Mill and the marginalists

There was a list of papers put up on the History of Economics website this week dealing with the History and Philosophy of Economics, of which the first was this, from which I have also excerpted the relevant bits for what I comment on:

Sraffa’s Silenced Revival of the Classical Economists and of Marx.
Guglielmo Chiodi (Sapienza University of Rome (IT))

The standpoint of the old classical economists as well as of Marx “has been submerged and forgotten since the advent of the ‘marginal’ method” – to borrow Sraffa’s own words. The neoclassical (or ‘marginal’) paradigm, in fact, triumphantly dominated over the twentieth century (and is still dominating even now). A serious step towards the rehabilitation of the paradigm of the old classical economists was made by Sraffa (1951) with his remarkable ‘Introduction’ to Ricardo’s Principles, his seminal 1960 book Production of Commodities by Means of Commodities (PCMC) followed a few years later, as a logical completion of his long-standing work.

After long contemplating whether I should stir up this particular hornets’ nest, in a went with my own reply. Here then is what I wrote.

A very interesting list, but I was quite struck by the first of these on Sraffa since I have been attempting the same resurrection, except that I would replace Marx with John Stuart Mill and would write:

The standpoint of the old classical economists as well as of Mill has been submerged and forgotten since the advent of the ‘marginal’ method.

The latter half of the nineteenth century was, in my view, the high point of economic theory, which is why Marx still attracts so many since he constructed his theories on the framework that had been crafted by the classical economists of his time. But much more acute was Mill whose economics may never have been surpassed. The “marginal method” shifted economics from the supply side to the demand side, bad enough in itself since it set up the advent of the Keynesian Revolution, but beyond that, removed the moral and ethical side of economic theory from the way economics was taught and understood and replaced it with a mathematical approach based on an unmeasureable and largely mythical entity called utility. The entrepreneur disappears and everything ends up determined by the relative addition to utility of increased units of particular forms of output. The human, moral and philosophical dimensions of life have vanished. Thus, if the aim is to provide “a genuine alternative perspective and a radically different representation of the economy, compared with that provided by neoclassical theory” you have no need to go to Marx, but can do it in a more sure-footed way by going to Mill.

As an example of what we might find in such a change in direction, let me provide this quote from Volume II of The Growth of English Industry and Commerce in Modern Times by W. Cunningham. Volume II is titled “Laissez-Faire” and at pages 745-46 of my copy (CUP 1912 but written much earlier) we find this:

“The economist of the early part of last century was ready to explain how the greatest amount of material wealth might be produced but not to discuss the uses to which it might be applied; he was prepared to show on what principles it was distributed among the various individuals who formed the nation, and to leave the question of consumption to each personally. But philanthropic sentiment and religious enthusiasm were not content to leave the matter there, and public opinion was gradually roused to demand that practical statesmen and their expert advisers should look farther ahead. Under the influence of these larger views, John Stua

The question really comes down to what questions a modern economist can answer that a classical economist could not, and I cannot think of any at all. As for the questions that a classical economist tried and did answer, there were many that no modern economist is able to answer, at least not within the confines of economic theory as it now is.rt Mill gave a new turn to economic study. He was not satisfied with discussing mere material progress. He could contemplate a stationary state with calmness; he could not but dwell with bitterness on the great misery which accompanied increasing wealth; and he tried to formulate an ideal of human welfare in his chapter On the Probably Futurity of the Working Classes. In this way he succeeded in indicating an end towards which the new material resources might be directed, and thus restored to Economics that practical side, w

hich it had been in danger of losing since the time of Ricardo. It is important that we should have a method of isolating economic phenomena and analysing them as accurately as may be, and this Ricardo has given us; but it is also desirable that we should be able to turn that knowledge to account, – to see some end at which it is worthwhile to aim, and to choose the means which will conduce towards it; this we can do better, not merely intuitively and by haphazard, but on the reasoned grounds, since the attempt was first made by Mill.

The question really comes down to what questions a modern economist can answer that a classical economist could not, and I cannot think of any at all. As for the questions that a classical economist tried and did answer, there were many that no modern economist is able to answer, at least not within the confines of economic theory as it now is.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s