Joseph A. Schumpeter
History of Economic Analysis
Oxford University Press, [1954] 1968
(7th printing), 3-11.
CHAPTER 1
Introduction and Plan
1.
Plan of the book 3
2.
Why do we study the history of economics? 4
3.
But is economics a science? 6
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.
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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: that 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
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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.
1 Ernst Mach, Die Mechanik
in ihrer Entwicklung: historisch-kritisch dargestelit (1st
ed., 1883; see Appendix, by J. Petzoldt, to the 8th
ed.); English trans. by T. J. McCormack, containing additions and alterations
up to the 9th (the final) ed., 1942.
5
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’
6
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: (i)
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 in
a primitive tribe if it uses techniques that are not generally accessible and
are being developed and handed on within a circle of professional magicians. And of course we ought to include it on
principle. This is so because magic, and
practices that in the relevant aspect do not differ fundamentally from magic,
sometimes shade off into what modern man recognizes as scientific procedure by
imperceptible steps: astrology was astronomy’s mate until the beginning of the
seventeenth century.
1 We shall reserve the term Exact Science for the
second of the meanings of the word Science enumerated above, i.e. for sciences
that use methods more or less similar in logical structure to those of
mathematical physics. The term Pure
Science will be used in contrast to Applied Science (the French used the same
term, for instance, mécanique or économie pure, but also the term mécanique or économie
rationnelle; the Italian equivalent is meccanica or economia
pure, the German reine Mechanik or Ökonomie).
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There is however another and still more compelling
reason. The exclusion of any kind of
tooled knowledge would amount to declaring our own standards to be absolutely
valid for all times and places. But this
we cannot do. [2] In practice we have indeed no choice but
to interpret and to appraise every piece of tooled knowledge, past as well as
present, in the light of our standards, since we have no others. They are the results of a development of more
than six centuries, [3] during which the realm of scientifically admissible
procedures or techniques has been more and more restricted in the sense that
more and more procedures or techniques have been ruled out as inadmissible. We mean this critically restricted realm only
when we speak of ‘modern’ or ‘empirical’ or ‘positive’ [4] science. Its rules of procedure differ in different
departments of science and, as we have already seen above, are never beyond
doubt. Broadly, however, they may be
described by two salient characteristics: they reduce the facts we are invited
to accept on scientific grounds to the narrower category of ‘facts
verifiable by observation or experiment’; and they reduce the range of
admissible methods to ‘logical inference from verifiable facts.’ Henceforth we shall put ourselves on this
standpoint of empirical science, at least so far as its principles are
recognized in economics. But in doing so
we must bear this in
2 The best way of convincing ourselves of this is to
observe that our rules of procedure are, and presumably always will be, subject
to controversy and in a state of flux. Consider, e.g., the following case. Nobody has proved that every even number can
be expressed as the sum of two prime numbers, although no even number that
cannot has been discovered so far. Suppose
now that this proposition someday leads to a contradiction with another
proposition which we agree to accept. Would it follow from this that there exists
an even number that is not the sum of two primes? ‘Classic’ mathematicians would answer Yes,
‘intuitionist’ mathematicians (such as Kronecker and Brouwer) would answer No; that is, the former admit and the
latter refuse to admit the validity of what are called indirect proofs of
existence theorems, which are widely used in many fields and also in pure
economics. Evidently, the mere
possibility of such a difference of opinion on what constitutes valid proof
suffices to show, among other things, that our own rules cannot be accepted as
the last word on scientific procedure.
3 This estimate refers to Western Civilization alone
and in addition takes account of Greek developments only so far as they entered
scientific thought in western Europe from the
thirteenth century on, as an inheritance, but not of those developments themselves.
As a landmark, we choose the Summa Theologica of St. Thomas Aquinas, which excludes
revelation from the philosophicae disciplinae, that is, from all sciences except
supernatural theology (sacra doctrina; natural
theology is one of the philosophicae disciplinae). This
was the earliest and most important step in methodological criticism taken in
Europe after the breakdown of the Graeco-Roman world.
It will be shown below how exclusion of
revelation from all sciences except the sacra doctrina
was coupled by St. Thomas with the exclusion from them of appeal to
authority as an admissible scientific method.
4 The word ‘positive’ as used in this connection has
nothing whatever to do with philosophical positivism. This is the first of many warnings that will
have to be issued in this book against the dangers of confusion that arise from
the use, for entirely different things, of the same word by writers who
themselves sometimes confuse the things. The point is important and so I shall mention
instances at once: rationalism, rationalization, relativism, liberalism,
empiricism.
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mind: although we are going to interpret doctrines
from this standpoint we do not claim any ‘absolute’ validity for it; and
although, reasoning from this standpoint, we may describe any given
propositions or methods as invalid - always of course with reference to the
historical conditions in which they were formulated - we do not therefore excli1de
them from the realm of scientific thought in our original (broadest) sense of
the word or, to put it somewhat differently, deny to them scientific character [5] - which must
be appraised, if at all, according to the ‘professional’ standards of every
time and place.
Second, our original
definition (‘tooled knowledge’) indicates the reason why it is in general
impossible to date - even by decades - the origins, let alone the ‘foundation,’
of a science as distinguished from the origins of a particular method or the
foundation of a ‘school.’ Just as
sciences grow by slow accretion when they have come into existence, so they
emerge by slow accretion, gradually differentiating themselves, under the
influence of favorable and inhibiting environmental and personal conditions,
from their common-sense background and sometimes also from other sciences. Research into the past, clarifying those
conditions, can and does reduce the time range within which it is in each case
about equally justifiable to aver or to deny the existence of a body of
scientific knowledge. But no amount of
research can eliminate altogether a zone of doubt that has always been
broadened by the historian’s personal equation. As regards economics, bias or ignorance alone
can explain such statements as that A. Smith or F. Quesnay
or Sir William Petty or anyone else ‘founded’ that science, or that the
historian should begin his report with one of them. But it must be admitted that economics
constitutes a particularly difficult case, because common-sense knowledge goes
in this field much farther relatively to such scientific knowledge as we have
been able to achieve, than does common-sense knowledge in almost any other
field. The layman’s knowledge that rich
harvests are associated with low prices of foodstuffs or that division of labor
increases the efficiency of the productive process are obviously prescientific and it is absurd to point to such statements
in old writings as if they embodied discoveries. The primitive apparatus of the theory of demand
and supply is scientific. But the
scientific achievement is so modest, and common sense and scientific knowledge
are logically such close neighbour in this case, that
any assertion about the precise point at which the one turned into the other
must of necessity remain arbitrary. I
use this opportunity to advert to a cognate problem.
To define science as tooled
knowledge and to associate it with particular groups of men is almost the same
thing as emphasizing the obvious importance of specialization of which the
individual sciences are the (relatively late)
5 All this is very inadequate and of course completely
fails to do justice to the deep problems that we have been touching
superficially. Since, however, it is all
that can be done in the available space, I wish to add only that the
interpretation above will be seen to be as far as possible removed from (a) a
claim to professorial omniscience; (b) a wish to ‘grade’ the cultural contents
of the thought of the past according to present standard; and especially (c) to
appraise anything but techniques of analysis.
Some related points will become clearer as we go alone.
9
result. [6] But this process of specialization has never gone on
according to any rational plan - whether explicitly preconceived or only
objectively present - so that science as a whole has never attained a logically
consistent architecture; it is a tropical forest, not a building erected
according to blueprint. Individuals and
groups have followed leaders or exploited methods or have been lured on by
their problems, as it were, cross country, as has been already explained in
Section 2. One of the consequences of
this is that the frontiers of the individual sciences or of most of them are
incessantly shifting and that there is no point in trying to define them either
by subject or by method. This
applies particularly to economics, which is not a science in the sense in which
acoustics is one, but is rather an agglomeration of ill-co-ordinated
and overlapping fields of research in the same sense as is ‘medicine.’ Accordingly, we shall indeed discuss other
people’s definitions - primarily for the purpose of wondering at their
inadequacies - but we shall not adopt one for ourselves. Our closest approach to doing so will consist
in the enumeration presented below of the main ‘fields’ now recognized in teaching
practice. But even this epideiktic definition [7] must be understood to carry no claim to completeness.
In addition we must always leave open
the possibility that, in the future, topics may be added to or dropped from any
complete list that might be drawn up as of today.
Third, our definition
implies nothing about the motives that impel men to exert themselves in order
to improve upon the existing knowledge in any field. In another connection we shall presently
return to this subject. For the moment
we only note that the scientific character of a given piece of analysis is
independent of the motive for the sake of which it is undertaken. For instance, bacteriological research is
scientific research and it does not make any difference to its procedures
whether the investigator embarks upon it in order to serve a medical purpose or
any other. Similarly, if an economist
investigates the practices of speculation by methods that meet the scientific
standards of his time and environment, the results will form part of the
scientific fund of economic knowledge, irrespective of whether he wishes to use
them for recommending regulatory legislation or to defend speculation against
such legislation or merely to satisfy his intellectual curiosity. Unless he allows his purpose to distort his
facts or his reasoning, there is no point in our refusing to
6 Let me add at once that within such groups of fellow
workers a specialized language is sure to develop that becomes increasingly
un-understandable to the lay public. This
effort-saving device could even be used as a criterion by which to recognize
the presence of a science if it were not the fact that very often it is
adopted, only long after a science in our sense has grown to respectable size,
under pressure of the intolerable inconvenience incident to using concepts of
everyday life that serve but ill the purposes of analysis. Economists in
particular, much to the detriment of their field, have attached unreasonable
importance to being understood by the general public, and this public even now
displays equally unreasonable resentment toward any attempt to adopt a more
rational practice.
7 An epideiktic definition
is the definition of a concept, say the concept
‘elephant,’ by pointing to a specimen of the class denoted by the concept.
10
accept his results or to deny their scientific character on
the ground that we disapprove of his purpose. This implies that any arguments of a
scientific character produced by ‘special pleaders’ - whether they are paid or
not for producing them - are for us just as good or bad as those of ‘detached
philosophers,’ if the latter species does indeed exist. Remember: occasionally, it may be an
interesting question to ask why a man says what he says; but whatever
the answer, it does not tell us anything about whether
what he says is true or false. We take
no stock in the cheap device of political warfare - unfortunately too common
also among economists - of arguing about a proposition by attacking or
extolling the motives of the man who sponsors it or the interest for or against
which the proposition seems to tell.
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