Evolutionary Economics: v. 1

Marc R. Tool

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781315493077
• Edition: 1
• Topic: Biological Sciences
• Subtopic: Environmental Conservation & Protection
• Index: Biological Sciences

The contributors to this volume focus on the political and value issues that, in their shared view, underlie the global environmental crisis facing us today. They argue that only by transforming our dominant values, social institutions and way of living can we avoid ecological disaster.

Part I

The Beginnings of Institutionalism

Anne Mayhew

The first institutionalists—Thorstein Veblen and John R. Commons—came to maturity in the decades following the Civil War, and both began to publish in the 1890s.¹ Veblen was born in Wisconsin in 1857 and Commons in Indiana in 1862. The Midwestern origins of both of these men have often been noted, as has Veblen’s “frontier origin.” It seems more important that they grew up in a rapidly changing—because rapidly industrializing—nation. The world they entered in maturity was not the world of their fathers; and this was markedly true of almost all Americans of the period, whether they lived in the Midwest or not.

Perhaps the most obvious manifestation and explanation of the changes was the decline in the relative importance of agriculture in American economy and society. In 1860 and in 1870, fifty-three percent of the labor force was engaged in agriculture. In 1880, the proportion was still 52 percent, but during the decade of the 1880s the percentage plunged to 43 percent and crept still further down in the 1890s.² During the 1880s the labor force increased by 34 percent, or by almost 6 million people, so that the increase in nonagricultural employment was dramatic indeed, as was the increase in nonagricultural output. Between 1839 and 1859, agriculture had contributed approximately 26 percent of national income, and manufacturing and mining 14 percent; but between 1880 and 1899, agriculture’s share fell to 15 percent, while manufacturing and mining contributed 25 percent of a much larger national income.³ Over the period 1870–1913, GNP grew at 4.3 percent and per capita GNP at 2.2 percent.⁴ The growth in the labor force, the growth in output, and the relative decline in the contribution of agriculture were accompanied by substantial changes in the nature of both output and nonagricultural employment. The 1.6 percent annual increase in labor productivity between 1889 and 1919 is testament to improving technology and increased energy use. Table 1 shows another measure of the changing composition of the workforce. The increase in the relative number of engineers is but one example of many that could be given to illustrate the increasingly industrial nature of the U.S. economy.

Table 1. A Measure of the Changing Composition of the Work Force.

(1)	(2)	(3)	(4)
	Labor Force (1860=100)	Engineers (1860=100)	Column Three As Percent of Column Two
1880	157	245	156
1890	210	522	249
1900	262	803	306
1910	337	1,432	425

SOURCE: Stanley Lebergott, The Americans: An Economic Record (New York: W. W. Norton, 1984), Table 27.3 (p. 39). Column 4 computed.

The changes in social and economic organization were as dramatic as the changes in the amount and composition of output, and they were certainly more traumatic. In 1870 and in 1880, just over a quarter of the population lived in “urban places” and these had as few as 2500 people. By 1900, 40 percent of the population lived in such places, and by 1920 more than half the population was “urban” by this definition. In 1870, about half the “urban population” lived in cities of 50,000 or more: that is, only about one in thirteen Americans lived in a city with more than 50,000 people. By 1900, well over half the “urban” population, or more than one out of every five people, lived in places with populations over 50,000.

The end of the nineteenth century and the beginning of the twentieth was the period of the rise of “big business” and of the great “robber barons.” It marked the end of the era when most manufacturing was carried out by single product, single plant firms that were owned and managed by the same individual or small group of individuals. The corporate form of legal organization was adapted to the economic reality of the newly emerging multi-product, multi-plant, bureaucratically managed firm. The “robber barons” were the most visible feature, but they were not the driving cause of the changes in business organization that included the growth of new forms of banking, the greater importance of external finance for the firm, expanded markets, and new forms of competition between firms with very substantial overhead costs.⁵

The rise of big business was by no means cheered by most of those who discussed it. The founders of institutionalism shared at least part of the general concern. Both Commons and Veblen were, from their early days, acutely aware of the economic changes and economic problems that were so much a part of the America in which they grew up. In his autobiography, Commons observed, perhaps partly in bitter jest, that his father’s failure as a businessman could be given “a historical justification. He could not fit himself to the Money and Credit economy.”⁶

Commons and Veblen grew up in the midst of massive economic change to a thoroughly commercialized “money and credit economy” and their early interests reflect this. Commons came to his study of economics by way of a passion for the ideas of Henry George, an interest in Richard Ely’s “socialism,” an active social conscience, and an interest in distribution.⁷ He was, from the beginning, interested in organizing change through labor unions.⁸ Veblen was less directly forthcoming about his early interests in economics, but his first wife asserted that their reading of Edward Bellamy’s Looking Backward represented a “turning point in their lives.”⁹ As much as Henry George’s single tax movement or Richard Ely’s “socialism,” Edward Bellamy’s Utopian scheme for a reordered world was a reaction to the traumatic changes that accompanied the rapid and often disruptive economic growth after the Civil War.

The New Ideas

In writing about the social and economic consequences of the industrialization of the United States, neither Veblen nor Commons relied heavily upon earlier traditions of economic thought, nor upon earlier justifications for economic reform. Instead, both relied upon the new social science that was just emerging as they were attempting to understand the socioeconomic changes taking place in the world.

Four ideas have been critical to the development and separation of institutionalist theory from neoclassical economic theory: evolution, culture, cultural relativity, and instrumental valuing. All four were thrown up from the ferment that created modern social science. In the years following the Civil War, virtually all American social thought was in one way or another affected by the ideas of Charles Darwin or Herbert Spencer, or at least by ideas attributed to them.¹⁰ Ideas of natural selection and evolution found their way into households and university discussions of economic affairs as ways of explaining the experiences that came with the late nineteenth century. It is probably significant that William Graham Sumner, who found Spencer’s ideas about the economic survival of the fittest attractive, was the son of an immigrant who had become unemployed as a result of the Industrial Revolution in Britain. It is probably also significant that Lester Frank Ward, who stressed man’s ability to alter the course of evolution, was a poor boy who had acquired an education while working as a government clerk and attending night school.¹¹ Social Darwinism was a powerful justification for the rapid enrichment of some, as well as for the lack of security for many that was characteristic of the urbanizing, industrializing, market-dominated U.S. economy of the last decades of the nineteenth century.

The ideas of society and culture as evolving systems emerged from a combination of evolutionary thought and the greatly increasing knowledge of human variation over time and place that became available during the nineteenth century. In the United States, Lewis Henry Morgan had begun to record the evidence of social variation to be found among “living primitives.” He not only recorded the kinship system of the Iroquois, he also classified and thereby “explained” it. He “divided all history into three main stages—Savagery, Barbarism, and Civilization—and correlated each with economic and intellectual achievements.”¹² According to Robert H. Lowie,

the idea of progressive development from savagery to civilization was much older than Darwin or even Lamarck. However, when evolution became not merely an approved biological principle but a magical catchword for the solution of all problems, it naturally assimilated the earlier speculations about cultural change as obviously congruous with its own philosophy. Similarly, the discoveries of prehistory neatly fitted into the evolutionary picture. Both biological theory and archaeological research powerfully stimulated the study of culture.¹³

Out of this study of culture came the ideas that served as the basis for anthropology.

Some parts of Morgan’s scheme look strange and wrong to the modern reader. Any anthropologist can find serious fault with some of his propositions about kinship patterns and their correlation with other social patterns and with technology. What is important, however, is not how dated Morgan’s ideas seem now, but how modern they seem when compared with what had gone before. Morgan grasped that the ways in which people saw, described, and related to their kin were both culturally specific and changed over time. He was not alone in beginning to understand culture in the modern anthropological sense. In 1871, Sir Edward Burnett Tylor defined culture as “that complex whole which includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society.”¹⁴ The recognition that morals—as well as law, custom, and art—were learned as part of a particular culture was one of the set of ideas that became the core of modern anthropology, but its impact on other disciplines was also profound.

The new anthropological concept of culture had important and widespread effect because it carried the implication that the process of cultural evolution might not be over, that it might indeed be a process that never was over. Walter Goldschmidt’s claim for anthropology does not seem exaggerated:

Anthropology has had a great impact on the moral philosophy of our time, an impact out of all proportion to the numerical and fiscal strength of the discipline. It has moved us away from biological thinking and toward an appreciation of the force of culture; it has made us aware of our own customs and beliefs as one of the many and apparently arbitrary modes of thought. In doing this it has promoted a cultural relativism, and this in turn has placed anthropology itself in the mainstream of an old scientific tradition. For as astronomy moved the earth away from the center of the universe and biology moved man out of his unique position in the living world, so, too, anthropology has removed Western man from the pinnacle and quintessence of human perfectibility and placed him with the Australian aborigine and the Hottentot as one of so many diverse cultural beings.¹⁵

The discovery of “cultures” necessarily entailed the discovery of our own culture, and that gave new perspective: once the ideas of culture and of evolution were accepted, the idea of cultural relativity followed.

Anthropology and sociology were disciplines defined by these ideas. Economics’ longer heritage made acceptance of the new ideas difficult. As Veblen explained, economics was trapped in a tradition of natural law.¹⁶ Neither the ideas of culture nor the ideas of cultural relativity could permeate a body of thought that was rooted in a hedonistic conception of human beings buffeted by natural laws that worked toward a predetermined social order. This impermeability was as characteristic of Marxist economics as of neoclassical economics, and it meant that economics continued to develop according to a different logic and quite apart from the other social sciences.

Veblen and the Idea of Culture

What made Veblen different—what made his economics unique and what leads Russett to call him “the complete Darwinian”—was that he was the first to approach the study of modern economics in the same anthropological spirit that Morgan pioneered in his investigations of the Iroquois.¹⁷ Darwinism to Veblen meant more than a process of natural selection in which teeming masses of people were likened to teeming masses of other animals. It meant more than that one could divide mankind’s past into stages, as the German historical economists had done. It meant that the culture of people living in Iowa in 1890 had evolved, and that, just as there was no natural way to count cousins or to trace descent, so there was no natural way to determine how the corn should be divided. Veblen was the first economic anthropologist, and what makes it so remarkable is that he did not study exotic peoples—it is always easier to see customs when they look foreign and therefore funny—but rather examined his own culture.¹⁸

Veblen understood that the variation in human society meant more than that societies change; he understood that human society was n...