Ernesto Screpanti & Stefano
Zamagni
An outline of the history of economic
thought
Chapter
5: The Triumph of
Utilitarianism and the Marginalist Revolution
Oxford University Press, 2nd
Edition, 2005, 163-173
Index
5.1 The Marginalist
Revolution
5.1.1 The ‘climax’ of the 1870s and 1880s
5.1.2. The neoclassical theoretical system
5.1.3. Was it a real revolution?
5.1.4. The reasons for success
5.1. The Marginalist
Revolution
5.1.1. The ‘climax’ of the 1870s and 1880s
The quarter century from
the early 1870s was a period of contrasts. On the one hand, there was a continuation or,
rather, an intensification, of the process of deep structural change, which had
begun during the preceding twenty years; on the other, economic difficulties of
various kinds and intensity appeared that looked like the first signs of a
general crisis of the capitalist system, and that made many observers speak of
a ‘Great Depression’.
Growth proceeded at
different rates in different countries, but was everywhere accompanied by a
marked increase in the concentration of capital, with a spread of collusive practices,
mergers, and the formation of cartels. This
process was encouraged by great changes in productive techniques, which caused
remarkable increases in the size of plant, especially in the mechanical, iron
and steel, transport, and communications industries. Besides this, the organizational form of the
limited company consolidated its position and became the privileged instrument
for the mobilization and control of the huge amounts of capital needed for
growth.
Social relations, in this
context, began to structure themselves by taking on two different
configurations in the factory and in society. Inside the firms, especially the large ones,
the relations among individuals assumed a hierarchical and bureaucratized form,
and this led to the first attempts at ‘personnel management’ and the first
formulations of ‘management science’. In
society as a whole, on the other hand, class conflict sharpened dramatically
and began to assume the form of a direct battle between powerful political and
union groups. In section 5.1.4 we shall
say more about the widespread explosion of social conflict and the effects it
produced on the moods of the dominant classes.
The unequal development of
countries also produced fiercer international competitiveness, not only in
prices and technology but also in the organizational models of the firm and the
national economy. This provoked both the
slow decline of English industrial leadership and increased difficulties in
international co-ordination, especially in capital markets. In fact, this was
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also a period of financial instability: serious monetary
crises occurred in various capitalist countries in 1873, 1882, 1890, and 1893. The English banking system, which tended to
play the role of international lender of last resort, had great difficulty in
keeping the situation under control, and often failed. The effects of these crises were aggravated,
in many European countries, by those produced by a long agricultural
depression, a depression which had been caused by the competition of American
corn and which had produced a reduction in the prices of agricultural products
and the incomes of the still large agricultural classes.
This was also a period of a
world-wide reduction in prices and a slowdown in the growth of international
trade - phenomena that should be considered in connection both with the
deflationary impulses generated by the adoption of the Gold Standard by the
main capitalist countries and with the increase in international
competitiveness mentioned above. Nor
should we forget the general movement away from the free-trade trend which had
been so strong in the preceding twenty years, and the concomitant emergence of
widespread attempts at protectionism. Finally,
the national product grew in all countries through the storms of marked
short-run business cycles. On the other
hand, the long-run growth trend was weaker everywhere than in the successive
twenty years (the Belle époque)
and in most countries it was weaker even than the, preceding twenty
years. It is this phenomenon above all
that has led some scholars to speak of a Great Depression. And if the relevance of such a point of view
has been questioned by other scholars, especially by those who observed at the
performances of the newly emerging powers, we should not forget that in Germany
the Grosse Depression is
usually associated with the Bismarckzeit, precisely the period we are
studying here.
Let us return to economic
thought. Three important books were
published at the beginnings of the 1870s: The Theory of Political Economy (1871) by William Stanley Jevons, the Grundsätze der Volkwirtschaftslehre (1871) by Carl Menger, and the Elements d’économie politique pure (1874-1877)
by Leon Walras: three books which marked the
beginning of what was later to he called the ‘marginalist
revolution’. These books are so
different that any attempt to group them could seem daring. In fact, they had various fundamental things
in common, but time was needed to realize this. Contemporary thinkers hardly noticed the three
innovative contributions at all. It
seemed that these authors were to meet the same cruel fate of other great
heretics and forerunners. In effect,
there was an almost complete silence for a decade. The time was still not ripe for the new
message to be received and appreciated. Then
suddenly, in the 1880s and the first half of the l890s, the revolution
exploded. Marshall, Edgeworth,
and Wicksteed in England, Wieser
and Böhn-Bawerk in Austria, Pantaleoni
in Italy, and Cassel and Wicksell
in Sweden all published fundamental works in the spirit of the new way of doing
economic science. The revolution was
completed in a decade. In the
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following thirty years the theories were refined and
generalized. But, by this time, the old
classical system was dead and buried, a new orthodoxy had asserted itself, and
even if certain differences between the national schools were to last a long
time, it had become clear to everybody that all over the world a single science
was being studied and one language spoken; the neoclassical system had imposed
itself. We will discuss this in the next
chapter.
This chapter will be
dedicated to the three founding fathers of marginalism,
and to the meaning of the revolution begun by them. First of all, however, it is necessary to turn
away from history so as to be able to give a summary of the neoclassical system
and to point out some of its distinctive characteristics. Even if some elements of this picture were
only to appear much later, it may be useful, in order to understand the meaning
of the revolution in the l870s and 1880s, to consider where it was all going to
lead.
5.1.2. The neoclassical theoretical system
One characteristic of the
new system which was apparent from the beginning was a reduction of interest in
economic growth, the great theme of the economic theories of Smith, Ricardo,
Marx, and all the classical economists. Attention, instead, was focused on the problem
of the allocation of given resources.
Certainly, the basic ideas of the
classical economists concerning the problem of growth continued to be
influential. In lesson 36 of the Elements, for example, Walras
put forward a theory of economic evolution that could still be considered Ricardian. The same
could be said, to give another example, of the process of ‘growth of wealth’
described by Marshall in his Principles. But it is a fact that,
in spite of the presence of considerations concerning the dynamics of economic
systems, the founders of the neoclassical theoretical system basically did not
consider the problem of the evolution of industrial economies. The central argument of the theoretical
research in this period was the study of a static equilibrium system, that is,
an economy, as J. B. Clark was to say later, ‘free to find the final levels of
equilibrium determined by the factors available at any given moment of time’ (The Distribution of Wealth, p.
29).
At the centre of the
neoclassical system is the problem of the allocation of given resources among alternative
uses.
In the analysis of the
conditions ensuring the optimal allocation of given resources among alternative
uses, the neoclassical economists identified a universally valid principle, one
which was able, alone, to embrace the entire economic reality. As Robbins said: ‘Scarcity
of means to satisfy ends of varying importance is an almost ubiquitous
condition of human behaviour. Here, then, is the unity of subject of
Economic Science, the forms assumed by human behaviour in disposing of scarce
means’ (An Essay on the Nature and
Significance of Economic Science, p. 15). The tendency to
extend the basic
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model to every branch of economic investigation was
reinforced during the course of the century until it culminated in the argument
of P. A. Samuelson that there is a simple principle at the heart of all
economic problems: a mathematical function to maximize under constraints.
Another characteristic that
unites the three founding fathers, and one which was to remain a pillar of the
neoclassical system, is their acceptance of the utilitarian approach; an
approach which numbered among its forerunners Galiani,
Beccaria, Bentham, Say,
Senior, Bastiat, Cournot,
and, above all, Gossen. In fact, the most important theoretical
contribution of Jevons, Menger,
and Walras lies, still more than in their complete
and coherent reformulation of the utility theory of value and in the hypothesis
of decreasing marginal utility, in the way they modified the utilitarian
foundation of political economy. Their marginalism gave credit to a special version of utilitarian
philosophy, one for which human behaviour is exclusively reducible to rational
calculation aimed at the maximization of utility. They considered this principle to be
universally valid: alone, it would have allowed the understanding of the entire
economic reality.
A third distinctive element
relates to the method. The neoclassical
method is based on the principle of the variation of proportions, the so-called
‘substitution principle’, a method which has no equivalent in classical
economics. In the theory of consumption,
the substitutability of one basket of goods for another is assumed; in the theory
of production, the substitutability of one combination of factors for another. The analysis is carried out in terms of the
alternative possibilities among which the subjects, both consumers and
producers, can choose. And the objective
is the same: to search for the conditions under which the optimal alternative
is chosen. This method presupposes that
the alternatives at stake are ‘open’ and that the decisions taken are reversible; otherwise, the substitution
principle would have no rational ground.
A fourth distinctive
characteristic of the neoclassical approach concerns the economic agents. If they are subjects able to make rational
decisions with a view to maximizing an individual goal, such as utility or
profit, they must be individuals, or, at the most, ‘minimum’ social aggregates
characterized by the individuality of the decision-making unit, such as
households and companies. Thus the
collective agents, the social classes and ‘political bodies’, which the
mercantilists, the physiocrats, the classical
economists, and Marx had placed at the centre of their theoretical systems,
disappear from the scene. With
neoclassical thought methodological individualism definitely entered economic
science: knowledge of the properties of a system comes from the knowledge of
the properties of its elements.
A fifth characteristic is
represented by the final attainment of an objective to which many classical
economists had aspired but which nobody had ever realized completely: the
historicity of economic laws. Economics
was likened to the natural sciences, physics in particular,
and economic laws
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finally assumed that absolute and objective characteristic of
natural laws. The pervasiveness of the
problem posed by the neoclassical economists, the problem of scarcity,
establishes the universal validity of the economic laws. But for this to make sense, it is necessary to
remove social relations from the field of economics, exorcizing them as a
superstition, a waste of time, a subject not in line with the new scientific
achievements. With the marginalist revolution also originated that reductionist project of economics which has marked all the
successive neoclassical thought, a project according to which economics has no
other field of research than technical relationships (the relationships between
man and nature). Thus, while
individualistic reductionism had led to the elimination of social classes, the
anti-historicist reduction led to the elimination of social relations - which
obviously meant that the study of their change also lost importance. While in the work of the classical economists
and Marx the analytical apparatus was constructed with explicit reference to
the capitalistic system whose laws of movement they wished to investigate, the
neoclassical paradigm aimed for a complete historicity. Naturally, this was not easy to achieve. Even Walras, for
example, had to use notions such as capital, interest, entrepreneur, wages - notions which make sense only in reference to the
capitalist system.
Finally, a sixth important
distinctive element of the neoclassical system lies in the substitution for the
objective theory of value of a subjective one. At the base of the principle of subjective
value is the argument that all values are individual and subjective. ‘Individual’ means that they are considered
always as the ends of particular individuals. On the other hand, values are ‘subjective’ in
that they arise from a process of choice: an object has value if it is desired
by at least somebody. The principle of
subjectivity implies that a value is such because somebody has chosen it as an
end; whereas the principle of individuality postulates that there must be a
particular individual to which that end can be attributed. In the opposite conception, that of objective
value, values exist independently of individual choices. The individual can accept or reject values but
he is not able to influence them. An
immediate and important consequence of the neoclassical approach in regard to
the question of value is that the theory of the distribution of income becomes a
special case of the theory of value, a problem of determining the prices of the
services of the productive factors rather than of sharing out income among the
social classes.
5.1.3. Was it a real revolution?
One of the most important
problems posed by the marginalist revolution for the
historian of ideas is whether it was a real revolution. That name, ‘neoclassical system’, which is now
given to the theoretical system originated from the marginalist
revolution, seems to prove right those who argue
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continuity with the preceding ‘classical’ theoretical system. But is the name correct? It is useful to begin precisely with this
problem.
It was Marx who identified
the classical theoretical system. As
already mentioned, he was extremely rigorous in defining the approach and very
selective in labelling the economists. The yardstick was Ricardo, but Marx went back
as far as Petty and Boisguillebert to find the
origins of the classical system. On the
basis of his measure, the English anti-Ricardians
were not considered classical, while Malthus and Say
were to be taken cum grano salis; and even Smith was accused of a few
‘vulgar notions’.
Instead, the definition of
‘neoclassical’ system, which is due to the institutionalist
Thorstein Vebelen, was
referred to the work of Marshall; then it widened to embrace the whole of
modern orthodox theory. It is an
independent definition from the Marxian one of classical economics. Marshall himself, moreover, wished to stress
the continuity of a tradition which linked him to Mill and Smith without
excluding Ricardo; and he endeavoured to ignore the
considerable heterogeneity of Ricardian economics
with respect to that tradition.
On the other hand, the
anti-Ricardian character of the marginalist
revolution was extremely clear to Jevons; and there
is no doubt that, if the theoretical system that originated from the revolution
had been named with reference to his work, it would have been called
‘anti-classical’ rather than ‘neoclassical’.
Now, if Marshall had been
correct in rejecting any element of discontinuity between the two theoretical
systems, those modern historians who deny the existence of the marginalist revolution would also be right. The idea of these historians is that, on the
Continent, marginalism can be traced back, with no
substantial epistemological break, to the ‘classical’ traditions, such as that
uniting Say to Bastiat, without excluding Dupuit and Cournot, in France, or
that uniting Lotz and Soden
to the ‘German Manchester School’, without excluding von Thünen
and Gossen, in Germany, or finally that uniting Galiani to Ferrara, in Italy.
England, on the other hand,
would be taken as a special case. Here a
particular version of the classical system developed, in the form of Ricardianism, which in a certain sense would have justified
Jevons’s claims of making a revolution. But then, ex post, Marshall turned out to be right in
his rejection of the idea of a qualitative jump. Paradoxically, with this interpretation
Marshall is credited with leading England out of its insularity.
But things are not exactly
like this. The true precursors and
founders of marginalism were not completely
integrated into the classical traditions, but instead were outcasts condemned
to the edges of the academic circles which cultivated orthodox theories. This is just as true for England as for the
Continent (with the exception of Italy), as demonstrated by the fact that not
only Jevons identified the enemy in the ‘noxious
influence of the authority’ of Smith, Ricardo, the two Mills etc., but also Walras violently attacked Smith,
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Ricardo, and Mill, and when he showed a little
appreciation for Say, he quickly raised some qualifications (opposite to those
of Marx). And both Jevons
and Walras were aware that, when they paid tribute to
Senior and Gossen, they were dealing with heretics.
In reality, in the orthodox
pre-marginalist economic theories, from Smith and Say
to Mill and to the theorists of economic harmonies, classical economic thought
had evolved while preserving intact the Smithian
theoretical dualism. The methodology of
aggregates remained anchored to an explanation of production and distribution
based on the social classes, and to a theory of value based on the costs of
production; whereas microeconomic methodology remained linked to a theory of
the competitive equilibrium based on the rationality, in the utilitarian sense,
of individual choices. The two
approaches continued to develop together for almost a century after Smith,
remaining intertwined in more or less awkward ways. Ricardo had made his revolution, trying to
free the former from the latter. The marginalists did the opposite. Their revolution consisted in this: they freed
microeconomics, understood as a theory of rational individual choices, from
classical macroeconomics. It was a
revolution not only against Ricardo, but against all that was present in a
confused way in the work of the other classical economists and which Ricardo
had tried to bring to light. In other
words, the ‘classical’ tradition, of which the neoclassical system proposed
itself as a continuation, basically consisted in that Benthamian
component which was partially already present in Smith, and later taken up
again by the anti-Ricardians and by Mill; a component
that Marx, instead, on the ground of the Ricardian
criticisms of Smith, had defined as ‘vulgar’, i.e. non-classical. It was
against Marx’s classical economics that the marginalists
made a revolution, not against that of Mill.
So different is the
neoclassical theoretical system from the classical one (in the Marxian sense)
that the revolution even led to a modification in the name itself of economic
science, which from 1879 (at least in the Anglo-Saxon world) began to be called
‘economics’ rather than ‘political economy’. The new term had been used sporadically in the
preceding forty years, but in 1877 and 1878 it even appeared in the titles of
books by J. M. Sturtevant and by H. D. Macleod. Subsequently, Alfred and Mary Marshall and Jevons explicitly proposed it as a more serious and
scientific substitute for the old term ‘political economy’.
Jevons dealt with this matter in the second edition (1879)
of his Theory of Political Economy.
His proposal to substitute
economics for political economy was motivated by an economic reason, one could
say: one word is better than two. Later,
however, phrases slipped out which reveal an inferiority complex, or spirit of
emulation, in relation to mathematics. On
the other hand, Jevons felt it was important to make
it clear that his aspiration was to give a new name to ‘a science that almost a
century ago was known to French economists as science économique’ (p. 18).
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Marshall had much clearer
ideas on this point. In The Economics
of Industry (1879), written
in collaboration with his wife, Mary, he explained his motivations for the
change of name by putting forward the view that economics has nothing to do
with political bodies and particular political interests. These are in fact two different motivations:
one explicit, concerned with avoiding confusing the science with vested
interests; the other implicit, but deeper, which was only later to emerge
clearly, as the neoclassical system began to differentiate itself from the
classical system: to avoid relating the science to ‘political’ or ‘collective’
bodies. This second reason turned into
the refusal to recognize the behaviour of collective economic agents as the
subject of study of economics.
As already mentioned, the
study of collective agents was precisely the feature adopted by the
mercantilists to found their science: no longer (domestic) economy, but political economy; no longer the
administration of the household, but that of the State; no longer the study of
the causes of the enrichment of the individuals, but that of the nation, the
people, and the merchant class. It is
significant that, by rejecting the ‘political’ nature of economics, the
neoclassical economists were once more conceiving of this science as one that
has to do with the domestic economy.
In fact, it still deals with the
maximization of the welfare of the household, or of the profits of the firm,
which are, in fact, individual economic agents.
5.1.4. The reasons for success
Another problem the marginalist revolution poses to the historians of economic
thought concerns the reasons why it occurred at that historical moment. Why not at the time of Senior, Longfield, Dupuit, Cournot, and von Thünen? And why did Jevons, Menger, and Walras not remain
ingenious heretics at the edges of the academic world, as seemed to be
occurring in the ten years after the publication of their works? Why was there, in the 1880s, a second
generation of marginalists who gave that heresy the
power of a revolutionary wave? The
correct way to pose the problem of the historical sense of the marginalist revolution seems to be this: it is not the problem
of finding the reasons why the fundamental works of the three great
neoclassical economists were published in the early 1870s, but rather of
understanding why, in a period of a few years, the message contained in those
works was accepted as the ‘New Testament’ by the majority of the economists who
counted. It is possible, with some simplication, to put forward two kinds of reason: one
‘internal’, the other ‘external’.
The first concerns the
inability of the classical orthodoxy to solve a series of theoretical problems.
The labour theory of value had never
been watertight, and the Ricardians’ attempts to
escape from the difficulties with a theory of the cost of production had only
made matters worse, inducing Mill to open cracks which the marginalists
had no difficulty penetrating with their
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corrosive criticisms. But here, generalizations were more damaging
than criticisms. For example, Jevons argued that the cases of joint production, which
Mill considered to be exceptions to the theory of value based on the cost of
production, in fact constituted the general case. Marshall, instead, had tried to generalize the
case of the goods whose production could not be increased without an increase
in cost. The labour theory of value, by
this time, was really only defended by Marx. Marx’s version of the theory was in fact
rather refined, but this did not avoid some broadsides from the neoclassical
economists, as we will see later. And
the weak defence set up by the Marxists (such as Hilferding) served only to discredit the theory finally, so
that it lost any residue of scientific decorum.
Furthermore, the classical
economists had not managed to produce a satisfactory theory of income
distribution. This was a serious flaw,
as the theory of distribution made up the core of the classical economic
theory. The principal difficulty
concerned the theory of wages, on which the whole structure was built. Once the argument is discarded that wages are
forced down to the subsistence level through the operation of Malthus’ population mechanism, the whole theory collapses. This was precisely one of Jevons’s
criticisms. On the other hand, the road
taken by the Ricardians to escape from this
difficulty was the theory of the wages fund, and this was even weaker and less
defensible than Ricardo’s own theory. It
was again Jevons and Walras
who put salt in the wound, by showing that the theory of the wages fund was
tautological (in the best of cases) and logically inconsistent (in the worst,
which were, in fact, the most widespread interpretations).
But all this is not enough
to explain the success of the marginalist revolution
and its rapid conquest of hegemony. The
‘external’ reasons are perhaps even more important than the internal ones. For some time, the Ricardian
theory had been used for critical purposes by the socialist economists. In particular, the theory of surplus had been
used as a foundation for a theory of capitalist exploitation. We have already mentioned that in the 1830s
the ‘anti-Ricardian’ economists had been motivated,
in their criticism of Ricardianism, by their
intention to attack socialist theories. Forty
years later, things were still the same. Jevons had little
difficulty in linking himself to the English anti-Ricardian
tradition. Walras
was even more explicit when, in regard to the theory of interest, he noted: ‘It
has been a favourite target for socialists; and the
answer which economists have given to these attacks has not, up to the present,
been overwhelmingly convincing’ (p. 422).
From the 1870s onwards,
theoretical socialism rapidly tended to identify itself with Marxism, and
unhesitatingly advanced strong claims to be a scientific theory. It was exactly against such claims that some
of the second- and third-generation marginalists launched
their attacks. We will limit ourselves
here to mentioning the powerful ‘Jevonian’ attack
that Wicksteed brought to bear on the Marxian theory
of value in ‘Das
Kapital: A Criticism’, and the even harsher one attempted by Böhn-Bawerk, which we will consider in next
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chapter. But in 1893
Pareto was already looking at the matter with more ‘detachment’, convinced that
‘the criticism of Karl Marx no longer needed to be made’, as it was by that
time implicit ‘in the improvements brought by political economy to the theory
of value’ (p. 141).
In order that the
criticisms of socialism, and of Marxism in particular,
should not seem too ideological, it was necessary to focus on their analytic
bases. But these were the same as those
of classical economic theory. It was
necessary, therefore, to ‘re-invent’ economic science, reconstructing it on a
foundation which would allow the deletion of the concepts themselves of ‘social
class’, ‘labour power’, ‘capitalism’, ‘exploitation’, ‘surplus’, etc. from the
body of the science. The theory of
marginal utility provided the solution. Moreover,
it seemed that it would permit the demonstration that an almost perfect kind of
social organization would be realized in a competitive economy; a kind of
organization in which the market rules would allow an optimum allocation to be
reached and, with it, the harmony of interests and the maximization of
individual objectives.
On the other hand, the
resumption of a sharp and endemic social conflict made academic communities and
political and cultural circles particularly receptive to the new theory. The first Workers’ International was inaugurated
in London in 1864, held its most important congresses in various European
capitals between 1866 and 1872, and disbanded in Philadelphia in 1876. But then, in 1889 the 2nd International was
founded in Paris, and this was much more fearsome and strongly influenced by
Marxism. These aggregation processes of
the revolutionary organizations were driven along by the powerful resumption of
the workers’ struggle in all the advanced capitalist countries. The period from 1868 until the mid-l870s was
characterized by sharp conflict, almost as if all the repressed anger of the
preceding twenty years of peace had exploded at the same time. The Paris Commune was only the tip of the
iceberg of a movement which was much more widespread and longer lasting. And the violent repressions which followed
these international explosions (1872-3 in France, 1873-4 in Great Britain and
Germany, 1877 in the USA and Italy) had only temporary effects. The conflict began to manifest itself again,
in more or less acute forms, during the l880s, and continued for about half the
following decade.
There is thus no doubt
that, when Jevons, Menger,
and Walras presented a theory capable of averting
attention completely from unpleasant problems, they were launching onto the
market exactly the theory that was demanded. In the 1880s and 1890s, that
demand was so strong that no marginalist economist
had to worry about remaining on the edges of the cultural and academic worlds.
A strange but eloquent fact is worth
noting here. Gossen’s
1854 book, which had anticipated many of the results of the marginalist
revolution, had been a total publishing failure. Gossen died in 1858
with no glory. But 30 years later, a
discerning Berlin publisher reprinted the book with a brief preface and a new
date: 1889. It was an extraordinary
success. Another curious insight,
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which, if nothing else, tells us a great deal about the
state of mind with which the marginalists set about
constructing a value-free science, was given in a letter from Auguste Walras to his son Leon on
6 February 1859:
One thing which I find most satisfying about your work
plan, and with which I am in complete agreement, is your decision to keep
within the most inoffensive limits with regards to proprietors. It is a wise decision and easy enough to
implement. One should dedicate oneself
to political economy as one would to the science of acoustics or mechanics. (quoted in Leroy, Auguste Wairas, p.
289)
Finally, it is worth
observing that marginalism, while presenting itself
as an alternative to the classical approach at the level of economic theory,
preserved the basic philosophy of the latter on at least one essential
question. Jevons,
Menger, and Walras, and the
vast majority of the marginalists of the following
generations, were fervent supporters of laissez-faire. Certainly,
while classical laissez-faire had
focused on the problem of accumulation, neoclassical laissez-faire was orientated more towards the
problem of allocative efficiency. The most advanced capitalist countries had by
this time solved the problem of industrial take-off, so that the needs of
accumulation were no longer felt in the terms in which they had been perceived
by Smith. On the other hand, the 1870s
and 1880s were marked by the ‘Great Depression’, the first great demonstration
of the inability of capitalism to defeat the anarchy of the market. We should not be surprised, therefore, by the
great success of a theory proving that the market, far from being anarchical,
is the best allocator of resources, and that, if
things do not work well, it is precisely because the ‘workers’ coalitions’
hinder the functioning of the market.
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