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THE COLLECTED WORKS OF<br />

F.A.Hayek<br />

VOLUME III<br />

THE TREND OF ECONOMIC<br />

THINKING<br />

<str<strong>on</strong>g>Essays</str<strong>on</strong>g> <strong>on</strong> <strong>Political</strong> Ec<strong>on</strong>omists and <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> History


PLAN OF THE COLLECTED WORKS<br />

Edited by W.W.Bartley, III<br />

Volume I <str<strong>on</strong>g>The</str<strong>on</strong>g> Fatal C<strong>on</strong>ceit: <str<strong>on</strong>g>The</str<strong>on</strong>g> Errors <str<strong>on</strong>g>of</str<strong>on</strong>g> Socialism<br />

Volume II <str<strong>on</strong>g>The</str<strong>on</strong>g> Uses and Abuses <str<strong>on</strong>g>of</str<strong>on</strong>g> Reas<strong>on</strong>: <str<strong>on</strong>g>The</str<strong>on</strong>g> Counter-<br />

Revoluti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Science, and Other <str<strong>on</strong>g>Essays</str<strong>on</strong>g><br />

Volume III <str<strong>on</strong>g>The</str<strong>on</strong>g> <str<strong>on</strong>g>Trend</str<strong>on</strong>g> <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> <str<strong>on</strong>g>Thinking</str<strong>on</strong>g>: <str<strong>on</strong>g>Essays</str<strong>on</strong>g> <strong>on</strong><br />

<strong>Political</strong> Ec<strong>on</strong>omists and <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> History<br />

Volume IV <str<strong>on</strong>g>The</str<strong>on</strong>g> Fortunes <str<strong>on</strong>g>of</str<strong>on</strong>g> Liberalism and the Austrian School<br />

Volume V Nati<strong>on</strong>s and Gold<br />

Volume VI M<strong>on</strong>ey and Nati<strong>on</strong>s<br />

Volume VII Investigati<strong>on</strong>s in <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s<br />

Volume VIII M<strong>on</strong>etary <str<strong>on</strong>g>The</str<strong>on</strong>g>ory and Industrial Fluctuati<strong>on</strong>s<br />

Volume IX C<strong>on</strong>tra Keynes and Cambridge: <str<strong>on</strong>g>Essays</str<strong>on</strong>g>,<br />

Corresp<strong>on</strong>dence and Documents<br />

Volume X Socialism and War: <str<strong>on</strong>g>Essays</str<strong>on</strong>g>, Corresp<strong>on</strong>dence and<br />

Documents<br />

Volume XI <str<strong>on</strong>g>Essays</str<strong>on</strong>g> <strong>on</strong> Liberty<br />

Volume XII <str<strong>on</strong>g>Essays</str<strong>on</strong>g>, Debates and Reviews<br />

Volume XIII <str<strong>on</strong>g>The</str<strong>on</strong>g> Pure <str<strong>on</strong>g>The</str<strong>on</strong>g>ory <str<strong>on</strong>g>of</str<strong>on</strong>g> Capital<br />

Volume XIV <str<strong>on</strong>g>The</str<strong>on</strong>g> Road to Serfdom<br />

Volume XV <str<strong>on</strong>g>The</str<strong>on</strong>g> C<strong>on</strong>stituti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Liberty<br />

Volume XVI Philosophy, Politics and <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s<br />

Volume XVII Law, Legislati<strong>on</strong> and Liberty<br />

Volume XVIII <str<strong>on</strong>g>The</str<strong>on</strong>g> Sensory Order and other <str<strong>on</strong>g>Essays</str<strong>on</strong>g> in Psychology<br />

Volume XIX John Stuart Mill and Harriet Taylor: <str<strong>on</strong>g>The</str<strong>on</strong>g>ir<br />

Friendship and Subsequent Marriage<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> plan is provisi<strong>on</strong>al. Minor alterati<strong>on</strong>s may occur in titles <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

individual books, and several additi<strong>on</strong>al volumes may be added.


THE COLLECTED WORKS OF<br />

F.A.Hayek<br />

VOLUME III<br />

THE TREND OF<br />

ECONOMIC THINKING<br />

<str<strong>on</strong>g>Essays</str<strong>on</strong>g> <strong>on</strong> <strong>Political</strong> Ec<strong>on</strong>omists<br />

and <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> History<br />

EDITED BY<br />

W.W.BARTLEY III<br />

and<br />

STEPHEN KRESGE


First published in 1991<br />

by Routledge<br />

11 New Fetter Lane, L<strong>on</strong>d<strong>on</strong> EC4P 4EE<br />

This editi<strong>on</strong> published in the Taylor & Francis e-Library, 2005.<br />

“To purchase your own copy <str<strong>on</strong>g>of</str<strong>on</strong>g> this or any <str<strong>on</strong>g>of</str<strong>on</strong>g> Taylor & Francis or Routledge’s<br />

collecti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> thousands <str<strong>on</strong>g>of</str<strong>on</strong>g> eBooks please go to www.eBookstore.tandf.co.uk.”<br />

© 1991 F.A.Hayek<br />

© 1991 Introducti<strong>on</strong> and editorial notes, Stephen P.Kresge<br />

All rights reserved. No part <str<strong>on</strong>g>of</str<strong>on</strong>g> this book<br />

may be reprinted or reproduced or utilized<br />

in any form or by any electr<strong>on</strong>ic, mechanical,<br />

or other means, now known or hereafter invented,<br />

including photocopying and recording, or in<br />

any informati<strong>on</strong> storage or retrieval system,<br />

without permissi<strong>on</strong> in writing from the publishers.<br />

British Library Cataloguing in Publicati<strong>on</strong> Data<br />

Hayek, F.A. (Friedrich August) 1899–<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> trend <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic thinking: essays <strong>on</strong><br />

political ec<strong>on</strong>omists and ec<strong>on</strong>omic history.—<br />

(<str<strong>on</strong>g>The</str<strong>on</strong>g> collected works <str<strong>on</strong>g>of</str<strong>on</strong>g> Friedrich August Hayek v: 3)<br />

1. <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s. <str<strong>on</strong>g>The</str<strong>on</strong>g>ories <str<strong>on</strong>g>of</str<strong>on</strong>g> Hayek, F.A.<br />

(Friedrich August) 1899–<br />

I. Title II. Bartley, William Warren<br />

III. Kresge, Stephen 330.1<br />

ISBN 0-203-98204-5 Master e-book ISBN<br />

ISBN 0-415-03515-5 (Print Editi<strong>on</strong>)


THE COLLECTED WORKS OF<br />

F.A.HAYEK<br />

General Editor: W.W.Bartley, III<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> Hoover Instituti<strong>on</strong> <strong>on</strong> War, Revoluti<strong>on</strong> and Peace, Stanford<br />

University<br />

Editors <str<strong>on</strong>g>of</str<strong>on</strong>g> the German editi<strong>on</strong>: Alfred Bosch and Reinhold Veit<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> Walter Eucken Institute, Freiburg im Breisgau<br />

Editor <str<strong>on</strong>g>of</str<strong>on</strong>g> the Japanese Editi<strong>on</strong>: Chiaki Nishiyama<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> Hoover Instituti<strong>on</strong> <strong>on</strong> War, Revoluti<strong>on</strong> and Peace, Stanford<br />

University<br />

Associate Editor: Stephen Kresge<br />

Assistant Editor: Gene Opt<strong>on</strong><br />

Published with the support <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> Hoover Instituti<strong>on</strong> <strong>on</strong> War, Revoluti<strong>on</strong> and Peace,<br />

Stanford University<br />

Anglo American and De Beers Chairman’s Fund, Johannesburg<br />

Cato Institute, Washingt<strong>on</strong>, D.C.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> Centre for Independent Studies, Sydney<br />

Chung-Hua Instituti<strong>on</strong> for <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Research, Taipei<br />

Earhart Foundati<strong>on</strong>, Ann Arbor<br />

Engenharia Comércio e Indústria S/A, Rio de Janeiro<br />

Escuela Superior de Ec<strong>on</strong>omia y Administración de Empresas<br />

(ESEADE), Buenos Aires<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> Heritage Foundati<strong>on</strong>, Washingt<strong>on</strong>, D.C.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> Institute for Humane Studies, George Mas<strong>on</strong> University<br />

Institute <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Affairs, L<strong>on</strong>d<strong>on</strong><br />

Instituto Liberal, Rio de Janeiro


CONTENTS<br />

Editorial Foreword viii<br />

Introducti<strong>on</strong> 2<br />

PART I. THE ECONOMIST AND HIS DISMAL TASK<br />

One <str<strong>on</strong>g>The</str<strong>on</strong>g> <str<strong>on</strong>g>Trend</str<strong>on</strong>g> <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> <str<strong>on</strong>g>Thinking</str<strong>on</strong>g> 13<br />

Two On Being an Ec<strong>on</strong>omist 31<br />

Three Two Types <str<strong>on</strong>g>of</str<strong>on</strong>g> Mind 45<br />

Four History and Politics 52<br />

PART II. THE ORIGINS OF POLITICAL ECONOMY IN<br />

BRITAIN<br />

Five Francis Bac<strong>on</strong>: Progenitor <str<strong>on</strong>g>of</str<strong>on</strong>g> Scientism (1561–<br />

1626)<br />

70<br />

Six Dr. Bernard Mandeville (1670–1733) 74<br />

Seven <str<strong>on</strong>g>The</str<strong>on</strong>g> Legal and <strong>Political</strong> Philosophy <str<strong>on</strong>g>of</str<strong>on</strong>g> David<br />

Hume (1711–1776)<br />

97<br />

Addendum: A Discovery about Hume by Keynes<br />

and Sraffa<br />

115<br />

Eight Adam Smith (1723–1790): His Message in<br />

Today’s Language<br />

116<br />

Addendum: Review, Adam Smith as Student and<br />

Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor<br />

119<br />

PART III. ENGLISH MONETARY POLICY AND THE BULLION<br />

DEBATE<br />

Nine Genesis <str<strong>on</strong>g>of</str<strong>on</strong>g> the Gold Standard in Resp<strong>on</strong>se to<br />

English Coinage Policy in the 17th and 18th<br />

Centuries<br />

124<br />

Ten First Paper M<strong>on</strong>ey in 18th-Century France 153


Eleven <str<strong>on</strong>g>The</str<strong>on</strong>g> Period <str<strong>on</strong>g>of</str<strong>on</strong>g> Restricti<strong>on</strong>s, 1797–1821, and the<br />

Bulli<strong>on</strong> Debate in England<br />

Twelve <str<strong>on</strong>g>The</str<strong>on</strong>g> Dispute Between the Currency School and<br />

the Banking School, 1821–1848<br />

176<br />

218<br />

Thirteen Richard Cantill<strong>on</strong> (c. 1680–1734) 248<br />

Addenda: On Higgs 297<br />

Fourteen Henry Thornt<strong>on</strong> (1760–1815) 303<br />

PART IV. CURRENTS OF THOUGHT IN THE 19th CENTURY<br />

Fifteen Frederic Bastiat (1801–1850), Jules Dupuit<br />

(1804–1866), and Hermann Heinrich Gossen<br />

(1810–1858)<br />

vii<br />

359<br />

Chr<strong>on</strong>ological Order <str<strong>on</strong>g>of</str<strong>on</strong>g> C<strong>on</strong>tents 385<br />

Bibliographical Note 386<br />

Editor’s Acknowledgements 387<br />

Index 388


EDITORIAL FOREWORD<br />

I<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> <str<strong>on</strong>g>Trend</str<strong>on</strong>g> <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> <str<strong>on</strong>g>Thinking</str<strong>on</strong>g>, a new collecti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> essays by Hayek<br />

c<strong>on</strong>cerning political ec<strong>on</strong>omists and ec<strong>on</strong>omic history, is the third<br />

volume <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>The</str<strong>on</strong>g> Collected Works <str<strong>on</strong>g>of</str<strong>on</strong>g> F.A.Hayek, a new standard editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

his writings, and the sec<strong>on</strong>d volume in order <str<strong>on</strong>g>of</str<strong>on</strong>g> appearance. <str<strong>on</strong>g>The</str<strong>on</strong>g> first<br />

volume, <str<strong>on</strong>g>The</str<strong>on</strong>g> Fatal C<strong>on</strong>ceit, was published in Britain in 1988 and in the<br />

United States in 1988.<br />

Of the work’s fifteen chapters, five have never previously been<br />

published, and another two have never before been published in English.<br />

Most <str<strong>on</strong>g>of</str<strong>on</strong>g> the remaining chapters are difficult to obtain, <strong>on</strong>ly three <str<strong>on</strong>g>of</str<strong>on</strong>g> them<br />

being readily available in other Hayek collecti<strong>on</strong>s. <str<strong>on</strong>g>The</str<strong>on</strong>g>se three essays<br />

are placed here as part <str<strong>on</strong>g>of</str<strong>on</strong>g> the more systematic presentati<strong>on</strong> aimed for in<br />

the Collected Works.<br />

II<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> Collected Works <str<strong>on</strong>g>of</str<strong>on</strong>g> F.A.Hayek attempts to make virtually the entire<br />

Hayek corpus available to the reader for the first time. <str<strong>on</strong>g>The</str<strong>on</strong>g> chief<br />

organisati<strong>on</strong> is thematic, but within this structure a chr<strong>on</strong>ological order<br />

is followed where possible.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> series opens with two closely-related books <strong>on</strong> the limits <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

reas<strong>on</strong> and planning in the social sciences—<str<strong>on</strong>g>The</str<strong>on</strong>g> Fatal C<strong>on</strong>ceit, a new<br />

work, and <str<strong>on</strong>g>The</str<strong>on</strong>g> Uses and Abuses <str<strong>on</strong>g>of</str<strong>on</strong>g> Reas<strong>on</strong>s: <str<strong>on</strong>g>The</str<strong>on</strong>g> Counter-Revoluti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Science and Other <str<strong>on</strong>g>Essays</str<strong>on</strong>g>, a work never previously published in<br />

Britain. <str<strong>on</strong>g>The</str<strong>on</strong>g> series c<strong>on</strong>tinues with two collecti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> historical and<br />

biographical essays (<str<strong>on</strong>g>The</str<strong>on</strong>g> <str<strong>on</strong>g>Trend</str<strong>on</strong>g> <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> <str<strong>on</strong>g>Thinking</str<strong>on</strong>g>: <str<strong>on</strong>g>Essays</str<strong>on</strong>g> <strong>on</strong><br />

<strong>Political</strong> Ec<strong>on</strong>omists and <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> History and <str<strong>on</strong>g>The</str<strong>on</strong>g> Fortunes <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Liberalism and the Austrian School).


<str<strong>on</strong>g>The</str<strong>on</strong>g> bulk <str<strong>on</strong>g>of</str<strong>on</strong>g> Hayek’s c<strong>on</strong>tributi<strong>on</strong>s to ec<strong>on</strong>omics are c<strong>on</strong>tained in the<br />

four volumes Nati<strong>on</strong>s and Gold; M<strong>on</strong>ey and Nati<strong>on</strong>s; Investigati<strong>on</strong>s in<br />

<str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s; and M<strong>on</strong>etary <str<strong>on</strong>g>The</str<strong>on</strong>g>ory and Industrial Fluctuati<strong>on</strong>s.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>se volumes are followed by two volumes <str<strong>on</strong>g>of</str<strong>on</strong>g> documentati<strong>on</strong>,<br />

historical record, and debate: C<strong>on</strong>tra Keynes and Cambridge and<br />

Socialism and War. <str<strong>on</strong>g>The</str<strong>on</strong>g> texts will be published in corrected, revised and<br />

annotated form, with introducti<strong>on</strong>s by distinguished scholars intended to<br />

place them in their historical and theoretical c<strong>on</strong>text.<br />

It is the intenti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the editors that the series <str<strong>on</strong>g>of</str<strong>on</strong>g> volumes be complete<br />

in so far as that is reas<strong>on</strong>able and resp<strong>on</strong>sible. Thus essays which exist<br />

in slightly variant forms, or in several different languages, will be<br />

published always in English or in English translati<strong>on</strong>, and <strong>on</strong>ly in their<br />

most complete and finished form unless some variati<strong>on</strong>, or the timing<br />

there<str<strong>on</strong>g>of</str<strong>on</strong>g>, is <str<strong>on</strong>g>of</str<strong>on</strong>g> theoretical or historical significance. Some items <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

ephemeral value, such as short newspaper articles and book notices <str<strong>on</strong>g>of</str<strong>on</strong>g> a<br />

few lines written when Hayek was editing. <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>a, will be omitted.<br />

And <str<strong>on</strong>g>of</str<strong>on</strong>g> course the corresp<strong>on</strong>dence to be published will be mainly that<br />

which bears significantly <strong>on</strong> Hayek’s literary and theoretical work in<br />

ec<strong>on</strong>omics, psychology, biography and history, political theory, and<br />

philosophy.<br />

III<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> preparati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> a standard editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> this type is a large and also<br />

expensive undertaking. First and foremost am<strong>on</strong>gst those to be thanked<br />

for their very great assistance are W.Glenn Campbell, Director Emeritus<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the Hoover Instituti<strong>on</strong> <strong>on</strong> War, Revoluti<strong>on</strong> and Peace, Stanford<br />

University, and John Raisian, Acting Director <str<strong>on</strong>g>of</str<strong>on</strong>g> the Hoover Instituti<strong>on</strong>,<br />

for the generous decisi<strong>on</strong> to provide the principal underlying support for<br />

this project. <str<strong>on</strong>g>The</str<strong>on</strong>g> presiding genius behind the larger project, without<br />

whose advice and support it never could have been organised or<br />

launched, is Walter S.Morris, <str<strong>on</strong>g>of</str<strong>on</strong>g> the Vera and Walter Morris<br />

Foundati<strong>on</strong>. Another instituti<strong>on</strong> whose directors watched carefully over<br />

the incepti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the project, and whose advice has been invaluable, is<br />

the Institute for Humane Studies, George Mas<strong>on</strong> University. <str<strong>on</strong>g>The</str<strong>on</strong>g> editor<br />

is particularly indebted to Le<strong>on</strong>ard P.Liggio, Walter Grinder, and John<br />

Blundell, <str<strong>on</strong>g>of</str<strong>on</strong>g> the Institute for Humane Studies. Equally important has<br />

been the unflagging support and advice <str<strong>on</strong>g>of</str<strong>on</strong>g> Norman Franklin, former<br />

Head <str<strong>on</strong>g>of</str<strong>on</strong>g> Routledge & Kegan Paul, who had been Hayek’s publisher for<br />

many years. I should also like to express my deep thanks to Mrs.<br />

Penelope Kaiserlian, Associate Director <str<strong>on</strong>g>of</str<strong>on</strong>g> the University <str<strong>on</strong>g>of</str<strong>on</strong>g> Chicago<br />

ix


x<br />

Press, and to Mr. Peter Sowden, <str<strong>on</strong>g>of</str<strong>on</strong>g> Routledge. Finally, the project could<br />

not have been carried through successfully without the generous<br />

financial assistance <str<strong>on</strong>g>of</str<strong>on</strong>g> the supporting organisati<strong>on</strong>s, whose names are<br />

listed prominently at the beginning <str<strong>on</strong>g>of</str<strong>on</strong>g> the volume, and to which all<br />

associated with the volume are deeply grateful. <str<strong>on</strong>g>The</str<strong>on</strong>g> support <str<strong>on</strong>g>of</str<strong>on</strong>g> these<br />

sp<strong>on</strong>sors—instituti<strong>on</strong>s and foundati<strong>on</strong>s from six c<strong>on</strong>tinents— not <strong>on</strong>ly<br />

acknowledges the internati<strong>on</strong>al appreciati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Hayek’s work, but also<br />

provides very tangible evidence <str<strong>on</strong>g>of</str<strong>on</strong>g> the ‘extended order <str<strong>on</strong>g>of</str<strong>on</strong>g> human<br />

cooperati<strong>on</strong>’ <str<strong>on</strong>g>of</str<strong>on</strong>g> which Hayek writes.<br />

W.W.Bartley, III


F.A.HAYEK<br />

THE TREND OF ECONOMIC THINKING<br />

<str<strong>on</strong>g>Essays</str<strong>on</strong>g> <strong>on</strong> <strong>Political</strong> Ec<strong>on</strong>omists and <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> History


INTRODUCTION<br />

Friedrich August v<strong>on</strong> Hayek was born in 1899 in what was then<br />

Vienna. <str<strong>on</strong>g>The</str<strong>on</strong>g> name is still in use, unlike, say, Saig<strong>on</strong>; and, unlike, say,<br />

Angkor Wat, there is still an inhabited city in the same locati<strong>on</strong>; but the<br />

Vienna into which Hayek was born, the city which that name c<strong>on</strong>jures<br />

up in our memory and imaginati<strong>on</strong>, survives no more than the fabled<br />

Trebiz<strong>on</strong>d. Hayek has lived most <str<strong>on</strong>g>of</str<strong>on</strong>g> his life, as have many civilised<br />

people <str<strong>on</strong>g>of</str<strong>on</strong>g> the twentieth century, in a kind <str<strong>on</strong>g>of</str<strong>on</strong>g> exile. England is his<br />

adopted country, but he made his last home in Freiburg.<br />

“What a small group!” Hayek has recalled, <str<strong>on</strong>g>of</str<strong>on</strong>g> his family and friends<br />

in that l<strong>on</strong>g-lost Vienna. “[K<strong>on</strong>rad] Lorenz I first encountered when he<br />

was a boy <str<strong>on</strong>g>of</str<strong>on</strong>g> four or five; [Otto] Frisch, the youngest brother <str<strong>on</strong>g>of</str<strong>on</strong>g> friends<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> my father; [Ludwig] Wittgenstein, a sec<strong>on</strong>d cousin <str<strong>on</strong>g>of</str<strong>on</strong>g> my mother<br />

whom I first remember in 1918 when we were both ensigns in the<br />

artillery <str<strong>on</strong>g>of</str<strong>on</strong>g> the Austro-Hungarian army; Böhm-Bawerk, my maternal<br />

grandfather’s colleague and mountaineering compani<strong>on</strong>; [Erwin]<br />

Schrödinger, the s<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> my father’s botanical colleague who<br />

occasi<strong>on</strong>ally accompanied his father to the botanists’ teas at our house….”<br />

What made Vienna the distinctive city that it was, as much as any other<br />

the fount <str<strong>on</strong>g>of</str<strong>on</strong>g> Western culture, is a questi<strong>on</strong> to be kept in mind, but it is<br />

not the subject here under discussi<strong>on</strong>. What we might observe is that a<br />

milieu such as that in which Hayek spent his childhood and youth, a<br />

society in which family and associates, positi<strong>on</strong> and accomplishment,<br />

knowledge and history were so tightly intertwined, meant that the<br />

members <str<strong>on</strong>g>of</str<strong>on</strong>g> such a society were quickly and always apprised <str<strong>on</strong>g>of</str<strong>on</strong>g> what<br />

mattered. This is no small feat, as any teacher <str<strong>on</strong>g>of</str<strong>on</strong>g> the present generati<strong>on</strong><br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> youth knows too well. It is the significance <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge and<br />

informati<strong>on</strong> that leads to the evoluti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> understanding. Indifference<br />

cannot produce the sort <str<strong>on</strong>g>of</str<strong>on</strong>g> inquiry, the criticism and dissent that is<br />

necessary for the growth <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge.


INTRODUCTION 3<br />

What has given Hayek’s writing its enduring value is this sense <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

what matters. Ec<strong>on</strong>omists cannot point to a sterling record <str<strong>on</strong>g>of</str<strong>on</strong>g> prescience.<br />

Classical theory foundered <strong>on</strong> the rocks <str<strong>on</strong>g>of</str<strong>on</strong>g> a world depressi<strong>on</strong>;<br />

Keynesian ec<strong>on</strong>omics <strong>on</strong> the phenomen<strong>on</strong> inelegantly referred to as<br />

‘stagflati<strong>on</strong>’; and as for Marxism, the year <str<strong>on</strong>g>of</str<strong>on</strong>g> 1989 has finally brought<br />

the collapse <str<strong>on</strong>g>of</str<strong>on</strong>g> a system that extracted inhuman costs to enforce a<br />

fanatical blunder. For Hayek, it is no c<strong>on</strong>solati<strong>on</strong> to have been right all<br />

al<strong>on</strong>g. It is in his criticisms <str<strong>on</strong>g>of</str<strong>on</strong>g> socialism, <str<strong>on</strong>g>of</str<strong>on</strong>g> the attempt to c<strong>on</strong>trol by<br />

fiat the relati<strong>on</strong>s am<strong>on</strong>g human beings, that Hayek has dem<strong>on</strong>strated his<br />

keen sense <str<strong>on</strong>g>of</str<strong>on</strong>g> significance, <str<strong>on</strong>g>of</str<strong>on</strong>g> the compelling need to define the problem<br />

faced. Only if a problem has been clearly defined can we know if we<br />

have found an answer. This is by no means the simple practice the<br />

statement suggests. In wanting the world to c<strong>on</strong>form to our expectati<strong>on</strong>s,<br />

we too <str<strong>on</strong>g>of</str<strong>on</strong>g>ten craft a problem to accept the soluti<strong>on</strong> we want, rather than<br />

face an unacceptable truth. In his preface to C<strong>on</strong>jectures and<br />

Refutati<strong>on</strong>s, 1 the work which Sir Karl Popper dedicated to Hayek,<br />

Popper observes that his book is largely a variati<strong>on</strong> <strong>on</strong> <strong>on</strong>e very simple<br />

theme—the thesis that we can learn from our mistakes. But then, how<br />

do we know when we are mistaken, and when can we afford to admit a<br />

mistake? <str<strong>on</strong>g>The</str<strong>on</strong>g> growth <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge is forced through a painful need<br />

generated by error, and the less<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics can be swift and<br />

unsparing. Even so, why should we bother with history, particularly<br />

with the history <str<strong>on</strong>g>of</str<strong>on</strong>g> theories, which is what many <str<strong>on</strong>g>of</str<strong>on</strong>g> the essays collected<br />

in this volume are about? <str<strong>on</strong>g>The</str<strong>on</strong>g>re are several aspects to an answer to this<br />

questi<strong>on</strong>.<br />

In the chapter “History and Politics”, Hayek observes that historical<br />

myths have perhaps played nearly as great a role in shaping opini<strong>on</strong> as<br />

historical facts; and that even new ideas reach wider circles usually not<br />

in their abstract form but as the interpretati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> particular events. Is it<br />

then not as important to know the lineage <str<strong>on</strong>g>of</str<strong>on</strong>g> an idea as the idea itself; to<br />

be able to assess its staying power and to observe whether the problem<br />

addressed has become a problem solved?<br />

Herewith, then, to compare, a passage from David Hume and <strong>on</strong>e<br />

from Richard Cantill<strong>on</strong>:<br />

Accordingly we find that, in every kingdom into which m<strong>on</strong>ey<br />

begins to flow in greater abundance than formerly, everything<br />

takes a new face: labour and industry gain life; the merchant<br />

becomes more enterprising, the manufacturer more diligent and<br />

skilful, and even the farmer follows his plough with greater


4 THE TREND OF ECONOMIC THINKING<br />

alacrity and attenti<strong>on</strong>…. From the whole <str<strong>on</strong>g>of</str<strong>on</strong>g> this reas<strong>on</strong>ing we may<br />

c<strong>on</strong>clude,<br />

that it is <str<strong>on</strong>g>of</str<strong>on</strong>g> no manner <str<strong>on</strong>g>of</str<strong>on</strong>g> c<strong>on</strong>sequence, with regard to the<br />

domestic happiness <str<strong>on</strong>g>of</str<strong>on</strong>g> a state, whether m<strong>on</strong>ey be in a greater or<br />

less quantity. <str<strong>on</strong>g>The</str<strong>on</strong>g> good policy <str<strong>on</strong>g>of</str<strong>on</strong>g> the magistrate c<strong>on</strong>sists <strong>on</strong>ly in<br />

keeping it, if possible, still encreasing; because, by that means, he<br />

keeps alive a spirit <str<strong>on</strong>g>of</str<strong>on</strong>g> industry in the nati<strong>on</strong>, and encreases the<br />

stock <str<strong>on</strong>g>of</str<strong>on</strong>g> labour, in which c<strong>on</strong>sists all real power and riches. 2<br />

But Cantill<strong>on</strong>, foreseeing a less happy outcome, provides an antidote;<br />

and completes the ec<strong>on</strong>omist’s ‘dismal task’:<br />

When a State has arrived at the highest point <str<strong>on</strong>g>of</str<strong>on</strong>g> wealth (I assume<br />

always that the comparative wealth <str<strong>on</strong>g>of</str<strong>on</strong>g> States c<strong>on</strong>sists principally<br />

in the respective quantities <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>ey which they possess) it will<br />

inevitably fall into poverty by the ordinary course <str<strong>on</strong>g>of</str<strong>on</strong>g> things. <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

too great abundance <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>ey, which so l<strong>on</strong>g as it lasts forms the<br />

power <str<strong>on</strong>g>of</str<strong>on</strong>g> States, throws them back imperceptibly but naturally<br />

into poverty. Thus it would seem that when a State expands by<br />

trade and the abundance <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>ey raises the price <str<strong>on</strong>g>of</str<strong>on</strong>g> Land and<br />

Labour, the Prince or the Legislator ought to withdraw m<strong>on</strong>ey<br />

from circulati<strong>on</strong>, keep it for emergencies, and try to retard its<br />

circulati<strong>on</strong> by every means except compulsi<strong>on</strong> and bad faith, so as<br />

to forestall the too great dearness <str<strong>on</strong>g>of</str<strong>on</strong>g> its articles and prevent the<br />

drawbacks <str<strong>on</strong>g>of</str<strong>on</strong>g> luxury. 3<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re is hardly a country in the world today where these two positi<strong>on</strong>s<br />

are not—still!—under interminable debate. <str<strong>on</strong>g>The</str<strong>on</strong>g> terms in which the<br />

debates are c<strong>on</strong>ducted do change, as politics and ec<strong>on</strong>omic theory<br />

c<strong>on</strong>tinue their three-legged race to define terms <str<strong>on</strong>g>of</str<strong>on</strong>g> success and escape<br />

the rude revelati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> a problem for which no soluti<strong>on</strong> ever seems<br />

forthcoming. <str<strong>on</strong>g>The</str<strong>on</strong>g> problem is the determinati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>etary standards;<br />

the rise and fall <str<strong>on</strong>g>of</str<strong>on</strong>g> prices must be c<strong>on</strong>veyed by some instrument,<br />

something with more staying power than, say, a tuning fork. <str<strong>on</strong>g>The</str<strong>on</strong>g>re is a<br />

1 K.R.Popper, C<strong>on</strong>jectures and Refutati<strong>on</strong>s (New York and L<strong>on</strong>d<strong>on</strong>: Basic<br />

Books, 1962).


INTRODUCTION 5<br />

difference between m<strong>on</strong>ey and a m<strong>on</strong>etary standard; and the dawn <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the history <str<strong>on</strong>g>of</str<strong>on</strong>g> the problem is to be found in Hayek’s chapter <strong>on</strong> the<br />

genesis <str<strong>on</strong>g>of</str<strong>on</strong>g> the gold standard. But it is also in the essay <strong>on</strong> Dr. Bernard<br />

Mandeville where Hayek finds “the definite breakthrough in modern<br />

thought <str<strong>on</strong>g>of</str<strong>on</strong>g> the twin ideas <str<strong>on</strong>g>of</str<strong>on</strong>g> evoluti<strong>on</strong> and <str<strong>on</strong>g>of</str<strong>on</strong>g> the sp<strong>on</strong>taneous formati<strong>on</strong><br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> an order”, an order which is the result <str<strong>on</strong>g>of</str<strong>on</strong>g> human acti<strong>on</strong>, but not <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

human design.<br />

England did not establish the gold standard by any c<strong>on</strong>scious and<br />

deliberate act. In fact, it came about as the unintended c<strong>on</strong>sequence <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the attempt to secure a silver standard through the recoinage <str<strong>on</strong>g>of</str<strong>on</strong>g> 1695,<br />

which was a deliberate, and rather costly, act, the result <str<strong>on</strong>g>of</str<strong>on</strong>g> an argument<br />

by John Locke that a m<strong>on</strong>etary standard was a matter <str<strong>on</strong>g>of</str<strong>on</strong>g> principle, and<br />

that a standard <strong>on</strong>ce established in which c<strong>on</strong>tracts are made should be<br />

upheld. <str<strong>on</strong>g>The</str<strong>on</strong>g> establishment <str<strong>on</strong>g>of</str<strong>on</strong>g> Locke’s principle did not secure its<br />

objective—a silver standard for the shilling, which Sir Isaac Newt<strong>on</strong>,<br />

too, tried to secure in his role as Master <str<strong>on</strong>g>of</str<strong>on</strong>g> the Mint—but it did have the<br />

fortuitous outcome <str<strong>on</strong>g>of</str<strong>on</strong>g> securing for L<strong>on</strong>d<strong>on</strong> the leading role in the<br />

world’s financial markets, since it led much <str<strong>on</strong>g>of</str<strong>on</strong>g> the world to believe that<br />

if they lent their m<strong>on</strong>ey to L<strong>on</strong>d<strong>on</strong> they could be reas<strong>on</strong>ably assured <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

getting it back. <str<strong>on</strong>g>The</str<strong>on</strong>g> principle was invoked in 1844 when England<br />

returned to the gold standard after the Napole<strong>on</strong>ic wars, and again in<br />

1926 with not so favourable an outcome. Alas, the principle, like all<br />

such, c<strong>on</strong>tained premisses the implicati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> which were not, perhaps<br />

still are not, known. Since the shilling—or any denominati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> any<br />

currency— must be a fixed number, to fix that number relative to any<br />

other c<strong>on</strong>vertible value is a mysterious achievement for which there is<br />

no reliable recipe. Yet a principle, <strong>on</strong>ce accepted, takes <strong>on</strong> the same<br />

objective reality as any other event, thus muddying the ancient<br />

distincti<strong>on</strong> between ‘natural’ and ‘artificial’ laws, the dichotomy which<br />

Hayek has found so pois<strong>on</strong>ous in the Aristotelian menu.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> less<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> history are not, or not <strong>on</strong>ly, to avoid repeating the<br />

mistakes <str<strong>on</strong>g>of</str<strong>on</strong>g> the past. Whatever history has left to teach—and that value<br />

cannot be over-estimated—derives largely from what was not, perhaps<br />

could not have been, understood in the first place. Since we cannot<br />

predict all <str<strong>on</strong>g>of</str<strong>on</strong>g> the c<strong>on</strong>sequences <str<strong>on</strong>g>of</str<strong>on</strong>g> any act, or all <str<strong>on</strong>g>of</str<strong>on</strong>g> the implicati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

2 David Hume, <str<strong>on</strong>g>Essays</str<strong>on</strong>g> Moral, <strong>Political</strong>, and Literary, ed. Eugene F.Miller<br />

(Indianapolis, Ind.: LibertyClassics, 1985), pp. 286–288.<br />

3 Richard Cantill<strong>on</strong>, Essai sur la Nature du Commerce en Général, ed. Henry<br />

Higgs (L<strong>on</strong>d<strong>on</strong>: Frank Cass, 1959), p. 185.


6 THE TREND OF ECONOMIC THINKING<br />

any theory, and do not, therefore, know what we are doing, we do not<br />

know what we have d<strong>on</strong>e. 4<br />

C<strong>on</strong>sider the difficulties faced by ec<strong>on</strong>omic forecasters extrapolating<br />

ec<strong>on</strong>omic trends from estimates <str<strong>on</strong>g>of</str<strong>on</strong>g> present activity which are derived<br />

from statistics which in turn undergo endless revisi<strong>on</strong>s. In the words <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

<strong>on</strong>e, “In theory, you’re trying to find out what the future is going to be<br />

like. That’s difficult when the past keeps changing.” 5 <str<strong>on</strong>g>The</str<strong>on</strong>g> assumpti<strong>on</strong><br />

that ec<strong>on</strong>omists can find predictable solu ti<strong>on</strong>s to ec<strong>on</strong>omic problems is<br />

undoubtedly the most inhibiting force in the present curriculum for<br />

students <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics. It has led to the increasing isolati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> theoretical<br />

ec<strong>on</strong>omists from the day-to-day practiti<strong>on</strong>ers <str<strong>on</strong>g>of</str<strong>on</strong>g> the subject—the actual<br />

participants in an ec<strong>on</strong>omy, the c<strong>on</strong>sumers and the producers. It is the<br />

growth <str<strong>on</strong>g>of</str<strong>on</strong>g> their knowledge which is all important both for the success <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

an ec<strong>on</strong>omy and the validity <str<strong>on</strong>g>of</str<strong>on</strong>g> any ec<strong>on</strong>omic theory. And the fact that<br />

this knowledge is so widely dispersed and ever-changing lies at the core<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> much <str<strong>on</strong>g>of</str<strong>on</strong>g> Hayek’s most important work, for example his famous<br />

essays, “<str<strong>on</strong>g>The</str<strong>on</strong>g> Use <str<strong>on</strong>g>of</str<strong>on</strong>g> Knowledge in Society” 6 and “<str<strong>on</strong>g>The</str<strong>on</strong>g> Meaning <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Competiti<strong>on</strong>”. 7 Yet it is the unpredictable character <str<strong>on</strong>g>of</str<strong>on</strong>g> the growth <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

knowledge which requires that from time to time we return our thoughts<br />

to the past, to rediscover in the terms set by our original problems<br />

whether we are still <strong>on</strong> course.<br />

We can find no better introducti<strong>on</strong> to the rewards <str<strong>on</strong>g>of</str<strong>on</strong>g> reading Hayek’s<br />

historical studies—many <str<strong>on</strong>g>of</str<strong>on</strong>g> which are collected in this volume, and some<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> which appear here for the first time in English—than to repeat the<br />

gracious acknowledgement given to Hayek by Sir John Clapham in the<br />

preface to his definitive history <str<strong>on</strong>g>of</str<strong>on</strong>g> the Bank <str<strong>on</strong>g>of</str<strong>on</strong>g> England. “His masterly<br />

knowledge <str<strong>on</strong>g>of</str<strong>on</strong>g> our ec<strong>on</strong>omic literature has been at my command; and to<br />

him I owe a number <str<strong>on</strong>g>of</str<strong>on</strong>g> pamphlet and press references. His editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Henry Thornt<strong>on</strong>’s Paper Credit was always <strong>on</strong> my table for the period<br />

1780–1820.” 8 <str<strong>on</strong>g>The</str<strong>on</strong>g> essays in this volume—including Hayek’s essay <strong>on</strong><br />

Henry Thornt<strong>on</strong>—are not printed in chr<strong>on</strong>ological order (though for the<br />

c<strong>on</strong>venience <str<strong>on</strong>g>of</str<strong>on</strong>g> students <str<strong>on</strong>g>of</str<strong>on</strong>g> Hayek’s work a table <str<strong>on</strong>g>of</str<strong>on</strong>g> the c<strong>on</strong>tents in<br />

chr<strong>on</strong>ological sequence is provided), since Hayek was not primarily<br />

c<strong>on</strong>cerned with establishing a sequential view <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic cause and<br />

4 For a full discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> this thesis and its implicati<strong>on</strong>s for ec<strong>on</strong>omic theory,<br />

see W.W.Bartley, III, Unfathomed Knowledge, Unmeasured Wealth (La Salle,<br />

Ill., and L<strong>on</strong>d<strong>on</strong>: Open Court, 1990).<br />

5 Martin Zimmerman, chief ec<strong>on</strong>omist at Ford Motor Co., quoted in <str<strong>on</strong>g>The</str<strong>on</strong>g> Wall<br />

Street Journal, August 31, 1989, p. A2.


INTRODUCTION 7<br />

effect. His c<strong>on</strong>cern here, and throughout most <str<strong>on</strong>g>of</str<strong>on</strong>g> his work, is with the<br />

development <str<strong>on</strong>g>of</str<strong>on</strong>g> c<strong>on</strong>cepts and their role in determining the evoluti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

ec<strong>on</strong>omic and political order. With an historical c<strong>on</strong>text in view we may<br />

attempt to escape from the limits <str<strong>on</strong>g>of</str<strong>on</strong>g> our own parochial assumpti<strong>on</strong>s<br />

about human behaviour; investigating, as it were, the fossil remains for<br />

clues about evoluti<strong>on</strong>, to try to evade our own extincti<strong>on</strong>.<br />

Hayek’s Vienna was not so lucky. <str<strong>on</strong>g>The</str<strong>on</strong>g> Great War and the Sec<strong>on</strong>d<br />

World War severed Vienna’s links with its former domain. But wars are<br />

effects as well as causes, and Vienna’s links with the former provinces<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the Austro-Hungarian empire had already begun to loosen. <str<strong>on</strong>g>The</str<strong>on</strong>g>re is<br />

perhaps yet another ec<strong>on</strong>omic history less<strong>on</strong> to be found in causes <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

eventual collapse <str<strong>on</strong>g>of</str<strong>on</strong>g> all the great nineteenth-century empires, <strong>on</strong>e that<br />

heret<str<strong>on</strong>g>of</str<strong>on</strong>g>ore has not received sufficient attenti<strong>on</strong>, <strong>on</strong>e that might reawaken<br />

an interest in ec<strong>on</strong>omic history and the history <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic theory.<br />

Hayek, as we have said, had a keen sense <str<strong>on</strong>g>of</str<strong>on</strong>g> what mattered. In fact, the<br />

primary functi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the capital city <str<strong>on</strong>g>of</str<strong>on</strong>g> an empire, such as Vienna or<br />

L<strong>on</strong>d<strong>on</strong>, has been to bring together all the informati<strong>on</strong> necessary to<br />

maintain the political and ec<strong>on</strong>omic order up<strong>on</strong> which the survival <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the empire depends. Understanding the significance <str<strong>on</strong>g>of</str<strong>on</strong>g> informati<strong>on</strong> was<br />

the job <str<strong>on</strong>g>of</str<strong>on</strong>g> every<strong>on</strong>e in a capital; their own careers depended <strong>on</strong> it. But<br />

an inventi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the nineteenth century changed the world forever in<br />

ways that we <strong>on</strong>ly now—with the development <str<strong>on</strong>g>of</str<strong>on</strong>g> the computer—begin<br />

to comprehend. Ec<strong>on</strong>omists <str<strong>on</strong>g>of</str<strong>on</strong>g> the time did not. Ricardo had changed<br />

the focus <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic theory to an investigati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> how ec<strong>on</strong>omic gain<br />

is shared am<strong>on</strong>g the factors <str<strong>on</strong>g>of</str<strong>on</strong>g> producti<strong>on</strong>. Marx compounded the fel<strong>on</strong>y<br />

with his focus <strong>on</strong> industrial producti<strong>on</strong>. In fact, the investment <str<strong>on</strong>g>of</str<strong>on</strong>g> capital<br />

in manufacturing is but <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> a set <str<strong>on</strong>g>of</str<strong>on</strong>g> interdependent relati<strong>on</strong>s which<br />

we might call the dispersal <str<strong>on</strong>g>of</str<strong>on</strong>g> c<strong>on</strong>sumpti<strong>on</strong>—and, although not<br />

identified as such in classical theory, is the necessary c<strong>on</strong>diti<strong>on</strong> for the<br />

divisi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> labour to be pr<str<strong>on</strong>g>of</str<strong>on</strong>g>itable. In short, it was the development <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

railroads that fundamentally changed the means <str<strong>on</strong>g>of</str<strong>on</strong>g> producti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> goods,<br />

and necessarily the c<strong>on</strong>sumpti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> those goods. (A thorough discussi<strong>on</strong><br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> this ec<strong>on</strong>omic process is bey<strong>on</strong>d the intent <str<strong>on</strong>g>of</str<strong>on</strong>g> this introducti<strong>on</strong>.<br />

6 In F.A.Hayek, Individualism and the <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Order, Gateway editi<strong>on</strong><br />

(Chicago: Henry Regnery, 1972), pp. 77–91.<br />

7 Op. cit., pp. 92–106.<br />

8 Sir John Clapham, <str<strong>on</strong>g>The</str<strong>on</strong>g> Bank <str<strong>on</strong>g>of</str<strong>on</strong>g> England (Cambridge: Cambridge University<br />

Press, 1944), p. viii.


8 THE TREND OF ECONOMIC THINKING<br />

However, examples are necessary to understand the importance <str<strong>on</strong>g>of</str<strong>on</strong>g> our<br />

subject, the unlearned less<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> history.)<br />

More important than the railroad, ultimately, was the telegraph. For<br />

the first time, informati<strong>on</strong> could be c<strong>on</strong>veyed over l<strong>on</strong>g distances<br />

without something or some<strong>on</strong>e having to be physically transported.<br />

Once this possibility existed, the financial, political and military<br />

justificati<strong>on</strong> for empire vanished. Think <str<strong>on</strong>g>of</str<strong>on</strong>g> the Roman road and the<br />

British navy; think <str<strong>on</strong>g>of</str<strong>on</strong>g> the early banking families, the Rothschilds, for<br />

example; think <str<strong>on</strong>g>of</str<strong>on</strong>g> the incredible intelligence network <str<strong>on</strong>g>of</str<strong>on</strong>g> Lloyd’s <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

L<strong>on</strong>d<strong>on</strong>.<br />

Now c<strong>on</strong>sider the instantaneous transmissi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> financial informati<strong>on</strong><br />

by computer and satellite. And c<strong>on</strong>sider why this is valuable enough to<br />

have repaid the enormous investment it has required to bring it into<br />

being. For an explanati<strong>on</strong>, we can retrace the development <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic<br />

theory, to writers before Ricardo, to Adam Smith, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, but also to<br />

Richard Cantill<strong>on</strong>, about whom Hayek’s essay is <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the treasures <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

this collecti<strong>on</strong>.<br />

Suppose now that the circulati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>ey in the provinces and in<br />

the Capital is equal both in quantity <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>ey and speed <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

circulati<strong>on</strong>. <str<strong>on</strong>g>The</str<strong>on</strong>g> balance will be first sent to the Capital in cash<br />

and this will diminish the quantity <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>ey in the Provinces and<br />

increase it in the Capital, and c<strong>on</strong>sequently the raw material and<br />

commodities will be dearer in the Capital than in the Provinces,<br />

<strong>on</strong> account <str<strong>on</strong>g>of</str<strong>on</strong>g> the greater abundance <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>ey in the Capital. <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

difference <str<strong>on</strong>g>of</str<strong>on</strong>g> prices in the Capital and in the Provinces must pay<br />

for the costs and risks <str<strong>on</strong>g>of</str<strong>on</strong>g> transport, otherwise cash will be sent to<br />

the Capital to pay the balance and this will go <strong>on</strong> till the prices in<br />

the Capital and the Provinces come to the level <str<strong>on</strong>g>of</str<strong>on</strong>g> these costs and<br />

risks. <str<strong>on</strong>g>The</str<strong>on</strong>g>n the Merchants or Undertakers <str<strong>on</strong>g>of</str<strong>on</strong>g> the Market Towns<br />

will buy at a low price the products <str<strong>on</strong>g>of</str<strong>on</strong>g> the Villages and will have<br />

them carried to the Capital to be sold there at a higher price: and<br />

this difference <str<strong>on</strong>g>of</str<strong>on</strong>g> price will necessarily pay for the upkeep <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

Horses and Menservants and the pr<str<strong>on</strong>g>of</str<strong>on</strong>g>it <str<strong>on</strong>g>of</str<strong>on</strong>g> the Undertaker, or else<br />

he would cease his enterprise.<br />

It will follow from this that the price <str<strong>on</strong>g>of</str<strong>on</strong>g> raw Produce <str<strong>on</strong>g>of</str<strong>on</strong>g> equal<br />

quality will always be higher in the Country places which are<br />

nearest the Capital than in those more distant in proporti<strong>on</strong> to the<br />

costs and risks <str<strong>on</strong>g>of</str<strong>on</strong>g> transport; and that the Countries adjacent to<br />

Seas and Rivers flowing into the Capital will get a better price for<br />

their Produce in proporti<strong>on</strong> than those which are distant (Other


things being equal) because water transport is less expensive than<br />

land transport. On the other hand the Products and small wares<br />

which cannot be c<strong>on</strong>sumed in the Capital, because they are not<br />

suitable or cannot be sent thither <strong>on</strong> account <str<strong>on</strong>g>of</str<strong>on</strong>g> their bulk, or<br />

because they would be spoiled <strong>on</strong> the way, will be infinitely<br />

cheaper in the Country and distant Provinces than in the Capital,<br />

owing to the amount <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>ey circulating for them which is much<br />

smaller in the distant Provinces.<br />

So it is that new laid eggs, game, fresh butter, wood fuel, etc. will<br />

generally be much cheaper in the district <str<strong>on</strong>g>of</str<strong>on</strong>g> Poitou than in Paris,<br />

whilst Corn, Cattle and Horses will be dearer at Paris <strong>on</strong>ly by the<br />

difference <str<strong>on</strong>g>of</str<strong>on</strong>g> the cost and risk <str<strong>on</strong>g>of</str<strong>on</strong>g> carriage and the dues for<br />

entering the City. 9<br />

(It should also be observed that in this passage Cantill<strong>on</strong> points to the<br />

source <str<strong>on</strong>g>of</str<strong>on</strong>g> the seas<strong>on</strong>al flow <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>ey that so plagued early banking.)<br />

And he observes as well:<br />

England today c<strong>on</strong>sumes not <strong>on</strong>ly the greatest part <str<strong>on</strong>g>of</str<strong>on</strong>g> its own<br />

small produce but also much foreign produce, such as Silks,<br />

Wines, Fruit, Linen in great quantity, etc. while she sends abroad<br />

<strong>on</strong>ly the produce <str<strong>on</strong>g>of</str<strong>on</strong>g> her Mines, her work and Manufactures for the<br />

most part, and dear though Labour be owing to the abundance <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

m<strong>on</strong>ey, she does not fail to sell her articles in distant countries,<br />

owing to the advantage <str<strong>on</strong>g>of</str<strong>on</strong>g> her shipping, at prices as reas<strong>on</strong>able as<br />

in France where these same articles are much cheaper. 10<br />

Hayek has written at some length about the role <str<strong>on</strong>g>of</str<strong>on</strong>g> prices as signals for<br />

altering ec<strong>on</strong>omic resp<strong>on</strong>ses. <str<strong>on</strong>g>The</str<strong>on</strong>g> primary signal is the existence <str<strong>on</strong>g>of</str<strong>on</strong>g> two<br />

different prices for the same good. If the cost <str<strong>on</strong>g>of</str<strong>on</strong>g> transport is less than the<br />

difference between the two prices, a pr<str<strong>on</strong>g>of</str<strong>on</strong>g>it can be made. That pr<str<strong>on</strong>g>of</str<strong>on</strong>g>it is<br />

the fundamental gain <str<strong>on</strong>g>of</str<strong>on</strong>g> capitalism. It is why capitalism can improve the<br />

welfare <str<strong>on</strong>g>of</str<strong>on</strong>g> all without shifting the burden <str<strong>on</strong>g>of</str<strong>on</strong>g> cost within an ec<strong>on</strong>omy.<br />

Agreed, the above discussi<strong>on</strong> is simplified. A price difference cannot<br />

always be discovered in an instant. <str<strong>on</strong>g>The</str<strong>on</strong>g>re is the complicati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

m<strong>on</strong>etary standard; and prices al<strong>on</strong>e do not tell <strong>on</strong>e all that <strong>on</strong>e needs to<br />

know in order to make efficient choices. Most troubling <str<strong>on</strong>g>of</str<strong>on</strong>g> all, there are<br />

unforeseen and unintended c<strong>on</strong>sequences which follow from any<br />

9 Cantill<strong>on</strong>, op. cit., pp. 152–153.<br />

INTRODUCTION 9


10 THE TREND OF ECONOMIC THINKING<br />

change in—or from a failure to change— ec<strong>on</strong>omic behaviour; or from<br />

some at <strong>on</strong>ce improbable, yet unprepossessing, inventi<strong>on</strong>.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> troubling history <str<strong>on</strong>g>of</str<strong>on</strong>g> England in the twentieth century provides an<br />

example. For an empire which thrived <strong>on</strong> its ability to develop<br />

knowledge and to comprehend the significance <str<strong>on</strong>g>of</str<strong>on</strong>g> informati<strong>on</strong>, there was<br />

a disastrous lapse at the end <str<strong>on</strong>g>of</str<strong>on</strong>g> the Sec<strong>on</strong>d World War. Recall the signal<br />

flags that Nels<strong>on</strong> used to win the battle at Trafalgar; the critical role that<br />

radar played in the Battle <str<strong>on</strong>g>of</str<strong>on</strong>g> Britain; and the decisive role that<br />

codebreaking played, first against the Japanese in the Pacific by the<br />

United States; sec<strong>on</strong>dly against the German U-boats by the British in<br />

the Atlantic, using a primitive computer developed by Alan Turing. <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

British failed to understand what they had been given. It was left for an<br />

Hungarian refugee, John v<strong>on</strong> Neumann—not in Vienna but in America<br />

—to c<strong>on</strong>tinue the revoluti<strong>on</strong> begun by the inventi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the telegraph.<br />

Of course, the sun did not begin to set <strong>on</strong> the British Empire because<br />

it failed to develop the computer. <str<strong>on</strong>g>The</str<strong>on</strong>g> empire dissolved when the costs<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> maintaining the ec<strong>on</strong>omic and political order embodied in the<br />

structure became greater than the benefits: the telegraph, wireless, and<br />

then, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, televisi<strong>on</strong> so accelerated ec<strong>on</strong>omic processes that even<br />

the C<strong>on</strong>corde supers<strong>on</strong>ic transport was obsolete by the time Britain and<br />

France had developed it at a cost <str<strong>on</strong>g>of</str<strong>on</strong>g> billi<strong>on</strong>s. Widely dispersed<br />

informati<strong>on</strong> can now be brought together instantly, and new intelligence<br />

can be broadcast so efficiently that it is bey<strong>on</strong>d the ability <str<strong>on</strong>g>of</str<strong>on</strong>g> any central<br />

power to c<strong>on</strong>trol. This has raised ‘opportunity cost’ above any cost <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

producti<strong>on</strong> as the critical factor in the success <str<strong>on</strong>g>of</str<strong>on</strong>g> any new enterprise,<br />

commercial or military. Surprising any<strong>on</strong>e—except ec<strong>on</strong>omists—has<br />

become more difficult and more costly. Stealth aircraft were the<br />

inevitable resp<strong>on</strong>se to radar, and when fax machines replace posters,<br />

dictators learn that the handwriting is <strong>on</strong> the wall.<br />

Has not something been lost in this instantaneous transmissi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

informati<strong>on</strong>? <str<strong>on</strong>g>The</str<strong>on</strong>g>re is now such a welter <str<strong>on</strong>g>of</str<strong>on</strong>g> facts, images, disasters,<br />

space launches, children fallen in wells, dictators shot or not shot, oil<br />

prices up and oil prices down, how is any<strong>on</strong>e to make sense <str<strong>on</strong>g>of</str<strong>on</strong>g> it all?<br />

Will not even the less<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> the present, to say nothing <str<strong>on</strong>g>of</str<strong>on</strong>g> history,<br />

disappear in the banality <str<strong>on</strong>g>of</str<strong>on</strong>g> ‘sound bytes’, homilies made urgent<br />

through a wilful distorti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> a sensory order. When we come to the<br />

realisati<strong>on</strong> that so many <str<strong>on</strong>g>of</str<strong>on</strong>g> the enduring ec<strong>on</strong>omic problems have not<br />

been solved, c<strong>on</strong>trary to the assumpti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omics textbooks,<br />

10 Op. cit., p. 171.


INTRODUCTION 11<br />

what will the undignified scramble for the exits leave trampled<br />

underfoot?<br />

What is becoming a scarce resource is any sense <str<strong>on</strong>g>of</str<strong>on</strong>g> the significance<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> this welter <str<strong>on</strong>g>of</str<strong>on</strong>g> informati<strong>on</strong>. We are losing the sense <str<strong>on</strong>g>of</str<strong>on</strong>g> what matters,<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the habits <str<strong>on</strong>g>of</str<strong>on</strong>g> mind that can identify problems and learn from<br />

mistakes. Some <str<strong>on</strong>g>of</str<strong>on</strong>g> this can be traced to a loss <str<strong>on</strong>g>of</str<strong>on</strong>g> c<strong>on</strong>text; abstract ideas<br />

are not easily c<strong>on</strong>veyed absent a recognisable embodiment, and the<br />

subtext, that which is not said, may be missing. Hayek’s quarrels with<br />

Aristotle are <str<strong>on</strong>g>of</str<strong>on</strong>g> the same character as his c<strong>on</strong>versati<strong>on</strong>s with Sir Karl<br />

Popper and Milt<strong>on</strong> Friedman: the welcome criticism <str<strong>on</strong>g>of</str<strong>on</strong>g> peers, those who<br />

can recognise the same premisses needed to define a given problem,<br />

however they may come to differ over their c<strong>on</strong>clusi<strong>on</strong>s. Only now do<br />

we begin to realise that something valuable may have been driven from<br />

the world when the c<strong>on</strong>tinuity and traditi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Western civilisati<strong>on</strong> was<br />

shattered in the same blows that destroyed unwanted empires. Now in<br />

Eastern Europe there is nostalgic talk <str<strong>on</strong>g>of</str<strong>on</strong>g> the good old days under the<br />

Hapsburg empire.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> evoluti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge is inseparable from the evoluti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

language, and something invaluable is lost when ‘sound bytes’ replace<br />

the human voice, heard in face-to-face discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> mutual c<strong>on</strong>cerns.<br />

Inflecti<strong>on</strong> counts for much, and what is not said can <strong>on</strong>ly be recognised<br />

when allusi<strong>on</strong> and ir<strong>on</strong>y are possible. So Vienna waltzes.<br />

“Carl Menger”, Hayek has recalled, “I saw <strong>on</strong>ly <strong>on</strong>ce, shortly after I<br />

had read his Grundsätze, when he marched in processi<strong>on</strong> at the<br />

unveiling at the university <str<strong>on</strong>g>of</str<strong>on</strong>g> a m<strong>on</strong>ument <str<strong>on</strong>g>of</str<strong>on</strong>g> his brother Ant<strong>on</strong>. He was<br />

so dignified and impressive with his l<strong>on</strong>g beard that later in my<br />

biographical essay I described him…as tall—the <strong>on</strong>ly wr<strong>on</strong>g statement<br />

and the <strong>on</strong>ly <strong>on</strong>e based <strong>on</strong> pers<strong>on</strong>al knowledge in that essay. I was<br />

however later brought in to advise <strong>on</strong> the sale <str<strong>on</strong>g>of</str<strong>on</strong>g> his library—so I saw<br />

the studies <str<strong>on</strong>g>of</str<strong>on</strong>g> all three founders <str<strong>on</strong>g>of</str<strong>on</strong>g> the Austrian school, but two <str<strong>on</strong>g>of</str<strong>on</strong>g> them<br />

<strong>on</strong>ly after their deaths….<br />

“<str<strong>on</strong>g>The</str<strong>on</strong>g> lady, Mrs. Menger, allowed me, as a reward for my efforts, to<br />

pick <strong>on</strong>e attractive seventeenth-century duodecimo volume from his shelf<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> duplicates. It happened to be the to me still unknown essay by<br />

Richard Cantill<strong>on</strong>, which at <strong>on</strong>ce greatly fascinated me….”<br />

Stephen Kresge


PART I<br />

THE ECONOMIST AND HIS<br />

DISMAL TASK


ONE<br />

THE TREND OF ECONOMIC<br />

THINKING 1<br />

I<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> positi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omist in the intellectual life <str<strong>on</strong>g>of</str<strong>on</strong>g> our time is<br />

unlike that <str<strong>on</strong>g>of</str<strong>on</strong>g> the practiti<strong>on</strong>ers <str<strong>on</strong>g>of</str<strong>on</strong>g> any other branch <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge.<br />

Questi<strong>on</strong>s for whose soluti<strong>on</strong> his special knowledge is relevant are<br />

probably more frequently encountered than questi<strong>on</strong>s related to any<br />

other science. Yet, in large measure, this knowledge is disregarded and<br />

in many respects public opini<strong>on</strong> even seems to move in a c<strong>on</strong>trary<br />

directi<strong>on</strong>. Thus the ec<strong>on</strong>omist appears to be hopelessly out <str<strong>on</strong>g>of</str<strong>on</strong>g> tune with<br />

his time, giving unpractical advice to which his public is not disposed to<br />

listen and having no influence up<strong>on</strong> c<strong>on</strong>temporary events. Why is this?<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> situati<strong>on</strong> is not without precedent in the history <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic<br />

thought; but it cannot be c<strong>on</strong>sidered as normal, and there is str<strong>on</strong>g<br />

reas<strong>on</strong> to believe that it must be the result <str<strong>on</strong>g>of</str<strong>on</strong>g> a particular historical<br />

situati<strong>on</strong>. For the views at present held by the public can clearly be<br />

traced to the ec<strong>on</strong>omists <str<strong>on</strong>g>of</str<strong>on</strong>g> a generati<strong>on</strong> or so ago. So that the fact is,<br />

not that the teaching <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omist has no influence at all; <strong>on</strong> the<br />

c<strong>on</strong>trary, it may be very powerful. But it takes a l<strong>on</strong>g time to make its<br />

influence felt, so that, if there is change, the new ideas tend to be<br />

swamped by the dominati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> ideas which, in fact, have become<br />

obsolete. Hence the recurring intellectual isolati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omist.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> problem <str<strong>on</strong>g>of</str<strong>on</strong>g> the relati<strong>on</strong> between the ec<strong>on</strong>omist and public opini<strong>on</strong><br />

today resolves itself, therefore, into a questi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the causes <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

intellectual changes which have c<strong>on</strong>spired to bring about this cleavage.<br />

It is this subject which I have chosen as the main theme <str<strong>on</strong>g>of</str<strong>on</strong>g> this lecture.


14 THE TREND OF ECONOMIC THINKING<br />

II<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> subject is a vast <strong>on</strong>e, but the aspect which I wish chiefly to<br />

emphasise is that which the ec<strong>on</strong>omist must, naturally, be most anxious<br />

to make clear to the public: i.e., the role played by purely scientific<br />

progress—the growth <str<strong>on</strong>g>of</str<strong>on</strong>g> our insight into the interdependence <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

ec<strong>on</strong>omic phenomena—in bringing about these changes in his attitude<br />

to practical problems.<br />

At first sight there seem to be <strong>on</strong>ly two reas<strong>on</strong>s why ec<strong>on</strong>omists<br />

should change their attitude towards questi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic policy:<br />

either they may find that their knowledge has been inadequate, or their<br />

views <strong>on</strong> the fundamental ethical postulates (up<strong>on</strong> which, <str<strong>on</strong>g>of</str<strong>on</strong>g> course,<br />

every practical c<strong>on</strong>clusi<strong>on</strong> is based) may undergo a change. In either<br />

case the role played by science would be clear. But, in fact, the cause <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the great historical changes which I am discussing seems to me to be <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

a more subtle kind. It c<strong>on</strong>sists neither <str<strong>on</strong>g>of</str<strong>on</strong>g> a change in the underlying<br />

ethical valuati<strong>on</strong>s nor <str<strong>on</strong>g>of</str<strong>on</strong>g> a refutati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the validity <str<strong>on</strong>g>of</str<strong>on</strong>g> certain analytical<br />

propositi<strong>on</strong>s, but rather in a change <str<strong>on</strong>g>of</str<strong>on</strong>g> view regarding the relevance <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

that knowledge for practical problems. It was not a change <str<strong>on</strong>g>of</str<strong>on</strong>g> ideals nor<br />

a change <str<strong>on</strong>g>of</str<strong>on</strong>g> reas<strong>on</strong>ing but a change <str<strong>on</strong>g>of</str<strong>on</strong>g> view with regard to the<br />

applicability <str<strong>on</strong>g>of</str<strong>on</strong>g> such reas<strong>on</strong>ing which was resp<strong>on</strong>sible for the<br />

characteristic features <str<strong>on</strong>g>of</str<strong>on</strong>g> the popular ec<strong>on</strong>omics <str<strong>on</strong>g>of</str<strong>on</strong>g> today. How did this<br />

come about?<br />

It is a comm<strong>on</strong> belief that, about the middle <str<strong>on</strong>g>of</str<strong>on</strong>g> last century, perhaps<br />

under the influence <str<strong>on</strong>g>of</str<strong>on</strong>g> socialistic ideas, the social c<strong>on</strong>science was<br />

aroused by the existence <str<strong>on</strong>g>of</str<strong>on</strong>g> human misery which had previously<br />

escaped recogniti<strong>on</strong>, and it was decided no l<strong>on</strong>ger to tolerate it. Hence<br />

the decline <str<strong>on</strong>g>of</str<strong>on</strong>g> ‘the old political ec<strong>on</strong>omy’ which had been blind to these<br />

c<strong>on</strong>siderati<strong>on</strong>s. But, in fact, nothing could be farther from the truth. No<br />

serious attempt has ever been made to show that the great liberal<br />

ec<strong>on</strong>omists were any less c<strong>on</strong>cerned with the welfare <str<strong>on</strong>g>of</str<strong>on</strong>g> the poorer<br />

1 [Inaugural lecture delivered at the L<strong>on</strong>d<strong>on</strong> School <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s and <strong>Political</strong><br />

Science <strong>on</strong> March 1, 1933. <str<strong>on</strong>g>The</str<strong>on</strong>g> Chair was taken by Dr. James B<strong>on</strong>ar. This essay<br />

was published in <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>a, vol. 13, May 1933, pp. 121–137. <str<strong>on</strong>g>The</str<strong>on</strong>g> title <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

lecture may possibly allude to an anthology edited by R.G.Tugwell, <str<strong>on</strong>g>The</str<strong>on</strong>g> <str<strong>on</strong>g>Trend</str<strong>on</strong>g><br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s (New York: Alfred A.Knopf, 1924), published when Hayek was a<br />

student at New York University and attending seminars at Columbia<br />

University, where Tugwell was Assistant Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s. For a study <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the significance <str<strong>on</strong>g>of</str<strong>on</strong>g> this lecture in the development <str<strong>on</strong>g>of</str<strong>on</strong>g> Hayek’s thought, see<br />

Bruce J.Caldwell, “Hayek’s ‘<str<strong>on</strong>g>The</str<strong>on</strong>g> <str<strong>on</strong>g>Trend</str<strong>on</strong>g> <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> <str<strong>on</strong>g>Thinking</str<strong>on</strong>g>’”, Review <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Austrian <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s, vol. 2, 1988, pp. 175–178. -Ed.]


THE TREND OF ECONOMIC THINKING 15<br />

classes <str<strong>on</strong>g>of</str<strong>on</strong>g> society than were their successors. And I do not think that any<br />

such attempt could possibly be successful. <str<strong>on</strong>g>The</str<strong>on</strong>g> causes <str<strong>on</strong>g>of</str<strong>on</strong>g> the change<br />

must be sought elsewhere.<br />

III<br />

It is probably true that ec<strong>on</strong>omic analysis has never been the product <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

detached intellectual curiosity about the why <str<strong>on</strong>g>of</str<strong>on</strong>g> social phenomena, but <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

an intense urge to rec<strong>on</strong>struct a world which gives rise to pr<str<strong>on</strong>g>of</str<strong>on</strong>g>ound<br />

dissatisfacti<strong>on</strong>. This is as true <str<strong>on</strong>g>of</str<strong>on</strong>g> the phylogenesis <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics as <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the <strong>on</strong>togenesis <str<strong>on</strong>g>of</str<strong>on</strong>g> probably every ec<strong>on</strong>omist. As Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Pigou 2 has<br />

aptly remarked: “It is not w<strong>on</strong>der, but the social enthusiasm which<br />

revolts from the sordidness <str<strong>on</strong>g>of</str<strong>on</strong>g> mean streets and the joylessness <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

withered lives, that is the beginning <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic science.” 3 <str<strong>on</strong>g>The</str<strong>on</strong>g> mere<br />

existence <str<strong>on</strong>g>of</str<strong>on</strong>g> an extremely complicated mechanism which led to some<br />

kind <str<strong>on</strong>g>of</str<strong>on</strong>g> coordinati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the independent acti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> individuals was not<br />

sufficient to arouse the scientific curiosity <str<strong>on</strong>g>of</str<strong>on</strong>g> men. While the movement<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the heavenly bodies or the changes in our material surroundings<br />

excited our w<strong>on</strong>der because they were evidently directed by forces<br />

which we did not know, mankind remained—and the majority <str<strong>on</strong>g>of</str<strong>on</strong>g> men<br />

still remain—under the err<strong>on</strong>eous impressi<strong>on</strong> that, since all social<br />

phenomena are the product <str<strong>on</strong>g>of</str<strong>on</strong>g> our own acti<strong>on</strong>s, all that depends up<strong>on</strong><br />

them is their deliberate object.<br />

It was <strong>on</strong>ly when, because the ec<strong>on</strong>omic system did not accomplish<br />

all we wanted, we prevented it from doing what it had been<br />

accomplishing, in an attempt to make it obey us in an arbitrary way,<br />

that we realised that there was anything to be understood. It was <strong>on</strong>ly<br />

incidentally, as a by-product <str<strong>on</strong>g>of</str<strong>on</strong>g> the study <str<strong>on</strong>g>of</str<strong>on</strong>g> such isolated phenomena,<br />

that it was gradually realised that many things which had been taken for<br />

granted were, in fact, the product <str<strong>on</strong>g>of</str<strong>on</strong>g> a highly complicated organism<br />

which we could <strong>on</strong>ly hope to understand by the intense mental effort <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

systematic inquiry. Indeed, it is probably no exaggerati<strong>on</strong> to say that<br />

ec<strong>on</strong>omics developed mainly as the outcome <str<strong>on</strong>g>of</str<strong>on</strong>g> the investigati<strong>on</strong> and<br />

refutati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> successive Utopian proposals—if by ‘Utopian’ we mean<br />

proposals for the improvement <str<strong>on</strong>g>of</str<strong>on</strong>g> undesirable effects <str<strong>on</strong>g>of</str<strong>on</strong>g> the existing<br />

system, based up<strong>on</strong> a complete disregard <str<strong>on</strong>g>of</str<strong>on</strong>g> those forces which actually<br />

enabled it to work.<br />

2 [Arthur C.Pigou (1877–1959), Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>Political</strong> Ec<strong>on</strong>omy, Cambridge<br />

University, 1908–1944. -Ed.]


16 THE TREND OF ECONOMIC THINKING<br />

IV<br />

Now, since ec<strong>on</strong>omic analysis originated in this way, it was <strong>on</strong>ly<br />

natural that ec<strong>on</strong>omists should immediately proceed from the<br />

investigati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> causal interrelati<strong>on</strong>ships to the drawing <str<strong>on</strong>g>of</str<strong>on</strong>g> practical<br />

c<strong>on</strong>clusi<strong>on</strong>s. In criticising proposals for improvement, they accepted the<br />

ethical postulates <strong>on</strong> which such proposals were based and tried to<br />

dem<strong>on</strong>strate that these were not c<strong>on</strong>ducive to the desired end and that,<br />

very <str<strong>on</strong>g>of</str<strong>on</strong>g>ten, policies <str<strong>on</strong>g>of</str<strong>on</strong>g> a radically different nature would bring about the<br />

desired result.<br />

Such a procedure does not in any way violate the rule, which<br />

Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Robbins 4 has so effectively impressed up<strong>on</strong> us, that science<br />

by itself can never prove what ought to be d<strong>on</strong>e. 5 But if there is<br />

agreement <strong>on</strong> ultimate aims, it is clearly scientific knowledge which<br />

decides the best policy for bringing them about. No doubt the ec<strong>on</strong>omist<br />

should always be c<strong>on</strong>scious <str<strong>on</strong>g>of</str<strong>on</strong>g> this distincti<strong>on</strong>; but it would certainly<br />

have been nothing but intolerable pedantry if, in discussing practical<br />

problems, the ec<strong>on</strong>omist had always insisted that science by itself<br />

proves nothing, when in fact it was <strong>on</strong>ly the newly gained knowledge<br />

which was decisive in bringing about the change in their attitude towards<br />

practical affairs.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> attitude <str<strong>on</strong>g>of</str<strong>on</strong>g> the classical ec<strong>on</strong>omists to questi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic<br />

policy was the outcome <str<strong>on</strong>g>of</str<strong>on</strong>g> their scientific c<strong>on</strong>clusi<strong>on</strong>s. <str<strong>on</strong>g>The</str<strong>on</strong>g> presumpti<strong>on</strong><br />

against government interference sprang from a wide range <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

dem<strong>on</strong>strati<strong>on</strong>s that isolated acts <str<strong>on</strong>g>of</str<strong>on</strong>g> interference definitely frustrated the<br />

attainment <str<strong>on</strong>g>of</str<strong>on</strong>g> those ends which all accepted as desirable.<br />

3 [Arthur C.Pigou, <str<strong>on</strong>g>The</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s <str<strong>on</strong>g>of</str<strong>on</strong>g> Welfare, fourth editi<strong>on</strong> (L<strong>on</strong>d<strong>on</strong>:<br />

Macmillan, 1932), p. 5. -Ed.]<br />

4 [Li<strong>on</strong>el Robbins (1898–1984), later Lord Robbins <str<strong>on</strong>g>of</str<strong>on</strong>g> Clare Market, Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s at the L<strong>on</strong>d<strong>on</strong> School <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s and <strong>Political</strong> Science,<br />

University <str<strong>on</strong>g>of</str<strong>on</strong>g> L<strong>on</strong>d<strong>on</strong>, 1929–61; later chairman <str<strong>on</strong>g>of</str<strong>on</strong>g> the Financial Times and<br />

President <str<strong>on</strong>g>of</str<strong>on</strong>g> the Royal <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Society; for many years <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> Hayek’s closest<br />

friends and associates. Am<strong>on</strong>g his works are An Essay <strong>on</strong> the Nature and<br />

Significance <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Science (L<strong>on</strong>d<strong>on</strong>: Macmillan, 1932), <str<strong>on</strong>g>The</str<strong>on</strong>g> Great<br />

Depressi<strong>on</strong> (L<strong>on</strong>d<strong>on</strong>: Macmillan, 1934), and Autobiography <str<strong>on</strong>g>of</str<strong>on</strong>g> an Ec<strong>on</strong>omist<br />

(L<strong>on</strong>d<strong>on</strong>: Macmillan, 1971). -Ed.]<br />

5 [Li<strong>on</strong>el Robbins, An Essay <strong>on</strong> the Nature and Significance <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g><br />

Science (L<strong>on</strong>d<strong>on</strong>: Macmillan, 1932). -Ed.]


THE TREND OF ECONOMIC THINKING 17<br />

V<br />

But the positi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the young science which led to c<strong>on</strong>clusi<strong>on</strong>s so much<br />

in c<strong>on</strong>flict with the result <str<strong>on</strong>g>of</str<strong>on</strong>g> more primitive reflecti<strong>on</strong>s was bound to<br />

become difficult as so<strong>on</strong> as—following its first triumphant success—it<br />

became more c<strong>on</strong>scious <str<strong>on</strong>g>of</str<strong>on</strong>g> its remaining defects. And those who<br />

disliked its c<strong>on</strong>clusi<strong>on</strong>s were not slow in making the most <str<strong>on</strong>g>of</str<strong>on</strong>g> all the<br />

defects they could find. It was not the practical preoccupati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

ec<strong>on</strong>omist which were resp<strong>on</strong>sible for this result. It is by no means<br />

certain that ec<strong>on</strong>omics would have been less disliked if ec<strong>on</strong>omists had<br />

been more careful to distinguish the pure theory from the more applied<br />

parts <str<strong>on</strong>g>of</str<strong>on</strong>g> their c<strong>on</strong>clusi<strong>on</strong>s. It is true that ec<strong>on</strong>omics was c<strong>on</strong>temptuously<br />

dubbed’ a mere utilitarian science because it did not pursue knowledge<br />

for its own sake. But nothing would have aroused more resentment than<br />

if ec<strong>on</strong>omists had tried to do so. Even today it is regarded almost as a<br />

sign <str<strong>on</strong>g>of</str<strong>on</strong>g> moral depravity if the ec<strong>on</strong>omist finds anything to marvel at in his<br />

science; i.e., if he finds an unsuspected order in things which arouses<br />

his w<strong>on</strong>der. And he is bitterly reproached if he does not emphasise, at<br />

every stage <str<strong>on</strong>g>of</str<strong>on</strong>g> his analysis, how much he regrets that his insight into the<br />

order <str<strong>on</strong>g>of</str<strong>on</strong>g> things makes it less easy to change them whenever we please.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> attack <strong>on</strong> ec<strong>on</strong>omics sprang rather from a dislike <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

applicati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> scientific methods to the investigati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> social problems.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> existence <str<strong>on</strong>g>of</str<strong>on</strong>g> a body <str<strong>on</strong>g>of</str<strong>on</strong>g> reas<strong>on</strong>ing which prevented people from<br />

following their first impulsive reacti<strong>on</strong>s, and which compelled them to<br />

balance indirect effects, which could be seen <strong>on</strong>ly by exercising the<br />

intellect, against intense feeling caused by the direct observati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

c<strong>on</strong>crete suffering, then as now, occasi<strong>on</strong>ed intense resentment. It was<br />

against the validity <str<strong>on</strong>g>of</str<strong>on</strong>g> such reas<strong>on</strong>ing in general that the emoti<strong>on</strong>al<br />

revolt was directed. Thus, temporarily, social enthusiasm succeeded in<br />

destroying an instrument created to serve it because it had been made<br />

impatient by the frequent disappointments which it had occasi<strong>on</strong>ed.<br />

It is not to be denied that, at this early stage, ec<strong>on</strong>omists had not yet<br />

become quite c<strong>on</strong>scious <str<strong>on</strong>g>of</str<strong>on</strong>g> the precise nature <str<strong>on</strong>g>of</str<strong>on</strong>g> their generalisati<strong>on</strong>s.<br />

Nor can it be questi<strong>on</strong>ed that <strong>on</strong> some points, such as the theory <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

value, they proceeded <strong>on</strong> very unsatisfactory general assumpti<strong>on</strong>s. To<br />

what extent the actual foundati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> the classical system were<br />

influenced by the fashi<strong>on</strong>able philosophy <str<strong>on</strong>g>of</str<strong>on</strong>g> the day has been made<br />

clear by the distinguished author <str<strong>on</strong>g>of</str<strong>on</strong>g> Philosophy and Politi cal Ec<strong>on</strong>omy.<br />

6 But the aband<strong>on</strong>ment en bloc <str<strong>on</strong>g>of</str<strong>on</strong>g> analytical ec<strong>on</strong>omics was mainly due,<br />

not to the detecti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> faults in the foundati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> c<strong>on</strong>cepts, but to the<br />

fact that, just at the time <str<strong>on</strong>g>of</str<strong>on</strong>g> this revolt, what pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essed to be a substitute


18 THE TREND OF ECONOMIC THINKING<br />

method <str<strong>on</strong>g>of</str<strong>on</strong>g> analytical reas<strong>on</strong>ing <str<strong>on</strong>g>of</str<strong>on</strong>g>fered itself to the more practicalminded<br />

ec<strong>on</strong>omist—a method which, from their point <str<strong>on</strong>g>of</str<strong>on</strong>g> view, had n<strong>on</strong>e<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the objecti<strong>on</strong>able features <str<strong>on</strong>g>of</str<strong>on</strong>g> the existing body <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics. I refer<br />

to the methods <str<strong>on</strong>g>of</str<strong>on</strong>g> the famous Historical School in <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s. 7<br />

Although in the proper sense <str<strong>on</strong>g>of</str<strong>on</strong>g> a school aiming at the replacement <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

theoretical analysis by descripti<strong>on</strong>, this is now a thing <str<strong>on</strong>g>of</str<strong>on</strong>g> the past, yet it<br />

is <str<strong>on</strong>g>of</str<strong>on</strong>g> tremendous historical importance because <str<strong>on</strong>g>of</str<strong>on</strong>g> its influence <strong>on</strong><br />

popular thought at the present time.<br />

It is clear that anything which justified the treatment <str<strong>on</strong>g>of</str<strong>on</strong>g> practical<br />

problems as something unique, determined <strong>on</strong>ly by their own historical<br />

development, was bound to be greeted as a welcome relief from the<br />

necessity <str<strong>on</strong>g>of</str<strong>on</strong>g> c<strong>on</strong>trolling emoti<strong>on</strong>s by difficult reas<strong>on</strong>ing. It was just this<br />

advantage which the historical method afforded. Refusing to believe in<br />

general laws, the Historical School had the special attracti<strong>on</strong> that its<br />

method was c<strong>on</strong>stituti<strong>on</strong>ally unable to refute even the wildest <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Utopias, and was, therefore, not likely to bring the disappointment<br />

associated with theoretical analysis. Its emphasis <strong>on</strong> the unsatisfactory<br />

aspects <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic life, rather than up<strong>on</strong> what was owed to the<br />

working <str<strong>on</strong>g>of</str<strong>on</strong>g> the existing system, and what would be the c<strong>on</strong>sequences if<br />

we tried directly to c<strong>on</strong>trol some <str<strong>on</strong>g>of</str<strong>on</strong>g> the recognised evils, str<strong>on</strong>gly<br />

recommended it to all those who had become impatient.<br />

VI<br />

For a c<strong>on</strong>siderable time, mainly during the last third <str<strong>on</strong>g>of</str<strong>on</strong>g> the nineteenth<br />

century, the two schools which now existed not <strong>on</strong>ly employed different<br />

methods, but also turned their attenti<strong>on</strong> to different problems. <str<strong>on</strong>g>The</str<strong>on</strong>g> more<br />

theoretically minded had to c<strong>on</strong>centrate rather <strong>on</strong> the revisi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

fundamental principles which had been damaged by decades <str<strong>on</strong>g>of</str<strong>on</strong>g> attack,<br />

and had to leave the more applied parts to others who were coming<br />

more and more under the influ ence <str<strong>on</strong>g>of</str<strong>on</strong>g> the historical method. So l<strong>on</strong>g,<br />

however, as this part <str<strong>on</strong>g>of</str<strong>on</strong>g> the task was left to men who had previously<br />

become acquainted with the general principles <str<strong>on</strong>g>of</str<strong>on</strong>g> analysis—and who<br />

were, therefore, immune from the more popular fallacies—the full<br />

6 [James B<strong>on</strong>ar, Philosophy and <strong>Political</strong> Ec<strong>on</strong>omy in Some <str<strong>on</strong>g>of</str<strong>on</strong>g> their Historical<br />

Relati<strong>on</strong>s (L<strong>on</strong>d<strong>on</strong>: S.S<strong>on</strong>nenschein; New York: Macmillan, 1893). -Ed.]<br />

7 [<str<strong>on</strong>g>The</str<strong>on</strong>g> German ec<strong>on</strong>omists Wilhelm Roscher (1817–1894), Bruno Hildebrand<br />

(1812–1878), Karl Knies (1821–1898), Gustav Schmoller (1838–1917), and<br />

their followers. -Ed.]


THE TREND OF ECONOMIC THINKING 19<br />

effect <str<strong>on</strong>g>of</str<strong>on</strong>g> this change did not become apparent. <str<strong>on</strong>g>The</str<strong>on</strong>g> distinguished<br />

ec<strong>on</strong>omist to whose memory this chair 8 is dedicated, and with whose<br />

l<strong>on</strong>g and fruitful career Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Gregory has made us familiar, 9 <str<strong>on</strong>g>of</str<strong>on</strong>g>fers<br />

a c<strong>on</strong>spicuous example <str<strong>on</strong>g>of</str<strong>on</strong>g> the nature <str<strong>on</strong>g>of</str<strong>on</strong>g> this change. Thomas Tooke<br />

could never have become <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the leaders <str<strong>on</strong>g>of</str<strong>on</strong>g> the free-trade movement<br />

in his early years, and remained its lifel<strong>on</strong>g advocate, if he had applied<br />

to the problems <str<strong>on</strong>g>of</str<strong>on</strong>g> internati<strong>on</strong>al trade the same purely inductive<br />

methods which, in his later years, he c<strong>on</strong>sidered as exclusively decisive<br />

in the discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>etary problems.<br />

As so frequently happens, it was <strong>on</strong>ly in the sec<strong>on</strong>d generati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

new school that the lack <str<strong>on</strong>g>of</str<strong>on</strong>g> the tools necessary for the interpretati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the intricate phenomena they were busy describing made itself felt. And<br />

so it came about that, just at the time when the theorists were most<br />

successful in c<strong>on</strong>structing a sounder analytical basis for their science,<br />

the superstructure <str<strong>on</strong>g>of</str<strong>on</strong>g> more c<strong>on</strong>crete applicati<strong>on</strong>s which had been left in<br />

the hands <str<strong>on</strong>g>of</str<strong>on</strong>g> the more practical-minded men fell gradually, more<br />

discredited than disproved, into oblivi<strong>on</strong>. And, in c<strong>on</strong>sequence, many <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the palliatives and quack remedies which, in the past, had been rejected<br />

because, even judged by the analysis <str<strong>on</strong>g>of</str<strong>on</strong>g> the classical system, their<br />

indirect effects were seen to be obviously more objecti<strong>on</strong>able than their<br />

immediate benefits, were introduced by the new generati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> historical<br />

ec<strong>on</strong>omists, until the reacti<strong>on</strong> was carried to a point at which the futile<br />

attempts to redress special grievances by short-sighted State acti<strong>on</strong><br />

could hardly have been more numerous if an analytical science <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

ec<strong>on</strong>omics had never existed. It is no accident that the return <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

protecti<strong>on</strong>ism which followed the free-trade era <str<strong>on</strong>g>of</str<strong>on</strong>g> the nineteenth<br />

century was the work <str<strong>on</strong>g>of</str<strong>on</strong>g> men under the influence <str<strong>on</strong>g>of</str<strong>on</strong>g> this school.<br />

VII<br />

It takes a l<strong>on</strong>g time to rebuild the structure <str<strong>on</strong>g>of</str<strong>on</strong>g> a science if <strong>on</strong>e starts by<br />

revising the fundamental c<strong>on</strong>cepts. And the modern revisi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

theoretical ec<strong>on</strong>omics has occupied sufficient time to allow what was at<br />

first the heretical view <str<strong>on</strong>g>of</str<strong>on</strong>g> a number <str<strong>on</strong>g>of</str<strong>on</strong>g> radical ec<strong>on</strong>omists—who had to<br />

8 [Thomas Tooke (1774–1858), after whom Hayek’s chair in <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Science<br />

and Statistics was named. -Ed.]<br />

9 [<str<strong>on</strong>g>The</str<strong>on</strong>g>odor Emmanuel Gugenheim Gregory, An Introducti<strong>on</strong> to Tooke and<br />

Newmarch’s A History <str<strong>on</strong>g>of</str<strong>on</strong>g> Prices and <str<strong>on</strong>g>of</str<strong>on</strong>g> the State <str<strong>on</strong>g>of</str<strong>on</strong>g> the Circulati<strong>on</strong> from 1792<br />

to 1856 (L<strong>on</strong>d<strong>on</strong>: P.S.King, 1928). -Ed.]


20 THE TREND OF ECONOMIC THINKING<br />

fight what was then the c<strong>on</strong>servatism <str<strong>on</strong>g>of</str<strong>on</strong>g> the practical men who were<br />

still under the influence <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic liberalism—to pervade the thought<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the public and to establish itself as the dominating doctrine, not <strong>on</strong>ly<br />

am<strong>on</strong>g advanced social reformers, but even am<strong>on</strong>g the most<br />

c<strong>on</strong>servative businessmen. <str<strong>on</strong>g>The</str<strong>on</strong>g> public mind in all the leading countries<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the world is now completely under the dominati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the views<br />

which spring from the revolt against the classical ec<strong>on</strong>omics <str<strong>on</strong>g>of</str<strong>on</strong>g> seventy<br />

years ago.<br />

But, in the meantime, theorists have carried their work to a more<br />

realistic stage and have discovered with surprise how <str<strong>on</strong>g>of</str<strong>on</strong>g>ten the older<br />

writers, with their cruder instruments, had come to the right c<strong>on</strong>clusi<strong>on</strong>s<br />

with regard to the c<strong>on</strong>crete problems <str<strong>on</strong>g>of</str<strong>on</strong>g> the day. And this advance <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

theoretical reas<strong>on</strong>ing has been borne out by the practical experience <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

our time. Times <str<strong>on</strong>g>of</str<strong>on</strong>g> great upheaval sometimes afford clearer<br />

dem<strong>on</strong>strati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the broad principles <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic analysis than times<br />

when the movement <str<strong>on</strong>g>of</str<strong>on</strong>g> things is much less perceptible. In what,<br />

following a phrase used by Alfred Marshall in a similar c<strong>on</strong>nexi<strong>on</strong><br />

regarding the Napole<strong>on</strong>ic period, 10 we may call the temporary return <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Europe to a reign <str<strong>on</strong>g>of</str<strong>on</strong>g> violence, the old doctrines have been <strong>on</strong>ce more<br />

tested; and while the descriptive-interventi<strong>on</strong>ist school had nothing to<br />

c<strong>on</strong>tribute, many <str<strong>on</strong>g>of</str<strong>on</strong>g> the classical maxims have emerged with renewed<br />

credit.<br />

But while the task <str<strong>on</strong>g>of</str<strong>on</strong>g> the historical ec<strong>on</strong>omist was comparatively<br />

simple because what he had to say <strong>on</strong> all problems <str<strong>on</strong>g>of</str<strong>on</strong>g> policy was not,<br />

and could not be, in any way different from what the man in the street<br />

would want if he had never heard <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics; that is, while the task<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the historical school could be accomplished by simply waiting until<br />

the public had forgotten what it had previously learned, the task <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

theoretical ec<strong>on</strong>omist is a much more difficult <strong>on</strong>e. It c<strong>on</strong>sists<br />

essentially in the dem<strong>on</strong>strati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> inc<strong>on</strong>sistencies in a kind <str<strong>on</strong>g>of</str<strong>on</strong>g> ordinary<br />

reas<strong>on</strong>ing which everybody employs and the validity <str<strong>on</strong>g>of</str<strong>on</strong>g> which no <strong>on</strong>e<br />

would ever doubt were it applied to simple cases where it can easily be<br />

understood. <str<strong>on</strong>g>The</str<strong>on</strong>g> difficulty really arises from the fact that the same kind<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> reas<strong>on</strong>ing from familiar and undoubted facts, which even those who<br />

are most scornful <str<strong>on</strong>g>of</str<strong>on</strong>g> theoretical reas<strong>on</strong>ing cannot avoid applying to<br />

simple cases, becomes suspect and calls for empirical c<strong>on</strong>firmati<strong>on</strong> as<br />

10 [Alfred Marshall, Industry and Trade: A Study <str<strong>on</strong>g>of</str<strong>on</strong>g> Industrial Technique and<br />

Business Organizati<strong>on</strong>; and <str<strong>on</strong>g>of</str<strong>on</strong>g> their Influences <strong>on</strong> the C<strong>on</strong>diti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> Various<br />

Classes and Nati<strong>on</strong>s (L<strong>on</strong>d<strong>on</strong>: Macmillan, 1920), p. 674. -Ed.]


THE TREND OF ECONOMIC THINKING 21<br />

so<strong>on</strong> as it is applied to somewhat more complicated phenomena where<br />

it cannot be followed without some effort, or even special training.<br />

And yet it is nothing but this that the ec<strong>on</strong>omist does. By combining<br />

elementary c<strong>on</strong>clusi<strong>on</strong>s and following up their implicati<strong>on</strong>s he gradually<br />

c<strong>on</strong>structs, from the familiar elements, a mental model which aims at<br />

reproducing the working <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omic system as a whole. Whether<br />

we use as a basis facts which are known from everyday experience or<br />

facts which have been laboriously collected by statistical or historical<br />

research, the importance and the difficulty <str<strong>on</strong>g>of</str<strong>on</strong>g> this further task remains<br />

the same, and the <strong>on</strong>ly test <str<strong>on</strong>g>of</str<strong>on</strong>g> its usefulness as a tool <str<strong>on</strong>g>of</str<strong>on</strong>g> interpretati<strong>on</strong> is<br />

whether, by impeccable logic, it yields a model which reproduces<br />

movements <str<strong>on</strong>g>of</str<strong>on</strong>g> the type which we observe in the modern world. Only<br />

when we have carried to its logical c<strong>on</strong>clusi<strong>on</strong> this task <str<strong>on</strong>g>of</str<strong>on</strong>g> fitting the<br />

known parts together, so that we realise all the implicati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> their<br />

coexistence, are we able to say whether the known facts from which we<br />

have started are sufficient for the explanati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the more complicated<br />

phenomena.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> process <str<strong>on</strong>g>of</str<strong>on</strong>g> reas<strong>on</strong>ing might, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, have been carried out by<br />

some superhuman master-mind in a sec<strong>on</strong>d, just as the whole structure<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> mathematics might be deduced from a few fundamental axioms. 11 But,<br />

in fact, its development has been the slow and gradual work <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

generati<strong>on</strong>s. But the very fact that ec<strong>on</strong>omic theory c<strong>on</strong>sists merely <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

ordinary reas<strong>on</strong>ing from comm<strong>on</strong>ly known facts— but carried bey<strong>on</strong>d<br />

the point at which it is immediately obvious, and even bey<strong>on</strong>d the point<br />

which an ordinary thinker would reach unaided by the work <str<strong>on</strong>g>of</str<strong>on</strong>g> earlier<br />

generati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omists—makes it very difficult for the n<strong>on</strong>ec<strong>on</strong>omist<br />

to believe that ec<strong>on</strong>omics can teach him anything. It explains<br />

why he is always likely to feel injured if the ec<strong>on</strong>omist implies that<br />

there are interrelati<strong>on</strong>s between things which he does not see; and why<br />

the ec<strong>on</strong>omist—unlike the practiti<strong>on</strong>ers <str<strong>on</strong>g>of</str<strong>on</strong>g> the other sciences—is<br />

almost expected to apologise if he disagrees with the more hastily<br />

reached c<strong>on</strong>clusi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> lay thought. What is even more resented is the<br />

mental shorthand and the c<strong>on</strong>venti<strong>on</strong>al formulae which the ec<strong>on</strong>omist<br />

11 [But see now Kurt Gödel, “Die Vollständigkeit der Axiome des logischen<br />

Funkti<strong>on</strong>enkalküls”, M<strong>on</strong>atshefte für Mathematik und Physik, vol. 37, 1930, pp.<br />

349–360; and “Über formal unentscheidbare Sätze der Principia Mathematica<br />

und verwandter Systeme”, Ibid., vol. 38, 1931, pp. 173–198. Hayek took note <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Gödel’s pro<str<strong>on</strong>g>of</str<strong>on</strong>g>s in his later work. See for example Studies in Philosophy,<br />

Politics, and <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s (Chicago: University <str<strong>on</strong>g>of</str<strong>on</strong>g> Chicago Press; L<strong>on</strong>d<strong>on</strong>:<br />

Routledge & Kegan Paul, 1967), p. 62. -Ed.]


22 THE TREND OF ECONOMIC THINKING<br />

uses as an indispensable part <str<strong>on</strong>g>of</str<strong>on</strong>g> his technique, in place <str<strong>on</strong>g>of</str<strong>on</strong>g> the explicit<br />

development <strong>on</strong> every occasi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> all his arguments—a process which,<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> course, would be inimical to the formulati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> any c<strong>on</strong>clusi<strong>on</strong>s<br />

whatever.<br />

VIII<br />

Now, pursued in the way I have explained, ec<strong>on</strong>omic analysis provides<br />

particular answers to particular questi<strong>on</strong>s. But it does more than this. By<br />

bringing out the interdependence <str<strong>on</strong>g>of</str<strong>on</strong>g> the particular phenomena, <strong>on</strong>e up<strong>on</strong><br />

the other, it provides insight <str<strong>on</strong>g>of</str<strong>on</strong>g> a much wider character: an insight into<br />

the nature <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omic system as a whole, which affords a refutati<strong>on</strong><br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the more naive beliefs regarding ec<strong>on</strong>omic phenomena to which<br />

minds trained in purely descriptive disciplines seem subject. It is<br />

exceedingly difficult to explain this in a form which is unexcepti<strong>on</strong>able.<br />

But it is necessary to understand it if we are to comprehend the general<br />

effects which preoccupati<strong>on</strong> with theoretical analysis tends to have up<strong>on</strong><br />

the attitude <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omist to practical questi<strong>on</strong>s. Let me try to make<br />

it clear.<br />

From the time <str<strong>on</strong>g>of</str<strong>on</strong>g> Hume and Adam Smith, the effect <str<strong>on</strong>g>of</str<strong>on</strong>g> every attempt<br />

to understand ec<strong>on</strong>omic phenomena—that is to say, <str<strong>on</strong>g>of</str<strong>on</strong>g> every theoretical<br />

analysis—has been to show that, in large part, the coordinati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

individual efforts in society is not the product <str<strong>on</strong>g>of</str<strong>on</strong>g> deliberate planning,<br />

but has been brought about, and in many cases could <strong>on</strong>ly have been<br />

brought about, by means which nobody wanted or understood, and<br />

which in isolati<strong>on</strong> might be regarded as some <str<strong>on</strong>g>of</str<strong>on</strong>g> the most objecti<strong>on</strong>able<br />

features <str<strong>on</strong>g>of</str<strong>on</strong>g> the system. It showed that changes implied, and made<br />

necessary, by changes in our wishes, or in the available means, were<br />

brought about without anybody realising their necessity. In short, it<br />

showed that an immensely complicated mechanism existed, worked and<br />

solved problems, frequently by means which proved to be the <strong>on</strong>ly<br />

possible means by which the result could be accomplished, but which<br />

could not possibly be the result <str<strong>on</strong>g>of</str<strong>on</strong>g> deliberate regulati<strong>on</strong> because nobody<br />

understood them. Even now, when we begin to understand their<br />

working, we discover again and again that necessary functi<strong>on</strong>s are<br />

discharged by sp<strong>on</strong>taneous instituti<strong>on</strong>s. If we tried to run the system by<br />

deliberate regulati<strong>on</strong>, we should have to invent such instituti<strong>on</strong>s, and yet<br />

at first we did not even understand them when we saw them.<br />

Unfortunately, this oldest and most general result <str<strong>on</strong>g>of</str<strong>on</strong>g> the theory <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

social phenomena has never been given a title which would secure it an<br />

adequate and permanent place in our thinking. <str<strong>on</strong>g>The</str<strong>on</strong>g> limitati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g>


THE TREND OF ECONOMIC THINKING 23<br />

language make it almost impossible to state it without using misleading<br />

metaphorical words. <str<strong>on</strong>g>The</str<strong>on</strong>g> <strong>on</strong>ly intelligible form <str<strong>on</strong>g>of</str<strong>on</strong>g> explanati<strong>on</strong> for what I<br />

am trying to state would be to say—as we say in German—that there is<br />

sense [Sinn] in the phenomena; that they perform a necessary functi<strong>on</strong>.<br />

But as so<strong>on</strong> as we take such phrases in a literal sense, they become<br />

untrue. It is an animistic, anthropomorphic interpretati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> phenomena,<br />

the main characteristic <str<strong>on</strong>g>of</str<strong>on</strong>g> which is that they are not willed by any mind.<br />

And as so<strong>on</strong> as we recognise this, we tend to fall into an opposite error,<br />

which is, however, very similar in kind: we deny the existence <str<strong>on</strong>g>of</str<strong>on</strong>g> what<br />

these terms are intended to describe.<br />

It is, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, supremely easy to ridicule Adam Smith’s famous<br />

“invisible hand”—which leads man “to promote an end which was no<br />

part <str<strong>on</strong>g>of</str<strong>on</strong>g> his intenti<strong>on</strong>”. 12 But it is an error not very different from this<br />

anthropomorphism to assume that the existing ec<strong>on</strong>omic system serves<br />

a definite functi<strong>on</strong> <strong>on</strong>ly in so far as its instituti<strong>on</strong>s have been<br />

deliberately willed by individuals. This is probably the last remnant <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

that primitive attitude which made us invest with a human mind<br />

everything that moved and changed in a way adapted to perpetuate itself<br />

or its kind. In the natural sciences, we have gradually ceased to do so<br />

and have learned that the interacti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> different tendencies may<br />

produce what we call an order, without any mind <str<strong>on</strong>g>of</str<strong>on</strong>g> our own kind<br />

regulating it. But we still refuse to recognise that the sp<strong>on</strong>taneous<br />

interplay <str<strong>on</strong>g>of</str<strong>on</strong>g> the acti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> individuals may produce something which is<br />

not the deliberate object <str<strong>on</strong>g>of</str<strong>on</strong>g> their acti<strong>on</strong>s but an organism in which every<br />

part performs a necessary functi<strong>on</strong> for the c<strong>on</strong>tinuance <str<strong>on</strong>g>of</str<strong>on</strong>g> the whole,<br />

without any human mind having devised it. In the words <str<strong>on</strong>g>of</str<strong>on</strong>g> an eminent<br />

Austrian ec<strong>on</strong>omist, we refuse to recognise that society is an organism<br />

and not an organisati<strong>on</strong> 13 and that, in a sense, we are part <str<strong>on</strong>g>of</str<strong>on</strong>g> a ‘higher’<br />

organised system which, without our knowledge, and l<strong>on</strong>g before we<br />

tried to understand it, solved problems the existence <str<strong>on</strong>g>of</str<strong>on</strong>g> which we did<br />

not even recognise, but which we should have had to solve in much the<br />

same way if we had tried to run it deliberately.<br />

12 [Adam Smith, An Inquiry Into the Nature and Causes <str<strong>on</strong>g>of</str<strong>on</strong>g> the Wealth <str<strong>on</strong>g>of</str<strong>on</strong>g> Nati<strong>on</strong>s<br />

[1776], book IV, chapter ii, in <str<strong>on</strong>g>The</str<strong>on</strong>g> Glasgow Editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the Works and<br />

Corresp<strong>on</strong>dence <str<strong>on</strong>g>of</str<strong>on</strong>g> Adam Smith, vol. 2:1 (Oxford: Clarend<strong>on</strong> Press, 1976), p.<br />

456. -Ed.]<br />

13 [Ludwig v<strong>on</strong> Mises, Gemeinwirtschaft (Jena: Gustav Fischer, 1923), p. 280 et<br />

seq. (sec<strong>on</strong>d editi<strong>on</strong>, 1932, p. 265). See English translati<strong>on</strong>: Socialism<br />

(Indianapolis, Ind.: LibertyClassics, 1981), pp. 261–263. -Ed.]


24 THE TREND OF ECONOMIC THINKING<br />

IX<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> recogniti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the existence <str<strong>on</strong>g>of</str<strong>on</strong>g> this organism is the recogniti<strong>on</strong> that<br />

there is a subject-matter for ec<strong>on</strong>omics. It is <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the causes <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

unique positi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics that the existence <str<strong>on</strong>g>of</str<strong>on</strong>g> a definite object <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

its investigati<strong>on</strong> can be realised <strong>on</strong>ly after a prol<strong>on</strong>ged study, and it is,<br />

therefore, not surprising that people who have never really studied<br />

ec<strong>on</strong>omic theory will necessarily be doubtful <str<strong>on</strong>g>of</str<strong>on</strong>g> the legitimacy <str<strong>on</strong>g>of</str<strong>on</strong>g> its<br />

existence, as well as <str<strong>on</strong>g>of</str<strong>on</strong>g> the appropriateness <str<strong>on</strong>g>of</str<strong>on</strong>g> its method. A real pro<str<strong>on</strong>g>of</str<strong>on</strong>g><br />

for all I have said and for all the ec<strong>on</strong>omist c<strong>on</strong>tends can, therefore, be<br />

given <strong>on</strong>ly by means <str<strong>on</strong>g>of</str<strong>on</strong>g> a complete expositi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> his science. Hence I<br />

must c<strong>on</strong>tent myself here with illustrating the meaning <str<strong>on</strong>g>of</str<strong>on</strong>g> what I have<br />

said by means <str<strong>on</strong>g>of</str<strong>on</strong>g> a few general references and <strong>on</strong>e more c<strong>on</strong>crete<br />

example.<br />

In the whole body <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics, there is probably no part which<br />

shows better how our inability to understand the working <str<strong>on</strong>g>of</str<strong>on</strong>g> the existing<br />

system leads to dissatisfacti<strong>on</strong> with it and also to acti<strong>on</strong> which can <strong>on</strong>ly<br />

make the situati<strong>on</strong> worse, than that most difficult part, the theory <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

capital and interest. It is in this field that, during the past fifty years,<br />

decisive advances have been made which have put <strong>on</strong> a sound basis<br />

much that was divined rather than dem<strong>on</strong>strated by the earlier<br />

ec<strong>on</strong>omists. I do not think that this belief—as might, perhaps, be<br />

suspected—is due to a pers<strong>on</strong>al predilecti<strong>on</strong> for those problems. It is, <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

course, true that I should not be standing here today if I had not had the<br />

good fortune to receive my training in ec<strong>on</strong>omics in an atmosphere<br />

which was still full <str<strong>on</strong>g>of</str<strong>on</strong>g> the influence <str<strong>on</strong>g>of</str<strong>on</strong>g> the man to whom these advances<br />

are mainly due. 14 And if I needed anything to remind me <str<strong>on</strong>g>of</str<strong>on</strong>g> this, the<br />

presence in the chair <str<strong>on</strong>g>of</str<strong>on</strong>g> the distinguished ec<strong>on</strong>omist to whom the<br />

introducti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> these doctrines into the English-speaking world is<br />

chiefly owing could not fail to make me vividly c<strong>on</strong>scious <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

situati<strong>on</strong>. 15<br />

14 [Eugen v<strong>on</strong> Böhm-Bawerk (1851–1914), Austrian minister <str<strong>on</strong>g>of</str<strong>on</strong>g> finance and<br />

later Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s at the University <str<strong>on</strong>g>of</str<strong>on</strong>g> Vienna al<strong>on</strong>g with Hayek’s<br />

teacher Friedrich v<strong>on</strong> Wieser. His works include the multi-volume Kapital und<br />

Kapitalzins [1884–1912], translated as Capital and Interest, 3 vols (South<br />

Holland, Ill.: Libertarian Press, 1959), and “Zum Abschluß des Marxschen<br />

Systems”, in Staatswissenschaftliche Arbeiten, Festgaben für Karl Knies, ed.<br />

O.v<strong>on</strong> Boenigk (Berlin: Haering, 1896), translated as Karl Marx and the Close<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> His System (L<strong>on</strong>d<strong>on</strong>: Fisher Unwin, 1898) and reprinted in Karl Marx and<br />

the Close <str<strong>on</strong>g>of</str<strong>on</strong>g> His System and Böhm-Bawerk’s Criticism <str<strong>on</strong>g>of</str<strong>on</strong>g> Marx, ed. Paul<br />

Sweezy (New York: Augustus M.Kelley, 1949). -Ed.]


THE TREND OF ECONOMIC THINKING 25<br />

But I think that there is ample objective evidence <str<strong>on</strong>g>of</str<strong>on</strong>g> the extraordinary<br />

part which this theory has played in the progress <str<strong>on</strong>g>of</str<strong>on</strong>g> our insight into the<br />

ec<strong>on</strong>omic process. <str<strong>on</strong>g>The</str<strong>on</strong>g>re is probably no better instance <str<strong>on</strong>g>of</str<strong>on</strong>g> how the study<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic theory compels socialist thinkers to realise that, in their<br />

attempts to c<strong>on</strong>struct a positive plan <str<strong>on</strong>g>of</str<strong>on</strong>g> their ideal society, they can<br />

solve some <str<strong>on</strong>g>of</str<strong>on</strong>g> the main problems in no better way than by copying as<br />

closely as possible even what seemed to them before some <str<strong>on</strong>g>of</str<strong>on</strong>g> the most<br />

objecti<strong>on</strong>able features <str<strong>on</strong>g>of</str<strong>on</strong>g> the existing system—including interest. And,<br />

<strong>on</strong> the other hand, there can be little doubt at the present day that the<br />

prevalent tendency to discredit the accumulati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> wealth, to belittle<br />

the need for capital, and to discourage saving—not <strong>on</strong>ly in times <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

depressi<strong>on</strong> 16 —which isclearly an effect <str<strong>on</strong>g>of</str<strong>on</strong>g> the lack <str<strong>on</strong>g>of</str<strong>on</strong>g> understanding <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the functi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> capital, is <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the main destructive forces leading the<br />

world to misery.<br />

Let me try to state in more detail an example which is typical <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

errors in reas<strong>on</strong>ing which lead, in most cases, to the demand for<br />

planning. It has the rare advantage <str<strong>on</strong>g>of</str<strong>on</strong>g> being capable <str<strong>on</strong>g>of</str<strong>on</strong>g> explanati<strong>on</strong> in<br />

few words. For a most impressive array <str<strong>on</strong>g>of</str<strong>on</strong>g> further examples <str<strong>on</strong>g>of</str<strong>on</strong>g> a similar<br />

nature, I need <strong>on</strong>ly remind you <str<strong>on</strong>g>of</str<strong>on</strong>g> the last inaugural address <str<strong>on</strong>g>of</str<strong>on</strong>g> an<br />

ec<strong>on</strong>omist at this School—that <str<strong>on</strong>g>of</str<strong>on</strong>g> Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Plant— delivered at the<br />

beginning <str<strong>on</strong>g>of</str<strong>on</strong>g> last sessi<strong>on</strong>. 17 My example relates to the theory <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

technical progress and depreciati<strong>on</strong>. In the popular discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

competitive capitalism, it is <str<strong>on</strong>g>of</str<strong>on</strong>g>ten complained that entrepreneurs go <strong>on</strong><br />

using obsolete machinery when better machines are available. Side by<br />

side with such complaints are others to the effect that capital is ‘wasted’<br />

by replacing existing machinery when it is still fit for many years’ use.<br />

Each <str<strong>on</strong>g>of</str<strong>on</strong>g> these obviously incompatible criticisms is made a plea for<br />

centralised planning. Each implies that competiti<strong>on</strong> leads to unec<strong>on</strong>omic<br />

producti<strong>on</strong> which a wise planner would avoid. Closer analysis,<br />

however, reveals the fact that either <str<strong>on</strong>g>of</str<strong>on</strong>g> the alternatives which the<br />

intelligent planner is supposed to adopt would lead to a waste <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

15 [James B<strong>on</strong>ar was in the chair when Hayek delivered this Inaugural Address.<br />

See footnotes 1 and 6 above. -Ed.]<br />

16 [See “Spending and Savings: Public Works from Rates”, Letter, with T.E.<br />

Gregory, Arnold Plant, and Li<strong>on</strong>el Robbins, to <str<strong>on</strong>g>The</str<strong>on</strong>g> Times <str<strong>on</strong>g>of</str<strong>on</strong>g> L<strong>on</strong>d<strong>on</strong>, October<br />

19, 1932, replying to “Private Spending: M<strong>on</strong>ey for Productive Investment”,<br />

letter in <str<strong>on</strong>g>The</str<strong>on</strong>g> Times, October 17, 1932, by D.H.MacGregor, A.C.Pigou,<br />

J.M.Keynes, Walter Layt<strong>on</strong>, Arthur Salter, and J.C.Stamp. -Ed.]<br />

17 [See Arnold Plant, “<str<strong>on</strong>g>Trend</str<strong>on</strong>g>s in Business Administrati<strong>on</strong>”, <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>a, vol. 35,<br />

no. 12, February 1932, pp. 45–62. -Ed.]


26 THE TREND OF ECONOMIC THINKING<br />

resources, and that the wisest thing he could do would be to bring<br />

about, by delicate regulati<strong>on</strong>, what is accomplished sp<strong>on</strong>taneously by<br />

competiti<strong>on</strong>. It reveals, too, that he would lack the most important guide<br />

to such acti<strong>on</strong> which the competitive system affords.<br />

In either case, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, what we want to do is to make the best<br />

possible use <str<strong>on</strong>g>of</str<strong>on</strong>g> the available resources. And whatever criteri<strong>on</strong> we<br />

adopt as to the relative importance <str<strong>on</strong>g>of</str<strong>on</strong>g> different needs, this means that a<br />

given result ought, in every case, to be obtained with the least possible<br />

sacrifice <str<strong>on</strong>g>of</str<strong>on</strong>g> other ends.<br />

In the case under c<strong>on</strong>siderati<strong>on</strong>, competiti<strong>on</strong> will obviously mean that<br />

the new inventi<strong>on</strong> will be introduced in all cases where it reduces<br />

current costs <str<strong>on</strong>g>of</str<strong>on</strong>g> producti<strong>on</strong>; i.e., where the cost <str<strong>on</strong>g>of</str<strong>on</strong>g> the capital required<br />

for the new inventi<strong>on</strong> is smaller than the saving <strong>on</strong> other costs made<br />

possible by the new machinery; and it will be introduced <strong>on</strong>ly in such<br />

cases. But the cost <str<strong>on</strong>g>of</str<strong>on</strong>g> capital, as well as other costs (such as the wages<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> labour) which are saved, is evidently determined by the competing<br />

demand from other industries. This in fact means, in the first place, that<br />

our problem is to determine whether, and to what extent, in the industry<br />

in questi<strong>on</strong>, labour (or other factors which can be used elsewhere) is to<br />

be replaced by new capital; and sec<strong>on</strong>dly, that the questi<strong>on</strong> depends<br />

up<strong>on</strong> the relative additi<strong>on</strong> to the total product which either <str<strong>on</strong>g>of</str<strong>on</strong>g> these two<br />

will c<strong>on</strong>tribute elsewhere. If the cost <str<strong>on</strong>g>of</str<strong>on</strong>g> capital—interest and<br />

amortisati<strong>on</strong>—invested in it is less than the cost <str<strong>on</strong>g>of</str<strong>on</strong>g> the other factors it<br />

replaces, the new machinery will be introduced not in order to do the<br />

work <str<strong>on</strong>g>of</str<strong>on</strong>g> machinery which is already in existence, but because it does<br />

that work plus the work <str<strong>on</strong>g>of</str<strong>on</strong>g> a quantity <str<strong>on</strong>g>of</str<strong>on</strong>g> other factors which will<br />

produce elsewhere more than the new capital could have d<strong>on</strong>e. It is<br />

obvious that a wise planner would have to act <strong>on</strong> the same principles,<br />

and that he could <strong>on</strong>ly do so <strong>on</strong> the basis <str<strong>on</strong>g>of</str<strong>on</strong>g> a given rate <str<strong>on</strong>g>of</str<strong>on</strong>g> interest,<br />

expressing the productivity <str<strong>on</strong>g>of</str<strong>on</strong>g> capital. But it is difficult to see how this<br />

could be obtained save by a competitive capital market. <str<strong>on</strong>g>The</str<strong>on</strong>g> best the<br />

dictator could do in such a case would be to imitate as closely as<br />

possible what would happen under free competiti<strong>on</strong>. Yet having regard<br />

to the extent to which legislative acti<strong>on</strong> is demanded, at the present time,<br />

to protect invested capital against obsolescence caused by the<br />

introducti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> more modern technical methods, it is not possible to be<br />

very optimistic about the outcome.


THE TREND OF ECONOMIC THINKING 27<br />

X<br />

This example <str<strong>on</strong>g>of</str<strong>on</strong>g> analysis will, perhaps, be sufficient to explain why the<br />

ec<strong>on</strong>omist will come to very different c<strong>on</strong>clusi<strong>on</strong>s from those reached<br />

by those to whom ec<strong>on</strong>omic phenomena represent a number <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

independent events, explained by their individual historical causes, and<br />

in no way implied by the inherent logic <str<strong>on</strong>g>of</str<strong>on</strong>g> the system. This does not by<br />

any means imply that the ec<strong>on</strong>omist will arrive at a purely negative<br />

attitude towards any kind <str<strong>on</strong>g>of</str<strong>on</strong>g> deliberate interference with the working <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the system. But it may, and very likely will, mean an almost<br />

c<strong>on</strong>sistently negative attitude towards those proposals for interference<br />

which are not based up<strong>on</strong> an understanding <str<strong>on</strong>g>of</str<strong>on</strong>g> the working <str<strong>on</strong>g>of</str<strong>on</strong>g> the system;<br />

namely, the proposals which spring most readily and regularly to the lay<br />

mind. Further, in view <str<strong>on</strong>g>of</str<strong>on</strong>g> the incomplete nature <str<strong>on</strong>g>of</str<strong>on</strong>g> our knowledge, it<br />

will mean that, in all doubtful cases, there will exist a presumpti<strong>on</strong><br />

against interference. However, this by no means does away with the<br />

positive part <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omist’s task, the delimitati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the field within<br />

which collective acti<strong>on</strong> is not <strong>on</strong>ly unobjecti<strong>on</strong>able but actually a useful<br />

means <str<strong>on</strong>g>of</str<strong>on</strong>g> obtaining the desired ends. Unfortunately, at the present time,<br />

as at the time when theoretical ec<strong>on</strong>omics was first in the ascendancy,<br />

the effects <str<strong>on</strong>g>of</str<strong>on</strong>g> an extensive State activity which is based up<strong>on</strong> a quite<br />

inadequate understanding <str<strong>on</strong>g>of</str<strong>on</strong>g> the coherence <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic phenomena are<br />

so prep<strong>on</strong>derantly more harmful than the absence <str<strong>on</strong>g>of</str<strong>on</strong>g> any new form <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

State activity which he might like to suggest, that the ec<strong>on</strong>omist is, in<br />

practice, almost inevitably driven into a mainly negative positi<strong>on</strong>. But it<br />

is certainly to be hoped that this practical necessity will not again<br />

prevent ec<strong>on</strong>omists from devoting more attenti<strong>on</strong> to the positive task <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

delimiting the field <str<strong>on</strong>g>of</str<strong>on</strong>g> useful State activity.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re can be no doubt that after Bentham’s early distincti<strong>on</strong> between<br />

the agenda and the n<strong>on</strong>-agenda <str<strong>on</strong>g>of</str<strong>on</strong>g> government, the classical writers<br />

very much neglected the positive part <str<strong>on</strong>g>of</str<strong>on</strong>g> the task and thereby allowed the<br />

impressi<strong>on</strong> to gain ground that laissez-faire was their ultimate and <strong>on</strong>ly<br />

c<strong>on</strong>clusi<strong>on</strong>—a c<strong>on</strong>clusi<strong>on</strong> which, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, would have been<br />

invalidated by the dem<strong>on</strong>strati<strong>on</strong> that, in any single case, State acti<strong>on</strong><br />

was useful. To remedy this deficiency must be <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the main tasks <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the future.<br />

XI<br />

But while I certainly do not wish to minimise this part <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

ec<strong>on</strong>omist’s task, I still think that our present knowledge justifies us in


28 THE TREND OF ECONOMIC THINKING<br />

saying that the field for rati<strong>on</strong>al State activity in the service <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

ethical ideals held by the majority <str<strong>on</strong>g>of</str<strong>on</strong>g> men is not <strong>on</strong>ly different from, but<br />

is also very much narrower than is <str<strong>on</strong>g>of</str<strong>on</strong>g>ten thought. It is, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, <strong>on</strong> this<br />

point that an increasing number <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omists so completely disagree<br />

with the current popular opini<strong>on</strong> which c<strong>on</strong>siders a progressive<br />

extensi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> State c<strong>on</strong>trol as inevitable.<br />

Characteristically enough, this belief in the inevitability <str<strong>on</strong>g>of</str<strong>on</strong>g> more State<br />

c<strong>on</strong>trol is, in most cases, based not so much up<strong>on</strong> a clear noti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

supposed advantages <str<strong>on</strong>g>of</str<strong>on</strong>g> planning as up<strong>on</strong> a kind <str<strong>on</strong>g>of</str<strong>on</strong>g> fatalism: up<strong>on</strong> the<br />

idea that ‘history never moves back’—another legacy <str<strong>on</strong>g>of</str<strong>on</strong>g> the belief in<br />

historical laws which dominated the thinking <str<strong>on</strong>g>of</str<strong>on</strong>g> the last two generati<strong>on</strong>s.<br />

But in an age where we are rapidly returning to the c<strong>on</strong>diti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

mercantilism, this argument against the possibility <str<strong>on</strong>g>of</str<strong>on</strong>g> a return to<br />

c<strong>on</strong>diti<strong>on</strong>s similar to those existing sixty years ago is probably bound to<br />

lose its force. More important is the fact that the other source <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

belief in the inevitability <str<strong>on</strong>g>of</str<strong>on</strong>g> the ultimate victory <str<strong>on</strong>g>of</str<strong>on</strong>g> planning, the<br />

c<strong>on</strong>victi<strong>on</strong> that, since where there is no directing Will there must be<br />

chaos, deliberate planning will necessarily mean an improvement <strong>on</strong><br />

existing c<strong>on</strong>diti<strong>on</strong>s, is more and more recognised to be the result <str<strong>on</strong>g>of</str<strong>on</strong>g> our<br />

insufficient understanding <str<strong>on</strong>g>of</str<strong>on</strong>g> the existing system.<br />

I have discussed planning here rather than its older brother socialism,<br />

not because I think that there is any difference between the two (except<br />

for the greater c<strong>on</strong>sistency <str<strong>on</strong>g>of</str<strong>on</strong>g> the latter), but because most <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

planners do not yet realise that they are socialists and that, therefore,<br />

what the ec<strong>on</strong>omist has to say with regard to socialism applies also to<br />

them. In this sense, there are, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, very few people left today who<br />

are not socialists.<br />

Indeed, it seems to me to be almost inevitable that, <strong>on</strong> the basis <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

such ec<strong>on</strong>omic ideas as are imbibed as part <str<strong>on</strong>g>of</str<strong>on</strong>g> the general educati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the day, every warm-hearted pers<strong>on</strong>, as so<strong>on</strong> as he becomes c<strong>on</strong>scious<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the existing misery, should become a socialist. This has certainly<br />

been the experience <str<strong>on</strong>g>of</str<strong>on</strong>g> a great many ec<strong>on</strong>omists <str<strong>on</strong>g>of</str<strong>on</strong>g> the younger<br />

generati<strong>on</strong> to whom, when they took up their study, ec<strong>on</strong>omics meant<br />

little else but more informati<strong>on</strong> about these deplorable facts which cried<br />

aloud for a remedy. But the c<strong>on</strong>clusi<strong>on</strong> to which the study <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics<br />

leads some <str<strong>on</strong>g>of</str<strong>on</strong>g> them seems so violently in c<strong>on</strong>trast with the reas<strong>on</strong>s<br />

which led them to embark up<strong>on</strong> their study <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics that most<br />

people c<strong>on</strong>clude that their ethical standards must have underg<strong>on</strong>e a<br />

complete change. It is, indeed, <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the interesting facts <str<strong>on</strong>g>of</str<strong>on</strong>g> the present<br />

time that a growing number <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omists <str<strong>on</strong>g>of</str<strong>on</strong>g> the younger generati<strong>on</strong><br />

who have not the slightest sentimental attachment to c<strong>on</strong>servatism—and


many <str<strong>on</strong>g>of</str<strong>on</strong>g> whom began as socialists—feel more and more compelled by<br />

their reas<strong>on</strong>ing to take a c<strong>on</strong>servative attitude towards many problems—<br />

or rather an attitude which, a generati<strong>on</strong> ago, would have been called<br />

c<strong>on</strong>servative. And this happens with men who not <strong>on</strong>ly have all possible<br />

sympathy with the ethical motives from which ec<strong>on</strong>omic radicalism<br />

springs, but who would be <strong>on</strong>ly too glad if they could believe that<br />

socialism or planning can do what they promise to do, because they<br />

probably realise better than any n<strong>on</strong>-ec<strong>on</strong>omist that, for a c<strong>on</strong>siderable<br />

time at least, development will tend in this directi<strong>on</strong> and will be revised,<br />

if ever, <strong>on</strong>ly at the cost <str<strong>on</strong>g>of</str<strong>on</strong>g> bitter experience and grave disillusi<strong>on</strong>ment.<br />

That such an intellectual reacti<strong>on</strong> is <strong>on</strong> the way and that it is not<br />

merely the experience <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>on</strong>e or two individuals is perhaps somewhat<br />

difficult to see if <strong>on</strong>e looks at a single country; but it becomes fairly<br />

clear if <strong>on</strong>e compares countries in different phases <str<strong>on</strong>g>of</str<strong>on</strong>g> development <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

ec<strong>on</strong>omic thought. 18 If <strong>on</strong>e compares, for example, Germany, where the<br />

influences which led to the decline <str<strong>on</strong>g>of</str<strong>on</strong>g> analytical insight originated,<br />

with, say, the United States, where they have been felt <strong>on</strong>ly in<br />

comparatively recent times, or even with England—which, in this<br />

respect, occupies a kind <str<strong>on</strong>g>of</str<strong>on</strong>g> intermediate positi<strong>on</strong>—<strong>on</strong>e cannot help<br />

noticing how far the cycle has already swung round in Germany and<br />

how completely the relative positi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the intellectual radicals and<br />

popular opini<strong>on</strong> has changed. In Germany—and to a certain extent in<br />

England also—the people who call for a further extensi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

governmental c<strong>on</strong>trol <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic life have certainly ceased to be in<br />

any way intellectual path-breakers. <str<strong>on</strong>g>The</str<strong>on</strong>g>y are most definitely the<br />

expressi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the spirit <str<strong>on</strong>g>of</str<strong>on</strong>g> the age, the ultimate product <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

revoluti<strong>on</strong>ary thinking <str<strong>on</strong>g>of</str<strong>on</strong>g> an earlier generati<strong>on</strong>. To recognise their<br />

positi<strong>on</strong> in this respect, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, does nothing to decide the questi<strong>on</strong><br />

whether the future bel<strong>on</strong>gs to them—as it well may. But it throws an<br />

interesting light <strong>on</strong> the role played by the progress <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge in this<br />

development. For, whatever we may think about particular problems,<br />

there can be no doubt that recent additi<strong>on</strong>s to knowledge in this respect<br />

have made the probability <str<strong>on</strong>g>of</str<strong>on</strong>g> a soluti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> our difficulties by planning<br />

appear less, rather than more, likely. What seemed minor difficulties to<br />

the ec<strong>on</strong>omist <str<strong>on</strong>g>of</str<strong>on</strong>g> a generati<strong>on</strong> ago have since been recognised—by<br />

socialists as well as by n<strong>on</strong>-socialists—as crucial problems which some<br />

may, perhaps, hope to solve in the future, but the complete neglect <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

18 [This essay was written in 1933. -Ed.]<br />

THE TREND OF ECONOMIC THINKING 29


30 THE TREND OF ECONOMIC THINKING<br />

which certainly invalidates much <str<strong>on</strong>g>of</str<strong>on</strong>g> the popular c<strong>on</strong>fidence <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

present. 19<br />

And so I come back to the point from which I started—the isolati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the c<strong>on</strong>temporary ec<strong>on</strong>omist and the refusal <str<strong>on</strong>g>of</str<strong>on</strong>g> modern progressivism to<br />

avail itself <str<strong>on</strong>g>of</str<strong>on</strong>g> the knowledge he can provide—a knowledge which is the<br />

product <str<strong>on</strong>g>of</str<strong>on</strong>g> the <strong>on</strong>ly persistent attempt systematically to explore the<br />

possibilities <str<strong>on</strong>g>of</str<strong>on</strong>g> change. <str<strong>on</strong>g>The</str<strong>on</strong>g> peculiar historical development which I have<br />

sketched has brought it about that the ec<strong>on</strong>omist frequently finds<br />

himself in disagreement in regard to means with those with whom he is<br />

in agreement with regard to ends; and in agreement in regard to means<br />

with those whose views regarding ends are entirely antipathetic to him—<br />

men who have never felt the urge to rec<strong>on</strong>struct the world and who<br />

frequently support the forces <str<strong>on</strong>g>of</str<strong>on</strong>g> stability <strong>on</strong>ly for reas<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> selfishness.<br />

In such a situati<strong>on</strong>, it is perhaps inevitable that he should become the<br />

object <str<strong>on</strong>g>of</str<strong>on</strong>g> dislike and suspici<strong>on</strong>. But if he recognises the circumstances<br />

from which they spring, he will be able to bear them with patience and<br />

understanding, c<strong>on</strong>fident that he possesses in his scientific knowledge a<br />

solvent for differences which are really intellectual, and that although,<br />

at present, his activities have little effect, yet in course <str<strong>on</strong>g>of</str<strong>on</strong>g> time they will<br />

come to be recognised as serving more c<strong>on</strong>sistently than the activities <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

those he opposes, the ends which they share in comm<strong>on</strong>.<br />

19 [See F.A.Hayek, ed., Collectivist <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Planning (L<strong>on</strong>d<strong>on</strong>: Routledge &<br />

Kegan Paul, 1935). -Ed.]


TWO<br />

ON BEING AN ECONOMIST 1<br />

It is reported <str<strong>on</strong>g>of</str<strong>on</strong>g> the greatest ec<strong>on</strong>omist whom I have pers<strong>on</strong>ally known 2<br />

that he used to say that if he had seven s<strong>on</strong>s they should all study<br />

ec<strong>on</strong>omics. If this was meant to suggest the magnitude <str<strong>on</strong>g>of</str<strong>on</strong>g> the task<br />

ec<strong>on</strong>omists have to solve, this heroic resoluti<strong>on</strong> cannot be highly<br />

enough commended. If it was meant to suggest that the study <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

ec<strong>on</strong>omics is a sure path to pers<strong>on</strong>al happiness, I am afraid I have no<br />

such cheerful message for you. And it may be that Carl Menger himself<br />

later changed his views: when at last, at the age <str<strong>on</strong>g>of</str<strong>on</strong>g> sixty-two, he<br />

produced <strong>on</strong>e s<strong>on</strong>, this s<strong>on</strong> did not become an ec<strong>on</strong>omist, though the<br />

father lived to see him become a promising mathematician.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re is at least <strong>on</strong>e kind <str<strong>on</strong>g>of</str<strong>on</strong>g> happiness which the pursuit <str<strong>on</strong>g>of</str<strong>on</strong>g> most<br />

sciences promises but which is almost wholly denied to the ec<strong>on</strong>omist.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> progress <str<strong>on</strong>g>of</str<strong>on</strong>g> the natural sciences <str<strong>on</strong>g>of</str<strong>on</strong>g>ten leads to unbounded<br />

c<strong>on</strong>fidence in the future prospects <str<strong>on</strong>g>of</str<strong>on</strong>g> the human race, and provides the<br />

natural scientist with the certainty that any important c<strong>on</strong>tributi<strong>on</strong> to<br />

knowledge which he makes will be used to improve the lot <str<strong>on</strong>g>of</str<strong>on</strong>g> men. <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

ec<strong>on</strong>omist’s lot, however, is to study a field in which, almost more than<br />

any other, human folly displays itself. <str<strong>on</strong>g>The</str<strong>on</strong>g> scientist has no doubt that<br />

the world is moving <strong>on</strong> to better and finer things, that the progress he<br />

makes today will tomorrow be recognised and used. <str<strong>on</strong>g>The</str<strong>on</strong>g>re is a glamour<br />

about the natural sciences which expresses itself in the spirit and the<br />

atmosphere in which it is pursued and received, in the prizes that wait<br />

for the successful as in the satisfacti<strong>on</strong> it can <str<strong>on</strong>g>of</str<strong>on</strong>g>fer to most. What I want<br />

to say to you t<strong>on</strong>ight is a warning that, if you want any <str<strong>on</strong>g>of</str<strong>on</strong>g> this, if to<br />

sustain you in the toil which the prol<strong>on</strong>ged pursuit <str<strong>on</strong>g>of</str<strong>on</strong>g> any subject<br />

requires, you want these clear signs <str<strong>on</strong>g>of</str<strong>on</strong>g> success, you had better leave<br />

ec<strong>on</strong>omics now and turn to <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the more fortunate other sciences. Not<br />

<strong>on</strong>ly are there no glittering prizes, no Nobel prizes 3 and—I should have<br />

said till recently—no fortunes and no peerages, 4 for the ec<strong>on</strong>omist. But<br />

even to look for them, to aim at praise or public recogniti<strong>on</strong>, is almost


32 THE TREND OF ECONOMIC THINKING<br />

certain to spoil your intellectual h<strong>on</strong>esty in this field. <str<strong>on</strong>g>The</str<strong>on</strong>g> dangers to the<br />

ec<strong>on</strong>omist from any too str<strong>on</strong>g desire to win public approval, and the<br />

reas<strong>on</strong>s why I think it indeed fortunate that there are <strong>on</strong>ly few marks <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

distincti<strong>on</strong> to corrupt him, I shall discuss later. But before that I want to<br />

c<strong>on</strong>sider the more serious cause for sorrow to the ec<strong>on</strong>omist, the fact<br />

that he cannot trust that the progress <str<strong>on</strong>g>of</str<strong>on</strong>g> his knowledge will necessarily<br />

be followed by a more intelligent handling <str<strong>on</strong>g>of</str<strong>on</strong>g> social affairs, or even that<br />

we shall advance in this field at all and there will not be retrograde<br />

movements. <str<strong>on</strong>g>The</str<strong>on</strong>g> ec<strong>on</strong>omist knows that a single error in his field may do<br />

more harm than almost all the sciences taken together can do good—<br />

even more, that a mistake in the choice <str<strong>on</strong>g>of</str<strong>on</strong>g> a social order, quite apart<br />

from the immediate effect, may pr<str<strong>on</strong>g>of</str<strong>on</strong>g>oundly affect the prospects for<br />

generati<strong>on</strong>s. Even if he believes that he is himself in possessi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

full truth—which he believes less the older he grows—he cannot be<br />

sure that it will be used. And he cannot even be sure that his own<br />

activities will not produce, because they are mishandled by others, the<br />

opposite <str<strong>on</strong>g>of</str<strong>on</strong>g> what he was aiming at.<br />

I shall not argue that the ec<strong>on</strong>omist has no influence. On the c<strong>on</strong>trary,<br />

I agree with Lord Keynes that “the ideas <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omists and political<br />

philosophers, both when they are right and when they are wr<strong>on</strong>g, are<br />

more powerful than is comm<strong>on</strong>ly understood. Indeed the world is ruled<br />

by little else.” 5 <str<strong>on</strong>g>The</str<strong>on</strong>g> <strong>on</strong>ly qualificati<strong>on</strong> I want to add, and with which<br />

Lord Keynes would probably agree, is that ec<strong>on</strong>omists have this great<br />

influence <strong>on</strong>ly in the l<strong>on</strong>g run and <strong>on</strong>ly indirectly, and that when their<br />

1 [An address delivered to the Students’ Uni<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the L<strong>on</strong>d<strong>on</strong> School <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

<str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s, February 23, 1944. <str<strong>on</strong>g>The</str<strong>on</strong>g> address was presumably delivered at<br />

Peterhouse, Cambridge University, where the LSE was lodged during the war.<br />

This essay has not previously been published. -Ed.]<br />

2 [Carl Menger, founder <str<strong>on</strong>g>of</str<strong>on</strong>g> the Austrian School, is being referred to, but what<br />

Hayek says is an exaggerati<strong>on</strong>. Hayek saw Menger <strong>on</strong> a formal occasi<strong>on</strong>, but<br />

did not meet him. He did know the family, was asked to help in estimating the<br />

value <str<strong>on</strong>g>of</str<strong>on</strong>g> Carl Menger’s library, and knew Menger’s s<strong>on</strong>, Karl Menger, Jr., quite<br />

well. -Ed.]


ON BEING AN ECONOMIST 33<br />

ideas begin to have effect, they have usually changed their form to such<br />

an extent that their fathers can scarcely recognise them.<br />

This is closely c<strong>on</strong>nected with the fact, inevitable I believe in a<br />

democracy, that those who have to apply ec<strong>on</strong>omic theory are laymen,<br />

not really trained as ec<strong>on</strong>omists. In this ec<strong>on</strong>omics differs from other<br />

disciplines. We do not, as the other sciences do, train practiti<strong>on</strong>ers who<br />

are called in when an ec<strong>on</strong>omic problem arises—or they can at most be<br />

called in as advisers while the actual decisi<strong>on</strong>s must be left to the<br />

statesman and the general public. However attractive the ideal <str<strong>on</strong>g>of</str<strong>on</strong>g> a<br />

government by experts may have appeared in the past—it even induced<br />

a radical liberal like John Stuart Mill to state that “<str<strong>on</strong>g>of</str<strong>on</strong>g> all governments,<br />

ancient and modern, the <strong>on</strong>e by which this excellence [i.e., that political<br />

questi<strong>on</strong>s are decided ‘by the deliberately formed opini<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> a<br />

comparatively few, specially educated for the task’] is possessed in the<br />

most eminent degree is the government <str<strong>on</strong>g>of</str<strong>on</strong>g> Prussia—a most powerfully<br />

and skilfully organised aristocracy <str<strong>on</strong>g>of</str<strong>on</strong>g> all the most highly educated men<br />

in the kingdom”. 6 We know now where this leads. And we prefer, I<br />

think rightly, an imperfect government by democratic methods to a real<br />

government by experts.<br />

But this has c<strong>on</strong>sequences <str<strong>on</strong>g>of</str<strong>on</strong>g> which ec<strong>on</strong>omists more than others<br />

ought to be aware. We can never be sure what our suggesti<strong>on</strong>s will<br />

produce and whether our best meant efforts may not result in something<br />

very different from what we wish. It is, in fact, quite c<strong>on</strong>ceivable that<br />

advance in social knowledge may produce a retrogressi<strong>on</strong> in social<br />

policy, and this has indeed happened more than <strong>on</strong>ce. I will give you<br />

<strong>on</strong>ly <strong>on</strong>e example. About seventy years ago ec<strong>on</strong>omists began seriously<br />

to urge certain excepti<strong>on</strong>s to the freetrade argument then almost<br />

universally accepted. I am not c<strong>on</strong>cerned here whether they were right or<br />

3 [This was written in 1944, l<strong>on</strong>g before the establishment <str<strong>on</strong>g>of</str<strong>on</strong>g> the Nobel<br />

Memorial Prize in <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Science which Hayek himself was awarded in<br />

1974. Hayek accepted the prize with some reservati<strong>on</strong>s, expressing in his<br />

acceptance speech in Stockholm some <str<strong>on</strong>g>of</str<strong>on</strong>g> the reluctance stated in this lecture.<br />

See “<str<strong>on</strong>g>The</str<strong>on</strong>g> Pretence <str<strong>on</strong>g>of</str<strong>on</strong>g> Knowledge”, chapter 2 <str<strong>on</strong>g>of</str<strong>on</strong>g> his New Studies in Philosophy,<br />

Politics, <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s and the History <str<strong>on</strong>g>of</str<strong>on</strong>g> Ideas (Chicago: University <str<strong>on</strong>g>of</str<strong>on</strong>g> Chicago<br />

Press; L<strong>on</strong>d<strong>on</strong>: Routledge & Kegan Paul, 1978). -Ed.]<br />

4 [<str<strong>on</strong>g>The</str<strong>on</strong>g> reference is obviously to Keynes, who was created a Bar<strong>on</strong> in 1942. -<br />

Ed.]<br />

5 <str<strong>on</strong>g>The</str<strong>on</strong>g> General <str<strong>on</strong>g>The</str<strong>on</strong>g>ory <str<strong>on</strong>g>of</str<strong>on</strong>g> Employment Interest and M<strong>on</strong>ey (L<strong>on</strong>d<strong>on</strong>: Macmillan,<br />

1936), p. 383 [reprinted as vol. 7 <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>The</str<strong>on</strong>g> Collected Writings <str<strong>on</strong>g>of</str<strong>on</strong>g> John Maynard<br />

Keynes (L<strong>on</strong>d<strong>on</strong>: Macmillan, 1973). -Ed.].


34 THE TREND OF ECONOMIC THINKING<br />

wr<strong>on</strong>g. <str<strong>on</strong>g>The</str<strong>on</strong>g> point I want to make is merely that when after the usual<br />

interval <str<strong>on</strong>g>of</str<strong>on</strong>g> a generati<strong>on</strong> or so their ideas began to take effect they<br />

produced a state <str<strong>on</strong>g>of</str<strong>on</strong>g> affairs which, I believe, even the most extreme<br />

protecti<strong>on</strong>ists would agree to be greatly inferior to the c<strong>on</strong>diti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

near free trade they had attacked. It may be true that some little<br />

protecti<strong>on</strong>, or some little flexibility in exchange rates, judiciously<br />

administered, may be better than free trade or the gold standard. I d<strong>on</strong>’t<br />

believe it, but it may be true. But this does not exclude that the<br />

advocacy <str<strong>on</strong>g>of</str<strong>on</strong>g> these modificati<strong>on</strong>s may have most regrettable effects. <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

attack against the principle, or perhaps half-truth, <str<strong>on</strong>g>of</str<strong>on</strong>g> the free-trade<br />

doctrine has certainly had the effect that the public forgot even a great<br />

deal <str<strong>on</strong>g>of</str<strong>on</strong>g> the elementary ec<strong>on</strong>omics it had learnt, and became <strong>on</strong>ce more<br />

ready to assent to absurdities which seventy years ago it would have<br />

laughed out <str<strong>on</strong>g>of</str<strong>on</strong>g> court.<br />

I have just referred to the interval <str<strong>on</strong>g>of</str<strong>on</strong>g> a generati<strong>on</strong> or so which usually<br />

elapses before a new opini<strong>on</strong> becomes a political force. This<br />

phenomen<strong>on</strong> will be familiar to the readers <str<strong>on</strong>g>of</str<strong>on</strong>g> Dicey’s Law and Opini<strong>on</strong>,<br />

7 and I could add many further instances to those given there. But it is<br />

perhaps specially necessary to remind you <str<strong>on</strong>g>of</str<strong>on</strong>g> it, because the unique<br />

rapidity with which, in our own time, the teaching <str<strong>on</strong>g>of</str<strong>on</strong>g> Lord Keynes has<br />

penetrated into public c<strong>on</strong>sciousness may a little mislead you about what<br />

is the more regular course <str<strong>on</strong>g>of</str<strong>on</strong>g> things. I shall presently have to suggest an<br />

explanati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> this excepti<strong>on</strong>al case.<br />

Another point to which I have indirectly referred already, but <strong>on</strong><br />

which I must dwell a little, is the fact that in our field no knowledge can<br />

be regarded as established <strong>on</strong>ce and for all, and that, in fact, knowledge<br />

<strong>on</strong>ce gained and spread is <str<strong>on</strong>g>of</str<strong>on</strong>g>ten, not disproved, but simply lost and<br />

forgotten. <str<strong>on</strong>g>The</str<strong>on</strong>g> elements <str<strong>on</strong>g>of</str<strong>on</strong>g> the free-trade argument, at <strong>on</strong>e time nearly<br />

understood by every educated man, are a case in point. <str<strong>on</strong>g>The</str<strong>on</strong>g> reas<strong>on</strong> why<br />

in our field knowledge can be so lost is, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, that it is never<br />

established by experiment, but can be acquired <strong>on</strong>ly by following a<br />

rather difficult process <str<strong>on</strong>g>of</str<strong>on</strong>g> reas<strong>on</strong>ing. And while people will believe a<br />

thing if you just tell them ‘it has been shown by experiment’—although<br />

they may understand nothing about it—they will not accept in the same<br />

6 [John Stuart Mill, “Rati<strong>on</strong>ale <str<strong>on</strong>g>of</str<strong>on</strong>g> Representati<strong>on</strong>” [1835], in <str<strong>on</strong>g>Essays</str<strong>on</strong>g> <strong>on</strong> Politics<br />

and Society (Tor<strong>on</strong>to: University <str<strong>on</strong>g>of</str<strong>on</strong>g> Tor<strong>on</strong>to Press; L<strong>on</strong>d<strong>on</strong>: Routledge &<br />

Kegan Paul, 1977), p. 23, which is vol. 18 <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>The</str<strong>on</strong>g> Collected Works <str<strong>on</strong>g>of</str<strong>on</strong>g> John<br />

Stuart Mill. <str<strong>on</strong>g>The</str<strong>on</strong>g> quotati<strong>on</strong> as given weaves together a full sentence by Mill with<br />

the quotati<strong>on</strong> in brackets which precedes it by a few lines. <str<strong>on</strong>g>The</str<strong>on</strong>g> meaning is not<br />

altered. -Ed.]


ON BEING AN ECONOMIST 35<br />

manner an argument, even though that argument may have c<strong>on</strong>vinced<br />

everybody who has understood it. <str<strong>on</strong>g>The</str<strong>on</strong>g> result is that in ec<strong>on</strong>omics you<br />

can never establish a truth <strong>on</strong>ce and for all but have always to c<strong>on</strong>vince<br />

every generati<strong>on</strong> anew—and that you may find much more difficult<br />

when things appear to yourself no l<strong>on</strong>ger so simple as they <strong>on</strong>ce did.<br />

I cannot attempt here more than to touch up<strong>on</strong> the inexhaustible<br />

subject <str<strong>on</strong>g>of</str<strong>on</strong>g> Ec<strong>on</strong>omists and the Public, a subject <strong>on</strong> which Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor<br />

W.H.Hutt <str<strong>on</strong>g>of</str<strong>on</strong>g> Capetown has written a thoughtful book, which c<strong>on</strong>tains<br />

many wise things and some not so wise—and which I str<strong>on</strong>gly<br />

recommend to your attenti<strong>on</strong>. 8 <str<strong>on</strong>g>The</str<strong>on</strong>g>re are very interesting points in this<br />

c<strong>on</strong>nexi<strong>on</strong>, which have c<strong>on</strong>siderable bearing <strong>on</strong> our pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essi<strong>on</strong>al<br />

positi<strong>on</strong> as ec<strong>on</strong>omists, such as the special difficulty, in our field, to<br />

distinguish between the expert and the quack—and the equally<br />

important fact <str<strong>on</strong>g>of</str<strong>on</strong>g> the traditi<strong>on</strong>al unpopularity <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omists. You<br />

probably all know the remark <str<strong>on</strong>g>of</str<strong>on</strong>g> Walter Bagehot 9 that the public has<br />

never yet been sorry to hear <str<strong>on</strong>g>of</str<strong>on</strong>g> the death <str<strong>on</strong>g>of</str<strong>on</strong>g> an ec<strong>on</strong>omist. In fact, the<br />

dislike for most <str<strong>on</strong>g>of</str<strong>on</strong>g> the teaching <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omists in the past has built<br />

up a picture <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omist as a sort <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>ster devouring children.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re is little to justify it in the facts. One <str<strong>on</strong>g>of</str<strong>on</strong>g> the great liberal politicians<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the early nineteenth century (Sir James Mackintosh 10 ) has said that<br />

“he had known Smith slightly, Ricardo well and Malthus intimately and<br />

found them about the best men he had known”. I can to some extent<br />

c<strong>on</strong>firm this. As you perhaps know I have amused myself at times to dig<br />

into the history <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics, and during the past twenty-five years I<br />

have had the opportunity to know not <strong>on</strong>ly a good many ec<strong>on</strong>omists <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

this and the past generati<strong>on</strong> but also to compare them with scholars in<br />

other fields. And I must say I have found them <strong>on</strong> the whole a<br />

surprisingly nice, sensitive and sane lot <str<strong>on</strong>g>of</str<strong>on</strong>g> people, less crotchety and<br />

mad than other scientists. Yet they still enjoy a reputati<strong>on</strong> worse than<br />

almost any other pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essi<strong>on</strong> and are imagined to be particularly hard,<br />

prejudiced, and devoid <str<strong>on</strong>g>of</str<strong>on</strong>g> feeling. And it was, and still is, the most<br />

eminent <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omists in an academic sense, towards whom these<br />

reproaches were most frequently directed, while nothing is easier than<br />

for a crank to acquire the reputati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> being a friend <str<strong>on</strong>g>of</str<strong>on</strong>g> the people.<br />

Things are in this respect still very much the same as they were in Adam<br />

Smith’s time, and what he said about the relati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> an M.P. to<br />

m<strong>on</strong>opolies applies very much to the relati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omist to the<br />

7 [A.V.Dicey, Lectures <strong>on</strong> the Relati<strong>on</strong> Between Law & Public Opini<strong>on</strong> in<br />

England During the Nineteenth Century (L<strong>on</strong>d<strong>on</strong>: Macmillan, 1914). -Ed.]


36 THE TREND OF ECONOMIC THINKING<br />

practical ‘interests’—and not <strong>on</strong>ly the capitalist interests: “<str<strong>on</strong>g>The</str<strong>on</strong>g> member<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> parliament”, you will find it said in the Wealth <str<strong>on</strong>g>of</str<strong>on</strong>g> Nati<strong>on</strong>s, 11 “who<br />

supports every proposal for strengthening this m<strong>on</strong>opoly (<str<strong>on</strong>g>of</str<strong>on</strong>g> house<br />

manufacturers), is sure to acquire not <strong>on</strong>ly the reputati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

understanding trade, but great popularity and influence with an order <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

men whose number and wealth render them <str<strong>on</strong>g>of</str<strong>on</strong>g> great importance. If he<br />

opposes them, <strong>on</strong> the c<strong>on</strong>trary, and still more if he has authority enough<br />

to thwart them, neither the most acknowledged probity, nor the highest<br />

rank, nor the greatest public services, can protect him from the most<br />

infamous abuse and detracti<strong>on</strong>, from pers<strong>on</strong>al insults, nor sometimes<br />

real danger, arising from the insolent outrage <str<strong>on</strong>g>of</str<strong>on</strong>g> furious and<br />

disappointed m<strong>on</strong>opolists.”<br />

Before I pursue this subject <str<strong>on</strong>g>of</str<strong>on</strong>g> the effect <str<strong>on</strong>g>of</str<strong>on</strong>g> public opini<strong>on</strong> and<br />

political bias <strong>on</strong> the work <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omist I must for a moment pause to<br />

c<strong>on</strong>sider the various reas<strong>on</strong>s and purposes which make us study<br />

ec<strong>on</strong>omics. It is probably still true <str<strong>on</strong>g>of</str<strong>on</strong>g> most <str<strong>on</strong>g>of</str<strong>on</strong>g> us—and in this, too,<br />

ec<strong>on</strong>omics differs from most other subjects—that we did not turn to<br />

ec<strong>on</strong>omics for the fascinati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the subject as such. Whatever may<br />

guide us later, few do—or at least did in my time—turn to ec<strong>on</strong>omics for<br />

that reas<strong>on</strong>—simply because we usually d<strong>on</strong>’t quite know what<br />

ec<strong>on</strong>omics is. Indeed I remember that when I first borrowed during the<br />

last war from a fellow <str<strong>on</strong>g>of</str<strong>on</strong>g>ficer a textbook <strong>on</strong> ec<strong>on</strong>omics 12 I was str<strong>on</strong>gly<br />

repelled by the dreariness <str<strong>on</strong>g>of</str<strong>on</strong>g> what I found, and my social enthusiasm<br />

was hardly sufficient to make me plod through the tome in which I<br />

hoped to find—and needless to say, did not find—the answer to the<br />

burning problem <str<strong>on</strong>g>of</str<strong>on</strong>g> how to build a juster society for which I really<br />

cared. But while the motives which have led most <str<strong>on</strong>g>of</str<strong>on</strong>g> us—and I hope<br />

8 [W.H.Hutt, Ec<strong>on</strong>omists and the Public: A Study <str<strong>on</strong>g>of</str<strong>on</strong>g> Competiti<strong>on</strong> and Opini<strong>on</strong><br />

(L<strong>on</strong>d<strong>on</strong>: J<strong>on</strong>athan Cape, 1936). Hutt was <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> Hayek’s earliest associates at<br />

the L<strong>on</strong>d<strong>on</strong> School <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s and a life-l<strong>on</strong>g friend and collaborator. -Ed.]<br />

9 [Walter Bagehot (1826–1877), English ec<strong>on</strong>omist, banker and essayist, editor<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>The</str<strong>on</strong>g> Ec<strong>on</strong>omist and author <str<strong>on</strong>g>of</str<strong>on</strong>g> Lombard Street (L<strong>on</strong>d<strong>on</strong>: P.S.King, 1873),<br />

reprinted in <str<strong>on</strong>g>The</str<strong>on</strong>g> Collected Works <str<strong>on</strong>g>of</str<strong>on</strong>g> Walter Bagehot (L<strong>on</strong>d<strong>on</strong>: <str<strong>on</strong>g>The</str<strong>on</strong>g> Ec<strong>on</strong>omist,<br />

1978), vol. 9, pp. 45– 233. This is perhaps the best-known book <strong>on</strong> English<br />

central banking. -Ed.]<br />

10 [Sir James Mackintosh (1765–1832), English jurist and aboliti<strong>on</strong>ist, author <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Vindiciae Gallicae: Defence <str<strong>on</strong>g>of</str<strong>on</strong>g> the French Revoluti<strong>on</strong> and its English Admirers<br />

against the Accusati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> the Right H<strong>on</strong>. Edmund Burke (L<strong>on</strong>d<strong>on</strong>: G.G.J. and<br />

J.Robins<strong>on</strong>, 1791), and History <str<strong>on</strong>g>of</str<strong>on</strong>g> the Revoluti<strong>on</strong> in England in 1688 (L<strong>on</strong>d<strong>on</strong>:<br />

L<strong>on</strong>gmans, Rees, Orme, Brown, Green, & L<strong>on</strong>gman, 1834). -Ed.]


ON BEING AN ECONOMIST 37<br />

most <str<strong>on</strong>g>of</str<strong>on</strong>g> you—to the study <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics are highly commendable, they<br />

are not very c<strong>on</strong>ducive to real advance <str<strong>on</strong>g>of</str<strong>on</strong>g> insight. <str<strong>on</strong>g>The</str<strong>on</strong>g> fact which we<br />

must face is that nearly all <str<strong>on</strong>g>of</str<strong>on</strong>g> us come to the study <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics with<br />

very str<strong>on</strong>g views <strong>on</strong> subjects which we do not understand. And even if<br />

we make a show <str<strong>on</strong>g>of</str<strong>on</strong>g> being detached and ready to learn, I am afraid it is<br />

almost always with a mental reservati<strong>on</strong>, with an inward determinati<strong>on</strong><br />

to prove that our instincts were right and that nothing we learn can<br />

change our basic c<strong>on</strong>victi<strong>on</strong>s. Though I am verging dangerously <strong>on</strong><br />

preaching, let me nevertheless implore you to make a determined effort<br />

to achieve that intellectual humility which al<strong>on</strong>e helps <strong>on</strong>e to learn.<br />

Nothing is more pernicious to intellectual h<strong>on</strong>esty than pride in not<br />

having changed <strong>on</strong>e’s opini<strong>on</strong>s—particularly if, as is usually the case in<br />

our field, these are opini<strong>on</strong>s which in the circles in which we move are<br />

regarded as ‘progressive’ or ‘advanced’ or just modern. You will so<strong>on</strong><br />

enough discover that what you regard as specially advanced opini<strong>on</strong>s<br />

are just the opini<strong>on</strong>s dominant in your particular generati<strong>on</strong> and that it<br />

requires much greater strength and independence <str<strong>on</strong>g>of</str<strong>on</strong>g> mind to take a<br />

critical view <str<strong>on</strong>g>of</str<strong>on</strong>g> what you have been taught to be progressive than<br />

merely to accept them.<br />

But back to my main topic. <str<strong>on</strong>g>The</str<strong>on</strong>g> great majority <str<strong>on</strong>g>of</str<strong>on</strong>g> you necessarily<br />

study the social sciences not with the intenti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> going <strong>on</strong> to study<br />

them for the rest <str<strong>on</strong>g>of</str<strong>on</strong>g> your lives, but with a view to a job in which in the<br />

near future you can use your knowledge. You will then be entirely<br />

c<strong>on</strong>cerned with what is practical and will have to take the dominant<br />

ideals and ideas <str<strong>on</strong>g>of</str<strong>on</strong>g> your time for granted. Though in the l<strong>on</strong>g run it may<br />

be the ec<strong>on</strong>omist who creates these ruling ideas, what he can do in<br />

practice is determined by the ideas created by his fathers or<br />

grandfathers. Does that mean that in academic study, too, we ought to<br />

be c<strong>on</strong>cerned with the immediately practical, take the current <str<strong>on</strong>g>of</str<strong>on</strong>g> ideas<br />

for granted, and prepare ourselves for the particular job we shall<br />

probably be called up<strong>on</strong> to perform? Now I do not believe that the<br />

universities can do this or that they would perform their proper functi<strong>on</strong><br />

if they attempted to do it. I do not think that in the social sciences the<br />

11 [Adam Smith, An Inquiry into the Nature and Causes <str<strong>on</strong>g>of</str<strong>on</strong>g> the Wealth <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Nati<strong>on</strong>s [1776], book IV, chapter ii, in <str<strong>on</strong>g>The</str<strong>on</strong>g> Glasgow Editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the Works and<br />

Corresp<strong>on</strong>dence <str<strong>on</strong>g>of</str<strong>on</strong>g> Adam Smith, vol. 2:1 (Oxford: Clarend<strong>on</strong> Press, 1976), p.<br />

471. -Ed.]<br />

12 [This happened during a quiet period <strong>on</strong> the Italian fr<strong>on</strong>t, <strong>on</strong> the Piave. <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

two books were by Grunzl and Jentsch. Hayek later told us, “I still marvel that<br />

these particular books did not give me a permanent distaste for the subject”. -Ed.]


38 THE TREND OF ECONOMIC THINKING<br />

universities could give an effective ‘pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essi<strong>on</strong>al training’ or that<br />

pers<strong>on</strong>s so trained would be <str<strong>on</strong>g>of</str<strong>on</strong>g> much use except for subordinate jobs.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> practical aspects <str<strong>on</strong>g>of</str<strong>on</strong>g> a particular job are much better learnt <strong>on</strong> the job<br />

—and that is even true <str<strong>on</strong>g>of</str<strong>on</strong>g> many <str<strong>on</strong>g>of</str<strong>on</strong>g> the more general c<strong>on</strong>crete aspects <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the society in which we live. What you need, if through that inevitable<br />

apprenticeship you hope ultimately to rise to more resp<strong>on</strong>sible positi<strong>on</strong>s,<br />

is a capacity to interpret the detail with which you will be c<strong>on</strong>cerned<br />

and to see through the catchwords and phrases which govern everyday<br />

life. Does the study <str<strong>on</strong>g>of</str<strong>on</strong>g> the social sciences as it is now pursued provide<br />

this educati<strong>on</strong>—or how can it be made to do so?<br />

This raises immediately the vexed problem <str<strong>on</strong>g>of</str<strong>on</strong>g> specialisati<strong>on</strong> versus a<br />

general and all-round educati<strong>on</strong>, much more acute and difficult in the<br />

social sciences than anywhere else. Let me at <strong>on</strong>ce meet a comm<strong>on</strong><br />

misunderstanding: it is <str<strong>on</strong>g>of</str<strong>on</strong>g>ten argued that in social life everything hangs<br />

so closely together that society can <strong>on</strong>ly be studied ‘as a whole’. 13 If that<br />

were really the case it would mean that it could not be studied at all.<br />

Nobody is capable <str<strong>on</strong>g>of</str<strong>on</strong>g> really understanding all aspects <str<strong>on</strong>g>of</str<strong>on</strong>g> society, and so<br />

far as advancement <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge is c<strong>on</strong>cerned specialisati<strong>on</strong> is in the<br />

social sciences as necessary as anywhere, and becomes daily more<br />

necessary. But in another sense the c<strong>on</strong>tenti<strong>on</strong> that exclusive knowledge<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> a single sector <str<strong>on</strong>g>of</str<strong>on</strong>g> the social sciences is <str<strong>on</strong>g>of</str<strong>on</strong>g> little use is perfectly true.<br />

While you may be a very useful member <str<strong>on</strong>g>of</str<strong>on</strong>g> society if you are a<br />

competent chemist or biologist but know nothing else, you will not be a<br />

useful member <str<strong>on</strong>g>of</str<strong>on</strong>g> society if you know <strong>on</strong>ly ec<strong>on</strong>omics or political<br />

science and nothing else. You cannot successfully use your technical<br />

knowledge unless you are a fairly educated pers<strong>on</strong>, and, in particular,<br />

have some knowledge <str<strong>on</strong>g>of</str<strong>on</strong>g> the whole field <str<strong>on</strong>g>of</str<strong>on</strong>g> the social sciences as well<br />

as some knowledge <str<strong>on</strong>g>of</str<strong>on</strong>g> history and philosophy. Of course real<br />

competence in some particular field comes first. Unless you really know<br />

your ec<strong>on</strong>omics or whatever your special field is, you will be simply a<br />

fraud. But if you know <strong>on</strong>ly ec<strong>on</strong>omics and nothing else, you will be a<br />

bane to mankind, good, perhaps, for writing articles for other<br />

ec<strong>on</strong>omists to read, but for nothing else. If you have <strong>on</strong>ly three years 14<br />

this double task <str<strong>on</strong>g>of</str<strong>on</strong>g> acquiring technical competence in a narrow field<br />

plus a general educati<strong>on</strong> is a formidable task. But you will find it will for<br />

l<strong>on</strong>g be the <strong>on</strong>ly opportunity you have to collect a great deal <str<strong>on</strong>g>of</str<strong>on</strong>g> varied<br />

knowledge whose meaning and significance you will recognise <strong>on</strong>ly<br />

later. And if you mean to make the academic study <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

subjects your life-work, it is even more important that during your<br />

undergraduate years you let your interests range rather widely. Any<br />

successful original work <strong>on</strong> <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the social sciences requires now


ON BEING AN ECONOMIST 39<br />

many years <str<strong>on</strong>g>of</str<strong>on</strong>g> exacting and exclusive attenti<strong>on</strong> to a narrow field, and it<br />

will be <strong>on</strong>ly after ten or fifteen years in which by such work you have<br />

become entitled to regard yourself as a creative ec<strong>on</strong>omist that you<br />

<strong>on</strong>ce again emerge as a man who can look at things in a wider<br />

perspective and can broaden out bey<strong>on</strong>d your narrow specialism. It is in<br />

the years before you have become specialists, before you have tied<br />

yourself to a particular field or a particular purpose, that you must<br />

acquire what general educati<strong>on</strong> you will have to guide you in the most<br />

active and productive part <str<strong>on</strong>g>of</str<strong>on</strong>g> your life.<br />

What I want to plead for here is that in this you should let yourself be<br />

guided not by any fixed purpose but mainly by intellectual curiosity and<br />

a spirit <str<strong>on</strong>g>of</str<strong>on</strong>g> explorati<strong>on</strong>. Apart from what you need for examinati<strong>on</strong><br />

purposes there is no definite field <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge which you can hope to<br />

have ‘covered’ by the time you complete your course. And you will<br />

derive infinitely more pr<str<strong>on</strong>g>of</str<strong>on</strong>g>it if you allow yourself to follow up problems<br />

which at the moment interest you, or interest yourself in questi<strong>on</strong>s<br />

which you feel are definitely interesting, than if you make it a set<br />

purpose to master a definite subject. That you do enough <str<strong>on</strong>g>of</str<strong>on</strong>g> that the<br />

impending examinati<strong>on</strong>s see to. But no man or woman deserves to be at<br />

a university whose intellectual energy is completely absorbed by that<br />

except in the last m<strong>on</strong>ths before the exams, in work for the exam.<br />

Unless you use the opportunities you now have in this respect you will<br />

never make the gain which I still regard as the greatest <str<strong>on</strong>g>of</str<strong>on</strong>g> all that the<br />

university can give: the discovery that to learn, to come to understand<br />

things, can be the greatest <str<strong>on</strong>g>of</str<strong>on</strong>g> human pleasures, and the <strong>on</strong>ly <strong>on</strong>e that<br />

will never be exhausted.<br />

But I see I let myself again and again be drawn away from what I<br />

wanted to talk more about than anything, and as time is now getting<br />

13 [This is an allusi<strong>on</strong> to K.R.Popper’s discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> ‘holism’ in his three<br />

articles <strong>on</strong> “<str<strong>on</strong>g>The</str<strong>on</strong>g> Poverty <str<strong>on</strong>g>of</str<strong>on</strong>g> Historicism”. Hayek, then editor <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>a,<br />

published the first two <str<strong>on</strong>g>of</str<strong>on</strong>g> these in that journal in 1944, and the third in 1945.<br />

Popper’s essays were later republished in book form as <str<strong>on</strong>g>The</str<strong>on</strong>g> Poverty <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Historicism (L<strong>on</strong>d<strong>on</strong>: Routledge & Kegan Paul, 1957). In 1943 and 1944 Hayek<br />

assisted Popper in three fundamental ways which Popper later described as<br />

“having saved my life”. <str<strong>on</strong>g>The</str<strong>on</strong>g> first was to publish “<str<strong>on</strong>g>The</str<strong>on</strong>g> Poverty <str<strong>on</strong>g>of</str<strong>on</strong>g> Historicism”,<br />

which G.E.Moore had refused for publicati<strong>on</strong> in Mind; the sec<strong>on</strong>d was to<br />

persuade Sir Herbert Read, at Routledge, to agree to publish <str<strong>on</strong>g>The</str<strong>on</strong>g> Open Society<br />

and Its Enemies (L<strong>on</strong>d<strong>on</strong>: Routledge & Kegan Paul, 1945), which had been<br />

been turned down by twenty publishers; the third was to secure for Popper, then<br />

in New Zealand, a Readership at the L<strong>on</strong>d<strong>on</strong> School <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s.— Ed.]<br />

14 [<str<strong>on</strong>g>The</str<strong>on</strong>g> length <str<strong>on</strong>g>of</str<strong>on</strong>g> the usual undergraduate degree programme in Britain. -Ed.]


40 THE TREND OF ECONOMIC THINKING<br />

short I must c<strong>on</strong>centrate entirely <strong>on</strong> that <strong>on</strong>e point. It is a point<br />

c<strong>on</strong>nected with the <strong>on</strong>e I have just discussed—the way in which, not as<br />

beginners, but in our original work as ec<strong>on</strong>omists, we should guide and<br />

direct our interests. Should we aim at immediate usefulness, should we<br />

c<strong>on</strong>cern ourselves mainly with what is immediately practicable? Or<br />

should we pursue whatever intellectual difficulty we feel we might be<br />

able to solve, follow up problems where we see accepted views are<br />

defective or muddled and where, therefore, we can hope to effect some<br />

theoretical improvement, irrespective <str<strong>on</strong>g>of</str<strong>on</strong>g> whether we can now see what<br />

its practical significance will be or not? <str<strong>on</strong>g>The</str<strong>on</strong>g> questi<strong>on</strong> is, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, closely<br />

c<strong>on</strong>nected with whether the ec<strong>on</strong>omist should strive for immediate<br />

influence or whether he should be c<strong>on</strong>tent to work in effect for a distant<br />

future in which he has little pers<strong>on</strong>al interest. This is, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, a choice<br />

which <strong>on</strong>ly the academic ec<strong>on</strong>omist, the ‘d<strong>on</strong>’, has to make; but it is<br />

nevertheless <str<strong>on</strong>g>of</str<strong>on</strong>g> some importance.<br />

When I stress the unpopular and unfashi<strong>on</strong>able answer to these<br />

questi<strong>on</strong>s I do not, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, mean to imply that these are really<br />

exclusive alternatives and that a sensible pers<strong>on</strong> will not aim at some<br />

judicious balance between the two. What I want to suggest is merely<br />

that the ‘academic’ attitude which I shall favour is being unduly<br />

disparaged at the moment and the dangers to full intellectual integrity<br />

and independence which the more ‘practical’ attitude involves are<br />

perhaps not fully enough recognised.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> reas<strong>on</strong> why I think that too deliberate striving for immediate<br />

usefulness is so likely to corrupt the intellectual integrity <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

ec<strong>on</strong>omist is that immediate usefulness depends almost entirely <strong>on</strong><br />

influence, and influence is gained most easily by c<strong>on</strong>cessi<strong>on</strong>s to popular<br />

prejudice and adherence to existing political groups. I seriously believe<br />

that any such striving for popularity—at least till you have very<br />

definitely settled your own c<strong>on</strong>victi<strong>on</strong>s, is fatal to the ec<strong>on</strong>omist and that<br />

above anything he must have the courage to be unpopular. Whatever his<br />

theoretical beliefs may be, when he has to deal with the proposals <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

laymen the chance is that in nine out <str<strong>on</strong>g>of</str<strong>on</strong>g> ten cases his answer will have to<br />

be that their various ends are incompatible and that they will have to<br />

choose between them and to sacrifice some ambiti<strong>on</strong>s which they<br />

cherish. This is an inevitable c<strong>on</strong>sequence <str<strong>on</strong>g>of</str<strong>on</strong>g> the type <str<strong>on</strong>g>of</str<strong>on</strong>g> problems with<br />

which he has to deal: problems which are well described by the lines <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Schiller that<br />

With ease by <strong>on</strong>e another dwell the thoughts


But hard in space together clash the things.<br />

ON BEING AN ECONOMIST 41<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> ec<strong>on</strong>omist’s task is precisely to detect such incompatibilities <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

thoughts before the clash <str<strong>on</strong>g>of</str<strong>on</strong>g> the things occurs, and the result is that he will<br />

always have the ungrateful task <str<strong>on</strong>g>of</str<strong>on</strong>g> pointing out the costs. That’s what he<br />

is there for and it is a task from which he must never shirk, however<br />

unpopular and disliked it may make him. Whatever else you may think<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the classical ec<strong>on</strong>omists you must admit that they never feared being<br />

unpopular.<br />

It is fashi<strong>on</strong>able now to sneer at their ‘n<strong>on</strong>-c<strong>on</strong>formist c<strong>on</strong>science’ or<br />

‘self-castigating spirit’ which found pleasure in recommending all sorts<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> self-denial. And perhaps at a time when to adhere to their doctrines was<br />

essential to respectability there really was not as much merit in their<br />

stern attitude as some <str<strong>on</strong>g>of</str<strong>on</strong>g> them might claim. But the pendulum has now<br />

so much swung in the opposite directi<strong>on</strong>, the fashi<strong>on</strong> is now so much to<br />

give the public what it wants rather than to warn it that it cannot have<br />

all, that it is worth remembering how much easier this is than to take the<br />

unpopular course. I think as ec<strong>on</strong>omists we should at least always<br />

suspect ourselves if we find that we are <strong>on</strong> the popular side. It is so<br />

much easier to believe pleasant c<strong>on</strong>clusi<strong>on</strong>s, or to trace doctrines which<br />

others like to believe, to c<strong>on</strong>cur in the views which are held by most<br />

people <str<strong>on</strong>g>of</str<strong>on</strong>g> good will, and not to disillusi<strong>on</strong> enthusiasts, that the<br />

temptati<strong>on</strong> to accept views which would not stand cold examinati<strong>on</strong> is<br />

sometimes almost irresistible.<br />

It is the desire to gain influence in order to be able to do good which<br />

is <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the main sources <str<strong>on</strong>g>of</str<strong>on</strong>g> intellectual c<strong>on</strong>cessi<strong>on</strong>s by the ec<strong>on</strong>omist.<br />

I do not mean, and do not wish to argue, that the ec<strong>on</strong>omist should<br />

entirely refrain from making value judgements or from speaking frankly<br />

<strong>on</strong> political questi<strong>on</strong>s. I do not believe that the former is possible or the<br />

latter desirable. But I think he ought to avoid committing himself to a<br />

party—or even devoting himself predominantly to some <strong>on</strong>e good<br />

cause. That not <strong>on</strong>ly warps his judgement—but the influence it gives<br />

him is almost certainly bought at the price <str<strong>on</strong>g>of</str<strong>on</strong>g> intellectual independence.<br />

Too much anxiety to get a particular thing d<strong>on</strong>e, or to keep <strong>on</strong>e’s<br />

influence over a particular group, is almost certain to be an obstacle to his<br />

saying many unpopular things he ought to say—and leads to his<br />

compromising with ‘dominant views’ which have to be accepted, and<br />

even accepting views which would not stand serious examinati<strong>on</strong>.<br />

I trust you will forgive me if I seriously suggest that the danger <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

such intellectual corrupti<strong>on</strong>, <str<strong>on</strong>g>of</str<strong>on</strong>g> c<strong>on</strong>cessi<strong>on</strong> made to the desire <str<strong>on</strong>g>of</str<strong>on</strong>g> gaining


42 THE TREND OF ECONOMIC THINKING<br />

influence, is today greater from what are known as the left or<br />

progressive parties than from those <str<strong>on</strong>g>of</str<strong>on</strong>g> the right. <str<strong>on</strong>g>The</str<strong>on</strong>g> forces <str<strong>on</strong>g>of</str<strong>on</strong>g> the right<br />

are usually neither intelligent enough to value the support <str<strong>on</strong>g>of</str<strong>on</strong>g> intellectual<br />

activities, nor have they the sort <str<strong>on</strong>g>of</str<strong>on</strong>g> prizes to <str<strong>on</strong>g>of</str<strong>on</strong>g>fer which are likely to<br />

influence h<strong>on</strong>est people. But the fact that, whatever may be true <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

country as a whole, the ‘intelligentsia’ is predominantly left means that<br />

you are certain to have much greater influence, and therefore apparently<br />

chances to be useful, if you accept the sort <str<strong>on</strong>g>of</str<strong>on</strong>g> views which are generally<br />

regarded as ‘progressive’. <str<strong>on</strong>g>The</str<strong>on</strong>g>re are now, and probably always will be,<br />

any number <str<strong>on</strong>g>of</str<strong>on</strong>g> attractive jobs, such as various sorts <str<strong>on</strong>g>of</str<strong>on</strong>g> research or adult<br />

educati<strong>on</strong>, in which you will be welcomed if you hold the right kind <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

‘progressive’ views, and will have a better chance <str<strong>on</strong>g>of</str<strong>on</strong>g> getting <strong>on</strong> various<br />

committees or commissi<strong>on</strong>s if you represent any known political<br />

programme than if you are known to go your own way. Never forget<br />

that the reputati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> being ‘progressive’ adheres almost always to people<br />

or movements which have already half succeeded in c<strong>on</strong>verting people.<br />

15<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re can be no questi<strong>on</strong> that in resisting the inclinati<strong>on</strong> to join in<br />

with some popular movement <strong>on</strong>e deliberately excludes <strong>on</strong>eself from<br />

much that is pleasant, pr<str<strong>on</strong>g>of</str<strong>on</strong>g>itable and flattering. Yet I believe that in our<br />

field more than in any other this is really essential: if any<strong>on</strong>e, the<br />

ec<strong>on</strong>omist must keep free not to believe things which it would be useful<br />

and pleasant to believe, must not allow himself to encourage wishdreams<br />

in himself or others. I d<strong>on</strong>’t think the work <str<strong>on</strong>g>of</str<strong>on</strong>g> the politician and<br />

the true student <str<strong>on</strong>g>of</str<strong>on</strong>g> society are compatible. Indeed it seems to me that in<br />

order to be successful as a politician, to become a political leader, it is<br />

almost essential that you have no original ideas <strong>on</strong> social matters but<br />

just express what the majority feel. But I have perhaps said already<br />

more than enough about the external temptati<strong>on</strong>s and I want to say <strong>on</strong>ly<br />

a few more words about the internal <strong>on</strong>es, the seductive attracti<strong>on</strong><br />

exercised by the pleasantness <str<strong>on</strong>g>of</str<strong>on</strong>g> certain views. Here, too, there has<br />

recently been a great change <str<strong>on</strong>g>of</str<strong>on</strong>g> attitude. While the classical ec<strong>on</strong>omists<br />

were perhaps a little too apt to feel ‘that is too good to be true’, I believe<br />

this attitude is still a safer <strong>on</strong>e than the feeling that the c<strong>on</strong>clusi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> an<br />

argument are so desirable that they must be true.<br />

I can illustrate this positi<strong>on</strong> <strong>on</strong>ly from my own experience and that<br />

will probably be different from yours. From all c<strong>on</strong>siderati<strong>on</strong>s other<br />

than the purely scientific <strong>on</strong>e I have every reas<strong>on</strong> to wish that I were<br />

able to believe that a planned socialist society can achieve what its<br />

advocates promise. If I could c<strong>on</strong>vince myself that they are right this<br />

would suddenly remove all the clouds which to me blacken all the


ON BEING AN ECONOMIST 43<br />

prospects <str<strong>on</strong>g>of</str<strong>on</strong>g> the future. I should be free to share in the happy c<strong>on</strong>fidence<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> so many <str<strong>on</strong>g>of</str<strong>on</strong>g> my fellow men and to join with them in the work for a<br />

comm<strong>on</strong> end. As an ec<strong>on</strong>omist such a situati<strong>on</strong> would indeed have a<br />

double attracti<strong>on</strong>. As I am again and again reminded by some socialist<br />

colleagues, our special knowledge would secure us a much more<br />

important positi<strong>on</strong> and I might rise to be a trusted leader instead <str<strong>on</strong>g>of</str<strong>on</strong>g> a<br />

hated obstructi<strong>on</strong>ist. You will probably say that <str<strong>on</strong>g>of</str<strong>on</strong>g> course it is <strong>on</strong>ly<br />

pride which, <strong>on</strong>ce I have staked my pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essi<strong>on</strong>al reputati<strong>on</strong> <strong>on</strong> a certain<br />

view, now prevents me from seeing the truth. But it was not always so.<br />

And I have indeed been mainly thinking <str<strong>on</strong>g>of</str<strong>on</strong>g> the extremely painful<br />

process <str<strong>on</strong>g>of</str<strong>on</strong>g> disillusi<strong>on</strong>ment which led me to my present views.<br />

You will probably not have the experience in the same c<strong>on</strong>nexi<strong>on</strong>,<br />

but I am sure that, if you do not regard your ec<strong>on</strong>omics just as a given<br />

instrument to achieve given ends, but as a c<strong>on</strong>tinuous adventure in the<br />

search for truth, you will so<strong>on</strong>er or later have a similar experience in<br />

<strong>on</strong>e c<strong>on</strong>nexi<strong>on</strong> or another. It will be for you as well a choice between<br />

cherished and pleasant illusi<strong>on</strong>s <strong>on</strong> the <strong>on</strong>e side and the ruthless pursuit<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> an argument which will lead you almost certainly into isolati<strong>on</strong> and<br />

unpopularity and which you do not know where else it will lead. I<br />

believe this duty to face and think through unpleasant facts is the hardest<br />

task <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omist and the reas<strong>on</strong> why, if he fulfils it, he must not<br />

look for public approval or sympathy for his efforts. If he does he will<br />

so<strong>on</strong> cease to be an ec<strong>on</strong>omist and become a politician—a very<br />

h<strong>on</strong>ourable and useful calling, but a different <strong>on</strong>e, and not <strong>on</strong>e which<br />

gives the kind <str<strong>on</strong>g>of</str<strong>on</strong>g> satisfacti<strong>on</strong> we expect when we embark <strong>on</strong> an<br />

intellectual pursuit. It is this choice about which I wanted to talk and <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the necessity <str<strong>on</strong>g>of</str<strong>on</strong>g> which I mainly wanted to warn you. <str<strong>on</strong>g>The</str<strong>on</strong>g>re are, as you<br />

will realise more and more, many self-denying ordinances which the<br />

ec<strong>on</strong>omist must pass <strong>on</strong> himself if he wants to remain true to his<br />

15 “Students <str<strong>on</strong>g>of</str<strong>on</strong>g> social science must fear popular approval; evil is with them<br />

when all men speak well <str<strong>on</strong>g>of</str<strong>on</strong>g> them. If there is any set <str<strong>on</strong>g>of</str<strong>on</strong>g> opini<strong>on</strong>s by the advocacy<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> which a newspaper can increase its sale, then the student…is bound to dwell<br />

<strong>on</strong> the limitati<strong>on</strong>s and defects and errors, if any, in that set <str<strong>on</strong>g>of</str<strong>on</strong>g> opini<strong>on</strong>s: and<br />

never to advocate them unc<strong>on</strong>diti<strong>on</strong>ally even in an ad hoc discussi<strong>on</strong>. It is<br />

almost impossible for a student to be a true patriot and to have the reputati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

being <strong>on</strong>e at the same time.”—Alfred Marshall. [Quoted in A.C.Pigou, “In<br />

Memoriam: Alfred Marshall”, in A.C.Pigou, Memorials <str<strong>on</strong>g>of</str<strong>on</strong>g> Alfred Marshall<br />

(New York: Kelley & Millman, 1956), p. 89. For more <strong>on</strong> Marshall’s views <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the duties <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omist see John K.Whitaker, “Some Neglected Aspects <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Alfred Marshall’s <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> and Social Thought”, History <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>Political</strong><br />

Ec<strong>on</strong>omy, vol. 9, no. 2, Summer 1977, pp. 161–197, esp. pp. 185–190. -Ed.]


44 THE TREND OF ECONOMIC THINKING<br />

vocati<strong>on</strong>. But the most important <str<strong>on</strong>g>of</str<strong>on</strong>g> them seems to me that he must<br />

never directly aim at immediate success and public influence. I do not<br />

go as far as Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Hutt in the book menti<strong>on</strong>ed who wants the<br />

ec<strong>on</strong>omists to submit to an almost m<strong>on</strong>astic discipline in order to protect<br />

them from corrupti<strong>on</strong>. But I believe there is more truth in what he says<br />

than is comm<strong>on</strong>ly admitted. And I d<strong>on</strong>’t know that any ec<strong>on</strong>omist will<br />

be happy in his pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essi<strong>on</strong> till he has made the choice and, if he chooses<br />

the pursuit <str<strong>on</strong>g>of</str<strong>on</strong>g> light rather than <str<strong>on</strong>g>of</str<strong>on</strong>g> fruits, rec<strong>on</strong>ciles himself with these<br />

limitati<strong>on</strong>s.<br />

If he is able to do so I believe he has a better chance in the l<strong>on</strong>g run to<br />

c<strong>on</strong>tribute to the improvement <str<strong>on</strong>g>of</str<strong>on</strong>g> our social problems than if he more<br />

directly strove for it. I am also c<strong>on</strong>vinced that if he has made the<br />

renunciati<strong>on</strong> there is a great deal <str<strong>on</strong>g>of</str<strong>on</strong>g> real pleasure in his work, just as<br />

there would be if he had equally wholeheartedly devoted himself to any<br />

more tangible and definite goal. So far as I myself am c<strong>on</strong>cerned, at any<br />

rate, and in spite <str<strong>on</strong>g>of</str<strong>on</strong>g> what I have said, I have never really regretted that I<br />

became an ec<strong>on</strong>omist, or really wished to change with anybody else.<br />

But I have been l<strong>on</strong>g enough. It was not my intenti<strong>on</strong> when I started<br />

to preach a serm<strong>on</strong>, and if I have sometimes more than verged <strong>on</strong> it, you<br />

must forgive me. It was the first and I trust will be the last serm<strong>on</strong> I<br />

shall ever preach. And it has taken this form, not because I am anxious<br />

to c<strong>on</strong>vert you to my point <str<strong>on</strong>g>of</str<strong>on</strong>g> view, but rather because I had to talk<br />

about questi<strong>on</strong>s which have deeply c<strong>on</strong>cerned me and where it has cost<br />

me c<strong>on</strong>siderable efforts to clear my own mind, and <strong>on</strong> which in<br />

c<strong>on</strong>sequence I feel str<strong>on</strong>gly.


THREE<br />

TWO TYPES OF MIND 1<br />

Accident had early drawn my attenti<strong>on</strong> to the c<strong>on</strong>trast between two<br />

types <str<strong>on</strong>g>of</str<strong>on</strong>g> scientific thinking which I have since again and again been<br />

watching with growing fascinati<strong>on</strong>. I have l<strong>on</strong>g wished to describe the<br />

difference but have been deterred by the egotistic character such an<br />

account is bound to assume. My interest in it is largely due to the fact that<br />

I myself represent a rather extreme instance <str<strong>on</strong>g>of</str<strong>on</strong>g> the more unc<strong>on</strong>venti<strong>on</strong>al<br />

type, and that to describe it inevitably means largely talking about<br />

myself and must appear like an apology for not c<strong>on</strong>forming to a<br />

recognised standard. I have now come to the c<strong>on</strong>clusi<strong>on</strong>, however, that<br />

the recogniti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the c<strong>on</strong>tributi<strong>on</strong> students <str<strong>on</strong>g>of</str<strong>on</strong>g> this type can make may<br />

have important c<strong>on</strong>sequences for policy in higher educati<strong>on</strong>, and that<br />

for this reas<strong>on</strong> such an account may serve a useful purpose.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re exists a stereotype <str<strong>on</strong>g>of</str<strong>on</strong>g> the great scientist which, though<br />

overdrawn, is not entirely wr<strong>on</strong>g. He is seen, above all, as the perfect<br />

master <str<strong>on</strong>g>of</str<strong>on</strong>g> his subject, the man who has at his ready command the whole<br />

theory and all the important facts <str<strong>on</strong>g>of</str<strong>on</strong>g> his discipline and is prepared to<br />

answer at a moment’s notice all important questi<strong>on</strong>s relating to his<br />

field. Even if such parag<strong>on</strong>s do not really exist, I have certainly<br />

encountered scientists who closely approach this ideal. And many more,<br />

I believe, feel that this is the standard at which they ought to aim, and<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g>ten suffer from a feeling <str<strong>on</strong>g>of</str<strong>on</strong>g> inadequacy because they fail to attain it.<br />

It is also the type we learn to admire because we can watch him in<br />

operati<strong>on</strong>. Most <str<strong>on</strong>g>of</str<strong>on</strong>g> the brilliant expositors, the most successful teachers,<br />

writers and speakers <strong>on</strong> science, the sparkling c<strong>on</strong>versati<strong>on</strong>alists bel<strong>on</strong>g<br />

to this class. <str<strong>on</strong>g>The</str<strong>on</strong>g>ir lucid accounts spring from a complete c<strong>on</strong>spectus <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the whole <str<strong>on</strong>g>of</str<strong>on</strong>g> their subject which comprehends not <strong>on</strong>ly their own<br />

c<strong>on</strong>cepti<strong>on</strong>s but equally the theories <str<strong>on</strong>g>of</str<strong>on</strong>g> others, past and present. No<br />

doubt these recognised masters <str<strong>on</strong>g>of</str<strong>on</strong>g> the existing state <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge<br />

include also some <str<strong>on</strong>g>of</str<strong>on</strong>g> the most creative minds, but what I am not certain<br />

is whether this particular capacity really helps creativity.


46 THE TREND OF ECONOMIC THINKING<br />

Some <str<strong>on</strong>g>of</str<strong>on</strong>g> my closest colleagues and best friends have bel<strong>on</strong>ged to this<br />

type and owe their well-deserved reputati<strong>on</strong>s to accomplishments I<br />

could never try to emulate. In almost any questi<strong>on</strong> about the state <str<strong>on</strong>g>of</str<strong>on</strong>g> our<br />

science I regard them as more competent to provide informati<strong>on</strong> than a<br />

pers<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> my own sort. <str<strong>on</strong>g>The</str<strong>on</strong>g>y certainly can give a more intelligible<br />

account <str<strong>on</strong>g>of</str<strong>on</strong>g> the subject to an outsider or young student than I could, and<br />

are <str<strong>on</strong>g>of</str<strong>on</strong>g> much greater help to the future practiti<strong>on</strong>er. What I am going to<br />

plead is that there is a place in the various instituti<strong>on</strong>s for a few<br />

specimens <str<strong>on</strong>g>of</str<strong>on</strong>g> minds <str<strong>on</strong>g>of</str<strong>on</strong>g> a different type. 2<br />

In my private language I used to describe the recognised standard<br />

type <str<strong>on</strong>g>of</str<strong>on</strong>g> scientists as the memory type. But this is somewhat unfair<br />

because their ability is due to a particular kind <str<strong>on</strong>g>of</str<strong>on</strong>g> memory, and there are<br />

also other kinds. I shall therefore here call this type simply the ‘master<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> his subject’. It is the kind <str<strong>on</strong>g>of</str<strong>on</strong>g> mind who can retain the particular things<br />

he has read or heard, <str<strong>on</strong>g>of</str<strong>on</strong>g>ten the particu lar words in which an idea has<br />

been expressed, and retain them for a l<strong>on</strong>g time. This capacity <strong>on</strong>e may<br />

lack, though <strong>on</strong>e may possess a very good short-term memory even for<br />

isolated facts, as I know from my own experience, at least when I was a<br />

very young man. I owe it largely to the capacity to swot up in a few<br />

weeks before the end-<str<strong>on</strong>g>of</str<strong>on</strong>g>-the-year examinati<strong>on</strong>s the whole substance <str<strong>on</strong>g>of</str<strong>on</strong>g> a<br />

year’s teaching in several subjects in which I had d<strong>on</strong>e no work<br />

whatever that I managed to complete a school educati<strong>on</strong> which gave me<br />

access to a university. But I forgot such knowledge as rapidly as I had<br />

acquired it; and I always lacked the capacity to retain, for any length <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

time, the successive steps <str<strong>on</strong>g>of</str<strong>on</strong>g> a complex argument, or to store in my<br />

mind useful informati<strong>on</strong> which I could not place into a framework <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

ideas with which I was familiar.<br />

1 Reprinted with additi<strong>on</strong>s from Encounter, vol. 45, September 1975, pp. 33–<br />

35. Since the first publicati<strong>on</strong> my attenti<strong>on</strong> has been drawn to the fact that there<br />

is some similarity between the distincti<strong>on</strong> drawn in this article and that drawn<br />

by Sir Isaiah Berlin in his well-known essay, “<str<strong>on</strong>g>The</str<strong>on</strong>g> hedgehog and the fox”. This<br />

had not occurred to me but is probably true. But if I had been aware <str<strong>on</strong>g>of</str<strong>on</strong>g> it I<br />

would certainly not have wished to claim <strong>on</strong> my behalf that in c<strong>on</strong>trast to the<br />

“foxes” who know many things, I was a “hedgehog who knows <strong>on</strong>e big thing”.<br />

[<str<strong>on</strong>g>The</str<strong>on</strong>g> revised versi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> this essay appeared in New Studies in Philosophy,<br />

Politics, <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s and the History <str<strong>on</strong>g>of</str<strong>on</strong>g> Ideas (Chicago: University <str<strong>on</strong>g>of</str<strong>on</strong>g> Chicago<br />

Press; L<strong>on</strong>d<strong>on</strong>: Routledge & Kegan Paul, 1978). Readers may find some<br />

corroborati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Hayek’s experience in the anecdotes and quotati<strong>on</strong>s provided<br />

by Ben-Ami Scharfstein in his <str<strong>on</strong>g>The</str<strong>on</strong>g> Philosophers: <str<strong>on</strong>g>The</str<strong>on</strong>g>ir Lives and the Nature <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>ir Thought (Oxford: Oxford University Press, 1980), especially chapter 1,<br />

secti<strong>on</strong> “Creative Resistance to Persuasi<strong>on</strong>”. -Ed.]


TWO TYPES OF MIND 47<br />

What preserved me from developing an acute sense <str<strong>on</strong>g>of</str<strong>on</strong>g> inferiority in<br />

the company <str<strong>on</strong>g>of</str<strong>on</strong>g> those more efficient scholars was that I knew that I<br />

owed whatever worthwhile new ideas I ever had to not being able to<br />

remember what every competent specialist is supposed to have at his<br />

fingertips. Whenever I saw a new light <strong>on</strong> something it was as the result<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> a painful effort to rec<strong>on</strong>struct an argument which most competent<br />

ec<strong>on</strong>omists would effortlessly and instantly reproduce.<br />

What, then, does my knowledge c<strong>on</strong>sist <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>on</strong> which I base my claim<br />

to be a trained ec<strong>on</strong>omist? Certainly not in the distinct recollecti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

particular statements or arguments. I generally will not be able to<br />

reproduce the c<strong>on</strong>tents <str<strong>on</strong>g>of</str<strong>on</strong>g> a book I have read or a lecture I have heard <strong>on</strong><br />

my subject. 3 But I have certainly <str<strong>on</strong>g>of</str<strong>on</strong>g>ten greatly pr<str<strong>on</strong>g>of</str<strong>on</strong>g>ited from such books<br />

or lectures, <str<strong>on</strong>g>of</str<strong>on</strong>g> the c<strong>on</strong>tents <str<strong>on</strong>g>of</str<strong>on</strong>g> which I could not possibly give an<br />

account even immediately after I had read or heard them. In fact the<br />

attempt to remember what the writer or speaker said would have<br />

deprived me <str<strong>on</strong>g>of</str<strong>on</strong>g> most <str<strong>on</strong>g>of</str<strong>on</strong>g> the benefit <str<strong>on</strong>g>of</str<strong>on</strong>g> the expositi<strong>on</strong>, at least so far as it<br />

was <strong>on</strong> a topic <strong>on</strong> which I had already some knowledge. Even as a<br />

student I so<strong>on</strong> gave up all attempts to take notes <str<strong>on</strong>g>of</str<strong>on</strong>g> lectures—as so<strong>on</strong> as<br />

I tried I ceased to understand. My gain from hearing or reading what<br />

other people thought was that it changed, as it were, the colours <str<strong>on</strong>g>of</str<strong>on</strong>g> my<br />

own c<strong>on</strong>cepts. What I heard or read did not enable me to reproduce<br />

their thought but altered my thought. I would not retain their ideas or<br />

c<strong>on</strong>cepts but modify the relati<strong>on</strong>s am<strong>on</strong>g my own.<br />

2 <str<strong>on</strong>g>The</str<strong>on</strong>g> first instances <str<strong>on</strong>g>of</str<strong>on</strong>g> this c<strong>on</strong>trast to strike me were E.v<strong>on</strong> Böhm-Bawerk and<br />

F.v<strong>on</strong> Wieser. <str<strong>on</strong>g>The</str<strong>on</strong>g> former, whom I saw <strong>on</strong>ly when I was a boy, was evidently<br />

an eminent “master <str<strong>on</strong>g>of</str<strong>on</strong>g> his subject”, while the latter, my teacher, was in many<br />

respects rather a puzzler. J.A.Schumpeter, another representative ‘master <str<strong>on</strong>g>of</str<strong>on</strong>g> his<br />

subject’, <strong>on</strong>ce described him as follows: “<str<strong>on</strong>g>The</str<strong>on</strong>g> fellow ec<strong>on</strong>omist who enters<br />

Wieser’s intellectual world at <strong>on</strong>ce finds himself in a new atmosphere. It is as if<br />

<strong>on</strong>e entered a house which nowhere resembles the houses <str<strong>on</strong>g>of</str<strong>on</strong>g> our time and the<br />

plan and furniture <str<strong>on</strong>g>of</str<strong>on</strong>g> which is strange and not at <strong>on</strong>ce intelligible. <str<strong>on</strong>g>The</str<strong>on</strong>g>re is<br />

hardly another author who owes as little to other authors as Wieser,<br />

fundamentally to n<strong>on</strong>e except Menger and to him <strong>on</strong>ly a suggesti<strong>on</strong>—with the<br />

result that for a l<strong>on</strong>g time many fellow ec<strong>on</strong>omists did not know what to do with<br />

Wieser’s work. Of his edifice everything is his intellectual property, even where<br />

what he says has already been said before him.” (From an article in a Viennese<br />

newspaper <strong>on</strong> the occasi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Wieser’s seventieth birthday, quoted at somewhat<br />

greater length in my obituary <str<strong>on</strong>g>of</str<strong>on</strong>g> Wieser reprinted as an introducti<strong>on</strong> to his<br />

Gesammelte Abhandlungen (Tübingen: J.C.B.Mohr, 1929).) A similar c<strong>on</strong>trast<br />

appears to have existed between the two influential Chicago teachers <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

ec<strong>on</strong>omics, Jacob Viner, very much a ‘master <str<strong>on</strong>g>of</str<strong>on</strong>g> his subject’, and Frank<br />

H.Knight, a puzzler if there ever was <strong>on</strong>e.


48 THE TREND OF ECONOMIC THINKING<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> result <str<strong>on</strong>g>of</str<strong>on</strong>g> this manner <str<strong>on</strong>g>of</str<strong>on</strong>g> absorbing ideas is best described by<br />

comparing it to the somewhat blurred outlines <str<strong>on</strong>g>of</str<strong>on</strong>g> a composite<br />

photograph: that is, the results <str<strong>on</strong>g>of</str<strong>on</strong>g> superimposing prints <str<strong>on</strong>g>of</str<strong>on</strong>g> different faces<br />

which at <strong>on</strong>e time were popular as a means <str<strong>on</strong>g>of</str<strong>on</strong>g> bringing out the comm<strong>on</strong><br />

features <str<strong>on</strong>g>of</str<strong>on</strong>g> a type or a race. <str<strong>on</strong>g>The</str<strong>on</strong>g>re is nothing very precise about such a<br />

picture <str<strong>on</strong>g>of</str<strong>on</strong>g> the world. But it provides a map or a framework in which <strong>on</strong>e<br />

has to discover <strong>on</strong>e’s path rather than being able to follow a rigidly<br />

defined established <strong>on</strong>e. What my sources give me are not definite<br />

pieces <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge which I can put together, but some modificati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

an already existing structure inside <str<strong>on</strong>g>of</str<strong>on</strong>g> which I have to find a way by<br />

observing all sorts <str<strong>on</strong>g>of</str<strong>on</strong>g> warning posts.<br />

Alfred North Whitehead is quoted as saying that<br />

“muddleheadedness” is a c<strong>on</strong>diti<strong>on</strong> precedent to independent thought.<br />

That is certainly my experience. It was because I did not remember the<br />

answers that to others may have been obvious that I was <str<strong>on</strong>g>of</str<strong>on</strong>g>ten forced to<br />

think out a soluti<strong>on</strong> to a problem which did not exist for those who had<br />

more orderly minds. That the existence <str<strong>on</strong>g>of</str<strong>on</strong>g> this sort <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge is not<br />

wholly unfamiliar is shown by the <strong>on</strong>ly half-joking descripti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> an<br />

educated pers<strong>on</strong> as <strong>on</strong>e who has forgotten a great deal. 4 Such<br />

submerged memories may be quite important guides <str<strong>on</strong>g>of</str<strong>on</strong>g> judgement.<br />

I am inclined to call minds <str<strong>on</strong>g>of</str<strong>on</strong>g> this type the ‘puzzlers’. But I shall not<br />

mind if they are called the muddlers, since they certainly will <str<strong>on</strong>g>of</str<strong>on</strong>g>ten give<br />

this impressi<strong>on</strong> if they talk about a subject before they have painfully<br />

worked through to some degree <str<strong>on</strong>g>of</str<strong>on</strong>g> clarity.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>ir c<strong>on</strong>stant difficulties, which in rare instances may be rewarded<br />

by a new insight, are due to the fact that they cannot avail themselves <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the established verbal formulae or arguments which lead others<br />

smoothly and quickly to the result. But being forced to find their own<br />

way <str<strong>on</strong>g>of</str<strong>on</strong>g> expressing an accepted idea, they sometimes discover that the<br />

c<strong>on</strong>venti<strong>on</strong>al formula c<strong>on</strong>ceals gaps or unjustified tacit presuppositi<strong>on</strong>s.<br />

3 This may sound a curious c<strong>on</strong>fessi<strong>on</strong> from a university teacher who for some<br />

forty years regularly lectured <strong>on</strong> the history <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic thought and enjoyed so<br />

doing. I was indeed always greatly interested in the works <str<strong>on</strong>g>of</str<strong>on</strong>g> earlier students,<br />

and learnt a great deal from them. And somehow I enjoyed rec<strong>on</strong>structing their<br />

lives and pers<strong>on</strong>alities, although I had no illusi<strong>on</strong>s that this in any way<br />

explained their scientific beliefs. I believe I also gave in my lectures a fairly<br />

adequate picture <str<strong>on</strong>g>of</str<strong>on</strong>g> their influence <strong>on</strong> the development <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics by<br />

discussing their effect <strong>on</strong> others. But what I told my students was essentially<br />

what I had learnt from those writers and not what they chiefly thought, which may<br />

have been something quite different.


TWO TYPES OF MIND 49<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>y will be forced explicitly to answer questi<strong>on</strong>s which had been l<strong>on</strong>g<br />

effectively evaded by a plausible but ambiguous turn <str<strong>on</strong>g>of</str<strong>on</strong>g> phrase <str<strong>on</strong>g>of</str<strong>on</strong>g> an<br />

implicit but illegitimate assumpti<strong>on</strong>.<br />

People whose minds work that way seem clearly to rely in some<br />

measure <strong>on</strong> a process <str<strong>on</strong>g>of</str<strong>on</strong>g> wordless thought, something the existence <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

which is occasi<strong>on</strong>ally denied but which at least bilingual pers<strong>on</strong>s seem<br />

to me <str<strong>on</strong>g>of</str<strong>on</strong>g>ten to possess. To ‘see’ certain c<strong>on</strong>nexi<strong>on</strong>s distinctly does not<br />

yet mean for them that they know how to describe them in words. Even<br />

after l<strong>on</strong>g endeavour to find the right form <str<strong>on</strong>g>of</str<strong>on</strong>g> words they may still be<br />

acutely aware that the expressi<strong>on</strong> adopted does not fully c<strong>on</strong>vey what<br />

they really mean. <str<strong>on</strong>g>The</str<strong>on</strong>g>y also show another somewhat curious feature<br />

which I believe is not rare but which I have never seen described: that<br />

many <str<strong>on</strong>g>of</str<strong>on</strong>g> their particular ideas in different fields may spring from some<br />

single more general c<strong>on</strong>cepti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> which they are themselves not aware<br />

but which, like the similarity <str<strong>on</strong>g>of</str<strong>on</strong>g> their approach to the separate issues,<br />

they may much later discover with surprise.<br />

Since I wrote the preceding secti<strong>on</strong>s I have been struck by a further<br />

observati<strong>on</strong> that certainly those <str<strong>on</strong>g>of</str<strong>on</strong>g> my close friends in my subject whom<br />

I regard as eminently ‘masters <str<strong>on</strong>g>of</str<strong>on</strong>g> their subject’, and by watching whom<br />

I have largely formed these ideas, seem also to be particularly<br />

susceptible to the opini<strong>on</strong>s dominant in their envir<strong>on</strong>ment and the<br />

intellectual fashi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> their time generally. This is perhaps inevitable in<br />

pers<strong>on</strong>s who strive to command all the relevant knowledge <str<strong>on</strong>g>of</str<strong>on</strong>g> their time<br />

and who usually are inclined to believe that if an opini<strong>on</strong> is widely held<br />

there must be something in it, while the ‘muddleheads’ are much more<br />

apt stubbornly and undisturbed to go <strong>on</strong> in their own way. I do not know<br />

what significance this may have, except, perhaps, merely that the<br />

sec<strong>on</strong>d type rarely takes the trouble carefully to study views which do<br />

not fit into their scheme <str<strong>on</strong>g>of</str<strong>on</strong>g> thought.<br />

If there really are two such different types <str<strong>on</strong>g>of</str<strong>on</strong>g> mind which both have<br />

their c<strong>on</strong>tributi<strong>on</strong>s to make to the growth <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge, it may well<br />

mean that our present system <str<strong>on</strong>g>of</str<strong>on</strong>g> selecting those to be admitted to the<br />

universities may exclude some who might make great c<strong>on</strong>tributi<strong>on</strong>s.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re are <str<strong>on</strong>g>of</str<strong>on</strong>g> course also other reas<strong>on</strong>s which make <strong>on</strong>e feel doubtful<br />

about the principle that all those, and <strong>on</strong>ly those, who can pass certain<br />

examinati<strong>on</strong>s should have a claim to a university educati<strong>on</strong>. <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

number <str<strong>on</strong>g>of</str<strong>on</strong>g> great scientists who were bad pupils at school and might not<br />

4 [Hayek is probably referring to the aphorism that an educated pers<strong>on</strong> is <strong>on</strong>e<br />

who has forgotten more than he knows. -Ed.]


50 THE TREND OF ECONOMIC THINKING<br />

have passed such a test is large—and the proporti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the children who<br />

were at school very good at all subjects and later became intellectually<br />

eminent comparatively small. It seems to me also clear that the<br />

applicati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the now accepted principle is, in fact, lowering the<br />

proporti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the students who study because <str<strong>on</strong>g>of</str<strong>on</strong>g> a passi<strong>on</strong>ate interest in<br />

their subject.<br />

At any rate, while I have serious doubts whether we ought to increase<br />

further the number <str<strong>on</strong>g>of</str<strong>on</strong>g> those who acquire a claim to a university<br />

educati<strong>on</strong> by passing certain examinati<strong>on</strong>s, I feel str<strong>on</strong>gly that there<br />

ought to be a sec<strong>on</strong>d way where the intensity <str<strong>on</strong>g>of</str<strong>on</strong>g> the desire for the<br />

acquisiti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> scientific knowledge counts decisively. This means that it<br />

should be possible to acquire this right by some sacrifice <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>on</strong>e’s own.<br />

I readily admit that there is little relati<strong>on</strong> between the strength <str<strong>on</strong>g>of</str<strong>on</strong>g> this<br />

wish and the capacity to pay for its satisfacti<strong>on</strong>. Nor is the possibility <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

financing the study by current earnings from other work an adequate<br />

soluti<strong>on</strong>—certainly not in the demanding experimental subjects. In<br />

pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essi<strong>on</strong>al schools like law or medicine, loans to be repaid from later<br />

earnings may solve the financial problem. Yet this hardly helps in the<br />

selecti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> those to be enabled to devote themselves to theoretical<br />

work.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re are sacrifices, however, which are in everybody’s power and<br />

which might be deemed to give a claim to the opportunity to devote<br />

<strong>on</strong>eself for a time wholly to the study <str<strong>on</strong>g>of</str<strong>on</strong>g> a chosen subject. If this<br />

privilege could be earned by pledging <strong>on</strong>eself for a number <str<strong>on</strong>g>of</str<strong>on</strong>g> years to<br />

an austere life <str<strong>on</strong>g>of</str<strong>on</strong>g> semi-m<strong>on</strong>astic character, denying <strong>on</strong>eself many <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

pleasures and amusements which at our present level <str<strong>on</strong>g>of</str<strong>on</strong>g> wealth youth<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g>ten takes for granted, it would truly be by an effort <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>on</strong>e’s own and<br />

not by somebody else’s judgement <str<strong>on</strong>g>of</str<strong>on</strong>g> his capacity that the passi<strong>on</strong>ate<br />

interest in a subject would come to count; a chance would thus be given<br />

to those whose talent will show itself <strong>on</strong>ly after they can immerse<br />

themselves in their special subject.<br />

What I envisage is an arrangement by which those who chose this<br />

course would have such essentials as housing, simple food, and an<br />

ample credit for books and the like provided for them, but would have<br />

to pledge themselves to live bey<strong>on</strong>d this <strong>on</strong> a very restricted budget. It<br />

seems to me that the readiness to give up for a few years some <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

usual pleasures <str<strong>on</strong>g>of</str<strong>on</strong>g> the young is a better indicati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the probability <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

an individual pr<str<strong>on</strong>g>of</str<strong>on</strong>g>iting from a higher educati<strong>on</strong> than the success in<br />

examinati<strong>on</strong>s in a variety <str<strong>on</strong>g>of</str<strong>on</strong>g> school subjects. I should also not be<br />

surprised if those who earned their right to study by such a pers<strong>on</strong>al<br />

sacrifice would be more respected by their fellows than those who had


TWO TYPES OF MIND 51<br />

acquired it by passing examinati<strong>on</strong>s. It is probably still true and<br />

recognised that most great achievements as well as high esteem are due<br />

to a self-discipline which puts a single-minded pursuit <str<strong>on</strong>g>of</str<strong>on</strong>g> a self-chosen<br />

goal above most other pleasures—a sacrifice <str<strong>on</strong>g>of</str<strong>on</strong>g> many other human<br />

values which many <str<strong>on</strong>g>of</str<strong>on</strong>g> the great scientists had to bring at the most<br />

productive stage <str<strong>on</strong>g>of</str<strong>on</strong>g> their careers.<br />

To be sure, even with such a system admissi<strong>on</strong> would require some<br />

pro<str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>of</str<strong>on</strong>g> competence in the chosen field and recurrent evi dence <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

progress in the course <str<strong>on</strong>g>of</str<strong>on</strong>g> the study. I would also hold up to those who,<br />

for some four years or so, stand the course with faithful observance <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the special discipline, and who then show great ability, the prospect <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

an ample graduate scholarship with complete freedom. Even if a large<br />

proporti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> those who started <strong>on</strong> this scheme fell by the wayside and<br />

either did not complete the course or showed no more than average<br />

performance, I believe such an instituti<strong>on</strong> would enable us to find and<br />

develop talents which without it may be lost. Indeed, it seems to me that<br />

the type that would be attracted thereby should c<strong>on</strong>stitute an important<br />

ingredient <str<strong>on</strong>g>of</str<strong>on</strong>g> any scholarly community—and a safeguard against the<br />

good examinees being able to establish a reign <str<strong>on</strong>g>of</str<strong>on</strong>g> sacred formulae under<br />

which all minds move in the accustomed grooves.


FOUR<br />

HISTORY AND POLITICS 1<br />

<strong>Political</strong> opini<strong>on</strong> and views about historical events ever have been and<br />

always must be closely c<strong>on</strong>nected. Past experience is the foundati<strong>on</strong> <strong>on</strong><br />

which our beliefs about the desirability <str<strong>on</strong>g>of</str<strong>on</strong>g> different policies and<br />

instituti<strong>on</strong>s are mainly based, and our present political views inevitably<br />

affect and colour our interpretati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the past. Yet, if it is too<br />

pessimistic a view that man learns nothing from history, it may well be<br />

questi<strong>on</strong>ed whether he always learns the truth. While the events <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

past are the source <str<strong>on</strong>g>of</str<strong>on</strong>g> the experience <str<strong>on</strong>g>of</str<strong>on</strong>g> the human race, their opini<strong>on</strong>s<br />

are determined not by the objective facts but by the records and<br />

interpretati<strong>on</strong>s to which they have access. Few men will deny that our<br />

views about the goodness or badness <str<strong>on</strong>g>of</str<strong>on</strong>g> different instituti<strong>on</strong>s are largely<br />

determined by what we believe to have been their effects in the past.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re is scarcely a political ideal or c<strong>on</strong>cept which does not involve<br />

opini<strong>on</strong>s about a whole series <str<strong>on</strong>g>of</str<strong>on</strong>g> past events, and there are few<br />

historical memories which do not serve as a symbol <str<strong>on</strong>g>of</str<strong>on</strong>g> some political<br />

aim. Yet the historical beliefs which guide us in the present are not<br />

always in accord with the facts; sometimes they are even the effects<br />

rather than the cause <str<strong>on</strong>g>of</str<strong>on</strong>g> political beliefs. Historical myths have perhaps<br />

played nearly as great a role in shaping opini<strong>on</strong> as historical facts. Yet<br />

we can hardly hope to pr<str<strong>on</strong>g>of</str<strong>on</strong>g>it from past experience unless the facts from<br />

which we draw our c<strong>on</strong>clusi<strong>on</strong>s are correct.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> influence which the writers <str<strong>on</strong>g>of</str<strong>on</strong>g> history thus exercise <strong>on</strong> public<br />

opini<strong>on</strong> is probably more immediate and extensive than that <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

political theorists who launch new ideas. It seems as though even such<br />

new ideas reach wider circles usually not in their abstract form but as<br />

the interpretati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> particular events. <str<strong>on</strong>g>The</str<strong>on</strong>g> historian is in this respect at<br />

least <strong>on</strong>e step nearer to direct power over public opini<strong>on</strong> than is the<br />

theorist. And l<strong>on</strong>g before the pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essi<strong>on</strong>al historian takes up his pen,<br />

current c<strong>on</strong>troversy about recent events will have created a definite<br />

picture, or perhaps several different pictures, <str<strong>on</strong>g>of</str<strong>on</strong>g> these events which will


THE TREND OF ECONOMIC THINKING 53<br />

affect c<strong>on</strong>temporary discussi<strong>on</strong> as much as any divisi<strong>on</strong> <strong>on</strong> the merits <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

new issues.<br />

This pr<str<strong>on</strong>g>of</str<strong>on</strong>g>ound influence which current views about history have <strong>on</strong><br />

political opini<strong>on</strong> is today perhaps less understood than it was in the<br />

past. One reas<strong>on</strong> for this probably is the pretensi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> many modern<br />

historians to be purely scientific and completely free from all political<br />

prejudice. <str<strong>on</strong>g>The</str<strong>on</strong>g>re can be no questi<strong>on</strong>, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, that this is an imperative<br />

duty <str<strong>on</strong>g>of</str<strong>on</strong>g> the scholar in so far as historical research, that is, the<br />

ascertainment <str<strong>on</strong>g>of</str<strong>on</strong>g> the facts, is c<strong>on</strong>cerned. <str<strong>on</strong>g>The</str<strong>on</strong>g>re is indeed no legitimate<br />

reas<strong>on</strong> why, in answering questi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> fact, historians <str<strong>on</strong>g>of</str<strong>on</strong>g> different<br />

political opini<strong>on</strong>s should not be able to agree. But at the very beginning,<br />

in deciding which questi<strong>on</strong>s are worth asking, individual value<br />

judgements are bound to come in. And it is more than doubtful whether<br />

a c<strong>on</strong>nected history <str<strong>on</strong>g>of</str<strong>on</strong>g> a period or <str<strong>on</strong>g>of</str<strong>on</strong>g> a set <str<strong>on</strong>g>of</str<strong>on</strong>g> events could be written<br />

without interpreting these in the light, not <strong>on</strong>ly <str<strong>on</strong>g>of</str<strong>on</strong>g> theories about the<br />

interc<strong>on</strong>nexi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> social processes, but also <str<strong>on</strong>g>of</str<strong>on</strong>g> definite values—or at<br />

least whether such a history would be worth reading. Historiography, as<br />

distinguished from historical research, is not <strong>on</strong>ly at least as much an art<br />

as a science; the writer who attempts it without being aware that his task<br />

is <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> interpretati<strong>on</strong> in the light <str<strong>on</strong>g>of</str<strong>on</strong>g> definite values also will succeed<br />

merely in deceiving and will become the victim <str<strong>on</strong>g>of</str<strong>on</strong>g> his unc<strong>on</strong>scious<br />

prejudices.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re is perhaps no better illustrati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the manner in which for<br />

more than a century the whole political ethos <str<strong>on</strong>g>of</str<strong>on</strong>g> a nati<strong>on</strong>, and for a<br />

shorter time <str<strong>on</strong>g>of</str<strong>on</strong>g> most <str<strong>on</strong>g>of</str<strong>on</strong>g> the Western world, was shaped by the writings <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

a group <str<strong>on</strong>g>of</str<strong>on</strong>g> historians than the influence exercised by the English ‘Whig<br />

interpretati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> history’. It is probably no exaggerati<strong>on</strong> to say that, for<br />

every pers<strong>on</strong> who had firsthand acquaintance with the writings <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

political philosophers who founded the liberal traditi<strong>on</strong>, there were fifty<br />

or a hundred who had absorbed it from the writings <str<strong>on</strong>g>of</str<strong>on</strong>g> men like Hallam 2<br />

and Macaulay 3 , or Grote 4 and Lord Act<strong>on</strong> 5 . It is significant that the<br />

1 [First published as the introducti<strong>on</strong> to Capitalism and the Historians. <str<strong>on</strong>g>Essays</str<strong>on</strong>g><br />

by T. S.Asht<strong>on</strong>, L.M.Hacker, W.H.Hutt, and B.de Jouvenel (L<strong>on</strong>d<strong>on</strong> and<br />

Chicago: University <str<strong>on</strong>g>of</str<strong>on</strong>g> Chicago Press, 1954). -Ed.]<br />

2 [Henry Hallam (1777–1859), English historian. -Ed.]<br />

3 [Thomas Babingt<strong>on</strong> Macaulay, 1st Bar<strong>on</strong> Macaulay (1800–1859), English<br />

essayist, historian, and politician, author <str<strong>on</strong>g>of</str<strong>on</strong>g> the History <str<strong>on</strong>g>of</str<strong>on</strong>g> England from the<br />

Accessi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> James II (L<strong>on</strong>d<strong>on</strong>: L<strong>on</strong>gman, Brown, Green & L<strong>on</strong>gmans, 1849–<br />

1861). -Ed.]


54 HISTORY AND POLITICS<br />

modern English historian who more than any other has endeavoured to<br />

discredit this Whig traditi<strong>on</strong> later came to write that “those who,<br />

perhaps in the misguided austerity <str<strong>on</strong>g>of</str<strong>on</strong>g> youth, wish to drive out that Whig<br />

interpretati<strong>on</strong>… are sweeping a room which humanly speaking cannot<br />

l<strong>on</strong>g remain empty. <str<strong>on</strong>g>The</str<strong>on</strong>g>y are opening the doors for seven devils which,<br />

precisely because they are newcomers, are bound to be worse than this<br />

first.” 6 And, although he still suggests that “Whig history” was “wr<strong>on</strong>g”<br />

history, he emphasises that it “was <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> our assets” and that “it had a<br />

w<strong>on</strong>derful effect <strong>on</strong> English politics”. 7<br />

Whether in any relevant sense “Whig history” really was wr<strong>on</strong>g<br />

history is a matter <strong>on</strong> which the last word has probably not yet been said<br />

but which we cannot discuss here. Its beneficial effect in creating the<br />

essentially liberal atmosphere <str<strong>on</strong>g>of</str<strong>on</strong>g> the nineteenth century is bey<strong>on</strong>d doubt<br />

and was certainly not due to any misrepresentati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> facts. It was<br />

mainly political history, and the chief facts <strong>on</strong> which it was based were<br />

known bey<strong>on</strong>d questi<strong>on</strong>. It may not stand up in all respects to modern<br />

standards <str<strong>on</strong>g>of</str<strong>on</strong>g> historical research, but it certainly gave the generati<strong>on</strong>s<br />

brought up <strong>on</strong> it a true sense <str<strong>on</strong>g>of</str<strong>on</strong>g> the value <str<strong>on</strong>g>of</str<strong>on</strong>g> the political liberty which<br />

their ancestors had achieved for them, and it served them as a guide in<br />

preserving that achievement.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> Whig interpretati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> history has g<strong>on</strong>e out <str<strong>on</strong>g>of</str<strong>on</strong>g> fashi<strong>on</strong> with the<br />

decline <str<strong>on</strong>g>of</str<strong>on</strong>g> liberalism. 8 But it is more than doubtful whether, because<br />

history now claims to be more scientific, it has become a more reliable<br />

or trustworthy guide in those fields where it has exercised most<br />

influence <strong>on</strong> political views. <strong>Political</strong> history indeed has lost much <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the power and fascinati<strong>on</strong> it had in the nineteenth century; and it is<br />

doubtful whether any historical work <str<strong>on</strong>g>of</str<strong>on</strong>g> our time has had a circulati<strong>on</strong><br />

or direct influence comparable with, say, T.B. Macaulay’s History <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

England. 9 Yet the extent to which our present political views are<br />

coloured by historical beliefs has certainly not diminished. As interest<br />

4 [George Grote (1794–1871), English classicist, historian, and politician,<br />

author <str<strong>on</strong>g>of</str<strong>on</strong>g> A History <str<strong>on</strong>g>of</str<strong>on</strong>g> Greece, 12 vols (L<strong>on</strong>d<strong>on</strong>: John Murray, 1846–56) and<br />

Plato and the Other Compani<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> Socrates, in 3 vols (L<strong>on</strong>d<strong>on</strong>: John Murray,<br />

1865). See also H.Grote, <str<strong>on</strong>g>The</str<strong>on</strong>g> Pers<strong>on</strong>al Life <str<strong>on</strong>g>of</str<strong>on</strong>g> George Grote (L<strong>on</strong>d<strong>on</strong>: John<br />

Murray, 1873). -Ed.]<br />

5 [See Hayek’s “<str<strong>on</strong>g>The</str<strong>on</strong>g> Act<strong>on</strong>ian Revival: On Lord Act<strong>on</strong>”, in vol. 4 <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

Collected Works <str<strong>on</strong>g>of</str<strong>on</strong>g> F.A.Hayek. -Ed.]<br />

6 Herbert Butterfield, <str<strong>on</strong>g>The</str<strong>on</strong>g> Englishman and His History (Cambridge: Cambridge<br />

University Press, 1944), p. 3.<br />

7 Ibid., p. 7.


THE TREND OF ECONOMIC THINKING 55<br />

has shifted from the c<strong>on</strong>stituti<strong>on</strong>al to the social and ec<strong>on</strong>omic field, so<br />

the historical beliefs which act as driving forces are not mainly beliefs<br />

about ec<strong>on</strong>omic history. It is probably justifiable to speak <str<strong>on</strong>g>of</str<strong>on</strong>g> a socialist<br />

interpretati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> history which has governed political thinking for the<br />

last two or three generati<strong>on</strong>s and which c<strong>on</strong>sists mainly <str<strong>on</strong>g>of</str<strong>on</strong>g> a particular<br />

view <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic history. <str<strong>on</strong>g>The</str<strong>on</strong>g> remarkable thing about this view is that<br />

most <str<strong>on</strong>g>of</str<strong>on</strong>g> the asserti<strong>on</strong>s to which it has given the status <str<strong>on</strong>g>of</str<strong>on</strong>g> ‘facts which<br />

everybody knows’ have l<strong>on</strong>g been proved not to have been facts at all;<br />

yet they still c<strong>on</strong>tinue, outside the circle <str<strong>on</strong>g>of</str<strong>on</strong>g> pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essi<strong>on</strong>al ec<strong>on</strong>omic<br />

historians, to be almost universally accepted as the basis for the estimate<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the existing ec<strong>on</strong>omic order.<br />

Most people, when being told that their political c<strong>on</strong>victi<strong>on</strong>s have<br />

been affected by particular views <strong>on</strong> ec<strong>on</strong>omic history, will answer that<br />

they never have been interested in it and never have read a book <strong>on</strong> the<br />

subject. This, however, does not mean that they do not, with the rest,<br />

regard as established facts many <str<strong>on</strong>g>of</str<strong>on</strong>g> the legends which at <strong>on</strong>e time or<br />

another have been given currency by writers <strong>on</strong> ec<strong>on</strong>omic history.<br />

Although in the indirect and circuitous process by which new political<br />

ideas reach the general public the historian holds a key positi<strong>on</strong>, even he<br />

operates chiefly through many further relays. It is <strong>on</strong>ly at several<br />

removes that the picture which he provides becomes general property; it<br />

is via the novel and the newspaper, the cinema and political speeches,<br />

and ultimately the school and comm<strong>on</strong> talk, that the ordinary pers<strong>on</strong><br />

acquires his c<strong>on</strong>cepti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> history. But in the end even those who never<br />

read a book and probably have never heard the names <str<strong>on</strong>g>of</str<strong>on</strong>g> the historians<br />

whose views have influenced them come to see the past through their<br />

spectacles. Certain beliefs, for instance, about the evoluti<strong>on</strong> and effects<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> trade uni<strong>on</strong>s, the alleged progressive growth <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>opoly, the<br />

deliberate destructi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> commodity stock as the result <str<strong>on</strong>g>of</str<strong>on</strong>g> competiti<strong>on</strong><br />

(an event which, in fact, whenever it happened, was always the result <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

m<strong>on</strong>opoly and usually <str<strong>on</strong>g>of</str<strong>on</strong>g> government-organised m<strong>on</strong>opoly), about the<br />

8 [Hayek refers here to liberalism in its nineteenth-century sense. “In 1860 a<br />

liberal, <str<strong>on</strong>g>of</str<strong>on</strong>g> whatever nati<strong>on</strong>ality, was <strong>on</strong>e who favoured free trade, a market<br />

ec<strong>on</strong>omy with little or no government interventi<strong>on</strong>, a limited c<strong>on</strong>stituti<strong>on</strong>al state,<br />

and a social policy based <strong>on</strong> self-help…. Those who espoused the views defined<br />

as liberal in 1860 were, by the mid-twentieth century, now comm<strong>on</strong>ly labelled<br />

as c<strong>on</strong>servatives.” Stephen Davies, in “Bibliographic Essay: <str<strong>on</strong>g>The</str<strong>on</strong>g> Decline <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Classical Liberalism: 1860– 1940”, Humane Studies Review, vol. 5, no. 2,<br />

Winter 1987–8, pp. 1–19. -Ed.]<br />

9 Macaulay, op. cit.


56 HISTORY AND POLITICS<br />

suppressi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> beneficial inventi<strong>on</strong>s, the causes and effects <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

‘imperialism’, and the role <str<strong>on</strong>g>of</str<strong>on</strong>g> the armament industries or <str<strong>on</strong>g>of</str<strong>on</strong>g> ‘capitalists’<br />

in general in causing war, have become part <str<strong>on</strong>g>of</str<strong>on</strong>g> the folklore <str<strong>on</strong>g>of</str<strong>on</strong>g> our time.<br />

Most people would be greatly surprised to learn that most <str<strong>on</strong>g>of</str<strong>on</strong>g> what they<br />

believe about these subjects are not safely established facts but myths,<br />

launched from political motives and then spread by people <str<strong>on</strong>g>of</str<strong>on</strong>g> goodwill<br />

into whose general beliefs they fitted. It would require several books<br />

like the present <strong>on</strong>e to show how most <str<strong>on</strong>g>of</str<strong>on</strong>g> what is comm<strong>on</strong>ly believed <strong>on</strong><br />

these questi<strong>on</strong>s, not merely by radicals but also by many c<strong>on</strong>servatives,<br />

is not history but political legend. All we can do here with regard to<br />

these topics is refer the reader to a few works from which he can inform<br />

himself about the present state <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge <strong>on</strong> the more important <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

them. 10<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re is, however, <strong>on</strong>e supreme myth which more than any other has<br />

served to discredit the ec<strong>on</strong>omic systems to which we owe our presentday<br />

civilisati<strong>on</strong> and to the examinati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> which the present volume 11 is<br />

devoted. It is the legend <str<strong>on</strong>g>of</str<strong>on</strong>g> the deteriorati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the positi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

working classes in c<strong>on</strong>sequence <str<strong>on</strong>g>of</str<strong>on</strong>g> the rise <str<strong>on</strong>g>of</str<strong>on</strong>g> ‘capitalism’ (or <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

‘manufacturing’ or ‘industrial’ system). Who has not heard <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

‘horrors <str<strong>on</strong>g>of</str<strong>on</strong>g> early capitalism’ and gained the impressi<strong>on</strong> that the advent <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

this system brought untold new suffering to large classes who before<br />

were tolerably c<strong>on</strong>tent and comfortable? We might justly hold in<br />

disrepute a system to which the blame attached that even for a time it<br />

worsened the positi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the poorest and most numerous class <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

populati<strong>on</strong>. <str<strong>on</strong>g>The</str<strong>on</strong>g> widespread emoti<strong>on</strong>al aversi<strong>on</strong> to ‘capitalism’ is<br />

closely c<strong>on</strong>nected with this belief that the undeniable growth <str<strong>on</strong>g>of</str<strong>on</strong>g> wealth<br />

which the competitive order has produced was purchased at the price <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

depressing the standard <str<strong>on</strong>g>of</str<strong>on</strong>g> life <str<strong>on</strong>g>of</str<strong>on</strong>g> the weakest elements <str<strong>on</strong>g>of</str<strong>on</strong>g> the society.<br />

That this was the case was at <strong>on</strong>e time indeed widely taught by<br />

ec<strong>on</strong>omic historians. A more careful examinati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the facts, however,<br />

has led to a thorough refutati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> this belief. Yet, a generati<strong>on</strong> after the<br />

c<strong>on</strong>troversy has been decided, popular opini<strong>on</strong> still c<strong>on</strong>tinues as though<br />

the older belief had been true. How this belief should ever have arisen<br />

and why it should c<strong>on</strong>tinue to determine the general view l<strong>on</strong>g after it<br />

has been disproved are both problems which deserve serious<br />

examinati<strong>on</strong>.<br />

This kind <str<strong>on</strong>g>of</str<strong>on</strong>g> opini<strong>on</strong> can be frequently found not <strong>on</strong>ly in the political<br />

literature hostile to capitalism but even in works which <strong>on</strong> the whole are<br />

sympathetic to the political traditi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the nineteenth century. It is well<br />

represented by the following passage from Ruggerio’s esteemed History<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> European Liberalism:


THE TREND OF ECONOMIC THINKING 57<br />

Thus it was precisely at the period <str<strong>on</strong>g>of</str<strong>on</strong>g> intensest industrial growth<br />

that the c<strong>on</strong>diti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the labourer changed for the worse. Hours <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

labour multiplied out <str<strong>on</strong>g>of</str<strong>on</strong>g> all measure; the employment <str<strong>on</strong>g>of</str<strong>on</strong>g> women<br />

and children in factories lowered wages: the keen competiti<strong>on</strong><br />

between the workers themselves, no l<strong>on</strong>ger tied to their parishes<br />

but free to travel and c<strong>on</strong>gregate where they were most in demand,<br />

further cheapened the labour they placed <strong>on</strong> the market: numerous<br />

and frequent industrial crises, inevitable at a period <str<strong>on</strong>g>of</str<strong>on</strong>g> growth,<br />

when populati<strong>on</strong> and c<strong>on</strong>sumpti<strong>on</strong> are not yet stabilised, swelled<br />

from time to time the ranks <str<strong>on</strong>g>of</str<strong>on</strong>g> the unemployed, the reserves in the<br />

army <str<strong>on</strong>g>of</str<strong>on</strong>g> starvati<strong>on</strong>. 12<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re was little excuse for such a statement even when it appeared a<br />

quarter-century ago. A year after it was first published, the most eminent<br />

student <str<strong>on</strong>g>of</str<strong>on</strong>g> modern ec<strong>on</strong>omic history, Sir John Clapham, rightly<br />

complained:<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> legend that everything was getting worse for the working<br />

man, down to some unspecified date between the drafting <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

People’s Charter and the Great Exhibiti<strong>on</strong>, dies hard. <str<strong>on</strong>g>The</str<strong>on</strong>g> fact<br />

that, after the price fall <str<strong>on</strong>g>of</str<strong>on</strong>g> 1820–21, the purchasing power <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

wages in general—not, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, <str<strong>on</strong>g>of</str<strong>on</strong>g> every<strong>on</strong>e’s wages—was<br />

definitely greater than it had been just before the revoluti<strong>on</strong>ary<br />

and Napole<strong>on</strong>ic wars, fits so ill with the traditi<strong>on</strong> that it is very<br />

10 Cf. M.Dorothy George, “<str<strong>on</strong>g>The</str<strong>on</strong>g> Combinati<strong>on</strong> Laws Rec<strong>on</strong>sidered”, <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g><br />

History (supplement to the <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Journal), vol. 1, May 1927, 214–228;<br />

W.H.Hutt, <str<strong>on</strong>g>The</str<strong>on</strong>g> <str<strong>on</strong>g>The</str<strong>on</strong>g>ory <str<strong>on</strong>g>of</str<strong>on</strong>g> Collective Bargaining (L<strong>on</strong>d<strong>on</strong>: P.S.King, 1930) and<br />

Ec<strong>on</strong>omists and the Public (L<strong>on</strong>d<strong>on</strong>: J<strong>on</strong>athan Cape, 1936); L.C.Robbins, <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

<str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Basis <str<strong>on</strong>g>of</str<strong>on</strong>g> Class C<strong>on</strong>flict (L<strong>on</strong>d<strong>on</strong>: Macmillan, 1939) and <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

<str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Causes <str<strong>on</strong>g>of</str<strong>on</strong>g> War (L<strong>on</strong>d<strong>on</strong>: J<strong>on</strong>athan Cape, 1939); Walter Sulzbach,<br />

“Capitalistic Warm<strong>on</strong>gers”: A Modern Superstiti<strong>on</strong> (Public Policy Pamphlets,<br />

No. 35 (Chicago: University <str<strong>on</strong>g>of</str<strong>on</strong>g> Chicago Press, 1942)); G.J.Stigler,<br />

“Competiti<strong>on</strong> in the United States”, in Five Lectures <strong>on</strong> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Problems<br />

(L<strong>on</strong>d<strong>on</strong> and New York: L<strong>on</strong>gmans, Green, 1949); G.Warren Nutter, <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

Extent <str<strong>on</strong>g>of</str<strong>on</strong>g> Enterprise M<strong>on</strong>opoly in the United States, 1899–1939 (Chicago:<br />

University <str<strong>on</strong>g>of</str<strong>on</strong>g> Chicago Press, 1951); and, <strong>on</strong> most <str<strong>on</strong>g>of</str<strong>on</strong>g> these problems, the<br />

writings <str<strong>on</strong>g>of</str<strong>on</strong>g> Ludwig v<strong>on</strong> Mises, especially his Socialism (L<strong>on</strong>d<strong>on</strong>: J<strong>on</strong>athan<br />

Cape, 1936; reprinted Indianapolis, Ind.: LibertyClassics, 1981). -Ed.]<br />

11 [That is, to Capitalism and the Historians, the volume <str<strong>on</strong>g>of</str<strong>on</strong>g> essays to which this<br />

essay first served as an introducti<strong>on</strong>. -Ed.]


58 HISTORY AND POLITICS<br />

seldom menti<strong>on</strong>ed, the works <str<strong>on</strong>g>of</str<strong>on</strong>g> statisticians <str<strong>on</strong>g>of</str<strong>on</strong>g> wages and prices<br />

being c<strong>on</strong>stantly disregarded by social historians. 13<br />

In so far as general public opini<strong>on</strong> is c<strong>on</strong>cerned, the positi<strong>on</strong> is scarcely<br />

better today, although the facts have had to be c<strong>on</strong>ceded even by most<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> those who had been mainly resp<strong>on</strong>sible for spreading the c<strong>on</strong>trary<br />

opini<strong>on</strong>. Few authors have d<strong>on</strong>e more to create the belief that the early<br />

nineteenth century had been a time in which the positi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the working<br />

class had become particularly bad than Mr. and Mrs. J.L.Hamm<strong>on</strong>d;<br />

their books are frequently quoted to illustrate this. But towards the end<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> their lives they admitted candidly that<br />

statisticians tell us that when they have put in order such data as<br />

they can find, they are satisfied that earnings increased and that<br />

most men and women were less poor when this disc<strong>on</strong>tent was<br />

loud and active than they were when the eighteenth century was<br />

beginning to grow old in a silence like that <str<strong>on</strong>g>of</str<strong>on</strong>g> autumn. <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

evidence, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, is scanty, and its interpretati<strong>on</strong> not too simple,<br />

but this general view is probably more or less correct. 14<br />

This did little to change the general effect their writing had <strong>on</strong> public<br />

opini<strong>on</strong>. In <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the latest competent studies <str<strong>on</strong>g>of</str<strong>on</strong>g> the history <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

Western political traditi<strong>on</strong>, for instance, we can still read that, “like all<br />

the great social experiments, however, the inventi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the labour<br />

market was expensive. It involved, in the first instance, a swift and<br />

drastic decline in the material standard <str<strong>on</strong>g>of</str<strong>on</strong>g> living <str<strong>on</strong>g>of</str<strong>on</strong>g> the working<br />

classes.” 15<br />

I was going to c<strong>on</strong>tinue here that this is still the view which is almost<br />

exclusively represented in the popular literature when the latest book by<br />

Bertrand Russell came to my hands in which, as if to c<strong>on</strong>firm this, he<br />

blandly asserts:<br />

12 Guido de Ruggiero, Storia del liberalism europeo (Bari, 1925), trans. R.G.<br />

Collingwood under the title <str<strong>on</strong>g>The</str<strong>on</strong>g> History <str<strong>on</strong>g>of</str<strong>on</strong>g> European Liberalism (L<strong>on</strong>d<strong>on</strong>:<br />

Oxford University Press, 1927), p. 47, esp. p. 85. It is interesting that Ruggiero<br />

seems to derive his facts mainly from another supposedly liberal historian, Elie<br />

Halévy, although Halévy never expressed them so crudely.<br />

13 J.H.Clapham, An <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> History <str<strong>on</strong>g>of</str<strong>on</strong>g> Modern Britain (Cambridge:<br />

Cambridge University Press, 1926), vol. 1, chapter 7.


THE TREND OF ECONOMIC THINKING 59<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> industrial revoluti<strong>on</strong> caused unspeakable misery both in<br />

England and in America. I do not think any student <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic<br />

history can doubt that the average happiness in England in the<br />

early nineteenth century was lower than it had been a hundred<br />

years earlier; and this was due almost entirely to scientific<br />

technique. 16<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> intelligent layman can hardly be blamed if he believes that such a<br />

categorical statement from a writer <str<strong>on</strong>g>of</str<strong>on</strong>g> this rank must be true. If a<br />

Bertrand Russell believes this, we must not be surprised that the versi<strong>on</strong>s<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic history which today are spread in hundreds <str<strong>on</strong>g>of</str<strong>on</strong>g> thousands<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> volumes <str<strong>on</strong>g>of</str<strong>on</strong>g> pocket editi<strong>on</strong>s are mostly <str<strong>on</strong>g>of</str<strong>on</strong>g> the kind which spread this old<br />

myth. It is also still a rare excepti<strong>on</strong> when we meet a work <str<strong>on</strong>g>of</str<strong>on</strong>g> historical<br />

ficti<strong>on</strong> which dispenses with the dramatic touch which the story <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

sudden worsening <str<strong>on</strong>g>of</str<strong>on</strong>g> the positi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> large groups <str<strong>on</strong>g>of</str<strong>on</strong>g> workers provides.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> true fact <str<strong>on</strong>g>of</str<strong>on</strong>g> the slow and irregular progress <str<strong>on</strong>g>of</str<strong>on</strong>g> the working class<br />

which we now know to have taken place is <str<strong>on</strong>g>of</str<strong>on</strong>g> course rather<br />

unsensati<strong>on</strong>al and uninteresting to the layman. It is no more than he has<br />

learned to expect as the normal state <str<strong>on</strong>g>of</str<strong>on</strong>g> affairs; and it hardly occurs to<br />

him that this is by no means an inevitable progress, that it was preceded<br />

by centuries <str<strong>on</strong>g>of</str<strong>on</strong>g> virtual stagnati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the positi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the poorest, and that<br />

we have come to expect c<strong>on</strong>tinuous improvement <strong>on</strong>ly as a result <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

experience <str<strong>on</strong>g>of</str<strong>on</strong>g> several generati<strong>on</strong>s with the system which he still thinks<br />

to be the cause <str<strong>on</strong>g>of</str<strong>on</strong>g> the misery <str<strong>on</strong>g>of</str<strong>on</strong>g> the poor.<br />

Discussi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> the effects <str<strong>on</strong>g>of</str<strong>on</strong>g> the rise <str<strong>on</strong>g>of</str<strong>on</strong>g> modern industry <strong>on</strong> the<br />

working classes refer almost always to the c<strong>on</strong>diti<strong>on</strong>s in England in the<br />

first half <str<strong>on</strong>g>of</str<strong>on</strong>g> the nineteenth century; yet the great change to which they<br />

refer had commenced much earlier and by then had quite a l<strong>on</strong>g history<br />

and had spread far bey<strong>on</strong>d England. <str<strong>on</strong>g>The</str<strong>on</strong>g> freedom <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic activity<br />

which in England had proved so favourable to the rapid growth <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

wealth was probably in the first instance an almost accidental byproduct<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the limitati<strong>on</strong>s which the revoluti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the seventeenth<br />

century had placed <strong>on</strong> the powers <str<strong>on</strong>g>of</str<strong>on</strong>g> government; and <strong>on</strong>ly after its<br />

14 J.L.Hamm<strong>on</strong>d and Barbara Hamm<strong>on</strong>d, <str<strong>on</strong>g>The</str<strong>on</strong>g> Bleak Age (1934) (revised<br />

editi<strong>on</strong>, L<strong>on</strong>d<strong>on</strong>: Pelican Books, 1947), p. 15.<br />

15 Frederick Watkins, <str<strong>on</strong>g>The</str<strong>on</strong>g> <strong>Political</strong> Traditi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the West (Cambridge, Mass.:<br />

Harvard University Press, 1948), p. 213.<br />

16 Bertrand Russell, <str<strong>on</strong>g>The</str<strong>on</strong>g> Impact <str<strong>on</strong>g>of</str<strong>on</strong>g> Science <strong>on</strong> Society (New York: Columbia<br />

University Press, 1951), pp. 19–20.


60 HISTORY AND POLITICS<br />

beneficial effects had come to be widely noticed did the ec<strong>on</strong>omists<br />

later undertake to explain the c<strong>on</strong>nexi<strong>on</strong> and to argue for the removal <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the remaining barriers to commercial freedom. In many ways it is<br />

misleading to speak <str<strong>on</strong>g>of</str<strong>on</strong>g> ‘capitalism’ as though this had been a new and<br />

altogether different system which suddenly came into being towards the<br />

end <str<strong>on</strong>g>of</str<strong>on</strong>g> the eighteenth century; we use this term here because it is the most<br />

familiar name, but <strong>on</strong>ly with great reluctance, since with its modern<br />

c<strong>on</strong>notati<strong>on</strong>s it is itself largely a creati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> that socialist interpretati<strong>on</strong><br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic history with which we are c<strong>on</strong>cerned. <str<strong>on</strong>g>The</str<strong>on</strong>g> term is<br />

especially misleading when, as is <str<strong>on</strong>g>of</str<strong>on</strong>g>ten the case, it is c<strong>on</strong>nected with the<br />

idea <str<strong>on</strong>g>of</str<strong>on</strong>g> the rise <str<strong>on</strong>g>of</str<strong>on</strong>g> the propertyless proletariat which by some devious<br />

process have been deprived <str<strong>on</strong>g>of</str<strong>on</strong>g> their rightful ownership <str<strong>on</strong>g>of</str<strong>on</strong>g> the tools for<br />

their work.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> actual history <str<strong>on</strong>g>of</str<strong>on</strong>g> the c<strong>on</strong>nexi<strong>on</strong> between capitalism and the rise<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the proletariat is almost the opposite <str<strong>on</strong>g>of</str<strong>on</strong>g> that which these theories <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the expropriati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the masses suggest. <str<strong>on</strong>g>The</str<strong>on</strong>g> truth is that, for the greater<br />

part <str<strong>on</strong>g>of</str<strong>on</strong>g> history, for most men the possessi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the tools for their work<br />

was an essential c<strong>on</strong>diti<strong>on</strong> for survival or at least for being able to rear a<br />

family. <str<strong>on</strong>g>The</str<strong>on</strong>g> number <str<strong>on</strong>g>of</str<strong>on</strong>g> those who could maintain themselves by<br />

working for others, although they did not themselves possess the<br />

necessary equipment, was limited to a small proporti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

populati<strong>on</strong>. <str<strong>on</strong>g>The</str<strong>on</strong>g> amount <str<strong>on</strong>g>of</str<strong>on</strong>g> arable land and <str<strong>on</strong>g>of</str<strong>on</strong>g> tools handed down from<br />

<strong>on</strong>e generati<strong>on</strong> to the next limited the total number who could survive.<br />

To be left without them meant in most instances death by starvati<strong>on</strong> or<br />

at least the impossibility <str<strong>on</strong>g>of</str<strong>on</strong>g> procreati<strong>on</strong>. <str<strong>on</strong>g>The</str<strong>on</strong>g>re was little incentive and<br />

little possibility for <strong>on</strong>e generati<strong>on</strong> to accumulate the additi<strong>on</strong>al tools<br />

which would have made possible the survival <str<strong>on</strong>g>of</str<strong>on</strong>g> a larger number to the<br />

next, so l<strong>on</strong>g as the advantage <str<strong>on</strong>g>of</str<strong>on</strong>g> employing additi<strong>on</strong>al hands was<br />

limited mainly to the instances where the divisi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the tasks increased<br />

the efficiency <str<strong>on</strong>g>of</str<strong>on</strong>g> the work <str<strong>on</strong>g>of</str<strong>on</strong>g> the owner <str<strong>on</strong>g>of</str<strong>on</strong>g> the tools. It was <strong>on</strong>ly when<br />

the larger gains from the employment <str<strong>on</strong>g>of</str<strong>on</strong>g> machinery provided both the<br />

means and the opportunity for their investment that what in the past had<br />

been a recurring surplus <str<strong>on</strong>g>of</str<strong>on</strong>g> populati<strong>on</strong> doomed to early death was in an<br />

increasing measure given the possibility <str<strong>on</strong>g>of</str<strong>on</strong>g> survival. Numbers which<br />

had been practically stati<strong>on</strong>ary for many centuries began to increase<br />

rapidly. <str<strong>on</strong>g>The</str<strong>on</strong>g> proletariat which capitalism can be said to have ‘created’<br />

was thus not a proporti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the populati<strong>on</strong> which would have existed<br />

without it and which it had degraded to a lower level; it was an<br />

additi<strong>on</strong>al populati<strong>on</strong> which was enabled to grow up by the new<br />

opportunities for employment which capitalism provided. In so far as it<br />

is true that the growth <str<strong>on</strong>g>of</str<strong>on</strong>g> capital made the appearance <str<strong>on</strong>g>of</str<strong>on</strong>g> the proletariat


THE TREND OF ECONOMIC THINKING 61<br />

possible, it was in the sense that it raised the productivity <str<strong>on</strong>g>of</str<strong>on</strong>g> labour so<br />

that much larger numbers <str<strong>on</strong>g>of</str<strong>on</strong>g> those who had not been equipped by their<br />

parents with the necessary tools were enabled to maintain themselves by<br />

their labour al<strong>on</strong>e; but the capital had to be supplied first before those<br />

were enabled to survive who afterwards claimed as a right a share in its<br />

ownership. Although it was certainly not from charitable motives, it still<br />

was the first time in history that <strong>on</strong>e group <str<strong>on</strong>g>of</str<strong>on</strong>g> people found it in their<br />

interest to use their earnings <strong>on</strong> a large scale to provide new instruments<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> producti<strong>on</strong> to be operated by those who without them could not have<br />

produced their own sustenance.<br />

Of the effect <str<strong>on</strong>g>of</str<strong>on</strong>g> the rise <str<strong>on</strong>g>of</str<strong>on</strong>g> modern industry <strong>on</strong> the growth <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

populati<strong>on</strong>, statistics tell a vivid tale. That this in itself largely<br />

c<strong>on</strong>tradicts the comm<strong>on</strong> belief about the harmful effect <str<strong>on</strong>g>of</str<strong>on</strong>g> the rise <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

factory system <strong>on</strong> the large masses is not the point with which we are at<br />

present c<strong>on</strong>cerned. Nor need we more than menti<strong>on</strong> the fact that, so l<strong>on</strong>g<br />

as this increase <str<strong>on</strong>g>of</str<strong>on</strong>g> the numbers <str<strong>on</strong>g>of</str<strong>on</strong>g> those whose output reached a certain<br />

level brought forward a fully corresp<strong>on</strong>ding increase in populati<strong>on</strong>, the<br />

level <str<strong>on</strong>g>of</str<strong>on</strong>g> the poorest fringe could not be substantially improved, however<br />

much the average might rise. <str<strong>on</strong>g>The</str<strong>on</strong>g> point <str<strong>on</strong>g>of</str<strong>on</strong>g> immediate relevance is that<br />

this increase <str<strong>on</strong>g>of</str<strong>on</strong>g> populati<strong>on</strong> and particularly <str<strong>on</strong>g>of</str<strong>on</strong>g> the manufacturing<br />

populati<strong>on</strong> had proceeded in England at least for two or three<br />

generati<strong>on</strong>s before the period <str<strong>on</strong>g>of</str<strong>on</strong>g> which it is alleged that the positi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the workers seriously deteriorated.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> period to which this refers is also the period when the problem <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the positi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the working class became for the first time <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

general c<strong>on</strong>cern. And the opini<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> some <str<strong>on</strong>g>of</str<strong>on</strong>g> the c<strong>on</strong>temporaries are<br />

indeed the main sources <str<strong>on</strong>g>of</str<strong>on</strong>g> the present beliefs. Our first questi<strong>on</strong> must<br />

therefore be how it came about that such an impressi<strong>on</strong> c<strong>on</strong>trary to the<br />

facts should have become widely held am<strong>on</strong>g the people then living.<br />

One <str<strong>on</strong>g>of</str<strong>on</strong>g> the chief reas<strong>on</strong>s was evidently an increasing awareness <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

facts which before had passed unnoticed. <str<strong>on</strong>g>The</str<strong>on</strong>g> very increase <str<strong>on</strong>g>of</str<strong>on</strong>g> wealth<br />

and well-being which had been achieved raised standards and aspirati<strong>on</strong>s.<br />

What for ages had seemed a natural and inevitable situati<strong>on</strong>, or even an<br />

improvement up<strong>on</strong> the past, came to be regarded as inc<strong>on</strong>gruous with the<br />

opportunities which the new age appeared to <str<strong>on</strong>g>of</str<strong>on</strong>g>fer. <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> suffering<br />

both became more c<strong>on</strong>spicuous and seemed less justified, because<br />

general wealth was increasing faster than ever before. But this, <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

course, does not prove that the people whose fate was beginning to<br />

cause indignati<strong>on</strong> and alarm were worse <str<strong>on</strong>g>of</str<strong>on</strong>g>f than their parents or<br />

grandparents had been. While there is every evidence that great misery<br />

existed, there is n<strong>on</strong>e that it was greater than or even as great as it had


62 HISTORY AND POLITICS<br />

been before. <str<strong>on</strong>g>The</str<strong>on</strong>g> aggregati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> large numbers <str<strong>on</strong>g>of</str<strong>on</strong>g> cheap houses <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

industrial workers were probably more ugly than the picturesque<br />

cottages in which some <str<strong>on</strong>g>of</str<strong>on</strong>g> the agricultural labourers or domestic<br />

workers had lived; and they were certainly more alarming to the<br />

landowner or to the city patrician than the poor dispersed over the<br />

country had been. But for those who had moved from country to town it<br />

meant an improvement; and even though the rapid growth <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

industrial centres created sanitary problems with which people had yet<br />

slowly and painfully to learn to cope, statistics leave little doubt that<br />

even general health was <strong>on</strong> the whole benefited rather than harmed. 17<br />

More important, however, for the explanati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the change from an<br />

optimistic to a pessimistic view <str<strong>on</strong>g>of</str<strong>on</strong>g> the effects <str<strong>on</strong>g>of</str<strong>on</strong>g> industrialisati<strong>on</strong> than this<br />

awakening <str<strong>on</strong>g>of</str<strong>on</strong>g> social c<strong>on</strong>science was probably the fact that this change<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> opini<strong>on</strong> appears to have commenced, not in the manufacturing<br />

districts which had firsthand knowledge <str<strong>on</strong>g>of</str<strong>on</strong>g> what was happening, but in<br />

the political discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the English metropolis which was somewhat<br />

remote from, and had little part in, the new development. It is evident that<br />

the belief about the ‘horrible’ c<strong>on</strong>diti<strong>on</strong>s prevailing am<strong>on</strong>g the<br />

manufacturing populati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> the Midlands and the north <str<strong>on</strong>g>of</str<strong>on</strong>g> England<br />

was in the 1830s and the 1840s widely held am<strong>on</strong>g the upper classes <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

L<strong>on</strong>d<strong>on</strong> and the south. It was <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the main arguments with which the<br />

landowning class hit back at the manufacturers to counter the agitati<strong>on</strong><br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the latter against the Corn Laws and for free trade. And it was from<br />

these arguments <str<strong>on</strong>g>of</str<strong>on</strong>g> the c<strong>on</strong>servative press that the radical intelligentsia<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the time, with little firsthand knowledge <str<strong>on</strong>g>of</str<strong>on</strong>g> the industrial districts,<br />

derived their views which were to become the standard weap<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

political propaganda.<br />

This positi<strong>on</strong>, to which so much even <str<strong>on</strong>g>of</str<strong>on</strong>g> the present-day beliefs about<br />

the effects <str<strong>on</strong>g>of</str<strong>on</strong>g> the rise <str<strong>on</strong>g>of</str<strong>on</strong>g> industrialism <strong>on</strong> the working classes can be<br />

traced, is well illustrated by a letter written about 1843 by a L<strong>on</strong>d<strong>on</strong><br />

lady, Mrs. Cooke Taylor, after she had for the first time visited some<br />

industrial districts <str<strong>on</strong>g>of</str<strong>on</strong>g> Lancashire. Her account <str<strong>on</strong>g>of</str<strong>on</strong>g> the c<strong>on</strong>diti<strong>on</strong>s she<br />

found is prefaced by some remarks about the general state <str<strong>on</strong>g>of</str<strong>on</strong>g> opini<strong>on</strong> in<br />

L<strong>on</strong>d<strong>on</strong>:<br />

I need not remind you <str<strong>on</strong>g>of</str<strong>on</strong>g> the statements put forward in the<br />

newspapers, relative to the miserable c<strong>on</strong>diti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> the operatives,<br />

17 Cf. M.C.Buer, Health, Wealth and Populati<strong>on</strong> in the Early Days <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

Industrial Revoluti<strong>on</strong> (L<strong>on</strong>d<strong>on</strong>: Routledge, 1926).


THE TREND OF ECONOMIC THINKING 63<br />

and the tyranny <str<strong>on</strong>g>of</str<strong>on</strong>g> their masters, for they made such an<br />

impressi<strong>on</strong> <strong>on</strong> me that it was with reluctance that I c<strong>on</strong>sented to<br />

go to Lancashire; indeed these misrepresentati<strong>on</strong>s are quite<br />

general, and people believe them without knowing why or<br />

wherefore. As an instance: just before starting I was at a large<br />

dinner party, at the west end <str<strong>on</strong>g>of</str<strong>on</strong>g> the town, and seated next a<br />

gentleman who is c<strong>on</strong>sidered a very clever and intelligent man. In<br />

the course <str<strong>on</strong>g>of</str<strong>on</strong>g> the c<strong>on</strong>versati<strong>on</strong> I menti<strong>on</strong>ed that I was going to<br />

Lancashire. He stared and asked, “What <strong>on</strong> earth could take me<br />

there? That he would as so<strong>on</strong> think <str<strong>on</strong>g>of</str<strong>on</strong>g> going to St. Giles’s; that it<br />

was a horrid place—factories all over; that the people, from<br />

starvati<strong>on</strong>, oppressi<strong>on</strong>, and over-work, had almost lost the form <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

humanity; and that the mill-owners were a bloated, pampered race,<br />

feeding <strong>on</strong> the very vitals <str<strong>on</strong>g>of</str<strong>on</strong>g> the people.” I answered that this was<br />

a dreadful state <str<strong>on</strong>g>of</str<strong>on</strong>g> things; and asked “In what part he had seen<br />

such misery?” He replied that “he had never seen it, but had been<br />

told that it existed; and that for his part he never had been in the<br />

manufacturing districts, and that he never would.” This gentleman<br />

was <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the very numerous body <str<strong>on</strong>g>of</str<strong>on</strong>g> people who spread reports<br />

without ever taking the trouble <str<strong>on</strong>g>of</str<strong>on</strong>g> inquiring if they be true or<br />

false. 18<br />

Mrs. Cooke Taylor’s detailed descripti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the satisfactory state <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

affairs which to her surprise she found ends with the remark:<br />

Now that I have seen the factory people at their work, in their<br />

cottages and in their schools, I am totally at a loss to account for<br />

the outcry that has been made against them. <str<strong>on</strong>g>The</str<strong>on</strong>g>y are better<br />

clothed, better fed, and better c<strong>on</strong>ducted than many other classes<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> working people. 19<br />

But even if at the time itself the opini<strong>on</strong> which was later taken over by<br />

the historians was loudly voiced by <strong>on</strong>e party, it remains to explain why<br />

the view <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>on</strong>e party am<strong>on</strong>g the c<strong>on</strong>temporaries, and that not <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

radicals or liberals but <str<strong>on</strong>g>of</str<strong>on</strong>g> the Tories, should have become the almost<br />

unc<strong>on</strong>tradicted view <str<strong>on</strong>g>of</str<strong>on</strong>g> the ec<strong>on</strong>omic historians <str<strong>on</strong>g>of</str<strong>on</strong>g> the sec<strong>on</strong>d half <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

century. <str<strong>on</strong>g>The</str<strong>on</strong>g> reas<strong>on</strong> for this seems to have been that the new interest in<br />

ec<strong>on</strong>omic history was itself closely associated with the interest in<br />

socialism and that at first a large proporti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> those who devoted<br />

themselves to the study <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic history were inclined towards<br />

socialism. It was not merely the great stimulus which Karl Marx’s


64 HISTORY AND POLITICS<br />

‘materialist interpretati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> history’ undoubtedly gave to the study <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

ec<strong>on</strong>omic history; practically all the socialist schools held a philosophy<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> history intended to show the relative character <str<strong>on</strong>g>of</str<strong>on</strong>g> the different<br />

ec<strong>on</strong>omic instituti<strong>on</strong>s and the necessity <str<strong>on</strong>g>of</str<strong>on</strong>g> different ec<strong>on</strong>omic systems<br />

succeeding each other in time. <str<strong>on</strong>g>The</str<strong>on</strong>g>y all tried to prove that the system<br />

which they attacked, the system <str<strong>on</strong>g>of</str<strong>on</strong>g> private property in the means <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

producti<strong>on</strong>, was a perversi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> an earlier and more natural system <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

communal property; and, because the theoretical prec<strong>on</strong>cepti<strong>on</strong>s which<br />

guided them postulated that the rise <str<strong>on</strong>g>of</str<strong>on</strong>g> capitalism must have been<br />

detrimental to the working classes, it is not surprising that they found<br />

what they were looking for.<br />

But not <strong>on</strong>ly those by whom the study <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic history was<br />

c<strong>on</strong>sciously made a tool <str<strong>on</strong>g>of</str<strong>on</strong>g> political agitati<strong>on</strong>—as is true in many instances<br />

from Marx and Engels to Werner Sombart 20 and Sidney and Beatrice<br />

Webb 21 —but also many <str<strong>on</strong>g>of</str<strong>on</strong>g> the scholars who sincerely believed that they<br />

were approaching the facts without prejudice produced results which<br />

were scarcely less biased. This was in part due to the fact that the<br />

‘historical approach’ which they adopted had itself been proclaimed as a<br />

counterblast to the theoretical analysis <str<strong>on</strong>g>of</str<strong>on</strong>g> classical ec<strong>on</strong>omics, because<br />

the latter’s verdict <strong>on</strong> the popular remedies for current complaints had<br />

so frequently been unfavourable. 22 It is no accident that the largest and<br />

most influential group <str<strong>on</strong>g>of</str<strong>on</strong>g> students <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic history in the sixty years<br />

preceding the First World War, the German Historical School, prided<br />

themselves also <strong>on</strong> the name <str<strong>on</strong>g>of</str<strong>on</strong>g> the ‘socialists <str<strong>on</strong>g>of</str<strong>on</strong>g> the chair’<br />

(Kathedersozialisten); or that their spiritual successors, the American<br />

‘instituti<strong>on</strong>alists’, were mostly socialists in their inclinati<strong>on</strong>. <str<strong>on</strong>g>The</str<strong>on</strong>g> whole<br />

atmosphere <str<strong>on</strong>g>of</str<strong>on</strong>g> these schools was such that it would have required an<br />

excepti<strong>on</strong>al independence <str<strong>on</strong>g>of</str<strong>on</strong>g> mind for a young scholar not to succumb<br />

to the pressure <str<strong>on</strong>g>of</str<strong>on</strong>g> academic opini<strong>on</strong>. No reproach was more feared or<br />

more fatal to academic prospects than that <str<strong>on</strong>g>of</str<strong>on</strong>g> being an ‘apologist’ <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

capitalist system; and, even if a scholar dared to c<strong>on</strong>tradict dominant<br />

opini<strong>on</strong> <strong>on</strong> a particular point, he would be careful to safeguard himself<br />

against such accusati<strong>on</strong> by joining the general c<strong>on</strong>demnati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

18 This letter is quoted in “Reuben”, A Brief History <str<strong>on</strong>g>of</str<strong>on</strong>g> the Rise and Progress <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the Anti-Corn-Law League (L<strong>on</strong>d<strong>on</strong> [1845]). Mrs. Cooke Taylor, who appears<br />

to have been the wife <str<strong>on</strong>g>of</str<strong>on</strong>g> the radical Dr. Cooke Taylor, had visited the factory <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Henry Ashworth at Turt<strong>on</strong>, near Bolt<strong>on</strong>, then still a rural district and therefore<br />

probably more attractive than some <str<strong>on</strong>g>of</str<strong>on</strong>g> the urban industrial districts.<br />

19 Ibid.


THE TREND OF ECONOMIC THINKING 65<br />

capitalist system. 23 To treat the existing ec<strong>on</strong>omic order as merely a<br />

‘historical phase’ and to be able to predict from the ‘laws <str<strong>on</strong>g>of</str<strong>on</strong>g> historical<br />

development’ the emergence <str<strong>on</strong>g>of</str<strong>on</strong>g> a better future system became the<br />

hallmark <str<strong>on</strong>g>of</str<strong>on</strong>g> what was then regarded as the truly scientific spirit.<br />

Much <str<strong>on</strong>g>of</str<strong>on</strong>g> the misrepresentati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the facts by the earlier ec<strong>on</strong>omic<br />

historians was, in reality, directly traceable to a genuine endeavour to<br />

look at these facts without any theoretical prec<strong>on</strong>cepti<strong>on</strong>s. <str<strong>on</strong>g>The</str<strong>on</strong>g> idea that<br />

<strong>on</strong>e can trace the causal c<strong>on</strong>nexi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> any events without employing a<br />

theory, or that such a theory will emerge automatically from the<br />

accumulati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> a sufficient amount <str<strong>on</strong>g>of</str<strong>on</strong>g> facts, is <str<strong>on</strong>g>of</str<strong>on</strong>g> course sheer illusi<strong>on</strong>.<br />

24 <str<strong>on</strong>g>The</str<strong>on</strong>g> complexity <str<strong>on</strong>g>of</str<strong>on</strong>g> social events in particular is such that, without the<br />

tools <str<strong>on</strong>g>of</str<strong>on</strong>g> analysis which a systematic theory provides, <strong>on</strong>e is almost<br />

bound to misinterpret them; and those who eschew the c<strong>on</strong>scious use <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

an explicit and tested logical argument usually merely become the<br />

victims <str<strong>on</strong>g>of</str<strong>on</strong>g> the popular beliefs <str<strong>on</strong>g>of</str<strong>on</strong>g> their time. Comm<strong>on</strong> sense is a<br />

treacherous guide in this field, and what seem ‘obvious’ explanati<strong>on</strong>s<br />

frequently are no more than comm<strong>on</strong>ly accepted superstiti<strong>on</strong>s. It may<br />

seem obvious that the introducti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> machinery will produce a general<br />

reducti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the demand for labour. But persistent effort to think the<br />

problem through shows that this belief is the result <str<strong>on</strong>g>of</str<strong>on</strong>g> a logical fallacy,<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> stressing <strong>on</strong>e effect <str<strong>on</strong>g>of</str<strong>on</strong>g> the assumed change and leaving out others.<br />

Nor do the facts give any support to the belief. Yet any<strong>on</strong>e who thinks it<br />

to be true is very likely to find what seems to him c<strong>on</strong>firming evidence.<br />

It is easy enough to find in the early nineteenth century instances <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

extreme poverty and to draw the c<strong>on</strong>clusi<strong>on</strong> that this must have been the<br />

20 [Werner Sombart (1863–1941), German ec<strong>on</strong>omist and sociologist. -Ed.]<br />

21 [Sidney (1859–1947) and Beatrice (1858–1943) Webb, early and major<br />

members <str<strong>on</strong>g>of</str<strong>on</strong>g> the Fabian socialist movement in Britain, and co-founders <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

L<strong>on</strong>d<strong>on</strong> School <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s. -Ed.]<br />

22 Merely as an illustrati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the general attitude <str<strong>on</strong>g>of</str<strong>on</strong>g> that school a characteristic<br />

statement <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> its best-known representatives, Adolf Held, may be quoted.<br />

According to him, it was David Ricardo “in whose hand orthodox ec<strong>on</strong>omics<br />

became the docile servant <str<strong>on</strong>g>of</str<strong>on</strong>g> the exclusive interests <str<strong>on</strong>g>of</str<strong>on</strong>g> mobile capital”, and his<br />

theory <str<strong>on</strong>g>of</str<strong>on</strong>g> rent “was simply dictated by the hatred <str<strong>on</strong>g>of</str<strong>on</strong>g> the m<strong>on</strong>eyed capitalist<br />

against the landowners” (Zwei Bücher zur sozialen Geschichte Englands<br />

(Leipzig: Duncker & Humblot, 1881), p. 178).<br />

23 A good account <str<strong>on</strong>g>of</str<strong>on</strong>g> the general political atmosphere prevailing am<strong>on</strong>g the<br />

German Historical School <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omists will be found in Ludwig Pohle, Die<br />

gegenwärtige Krise in der deutschen Volkswirtschaftslehre (Leipzig:<br />

A.Deichert, 1911).


66 HISTORY AND POLITICS<br />

effect <str<strong>on</strong>g>of</str<strong>on</strong>g> the introducti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> machinery, without asking whether<br />

c<strong>on</strong>diti<strong>on</strong>s had been any better or perhaps even worse before. Or <strong>on</strong>e<br />

may believe that an increase <str<strong>on</strong>g>of</str<strong>on</strong>g> producti<strong>on</strong> must lead to the<br />

impossibility <str<strong>on</strong>g>of</str<strong>on</strong>g> selling all the product and, when <strong>on</strong>e then finds a<br />

stagnati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> sales, regard this as a c<strong>on</strong>firmati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the expectati<strong>on</strong>s,<br />

although there are several more plausible explanati<strong>on</strong>s than general<br />

“overproducti<strong>on</strong>” or “underc<strong>on</strong>sumpti<strong>on</strong>”.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re can be no doubt that many <str<strong>on</strong>g>of</str<strong>on</strong>g> these misrepresentati<strong>on</strong>s were<br />

put forward in good faith; and there is no reas<strong>on</strong> why we should not<br />

respect the motives <str<strong>on</strong>g>of</str<strong>on</strong>g> some <str<strong>on</strong>g>of</str<strong>on</strong>g> those who, to arouse public c<strong>on</strong>science,<br />

painted the misery <str<strong>on</strong>g>of</str<strong>on</strong>g> the poor in the blackest colours. We owe to<br />

agitati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> this kind, which forced unwilling eyes to face unpleasant<br />

facts, some <str<strong>on</strong>g>of</str<strong>on</strong>g> the finest and most generous acts <str<strong>on</strong>g>of</str<strong>on</strong>g> public policy—from<br />

the aboliti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> slavery to the removal <str<strong>on</strong>g>of</str<strong>on</strong>g> taxes <strong>on</strong> imported food and the<br />

destructi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> many entrenched privileges and abuses. And there is<br />

every reas<strong>on</strong> to remember how miserable the majority <str<strong>on</strong>g>of</str<strong>on</strong>g> the people still<br />

were as recently as 100 or 150 years ago. But we must not, l<strong>on</strong>g after<br />

the event, allow a distorti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the facts, even if committed out <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

humanitarian zeal, to affect our view <str<strong>on</strong>g>of</str<strong>on</strong>g> what we owe to a system which<br />

for the first time in history made people feel that this misery might be<br />

avoidable. <str<strong>on</strong>g>The</str<strong>on</strong>g> very claims and ambiti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> the working classes were<br />

and are the result <str<strong>on</strong>g>of</str<strong>on</strong>g> the enormous improvement <str<strong>on</strong>g>of</str<strong>on</strong>g> their positi<strong>on</strong> which<br />

capitalism brought about. <str<strong>on</strong>g>The</str<strong>on</strong>g>re were, no doubt, many people whose<br />

privileged positi<strong>on</strong>, whose power to secure comfortable income by<br />

preventing others from doing better what they were being paid for, was<br />

destroyed by the advance <str<strong>on</strong>g>of</str<strong>on</strong>g> freedom <str<strong>on</strong>g>of</str<strong>on</strong>g> enterprise. <str<strong>on</strong>g>The</str<strong>on</strong>g>re may be<br />

various other grounds <strong>on</strong> which the development <str<strong>on</strong>g>of</str<strong>on</strong>g> modern<br />

industrialism might be deplored by some; certain aesthetic and moral<br />

values to which the privileged classes attached great importance were<br />

no doubt endangered by it. Some people might even questi<strong>on</strong> whether<br />

the rapid increase <str<strong>on</strong>g>of</str<strong>on</strong>g> populati<strong>on</strong>, or, in other words, the decrease in<br />

infant mortality, was a blessing. But if, and in so far as, <strong>on</strong>e takes as<br />

<strong>on</strong>e’s test the effect <strong>on</strong> the standard <str<strong>on</strong>g>of</str<strong>on</strong>g> life <str<strong>on</strong>g>of</str<strong>on</strong>g> the large number <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

toiling classes, there can be little doubt that this effect was to produce a<br />

general upward trend.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> recogniti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> this fact by the students had to wait for the rise <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

a generati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic historians who no l<strong>on</strong>ger regarded themselves<br />

24 See K.R.Popper, <str<strong>on</strong>g>The</str<strong>on</strong>g> Logic <str<strong>on</strong>g>of</str<strong>on</strong>g> Scientific Discovery [1934] (L<strong>on</strong>d<strong>on</strong>:<br />

Hutchins<strong>on</strong>, 1959).


THE TREND OF ECONOMIC THINKING 67<br />

as the opp<strong>on</strong>ents <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omics, intent up<strong>on</strong> proving that the ec<strong>on</strong>omists<br />

had been wr<strong>on</strong>g, but who were themselves trained ec<strong>on</strong>omists who<br />

devoted themselves to the study <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic evoluti<strong>on</strong>. Yet the results<br />

which this modern ec<strong>on</strong>omic history had largely established a<br />

generati<strong>on</strong> ago have still gained little recogniti<strong>on</strong> outside pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essi<strong>on</strong>al<br />

circles. <str<strong>on</strong>g>The</str<strong>on</strong>g> process by which the results <str<strong>on</strong>g>of</str<strong>on</strong>g> research ultimately become<br />

general property has in this instance proved to be even slower than<br />

usual. 25 <str<strong>on</strong>g>The</str<strong>on</strong>g> new results in this case have not been <str<strong>on</strong>g>of</str<strong>on</strong>g> the kind which is<br />

avidly picked up by the intellectuals because it readily fits into their<br />

general prejudices but, <strong>on</strong> the c<strong>on</strong>trary, are <str<strong>on</strong>g>of</str<strong>on</strong>g> a kind which is in c<strong>on</strong>flict<br />

with their general beliefs. Yet, if we have been right in our estimate <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the importance which err<strong>on</strong>eous views have had in shaping political<br />

opini<strong>on</strong>, it is high time that the truth should at last displace the legend<br />

which has so l<strong>on</strong>g governed public belief.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> recogniti<strong>on</strong> that the working class as a whole benefited from the<br />

rise <str<strong>on</strong>g>of</str<strong>on</strong>g> modern industry is <str<strong>on</strong>g>of</str<strong>on</strong>g> course entirely compatible with the fact<br />

that some individuals or groups in this as well as other classes may for a<br />

time have suffered from its results. <str<strong>on</strong>g>The</str<strong>on</strong>g> new order meant an increased<br />

rapidity <str<strong>on</strong>g>of</str<strong>on</strong>g> change, and the quick increase <str<strong>on</strong>g>of</str<strong>on</strong>g> wealth was largely the<br />

result <str<strong>on</strong>g>of</str<strong>on</strong>g> the increased speed <str<strong>on</strong>g>of</str<strong>on</strong>g> adaptati<strong>on</strong> to change which made it<br />

possible. In those spheres where the mobility <str<strong>on</strong>g>of</str<strong>on</strong>g> a highly competitive<br />

market became effective, the increased range <str<strong>on</strong>g>of</str<strong>on</strong>g> opportunities more than<br />

compensated for the greater instability <str<strong>on</strong>g>of</str<strong>on</strong>g> particular jobs. But the<br />

spreading <str<strong>on</strong>g>of</str<strong>on</strong>g> the new order was gradual and uneven. <str<strong>on</strong>g>The</str<strong>on</strong>g>re remained—<br />

and there remain to the present day—pockets which, while fully<br />

exposed to the vicissitudes <str<strong>on</strong>g>of</str<strong>on</strong>g> the markets for their products, are too<br />

isolated to benefit much from the opportunities which the market<br />

opened elsewhere. <str<strong>on</strong>g>The</str<strong>on</strong>g> various instances <str<strong>on</strong>g>of</str<strong>on</strong>g> the decline <str<strong>on</strong>g>of</str<strong>on</strong>g> old crafts<br />

which were displaced by a mechanical process have been widely<br />

publicised (the fate <str<strong>on</strong>g>of</str<strong>on</strong>g> the hand-loom weavers is the classical example<br />

always quoted). But even there it is more than doubtful whether the<br />

amount <str<strong>on</strong>g>of</str<strong>on</strong>g> suffering caused is comparable to that which a series <str<strong>on</strong>g>of</str<strong>on</strong>g> bad<br />

harvests in any regi<strong>on</strong> would have caused before capitalism had greatly<br />

increased the mobility <str<strong>on</strong>g>of</str<strong>on</strong>g> goods and <str<strong>on</strong>g>of</str<strong>on</strong>g> capital. <str<strong>on</strong>g>The</str<strong>on</strong>g> incidence <strong>on</strong> a small<br />

group am<strong>on</strong>g a prospering community is probably felt as more <str<strong>on</strong>g>of</str<strong>on</strong>g> an<br />

25 On this, cf. my essay, “<str<strong>on</strong>g>The</str<strong>on</strong>g> Intellectuals and Socialism”, University <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Chicago Law Review, vol. 16, 1949. [Reprinted in Studies in Philosophy,<br />

Politics, and <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s (Chicago: University <str<strong>on</strong>g>of</str<strong>on</strong>g> Chicago Press; L<strong>on</strong>d<strong>on</strong>:<br />

Routledge & Kegan Paul, 1967). -Ed.]


68 HISTORY AND POLITICS<br />

injustice and a challenge than was the general suffering <str<strong>on</strong>g>of</str<strong>on</strong>g> earlier times<br />

which was c<strong>on</strong>sidered as unalterable fate.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> understanding <str<strong>on</strong>g>of</str<strong>on</strong>g> the true sources <str<strong>on</strong>g>of</str<strong>on</strong>g> the grievances, and still<br />

more the manner in which they might be remedied so far as possible,<br />

presupposes a better comprehensi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the working <str<strong>on</strong>g>of</str<strong>on</strong>g> the market<br />

system than most <str<strong>on</strong>g>of</str<strong>on</strong>g> the earlier historians possessed. Much that has been<br />

blamed <strong>on</strong> the capitalist system is in fact due to remnants or revivals <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

pre-capitalistic features: to m<strong>on</strong>opolistic elements which were either the<br />

direct result <str<strong>on</strong>g>of</str<strong>on</strong>g> ill-c<strong>on</strong>ceived state acti<strong>on</strong> or the c<strong>on</strong>sequence <str<strong>on</strong>g>of</str<strong>on</strong>g> a failure<br />

to understand that a smoothworking competitive order required an<br />

appropriate legal framework. We have already referred to some <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

features and tendencies for which capitalism is usually blamed and<br />

which are in fact due to its basic mechanism not being allowed to work;<br />

and the questi<strong>on</strong>, in particular, why and to what extent m<strong>on</strong>opoly has<br />

interfered with its beneficial operati<strong>on</strong> is too big a problem for us to<br />

attempt to say more about it here.<br />

This introducti<strong>on</strong> is not intended to do more than to indicate the<br />

general setting in which the more specific discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the following<br />

papers 26 must be seen. For its inevitable tendency to run in generalities I<br />

trust these special studies will make up by the very c<strong>on</strong>crete treatment<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> their particular problems. <str<strong>on</strong>g>The</str<strong>on</strong>g>y cover merely part <str<strong>on</strong>g>of</str<strong>on</strong>g> the wider issue,<br />

since they were intended to provide the factual basis for the discussi<strong>on</strong><br />

which they opened. Of the three related questi<strong>on</strong>s—What were the<br />

facts? How did the historians present them? and Why?—they deal<br />

primarily with the first and chiefly by implicati<strong>on</strong> with the sec<strong>on</strong>d. Only<br />

the paper by M.de Jouvenel, 27 which therefore possesses a somewhat<br />

different character, addresses itself mainly to the third questi<strong>on</strong>; and, in<br />

so doing, it raises problems which reach even bey<strong>on</strong>d the complex <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

questi<strong>on</strong>s which have been sketched here.<br />

26 [I.e., the essays by T.S.Asht<strong>on</strong>, L.M.Hacker, W.H.Hutt, and B.de Jouvenel in<br />

Capitalism and the Historians. See footnote 1. -Ed.]<br />

27 [Bertrand de Jouvenel, “<str<strong>on</strong>g>The</str<strong>on</strong>g> Treatment <str<strong>on</strong>g>of</str<strong>on</strong>g> Capitalism by C<strong>on</strong>tinental<br />

Intellectuals”, ibid. -Ed.]


PART II<br />

THE ORIGINS OF POLITICAL<br />

ECONOMY IN BRITAIN


FIVE<br />

FRANCIS BACON: PROGENITOR OF<br />

SCIENTISM (1561–1626) 1<br />

Practising scientists sometimes imagine that they are following the<br />

‘Bac<strong>on</strong>ian empirical method’. It is doubtful whether any successful<br />

scientist ever did so. Certainly Francis Bac<strong>on</strong> himself was not a scientist<br />

but a lawyer, at <strong>on</strong>e time Lord Chancellor <str<strong>on</strong>g>of</str<strong>on</strong>g> England—and a man with<br />

little sympathy for the work <str<strong>on</strong>g>of</str<strong>on</strong>g> the true great scientists <str<strong>on</strong>g>of</str<strong>on</strong>g> his age, <str<strong>on</strong>g>of</str<strong>on</strong>g> a<br />

Galileo, a Harvey, or a Gilbert. But he was a man who wrote a great deal<br />

about what science ought to do and he was a great phrasemaker, a man<br />

who believed himself called up<strong>on</strong> to direct other men’s scientific work<br />

and thereby to recognise scientific effort so as to make it more beneficial<br />

to mankind.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> interesting point, which is not <str<strong>on</strong>g>of</str<strong>on</strong>g>ten perceived, is the c<strong>on</strong>nexi<strong>on</strong><br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> this c<strong>on</strong>cepti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> science with Bac<strong>on</strong>’s political views. We come to<br />

understand its significance when we read in A.V.Dicey’s account <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

seventeenth-century English c<strong>on</strong>stituti<strong>on</strong>al history that “the real subject<br />

in dispute between statesmen such as Bac<strong>on</strong> and Wentworth 2 <strong>on</strong> the <strong>on</strong>e<br />

hand, and Coke 3 and Eliot 4 <strong>on</strong> the other, was whether a str<strong>on</strong>g<br />

1 [Published as “Progenitor <str<strong>on</strong>g>of</str<strong>on</strong>g> Scientism”, Nati<strong>on</strong>al Review, July 16, 1960, pp.<br />

23– 24, as a review <str<strong>on</strong>g>of</str<strong>on</strong>g> J.G.Crowther, Francis Bac<strong>on</strong>, <str<strong>on</strong>g>The</str<strong>on</strong>g> First Statesman <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Science (L<strong>on</strong>d<strong>on</strong>: Cresset Press, 1960). Am<strong>on</strong>g J.G.Crowther’s other books are<br />

An Outline <str<strong>on</strong>g>of</str<strong>on</strong>g> the Universe (L<strong>on</strong>d<strong>on</strong>: Paul, French, & Trubner, 1931); Scientists<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the Industrial Revoluti<strong>on</strong> (L<strong>on</strong>d<strong>on</strong>: Cresset, 1962); Six Great Scientists:<br />

Copernicus, Galileo, Newt<strong>on</strong>, Darwin, Curie, Einstein (L<strong>on</strong>d<strong>on</strong>: Hamish<br />

Hamilt<strong>on</strong>, 1961); British Scientists <str<strong>on</strong>g>of</str<strong>on</strong>g> the 20th Century (L<strong>on</strong>d<strong>on</strong>: Routledge &<br />

Kegan Paul, 1952); A Short History <str<strong>on</strong>g>of</str<strong>on</strong>g> Science (L<strong>on</strong>d<strong>on</strong>: Methuen, 1969);<br />

Founders <str<strong>on</strong>g>of</str<strong>on</strong>g> British Science (L<strong>on</strong>d<strong>on</strong>: Cresset, 1960). -Ed.]<br />

2 [Peter Wentworth (1530–1596), Puritan parliamentary leader from 1571 to<br />

1593. Wentworth was sent to the Tower repeatedly for insisting <strong>on</strong><br />

parliamentary exempti<strong>on</strong> from royal prerogative, and for demanding that<br />

Elizabeth name a successor in 1593. -Ed.]


FRANCIS BACON: PROGENITOR OF SCIENTISM (1561–1626) 71<br />

administrati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the C<strong>on</strong>tinental type should, or should not, be<br />

permanently established in England”.<br />

We owe it to the victory <str<strong>on</strong>g>of</str<strong>on</strong>g> Coke and Eliot that the English-speaking<br />

world did not develop the tyranny <str<strong>on</strong>g>of</str<strong>on</strong>g> a ‘scientific’ administrati<strong>on</strong>.<br />

Indeed, except for his <strong>on</strong>e-time secretary, Thomas Hobbes, neither the<br />

political nor the scientific views <str<strong>on</strong>g>of</str<strong>on</strong>g> Bac<strong>on</strong> carried much weight in<br />

England. Fortunately, it was the successors <str<strong>on</strong>g>of</str<strong>on</strong>g> his great opp<strong>on</strong>ent<br />

Edward Coke—Matthew Hale 5 and David Hume, Adam Smith and<br />

Edmund Burke—who fashi<strong>on</strong>ed the political traditi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the Englishspeaking<br />

world.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> latest book devoted to Bac<strong>on</strong> by <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> his c<strong>on</strong>temporary<br />

admirers, 6 J.G.Crowther, says revealingly: “Bac<strong>on</strong>’s influence may<br />

have been more widely and deeply realised through the French<br />

Encyclopaedia than through the Royal Society. But the complete<br />

realisati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> his aims, so far, is to be found in the new socialist states,<br />

where social life has been reorganised <strong>on</strong> scientific lines, and science is<br />

pursued according to a comprehensive plan, for the endowment <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

human life ‘with new discoveries and powers’. “Later in the book the<br />

Chinese <str<strong>on</strong>g>of</str<strong>on</strong>g> 1958 are cited for a modern expressi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Bac<strong>on</strong>’s ideas; and<br />

<strong>on</strong>e suspects that the author generally regards Bac<strong>on</strong> more as the<br />

predecessor <str<strong>on</strong>g>of</str<strong>on</strong>g> what he discreetly calls “n<strong>on</strong>egalitarian socialism” than<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the democratic socialism <str<strong>on</strong>g>of</str<strong>on</strong>g> the West.<br />

What is so interesting about this book is not the descripti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

character <str<strong>on</strong>g>of</str<strong>on</strong>g> Bac<strong>on</strong>, which is probably just, but that he should be praised<br />

for it. This becomes significant if <strong>on</strong>e learns more about the author. Mr.<br />

J.G.Crowther has for many years been prominent as ‘a scientific<br />

journalist <str<strong>on</strong>g>of</str<strong>on</strong>g> the new type’ who, in his own words, “tries by c<strong>on</strong>tinuous<br />

unpers<strong>on</strong>al accounts to create the scientific attitude required to solve<br />

present social problems”. He has l<strong>on</strong>g been <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the most active<br />

members <str<strong>on</strong>g>of</str<strong>on</strong>g> a small but influential group which spread the Marxist<br />

message so successfully introduced by the Russians at the C<strong>on</strong>gress <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the History <str<strong>on</strong>g>of</str<strong>on</strong>g> Science in L<strong>on</strong>d<strong>on</strong> thirty years ago. Ten years later with<br />

3 [Sir Edward Coke (1552–1634), English judge, appointed Attorney-General in<br />

1594 (an appointment for which Bac<strong>on</strong> was also vying). He became Chief<br />

Justice <str<strong>on</strong>g>of</str<strong>on</strong>g> the King’s bench in 1613, but fricti<strong>on</strong> with the King forced his<br />

resignati<strong>on</strong> and impris<strong>on</strong>ment. After later joining parliament he became a leader<br />

in the popular movement against the arbitrary powers <str<strong>on</strong>g>of</str<strong>on</strong>g> the court. He is author<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the Reports (1600–15) and <str<strong>on</strong>g>of</str<strong>on</strong>g> Institutes <str<strong>on</strong>g>of</str<strong>on</strong>g> the Law <str<strong>on</strong>g>of</str<strong>on</strong>g> England (1628). See<br />

Stephen D.White, Sir Edward Coke and ‘<str<strong>on</strong>g>The</str<strong>on</strong>g> Grievances <str<strong>on</strong>g>of</str<strong>on</strong>g> the Commmwealth’<br />

1621–28 (Chapel Hill, N.C.:


72 THE TREND OF ECONOMIC THINKING<br />

his <str<strong>on</strong>g>The</str<strong>on</strong>g> Social Relati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> Science 7 he produced <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the standard<br />

works <str<strong>on</strong>g>of</str<strong>on</strong>g> that school and he is now able to list no less than twenty-four<br />

other books he has published <strong>on</strong> various aspects <str<strong>on</strong>g>of</str<strong>on</strong>g> the ‘statesmanship<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> science’. (This does not quite measure up to Bac<strong>on</strong>’s ambiti<strong>on</strong>s, who<br />

at <strong>on</strong>e stage proposed to write books <strong>on</strong> the various departments <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

science at the rate <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>on</strong>e a m<strong>on</strong>th!)<br />

Mr. Crowther rightly sees in Bac<strong>on</strong> primarily “<strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the forerunners<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the modern art <str<strong>on</strong>g>of</str<strong>on</strong>g> propaganda”, especially important to a generati<strong>on</strong><br />

for whom “propaganda for science in the development and government<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> human affairs is as important as technical skill”. He admires him as a<br />

man anxious to command other men’s wits and to organise a “massproducti<strong>on</strong><br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> discoveries by machines, al<strong>on</strong>g industrial lines”, even<br />

though he has to admit that Bac<strong>on</strong> “almost certainly [sic] did not<br />

succeed in discovering…an automatic method <str<strong>on</strong>g>of</str<strong>on</strong>g> discovery, in which<br />

imaginati<strong>on</strong> plays no part”. He nevertheless is represented as “the first<br />

to outline the chief aims <str<strong>on</strong>g>of</str<strong>on</strong>g> modern man, which are taking shape so swiftly<br />

in the twentieth century…closer to the ideas <str<strong>on</strong>g>of</str<strong>on</strong>g> today than <str<strong>on</strong>g>of</str<strong>on</strong>g> the last<br />

three centuries”, or even as “the greatest prophet <str<strong>on</strong>g>of</str<strong>on</strong>g> the modern age”<br />

and the “forerunner <str<strong>on</strong>g>of</str<strong>on</strong>g> Hegel, and <str<strong>on</strong>g>of</str<strong>on</strong>g> Marx and Engels”.<br />

One should not for this reas<strong>on</strong> dismiss this book too lightly as just<br />

Marxist propaganda. It is in fact extraordinarily instructive <strong>on</strong> <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

most significant phenomena <str<strong>on</strong>g>of</str<strong>on</strong>g> our time, the great fascinati<strong>on</strong> which the<br />

idea <str<strong>on</strong>g>of</str<strong>on</strong>g> a centrally directed society has exercised over some <str<strong>on</strong>g>of</str<strong>on</strong>g> the best<br />

scientific men <str<strong>on</strong>g>of</str<strong>on</strong>g> our time—although the worst excesses come rarely<br />

from working scientists but usually from the kind <str<strong>on</strong>g>of</str<strong>on</strong>g> lay enthusiasts for<br />

science <str<strong>on</strong>g>of</str<strong>on</strong>g> whom Francis Bac<strong>on</strong> is the great prototype. It is surely no<br />

University <str<strong>on</strong>g>of</str<strong>on</strong>g> North Carolina Press, 1974). See also William Holdsworth,<br />

History <str<strong>on</strong>g>of</str<strong>on</strong>g> English Law (L<strong>on</strong>d<strong>on</strong>: Methuen, 1909–72), and Louis Knafla, Law<br />

and Politics in Jacobean England (Cambridge: Cambridge University Press,<br />

1977). -Ed.]<br />

4 [Sir John Eliot (1592–1632), leader <str<strong>on</strong>g>of</str<strong>on</strong>g> the C<strong>on</strong>stituti<strong>on</strong>al Party in the sec<strong>on</strong>d<br />

parliament <str<strong>on</strong>g>of</str<strong>on</strong>g> Charles I (1626). He str<strong>on</strong>gly attacked royal misgovernment and<br />

wrote the bulk <str<strong>on</strong>g>of</str<strong>on</strong>g> the Rem<strong>on</strong>strance and Petiti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Right. Impris<strong>on</strong>ed when<br />

parliament was dissolved, he wrote in pris<strong>on</strong> a treatise <strong>on</strong> c<strong>on</strong>stituti<strong>on</strong>al<br />

m<strong>on</strong>archy, M<strong>on</strong>archy <str<strong>on</strong>g>of</str<strong>on</strong>g> Men (1632). -Ed.]<br />

5 [Sir Matthew Hale (1609–1676), judge <str<strong>on</strong>g>of</str<strong>on</strong>g> the comm<strong>on</strong> bench under<br />

Cromwell, Lord Chief Justice under Charles II. Author <str<strong>on</strong>g>of</str<strong>on</strong>g> History <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

Comm<strong>on</strong> Law (1739) and Please <str<strong>on</strong>g>of</str<strong>on</strong>g> the Crown (1736). See Edmund Heward,<br />

Matthew Hale (L<strong>on</strong>d<strong>on</strong>: Robert Hale, 1972). -Ed.]<br />

6 [J.G.Crowther, Francis Bac<strong>on</strong>, <str<strong>on</strong>g>The</str<strong>on</strong>g> First Statesman <str<strong>on</strong>g>of</str<strong>on</strong>g> Science, op. cit. -Ed.]


FRANCIS BACON: PROGENITOR OF SCIENTISM (1561–1626) 73<br />

accident that he was probably the first to argue that it was not to be “left<br />

(as heret<str<strong>on</strong>g>of</str<strong>on</strong>g>ore) to the pleasure <str<strong>on</strong>g>of</str<strong>on</strong>g> the undertakers and adventurers, where<br />

and how to build and plant; but that they do it according to a prescript<br />

and formulary”.<br />

It is surely also no accident that Bac<strong>on</strong>’s great opp<strong>on</strong>ent, Sir Edward<br />

Coke, “though a c<strong>on</strong>servative in law, emerged as the champi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

liberty and progress”, and had the insight to write <strong>on</strong> the title page <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

copy <str<strong>on</strong>g>of</str<strong>on</strong>g> the Novum Organ<strong>on</strong> which Bac<strong>on</strong> had presented to him:<br />

It deserveth not to be read in Schooles<br />

But to be freighted in the ship <str<strong>on</strong>g>of</str<strong>on</strong>g> Fooles.<br />

Mr. Crowther’s portrait <str<strong>on</strong>g>of</str<strong>on</strong>g> Bac<strong>on</strong> is not <str<strong>on</strong>g>of</str<strong>on</strong>g> the quality <str<strong>on</strong>g>of</str<strong>on</strong>g> the great<br />

biography <str<strong>on</strong>g>of</str<strong>on</strong>g> Coke which Catherine Drinker Bowen gave us a few years<br />

ago. 8 Yet the two make fascinating reading side by side. Neither,<br />

however, has quite brought out the nature <str<strong>on</strong>g>of</str<strong>on</strong>g> a c<strong>on</strong>trast <str<strong>on</strong>g>of</str<strong>on</strong>g> intellectual<br />

types which has played a great role ever since, and <str<strong>on</strong>g>of</str<strong>on</strong>g> which Bac<strong>on</strong> and<br />

Coke are perhaps historically both the first and the most interesting<br />

examples. 9 It is fundamentally a difference <str<strong>on</strong>g>of</str<strong>on</strong>g> attitude to knowledge,<br />

which both men in their different ways revered.<br />

To the pseudo-scientist it is a tool which he can manipulate and<br />

through which he can manipulate society. Bac<strong>on</strong> was thinking in terms<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the master-mind who commands and c<strong>on</strong>sciously applies all<br />

knowledge. To Coke, most <str<strong>on</strong>g>of</str<strong>on</strong>g> the knowledge <str<strong>on</strong>g>of</str<strong>on</strong>g> mankind is embodied<br />

rather in the cultural traditi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> which the lawyer in particular is the<br />

tool and instrument. To him the process in which knowledge grows is<br />

something greater than individual man and bey<strong>on</strong>d the capacity <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

c<strong>on</strong>trol <str<strong>on</strong>g>of</str<strong>on</strong>g> any <strong>on</strong>e mind.<br />

For the past 350 years it has been <strong>on</strong> the whole the ideals <str<strong>on</strong>g>of</str<strong>on</strong>g> Coke<br />

which have governed the West. I believe they are also closer to those <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the really great scientists, who usually are informed with humility. But<br />

are not perhaps the great number <str<strong>on</strong>g>of</str<strong>on</strong>g> the scientists who are not so great,<br />

but who are likely to rule us in the future, generally closer to Bac<strong>on</strong> than<br />

to Coke?<br />

7 (New York: Macmillan, 1941; revised editi<strong>on</strong>, L<strong>on</strong>d<strong>on</strong>: Cresset, 1967).<br />

8 <str<strong>on</strong>g>The</str<strong>on</strong>g> Li<strong>on</strong> and the Thr<strong>on</strong>e (Bost<strong>on</strong>: Little, Brown, 1957; L<strong>on</strong>d<strong>on</strong>: Hamish<br />

Hamilt<strong>on</strong>, 1957).<br />

9 [See this volume, chapter 3, “Two Types <str<strong>on</strong>g>of</str<strong>on</strong>g> Mind”. -Ed.]


SIX<br />

DR. BERNARD MANDEVILLE 1<br />

(1670–1733)<br />

I<br />

It is to be feared that not <strong>on</strong>ly would most <str<strong>on</strong>g>of</str<strong>on</strong>g> Bernard Mandeville’s<br />

c<strong>on</strong>temporaries turn in their graves if they could know that he is today<br />

presented as a master-mind to this august body, but that even now there<br />

may have been some raising <str<strong>on</strong>g>of</str<strong>on</strong>g> eyebrows about the appropriateness <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

such a choice. <str<strong>on</strong>g>The</str<strong>on</strong>g> author who achieved such a succès de scandale<br />

almost 250 years ago is still not quite reputable. Though there can be no<br />

doubt that his works 2 had an enormous circulati<strong>on</strong> and that they set<br />

many people thinking <strong>on</strong> important problems, it is less easy to explain<br />

what precisely he has c<strong>on</strong>tributed to our understanding.<br />

Let me say at <strong>on</strong>ce, to dispel a natural apprehensi<strong>on</strong>, that I am not<br />

going to represent him as a great ec<strong>on</strong>omist. Although we owe to him<br />

both the term ‘divisi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> labour’ and a clearer view <str<strong>on</strong>g>of</str<strong>on</strong>g> the nature <str<strong>on</strong>g>of</str<strong>on</strong>g> this<br />

phenomen<strong>on</strong>, and although no less an authority than Lord Keynes 3 has<br />

given him high praise for other parts <str<strong>on</strong>g>of</str<strong>on</strong>g> his ec<strong>on</strong>omic work, it will not<br />

be <strong>on</strong> this ground that I shall claim eminence for him. With the<br />

excepti<strong>on</strong> I have menti<strong>on</strong>ed—which is a big <strong>on</strong>e—what Mandeville has<br />

to say <strong>on</strong> technical ec<strong>on</strong>omics seems to me to be rather mediocre, or at<br />

1 [This essay was first printed in Proceedings <str<strong>on</strong>g>of</str<strong>on</strong>g> the British Academy (L<strong>on</strong>d<strong>on</strong>:<br />

Oxford University Press), vol. 52, 1966, pp. 125–141, being the Lecture <strong>on</strong> a<br />

Master Mind delivered to the Academy <strong>on</strong> March 23, 1966. Reprinted as<br />

chapter 15 <str<strong>on</strong>g>of</str<strong>on</strong>g> New Studies in Philosophy, Politics, <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s and the History<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> Ideas (Chicago: University <str<strong>on</strong>g>of</str<strong>on</strong>g> Chicago Press; L<strong>on</strong>d<strong>on</strong>: Routledge & Kegan<br />

Paul, 1978); German translati<strong>on</strong> in F.A. Hayek, Freiburger Studien (Tübingen:<br />

J.C.B.Mohr [Paul Siebeck] Verlag, 1969). Spanish translati<strong>on</strong>, Estudios<br />

Públicos, Santiago, Chile, 1986. -Ed.]


DR. BERNARD MANDEVILLE (1670–1733) 75<br />

least unoriginal—ideas widely current in his time which he uses merely<br />

to illustrate c<strong>on</strong>cepti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> a much wider bearing.<br />

Even less do I intend to stress Mandeville’s c<strong>on</strong>tributi<strong>on</strong>s to the<br />

theory <str<strong>on</strong>g>of</str<strong>on</strong>g> ethics, in the history <str<strong>on</strong>g>of</str<strong>on</strong>g> which he has his well-established<br />

place. But though a c<strong>on</strong>tributi<strong>on</strong> to our understanding <str<strong>on</strong>g>of</str<strong>on</strong>g> the genesis <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

moral rules is part <str<strong>on</strong>g>of</str<strong>on</strong>g> his achievement, it appears to me that the fact that<br />

he is regarded as primarily a moralist has been the chief obstacle to an<br />

appreciati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> his main achievement.<br />

I should be much more inclined to praise him as a really great<br />

psychologist, 4 if this is not too weak a term for a great student <str<strong>on</strong>g>of</str<strong>on</strong>g> human<br />

nature; but even this is not my main aim, though it brings me nearer to<br />

my c<strong>on</strong>tenti<strong>on</strong>. <str<strong>on</strong>g>The</str<strong>on</strong>g> Dutch doctor, who about 1696, in his late twenties,<br />

started to practise in L<strong>on</strong>d<strong>on</strong> as a specialist in the diseases <str<strong>on</strong>g>of</str<strong>on</strong>g> the nerves<br />

and the stomach, that is, as a psychiatrist, 5 and c<strong>on</strong>tinued to do so for<br />

the following thirty-seven years, clearly acquired in the course <str<strong>on</strong>g>of</str<strong>on</strong>g> time<br />

an insight into the working <str<strong>on</strong>g>of</str<strong>on</strong>g> the human mind which is very remarkable<br />

and sometimes strikingly modern. He clearly prided himself <strong>on</strong> this<br />

understanding <str<strong>on</strong>g>of</str<strong>on</strong>g> human nature more than <strong>on</strong> anything else. That we do<br />

not know why we do what we do, and that the c<strong>on</strong>sequences <str<strong>on</strong>g>of</str<strong>on</strong>g> our<br />

decisi<strong>on</strong>s are <str<strong>on</strong>g>of</str<strong>on</strong>g>ten very different from what we imagine them to be, are<br />

2 Any serious work d<strong>on</strong>e today <strong>on</strong> Mandeville must be deeply indebted to the<br />

splendid editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>The</str<strong>on</strong>g> Fable <str<strong>on</strong>g>of</str<strong>on</strong>g> the Bees which the late Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor F.B.Kaye<br />

published in 1924 through the Oxford University Press. All informati<strong>on</strong> about<br />

Mandeville and his work used in this lecture is taken from this editi<strong>on</strong> and<br />

references to its two volumes will be simply ‘i’ and ‘ii’. Though my opini<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Mandeville’s importance is based <strong>on</strong> earlier acquaintance with most <str<strong>on</strong>g>of</str<strong>on</strong>g> his works,<br />

when I came to write this lecture I had access <strong>on</strong>ly to this editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the Fable<br />

and two modern reprints <str<strong>on</strong>g>of</str<strong>on</strong>g> A Letter to Di<strong>on</strong>; all quotati<strong>on</strong>s from other works<br />

are taken from Kaye’s Introducti<strong>on</strong> and Notes to his editi<strong>on</strong>. At least<br />

Mandeville’s Origin <str<strong>on</strong>g>of</str<strong>on</strong>g> H<strong>on</strong>our (1732) and his Free Thoughts <strong>on</strong> Religi<strong>on</strong> etc.<br />

(1720), and probably also some <str<strong>on</strong>g>of</str<strong>on</strong>g> his other works, would, however, deserve to<br />

be made more accessible; it would be a great bo<strong>on</strong> if the Oxford University<br />

Press could be persuaded to expand its magnificent producti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the Fable into<br />

an editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Mandeville’s collected works. [Hayek also included in his<br />

bibliography in the original article An Enquiry into the Causes <str<strong>on</strong>g>of</str<strong>on</strong>g> the Frequent<br />

Executi<strong>on</strong>s at Tyburn (L<strong>on</strong>d<strong>on</strong>, 1725) and A Letter to Di<strong>on</strong> (L<strong>on</strong>d<strong>on</strong>, 1732), new<br />

editi<strong>on</strong> by B.Dobrée (Liverpool, 1954). Am<strong>on</strong>g recent reprints <str<strong>on</strong>g>of</str<strong>on</strong>g> Mandeville’s<br />

works are <str<strong>on</strong>g>The</str<strong>on</strong>g> Virgin Unmask’d [1709] (Delmar, N.Y.: Scholars’ Facsimiles<br />

and Reprints, 1975); <str<strong>on</strong>g>The</str<strong>on</strong>g> Mischiefs that Ought Justly to be Apprehended From a<br />

Whig-Government [1714] (Los Angeles: published for the William Andrews<br />

Clark Memorial Library, University <str<strong>on</strong>g>of</str<strong>on</strong>g> California, by Augustan Reprint Society,<br />

1975); Free Thoughts <strong>on</strong> Religi<strong>on</strong>, the Church, and Nati<strong>on</strong>al Happiness [1720]<br />

(Delmar, N.Y.: Scholars’ Facsimiles and Reprints, 1981); A Modest


76 THE TREND OF ECONOMIC THINKING<br />

the two foundati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> that satire <strong>on</strong> the c<strong>on</strong>ceits <str<strong>on</strong>g>of</str<strong>on</strong>g> a rati<strong>on</strong>alist age<br />

which was his initial aim.<br />

What I do mean to claim for Mandeville is that the speculati<strong>on</strong>s to<br />

which that jeu d’esprit led him mark the definite breakthrough in<br />

modern thought <str<strong>on</strong>g>of</str<strong>on</strong>g> the twin ideas <str<strong>on</strong>g>of</str<strong>on</strong>g> evoluti<strong>on</strong> and <str<strong>on</strong>g>of</str<strong>on</strong>g> the sp<strong>on</strong>taneous<br />

formati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> an order, c<strong>on</strong>cepti<strong>on</strong>s which had l<strong>on</strong>g been in coming,<br />

which had <str<strong>on</strong>g>of</str<strong>on</strong>g>ten been closely approached, but which just then needed<br />

emphatic statement because seventeenth-century rati<strong>on</strong>alism had largely<br />

submerged earlier progress in this directi<strong>on</strong>. Though Mandeville may<br />

have c<strong>on</strong>tributed little to the answers <str<strong>on</strong>g>of</str<strong>on</strong>g> particular questi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> social<br />

and ec<strong>on</strong>omic theory, he did, by asking the right questi<strong>on</strong>s, show that<br />

there was an object for a theory in this field. Perhaps in no case did he<br />

precisely show how an order formed itself without design, but he made<br />

it abundantly clear that it did, and thereby raised the questi<strong>on</strong>s to which<br />

theoretical analysis, first in the social sciences and later in biology,<br />

could address itself. 6<br />

Defence <str<strong>on</strong>g>of</str<strong>on</strong>g> Publick Stews [1724] (Los Angeles: published for the William<br />

Andrews Clark Memorial Library, University <str<strong>on</strong>g>of</str<strong>on</strong>g> California, by Augustan<br />

Reprint Society, 1973); and An Enquiry into the Origin <str<strong>on</strong>g>of</str<strong>on</strong>g> H<strong>on</strong>our and the<br />

Usefulness <str<strong>on</strong>g>of</str<strong>on</strong>g> Christianity in War [1732] (L<strong>on</strong>d<strong>on</strong>: Cass, 1971). Kaye’s editi<strong>on</strong><br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>The</str<strong>on</strong>g> Fable <str<strong>on</strong>g>of</str<strong>on</strong>g> the Bees, recently reprinted (2 vols; Indianapolis, Ind.:<br />

LibertyClassics, 1988), is still c<strong>on</strong>sidered the definitive editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Mandeville’s<br />

work. -Ed.]<br />

3 [John Maynard Keynes (1883–1946). -Ed.]<br />

4 Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Kaye has duly drawn attenti<strong>on</strong> to the more remarkable <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Mandeville’s psychological insights, especially to his modern c<strong>on</strong>cepti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> an<br />

ex post rati<strong>on</strong>alizati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> acti<strong>on</strong>s directed by emoti<strong>on</strong>s (see i, p. lxxvii, and cf.<br />

pp. lxiii–lxiv), to which I would like to add references to his observati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

manner in which a man born blind would, after gaining sight, learn to judge<br />

distances (i, p. 227), and to his interesting c<strong>on</strong>cepti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the structure and<br />

functi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the brain (ii, p. 165).<br />

5 Mandeville’s work <strong>on</strong> psychiatry seems to have had a c<strong>on</strong>siderable reputati<strong>on</strong>.<br />

A Treatise <str<strong>on</strong>g>of</str<strong>on</strong>g> Hypoch<strong>on</strong>driac and Hysteric Passi<strong>on</strong>s which he published in 1711<br />

had to be reprinted in the same year and was republished in an enlarged versi<strong>on</strong><br />

in 1730 with the word ‘Diseases’ substituted for ‘Passi<strong>on</strong>s’ in the title. [See<br />

reprints: A Treatise <str<strong>on</strong>g>of</str<strong>on</strong>g> the Hypoch<strong>on</strong>driack and Hysterick Diseases (Delmar,<br />

N.Y.: Scholars’ Facsimiles and Reprints,


II<br />

Mandeville is perhaps himself a good illustrati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> his main<br />

c<strong>on</strong>tenti<strong>on</strong>s in that he probably never fully understood what was his<br />

main discovery. He had begun by laughing about the foibles and<br />

pretences <str<strong>on</strong>g>of</str<strong>on</strong>g> his c<strong>on</strong>temporaries, and that poem in Hudibrastic verse<br />

which he published in 1705 as <str<strong>on</strong>g>The</str<strong>on</strong>g> Grumbling Hive, or Knaves Turned<br />

H<strong>on</strong>est was probably little more than an exercise in the new language he<br />

had come to love and <str<strong>on</strong>g>of</str<strong>on</strong>g> which in so short a time he had acquired a<br />

remarkable mastery. Yet though this poem is all that most people today<br />

know about him, it gives yet little indicati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> his important ideas. It<br />

also seems at first to have attracted no attenti<strong>on</strong> am<strong>on</strong>g serious people.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> idea that<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> worst <str<strong>on</strong>g>of</str<strong>on</strong>g> all the multitude<br />

Did something for the comm<strong>on</strong> good<br />

DR. BERNARD MANDEVILLE (1670–1733) 77<br />

was but the seed from which his later thought sprang. It was not until<br />

nine years later, when he republished the original poem with an<br />

elaborate and wholly serious prose commentary, that the trend <str<strong>on</strong>g>of</str<strong>on</strong>g> his<br />

thought became more clearly visible; and <strong>on</strong>ly a further nine years later,<br />

with a sec<strong>on</strong>d editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>The</str<strong>on</strong>g> Fable <str<strong>on</strong>g>of</str<strong>on</strong>g> the Bees, or Private Vices Public<br />

Benefits, a book about twenty times as l<strong>on</strong>g as the original poem, that<br />

his ideas suddenly attracted wide attenti<strong>on</strong> and caused a public scandal.<br />

Finally, it was really <strong>on</strong>ly after yet another six years, when in 1728, at<br />

the age <str<strong>on</strong>g>of</str<strong>on</strong>g> fifty-eight, he added a sec<strong>on</strong>d volume to it, that the bearing <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

his thought became quite clear. By that time, however, he had become a<br />

bogey man, a name with which to frighten the godly and respectable, an<br />

author whom <strong>on</strong>e might read in secret to enjoy a paradox, but whom<br />

everybody knew to be a moral m<strong>on</strong>ster by whose ideas <strong>on</strong>e must not be<br />

infected.<br />

1976); A Treatise <str<strong>on</strong>g>of</str<strong>on</strong>g> Hypoch<strong>on</strong>driack and Hysterick Passi<strong>on</strong>s (New York: Arno<br />

Press, 1976). -Ed.]<br />

6 Cf. Leslie Stephen, History <str<strong>on</strong>g>of</str<strong>on</strong>g> English Thought in the 18th Century, sec<strong>on</strong>d<br />

editi<strong>on</strong> (L<strong>on</strong>d<strong>on</strong>: Smith, Elder, 1881), vol. 1, p. 40: “Mandeville anticipates, in<br />

many respects, the views <str<strong>on</strong>g>of</str<strong>on</strong>g> modern philosophers. He gives a kind <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

c<strong>on</strong>jectural history describing the struggle for existence by which man gradually<br />

elevated himself above the wild beasts, and formed societies for mutual<br />

protecti<strong>on</strong>.”


78 THE TREND OF ECONOMIC THINKING<br />

Yet almost everybody read him 7 and few escaped infecti<strong>on</strong>. Though<br />

the very title <str<strong>on</strong>g>of</str<strong>on</strong>g> the book, as the modern editor observes, 8 was apt “to<br />

throw many good people into a kind <str<strong>on</strong>g>of</str<strong>on</strong>g> philosophical hysterics which<br />

left them no wit to grasp what he was driving at”, the more the outraged<br />

thundered, the more the young read the book. If Dr. Hutches<strong>on</strong> 9 could<br />

give no lecture without attacking <str<strong>on</strong>g>The</str<strong>on</strong>g> Fable <str<strong>on</strong>g>of</str<strong>on</strong>g> the Bees, we may be sure<br />

that his student Adam Smith very so<strong>on</strong> turned to it. Even half a century<br />

later Dr. Samuel Johns<strong>on</strong> 10 is said to have described it as a book that<br />

every young man had <strong>on</strong> his shelves in the mistaken belief that it was a<br />

wicked book. 11 Yet by then it had d<strong>on</strong>e its work and its chief<br />

c<strong>on</strong>tributi<strong>on</strong>s had become the basis <str<strong>on</strong>g>of</str<strong>on</strong>g> the approach to social philosophy<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> David Hume 12 and his successors.<br />

III<br />

But does even the modern reader quite see what Mandeville was driving<br />

at? And how far did Mandeville himself? His main general thesis<br />

emerges <strong>on</strong>ly gradually and indirectly, as it were as a by-product <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

defending his initial paradox that what are private vices are <str<strong>on</strong>g>of</str<strong>on</strong>g>ten public<br />

benefits. By treating as vicious everything d<strong>on</strong>e for selfish purposes,<br />

and admitting as virtuous <strong>on</strong>ly what was d<strong>on</strong>e in order to obey moral<br />

commands, he had little difficulty in showing that we owed most<br />

benefits <str<strong>on</strong>g>of</str<strong>on</strong>g> society to what <strong>on</strong> such a rigoristic standard must be called<br />

vicious. This was no new discovery but as old almost as any reflecti<strong>on</strong><br />

<strong>on</strong> these problems. Had not even Thomas Aquinas had to admit that<br />

multae utilitates impedirentur si omnia peccata districte prohiberentur<br />

—that much that is useful would be prevented if all sins were strictly<br />

prohibited? 13 <str<strong>on</strong>g>The</str<strong>on</strong>g> whole idea was so familiar to the literature <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

7 <str<strong>on</strong>g>The</str<strong>on</strong>g>re is perhaps no other comparable work <str<strong>on</strong>g>of</str<strong>on</strong>g> which <strong>on</strong>e can be equally<br />

c<strong>on</strong>fident that all c<strong>on</strong>temporary writers in the field knew it, whether they<br />

explicitly refer to it or not. Alfred Espinas (“La Troisième phase de la<br />

dissoluti<strong>on</strong> du mercantilisme”, Revue internati<strong>on</strong>ale de sociologie, 1902, p.<br />

162) calls it “un livre d<strong>on</strong>t nous nous sommes assures que la plupart des<br />

hommes du XVIII e siècle <strong>on</strong>t pris c<strong>on</strong>naissance”.<br />

8 F.B.Kaye in i, p. xxxix.<br />

9 [Francis Hutches<strong>on</strong> (1694–1746), Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor <str<strong>on</strong>g>of</str<strong>on</strong>g> Moral Philosophy at Glasgow<br />

University. -Ed.]<br />

10 [(1709–1784). -Ed.]<br />

11 I borrow this quotati<strong>on</strong>, which I have not been able to trace, from Joan<br />

Robins<strong>on</strong>, <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Philosophy (L<strong>on</strong>d<strong>on</strong>: C.A.Watts, 1962), p. 15.


DR. BERNARD MANDEVILLE (1670–1733) 79<br />

preceding century, particularly through the work <str<strong>on</strong>g>of</str<strong>on</strong>g> La<br />

Rochefoucauld 14 and Bayle 15 , that it was not difficult for a witty and<br />

somewhat cynical mind, steeped from early youth in the ideas <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Erasmus 16 and M<strong>on</strong>taigne 17 , to develop it into a grotesque <str<strong>on</strong>g>of</str<strong>on</strong>g> society.<br />

Yet by making his starting-point the particular moral c<strong>on</strong>trast between<br />

the selfishness <str<strong>on</strong>g>of</str<strong>on</strong>g> the motives and the benefits which the resulting<br />

acti<strong>on</strong>s c<strong>on</strong>ferred <strong>on</strong> others, Mandeville saddled himself with an<br />

incubus <str<strong>on</strong>g>of</str<strong>on</strong>g> which neither he nor his successors to the present day could<br />

ever quite free themselves.<br />

It was in the elaborati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> this wider thesis that Mandeville for the<br />

first time developed all the classical paradigmata <str<strong>on</strong>g>of</str<strong>on</strong>g> the sp<strong>on</strong>taneous<br />

growth <str<strong>on</strong>g>of</str<strong>on</strong>g> orderly social structures: <str<strong>on</strong>g>of</str<strong>on</strong>g> law and morals, <str<strong>on</strong>g>of</str<strong>on</strong>g> language, the<br />

market, <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>ey, and also <str<strong>on</strong>g>of</str<strong>on</strong>g> the growth <str<strong>on</strong>g>of</str<strong>on</strong>g> technological knowledge.<br />

To understand the significance <str<strong>on</strong>g>of</str<strong>on</strong>g> this it is necessary to be aware <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

c<strong>on</strong>ceptual scheme into which these phenomena had somewhat uneasily<br />

been fitted during the preceding 2,000 years.<br />

IV<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> ancient Greeks, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, had not been unaware <str<strong>on</strong>g>of</str<strong>on</strong>g> the problem<br />

which the existence <str<strong>on</strong>g>of</str<strong>on</strong>g> such phenomena raised; but they had tried to cope<br />

with it with a dichotomy which by its ambiguity produced endless<br />

c<strong>on</strong>fusi<strong>on</strong>, yet became so firm a traditi<strong>on</strong> that it acted like a pris<strong>on</strong> from<br />

which Mandeville at last showed the way <str<strong>on</strong>g>of</str<strong>on</strong>g> escape.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> Greek dichotomy which had governed thinking so l<strong>on</strong>g, and<br />

which still has not lost all its power, is that between what is natural<br />

(physei) and that which is artificial or c<strong>on</strong>venti<strong>on</strong>al (thesmoi or nomoi).<br />

18 It was obvious that the order <str<strong>on</strong>g>of</str<strong>on</strong>g> nature, the kosmos, was given<br />

independently <str<strong>on</strong>g>of</str<strong>on</strong>g> the will and acti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> men, but that there existed also<br />

other kinds <str<strong>on</strong>g>of</str<strong>on</strong>g> order (for which they had a distinct word, taxis, for which<br />

12 [See this volume, chapter 7. -Ed.]<br />

13 Summa <str<strong>on</strong>g>The</str<strong>on</strong>g>ologia, II. ii, q. 78 i.<br />

14 [François de Marsillac, duc de La Rochefoucauld (1613–1680), French<br />

courtier, soldier, and moralist, author <str<strong>on</strong>g>of</str<strong>on</strong>g> Reflexi<strong>on</strong>s ou sentences et maximes<br />

morales (1678, numerous editi<strong>on</strong>s). -Ed.]<br />

15 [Pierre Bayle (1647–1706), French Protestant scholar and philosopher, author<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the Dicti<strong>on</strong>naire historique et critique (Rotterdam: R.Leers, 1697). -Ed.]<br />

16 [Desiderius Erasmus (1466?-1536). -Ed.]<br />

17 [Michel Eyquem de M<strong>on</strong>taigne (1533–1592). -Ed.]


80 THE TREND OF ECONOMIC THINKING<br />

we may envy them) which were the result <str<strong>on</strong>g>of</str<strong>on</strong>g> the deliberate<br />

arrangements <str<strong>on</strong>g>of</str<strong>on</strong>g> men. But if everything that was clearly independent <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

men’s will and their acti<strong>on</strong>s was in this sense obviously ‘natural’, and<br />

everything that was the intended result <str<strong>on</strong>g>of</str<strong>on</strong>g> men’s acti<strong>on</strong> ‘artificial’, this<br />

left no distinct place for any order which was the result <str<strong>on</strong>g>of</str<strong>on</strong>g> human<br />

acti<strong>on</strong>s but not <str<strong>on</strong>g>of</str<strong>on</strong>g> human design. That there existed am<strong>on</strong>g the<br />

phenomena <str<strong>on</strong>g>of</str<strong>on</strong>g> society such sp<strong>on</strong>taneous orders was <str<strong>on</strong>g>of</str<strong>on</strong>g>ten perceived.<br />

But as men were not aware <str<strong>on</strong>g>of</str<strong>on</strong>g> the ambiguity <str<strong>on</strong>g>of</str<strong>on</strong>g> the established natural/<br />

artificial terminology, they endeavoured to express what they perceived<br />

in terms <str<strong>on</strong>g>of</str<strong>on</strong>g> it, and inevitably produced c<strong>on</strong>fusi<strong>on</strong>: <strong>on</strong>e would describe a<br />

social instituti<strong>on</strong> as ‘natural’ because it had never been deliberately<br />

designed, while another would describe the same instituti<strong>on</strong> as<br />

‘artificial’ because it resulted from human acti<strong>on</strong>s.<br />

It is remarkable how close, nevertheless, some <str<strong>on</strong>g>of</str<strong>on</strong>g> the ancient thinkers<br />

came to an understanding <str<strong>on</strong>g>of</str<strong>on</strong>g> the evoluti<strong>on</strong>ary processes that produced<br />

social instituti<strong>on</strong>s. <str<strong>on</strong>g>The</str<strong>on</strong>g>re appears to have existed in all free countries a<br />

belief that a special providence watched over their affairs which turned<br />

their unsystematic efforts to their benefit. Aristophanes refers to this<br />

when he menti<strong>on</strong>s that 19<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re is a legend <str<strong>on</strong>g>of</str<strong>on</strong>g> the olden time<br />

That all our foolish plans and vain c<strong>on</strong>ceits<br />

Are overruled to work the public good.<br />

—a sentiment not wholly unfamiliar in [Britain]. And at least the<br />

Roman lawyers <str<strong>on</strong>g>of</str<strong>on</strong>g> classical times were very much aware that the<br />

Roman legal order was superior to others because, as Cato is reported to<br />

have said, it 20<br />

was based up<strong>on</strong> the genius, not <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>on</strong>e man, but <str<strong>on</strong>g>of</str<strong>on</strong>g> many: it was<br />

founded, not in <strong>on</strong>e generati<strong>on</strong>, but in a l<strong>on</strong>g period <str<strong>on</strong>g>of</str<strong>on</strong>g> several<br />

centuries and many ages <str<strong>on</strong>g>of</str<strong>on</strong>g> men. For, said he, there never has<br />

lived a man possessed <str<strong>on</strong>g>of</str<strong>on</strong>g> so great a genius that nothing could<br />

escape him, nor could the combined powers <str<strong>on</strong>g>of</str<strong>on</strong>g> all men living at<br />

18 Cf. F.Heinimann, Nomos und Physis (Basel: F.Reinhardt, 1945), and my<br />

essay “<str<strong>on</strong>g>The</str<strong>on</strong>g> Result <str<strong>on</strong>g>of</str<strong>on</strong>g> Human Acti<strong>on</strong> But Not <str<strong>on</strong>g>of</str<strong>on</strong>g> Human Design” in my Studies<br />

in Philosophy, Politics, and <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s (L<strong>on</strong>d<strong>on</strong> and Chicago: University <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Chicago Press; L<strong>on</strong>d<strong>on</strong>: Routledge & Kegan Paul, 1967).


DR. BERNARD MANDEVILLE (1670–1733) 81<br />

<strong>on</strong>e time possibly make all the provisi<strong>on</strong>s for the future without<br />

the aid <str<strong>on</strong>g>of</str<strong>on</strong>g> actual experience and the test <str<strong>on</strong>g>of</str<strong>on</strong>g> time.<br />

This traditi<strong>on</strong> was handed <strong>on</strong>, chiefly through the theories <str<strong>on</strong>g>of</str<strong>on</strong>g> the law <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

nature; and it is startling how far the older theorists <str<strong>on</strong>g>of</str<strong>on</strong>g> the law <str<strong>on</strong>g>of</str<strong>on</strong>g> nature,<br />

before they were displaced by the altogether different rati<strong>on</strong>alist natural<br />

law school <str<strong>on</strong>g>of</str<strong>on</strong>g> the seventeenth century, penetrated into the secrets <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

sp<strong>on</strong>taneous development <str<strong>on</strong>g>of</str<strong>on</strong>g> social orders in spite <str<strong>on</strong>g>of</str<strong>on</strong>g> the handicap <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

term ‘natural’. Gradually even this unfortunate word became almost a<br />

technical term for referring to human instituti<strong>on</strong>s which had never been<br />

invented or designed by men, but had been shaped by the force <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

circumstances. Especially in the works <str<strong>on</strong>g>of</str<strong>on</strong>g> the last <str<strong>on</strong>g>of</str<strong>on</strong>g> the Schoolmen, the<br />

Spanish Jesuits <str<strong>on</strong>g>of</str<strong>on</strong>g> the sixteenth century, it led to a systematic<br />

questi<strong>on</strong>ing <str<strong>on</strong>g>of</str<strong>on</strong>g> how things would have ordered themselves if they had<br />

not otherwise been arranged by the deliberate efforts <str<strong>on</strong>g>of</str<strong>on</strong>g> government;<br />

they thus produced what I should call the first modern theories <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

society if their teaching had not been submerged by the rati<strong>on</strong>alist tide<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the following century. 21<br />

V<br />

Because, however great an advance the work <str<strong>on</strong>g>of</str<strong>on</strong>g> a Descartes, a Hobbes,<br />

and a Leibniz may have meant in other fields, for the understanding <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

social growth processes it was simply disastrous. That to Descartes<br />

Sparta seemed eminent am<strong>on</strong>g Greek nati<strong>on</strong>s because its laws were the<br />

product <str<strong>on</strong>g>of</str<strong>on</strong>g> design and “originated by a single individual, they all tended<br />

to a single end” 22 is characteristic <str<strong>on</strong>g>of</str<strong>on</strong>g> that c<strong>on</strong>structivistic rati<strong>on</strong>alism<br />

which came to rule. 23 It came to be thought that not <strong>on</strong>ly all cultural<br />

instituti<strong>on</strong>s were the product <str<strong>on</strong>g>of</str<strong>on</strong>g> deliberate c<strong>on</strong>structi<strong>on</strong>, but that all that<br />

was so designed was necessarily superior to all mere growth. Under this<br />

19 Ecclesiazusae, 473; the translati<strong>on</strong> is that by B.B.Rogers in the Loeb editi<strong>on</strong><br />

(Cambridge, Mass.: Harvard University Press; L<strong>on</strong>d<strong>on</strong>: William Heinemann,<br />

1924), vol. 3, p. 289.<br />

20 M.Tullius Cicero, De re publica ii, I, 2, Loeb editi<strong>on</strong> by C.W.Keyes (L<strong>on</strong>d<strong>on</strong>:<br />

W.Heinemann; New York: G.Putnam’s S<strong>on</strong>s, 1928), p. 113. Cf. also the Attic<br />

orator Antiph<strong>on</strong>, On the Choreutes, par. 2 (in Minor Attic Orators, Loeb editi<strong>on</strong><br />

by K.J. Maidment (Cambridge, Mass.: Harvard University Press; L<strong>on</strong>d<strong>on</strong>:<br />

William Heinemann, 1941), p. 247), where he speaks <str<strong>on</strong>g>of</str<strong>on</strong>g> laws having “the<br />

distincti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> being the oldest in this country,…and that is the surest token <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

good laws, as time and experience show mankind what is imperfect”.


82 THE TREND OF ECONOMIC THINKING<br />

influence the traditi<strong>on</strong>al c<strong>on</strong>cepti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the law <str<strong>on</strong>g>of</str<strong>on</strong>g> nature was<br />

transformed from the idea <str<strong>on</strong>g>of</str<strong>on</strong>g> something which had formed itself by<br />

gradual adaptati<strong>on</strong> to the ‘nature <str<strong>on</strong>g>of</str<strong>on</strong>g> things’, into the idea <str<strong>on</strong>g>of</str<strong>on</strong>g> something<br />

which a natural reas<strong>on</strong> with which man had been originally endowed<br />

would enable him to design.<br />

I do not know how much <str<strong>on</strong>g>of</str<strong>on</strong>g> the older traditi<strong>on</strong> was preserved through<br />

this intellectual turmoil, and particularly how much <str<strong>on</strong>g>of</str<strong>on</strong>g> it may still have<br />

reached Mandeville. This would require an intimate knowledge <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

seventeenth-century Dutch discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> legal and social problems<br />

which is still largely inaccessible to <strong>on</strong>e who does not read Dutch. <str<strong>on</strong>g>The</str<strong>on</strong>g>re<br />

are many other reas<strong>on</strong>s why a thorough study <str<strong>on</strong>g>of</str<strong>on</strong>g> this period <str<strong>on</strong>g>of</str<strong>on</strong>g> Dutch<br />

thought, which probably had great influence <strong>on</strong> English intellectual<br />

development at the end <str<strong>on</strong>g>of</str<strong>on</strong>g> that and the beginning <str<strong>on</strong>g>of</str<strong>on</strong>g> the next century,<br />

has l<strong>on</strong>g seemed to me <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the great desiderata <str<strong>on</strong>g>of</str<strong>on</strong>g> intellectual<br />

history. But until that gap is filled I can, so far as my particular problem<br />

is c<strong>on</strong>cerned, <strong>on</strong>ly surmise that a closer study would probably show that<br />

there are some threads c<strong>on</strong>necting Mandeville with that group <str<strong>on</strong>g>of</str<strong>on</strong>g> late<br />

School men and particularly its Flemish member, Le<strong>on</strong>ard Lessius <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Louvain. 24<br />

Apart from this likely c<strong>on</strong>nexi<strong>on</strong> with the older c<strong>on</strong>tinental theorists<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the law <str<strong>on</strong>g>of</str<strong>on</strong>g> nature, another probable source <str<strong>on</strong>g>of</str<strong>on</strong>g> inspirati<strong>on</strong> for<br />

Mandeville was the English theorists <str<strong>on</strong>g>of</str<strong>on</strong>g> the comm<strong>on</strong> law, particularly<br />

Sir Matthew Hale. 25 <str<strong>on</strong>g>The</str<strong>on</strong>g>ir work had in some respects preserved, and in<br />

other respects made unnecessary in England, a c<strong>on</strong>cepti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> what the<br />

natural law theorists had been aiming at; and in the work <str<strong>on</strong>g>of</str<strong>on</strong>g> Hale<br />

Mandeville could have found much that would have helped him in the<br />

speculati<strong>on</strong>s about the growth <str<strong>on</strong>g>of</str<strong>on</strong>g> cultural instituti<strong>on</strong>s which increasingly<br />

became his central problem. 26<br />

Yet all these were merely survivals <str<strong>on</strong>g>of</str<strong>on</strong>g> an older traditi<strong>on</strong> which had<br />

been swamped by the c<strong>on</strong>structivistic rati<strong>on</strong>alism <str<strong>on</strong>g>of</str<strong>on</strong>g> the time, the most<br />

powerful expositor <str<strong>on</strong>g>of</str<strong>on</strong>g> which in the social field was the chief target <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Hale’s argument, Thomas Hobbes. 27 How ready men still were, under<br />

21 On Luis Molina, from this angle the most important <str<strong>on</strong>g>of</str<strong>on</strong>g> these sixteenthcentury<br />

Spanish Jesuits, and some <str<strong>on</strong>g>of</str<strong>on</strong>g> his predecessors see my essay “<str<strong>on</strong>g>The</str<strong>on</strong>g> Result<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> Human Acti<strong>on</strong> But Not <str<strong>on</strong>g>of</str<strong>on</strong>g> Human Design”, in Studies in Philosophy,<br />

Politics, and <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s, op. cit.<br />

22 René Descartes, A Discourse <strong>on</strong> Method, part II, Everyman editi<strong>on</strong> (L<strong>on</strong>d<strong>on</strong>:<br />

J. M.Dent; New York: E.P.Dutt<strong>on</strong>, 1912), p. 11.<br />

23 [See Hayek’s account <str<strong>on</strong>g>of</str<strong>on</strong>g> c<strong>on</strong>structivism in this volume, chapter 8. -Ed.]


DR. BERNARD MANDEVILLE (1670–1733) 83<br />

the influence <str<strong>on</strong>g>of</str<strong>on</strong>g> a powerful philosophy flattering to the human mind, to<br />

return to the naive design theories <str<strong>on</strong>g>of</str<strong>on</strong>g> human instituti<strong>on</strong>s, much more in<br />

accord with the ingrained propensity <str<strong>on</strong>g>of</str<strong>on</strong>g> our thinking to interpret<br />

everything anthropomorphically, we will understand better when we<br />

remember that distinguished renaissance scholars could still as a matter<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> course search for pers<strong>on</strong>al inventors <str<strong>on</strong>g>of</str<strong>on</strong>g> all the instituti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> culture.<br />

28 <str<strong>on</strong>g>The</str<strong>on</strong>g> renewed efforts to trace the political order to some deliberate act,<br />

an original agreement or c<strong>on</strong>tract, was much more c<strong>on</strong>genial to this view<br />

than the more sophisticated accounts <str<strong>on</strong>g>of</str<strong>on</strong>g> their evoluti<strong>on</strong> which had been<br />

attempted earlier.<br />

VI<br />

To his c<strong>on</strong>temporaries “Mandeville’s reducti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> all acti<strong>on</strong> to open or<br />

disguised selfishness” 29 may indeed have seemed little more than<br />

another versi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Hobbes, and to have disguised the fact that it led to<br />

wholly different c<strong>on</strong>clusi<strong>on</strong>s. His initial stress <strong>on</strong> selfishness still carried<br />

a suggesti<strong>on</strong> that man’s acti<strong>on</strong>s were guided by wholly rati<strong>on</strong>al<br />

c<strong>on</strong>siderati<strong>on</strong>s, while the tenor <str<strong>on</strong>g>of</str<strong>on</strong>g> his argument becomes increasingly<br />

that it is not insight but restraints imposed up<strong>on</strong> men by the instituti<strong>on</strong>s<br />

and traditi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> society which make their acti<strong>on</strong>s appear rati<strong>on</strong>al.<br />

While he still seems most c<strong>on</strong>cerned to show that it is merely pride (or<br />

“self-liking”) 30 which determines men’s acti<strong>on</strong>s, he becomes in fact<br />

much more interested in the origin <str<strong>on</strong>g>of</str<strong>on</strong>g> the rules <str<strong>on</strong>g>of</str<strong>on</strong>g> c<strong>on</strong>duct which pride<br />

24 Le<strong>on</strong>ard Lessius, De justitia et jure, 1606.<br />

25 [Sir Matthew Hale (1609–1676). -Ed.]<br />

26 On Sir Matthew Hale see now particularly J.G.A.Pocock, <str<strong>on</strong>g>The</str<strong>on</strong>g> Ancient<br />

C<strong>on</strong>stituti<strong>on</strong> and the Feudal Law (Cambridge: Cambridge University Press,<br />

1957), esp. pp. 171 et seq. I would like to make amends here for inadvertently<br />

not referring to this excellent book in <str<strong>on</strong>g>The</str<strong>on</strong>g> C<strong>on</strong>stituti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Liberty (Chicago:<br />

University <str<strong>on</strong>g>of</str<strong>on</strong>g> Chicago Press, 1960), for the final revisi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> which I had much<br />

pr<str<strong>on</strong>g>of</str<strong>on</strong>g>ited from Mr. Pocock’s work.<br />

27 [Thomas Hobbes (1588–1679). -Ed.]<br />

28 Cf. Pocock, op. cit., p. 19: “This was the period in which Polydore Vergil<br />

wrote his De inventoribus rerum <strong>on</strong> the assumpti<strong>on</strong> that every inventi<strong>on</strong> could<br />

be traced to an individual discoverer; and in the field <str<strong>on</strong>g>of</str<strong>on</strong>g> legal history Macchiavelli<br />

would write with what seems singular naivete <str<strong>on</strong>g>of</str<strong>on</strong>g> the man “chi ordinó” so<br />

complex a creati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> history as the m<strong>on</strong>archy <str<strong>on</strong>g>of</str<strong>on</strong>g> France”—with footnote<br />

references to Denys Hay, Polydore Vergil (Oxford: Clarend<strong>on</strong> Press, 1952),<br />

chapter 3, Niccoló Macchiavelli, Discorsi I xvi, and Pierre Mesnard, L’Essor de<br />

la philosophie politique au XVIe siècle (Paris: J.Vrin, 1951), p. 83.


84 THE TREND OF ECONOMIC THINKING<br />

makes men obey but whose origin and rati<strong>on</strong>ale they do not understand.<br />

After he has c<strong>on</strong>vinced himself that the reas<strong>on</strong>s for which men observe<br />

rules are very different from the reas<strong>on</strong>s which made these rules<br />

prevail, he gets increasingly intrigued about the origin <str<strong>on</strong>g>of</str<strong>on</strong>g> these rules<br />

whose significance for the orderly process <str<strong>on</strong>g>of</str<strong>on</strong>g> society is quite<br />

unc<strong>on</strong>nected with the motives which make individual men obey them.<br />

This begins to show itself already in the prose commentary <strong>on</strong> the<br />

poem and the other pieces which make up part I <str<strong>on</strong>g>of</str<strong>on</strong>g> the Fable, but<br />

blossoms forth in full <strong>on</strong>ly in part II. In part I Mandeville draws his<br />

illustrati<strong>on</strong>s largely from ec<strong>on</strong>omic affairs because, as he thinks, “the<br />

sociableness <str<strong>on</strong>g>of</str<strong>on</strong>g> man arises from those two things, viz., the multiplicity <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

his desires, and the c<strong>on</strong>tinuous oppositi<strong>on</strong> he meets with in his<br />

endeavours to satisfy them”. 31 But this leads him merely to those<br />

mercantilist c<strong>on</strong>siderati<strong>on</strong>s about the beneficial effects <str<strong>on</strong>g>of</str<strong>on</strong>g> luxury which<br />

caused the enthusiasm <str<strong>on</strong>g>of</str<strong>on</strong>g> Lord Keynes. We find here also that<br />

magnificent descripti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> all the activities spread over the whole earth<br />

that go to the making <str<strong>on</strong>g>of</str<strong>on</strong>g> a piece <str<strong>on</strong>g>of</str<strong>on</strong>g> crims<strong>on</strong> cloth 32 which so clearly<br />

inspired Adam Smith and provided the basis for the explicit<br />

introducti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the divisi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> labour in part II. 33 Already underlying this<br />

discussi<strong>on</strong> there is clearly an awareness <str<strong>on</strong>g>of</str<strong>on</strong>g> the sp<strong>on</strong>taneous order which<br />

the market produces.<br />

VII<br />

I would not wish to dwell <strong>on</strong> this at any length, however, if it were not<br />

for the fact that Mandeville’s l<strong>on</strong>g recognised positi<strong>on</strong> as an anticipator<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> Adam Smith’s argument for ec<strong>on</strong>omic liberty has recently been<br />

challenged by Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Jacob Viner, 34 than whom there is no greater<br />

authority <strong>on</strong> such matters. With all due respect, however, it seems to me<br />

29 F.B.Kaye, i, p. lxiii.<br />

30 See Chiaki Nishiyama, <str<strong>on</strong>g>The</str<strong>on</strong>g> <str<strong>on</strong>g>The</str<strong>on</strong>g>ory <str<strong>on</strong>g>of</str<strong>on</strong>g> Self-Love: an Essay in the Methodology<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> the Social Sciences, and especially <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s, with special Reference to<br />

Bernard Mandeville, University <str<strong>on</strong>g>of</str<strong>on</strong>g> Chicago, Ph.D. thesis (mimeographed),<br />

1960.<br />

31 i, p. 344.<br />

32 i, p. 356. Already Dugald Stewart in his Lectures <strong>on</strong> <strong>Political</strong> Ec<strong>on</strong>omy<br />

(Collected Works, vii, p. 323) suggests that this passage in Mandeville “clearly<br />

suggested to Adam Smith <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the finest passages <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>The</str<strong>on</strong>g> Wealth <str<strong>on</strong>g>of</str<strong>on</strong>g> Nati<strong>on</strong>s”.<br />

33 ii, p. 284.


DR. BERNARD MANDEVILLE (1670–1733) 85<br />

that Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Viner has been misled by a phrase which Mandeville<br />

repeatedly uses, namely his allusi<strong>on</strong>s to the “dextrous management by<br />

which the skilful politician might turn private vices into public<br />

benefits”. 35 Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Viner interprets this to mean that Mandeville<br />

favours what we now call government interference or interventi<strong>on</strong>, that<br />

is, a specific directi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> men’s ec<strong>on</strong>omic activities by government.<br />

This, however, is certainly not what Mandeville meant. His aim<br />

comes out fairly unmistakably already in the little-noticed subtitle to the<br />

sec<strong>on</strong>d 1714 printing <str<strong>on</strong>g>of</str<strong>on</strong>g> the Fable, which describes it as c<strong>on</strong>taining<br />

“Several Discourses, to dem<strong>on</strong>strate, that Human Frailties,… may be<br />

turned to the Advantage <str<strong>on</strong>g>of</str<strong>on</strong>g> the Civil Society, and made to supply the<br />

Place <str<strong>on</strong>g>of</str<strong>on</strong>g> Moral Virtues”. 36 WhatI believe he wants to say by this is<br />

precisely what Josiah Tucker expressed more clearly forty years later<br />

34 Introducti<strong>on</strong> to Bernard Mandeville, A Letter to Di<strong>on</strong> (1732), edited for the<br />

Augustan Reprint Society, Los Angeles, University <str<strong>on</strong>g>of</str<strong>on</strong>g> California, 1953, and<br />

reprinted in Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Viner’s <str<strong>on</strong>g>The</str<strong>on</strong>g> L<strong>on</strong>g View and the Short (Glencoe, Ill.: <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

Free Press, 1958), pp. 332–342. For the predominant and, I believe, truer<br />

opini<strong>on</strong>, cf. Albert Schatz, L’Individualisme éc<strong>on</strong>omique et social (Paris:<br />

A.Colin, 1907), p. 62, who describes the Fable as “l’ouvrage capital oú se<br />

trouvent tous les germes essentiels de la philosophie éc<strong>on</strong>omique et sociale de<br />

l’individualisme”. [I am grateful to Mr. Douglas Irwin, <str<strong>on</strong>g>of</str<strong>on</strong>g> the Federal Reserve<br />

System in Washingt<strong>on</strong>, for pointing out to me that the late Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Viner, an<br />

associate and corresp<strong>on</strong>dent <str<strong>on</strong>g>of</str<strong>on</strong>g> Hayek’s since 1931, replied to this passage, and<br />

Hayek’s argument as a whole, in a letter (January 23, 1967) that is preserved,<br />

with the Viner papers, in the Archives <str<strong>on</strong>g>of</str<strong>on</strong>g> Princet<strong>on</strong> University Library, as well<br />

as with the Hayek papers at the Hoover Instituti<strong>on</strong>, Stanford University.<br />

Unfortunately, Hayek’s reply is not to be found in either locati<strong>on</strong>. “As things<br />

stand now”, Viner wrote, “I see nothing to withdraw, to amend, or to justify, in<br />

what I have written about Mandeville…”. Viner requests clarificati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> (1)<br />

what Hayek means by “interventi<strong>on</strong>ism”, “management”, or “laissez faire”; (2)<br />

whether Hayek has a definiti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> interventi<strong>on</strong> that excludes activity by<br />

government <str<strong>on</strong>g>of</str<strong>on</strong>g> ancient origin, or which if new is “improvement”, or is not<br />

“deliberate”—in the sense, say, <str<strong>on</strong>g>of</str<strong>on</strong>g> being impulsive, or is local rather than central,<br />

or has been introduced by mediocrities, or is according to the rule <str<strong>on</strong>g>of</str<strong>on</strong>g> law; (3)<br />

why mercantilist interventi<strong>on</strong> is not relevant or important in interpreting<br />

Mandeville’s positi<strong>on</strong>. “All the evidence”, Viner insists, “points to Mandeville<br />

having been a staunch Whig <str<strong>on</strong>g>of</str<strong>on</strong>g> his time. I know <str<strong>on</strong>g>of</str<strong>on</strong>g> no interventi<strong>on</strong>ist law <strong>on</strong> the<br />

books in his time which he criticized, except as it involved discriminati<strong>on</strong><br />

against dissenters or exclusi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Protestant immigrants. He was, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, an<br />

immigrant himself, and he says somewhere that he was ‘a part <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

dissenters,’ but unlike many dissenters, I am sure he had too little religious faith<br />

to practice religious intolerance <str<strong>on</strong>g>of</str<strong>on</strong>g> any kind, even against Puritans, had he the<br />

power.” -Ed.]<br />

35 i, pp. 51, 369; ii, p. 319; also A Letter to Di<strong>on</strong>, op. cit., p. 36.


86 THE TREND OF ECONOMIC THINKING<br />

when he wrote that “that universal mover in human nature, SELF-<br />

LOVE, may receive such a directi<strong>on</strong> in this case (as in all others) as to<br />

promote the public interest by those efforts it shall make towards<br />

pursuing its own”. 37 <str<strong>on</strong>g>The</str<strong>on</strong>g> means through which in the opini<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Mandeville and Tucker individual efforts are given such a directi<strong>on</strong>,<br />

however, are by no means any particular commands <str<strong>on</strong>g>of</str<strong>on</strong>g> government but<br />

instituti<strong>on</strong>s and particularly general rules <str<strong>on</strong>g>of</str<strong>on</strong>g> just c<strong>on</strong>duct. It seems to me<br />

that Mr. Nathan Rosenberg is wholly right when, in his reply to<br />

Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Viner, he argues that in Mandeville’s view, just as in Adam<br />

Smith’s, the proper functi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> government is “to establish the rules <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the game by the creati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> a framework <str<strong>on</strong>g>of</str<strong>on</strong>g> wise laws”, and that<br />

Mandeville is searching for a system where “arbitrary exerti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

government power would be minimised”. 38 Clearly an author who could<br />

argue, as Mandeville had already in part I <str<strong>on</strong>g>of</str<strong>on</strong>g> the Fable, that “this<br />

proporti<strong>on</strong> as to numbers in every trade finds itself, and is never better<br />

kept than when nobody meddles or interferes with it”, 39 and who in<br />

c<strong>on</strong>clusi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> part II speaks about “how the shortsighted wisdom, <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

perhaps well-meaning people, may rob us <str<strong>on</strong>g>of</str<strong>on</strong>g> a felicity, that would flow<br />

sp<strong>on</strong>taneously from the nature <str<strong>on</strong>g>of</str<strong>on</strong>g> every large society, if n<strong>on</strong>e were to<br />

36 Cf. the title page reproduced in ii, p. 393. It is not described as a sec<strong>on</strong>d<br />

editi<strong>on</strong>, which term was reserved to the editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> 1723.<br />

37 Josiah Tucker, <str<strong>on</strong>g>The</str<strong>on</strong>g> Elements <str<strong>on</strong>g>of</str<strong>on</strong>g> Commerce and <str<strong>on</strong>g>The</str<strong>on</strong>g>ory <str<strong>on</strong>g>of</str<strong>on</strong>g> Taxes (1755), in<br />

R.L. Schuyler, Josiah Tucker, a Selecti<strong>on</strong> from his <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> and <strong>Political</strong><br />

Writings (New York: Columbia University Press, 1931), p. 92.<br />

38 Nathan Rosenberg, “Mandeville and laissez faire”, Journal <str<strong>on</strong>g>of</str<strong>on</strong>g> the History <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Ideas, vol. 24, 1963, pp. 190, 193. Cf. ii, p. 335, where Mandeville argues that,<br />

though it would be preferable to have all power in the hands <str<strong>on</strong>g>of</str<strong>on</strong>g> the good, “the<br />

best <str<strong>on</strong>g>of</str<strong>on</strong>g> all then not being to be had, let us look out for the next best, and we<br />

shall find, that <str<strong>on</strong>g>of</str<strong>on</strong>g> all possible means to secure and perpetuate to nati<strong>on</strong>s their<br />

establishment, and whatever they value, there is no better method than with<br />

wise laws to guard and entrench their c<strong>on</strong>stituti<strong>on</strong> and to c<strong>on</strong>trive such forms <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

administrati<strong>on</strong>, that the comm<strong>on</strong>-weal can receive no great detriment from the<br />

want <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge or probity <str<strong>on</strong>g>of</str<strong>on</strong>g> ministers, if any <str<strong>on</strong>g>of</str<strong>on</strong>g> them should prove less able<br />

and h<strong>on</strong>est than we would wish them.” [In the letter menti<strong>on</strong>ed above, Jacob<br />

Viner also disputes Hayek’s interpretati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> Tucker. Viner writes: “If you read<br />

<strong>on</strong> a few pages after the citati<strong>on</strong> you made I think you will find that this is <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the many occasi<strong>on</strong>s in which freedom meant for him avoidance <str<strong>on</strong>g>of</str<strong>on</strong>g> outright<br />

prohibiti<strong>on</strong>s or commands or physical c<strong>on</strong>straint where taxes and subsidies<br />

could do the job, but did not mean n<strong>on</strong>-regulati<strong>on</strong>.” -Ed.]<br />

39 i, pp. 299–300.


DR. BERNARD MANDEVILLE (1670–1733) 87<br />

divert or interrupt this stream”, 40 was quite as much (or as little) 41 an<br />

advocate <str<strong>on</strong>g>of</str<strong>on</strong>g> laissez faire as Adam Smith.<br />

I do not attach much importance to this questi<strong>on</strong> and would have<br />

relegated it to a footnote if in c<strong>on</strong>nexi<strong>on</strong> with it the baneful effect <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

old dichotomy <str<strong>on</strong>g>of</str<strong>on</strong>g> the ‘natural’ and the ‘artificial’ had not <strong>on</strong>ce again<br />

made an appearance. It was Elie Halévy who had first suggested that<br />

Mandeville and Adam Smith had based their argument <strong>on</strong> a “natural<br />

identity <str<strong>on</strong>g>of</str<strong>on</strong>g> interests”, while Helvetius (who undoubtedly was greatly<br />

indebted to Mandeville and Hume), and, following Helvetius, Jeremy<br />

Bentham, were thinking <str<strong>on</strong>g>of</str<strong>on</strong>g> an “artificial identificati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> interests”; 42<br />

and Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Viner suggests that Helvetius had derived this c<strong>on</strong>cepti<strong>on</strong><br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> an artificial identificati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> interests from Mandeville. 43 I am afraid<br />

this seems to me the kind <str<strong>on</strong>g>of</str<strong>on</strong>g> muddle to which the natural/artificial<br />

dichotomy inevitably leads. What Mandeville was c<strong>on</strong>cerned with was<br />

that instituti<strong>on</strong>s which man had not deliberately made—though it is the<br />

task <str<strong>on</strong>g>of</str<strong>on</strong>g> the legislator to improve them—bring it about that the divergent<br />

interests <str<strong>on</strong>g>of</str<strong>on</strong>g> the individuals are rec<strong>on</strong>ciled. <str<strong>on</strong>g>The</str<strong>on</strong>g> identity <str<strong>on</strong>g>of</str<strong>on</strong>g> interests was<br />

thus neither ‘natural’ in the sense that it was independent <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

instituti<strong>on</strong>s which had been formed by men’s acti<strong>on</strong>s, nor ‘artificial’ in<br />

the sense that it was brought about by deliberate arrangement, but the<br />

result <str<strong>on</strong>g>of</str<strong>on</strong>g> sp<strong>on</strong>taneously grown instituti<strong>on</strong>s which had developed because<br />

they made those societies prosper which tumbled up<strong>on</strong> them.<br />

VIII<br />

It is not surprising that from this angle Mandeville’s interest became<br />

increasingly directed to the questi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> how those instituti<strong>on</strong>s grew up<br />

which bring it about that men’s divergent interests are rec<strong>on</strong>ciled.<br />

Indeed this theory <str<strong>on</strong>g>of</str<strong>on</strong>g> the growth <str<strong>on</strong>g>of</str<strong>on</strong>g> law, not through the design <str<strong>on</strong>g>of</str<strong>on</strong>g> some<br />

wise legislator but through a l<strong>on</strong>g process <str<strong>on</strong>g>of</str<strong>on</strong>g> trial and error, is probably<br />

the most remarkable <str<strong>on</strong>g>of</str<strong>on</strong>g> those sketches <str<strong>on</strong>g>of</str<strong>on</strong>g> the evoluti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> instituti<strong>on</strong>s<br />

which make his investigati<strong>on</strong> into the origin <str<strong>on</strong>g>of</str<strong>on</strong>g> society which<br />

40 ii, p. 353.<br />

41 Cf. J.Viner, “Adam Smith and laissez faire”, Journal <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>Political</strong> Ec<strong>on</strong>omy,<br />

vol. 35, 1927, and reprinted in <str<strong>on</strong>g>The</str<strong>on</strong>g> L<strong>on</strong>g View and the Short, op. cit.<br />

42 Elie Halévy, <str<strong>on</strong>g>The</str<strong>on</strong>g> Growth <str<strong>on</strong>g>of</str<strong>on</strong>g> Philosophic Radicalism (L<strong>on</strong>d<strong>on</strong>: Faber &<br />

Gwyer, 1928), pp. 15–17.<br />

43 <str<strong>on</strong>g>The</str<strong>on</strong>g> L<strong>on</strong>g View and the Short, op. cit., p. 342.


88 THE TREND OF ECONOMIC THINKING<br />

c<strong>on</strong>stitutes part II <str<strong>on</strong>g>of</str<strong>on</strong>g> the Fable so remarkable a work. His central thesis<br />

becomes 44<br />

That we <str<strong>on</strong>g>of</str<strong>on</strong>g>ten ascribe to the excellency <str<strong>on</strong>g>of</str<strong>on</strong>g> man’s genius, and the<br />

depth <str<strong>on</strong>g>of</str<strong>on</strong>g> his penetrati<strong>on</strong>, what is in reality owing to the length <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

time, and the experience <str<strong>on</strong>g>of</str<strong>on</strong>g> many generati<strong>on</strong>s, all <str<strong>on</strong>g>of</str<strong>on</strong>g> them very<br />

little differing from <strong>on</strong>e another in natural parts and sagacity.<br />

He develops it with reference to laws by saying that 45<br />

there are very few, that are the work <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>on</strong>e man, or <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>on</strong>e<br />

generati<strong>on</strong>; the greatest part <str<strong>on</strong>g>of</str<strong>on</strong>g> them are the product, the joint<br />

labour <str<strong>on</strong>g>of</str<strong>on</strong>g> several ages…. <str<strong>on</strong>g>The</str<strong>on</strong>g> wisdom I speak <str<strong>on</strong>g>of</str<strong>on</strong>g>, is not the<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g>fspring <str<strong>on</strong>g>of</str<strong>on</strong>g> a fine understanding, or intense thinking, but <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

sound and deliberate judgement, acquired from a l<strong>on</strong>g experience<br />

in business, and a multiplicity <str<strong>on</strong>g>of</str<strong>on</strong>g> observati<strong>on</strong>s. By this sort <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

wisdom, and length <str<strong>on</strong>g>of</str<strong>on</strong>g> time, it may be brought about, that there<br />

may be no greater difficulty in governing a large city, than<br />

(pard<strong>on</strong> the lowness <str<strong>on</strong>g>of</str<strong>on</strong>g> the simile) there is in weaving <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

stockings.<br />

When by this process the laws “are brought to as much perfecti<strong>on</strong>, as art<br />

and human wisdom can carry them, the whole machinery can be made<br />

to play <str<strong>on</strong>g>of</str<strong>on</strong>g> itself, with as little skill, as is required to wind up a clock”. 46<br />

Of course Mandeville is not fully aware <str<strong>on</strong>g>of</str<strong>on</strong>g> how l<strong>on</strong>g would be the<br />

time required for the development <str<strong>on</strong>g>of</str<strong>on</strong>g> the various instituti<strong>on</strong>s—or <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

length <str<strong>on</strong>g>of</str<strong>on</strong>g> time actually at his disposal for accounting for it. He is <str<strong>on</strong>g>of</str<strong>on</strong>g>ten<br />

tempted to telescope this process <str<strong>on</strong>g>of</str<strong>on</strong>g> adaptati<strong>on</strong> to circumstances, 47 and<br />

does not pull himself up to say explicitly, as Hume later did in a similar<br />

c<strong>on</strong>text, that “I here <strong>on</strong>ly suppose those reflecti<strong>on</strong>s to be formed at<br />

<strong>on</strong>ce, which in fact arise insensibly and by degrees”. 48 He still vacillates<br />

between the then predominant pragmatic-rati<strong>on</strong>alist and his new<br />

genetic or evoluti<strong>on</strong>ary view. 49 But what makes the latter so much more<br />

44 ii, p. 142.<br />

45 ii, p. 322.<br />

46 ii, p. 323.<br />

47 N.Rosenberg, loc. cit., p. 194.<br />

48 David Hume, A Treatise <strong>on</strong> Human Nature, ed. T.H.Green and T.H.Grose<br />

(L<strong>on</strong>d<strong>on</strong>: L<strong>on</strong>gmans, Green, 1882), vol. 2, p. 274.


significant in his work than it was in the applicati<strong>on</strong> to particular topics<br />

by Matthew Hale or John Law, 50 who probably did it better in their<br />

particular fields, is that he applies it to society at large and extends it to<br />

new topics. He still struggles to free himself from the c<strong>on</strong>structivistic<br />

prec<strong>on</strong>cepti<strong>on</strong>s. <str<strong>on</strong>g>The</str<strong>on</strong>g> burden <str<strong>on</strong>g>of</str<strong>on</strong>g> his argument is throughout that most <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the instituti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> society are not the result <str<strong>on</strong>g>of</str<strong>on</strong>g> design, but how “a most<br />

beautiful superstructure may be raised up<strong>on</strong> a rotten and despicable<br />

foundati<strong>on</strong>”, 51 namely men’s pursuit <str<strong>on</strong>g>of</str<strong>on</strong>g> their selfish interests, and how,<br />

as “the order, ec<strong>on</strong>omy, and the very existence <str<strong>on</strong>g>of</str<strong>on</strong>g> civil society …is<br />

entirely built up<strong>on</strong> the variety <str<strong>on</strong>g>of</str<strong>on</strong>g> our wants…so the whole<br />

superstructure is made up <str<strong>on</strong>g>of</str<strong>on</strong>g> the reciprocal services which men do to<br />

each other”. 52<br />

IX<br />

It is never wise to overload a lecture with quotati<strong>on</strong>s which, taken out <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

their c<strong>on</strong>text, rarely c<strong>on</strong>vey to the listener what they suggest to the<br />

reader <str<strong>on</strong>g>of</str<strong>on</strong>g> the c<strong>on</strong>secutive expositi<strong>on</strong>. So I will merely briefly menti<strong>on</strong><br />

the further chief applicati<strong>on</strong>s to which Mandeville puts these ideas.<br />

Starting from the observati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> how the skills <str<strong>on</strong>g>of</str<strong>on</strong>g> sport involve<br />

movements the purpose <str<strong>on</strong>g>of</str<strong>on</strong>g> which the acting pers<strong>on</strong> does not know, 53<br />

and how similarly the skills <str<strong>on</strong>g>of</str<strong>on</strong>g> the arts and trades have been raised to<br />

“prodigious height…by the uninterrupted labour and joint experience <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

many generati<strong>on</strong>s, though n<strong>on</strong>e but men <str<strong>on</strong>g>of</str<strong>on</strong>g> ordinary capacity should<br />

ever be employed in them”, 54 he maintains that manners in speaking,<br />

writing, and ordering acti<strong>on</strong>s are general ly followed by what we regard<br />

49 Cf. Paul Sakmann, Bernard de Mandeville und die Bienenfabel-C<strong>on</strong>troverse<br />

(Freiburg i.B., Leipzig, and Tübingen: J.C.B.Mohr, 1897), p. 141. Although<br />

partly superseded by Kaye’s editi<strong>on</strong>, this is still the most comprehensive study<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> Mandeville.<br />

50 In his M<strong>on</strong>ey and Trade C<strong>on</strong>sidered: With a Proposal for Supplying the<br />

Nati<strong>on</strong> with M<strong>on</strong>ey (Edinburgh: Printed by the Heirs and Successors <str<strong>on</strong>g>of</str<strong>on</strong>g> Andrew<br />

Anders<strong>on</strong>, 1705), which thus appeared in the same year as Mandeville’s<br />

original poem, John Law gave what Carl Menger rightly described as the first<br />

adequate account <str<strong>on</strong>g>of</str<strong>on</strong>g> the development <str<strong>on</strong>g>of</str<strong>on</strong>g> m<strong>on</strong>ey. <str<strong>on</strong>g>The</str<strong>on</strong>g>re is no ground for<br />

believing that Mandeville knew it, but the date is interesting as showing that the<br />

evoluti<strong>on</strong>ary idea was somehow ‘in the air’.<br />

51 ii, p. 64.<br />

52 ii, p. 349.<br />

53 ii, pp. 140–141.<br />

DR. BERNARD MANDEVILLE (1670–1733) 89


90 THE TREND OF ECONOMIC THINKING<br />

as “rati<strong>on</strong>al creatures…without thinking and knowing what they are<br />

about”. 55 <str<strong>on</strong>g>The</str<strong>on</strong>g> most remarkable applicati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> this, in which Mandeville<br />

appears to have been, wholly a pi<strong>on</strong>eer, is to the evoluti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> language<br />

which, he maintains, has also come into the world “by slow degrees, as<br />

all other arts and sciences”. 56 When we remember that not l<strong>on</strong>g before<br />

even John Locke had regarded words as arbitrarily “invented”, 57 it<br />

would seem that Mandeville is the chief source <str<strong>on</strong>g>of</str<strong>on</strong>g> that rich speculati<strong>on</strong><br />

<strong>on</strong> the growth <str<strong>on</strong>g>of</str<strong>on</strong>g> language which we find in the sec<strong>on</strong>d half <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

eighteenth century. 58<br />

All this is part <str<strong>on</strong>g>of</str<strong>on</strong>g> an increasing preoccupati<strong>on</strong> with the process which<br />

we would now call cultural transmissi<strong>on</strong>, especially through educati<strong>on</strong>.<br />

He explicitly distinguishes what is “adventitious acquired by culture” 59<br />

from what is innate, and makes his spokesman in the dialogue <str<strong>on</strong>g>of</str<strong>on</strong>g> part II<br />

stress that “what you call natural, is evidently artificial and acquired by<br />

educati<strong>on</strong>”. 60 All this leads him in the end to argue that “it was with our<br />

thought as it is with speech” 61 and that 62<br />

human wisdom is the child <str<strong>on</strong>g>of</str<strong>on</strong>g> time. It was not the c<strong>on</strong>trivance <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

<strong>on</strong>e man, nor could it have been the business <str<strong>on</strong>g>of</str<strong>on</strong>g> a few years, to<br />

establish the noti<strong>on</strong>, by which a rati<strong>on</strong>al creature is kept in awe<br />

for fear <str<strong>on</strong>g>of</str<strong>on</strong>g> itself, and an idol is set up, that shall be its own<br />

worshipper.<br />

Here the anti-rati<strong>on</strong>alism, to use for <strong>on</strong>ce the misleading term which has<br />

been widely used for Mandeville and Hume, and which we had now<br />

better drop in favour <str<strong>on</strong>g>of</str<strong>on</strong>g> Sir Karl Popper’s “critical rati<strong>on</strong>alism”, 63<br />

comes out most clearly. With it Mandeville seems to me to have<br />

provided the foundati<strong>on</strong>s <strong>on</strong> which David Hume was able to build.<br />

54 ii, p. 141.<br />

55 ii, p. 287.<br />

56 ii, p. 287.<br />

57 John Locke, Essay C<strong>on</strong>cerning Human Understanding, III, ii, I.<br />

58 [Compare, however, G.A.Wells, <str<strong>on</strong>g>The</str<strong>on</strong>g> Origins <str<strong>on</strong>g>of</str<strong>on</strong>g> Language (La Salle, Ill.:<br />

Open Court, 1987). -Ed.]<br />

59 ii, p. 89.<br />

60 ii, p. 270.<br />

61 ii, p. 269.<br />

62 <str<strong>on</strong>g>The</str<strong>on</strong>g> Origin <str<strong>on</strong>g>of</str<strong>on</strong>g> H<strong>on</strong>our (1732), quoted, i, p. 47n.


DR. BERNARD MANDEVILLE (1670–1733) 91<br />

Already in part II <str<strong>on</strong>g>of</str<strong>on</strong>g> the Fable we meet more and more frequently terms<br />

which are familiar to us through Hume, as when Mandeville speaks <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

“the narrow bounds <str<strong>on</strong>g>of</str<strong>on</strong>g> human knowledge” 64 and says that<br />

we are c<strong>on</strong>vinced, that human understanding is limited; and by the<br />

help <str<strong>on</strong>g>of</str<strong>on</strong>g> very little reflecti<strong>on</strong>, we may be as certain, that the<br />

narrowness <str<strong>on</strong>g>of</str<strong>on</strong>g> its bounds, its being so limited, is the very thing,<br />

the sole cause, which palpably hinders us from driving into our<br />

origins by dint <str<strong>on</strong>g>of</str<strong>on</strong>g> penetrati<strong>on</strong>. 65<br />

And in <str<strong>on</strong>g>The</str<strong>on</strong>g> Origin <str<strong>on</strong>g>of</str<strong>on</strong>g> H<strong>on</strong>our, which came out when Hume was twenty<strong>on</strong>e<br />

and according to his own testim<strong>on</strong>y was “planning” the Treatise <strong>on</strong><br />

Human Nature, but had not yet started “composing” it, 66 we find the<br />

wholly Humean passage that 67<br />

all human creatures are swayed and wholly governed by their<br />

passi<strong>on</strong>s, whatever fine noti<strong>on</strong>s we may flatter ourselves with;<br />

even those who act suitably to their knowledge, and strictly follow<br />

the dictates <str<strong>on</strong>g>of</str<strong>on</strong>g> their reas<strong>on</strong>, are not less compelled to do so by some<br />

passi<strong>on</strong> or other, that sets them to work, than others, who bid<br />

defiance and act c<strong>on</strong>trary to both, and whom we call slaves to<br />

their passi<strong>on</strong>s.<br />

X<br />

I do not intend to pitch my claim <strong>on</strong> behalf <str<strong>on</strong>g>of</str<strong>on</strong>g> Mandeville higher than to<br />

say that he made Hume possible. 68 It is indeed my estimate <str<strong>on</strong>g>of</str<strong>on</strong>g> Hume as<br />

perhaps the greatest <str<strong>on</strong>g>of</str<strong>on</strong>g> all modern students <str<strong>on</strong>g>of</str<strong>on</strong>g> mind and society which<br />

63 [See K.R.Popper, <str<strong>on</strong>g>The</str<strong>on</strong>g> Open Society and Its Enemies, fourth and subsequent<br />

editi<strong>on</strong>s (L<strong>on</strong>d<strong>on</strong>: Routledge & Kegan Paul, 1962). See also Hayek’s “Kinds <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Rati<strong>on</strong>alism”, in Studies in Philosophy, Politics, and <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s (Chicago:<br />

University <str<strong>on</strong>g>of</str<strong>on</strong>g> Chicago Press; L<strong>on</strong>d<strong>on</strong>: Routledge & Kegan Paul, 1967), pp. 82–<br />

95.—Ed.]<br />

64 ii, p. 104. Cf. David Hume, “Enquiry”, in <str<strong>on</strong>g>Essays</str<strong>on</strong>g>, Moral, <strong>Political</strong>, and<br />

Literary, ed. T.H.Green and T.H.Grose (L<strong>on</strong>d<strong>on</strong>: L<strong>on</strong>gmans, Green, 1875), vol.<br />

2, p. 6: “Man is a reas<strong>on</strong>able being; and as such, receives from science his<br />

proper food and nourishment: But so narrow are the bounds <str<strong>on</strong>g>of</str<strong>on</strong>g> human<br />

understanding, that little satisfacti<strong>on</strong> can be hoped for in this particular, either<br />

from the extent or security <str<strong>on</strong>g>of</str<strong>on</strong>g> his acquisiti<strong>on</strong>s.”<br />

65 ii, p. 315.


92 THE TREND OF ECONOMIC THINKING<br />

makes Mandeville appear to me so important. It is <strong>on</strong>ly in Hume’s work<br />

that the significance <str<strong>on</strong>g>of</str<strong>on</strong>g> Mandeville’s efforts becomes wholly clear, and<br />

it was through Hume that he exercised his most lasting influence. Yet to<br />

have given Hume 69 some <str<strong>on</strong>g>of</str<strong>on</strong>g> his leading c<strong>on</strong>cepti<strong>on</strong>s seems to me<br />

sufficient title for Mandeville to qualify as a master-mind.<br />

How much Mandeville’s c<strong>on</strong>tributi<strong>on</strong> meant we recognise when we<br />

look at the further development <str<strong>on</strong>g>of</str<strong>on</strong>g> those c<strong>on</strong>cepti<strong>on</strong>s which Hume was<br />

the first and greatest to take up and elaborate. This development includes,<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> course, the great Scottish moral philosophers <str<strong>on</strong>g>of</str<strong>on</strong>g> the sec<strong>on</strong>d half <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

century, above all Adam Smith and Adam Fergus<strong>on</strong>, the latter <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

whom, with his phrase about the “results <str<strong>on</strong>g>of</str<strong>on</strong>g> human acti<strong>on</strong> but not <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

human design”, 70 has provided not <strong>on</strong>ly the best brief statement <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Mandeville’s central problem but also the best definiti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the task <str<strong>on</strong>g>of</str<strong>on</strong>g> all<br />

social theory. I will not claim in favour <str<strong>on</strong>g>of</str<strong>on</strong>g> Mandeville that his work also<br />

led via Helvetius to Bentham’s particularistic utilitarianism which,<br />

though the claim is true enough, meant a relapse into that<br />

c<strong>on</strong>structivistic rati<strong>on</strong>alism which it was Mandeville’s main<br />

achievement to have overcome. But the traditi<strong>on</strong> which Mandeville<br />

started includes also Edmund Burke, and, largely through Burke, all<br />

those ‘historical schools’ which, chiefly <strong>on</strong> the C<strong>on</strong>tinent, and through<br />

men like Herder 71 and Savigny 72 , made the idea <str<strong>on</strong>g>of</str<strong>on</strong>g> evoluti<strong>on</strong> a<br />

comm<strong>on</strong>place in the social sciences <str<strong>on</strong>g>of</str<strong>on</strong>g> the nineteenth century l<strong>on</strong>g<br />

before Darwin. And it was in this atmosphere <str<strong>on</strong>g>of</str<strong>on</strong>g> evoluti<strong>on</strong>ary thought in<br />

the study <str<strong>on</strong>g>of</str<strong>on</strong>g> society, where ‘Darwinians before Darwin’ had l<strong>on</strong>g<br />

thought in terms <str<strong>on</strong>g>of</str<strong>on</strong>g> the prevailing <str<strong>on</strong>g>of</str<strong>on</strong>g> more effective habits and<br />

practices, that Charles Darwin at last applied the idea systematically to<br />

biological organisms. 73 I do not, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, mean to suggest that<br />

Mandeville had any direct influence <strong>on</strong> Darwin (though David Hume<br />

66 Cf. E.C.Mossner, <str<strong>on</strong>g>The</str<strong>on</strong>g> Life <str<strong>on</strong>g>of</str<strong>on</strong>g> David Hume (L<strong>on</strong>d<strong>on</strong>: Nels<strong>on</strong>, 1954), p. 74.<br />

67 <str<strong>on</strong>g>The</str<strong>on</strong>g> Origin <str<strong>on</strong>g>of</str<strong>on</strong>g> H<strong>on</strong>our, p. 31, quoted, i, p. lxxix.<br />

68 Cf. Sim<strong>on</strong> N.Patten, <str<strong>on</strong>g>The</str<strong>on</strong>g> Development <str<strong>on</strong>g>of</str<strong>on</strong>g> English Thought (New York:<br />

Macmillan, 1910), pp. 212–213: “Mandeville’s immediate successor was<br />

Hume…. If my interpretati<strong>on</strong> is correct, the starting-point <str<strong>on</strong>g>of</str<strong>on</strong>g> Hume’s<br />

development lay in the writings <str<strong>on</strong>g>of</str<strong>on</strong>g> Mandeville.” Also O.Bobertag’s observati<strong>on</strong><br />

in his German translati<strong>on</strong> Mandeville’s Bienenfabel (Munich: Georg Muller,<br />

1914), p. xxv: “Im 18. Jahrhundert gibt es nur einen Mann, der etwas gleich<br />

Grosses—und Grösseres—geleistet hat, David Hume.”<br />

69 <str<strong>on</strong>g>The</str<strong>on</strong>g> same may also be true c<strong>on</strong>cerning M<strong>on</strong>tesquieu. See <strong>on</strong> this Joseph<br />

Dedieu, M<strong>on</strong>tesquieu et la traditi<strong>on</strong> politique anglaise (Paris: J.Gabalda, 1909),<br />

pp. 260– 261, and 307n.


DR. BERNARD MANDEVILLE (1670–1733) 93<br />

probably had). But it seems to me that in many respects Darwin is the<br />

culminati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> a development which Mandeville more than any other<br />

single man had started.<br />

Yet Mandeville and Darwin still have <strong>on</strong>e thing in comm<strong>on</strong>: the<br />

scandal they caused had ultimately the same source, and Darwin in this<br />

respect finished what Mandeville had begun. It is difficult to remember<br />

now, perhaps most difficult for those who hold religious views in their<br />

now prevailing form, how closely religi<strong>on</strong> was not l<strong>on</strong>g ago still<br />

associated with the ‘argument from design’. <str<strong>on</strong>g>The</str<strong>on</strong>g> discovery <str<strong>on</strong>g>of</str<strong>on</strong>g> an<br />

astounding order which no man had designed was for most men the<br />

chief evidence for the existence <str<strong>on</strong>g>of</str<strong>on</strong>g> a pers<strong>on</strong>al creator. In the moral and<br />

political sphere Mandeville and Hume did show that the sense <str<strong>on</strong>g>of</str<strong>on</strong>g> justice<br />

and probity <strong>on</strong> which the order in this sphere rested was not originally<br />

implanted in man’s mind but had, like that mind itself, grown in a<br />

process <str<strong>on</strong>g>of</str<strong>on</strong>g> gradual evoluti<strong>on</strong> which at least in principle we might learn<br />

to understand. <str<strong>on</strong>g>The</str<strong>on</strong>g> revulsi<strong>on</strong> against this suggesti<strong>on</strong> was quite as great as<br />

that caused more than a century later when it was shown that the<br />

marvels <str<strong>on</strong>g>of</str<strong>on</strong>g> the organism could no l<strong>on</strong>ger be adduced as pro<str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>of</str<strong>on</strong>g> special<br />

design. Perhaps I should have said that the process began with Kepler<br />

and Newt<strong>on</strong>. But if it began and ended with a growing insight into what<br />

determined the kosmos <str<strong>on</strong>g>of</str<strong>on</strong>g> nature, it seems that the shock caused by the<br />

discovery that the moral and political kosmos was also the result <str<strong>on</strong>g>of</str<strong>on</strong>g> a<br />

70 Adam Fergus<strong>on</strong>, An Essay <strong>on</strong> the History <str<strong>on</strong>g>of</str<strong>on</strong>g> Civil Society (Edinburgh:<br />

Edinburgh University Press, 1767), p. 187: “Every step and every movement <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the multitude, even in what are termed enlightened ages, are made with equal<br />

blindness to the future; and nati<strong>on</strong>s stumble up<strong>on</strong> establishments, which are<br />

indeed the result <str<strong>on</strong>g>of</str<strong>on</strong>g> human acti<strong>on</strong>, but not the executi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> any human design. If<br />

Cromwell said, That a man never mounts higher than when he knows not wither<br />

he is going; it may with more reas<strong>on</strong> be affirmed <str<strong>on</strong>g>of</str<strong>on</strong>g> communities, that they<br />

admit <str<strong>on</strong>g>of</str<strong>on</strong>g> the greatest revoluti<strong>on</strong>s where no change is intended, and that the most<br />

refined politicians do not always know wither they are leading the state by their<br />

projects.”<br />

71 It may deserve notice that J.G.Herder seems to have been the earliest instance<br />

where the influence <str<strong>on</strong>g>of</str<strong>on</strong>g> Mandeville joined with that <str<strong>on</strong>g>of</str<strong>on</strong>g> the somewhat similar<br />

ideas <str<strong>on</strong>g>of</str<strong>on</strong>g> G.Vico.<br />

72 It would seem as if it had been largely by way <str<strong>on</strong>g>of</str<strong>on</strong>g> Savigny that those ideas <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Mandeville and Hume eventually reached Carl Menger and thus returned to<br />

ec<strong>on</strong>omic theory. It was in the sociological parts <str<strong>on</strong>g>of</str<strong>on</strong>g> his Untersuchungen über<br />

die Methode (1883), translated as Problems <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s and Sociology, ed.<br />

Louis Schneider (Urbana, Ill.: University <str<strong>on</strong>g>of</str<strong>on</strong>g> Illinois Press, 1963), that Carl<br />

Menger not <strong>on</strong>ly restated the general theory <str<strong>on</strong>g>of</str<strong>on</strong>g> the formati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> law, morals,<br />

m<strong>on</strong>ey, and the market in a manner which, I


94 THE TREND OF ECONOMIC THINKING<br />

process <str<strong>on</strong>g>of</str<strong>on</strong>g> evoluti<strong>on</strong> and not <str<strong>on</strong>g>of</str<strong>on</strong>g> design c<strong>on</strong>tributed no less to produce<br />

what we call the modern mind.<br />

Addendum: Bernard Mandeville 74<br />

Bernard Mandeville was born in 1670 in Rotterdam as the sci<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> a<br />

family <str<strong>on</strong>g>of</str<strong>on</strong>g> medical doctors named ‘de Mandeville’—a title that he<br />

himself did not use—that had been active in Holland for at least three<br />

generati<strong>on</strong>s. He studied medicine at the University <str<strong>on</strong>g>of</str<strong>on</strong>g> Leiden, where in<br />

1691 he achieved the rank <str<strong>on</strong>g>of</str<strong>on</strong>g> doctor, specialising in nervous and<br />

digestive illnesses. Not l<strong>on</strong>g afterwards he moved to L<strong>on</strong>d<strong>on</strong>, where<br />

within a few years he attained a successful practice and distinguished<br />

positi<strong>on</strong>. After publishing three Latin essays <strong>on</strong> medical questi<strong>on</strong>s while<br />

still living in Holland, and also a few minor literary essays in English,<br />

his work in social philosophy began in 1705 with his publicati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> a<br />

satirical poem called “<str<strong>on</strong>g>The</str<strong>on</strong>g> Grumbling Hive, or Knaves turn’d H<strong>on</strong>est”.<br />

Although this work already c<strong>on</strong>tained the basic ideas <str<strong>on</strong>g>of</str<strong>on</strong>g> his later work<br />

and was a popular success, it n<strong>on</strong>etheless found hardly any serious<br />

attenti<strong>on</strong>. Similarly, the first book editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> 1714—published under the<br />

title <str<strong>on</strong>g>The</str<strong>on</strong>g> Fable <str<strong>on</strong>g>of</str<strong>on</strong>g> the Bees: or, Private Vices, Publick Benefits, in which<br />

the poem was followed by a detailed commentary entitled “An Inquiry<br />

into the Origin <str<strong>on</strong>g>of</str<strong>on</strong>g> Moral Virtue”, as well as a series <str<strong>on</strong>g>of</str<strong>on</strong>g> “Remarks”-—<br />

enjoyed little real notice. Only the third editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> 1723 (which was<br />

designated as the sec<strong>on</strong>d editi<strong>on</strong>) aroused not <strong>on</strong>ly great attenti<strong>on</strong> but<br />

even public scandal. In this editi<strong>on</strong> the “Remarks” were substantially<br />

expanded and an “Essay <strong>on</strong> Charity Schools” was added. Overlooking a<br />

few minor works, this was followed in 1729 by <str<strong>on</strong>g>The</str<strong>on</strong>g> Fable <str<strong>on</strong>g>of</str<strong>on</strong>g> the Bees,<br />

Part II, Mandeville’s most mature work, and in 1732, the year <str<strong>on</strong>g>of</str<strong>on</strong>g> his<br />

believe, had never again been attempted since Hume, but that he also expressed<br />

the fundamental insight that (p. 94 <str<strong>on</strong>g>of</str<strong>on</strong>g> the translati<strong>on</strong>): “This genetic insight is<br />

inseparable from the idea <str<strong>on</strong>g>of</str<strong>on</strong>g> theoretical science.” Perhaps it also deserves notice<br />

here, since this seems not to be generally known, that, through his pupil Richard<br />

Thurnwald, Menger exercised some influence <strong>on</strong> the rise <str<strong>on</strong>g>of</str<strong>on</strong>g> modern cultural<br />

anthropology, the discipline which more than any other has in our day<br />

c<strong>on</strong>centrated <strong>on</strong> what were the central problems <str<strong>on</strong>g>of</str<strong>on</strong>g> the Mandeville-Hume-Smith-<br />

Fergus<strong>on</strong> traditi<strong>on</strong>. Cf. also the l<strong>on</strong>g extracts from Mandeville now given in<br />

J.S.Slotkin, ed., Readings in Early Anthropology (Chicago: Aldine Publishing,<br />

1965).<br />

73 On the influence <strong>on</strong> Charles Darwin <str<strong>on</strong>g>of</str<strong>on</strong>g> c<strong>on</strong>cepti<strong>on</strong>s derived from social<br />

theory see E.Radl, Geschichte der biologischen <str<strong>on</strong>g>The</str<strong>on</strong>g>orien, ii (Leipzig:<br />

W.Engelmann, 1909), esp. p. 121.


DR. BERNARD MANDEVILLE (1670–1733) 95<br />

death, A Letter to Di<strong>on</strong>, a debate with an an<strong>on</strong>ymous critic about the<br />

philosophy <str<strong>on</strong>g>of</str<strong>on</strong>g> Bishop Berkeley.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> subtitle <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>The</str<strong>on</strong>g> Fable <str<strong>on</strong>g>of</str<strong>on</strong>g> the Bees—“Private Vices, Publick<br />

Benefits”—expresses in paradoxical form Mandeville’s main thesis,<br />

which, set out in the original poem in half-jesting form, led to ever more<br />

serious philosophical c<strong>on</strong>siderati<strong>on</strong>s about questi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> ethics and social<br />

philosophy. In the realm <str<strong>on</strong>g>of</str<strong>on</strong>g> ethics Mandeville failed to resolve the<br />

paradox which is posed by the oppositi<strong>on</strong> between a rigorous ethics <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

duty and a study <str<strong>on</strong>g>of</str<strong>on</strong>g> human acti<strong>on</strong>s from the standpoint <str<strong>on</strong>g>of</str<strong>on</strong>g> utility.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> lively c<strong>on</strong>trast between the self-interested motives and the<br />

beneficent c<strong>on</strong>sequences <str<strong>on</strong>g>of</str<strong>on</strong>g> human acti<strong>on</strong> was n<strong>on</strong>etheless excepti<strong>on</strong>ally<br />

influential and the discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> ethical and social philosophy in the<br />

middle <str<strong>on</strong>g>of</str<strong>on</strong>g> the eighteenth century is dominated by its influence, even<br />

where Mandeville’s book, branded as immoral and godless, went<br />

unmenti<strong>on</strong>ed.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> significance <str<strong>on</strong>g>of</str<strong>on</strong>g> Mandeville lies not so much in his particular<br />

c<strong>on</strong>tributi<strong>on</strong> to ec<strong>on</strong>omic theory, where he generally (as in the<br />

discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> luxury) introduces <strong>on</strong>ly prevailing and <str<strong>on</strong>g>of</str<strong>on</strong>g>ten err<strong>on</strong>eous<br />

opini<strong>on</strong>s to illustrate his thesis and really <strong>on</strong>ly achieved an important<br />

c<strong>on</strong>tributi<strong>on</strong> in his working out <str<strong>on</strong>g>of</str<strong>on</strong>g> the c<strong>on</strong>cept <str<strong>on</strong>g>of</str<strong>on</strong>g> divisi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> labour. <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

significant step forward which he represents c<strong>on</strong>sists in the general<br />

applicati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the idea <str<strong>on</strong>g>of</str<strong>on</strong>g> development to social arrangements,<br />

something which before him had been attempted <strong>on</strong>ly in the area <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

law.<br />

Not <strong>on</strong>ly in the areas <str<strong>on</strong>g>of</str<strong>on</strong>g> morality and c<strong>on</strong>venti<strong>on</strong>, but also for<br />

language and m<strong>on</strong>ey, he shows clearly how the preservati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> more<br />

advantagous and the eliminati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> less pr<str<strong>on</strong>g>of</str<strong>on</strong>g>itable practices and usages<br />

leads to cumulative growth <str<strong>on</strong>g>of</str<strong>on</strong>g> extremely complicated structures which<br />

serve human goals and form the basis <str<strong>on</strong>g>of</str<strong>on</strong>g> culture without ever having<br />

been c<strong>on</strong>sciously designed. This methodological positi<strong>on</strong>, developed in<br />

deliberate oppositi<strong>on</strong> to the rati<strong>on</strong>alism <str<strong>on</strong>g>of</str<strong>on</strong>g> Thomas Hobbes, René<br />

Descartes, and in part also <str<strong>on</strong>g>of</str<strong>on</strong>g> John Locke, has become <str<strong>on</strong>g>of</str<strong>on</strong>g> the greatest<br />

importance for the theory <str<strong>on</strong>g>of</str<strong>on</strong>g> the social sciences. From Mandeville there<br />

flows a direct line to David Hume and then <strong>on</strong> the <strong>on</strong>e side to Adam<br />

74 [Hayek published this brief article <strong>on</strong> Mandeville in the Handwörterbuch der<br />

Sozialwissenschaften (Stuttgart-Tübingen-Göttingen), vol. 7, 1959, pp. 116–117.<br />

It is translated into English for the first time here. <str<strong>on</strong>g>The</str<strong>on</strong>g> translati<strong>on</strong> is by the General<br />

Editor. -Ed.]


96 THE TREND OF ECONOMIC THINKING<br />

Smith, Adam Fergus<strong>on</strong>, and Edmund Burke, and <strong>on</strong> the other side to<br />

Jeremy Bentham and the utilitarians.<br />

About Mandeville:<br />

Bibliographical Note:<br />

Paul Sakmann, Bernard de Mandeville und die Bienenfabelk<strong>on</strong>troverse<br />

(Freiburg: J.C.B.Mohr, 1897).<br />

Albert Schatz, “Bernard de Mandeville”, Vierteljahreschrift für Soziale- und<br />

Wirtschaftsgeschichte, Stuttgart, 1903.<br />

Rudolf Stammler, Mandeville’s Bienenfabel. Die letzten Gründe einer wissenschaftlich<br />

geleiteten Politik (Berlin: O.Reichl, 1918).<br />

Frederick Benjamin Kaye, “Mandeville and the Origin <str<strong>on</strong>g>of</str<strong>on</strong>g> Language”, Modern<br />

Language Notes, vol. 39, 1924.<br />

——, “<str<strong>on</strong>g>The</str<strong>on</strong>g> Mandeville Can<strong>on</strong>: A Supplement”, Notes and Queries, L<strong>on</strong>d<strong>on</strong>,<br />

1924.<br />

Arthur K.Rogers, “<str<strong>on</strong>g>The</str<strong>on</strong>g> Ethics <str<strong>on</strong>g>of</str<strong>on</strong>g> Mandeville”, Internati<strong>on</strong>al Journal <str<strong>on</strong>g>of</str<strong>on</strong>g> Ethics,<br />

Chicago, 1925–6.<br />

Sterling Power Lamprecht, “<str<strong>on</strong>g>The</str<strong>on</strong>g> Fable <str<strong>on</strong>g>of</str<strong>on</strong>g> the Bees”, Journal <str<strong>on</strong>g>of</str<strong>on</strong>g> Philosophy,<br />

New York, 1926.<br />

Vinzenz Rufner, “Die soziologische Stellung v<strong>on</strong> Mandevilles Bienenfabel”,<br />

Archiv für Geschichte der Philosophie und Soziologie, Berlin, 1929–30.<br />

Wilhelm Deckelmann, “Untersuchungen zur Bienenfabel Mandevilles zu ihrer<br />

Entstehungsgeschichte im Hinblick auf die Bienenfabelthese”. Dissertati<strong>on</strong>,<br />

Hamburg, 1933.<br />

[Hayek appended the above references to his original article. For<br />

recent studies <str<strong>on</strong>g>of</str<strong>on</strong>g> Mandeville, see M.M.Goldsmith, Private Vices, Public<br />

Benefits: Bernard Mandeville’s Social and <strong>Political</strong> Thought<br />

(Cambridge and New York: Cambridge University Press, 1985);<br />

Thomas A.Horne, <str<strong>on</strong>g>The</str<strong>on</strong>g> Social Thought <str<strong>on</strong>g>of</str<strong>on</strong>g> Bernard Mandeville: Virtue<br />

and Commerce in Early Eighteenth-Century England (L<strong>on</strong>d<strong>on</strong>:<br />

Macmillan, 1978); Harry Landreth, “<str<strong>on</strong>g>The</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g> Thought <str<strong>on</strong>g>of</str<strong>on</strong>g> Bernard<br />

Mandeville”, History <str<strong>on</strong>g>of</str<strong>on</strong>g> <strong>Political</strong> Ec<strong>on</strong>omy, vol. 7, no. 2, Summer 1975,<br />

pp. 193–208; Irwin Primer, ed., Mandeville Studies (<str<strong>on</strong>g>The</str<strong>on</strong>g> Hague:<br />

Martinus Nijh<str<strong>on</strong>g>of</str<strong>on</strong>g>f, 1975); N.Rosenberg, “Mandeville, Bernard”, in <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

New Palgrave: A Dicti<strong>on</strong>ary <str<strong>on</strong>g>of</str<strong>on</strong>g> <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s, ed. Eatwell, Milgate, and<br />

Newman (L<strong>on</strong>d<strong>on</strong>: Macmillan, 1987), vol. 3, pp. 297–298; and Louis<br />

Schneider, Paradox and Society: <str<strong>on</strong>g>The</str<strong>on</strong>g> Work <str<strong>on</strong>g>of</str<strong>on</strong>g> Bernard Mandeville (New<br />

Brunswick, N.J.: Transacti<strong>on</strong> Books, 1986). -Ed.]


SEVEN<br />

THE LEGAL AND POLITICAL<br />

PHILOSOPHY OF DAVID HUME<br />

(1711–1776) 1<br />

It is always misleading to label an age by a name which suggests that it<br />

was ruled by a comm<strong>on</strong> set <str<strong>on</strong>g>of</str<strong>on</strong>g> ideas. It particularly falsifies the picture<br />

if we do this for a period which was in such a state <str<strong>on</strong>g>of</str<strong>on</strong>g> ferment as was<br />

the eighteenth century. To lump together under the name <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

‘enlightenment’ (or Aufklärung) the French philosophers from Voltaire<br />

to C<strong>on</strong>dorcet <strong>on</strong> the <strong>on</strong>e hand, and the Scottish and English thinkers<br />

from Mandeville through Hume and Adam Smith to Edmund Burke <strong>on</strong><br />

the other, is to gloss over differences which for the influence <str<strong>on</strong>g>of</str<strong>on</strong>g> these<br />

men <strong>on</strong> the next century were much more important than any superficial<br />

similarity which may exist. So far as David Hume in particular is<br />

c<strong>on</strong>cerned, a much truer view has recently been expressed when it was<br />

said that he “turned against the enlightenment its own weap<strong>on</strong>s” and<br />

undertook “to whittle down the claims <str<strong>on</strong>g>of</str<strong>on</strong>g> reas<strong>on</strong> by the use <str<strong>on</strong>g>of</str<strong>on</strong>g> rati<strong>on</strong>al<br />

analysis”. 2<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> habit <str<strong>on</strong>g>of</str<strong>on</strong>g> speaking <str<strong>on</strong>g>of</str<strong>on</strong>g> the Aufklärung as if it represented a<br />

homogeneous body <str<strong>on</strong>g>of</str<strong>on</strong>g> ideas is nowhere so str<strong>on</strong>g as it is in Germany,<br />

and there is a definite reas<strong>on</strong> for this. But the reas<strong>on</strong> which has led to<br />

this view <str<strong>on</strong>g>of</str<strong>on</strong>g> eighteenth-century thought has also had very grave and, in<br />

my opini<strong>on</strong>, regrettable c<strong>on</strong>sequences. This reas<strong>on</strong> is that the English<br />

ideas <str<strong>on</strong>g>of</str<strong>on</strong>g> the time (which were, <str<strong>on</strong>g>of</str<strong>on</strong>g> course, mainly expounded by<br />

Scotsmen—but I cannot rid myself <str<strong>on</strong>g>of</str<strong>on</strong>g> the habit <str<strong>on</strong>g>of</str<strong>on</strong>g> saying ‘English’<br />

when I mean ‘British’) became known in Germany largely through<br />

French intermediaries and in French interpretati<strong>on</strong>s—and <str<strong>on</strong>g>of</str<strong>on</strong>g>ten<br />

misinterpretati<strong>on</strong>s. It appears to me to be <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the great tragedies <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

intellectual and political history that thus the great ideals <str<strong>on</strong>g>of</str<strong>on</strong>g> political<br />

freedom became known <strong>on</strong> the C<strong>on</strong>tinent almost exclusively in the form<br />

in which the French, a people who had never known liberty, interpreted<br />

traditi<strong>on</strong>s, instituti<strong>on</strong>s and ideas which derived from an entirely<br />

different intellectual and political climate. <str<strong>on</strong>g>The</str<strong>on</strong>g>y did this in a spirit <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

c<strong>on</strong>structivist intellectualism, which I shall briefly call rati<strong>on</strong>alism, a


98 THE TREND OF ECONOMIC THINKING<br />

spirit which was thoroughly c<strong>on</strong>genial to the atmosphere <str<strong>on</strong>g>of</str<strong>on</strong>g> an absolute<br />

state which endeavoured to design a new centralised structure <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

government, but entirely alien to the older traditi<strong>on</strong> which ultimately<br />

was preserved <strong>on</strong>ly in Britain.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> seventeenth century, indeed, had <strong>on</strong> both sides <str<strong>on</strong>g>of</str<strong>on</strong>g> the Channel<br />

been an age in which this c<strong>on</strong>structivist rati<strong>on</strong>alism dominated. Francis<br />

Bac<strong>on</strong> and Thomas Hobbes were no less spokesmen <str<strong>on</strong>g>of</str<strong>on</strong>g> this rati<strong>on</strong>alism<br />

than Descartes or Leibniz—and even John Locke could not entirely<br />

escape its influence. It was a new phenomen<strong>on</strong> which must not be<br />

c<strong>on</strong>fused with ways <str<strong>on</strong>g>of</str<strong>on</strong>g> thought <str<strong>on</strong>g>of</str<strong>on</strong>g> earlier times which are also described<br />

as rati<strong>on</strong>alism. Reas<strong>on</strong> was for the rati<strong>on</strong>alist no l<strong>on</strong>ger a capacity to<br />

recognise the truth when he found it expressed, but a capacity to arrive<br />

at truth by deductive reas<strong>on</strong>ing from explicit premises. 3 <str<strong>on</strong>g>The</str<strong>on</strong>g> older<br />

traditi<strong>on</strong>, which had been represented by the earlier theorists <str<strong>on</strong>g>of</str<strong>on</strong>g> the law<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> nature, survived chiefly in England in the works <str<strong>on</strong>g>of</str<strong>on</strong>g> the great comm<strong>on</strong><br />

lawyers, especially Sir Edward Coke and Matthew Hale, the opp<strong>on</strong>ents<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> Bac<strong>on</strong> and Hobbes, who were able to hand <strong>on</strong> an understanding <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the growth <str<strong>on</strong>g>of</str<strong>on</strong>g> instituti<strong>on</strong>s which was elsewhere displaced by the ruling<br />

desire deliberately to remake them.<br />

1 A public lecture delivered at the University <str<strong>on</strong>g>of</str<strong>on</strong>g> Freiburg <strong>on</strong> July 18, 1963, and<br />

published in Il Politico, vol. 28, no. 4, 1963. <str<strong>on</strong>g>The</str<strong>on</strong>g> reference to the philosophical<br />

works <str<strong>on</strong>g>of</str<strong>on</strong>g> Hume will be throughout to the editi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> T.H.Green and T.H.Grose,<br />

namely, A Treatise <str<strong>on</strong>g>of</str<strong>on</strong>g> Human Nature, 2 vols, L<strong>on</strong>d<strong>on</strong>, 1890 (which will be<br />

referred to as I and II) and <str<strong>on</strong>g>Essays</str<strong>on</strong>g>, Moral, <strong>Political</strong>, and Literary, 2 vols,<br />

L<strong>on</strong>d<strong>on</strong>, 1875 (which will be referred to as III and IV). <str<strong>on</strong>g>The</str<strong>on</strong>g> references to<br />

Hume’s History <str<strong>on</strong>g>of</str<strong>on</strong>g> England will be to the quarto editi<strong>on</strong> in six volumes, L<strong>on</strong>d<strong>on</strong>,<br />

1762.<br />

Since the first publicati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> this essay a number <str<strong>on</strong>g>of</str<strong>on</strong>g> C<strong>on</strong>tinental studies <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Hume’s legal philosophy have come to my notice, <str<strong>on</strong>g>of</str<strong>on</strong>g> which the most important<br />

is Georges Vlachos, Essai sur la politique de Hume (Paris: Domat-<br />

M<strong>on</strong>tchretien, 1955). Others are: G.Laviosa, La filos<str<strong>on</strong>g>of</str<strong>on</strong>g>ia scientifica del diritto in<br />

Inghilterra, Parte I, Da Bac<strong>on</strong>e a Hume (Turin, 1897), pp. 697–850;<br />

W.Wallenfels, Die Rechtsphilosophie David Humes, Doctoral Dissertati<strong>on</strong> at<br />

the University <str<strong>on</strong>g>of</str<strong>on</strong>g> Göttingen, 1938; L.Bagolini, Esperienza giurdica ed<br />

esperienza politica nel pensioro di David Hume (Sienna, 1947); and Silvana<br />

Castign<strong>on</strong>e, “La Dottrina della o giustizia in D. Hume”, Rivista Internati<strong>on</strong>ale di<br />

Filos<str<strong>on</strong>g>of</str<strong>on</strong>g>ia di Diritto, vol. 38, 1960, and “Diritto naturale e diritto positivo in<br />

David Hume”, ibid., vol. 39, 1962. [This essay has been republished previously<br />

in F.A.Hayek, Studies in Philosophy, Politics, and <str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s (Chicago:<br />

University <str<strong>on</strong>g>of</str<strong>on</strong>g> Chicago Press; L<strong>on</strong>d<strong>on</strong>: Routledge & Kegan Paul, 1967). -Ed.]<br />

2 S.S.Wolin, “Hume and C<strong>on</strong>servatism”, American <strong>Political</strong> Science Review, vol.<br />

48, 1954, p. 1001.


THE LEGAL AND POLITICAL PHILOSOPHY OF DAVID HUME (1711–1776) 99<br />

But when the attempt to create also in England a centralised absolute<br />

m<strong>on</strong>archy with its bureaucratic apparatus had failed, and what in<br />

C<strong>on</strong>tinental eyes appeared as a weak government coincided with <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the greatest upsurges <str<strong>on</strong>g>of</str<strong>on</strong>g> nati<strong>on</strong>al strength and prosperity which are<br />

known to history, the interest in the prevailing undesigned, ‘grown’<br />

instituti<strong>on</strong>s led to a revival <str<strong>on</strong>g>of</str<strong>on</strong>g> this older way <str<strong>on</strong>g>of</str<strong>on</strong>g> thinking. While the<br />

C<strong>on</strong>tinent was dominated during the eighteenth century by c<strong>on</strong>structivist<br />

rati<strong>on</strong>alism, there grew up in England a traditi<strong>on</strong> which by way <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

c<strong>on</strong>trast has sometimes been described as ‘anti-rati<strong>on</strong>alist’.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> first great eighteenth-century figure in this traditi<strong>on</strong> was Bernard<br />

Mandeville, originally a Dutchman, and many <str<strong>on</strong>g>of</str<strong>on</strong>g> the ideas I shall have<br />

to discuss in c<strong>on</strong>necti<strong>on</strong> with David Hume can be found in nuce already<br />

in the writings <str<strong>on</strong>g>of</str<strong>on</strong>g> the former. 4 That Hume owes much to him seems to<br />

be bey<strong>on</strong>d doubt. I shall discuss these ideas, however, in the fully<br />

developed form which <strong>on</strong>ly Hume gave them.<br />

Almost all these ideas can be found already in the sec<strong>on</strong>d part <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

Treatise <strong>on</strong> Human Nature which he published at the age <str<strong>on</strong>g>of</str<strong>on</strong>g> twenty-nine<br />

in 1740 and which, though it was almost completely overlooked at first,<br />

is today universally acknowledged as his greatest achievement. His<br />

<str<strong>on</strong>g>Essays</str<strong>on</strong>g>, which began to appear in 1742, the Enquiry c<strong>on</strong>cerning the<br />

Principles <str<strong>on</strong>g>of</str<strong>on</strong>g> Morals, in which nine years later he attempted to restate<br />

those ideas in briefer and more popular form, and his History <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

England c<strong>on</strong>tain sometimes improved formulati<strong>on</strong>s and were much<br />

more effective in spreading his ideas; but they added little that is new to<br />

the first statement.<br />

Hume is <str<strong>on</strong>g>of</str<strong>on</strong>g> course known mainly for his theory <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge, and in<br />

Germany largely as the author who stated the problems which Immanuel<br />

Kant endeavoured to solve. But to Hume the chief task was from the<br />

beginning a general science <str<strong>on</strong>g>of</str<strong>on</strong>g> human nature, for which morals and<br />

politics were as important as the sources <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge. And it would<br />

seem probable that in those fields he awoke Kant from his ‘dogmatic<br />

slumber’ as much as he had d<strong>on</strong>e in epistemology. Certainly Kant, but<br />

also the other two great German liberals, Schiller 5 and Humboldt 6 , still<br />

knew Hume better than was true <str<strong>on</strong>g>of</str<strong>on</strong>g> later generati<strong>on</strong>s, which were<br />

3 John Locke seems to have been clearly aware <str<strong>on</strong>g>of</str<strong>on</strong>g> this change in the meaning <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the term ‘reas<strong>on</strong>’. In <str<strong>on</strong>g>Essays</str<strong>on</strong>g> <strong>on</strong> the Law <str<strong>on</strong>g>of</str<strong>on</strong>g> Nature (ed. W.v<strong>on</strong> Leyden (Oxford:<br />

Clarend<strong>on</strong> Press, 1954), p. 111) he wrote: “By reas<strong>on</strong>, however, I do not think is<br />

meant here that faculty <str<strong>on</strong>g>of</str<strong>on</strong>g> the understanding which forms trains <str<strong>on</strong>g>of</str<strong>on</strong>g> thought and<br />

deduces pro<str<strong>on</strong>g>of</str<strong>on</strong>g>s, but certain definite principles <str<strong>on</strong>g>of</str<strong>on</strong>g> acti<strong>on</strong> from which spring all<br />

virtues and whatever is necessary for the proper moulding <str<strong>on</strong>g>of</str<strong>on</strong>g> morals.”


100 THE TREND OF ECONOMIC THINKING<br />

entirely dominated by French thought, and particularly by the influence<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> Rousseau. But Hume as a political theorist and as a historian has<br />

never been properly appreciated <strong>on</strong> the C<strong>on</strong>tinent. It is characteristic <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the misleading generalisati<strong>on</strong>s about the eighteenth century that even<br />

today it is still largely regarded as a period which lacked historical<br />

sense, a statement which is true enough <str<strong>on</strong>g>of</str<strong>on</strong>g> the Cartesian rati<strong>on</strong>alism<br />

which ruled in France, but certainly not <str<strong>on</strong>g>of</str<strong>on</strong>g> Britain and least <str<strong>on</strong>g>of</str<strong>on</strong>g> all <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Hume who could describe his as “the historical age and [his] as the<br />

historical nati<strong>on</strong>”. 7<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> neglect <str<strong>on</strong>g>of</str<strong>on</strong>g> Hume as a legal and political philosopher, however, is<br />

not c<strong>on</strong>fined to the C<strong>on</strong>tinent. Even in England, where it is now at last<br />

recognised that he is not merely the founder <str<strong>on</strong>g>of</str<strong>on</strong>g> the modern theory <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

knowledge but also <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the founders <str<strong>on</strong>g>of</str<strong>on</strong>g> ec<strong>on</strong>omic theory, his<br />

political and still more his legal philosophy is curiously neglected. In<br />

works <strong>on</strong> jurisprudence we will look in vain for his name. <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

systematic philosophy <str<strong>on</strong>g>of</str<strong>on</strong>g> law begins in England with Jeremy Bentham<br />

and John Austin who were both indebted mainly to the C<strong>on</strong>tinental<br />

rati<strong>on</strong>alist traditi<strong>on</strong>—Bentham to Helvetius 8 and Beccaria 9 , and Austin<br />

to German sources. But the greatest legal philosopher whom Britain<br />

produced before Bentham, and who, incidentally, was trained as a<br />

lawyer, had practically no influence <strong>on</strong> that development. 10<br />

This is the more remarkable as Hume gives us probably the <strong>on</strong>ly<br />

comprehensive statement <str<strong>on</strong>g>of</str<strong>on</strong>g> the legal and political philosophy which<br />

4 [See the preceding chapter. -Ed.] See C.Nishiyama, <str<strong>on</strong>g>The</str<strong>on</strong>g> <str<strong>on</strong>g>The</str<strong>on</strong>g>ory <str<strong>on</strong>g>of</str<strong>on</strong>g> Self-Love:<br />

An Essay <strong>on</strong> the Methodology <str<strong>on</strong>g>of</str<strong>on</strong>g> the Social Sciences, and Especially <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

<str<strong>on</strong>g>Ec<strong>on</strong>omic</str<strong>on</strong>g>s, with Special Reference to Bernard Mandeville, University <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Chicago, Ph.D. thesis (mimeographed), 1960.<br />

5 Johann Christoph Friedrich v<strong>on</strong> Schiller (1759–1805).<br />

6 [Wilhelm v<strong>on</strong> Humboldt (1767–1835). Humboldt’s Spheres and Duties <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

Government (1792) is an early statement <str<strong>on</strong>g>of</str<strong>on</strong>g> an individualist and evoluti<strong>on</strong>ary<br />

case against government interference. His studies <str<strong>on</strong>g>of</str<strong>on</strong>g> the German and Prussian<br />

c<strong>on</strong>stituti<strong>on</strong>s (1813 and 1819) set the t<strong>on</strong>e for nineteenth-century German<br />

liberalism. Foreign minister, educati<strong>on</strong>al theorist, and philologist, Humboldt<br />

was also the founder <str<strong>on</strong>g>of</str<strong>on</strong>g> the University <str<strong>on</strong>g>of</str<strong>on</strong>g> Berlin. -Ed.]<br />

7 <str<strong>on</strong>g>The</str<strong>on</strong>g> Letters <str<strong>on</strong>g>of</str<strong>on</strong>g> David Hume, ed. J.Y.T.Greig (Oxford: Clarend<strong>on</strong> Press, 1932),<br />

vol. II, p. 444 (reprinted New York: Garland Publishing Company, 1983).<br />

8 [Claude Adrien Helvetius (1715–1771). One <str<strong>on</strong>g>of</str<strong>on</strong>g> Diderot’s Encyclopédists,<br />

Helvetius served as Farmer-General from 1738 to 1751. <str<strong>on</strong>g>The</str<strong>on</strong>g> egalitarian and<br />

hed<strong>on</strong>istic doctrines <str<strong>on</strong>g>of</str<strong>on</strong>g> his De l’Ésprit (1758) str<strong>on</strong>gly influenced Beccaria and<br />

the early utilitarians. -Ed.]


THE LEGAL AND POLITICAL PHILOSOPHY OF DAVID HUME (1711–1776) 101<br />

later became known as liberalism. It is today fairly generally recognised<br />

that the programme <str<strong>on</strong>g>of</str<strong>on</strong>g> nineteenth-century liberalism c<strong>on</strong>tained two<br />

distinct and in some ways even antag<strong>on</strong>istic elements, liberalism proper<br />

and the democratic traditi<strong>on</strong>. Of these <strong>on</strong>ly the sec<strong>on</strong>d, democracy, is<br />

essentially French in origin and was added in the course <str<strong>on</strong>g>of</str<strong>on</strong>g> the French<br />

revoluti<strong>on</strong> to the older, individualistic liberal traditi<strong>on</strong> which came from<br />

England. <str<strong>on</strong>g>The</str<strong>on</strong>g> uneasy partnership which the two ideals kept during the<br />

nineteenth century should not lead us to overlook their different<br />

character and origin. <str<strong>on</strong>g>The</str<strong>on</strong>g> liberal ideal <str<strong>on</strong>g>of</str<strong>on</strong>g> pers<strong>on</strong>al liberty was first<br />

formulated in England which throughout the eighteenth century had<br />

been the envied land <str<strong>on</strong>g>of</str<strong>on</strong>g> liberty and whose political instituti<strong>on</strong>s and<br />

doctrines served as models for the theorists elsewhere. <str<strong>on</strong>g>The</str<strong>on</strong>g>se doctrines<br />

were those <str<strong>on</strong>g>of</str<strong>on</strong>g> the Whig party, the doctrines <str<strong>on</strong>g>of</str<strong>on</strong>g> the Glorious Revoluti<strong>on</strong><br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> 1688. And it is in Hume, and not, as is comm<strong>on</strong>ly believed, in Locke,<br />

who had provided the justificati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> that revoluti<strong>on</strong>, that we find the<br />

fullest statement <str<strong>on</strong>g>of</str<strong>on</strong>g> that doctrine.<br />

If this is not more widely recognised, it is partly a c<strong>on</strong>sequence <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

err<strong>on</strong>eous belief that Hume himself was a Tory rather than a Whig. He<br />

acquired this reputati<strong>on</strong> because in his History, as an eminently just<br />

man, he defended the Tory leaders against many <str<strong>on</strong>g>of</str<strong>on</strong>g> the unfair<br />

accusati<strong>on</strong>s brought against them—and, in the religious field, he chided<br />

the Whigs for the intolerance which, c<strong>on</strong>trary to their own doctrine, they<br />

showed towards the catholic leanings prevalent am<strong>on</strong>g the Tories. He<br />

himself explained his positi<strong>on</strong> very fairly when he wrote, with reference<br />

to his History, that “my views <str<strong>on</strong>g>of</str<strong>on</strong>g> things are more c<strong>on</strong>formable to Whig<br />

principles; my representati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> pers<strong>on</strong>s to Tory prejudices”. 11 In this<br />

respect such an arch-reacti<strong>on</strong>ary as Thomas Carlyle, who <strong>on</strong>ce<br />

described Hume as “the father <str<strong>on</strong>g>of</str<strong>on</strong>g> all succeeding Whigs”, 12 saw his<br />

positi<strong>on</strong> more correctly than most <str<strong>on</strong>g>of</str<strong>on</strong>g> the democratic liberals <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

nineteenth and twentieth centuries.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>re are <str<strong>on</strong>g>of</str<strong>on</strong>g> course some excepti<strong>on</strong>s to the comm<strong>on</strong><br />

misunderstanding and neglect <str<strong>on</strong>g>of</str<strong>on</strong>g> Hume as the outstanding philosopher<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> liberal political and legal theory. One <str<strong>on</strong>g>of</str<strong>on</strong>g> these is Friedrich Meinecke<br />

9 [Cesare B<strong>on</strong>sana, Marchesi di Beccaria (1738–1794) is known for his attacks<br />

<strong>on</strong> the inhumane c<strong>on</strong>diti<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> eighteenth-century European pris<strong>on</strong>s, Essay <strong>on</strong><br />

Crimes and Punishment (1764), in which the utilitarian phrase “the greatest<br />

happiness <str<strong>on</strong>g>of</str<strong>on</strong>g> the greatest number” was first used. His major ec<strong>on</strong>omic work,<br />

Elementi di ec<strong>on</strong>omia pubblica (1771), was never completed. -Ed.]<br />

10 My attenti<strong>on</strong> was first directed to these parts <str<strong>on</strong>g>of</str<strong>on</strong>g> Hume’s works many years<br />

ago by Pr<str<strong>on</strong>g>of</str<strong>on</strong>g>essor Sir Arnold Plant.


102 THE TREND OF ECONOMIC THINKING<br />

who in his Entstehung des Historismus clearly describes how for Hume<br />

“der Sinn der englischen Geschichte [war], v<strong>on</strong> einem government <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

men zu einem government <str<strong>on</strong>g>of</str<strong>on</strong>g> law zu werden. Diesen unendlich<br />

mühsamen, ja hässlichen, aber zum Guten endenden Prozess in seiner<br />

ganzen Komplikati<strong>on</strong> und in allen seinen Phasen anschaulich machen,<br />

war oder wurde vielmehr sein Vorhaben…. Eine politische Grund- und<br />

Hauptfrage wurde so zum Generalthema seines Werkes. Nur v<strong>on</strong> ihm<br />

aus ist es, was bisher immer übersehen wurde, in seiner Anlage und<br />

St<str<strong>on</strong>g>of</str<strong>on</strong>g>fauswahl zu verstehen.” 13<br />

It was not Meinecke’s task to trace this interpretati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> history back<br />

to Hume’s philosophical work where he could have found the theoretical<br />

foundati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the ideal which guided Hume in the writing <str<strong>on</strong>g>of</str<strong>on</strong>g> his History.<br />

It may be true that through his historical work Hume did more to spread<br />

this ideal than through his philosophical treatment. Indeed, Hume’s<br />

History did probably as much to spread Whig liberalism throughout<br />

Europe in the eighteenth century as Macaulay’s History did in the<br />

nineteenth. But that does not alter the fact that if we want an explicit<br />

and reas<strong>on</strong>ed statement <str<strong>on</strong>g>of</str<strong>on</strong>g> this ideal we must turn to his philosophical<br />

works, the Treatise and the easier and more elegant expositi<strong>on</strong> in the<br />

<str<strong>on</strong>g>Essays</str<strong>on</strong>g> and Enquiries.<br />

It is no accident that Hume develops his political and legal ideas in<br />

his philosophical work. <str<strong>on</strong>g>The</str<strong>on</strong>g>y are most intimately c<strong>on</strong>nected with his<br />

general philosophical c<strong>on</strong>cepti<strong>on</strong>s, especially with his sceptical views<br />

<strong>on</strong> the ‘narrow bounds <str<strong>on</strong>g>of</str<strong>on</strong>g> human understanding’. His c<strong>on</strong>cern was<br />

human nature in general, and his theory <str<strong>on</strong>g>of</str<strong>on</strong>g> knowledge was intended<br />

mainly as a step towards an understanding <str<strong>on</strong>g>of</str<strong>on</strong>g> the c<strong>on</strong>duct <str<strong>on</strong>g>of</str<strong>on</strong>g> man as a<br />

moral being and a member <str<strong>on</strong>g>of</str<strong>on</strong>g> society. What he produced was above all<br />

a theory <str<strong>on</strong>g>of</str<strong>on</strong>g> the growth <str<strong>on</strong>g>of</str<strong>on</strong>g> human instituti<strong>on</strong>s which became the basis <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

his case for liberty and the foundati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the work <str<strong>on</strong>g>of</str<strong>on</strong>g> the great Scottish<br />

moral philosophers, <str<strong>on</strong>g>of</str<strong>on</strong>g> Adam Fergus<strong>on</strong>, Adam Smith and Dugald<br />

Stewart, who are today recognised as the chief ancestors <str<strong>on</strong>g>of</str<strong>on</strong>g> modern<br />

evoluti<strong>on</strong>ary anthropology. His work also provided the foundati<strong>on</strong> <strong>on</strong><br />

which the authors <str<strong>on</strong>g>of</str<strong>on</strong>g> the American c<strong>on</strong>stituti<strong>on</strong> built 14 and in some<br />

measure for the political philosophy <str<strong>on</strong>g>of</str<strong>on</strong>g> Edmund Burke which is much<br />

11 E.C.Mossner, Life <str<strong>on</strong>g>of</str<strong>on</strong>g> David Hume (L<strong>on</strong>d<strong>on</strong>: Nels<strong>on</strong>, 1954), p. 311. For a<br />

survey <str<strong>on</strong>g>of</str<strong>on</strong>g> Hume’s relati<strong>on</strong>s to Whigs and Tories, see Eugene Miller, “David<br />

Hume: Whig or Tory?”, New Individualist Review, vol. 1, no. 4 (Chicago:<br />

1962).<br />

12 Thomas Carlyle, “Boswell’s Life <str<strong>on</strong>g>of</str<strong>on</strong>g> Johns<strong>on</strong>”, Fraser’s Magazine, 1832.


THE LEGAL AND POLITICAL PHILOSOPHY OF DAVID HUME (1711–1776) 103<br />

closer to, and more directly indebted to, Hume than is generally<br />

recognised. 15<br />

Hume’s starting point is his anti-rati<strong>on</strong>alist theory <str<strong>on</strong>g>of</str<strong>on</strong>g> morals which<br />

shows that, so far as the creati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> moral rules is c<strong>on</strong>cerned, “reas<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

itself is utterly impotent” and that “the rules <str<strong>on</strong>g>of</str<strong>on</strong>g> morality, therefore, are<br />

not c<strong>on</strong>clusi<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> our reas<strong>on</strong>”. 16 He dem<strong>on</strong>strates that our moral beliefs<br />

are neither natural in the sense <str<strong>on</strong>g>of</str<strong>on</strong>g> innate, nor a deliberate inventi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

human reas<strong>on</strong>, but an “artifact” in the special sense in which he<br />

introduces this term, that is, a product <str<strong>on</strong>g>of</str<strong>on</strong>g> cultural evoluti<strong>on</strong>, as we would<br />

call it. In this process <str<strong>on</strong>g>of</str<strong>on</strong>g> evoluti<strong>on</strong> what proved c<strong>on</strong>ducive to more<br />

effective human effort survived, and the less effective was superseded.<br />

As a recent writer put it somewhat pointedly, “Standards <str<strong>on</strong>g>of</str<strong>on</strong>g> morality<br />

and justice are what Hume calls ‘artifacts’; they are neither divinely<br />

ordained, nor an integral part <str<strong>on</strong>g>of</str<strong>on</strong>g> original human nature, nor revealed by<br />

pure reas<strong>on</strong>. <str<strong>on</strong>g>The</str<strong>on</strong>g>y are an outcome <str<strong>on</strong>g>of</str<strong>on</strong>g> the practical experience <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

mankind, and the sole c<strong>on</strong>siderati<strong>on</strong> in the slow test <str<strong>on</strong>g>of</str<strong>on</strong>g> time is the utility<br />

each moral rule can dem<strong>on</strong>strate towards promoting human welfare.<br />

Hume may be called a precursor to Darwin in the field <str<strong>on</strong>g>of</str<strong>on</strong>g> ethics. In<br />

effect, he proclaimed a doctrine <str<strong>on</strong>g>of</str<strong>on</strong>g> survival <str<strong>on</strong>g>of</str<strong>on</strong>g> the fittest am<strong>on</strong>g human<br />

c<strong>on</strong>venti<strong>on</strong>s—fittest not in terms <str<strong>on</strong>g>of</str<strong>on</strong>g> good teeth but in terms <str<strong>on</strong>g>of</str<strong>on</strong>g> maximum<br />

social utility.” 17<br />

It is, however, in his analysis <str<strong>on</strong>g>of</str<strong>on</strong>g> the circumstances which determined<br />

the evoluti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the chief legal instituti<strong>on</strong>s, in which he shows why a<br />

13<br />

[“…the underlying tendency <str<strong>on</strong>g>of</str<strong>on</strong>g> English history was to be found in<br />

the transformati<strong>on</strong> from a government <str<strong>on</strong>g>of</str<strong>on</strong>g> men to a government <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

law. It was his intenti<strong>on</strong>, or, to be exact, it came to be his<br />

intenti<strong>on</strong>, to illustrate this infinitely laborious, not to say<br />

ungainly, process in all its complicati<strong>on</strong>s and all its phases…. A<br />

basic, major political questi<strong>on</strong> thus became the guiding theme <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

his work—a fact that has been overlooked hitherto, although it is<br />

crucial for understanding the organisati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> his work and his<br />

choice <str<strong>on</strong>g>of</str<strong>on</strong>g> material.” -Ed.]<br />

Friedrich Meinecke, Die Entstehung des Historismus (Munich and<br />

Berlin: R.Oldenbourg, 1936), vol. I, p. 234. [Now available in a single<br />

volume, ed. Carl Hinrichs (Munich and Berlin: R.Oldenbourg, 1965). -<br />

Ed.]


104 THE TREND OF ECONOMIC THINKING<br />

complex civilisati<strong>on</strong> could grow up <strong>on</strong>ly where certain types <str<strong>on</strong>g>of</str<strong>on</strong>g> legal<br />

instituti<strong>on</strong>s developed, that he makes some <str<strong>on</strong>g>of</str<strong>on</strong>g> his most important<br />

c<strong>on</strong>tributi<strong>on</strong>s to jurisprudence. In the discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> these problems his<br />

ec<strong>on</strong>omic and his legal and political theory are intimately c<strong>on</strong>nected.<br />

Hume is indeed <strong>on</strong>e <str<strong>on</strong>g>of</str<strong>on</strong>g> the few social theorists who are clearly aware <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

the c<strong>on</strong>necti<strong>on</strong> between the rules men obey and the order which is<br />

formed as a result.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> transiti<strong>on</strong> from explanati<strong>on</strong> to ideal does not, however, involve<br />

him in any illegitimate c<strong>on</strong>fusi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> explanati<strong>on</strong> and recommendati<strong>on</strong>.<br />

Nobody was more critical <str<strong>on</strong>g>of</str<strong>on</strong>g>, or explicit about the impossibility <str<strong>on</strong>g>of</str<strong>on</strong>g>, a<br />

logical transiti<strong>on</strong> from the is to the ought, 18 about the fact that “an<br />

active principle can never be founded <strong>on</strong> an inactive” <strong>on</strong>e. 19 What he<br />

undertakes is to show that certain characteristics <str<strong>on</strong>g>of</str<strong>on</strong>g> modern society<br />

which we prize are dependent <strong>on</strong> c<strong>on</strong>diti<strong>on</strong>s which were not created in<br />

order to bring about these results, yet are nevertheless their<br />

indispensable presuppositi<strong>on</strong>s. <str<strong>on</strong>g>The</str<strong>on</strong>g>y are instituti<strong>on</strong>s “advantageous to<br />

the public though…not intended for that purpose by the inventors”. 20<br />

Hume shows, in effect, that an orderly society can develop <strong>on</strong>ly if men<br />

learn to obey certain rules <str<strong>on</strong>g>of</str<strong>on</strong>g> c<strong>on</strong>duct.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> secti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the Treatise which deals “Of the Origin <str<strong>on</strong>g>of</str<strong>on</strong>g> Justice and<br />

Property” and which examines “the manner in which rules <str<strong>on</strong>g>of</str<strong>on</strong>g> justice are<br />

established by the artifice <str<strong>on</strong>g>of</str<strong>on</strong>g> men” 21 is his most significant c<strong>on</strong>tributi<strong>on</strong><br />

in this field. It sets out from the fact that it is life in society which al<strong>on</strong>e<br />

gives that weak animal, man, his excepti<strong>on</strong>al powers. He c<strong>on</strong>cisely<br />

describes the advantages <str<strong>on</strong>g>of</str<strong>on</strong>g> the “partiti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> employments” 22 (what<br />

Adam Smith was to make popular under the Mandevillian term<br />

“divisi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> labour”) and shows how the obstacles to uni<strong>on</strong> in society<br />

are gradually overcome. <str<strong>on</strong>g>The</str<strong>on</strong>g> chief <strong>on</strong>es am<strong>on</strong>g these are firstly every<br />

individual’s predominant c<strong>on</strong>cern with his own needs or those <str<strong>on</strong>g>of</str<strong>on</strong>g> his<br />

immediate associates, and sec<strong>on</strong>dly the scarcity (Hume’s term!) <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

means, i.e., the fact that “there is not a sufficient quantity <str<strong>on</strong>g>of</str<strong>on</strong>g> them to<br />

supply every <strong>on</strong>e’s desires and necessities”. 23 It is thus “the c<strong>on</strong>currence<br />

14 Douglass Adair, “‘That politics may be reduced to a science’: David Hume,<br />

James Madis<strong>on</strong> and the Tenth Federalist”, Huntingt<strong>on</strong> Library Quarterly, vol.<br />

20, no. 4, 1957, pp. 343–360.’<br />

15 H.B.Act<strong>on</strong>, “Prejudice”, Revue Internati<strong>on</strong>ale de Philosophie, vol. 21, 1952.<br />

16 II, p. 235.<br />

17 C.Bay, <str<strong>on</strong>g>The</str<strong>on</strong>g> Structure <str<strong>on</strong>g>of</str<strong>on</strong>g> Freedom (Stanford, Calif.: Stanford University<br />

Press, 1958), p. 33.


THE LEGAL AND POLITICAL PHILOSOPHY OF DAVID HUME (1711–1776) 105<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> certain qualities <str<strong>on</strong>g>of</str<strong>on</strong>g> the human mind with the situati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> external<br />

objects” 24 which forms the obstacles to smooth collaborati<strong>on</strong>: “<str<strong>on</strong>g>The</str<strong>on</strong>g><br />

qualities <str<strong>on</strong>g>of</str<strong>on</strong>g> mind are selfishness and limited generosity: And the<br />

situati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> external objects is their easy change, joined to their scarcity<br />

in comparis<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the wants and desires <str<strong>on</strong>g>of</str<strong>on</strong>g> men.” 25 Were it not for those<br />

facts, no laws would ever have been necessary or have been thought <str<strong>on</strong>g>of</str<strong>on</strong>g>:<br />

“if men were supplied with everything in the same abundance, or if<br />

every <strong>on</strong>e had the same affecti<strong>on</strong> and tender regard for every <strong>on</strong>e as for<br />

himself, justice and injustice would be equally unknown am<strong>on</strong>g<br />

mankind.” 26 “For what purpose make a partiti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> goods, when<br />

every<strong>on</strong>e has already more than enough?… Why call this object mine,<br />

when, up<strong>on</strong> seizing <str<strong>on</strong>g>of</str<strong>on</strong>g> it by another, I need but stretch out my hand to<br />

possess myself <str<strong>on</strong>g>of</str<strong>on</strong>g> what is equally valuable? Justice, in that case, being<br />

totally useless, would be an idle cerem<strong>on</strong>ial.” 27 It is thus “<strong>on</strong>ly from the<br />

selfishness and c<strong>on</strong>fined generosity <str<strong>on</strong>g>of</str<strong>on</strong>g> men, al<strong>on</strong>g with the scanty<br />

provisi<strong>on</strong>s nature has made for his wants, that justice derives its<br />

origin.” 28<br />

It is thus the nature <str<strong>on</strong>g>of</str<strong>on</strong>g> the circumstances, what Hume calls “the<br />

necessity <str<strong>on</strong>g>of</str<strong>on</strong>g> human society”, that gives rise to the “three fundamental<br />

laws <str<strong>on</strong>g>of</str<strong>on</strong>g> nature”: 29 those <str<strong>on</strong>g>of</str<strong>on</strong>g> “the stability <str<strong>on</strong>g>of</str<strong>on</strong>g> possessi<strong>on</strong>, <str<strong>on</strong>g>of</str<strong>on</strong>g> its<br />

transference by c<strong>on</strong>sent, and <str<strong>on</strong>g>of</str<strong>on</strong>g> the performance <str<strong>on</strong>g>of</str<strong>on</strong>g> promises” 30 <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

which the whole system <str<strong>on</strong>g>of</str<strong>on</strong>g> law is merely an elaborati<strong>on</strong>. <str<strong>on</strong>g>The</str<strong>on</strong>g>se rules<br />

were not, however, deliberately invented by men to solve a problem<br />

which they saw (though it has become a task <str<strong>on</strong>g>of</str<strong>on</strong>g> legislati<strong>on</strong> to improve<br />

them). Hume takes great pains to show for each <str<strong>on</strong>g>of</str<strong>on</strong>g> these rules how selfinterest<br />

will lead to their being increasingly observed and finally<br />

enforced. “<str<strong>on</strong>g>The</str<strong>on</strong>g> rule c<strong>on</strong>cerning the stability <str<strong>on</strong>g>of</str<strong>on</strong>g> possessi<strong>on</strong>”, he writes,<br />

for instance, “arises gradually, and acquires force by slow progressi<strong>on</strong>,<br />

18 II, p. 245.<br />

19 II, p. 235.<br />

20 II, p. 296.<br />

21 II, pp. 258–273. Note Hume’s acknowledgement <str<strong>on</strong>g>of</str<strong>on</strong>g> his indebtedness to H.<br />

Grotius, IV, p. 275.<br />

22 II, p. 259.<br />

25 II, p. 261.<br />

24 II, p. 266.<br />

25 II, pp. 266–267.<br />

26 II, p. 267.


106 THE TREND OF ECONOMIC THINKING<br />

and our repeated experience <str<strong>on</strong>g>of</str<strong>on</strong>g> the inc<strong>on</strong>venience <str<strong>on</strong>g>of</str<strong>on</strong>g> transgressing it.” 31<br />

Similarly, “it is evident that if men were to regulate their c<strong>on</strong>duct [as<br />

regards the keeping <str<strong>on</strong>g>of</str<strong>on</strong>g> promises] by the view <str<strong>on</strong>g>of</str<strong>on</strong>g> a particular interest,…<br />

they would involve themselves in endless c<strong>on</strong>fusi<strong>on</strong>.” 32 He points out<br />

that, in like manner as rules <str<strong>on</strong>g>of</str<strong>on</strong>g> justice arise, “are languages gradually<br />

established by human c<strong>on</strong>venti<strong>on</strong>s without any promise. In like manner<br />

do gold and silver become the comm<strong>on</strong> measure <str<strong>on</strong>g>of</str<strong>on</strong>g> exchange.” 33 Law<br />

and morals, like language and m<strong>on</strong>ey, are, as we would say, not<br />

deliberate inventi<strong>on</strong>s but grown instituti<strong>on</strong>s or “formati<strong>on</strong>s”. To guard<br />

against the impressi<strong>on</strong> that his emphasis <strong>on</strong> proven utility means that<br />

men adopted these instituti<strong>on</strong>s because they foresaw their utility, he<br />

stresses that in all his references to utility he “<strong>on</strong>ly suppose[s] those<br />

reflecti<strong>on</strong>s to be formed at <strong>on</strong>ce which in fact arise insensibly and by<br />

degrees”. 34<br />

Rules <str<strong>on</strong>g>of</str<strong>on</strong>g> this sort must be recognised before people can come to agree<br />

or bind themselves by promise or c<strong>on</strong>tract to any form <str<strong>on</strong>g>of</str<strong>on</strong>g> government.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>refore, “though it be possible for men to maintain a small<br />

uncultivated society without government, it is impossible they should<br />

maintain a society <str<strong>on</strong>g>of</str<strong>on</strong>g> any kind without justice, and the observance <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

those three fundamental laws c<strong>on</strong>cerning the stability <str<strong>on</strong>g>of</str<strong>on</strong>g> possessi<strong>on</strong>, its<br />

translati<strong>on</strong> by c<strong>on</strong>sent, and the performance <str<strong>on</strong>g>of</str<strong>on</strong>g> promises. <str<strong>on</strong>g>The</str<strong>on</strong>g>se are,<br />

therefore, antecedent to government,…though government, up<strong>on</strong> its<br />

first establishment, would naturally be supposed to derive its obligati<strong>on</strong><br />

from those laws <str<strong>on</strong>g>of</str<strong>on</strong>g> nature, and in particular from that c<strong>on</strong>cerning the<br />

performance <str<strong>on</strong>g>of</str<strong>on</strong>g> promises.” 35<br />

Hume’s further c<strong>on</strong>cern is chiefly to show that it is <strong>on</strong>ly the universal<br />

applicati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the same “general and inflexible rules <str<strong>on</strong>g>of</str<strong>on</strong>g> justice” which<br />

will secure the establishment <str<strong>on</strong>g>of</str<strong>on</strong>g> a general order, that this and not any<br />

particular aims or results must guide the applicati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the rules if an<br />

27 IV, p. 180.<br />

28 II, pp. 267–268. <str<strong>on</strong>g>The</str<strong>on</strong>g> whole passage is in italics.<br />

29 Cf. II, p. 258: “Though the rules <str<strong>on</strong>g>of</str<strong>on</strong>g> justice be artificial, they are not<br />

arbitrary. Nor is the expressi<strong>on</strong> improper to call them Laws <str<strong>on</strong>g>of</str<strong>on</strong>g> Nature; if by<br />

natural we understand what is comm<strong>on</strong> to any species, or even if we c<strong>on</strong>fine it<br />

to mean what is inseparable from the species.”<br />

30 II, p. 293.<br />

31 II, p. 263.<br />

32 II, p. 318.<br />

33 II, p. 263; cf. IV, p. 275.


THE LEGAL AND POLITICAL PHILOSOPHY OF DAVID HUME (1711–1776) 107<br />

order is to be the result. Any c<strong>on</strong>cern with particular ends <str<strong>on</strong>g>of</str<strong>on</strong>g> either the<br />

individuals or the community, or a regard for the merits <str<strong>on</strong>g>of</str<strong>on</strong>g> particular<br />

individuals, would entirely spoil that aim. This c<strong>on</strong>tenti<strong>on</strong> is intimately<br />

bound up with Hume’s belief in the short-sightedness <str<strong>on</strong>g>of</str<strong>on</strong>g> men, their<br />

propensity to prefer immediate advantage to distant gain, and their<br />

incapacity to be guided by a proper appreciati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> their true l<strong>on</strong>g-run<br />

interest unless they bind themselves by general and inflexible rules<br />

which in the particular case are applied without regard to c<strong>on</strong>sequences.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g>se ideas, first developed in the Treatise from which I have so far<br />

mainly quoted, become more prominent in Hume’s later writing, in<br />

which they are also more clearly c<strong>on</strong>nected with his political ideals. <str<strong>on</strong>g>The</str<strong>on</strong>g><br />

most c<strong>on</strong>cise statement <str<strong>on</strong>g>of</str<strong>on</strong>g> them will be found in Appendix III to the<br />

Enquiry c<strong>on</strong>cerning the Principles <str<strong>on</strong>g>of</str<strong>on</strong>g> Morals. 36 I would recommend to<br />

all who wish to become acquainted with Hume’s legal philosophy to<br />

begin with those six pages (272–278 <str<strong>on</strong>g>of</str<strong>on</strong>g> volume II <str<strong>on</strong>g>of</str<strong>on</strong>g> the standard<br />

editi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the <str<strong>on</strong>g>Essays</str<strong>on</strong>g>) and to work backwards from them to the fuller<br />

statements <str<strong>on</strong>g>of</str<strong>on</strong>g> the Treatise. But I shall c<strong>on</strong>tinue to quote mainly from the<br />

Treatise, where the individual statements <str<strong>on</strong>g>of</str<strong>on</strong>g>ten have greater freshness,<br />

even though the expositi<strong>on</strong> as a whole is sometimes rather prolix.<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> weakness <str<strong>on</strong>g>of</str<strong>on</strong>g> men’s minds (or the “narrow bounds <str<strong>on</strong>g>of</str<strong>on</strong>g> human<br />

understanding” as Hume would say, or their inevitable ignorance, as I<br />

should prefer to express it) would, without fixed rules, have the result<br />

that they “would c<strong>on</strong>duct themselves, <strong>on</strong> most occasi<strong>on</strong>s, by particular<br />

judgements, and would take into c<strong>on</strong>siderati<strong>on</strong> the characters and<br />

circumstances <str<strong>on</strong>g>of</str<strong>on</strong>g> the pers<strong>on</strong>s, as well as the general nature <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

questi<strong>on</strong>. But it is easy to observe that this would produce an infinite<br />

c<strong>on</strong>fusi<strong>on</strong> in human society, and that the avidity and partiality <str<strong>on</strong>g>of</str<strong>on</strong>g> men<br />

34 II, p. 274.<br />

35 II, p. 306; first group <str<strong>on</strong>g>of</str<strong>on</strong>g> italics added.<br />

36 Cf. II, p. 301: men “prefer any trivial advantage that is present to the<br />

maintenance <str<strong>on</strong>g>of</str<strong>on</strong>g> order in society which so much depends <strong>on</strong> the observance <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

justice…. You have the same propensi<strong>on</strong> I have, in favour <str<strong>on</strong>g>of</str<strong>on</strong>g> what is c<strong>on</strong>tiguous<br />

above what is remote”; and II, p. 303: “Here then is the origin <str<strong>on</strong>g>of</str<strong>on</strong>g> civil<br />

government and society. Men are not able radically to cure, either in themselves<br />

or others, that narrowness <str<strong>on</strong>g>of</str<strong>on</strong>g> soul which makes them prefer the present to the<br />

remote. <str<strong>on</strong>g>The</str<strong>on</strong>g>y cannot change their natures. All they can do is to change their<br />

situati<strong>on</strong>, and render the observance <str<strong>on</strong>g>of</str<strong>on</strong>g> justice the immediate interest <str<strong>on</strong>g>of</str<strong>on</strong>g> some<br />

particular pers<strong>on</strong>s…. But this executi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> justice, though the principal, is not<br />

the <strong>on</strong>ly advantage <str<strong>on</strong>g>of</str<strong>on</strong>g> government…not c<strong>on</strong>tented to protect men in those<br />

c<strong>on</strong>venti<strong>on</strong>s they make for their mutual interest, it


108 THE TREND OF ECONOMIC THINKING<br />

would quickly bring disorder into the world, if not restrained by some<br />

general and inflexible principles.” 37<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> rules <str<strong>on</strong>g>of</str<strong>on</strong>g> law, however, “are not derived from any utility or<br />

advantage which either the particular pers<strong>on</strong> or the public may reap<br />

from his enjoyment <str<strong>on</strong>g>of</str<strong>on</strong>g> any particular goods…. Justice in her decisi<strong>on</strong>s<br />

never regards the fitness or unfitness <str<strong>on</strong>g>of</str<strong>on</strong>g> objects to particular pers<strong>on</strong>s,<br />

but c<strong>on</strong>ducts herself by more extensive views.” 38 In particular: “<str<strong>on</strong>g>The</str<strong>on</strong>g><br />

relati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> fitness or suitableness ought never to enter into c<strong>on</strong>siderati<strong>on</strong>,<br />

in distributing the properties <str<strong>on</strong>g>of</str<strong>on</strong>g> mankind.” 39 A single act <str<strong>on</strong>g>of</str<strong>on</strong>g> justice is<br />

even “frequently c<strong>on</strong>trary to the public interest; and were it to stand by<br />

itself, without being followed by other acts, may, in itself, be very<br />

prejudicial to society…. Nor is every single act <str<strong>on</strong>g>of</str<strong>on</strong>g> justice, c<strong>on</strong>sidered<br />

apart, more c<strong>on</strong>ducive to private interest than to public…. But, however<br />

single acts <str<strong>on</strong>g>of</str<strong>on</strong>g> justice may be c<strong>on</strong>trary, either to public or to private<br />

interest, it is certain that the whole plan or scheme is highly c<strong>on</strong>ducive,<br />

or indeed absolutely requisite, both to the support <str<strong>on</strong>g>of</str<strong>on</strong>g> society and the<br />

well being <str<strong>on</strong>g>of</str<strong>on</strong>g> every individual.” 40 Or, as Hume puts it in the Appendix<br />

to the Enquiry, “the benefit resulting from [the social virtues <str<strong>on</strong>g>of</str<strong>on</strong>g> justice<br />

and fidelity] is not the c<strong>on</strong>sequence <str<strong>on</strong>g>of</str<strong>on</strong>g> every individual single act; but<br />

arises from the whole scheme or system, c<strong>on</strong>curred in by the whole, or<br />

the greater part <str<strong>on</strong>g>of</str<strong>on</strong>g> society…. <str<strong>on</strong>g>The</str<strong>on</strong>g> result <str<strong>on</strong>g>of</str<strong>on</strong>g> the individual act is here, in<br />

many instances, directly opposite to that <str<strong>on</strong>g>of</str<strong>on</strong>g> the whole system <str<strong>on</strong>g>of</str<strong>on</strong>g> acti<strong>on</strong>s;<br />

and the former may be extremely hurtful, while the latter is, to the<br />

highest degree, advantageous… . Its benefit arises <strong>on</strong>ly from the<br />

observance <str<strong>on</strong>g>of</str<strong>on</strong>g> the general rule; and it is sufficient, if compensati<strong>on</strong> is<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g>ten obliges them to make such c<strong>on</strong>venti<strong>on</strong>s, and forces them to seek their own<br />

advantage, by c<strong>on</strong>currence in some comm<strong>on</strong> end or purpose.”<br />

37 II, pp. 298–299. Cf. also II, p. 318: “it is evident that if men were to regulate<br />

their c<strong>on</strong>duct in this particular [the appointment <str<strong>on</strong>g>of</str<strong>on</strong>g> magistrates] by the view <str<strong>on</strong>g>of</str<strong>on</strong>g> a<br />

particular interest, either public or private, they would involve themselves in<br />

endless c<strong>on</strong>fusi<strong>on</strong>, and would render all government, in a great measure,<br />

ineffectual. <str<strong>on</strong>g>The</str<strong>on</strong>g> private interest <str<strong>on</strong>g>of</str<strong>on</strong>g> every<strong>on</strong>e is different; and though the public<br />

interest in itself be always <strong>on</strong>e and the same, yet it becomes the source <str<strong>on</strong>g>of</str<strong>on</strong>g> great<br />

dissensi<strong>on</strong>s, by reas<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the different opini<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> particular pers<strong>on</strong>s c<strong>on</strong>cerning<br />

it…were we to follow the same advantage, in assigning particular possessi<strong>on</strong>s to<br />

particular pers<strong>on</strong>s, we should disappoint our end, and perpetuate the c<strong>on</strong>fusi<strong>on</strong><br />

which that rule is intended to prevent. We must, therefore, proceed by general<br />

rules, and regulate ourselves by general interests.”<br />

38 II, p. 273.<br />

39 II, p. 283.


THE LEGAL AND POLITICAL PHILOSOPHY OF DAVID HUME (1711–1776) 109<br />

thereby made for all the ills and inc<strong>on</strong>veniences which flow from the<br />

particular characters and situati<strong>on</strong>s.” 41<br />

Hume sees clearly that it would be c<strong>on</strong>trary to the whole spirit <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

system if individual merit rather than those general and inflexible rules<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> law were to govern justice and government: were mankind to execute<br />

a law which…“assigned the largest possessi<strong>on</strong> to the most extensive<br />

virtue, and gave every<strong>on</strong>e the power <str<strong>on</strong>g>of</str<strong>on</strong>g> doing good according to his<br />

inclinati<strong>on</strong>s…so great is the uncertainty <str<strong>on</strong>g>of</str<strong>on</strong>g> merit, both from its natural<br />

obscurity, and from the self-c<strong>on</strong>ceit <str<strong>on</strong>g>of</str<strong>on</strong>g> every individual, that no<br />

determinate rule <str<strong>on</strong>g>of</str<strong>on</strong>g> c<strong>on</strong>duct would ever follow from it, and the total<br />

dissoluti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> society must be the immediate c<strong>on</strong>sequence.” 42 This<br />

follows necessarily from the fact that law can deal <strong>on</strong>ly with “the external<br />

performance [which] has no merit. [While] we must look within to find<br />

the moral quality.” 43 In other words, there can be no rules for rewarding<br />

merit, or no rules <str<strong>on</strong>g>of</str<strong>on</strong>g> distributive justice, because there are no<br />

circumstances which may not affect merit, while rules always single out<br />

some circumstances as the <strong>on</strong>ly relevant <strong>on</strong>es.<br />

I cannot pursue here further the extent to which Hume elaborates the<br />

distincti<strong>on</strong> between the general and abstract rules <str<strong>on</strong>g>of</str<strong>on</strong>g> justice and the<br />

particular and c<strong>on</strong>crete aims <str<strong>on</strong>g>of</str<strong>on</strong>g> individual and public acti<strong>on</strong>. I hope<br />

what I have already said will suffice to show how central this distincti<strong>on</strong><br />

is for his whole legal philosophy, and how questi<strong>on</strong>able therefore is the<br />

prevalent view which I have just found tersely expressed in an<br />

otherwise excellent Freiburg doctoral dissertati<strong>on</strong> that “Die moderne<br />

Geschichte des Begriffes des allgemeinen Gesetzes beginnt mit<br />

Kant.” 44 What Kant had to say about this seems to derive directly from<br />

Hume. This becomes even more evident when we turn from the more<br />

theoretical to the more practical part <str<strong>on</strong>g>of</str<strong>on</strong>g> his discussi<strong>on</strong>, especially his<br />

c<strong>on</strong>cepti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the government <str<strong>on</strong>g>of</str<strong>on</strong>g> laws and not <str<strong>on</strong>g>of</str<strong>on</strong>g> men 45 and his general<br />

idea <str<strong>on</strong>g>of</str<strong>on</strong>g> freedom under the law. It c<strong>on</strong>tains the fullest expressi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

Whig or liberal doctrines which was made familiar to C<strong>on</strong>tinental<br />

thinking by Kant and the later theorists <str<strong>on</strong>g>of</str<strong>on</strong>g> the Rechtsstaat. It is<br />

sometimes suggested that Kant developed his theory <str<strong>on</strong>g>of</str<strong>on</strong>g> the Rechtsstaat<br />

by applying tc public affairs his moral c<strong>on</strong>cepti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the categorical<br />

imperative. 46 It probably was the other way round, and Kant developed<br />

40 IV, p. 273.<br />

41 IV, p. 273.<br />

42 IV, p. 187.<br />

43 II, p. 252.


110 THE TREND OF ECONOMIC THINKING<br />

his theory <str<strong>on</strong>g>of</str<strong>on</strong>g> the categorical imperative by applying to morals the<br />

c<strong>on</strong>cept <str<strong>on</strong>g>of</str<strong>on</strong>g> the rule <str<strong>on</strong>g>of</str<strong>on</strong>g> law which he found ready made.<br />

I cannot deal here with Hume’s political philosophy in the same<br />

detail in which I have c<strong>on</strong>sidered his legal philosophy. It is extremely<br />

rich, but also somewhat better known than the latter. I will completely<br />

pass over his important and characteristic discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> how all<br />

government is guided by opini<strong>on</strong>, <str<strong>on</strong>g>of</str<strong>on</strong>g> the relati<strong>on</strong>s between opini<strong>on</strong> and<br />

interest, and <str<strong>on</strong>g>of</str<strong>on</strong>g> how opini<strong>on</strong> is formed. <str<strong>on</strong>g>The</str<strong>on</strong>g> few points I will c<strong>on</strong>sider<br />

are those where his political theory rests directly <strong>on</strong> his legal theory and<br />

particularly his views <strong>on</strong> the relati<strong>on</strong>s between law and liberty.<br />

In Hume’s last statements <strong>on</strong> these problems, the essay “On the origin<br />

<str<strong>on</strong>g>of</str<strong>on</strong>g> Government” which he added in 1770 to his <str<strong>on</strong>g>Essays</str<strong>on</strong>g>, he defines “the<br />

government which, in comm<strong>on</strong> appellati<strong>on</strong>, receives the appellati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

free [as] that which admits <str<strong>on</strong>g>of</str<strong>on</strong>g> a partiti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> power am<strong>on</strong>g several<br />

members whose united authority is no less, or is comm<strong>on</strong>ly greater, than<br />

that <str<strong>on</strong>g>of</str<strong>on</strong>g> a m<strong>on</strong>arch, but who, in the usual course <str<strong>on</strong>g>of</str<strong>on</strong>g> administrati<strong>on</strong>, must<br />

act by general and equal laws, that are previously known to all<br />

members, and to all their subjects. In this sense, it must be owned that<br />

liberty is the perfecti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> civil society.” 47 Earlier he had in the same<br />

series <str<strong>on</strong>g>of</str<strong>on</strong>g> essays described how in such a government it is necessary “to<br />

maintain a watchful jealousy over the magistrates, to remove all<br />

discreti<strong>on</strong>ary powers, and to secure every <strong>on</strong>e’s life and fortune by<br />

general and inflexible laws. No acti<strong>on</strong> must be deemed a crime, but what<br />

the law has plainly determined to be such…”, 48 and that “all general<br />

laws are attended with inc<strong>on</strong>veniences, when applied to particular<br />

cases; and it requires great penetrati<strong>on</strong> and experience, both to perceive<br />

that these inc<strong>on</strong>veniences are fewer than what results from full<br />

discreti<strong>on</strong>ary powers in every magistrate; and also to discern what<br />

general laws are, up<strong>on</strong> the whole, attended with the fewest<br />

inc<strong>on</strong>veniences. This is a matter <str<strong>on</strong>g>of</str<strong>on</strong>g> so great a difficulty that men have<br />

made some advances, even in the sublime art <str<strong>on</strong>g>of</str<strong>on</strong>g> poetry and eloquence,<br />

where a rapidity <str<strong>on</strong>g>of</str<strong>on</strong>g> genius and imaginati<strong>on</strong> assists their progress, before<br />

they have arrived at any great refinement in their municipal laws, where<br />

frequent trials and diligent observati<strong>on</strong> can al<strong>on</strong>e direct their<br />

44 K<strong>on</strong>rad Huber, Massnahmegesetz und Rechtsgesetz (Berlin: Duncker &<br />

Humblot, 1963), p. 133.<br />

45 III, p. 161.<br />

46 K.Huber, loc. cit.<br />

47 III, p. 116.


THE LEGAL AND POLITICAL PHILOSOPHY OF DAVID HUME (1711–1776) 111<br />

improvements.” 49 And in his History <str<strong>on</strong>g>of</str<strong>on</strong>g> England, speaking <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

Revoluti<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> 1688, he tells us proudly how “No government, at that