History of Economic Analysis

Joseph A. Schumpeter

• Publisher: Routledge
• Year: 2006
• ISBN:
  9781134838707
• Edition: 1
• Topic: Business
• Subtopic: Business generale
• Index: Business

At the time of his death in 1950, Joseph Schumpeter was working on his monumental History of Economic Analysis. Unprecedented in scope, the book was to provide a complete history of economic theory from Ancient Greece to the end of the second world war. A major contribution to the history of ideas as well as to economics, History of Economic Analysis rapidly gained a reputation as a unique and classic work.
As well being an economist, Schumpeter was a gifted mathematician, historian, philosopher and psychologist and this is reflected in the multi-disciplinary nature of his great endeavour. Topics addressed include the techniques of economic analysis, contemporaneous developments in other sciences and the sociology of economics. This inclusiveness extends to the periods and individuals who figure in the book. As well as dealing with all of the major economists from Adam Smith to Maynard Keynes, the book considers the economic writings of Plato and Aristotle, of the Medieval Scholastics and of the major European economists. Throughout, Schumpeter perceived economics as a human science and this is reflected in a volume which is lucid and insightful throughout.

PART I

INTRODUCTION

SCOPE AND METHOD

CHAPTER 1

[Introduction and Plan]

1. PLAN OF THE BOOK
2. WHY DO WE STUDY THE HISTORY OF ECONOMICS?
3. BUT IS ECONOMICS A SCIENCE?

1. PLAN OF THE BOOK

BY HISTORY of Economic Analysis I mean the history of the intellectual efforts that men have made in order to understand economic phenomena or, which comes to the same thing, the history of the analytic or scientific aspects of economic thought. Part II of this book will describe the history of those efforts from the earliest discernible beginnings up to and including the last two or three decades of the eighteenth century. Part III will go on through the period that may be described, though only very roughly, as the period of the English ‘classics’—to about the early 1870’s. Part IV will present an account of the fortunes of analytic or scientific economics from (speaking again very roughly) the end of the ‘classic’ period to the First World War, though the history of some topics will, for the sake of convenience, be carried to the present time. These three Parts constitute the bulk of the book and embody the bulk of the research that went into it. Part V is merely a sketch of modern developments, relieved of some of its cargo by the anticipations in Part IV that have been just mentioned, and aims at nothing more ambitious than helping the reader to understand how modern work links up with the work of the past.

In facing the huge task that has been attempted rather than performed in this book we become aware immediately of an ominous fact. Whatever the problems that, to snare the unwary, lurk below the surface of the history of any science, its historian is in other cases at least sure enough of his subject to be able to start right away. This is not so in our case. Here, the very ideas of economic analysis, of intellectual effort, of science, are ‘quenched in smoke,’ and the very rules or principles that are to guide the historian's pen are open to doubt and, what is worse, to misunderstanding. Therefore, Parts II to V will be prefaced by a Part I that is to explain as fully as space permits my views on the nature of my subject and some of the conceptual arrangements I propose to use. It has further seemed to me that a number of topics should be included that pertain to the Sociology of Science—to the theory of science considered as a social phenomenon. But observe: these things stand here in order to convey some information about the principles I am going to adopt or about the atmosphere of this book. Though reasons will be given for my adopting them, they cannot be fully established here. They are merely to facilitate the understanding of what I have tried to do and to enable the reader to lay the book aside if this atmosphere be not to his taste.

2. WHY DO WE STUDY THE HISTORY OF ECONOMICS?

Well, why do we study the history of any science? Current work, so one would think, will preserve whatever is still useful of the work of preceding generations. Concepts, methods, and results that are not so preserved are presumably not worth bothering about. Why then should we go back to old authors and rehearse outmoded views? Cannot the old stuff be safely left to the care of a few specialists who love it for its own sake?

There is much to be said for this attitude. It is certainly better to scrap outworn modes of thought than to stick to them indefinitely. Nevertheless, we stand to profit from visits to the lumber room provided we do not stay there too long. The gains with which we may hope to emerge from it can be displayed under three heads: pedagogical advantages, new ideas, and insights into the ways of the human mind. We shall take these up in turn, at first without special reference to economics and then add, under a fourth head, some reasons for believing that in economics the case for a study of the history of analytic work is still stronger than it is for other fields.

First, then, teachers or students who attempt to act upon the theory that the most recent treatise is all they need will soon discover that they are making things unnecessarily difficult for themselves. Unless that recent treatise itself presents a minimum of historical aspects, no amount of correctness, originality, rigor, or elegance will prevent a sense of lacking direction and meaning from spreading among the students or at least the majority of students. This is because, whatever the field, the problems and methods that are in use at any given time embody the achievements and carry the scars of work that has been done in the past under entirely different conditions. The significance and validity of both problems and methods cannot be fully grasped without a knowledge of the previous problems and methods to which they are the (tentative) response. Scientific analysis is not simply a logically consistent process that starts with some primitive notions and then adds to the stock in a straight-line fashion. It is not simply progressive discovery of an objective reality—as is, for example, discovery in the basin of the Congo. Rather it is an incessant struggle with creations of our own and our predecessors’ minds and it ‘progresses,’ if at all, in a criss-cross fashion, not as logic, but as the impact of new ideas or observations or needs, and also as the bents and temperaments of new men, dictate. Therefore, any treatise that attempts to render ‘the present state of science’ really renders methods, problems, and results that are historically conditioned and are meaningful only with reference to the historical background from which they spring. To put the same thing somewhat differently: the state of any science at any given time implies its past history and cannot be satisfactorily conveyed without making this implicit history explicit. Let me add at once that this pedagogical aspect will be kept in mind throughout the book and that it will guide the choice of material for discussion, sometimes at the expense of other important criteria.

Second, our minds are apt to derive new inspiration from the study of the history of science. Some do so more than others, but there are probably few that do not derive from it any benefit at all. A man's mind must be indeed sluggish if, standing back from the work of his time and beholding the wide mountain ranges of past thought, he does not experience a widening of his own horizon. The productivity of this experience may be illustrated by the fact that the fundamental ideas that eventually developed into the theory of (special) relativity occurred first in a book on the history of mechanics.¹ But, besides inspiration every one of us may glean lessons from the history of his science that are useful, even though sometimes discouraging. We learn about both the futility and the fertility of controversies; about detours, wasted efforts, and blind alleys; about spells of arrested growth, about our dependence on chance, about how not to do things, about leeways to make up for. We learn to understand why we are as far as we actually are and also why we are not further. And we learn what succeeds and how and why—a question to which attention will be paid throughout this book.

Third, the highest claim that can be made for the history of any science or of science in general is that it teaches us much about the ways of the human mind. To be sure, the material it presents bears only upon a particular kind of intellectual activity. But within this field its evidence is almost ideally complete. It displays logic in the concrete, logic in action, logic wedded to vision and to purpose. Any field of human action displays the human mind at work but in no other field do we get so near the actual methods of working because in no other field do people take so much trouble to report on their mental processes. Different men have behaved differently in this respect. Some, like Huyghens, were frank; others, like Newton, were reticent. But even the most reticent of scientists are bound to reveal their mental processes because scientific—unlike political—performance is self-revelatory by nature. It is for this reason mainly that it has been recognized many times—from Whewell and J. S. Mill to Wundt and Dewey—that the general science of science (the German Wissenschaftslehre) is not only applied logic but also a laboratory for pure logic itself. That is to say, scientific habits or rules of procedure are not merely to be judged by logical standards that exist independently of them; they contribute something to, and react back upon, these logical standards themselves. To convey the point by the useful device of exaggeration: a sort of pragmatic or descriptive logic may be abstracted from observation and formulation of scientific procedures—which of course involve, or merge into, the study of the history of sciences.

Fourth, it stands to reason that the preceding arguments, at least the ones that have been presented under the first two headings, apply with added force to the special case of economics. We shall attend presently to the implications of the obvious fact that the subject matter of economics is itself a unique historical process (see sec. 3 below) so that, to a large extent, the economics of different epochs deal with different sets of facts and problems. This fact alone would suffice to lend increased interest to doctrinal history. But let us discard it for the moment in order to avoid repetition and to emphasize another fact. As we shall see, scientific economics does not lack historical continuity. It is in fact our main purpose to describe what may be called the process of the Filiation of Scientific Ideas—the process by which men's efforts to understand economic phenomena produce, improve, and pull down analytic structures in an unending sequence. And it is one of the main theses to be established in this book that fundamentally this process does not differ from the analogous processes in other fields of knowledge. But, for reasons that it is also one of our purposes to make clear, this filiation of ideas has met with more inhibitions in our field than it has in almost all others. Few people, and least of all we economists ourselves, are prone to offer us congratulations on our intellectual achievements. Moreover our performance is, and always was, not only modest but also disorganized. Methods of fact-finding and analysis that are and were considered substandard or wrong on principle by some of us do prevail and have prevailed widely with others. Although it is possible nevertheless—as I shall try to show—to speak for every epoch of established professional opinion on scientific topics and although this opinion has often stood the test of being proof against strong differences in political views, we cannot speak with as much confidence about it as can physicists or mathematicians. In consequence we cannot, or at least we do not, trust one another to sum up ‘the state of the science’ in an equally satisfactory manner. And the obvious remedy for the shortcomings of summarizing works is the study of doctrinal history: much more than in, say, physics is it true in economics that modern problems, methods, and results cannot be fully understood without some knowledge of how economists have come to reason as they do. In addition, much more than in physics have results been lost on the way or remained in abeyance for centuries. We shall meet with instances that are little short of appalling. Stimulating suggestions and useful if disconcerting lessons are much more likely to come to the economist who studies the history of his science than to the physicist who can, in general, rely on the fact that almost nothing worth while has been lost of the work of his predecessors. Why, then, not start in at once upon another story of intellectual conquest?

3. BUT IS ECONOMICS A SCIENCE?

The answer to the question that heads this section depends of course on what we mean by ‘science.’ Thus, in everyday parlance as well as in the lingo of academic life—particularly in French and English-speaking countries—the term is often used to denote mathematical physics. Evidently, this excludes all social sciences and also economics. Nor is economics as a whole a science if we make the use of methods similar to those of mathematical physics the defining characteristic (definiens) of science. In this case only a small part of economics is ‘scientific.’ Again, if we define science according to the slogan ‘Science is Measurement,’ then economics is scientific in some of its parts and not in others. There should be no susceptibilities concerning ‘rank’ or ‘dignity’ about this: to call a field a science should not spell either a compliment or the reverse.

For our purpose, a very wide definition suggests itself, to wit: a science is any kind of knowledge that has been the object of conscious efforts to improve it.¹ Such efforts produce habits of mind—methods or ‘techniques’—and a command of facts unearthed by these techniques which are beyond the range of the mental habits and the factual knowledge of everyday life. Hence we may also adopt the practically equivalent definition: a science is any field of knowledge that has developed specialized techniques of fact-finding and of interpretation or inference (analysis). Finally, if we wish to emphasize sociological aspects, we may formulate still another definition, which is also practically equivalent to the other two: a science is any field of knowledge in which there are people, so-called research workers or scientists or scholars., who engage in the task of improving upon the existing stock of facts and methods and who, in the process of doing so, acquire a command of both that differentiates them from the ‘layman’ and eventually also from the mere ‘practitioner.’ Many other definitions would be just as good. Here are two which I add without further explanations: (1) science is refined common sense; (2) science is tooled knowledge.

Since economics uses techniques that are not in use among the general public, and since there are economists to cultivate them, economics is obviously a science within our meaning of the term. It seems to follow that to write the history of those techniques is a perfectly straightforward task about which there should be no doubts or qualms. Unfortunately this is not so. We are not yet out of the wood; in fact, we are not yet in it. A number of obstacles will have to be removed before we can feel sure of our ground—the most serious one carrying the label Ideology. This will be done in the subsequent chapters of this Part. Just now, a few comments will be presented on our definition of science.

First of all we must meet what the reader presumably considers a fatal objection. Science being tooled knowledge, that is, being defined by the criterion of using special techniques, it seems as though we should have to include, for instance, the magic practiced...