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labor. The English political economy, in Raymond's view, was a study of private as opposed to political or national economy. Raymond emphasized the distinction between individual and social wealth, and maintained that the laws of wealth laid down by Adam Smith were untrue of a nation conceived as a unit. The interests of particular individuals, or particular classes, he argued, do not always coincide with the interests of the nation as a whole, and the latter, he concluded, will be best advanced by developing all the national powers to their widest possible extent. He was thus a warm advocate of protection as opposed to laissez-faire.

Raymond's views had so impressed Matthew Carey that he offered to support a chair of political economy at the University of Maryland if the University would permit Raymond to fill it. Matthew Carey's son, Henry C. Carey (1793-1879), by far the most influential of the early American economists, was in like manner probably influenced by the teachings of Raymond. Carey was not only an earnest champion of protection, but an indefatigable critic of classical economic doctrines. He denied the truth of the Malthusian principle and the law of diminishing returns; objected to the Ricardian theory of rent; and maintained that the value of a commodity depends upon the cost of reproduction rather than the cost of production, as was laid down in the classical theory of value. Carey entertained a concept of wealth very similar to that of Raymond, and in some parts of his work adopted methods of investigation which brought him in close touch with the sociologists and the German historical economists. The keystone of his economic system is the doctrine of association. The increasing mastery of man over nature, or the increase of wealth, Carey held to be dependent upon the increasing efficiency resulting from a compact, homogeneous population, in which agriculture and manufacture are conducted side by side, in which the home market idea is carried out in the most complete way, and in which, to be brief, the association of industrial and social units is most intense and intimate. It can be readily understood why the economic philosophy of Carey was so inimical to free trade at every point.

The Austrian School.

The protests against the classical econo

mists which we have been considering were directed largely against the narrow scope and deductive methods of the classical school. The Austrian economists represent a reaction not against their methods, but against the conclusions, and particularly against the theory of value of the classical school. The great contribution of the Austrian school is the marginal utility theory of value which has been most assiduously applied in economic analysis by a group of Austrian economists, among whom may be mentioned Professor Menger, Wieser, Sax, and Böhm-Bawerk. But the marginal utility theory of value was advanced almost simultaneously, about 1871, by the English economist Jevons, the Austrian economist Menger, and the Swiss economist Walras.1

The Austrians have been a leading force in producing what is not inaptly termed a renaissance in theory, although, as stated, they indorsed the deductive and abstract methods of the classical economists. The classical theory put the emphasis upon supply or the conditions of supply, maintained that cost of production determines value, and found the ultimate measure and explanation of value in the pain and sacrifice of labor. The Austrians maintain that utility, the pleasure or satisfaction derived from consumption, is the ultimate cause and measure of value; they emphasize demand as the English economists emphasized supply; and hold that value determines cost of production and not the cost of production, value. Capital, they conclude, receives its value from the finished product instead of giving value to that product. The work of this school has tended to put the consumer in the place primarily occupied by the capitalist as the center of discussion in economic theory.

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Present Condition of Economic Thought. The net effect of all these protests against the classical English economists has been to introduce a welcome catholicity into the methods of economic investigation. The historical school emphasized the evolutionary standpoint and the necessity of minute investigation of the facts of industrial life, while the work of the Austrians operated to

1 In reality the marginal utility theory had been explained many years before this by a number of obscure writers whose ideas, however, never affected the main current of economic thought.

strengthen and explain the necessary place of deduction in economic analysis. To-day the ordinary economist employs either method, or both, as the subject-matter demands, and the controversy about methods has become a thing of the past. With respect to the theory of value, neither supply nor demand, neither cost nor utility, neither the capitalist nor the consumer, is now said to exert a predominating influence in the determination of values. The Austrian school, it is now understood, supplied a needed corrective without revolutionizing the earlier theory of value. The Austrians themselves are seen to have been guilty of laying exaggerated emphasis upon the consumer's influence upon value and price.1

So, similarly, with respect to the scope of economics. The attempt of the classical economists to isolate an "economic man" ruled entirely by an enlightened self-interest and unaffected by political, ethical, and humanitarian impulses, is recognized to have been a mistake. But economics has never given itself to a complete study of politics or ethics. It considers ethical and political phenomena when these cannot be dissociated from economic phenomena, but insists, nevertheless, upon the separation of economics from ethics, politics, and sociology. We recognize that these fields are not wholly or clearly differentiated, but we recognize just as clearly that a division of labor is necessary if accurate results are to be achieved. Furthermore, this division of labor is showing itself progressively within the limits of economics itself, as it has shown itself in all growing sciences. Indeed, the present condition of economic thought was so accurately predicted by Professor Jevons in 1876, that his words — written in the midst of the controversy among the adherents of the deductive, historical, mathematical, and sociological methods of investigation - may well be employed to picture the condition of the science of economics as it exists to-day:

"As I have previously explained, the present chaotic state of economics arises from the confusing together of several branches of knowledge. Subdivision is the remedy. We must distinguish the empirical element from the abstract theory, from the applied

' And there is reason to believe that their analysis was based in some degree upon a faulty psychology.

theory, and from the more detailed art of finance and administration. Thus will arise various sciences, such as commercial statistics, the mathematical theory of economics, systematic and descriptive economics, economic sociology, and fiscal science. There may even be a kind of cross subdivision of the sciences; that is to say, there will be division into branches as regards the subject, and division according to the manner of treating the branch of the subject. The manner may be theoretical, empirical, historical, or practical; the subject may be capital and labor, currency, banking, taxation, land tenure, etc., not to speak of the more fundamental division of the science as it treats of consumption, production, exchange, and distribution of wealth. In fact, the whole subject is so extensive, intricate, and diverse, that it is absurd to suppose it can be treated in any single book, or in any single manner.”

1

QUESTIONS

1. What were the economic doctrines of the canonists?
2. How did the physiocrats differ from the mercantilists?
3. What is Adam Smith's relation to the physiocrats?
4. Characterize the "classical" school.

5. How did Ricardo use the Malthusian proposition?

6. In what respect is Mill's thought a turning point in economic theory? 7. How is the socialist thought related to the theories of the classical writers?

8. In what did the protest of the historical school against the classical school consist?

9. Characterize the economic thought of Bastiat?

10. What are the characteristics of the Austrian school?

REFERENCES

ASHLEY, W. J. Introduction to English Economic History and Theory.
CANNAN, E. History of Theories of Production and Distribution.

INGRAM, J. K. History of Political Economy.

PALGRAVE, R. H. I. Dictionary of Political Economy (articles on various economists).

PRICE, L. L. History of Political Economy in England.

1 Jevons, Theory of Political Economy, 3d ed., pp. xv-xvi.

APPENDIX A

STATISTICS OF PUBLIC EXPENDITURES

It will be observed that the payments in Table II are larger than in Table I. This is because, as regards Table I, subtractions have been made of certain items as follows:

(1) Payments on account of the public debt;

(2) premiums on bonds purchased and exchanged;

(3) internal revenue and customs rebates and other funds;

(4) interest on bonds of Pacific railroads ;

(5) District of Columbia expenditures (agency account);

(6) Soldiers' Home permanent fund (transfer).

The exclusion of these payments removes from the aggregate the greater portion of those which under the census classification are designated temporary and transfer.

Table III, giving the expenditures of the principal divisions of the United States, helps us to understand the activities of the various main parts of the United States as revealed in public expenditures; and it also helps us to understand the character and degree of evolution in the various parts of the country, and the height to which civilization has ascended in these parts, although here, again, the student must be cautioned that in public expenditures we have only one of many indications of the nature and growth of civilization, yet one of the most important.

North Atlantic division includes: New England and Southern North Atlantic States.

New England includes: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut.

Southern North Atlantic includes: New York, New Jersey, Pennsylvania. Northern South Atlantic includes: Delaware, Maryland, District of Columbia, Virginia, West Virginia.

Southern South Atlantic includes: North Carolina, South Carolina, Georgia, Florida.

Eastern North Central includes: Ohio, Indiana, Illinois, Michigan, Wisconsin. Western North Central includes: Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Kansas.

Eastern South Central includes: Kentucky, Tennessee, Alabama, Mississippi. Western South Central includes: Louisiana, Arkansas, Indian Territory, Oklahoma, Texas.

Rocky Mountain includes: Montana, Idaho, Wyoming, Colorado, New Mexico.

Basin and Plateau includes: Arizona, Utah, Nevada.
Pacific includes: Washington, Oregon, California.

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