monopolistic Competition was a huge success. The canonical graph of a monopolistically competitive firm in equilibrium, with its downward-sloping demand curve tangent to average cost at that output that maximizes profits (where MR ¼ MC) has been standard fare in introductory, micro, and industrial organization texts for years. In 1966 Alexander Morin published an article on the market for professional economic writing. In his discussion of the textbook market, Morin examined the sales record of ‘‘five books that seem to me representative of specialized professional writing in economics at its best’’ (Morin, 1966, pp. 406–407). In addition, to Joseph Schumpeter’s Theory of Economic Development, Samuelson’s Foundations of Economic Analysis, Friedman’s Essays in Positive Economics, and Becker’s Economics of Discrimination, Morin chose Chamberlin’s Theory of Monopolistic Competition. Not only was Chamberlin’s book included in this select group, the data on sales showed that Chamberlin blew away the others. He had three times as many books sold as either Schumpeter or Samuelson, his two closest competitors.

80 70 60 50 40 30 20 10 0 1930

Fig. 1.

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JSTOR Citations of ‘‘Monopolistic Competition’’ in Sixteen Core Journals from 1930 to 1999. Source: http://www.jstor.org

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But objective evidence of impact is not what the failed-first-revolution claim is really all about. It turns out that the roots are deep into the intellectual disagreement between the Chicago School and Harvard–MIT (Archibald, 1961). Both Stigler (1949) and Friedman (1953) were sharply critical of Chamberlin. Both argued on theoretical and methodological grounds, but it is clear that Stigler and Friedman were uncomfortable replacing perfect competition as an ideal. Not only would economics lose a familiar set of graphs and analytical results, the core of the efficiency defense of markets would be eviscerated. To this day, the welfare implications of equilibrium in monopolistic competition are mired in ambiguity, depending on such unknowns as the form of the utility function and whether lump sum taxes are available (leading to a constrained versus unconstrained social optimum). Complicated theoretical discussions of the balancing of product variety versus higher than minimum average cost made monopolistic competition unacceptable as the core model. The model failed the litmus test of demonstrating the efficiency of markets. Samuelson’s reaction is representative of the other side of the story. Chicago economists can continue to shout until they are blue in the face that there is no elegant alternative to the theory of perfect competition. If not, the proper moral is, ‘‘So much the worse for elegance,’’ rather than ‘‘Economists of the world, unite in proclaiming that the Emperor has almost no clothes, and in pretending that the model of perfect competition does a good enough job in fitting the real world.’’ (Samuelson, 1967, pp. 108–109)

I accept that Dixit–Stiglitz (1977) was an innovative, influential paper that triggered a second revolution in monopolistic competition. I am sympathetic to the argument that the formalization in Dixit and Stiglitz’s exposition was a key explanatory factor in the success of the paper. I am not convinced, however, of the failed-first-revolution claim. I would be interested in learning more about this episode and the rise of the urban legend about the failed-first-revolution.

SCHUMPETER AND MONOPOLISTIC COMPETITION Another set of questions concerns the relationship between Joseph Schumpeter’s vision of capitalism and monopolistic competition. Papers by Stiglitz, Smulders-van de Klundert, and Boone comment on how Dixit–Stiglitz can be adapted to deal with Schumpeterian innovation. In each case, however, I found myself thinking that Schumpeterian was quite far removed from


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Schumpeter. It turns out that the moderns are not the only ones who have sought to incorporate or claim allegiance to Schumpeter’s worldly philosophy. Shortly after Schumpeter’s death, Chamberlin wrote a reply to Schumpeter’s views of monopolistic competition as published under ‘‘recent developments’’ in the History of Economic Analysis. Chamberlin’s last sentence highlighted the areas of agreement between them: In spite of many – and important – differences between his system and my own, the two systems have always seemed to me essentially harmonious in the sense that their differences could easily be resolved, and that a marriage between them would be most fruitful, at least in congenial day-to-day living, and possibly even in the production of economically handsome offspring. (Chamberlin, 1951, p. 138)

I do not see how such a marriage could take place. Schumpeter’s emphasis on dynamics and the entrepreneur as innovator cannot be reconciled with essentially static optimizing. Schumpeter’s entrepreneur was neither rational nor calculating. And while equilibrium was an attracting force, no realworld market economy would ever actually be in equilibrium. Stiglitz claims that ‘‘There are some close affinities between Schumpeterian competition and monopolistic competition. Both are concerned with creating new commodities, the latter from a well-defined opportunity set, and the former by an expansion of the opportunity set’’ (p. 144). In Schumpeter’s view, however, the expansion of the opportunity set was not driven by rational decision-making. The entrepreneur does not weigh marginal benefit against marginal cost nor can observed R&D be expressed as a reduced-form solution. It seems to me that this is a fundamental difference. One cannot shoehorn Schumpeter into an optimizing framework. Boone and Smulders-van de Klundert explicitly use Dixit–Stiglitz style models to generate comparative statics results. ‘‘This is a way in which economists have formalized Schumpeter’s idea that big firms are needed to stimulate R&D and innovation’’ (p. 405). Such formalization destroys Schumpeter’s original vision and, just as Marx and Keynes proclaimed, one can easily imagine Schumpeter saying, ‘‘I am not a Schumpeterian.’’

THE NEW HISTORY OF ECONOMICS? In their introductory essay, the editors explain their decision to include the two earlier versions of Dixit–Stiglitz (1977) by noting that ‘‘These working papers not only develop the basic model in more detail than the published

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version does, but also contain some interesting material that later had to be, independently, re-discovered by others’’ (p. 28). Redding says, ‘‘Indeed, publishing the earlier versions of the Dixit–Stiglitz paper so that they can be widely read is a key contribution of this volume’’ (Redding, 2005, p. 532). Of course it is a great idea to include the two earlier versions, but their inclusion begs the question of why they were so substantially revised. Who and what drove these changes? Why were these papers, which have become ‘‘underground classics,’’ never published? Were the re-discoverers of the ideas in these papers aware of their intellectual debt? Wilfred Ethier reports that he refereed Krugman’s 1979 paper for the Journal of International Economics (JIE) and enthusiastically recommended publication. Years later, he was dismayed to read in Gans and Shephard (1994) that Krugman (1979) had been rejected by the Quarterly Journal of Economics (QJE) and that Jagdish Bhagwati had decided to publish Krugman’s paper in the JIE ‘‘despite two adverse referee reports by very distinguished experts’’ (p. 152). Ethier’s retelling is in the form of an anecdote and Brakman and Heijdra describe it as ‘‘a funny insight into the refereeing process’’ (p. 29), but this reviewer wanted to know more. I suppose, given the demise of the history of economics as a field, this book is an example of the future of the history of economics. I read the book twice (and several papers even more often) and always had this nagging feeling that there was a lot more going on under the surface. I found myself wanting to know more about the real story, but when history is written by experts on the research frontier, this is not going to happen. I was surprised to see Schumpeter’s name tied to a model with no recognition of the extent of the alteration generated by the process of formalization. Clearly, neither depth of analysis nor faithful presentation of original ideas is going to be a hallmark of the new history of economics.

CONCLUSION In 1967, Robert Kuenne edited a volume titled Monopolistic Competition Theory: Studies in Impact, which is identical in structure and organization to Brakman and Heijdra’s book. Famous names paid homage to Chamberlin. The value of these books lies in the quality of the individual papers and they can be profitably read side by side. Brakman and Heijdra should be complimented for organizing and completing this project. It is clear that, like Chamberlin before them, Dixit and Stiglitz have revolutionized the discipline. It is amazing, as you read paper after paper in


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the four fields covered, to see how a single model could be applied in so many different ways. As Ethier concludes, ‘‘In closing, let me say that what most impresses me about Dixit–Stiglitz – and its impact on economics – is that it demonstrates how a truly great tool-paper, even if not claiming to address deep issues, can, if it is in fact great enough, have a much deeper influence on how those issues are addressed than those idea-papers claiming actually to do so’’ (p. 155).

REFERENCES Archibald, G. C. (1961). Chamberlin versus Chicago. Review of Economic Studies, 29(1), 2–28. Chamberlin, E. (1951). The impact of recent monopoly theory on the Schumpeterian system. Review of Economics and Statistics, 33(2), 133–138. Friedman, M. (1953). Essays in positive economics. Chicago: Chicago University Press. Gans, J. S., & Shephard, G. B. (1994). How are the mighty fallen: Rejected classic articles by leading economists. Journal of Economic Perspectives, 8, 165–179. Krugman, P. (1979). Increasing returns, monopolistic competition, and international trade. Journal of International Economics, 9, 469–480. Kuenne, R. (Ed.) (1967). Monopolistic competition theory: Studies in impact. New York: Wiley. Morin, A. (1966). The market for professional writing in economics. American Economic Review, 56(1/2), 401–411. Redding, S. (2005). Review of the monopolistic competition revolution in retrospect. Journal of International Economics, 65(2), 531–537. Samuelson, P. (1967). The monopolistic competition revolution. In: R. Kuenne (Ed.), Monopolistic competition theory: Studies in impact. New York: Wiley. Stigler, G. J. (1949). Five lectures on economic problems. London: Longmans, Green.


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NEW BOOKS RECEIVED Aoki, Masanao. Modeling Aggregate Behavior and Fluctuations in Economics: Stochastic Views of Interacting Agents. New York: Cambridge University Press, 2004. Pp. xv, 263. $34.99, paper. Backhouse, Ju¨rgen G. (ed.). The Elgar Companion to Law and Economics, 2nd ed. Cheltenham: Edward Elgar, 2005. Pp. xiv, 763. $279.00. Belloc, Hilaire. Economics for Helen: A Brief Outline of Real Economy. Norfolk, VA: IHS Press, 2004. Pp. 170. $16.95, paper. Best, Stephen M. The Fugitive’s Properties: Law and the Poetics of Possession. Chicago, IL: University of Chicago Press, 2004. Pp. xii, 362. $25.00, paper. Bicchieri, Cristina. The Grammar of Society: The Nature and Dynamic of Social Norms. New York: Cambridge University Press, 2006. Pp. xvi, 260. $70.00, cloth; $24.99, paper. Camic, Charles; Philip S. Gorski; and David M. Trubek (eds.). Max Weber’s ‘‘Economy and Society’’: A Critical Companion. Stanford: Stanford University Press, 2005. Pp. xii, 403. $29.95, paper. Cochrane, John H. Asset Pricing, revised ed. Princeton: Princeton University Press, 2005. Pp. xvii, 533. $85.00. Crowther-Heyck, Hunter. Herbert A. Simon: The Bounds of Reason in Modern America. Baltimore: Johns Hopkins University Press, 2005. Pp. xi, 420. $49.95. Davis, John; Alain Marciano; and Jochen Runde (eds.). The Elgar Companion to Economics and Philosophy. Cheltenham: Edward Elgar, 2004. Pp. xxvii, 509. $240.00. Davis, Timothy. Ricardo’s Macroeconomics: Money, Trade Cycles and Growth. New York: Cambridge University Press, 2005. Pp. xii, 316. $75.00. Docherty, Peter. Money and Employment: A Study of the Theoretical Implications of Endogenous Money. Cheltenham: Edward Elgar, 2005. Pp. vii, 383. $130.00. Evensky, Jerry. Adam Smith’s Moral Philosophy: A Historical and Contemporary Perspective on Markets, Law, Ethics, and Culture. New York: Cambridge University Press, 2005. Pp. xv, 331. 233

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Federico, Giovanni. Feeding the World: An Economic History of Agriculture, 1800–2000. Princeton: Princeton University Press, 2005. Pp. xiv, 388. $45.00. Ferguson, Niall. Empire: The Rise and Demise of the British World Order and the Lessons for Global Power. New York: Basic Books, 2004. Pp. xxvi, 351. $17.95, paper. Fleischacker, Samuel. On Adam Smith’s Wealth of Nations: A Philosophical Companion. Princeton, NJ: Princeton University Press, 2004. Pp. xvii, 329. $39.50. Florio, Massimo. The Great Divestiture: Evaluating the Welfare Impact of the British Privatizations, 1979–1997. Cambridge, MA: MIT Press, 2004. Pp. xvi, 424. $45.00. Franco, Paul. Michael Oakeshott: An Introduction. New Haven, CT: Yale University Press, 2004. Pp. xii, 209. Grady, Mark F.; and Francesco Parisi (eds.). The Law and Economics of Cybersecurity. New York: Cambridge University Press, 2005. Pp. viii, 310. $75.00. Haslam, Jonathan. The Nixon Administration and the Death of Allende’s Chile. New York: Verso, 2005. Pp. xvi, 255. $23.00. Hont, Istvan. Jealousy of Trade: International Competition and the NationState in Historical Perspective. Cambridge, MA: Harvard University Press, 2005. Pp. xviii, 541. $49.50. Jaëger, Lorenz. Adorno: A Political Biography. New Haven, CT: Yale University Press, 2004. Pp. xi, 235. $32.00. Kalman, Laura. Yale Law School and the Sixties: Revolt and Reverberations. Chapel Hill, NC: University of North Carolina Press, 2005. Pp. xiv, 467. $49.95. Levine, David P.; and S. Abu Turab Rizvi. Poverty, Work, and Freedom: Political Economy and the Moral Order. New York: Cambridge University Press, 2005. Pp. xi, 159. $65.00. Liu, Alan. The Laws of Cool: Knowledge Work and the Culture of Information. Chicago, IL: University of Chicago Press, 2004. Pp. xi, 573. $22.50, paper. Lundahl, Mats. Knut Wicksell on Poverty. London: Routledge, 2005. Pp. xviii, 122. $75.00. Maas, Harro. William Stanley Jevons and the Making of Modern Economics. New York: Cambridge University Press, 2005. Pp. xxii, 350. $75.00. Manning, Alan. Monopsony in Motion: Imperfect Competition in Labor Markets. Princeton, NJ: Princeton University Press, 2003. Pp. xi, 401. $45.00.

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McIntire, C. T. Herbert Butterfield: Historian as Dissenter. New Haven, CT: Yale University Press, 2004. Pp. xxv, 499. $45.00. Mehrling, Perry. Fischer Black and the Revolutionary Idea of Finance. Hoboken: Wiley, 2005. Pp. xv, 374. $22.71. Minsky, Hyman P. Induced Investment and Business Cycles. Cheltenham: Edward Elgar, 2004. Pp. xvi, 272. $125.00. Montes, Leon. Adam Smith in Context: A Critical Reassessment of Some Central Components of His Thought. New York: Palgrave Macmillan, 2004. Pp. 224. $75.00. Neurath, Otto. Economic Writings: Selections, 1904–1945. Berlin: Springer, 2004. Pp. vii, 566. $187.00. Padoa-Schioppa, Tommaso. The Euro and Its Central Bank: Getting United After the Union. Cambridge, MA: MIT Press, 2004. Pp. xix, 260. $40.00. Parisi, Francesco; and Charles K. Rowley (eds.). The Origins of Law and Economics: Essays by the Founding Fathers. Cheltenham: Edward Elgar, 2005. Pp. xii, 531. $165.00. Reisman, David. Democracy and Exchange: Schumpeter, Galbraith, T. H. Marshall, Titmuss and Adam Smith. Northampton, MA: Edward Elgar, 2005. Pp. vii, 356. $75.00. Roncaglia, Allessandro. The Wealth of Ideas: A History of Economic Thought. New York: Cambridge University Press, 2005. Pp. xiv, 582. $110.00. Ross, Don. Economic Theory and Cognitive Science: Microexplanations. Cambridge, MA: MIT Press, 2005. Pp. x, 444. $45.00. Schmid, A. Allan. Conflict and Cooperation: Institutional and Behavioral Economics. Oxford: Blackwell Publishing, 2004. Pp. xviii, 342. $39.95, paper. Screpanti, Ernesto; and Stefano Zamagni. An Outline of the History of Economic Thought, 2nd ed. New York: Oxford University Press, 2005. Pp. xviii, 559. $45.00, paper. Segura, Julio; and Carlos Rodrı´ guez Braun (eds.). An Eponymous Dictionary of Economics: A Guide to Laws and Theorems Named after Economists. Cheltenham: Edward Elgar, 2004. Pp. xxviii, 280. $150.00. Siebert, Horst. The German Economy: Beyond the Social Market. Princeton: Princeton University Press, 2005. Pp. ix, 403. $60.00. Smelser, Neil J.; and Richard Swedberg (eds.). The Handbook of Economic Sociology, 2nd ed. Princeton: Princeton University Press, 2005. Pp. xi, 736. $49.95, paper. Smith, B. Mark. A History of the Global Stock Market from Ancient Rome to Silicon Valley. Chicago, IL: University of Chicago Press, 2003. Pp. 344. $20.00, paper.

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Steinmetz, George (ed.). The Politics of Method in the Human Sciences: Positivism and Its Epistemological Others. Durham: Duke University Press, 2005. Pp. 620. $29.95, paper. Szenberg, Michael; and Lall Ramhatan (eds.). Reflections of Eminent Economists. Cheltenham: Edward Elgar, 2004. Pp. 480. $125.00 Taylor, Stephen J. Asset Price Dynamics, Volatility, and Prediction. Princeton, NJ: Princeton University Press, 2005. Pp. xv, 525. Toniolo, Gianni; with the assistance of Piet Clement. Central Bank Cooperation at the Bank for International Setrtlements, 1930–1973. Pp. xxii, 729. $125.00. Toporowski, Jan. Theories of Financial Disturbance: An Examination of Critical Theories of Finance from Adam Smith to the Present Day. Cheltenham: Edward Elgar, 2005. Pp. viii, 195. $90.00. Touchie, John C. W. Hayek and Human Rights: Foundations for a Minimalist Approach to Law. Cheltenham: Edward Elgar, 2005. Pp. xi, 267. $100.00. Unger, Roberto M. False Necessity: Anti-necessitarian Social Theory in the Service of Radical Democracy. Vol. 1. New York: Verso, 2004. Pp. cxxviii, 661. $19.00, paper. Unger, Roberto M. Social Theory: Its Situation and Its Task. Vol. 2. New York: Verso, 2004. Pp. vii, 256. $17.00, paper. Unger, Roberto M. Plasticity into Power: Comparative-Historical Studies on the Institutional Conditions of Economic and Military Success. Vol. 3. New York: Verso, 2004. Pp. vi, 231. $17.00, paper. Vane, Howard R.; and Chris Mulhearn (eds.). The Nobel Memorial Laureates in Economics: An Introduction to Their Careers and Main Published Works. Cheltenham: Edward Elgar, 2005. Pp. xii, 362. $125.00. Ventelou, Bruno Millennial Keynes: An Introduction to the Origin, Development, and Later Currents of Keynesian Thought. Armonk, NY: M. E. Sharpe, 2004. Pp. 216. $68.95. Waterman, Anthony. Political Economy and Christian Theology since the Enlightenment: Essays in Intellectual History. Studies in Modern History. New York: Palgrave Macmillan, 2005. Pp. 336. $90.00. Werner, Cynthis; and Duran Bell (eds.). Values and Valuables: From the Sacred to the Symbolic. Lanham, MD: Roman & Littlefield, 2004. Pp. xxv, 326, $72.00, cloth; $24.95, paper. White, Harrison C. Markets from Networks: Socioeconomic Models of Production. Princeton: Princeton University Press, 2002. Pp. xvii, 389. $24.95, paper.

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Wood, John H. A History of Central Banking in Great Britain and the United States. New York: Cambridge University Press, 2005. Pp. xiv, 439. $90.00. Wooten, James A. The Employment Retirement Income Security Act of 1974: A Political History. Berkeley, CA: University of California Press, 2004. Pp. xv, 415. $65.00. Yu, Tony Fu-Lai. Firms, Strategies and Economic Change: Explorations in Austrian Economics. Cheltenham: Edward Elgar, 2005. Pp. xii, 177. $85.00.


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Research in the History of Economic Thought and Methodology, Volume 24 A: A Research Manual

Research in the History of Economic Thought and Methodology

Research in the History of Economic Thought and Methodology