A critique of economics

Front matter

^ 4.<

THE MACMILLAN COMPANY

MACMILLAN & CO.. Limited

Preface

On account of recent developments in philosophy and science we are today again confronted with the important question as to whether economics is really a science or only a study of values akin to philosophy proper. If economics is a science comparable to physics or chemistry, for example, applications in both private and public life may be possible ; if not, the practical value of economic research must be slight, whatever our interest in it on other grounds.

This book is an attempt mainly to show in what sense economics may be called a science, and what changes seem necessary to bring it into harmony with current facts and concepts in allied fields. The first part is entirely critical, following other writers who have broken with either Utilitarian (classical and neo-classical) or Marginal economics, or with both. It deals with the errors of the old psychology on which economic theorizing until recently was based, and supports the well-known contention that economic laws so far have been not so much laws as proofs derived from certain more or less arbitrary assumptions. To this extent then the first part goes over familiar ground and leads simply to a negation.

The second part, however, is meant to be more than a criticism. It seeks to make clear not only that new points in method must be stressed if old premises are abandoned.

viii PREFACE

but also that this question of method must be connected with current views in psychology, philosophy, logic, and ethics. That the rejection of eighteenth century sensationalism would prove fatal to many economic "laws" might be taken for granted. That for the same reason however the relation of induction to deduction, of statics to dynamics, of statistics to induction, or of economics to ethics should also be restated is not self-evident. Yet this is the belief of the present writer, and hence his endeavor to sketch in outline a new methodology of economics. The second part of the book thus is constructive as well as destructive, and has a bearing on all social inquiries, not merely on economics.

In saying this, however, the writer wishes to call attention to three points :

In the first place the logic of the principal argument in this book will be broken if its several chapters are not read in the exact order here given. Any departure may lead to misunderstandings with regard to a particular problem.

In the second place the approach here made is tentative, and not by any means categorical, in spite of a rather positive tone here or there. It is virtually impossible to preserve at all times the interrogatory form, however great our desire to admit the subjective nature of all inquiry, and especially of a critique of economics passing through a transition stage.

In the third place, the writer of these lines is keenly aware of his obligations to other writers, living and no longer alive. A bibliography has been appended in order to indicate partly the scope of this indebtedness. But it

PREFACE ix

will necessarily be very fragmentary. For the rest, therefore, the acknowledgment must be implied rather than expressed. It is the text which shows what is borrowed and what is new, and to this the expert will turn in making his appraisal.

Contents

CHAPTER PAQBB

PART II. A CRITIQUE OF ECONOMIC METHODOLOGY A Restatement of the Problem .... 143-146

9. The Methodology of Economics . • . . 236-278 10. Lines of Reconstruction 279-288

TABLES

PAGB

One: Classification of Margins Used in Marginal Economics . 124

Two: Important Margins for the Distributive Theory

of Marginal Economics 125

Three: Logical Order for the Basic Concepts of Economics as a Science 137

Chapter One The Problem

How Economics Became an Exact Science. — The founders of economics as a science had very definite hopes regarding it.-^ They wished to show that laws prevailed in the realm of psychics no less than in that of physics. They differed from the Kameralists and Mercantilists in that they cared little about mere description of individual events or institutions, and much about the discovery of principles which should make applications in government reliable and fruitful. It was held by the Physiocrats and by Adam Smith that the Newtonian system could not stand alone in the cosmos, that mind and human actions in general must surely have their laws too, and that a continuity from molecule to man was part of the plan of the Creator.

The eighteenth century carried on the work of the, preceding one of course, and there was a great variety of beliefs on things philosophical. Most of the viewpoints in metaphysics and epistemology, which have since then

^Discussed in the writer's "Development of Economics," of which the present book is, in a sense, a continuation.

come to definite expression, found currency in one form or another even at that time. It would be wrong to say that the age of Voltaire was preeminently materialistic, or phenomenalistic, or empirical or rationalistic, and so on. We cannot identify so broad a stretch of time, at ticular system of speculation. But there is no doubt so late a date in the history of mankind, with one parthat the men who made out of Kameralism a science, or essayed to do so, leaned strongly toward a monism that coupled mind with matter, acknowledging but one Design in the workings of organic and inorganic existence, and believing implicitly in the possibility of proving social events as regular, as truly subject to law and causation, as the substances, the forces, that had been studied so successfully by Galileo and his disciples. The fathers of economics, of political economy, were more interested in disclosing laws of feeling, valuation, and action than in devising ways and means for filling the public coffers. The needs of the state were not slighted. Nobody overlooked them, or thought them unsuitable for study by theorists. The eighteenth century was so filled with wars and striking changes in the economic environment that public revenue and expenditure was sure to form a fascinating topic. But on the other hand the scientific spirit, the aim at a formulation of laws which should show what governs the present and the future — this thought animated most of the men who lifted economics out of its obscurity, developing it into the first of modern social sciences.

The Physiocrats were outspokenly materialistic and stressed the circulation of wealth as a counterpart to the circulation of blood in the human body, both corresponding, as it seemed, to the orbits of the planets in the cosmos. This naive, physical view of socio-economic happenings had its disadvantages, but it meant from the start a concern for the thing-aspects of wealth, for the physical volume of production, for progress measured by output and income in tangible items of consumption ; and this was a wholesome interest. To the Scotch philosopher who published his "Wealth of Nations" in 1776 the Physiocratic attitude was not altogether intelligible, or at any rate acceptable. He agreed with Quesnay on many points, but put the importance of labor far above that of the fertility of the soil, and furthermore took a psychological view of the economic process that has dominated us ever since. It would not be worth while to rehearse the circumstances of the rise of the science of economics, except for this faith in laws, equal to those of the Newtonian, and for the firm belief of Naturalistic economists since Adam Smith, that human nature is the basis of such laws. The fact that the author of the "Wealth of Nations" had much earlier written a "Theory of the Moral Sentiments," while other British thinkers had turned out a long series of psychological studies both from a moral and a logical standpoint, this fact should never be forgotten in our appraisal of economics to-day, especially when we contemplate its present perplexities.

Smith first emphasized the balance of forces that a wise Providence displayed everywhere in the universe. He was profoundly impressed with a play of forces that meant peace and prosperity in the long run. He opposed sympathy and altruism to self-interest, and derived his cosmopolitanism and doctrine of Laissez Faire from this inherent goodness of human nature. Individualism meant egotism, but also solidarity of aims. Human nature was the foundation of all wealth and its augmentation. What individuals thought and endeavored was the key to the principles manifested in price, income, and productivity. These fundamentals back of the pricing process took first place in the consideration of things human. The founders of economics insisted more upon the premises of their science than upon the principles of price or the circulation of wealth.

Those who are customarily called the English classics, to wit Malthus, Ricardo, Mill (father and son) and Senior, were just as objective in their analysis as the Naturalists, i.e.. Physiocrats and Smith. The facts of economics were still things as much as values, and the non-pecuniary standard was conspicuous in the writings of the time. Physical productivity and costs as expenditure of time or of tangible goods were real to these Utilitarians — if we may call them so because of their hedonistic psychology and ethics.

But they differed from the Naturalists in substituting price and factorial shares for production and exchange. They gave a preeminence to the problem of price and distribution that has marked economics up to our own day. They brought in such concepts as labor-pain, talked of abstinence as an clement in rates of interest, and gave to utility a higher rating as a determiner of price than their predecessors could have allowed. And above all, they admitted frankly their hedonistic outlook. What Bentham and others before him had said in explanation of our moral codes and of our conduct in private and public, the economic Utilitarians took up as an arcanum, a precious stone of wisdom, that might explain the operations of the economic system. Sensationalistic psychology colored economics from the turn of the century on, and has done so up to the present moment.

It was due to one man chiefly that this advance of economics as an "exact science" was so steady and rapid, and this man was John Stuart Mill. While others had made clear the bearing of legal premises upon the analysis of price and income, while much pains had been taken to show the laws of nature manifesting themselves in a "normaP* price, or in the growth of the national income, it was left to the younger Mill to point out why and how economics could be a science comparable with physics. Precisely as Comte had proceeded to found a "social physics," calling it sociology, so J. S. Mill went ahead finding for economics a methodology. Economics has never had a more ardent, a more capable, a more illuminating exponent of the philosophical prerequisites of economics than this writer of the inductive "Logic" ajid of the "Principles of Political Economy."

The questions of the scope and method of social science, and of economics in particular, were settled by Mill who was reared in the atmosphere of Utilitarianism. In essentials he remained true to sensationalism, even though he disavowed Benthamism, and borrowed from Comte In rounding out his logical survey.

Through Mill's Logic the researches of the Naturalists were turned into a science of catallactlcs. Exactness counted more than comprehensiveness. The aim was to delimit economic investigations and to demonstrate beyond a doubt that social laws were as genuine as those of physics or chemistry. The argument which J. S. Mill used for expounding his theory of deductive economics cannot here be stated, nor would it be in place. But we may bear in mind that catallactics rested on the supremacy of pain-pleasure sensations and memories and desires over all other psychic states ; that wealth was identified with pleasure, and that the hedonistic theory of valuation was as much a part of Mill's logic as of later economic doctrines of price and income. The statical viewpoint likewise presupposed the existence of psychic forces definite and interacting like the physical, so that an equilibrium for economists had to mean a status quo, as well as an average result. And again: If J. S. Mill defended deduction as the economic method his chief reason was the circumstance, as he believed, that psychological and social happenings obeyed the principle of a Composition of Causes, not of chemical causation. A distinction was made "between the case in which the joint effect of causes is the sum of their separate effects, and the case in which it is heterogeneous to them ; between laws which work together without alteration, and laws which, when called upon to work together, cease and give place to others." ^ The processes of consciousness and of society represented a mechanical rather than a chemical blending of elements, and therefore economists were not only permitted, but really compelled, to reason deductively, to consult the basic traits of man for their understanding of the relevant data, and to seek a simplicity of treatment by abstracting dominant motives from the whole of human nature, in short by following the suggestions of Hartley and James Mill who compounded percepts and feelings in a quite arithmetical style out of the primary sensations.

•Mill's "Logic," Book III, ch. 6, § 2. The argument is contained in Book III, chs. 6, 10, 11, and Book VI, chs. 4, 7, and 9.

John Stuart Mill, to be sure, was not oblivious of the chemical aspects of physiology,^ but this he thought somewhat apart from the main point.

Now, though it is true that Historism departed radically from all this kind of thinking on matters psychological and economic, and though it would be wrong to underestimate the force of the Historical outlook as a protest against the individualistic, competitive economics of Smith and the Utilitarians after him, yet on two counts the Historical movement must be regarded as an interlude merely of a larger whole. For in the first place the friends of Historism were in quest of economic laws exactly like their opponents, albeit by a different route, and in the second place the vitality of Utilitarianism was so great that nothing up to the last few decades has seriously undermined it. Indeed, while the adherents of Marginism have naturally magnified their original contributions, in reality the gap between Mill or neo-classicism on the one hand, and Jevons or present-day Marginists on the other, is not unbridgeable. In fundamentals Marginism resembles Utilitarianism, the chief differences being the displacement in Marginism of objective terms by subjective ones, and the introduction of a differential, of a margin, whose services were expected to be unique. All that the Utilitarians stood for, to wit, the stress on legal premises of property, freedom of contract, freedom of vocation and residence, mobility of labor and capital in a legal or perhaps technical sense, this and the acceptance of sensationalism as a theory of value and action, or as a basis for an economic methodology — all this the two groups of economists shared in common. The de- "See Book VI, ch. 4, §§ 2-3.

parture from Utilitarian norms was less resolute than imagined. The ties linking Mill and Menger were stronger than the differences of opinion which, to some extent, drove them apart. What characterized both was an insistence upon precise formulations of laws in Price and Distribution, a belief in regularities abstracted in such a manner from reality as to produce a science of catallactics, Mill being inconsistent in this demarcation, because a greater mind and a friend of Comte, while Menger and Marginists in general strove to avoid contradictions regardless of what became of the world of facts.

Remnants of the objective view still exist in definitions and treatments of expenses, of physical supply, and of productivity, but on the whole Marginism was subjective. Psychology, that is, sensationalism and hedonism, proved the bedrock of Marginal reasoning. Man in the center of valuations, psychic states as causes, and last or least units as standards of measurement — such were the innovations that followed upon Utilitarianism. For the rest, everything was as of old. On the continent a transcendental logic served as well as MilFs empirical logic, since both stressed deduction of the formal sort. But otherwise sensationalism formed tacitly or expressedly the substratum of the economic edifice.

Present Critical Attitude. — Nor was any widespread discontent with this state of affairs noticeable before the dawn of the twentieth century. Whatever protests were raised against this or that feature of the orthodox methodology or statement of principles was sporadic. Only as certain changes occurred in the environment and in other fields of scientific inquiry did economists scrutinize their teachings from another angle, thus arriving by degrees at opinions which now have brought a crisis in economics. We live in a period of transition whose final outcome none can predict.

These changes have been forced upon us largely of course by the abandonment of sensationalistic psychology ^ — of which more in awhile — but the modifications of principles in price, production, and distribution are themselves noteworthy and in part due entirely to a searching of heart among economists as such. Economic literature during the last two decades has excelled in critical revisions and in controversial tone, the Europeans leading in questions of methodology. But the Amer-

* For literature in criticism and rejection of the hedonistic psychology see as follows: Before 1900: Bonar, J,, in Quarterly J. of Ec, October, 1888; Patten, S. N., in ^. ^. ^. 0/ Pol. ^ Soc. Sc, 1892, pp. 28-29 by way of stressing a complementary-utility law; Stuart, H. W., in /, of Pol. Econ., December, 1895; Powers, H. H., in ^. ^. ^. 0/ Pol. ^ Soc. Sc, vols. 12-13; Veblen, Th., in /. of Pol. Ec, 1898, pp. 73-97. Since 1900: Pigou, A. C, Econ. J., March, 1903; Davenport, H. J., "Value and Distribution," 1904, ch, 17; Veblen, Th., in Quart. J. of Econ. 1908, J. of Pol. Econ., November, 1909; Wicksteed, Ph. H., "Common Sense of Political Economy," 1910; Parker C, in P. ^ P. of Am. Ec. Assoc, March, 1918, in his "Motives in Economic Life"; Mitchell, W. C, in Quarterly J. of Ec, vol. 29, pp. 1-47, where recent literature on human nature is reviewed; Clark, J. M., in /. of Pol. Ec, 1918, pp. 1-30, and 136-66, a historical resume; Fisher, I., in his Presidential address before American Association for Labor Legislation, 1918; Hamilton, W. H., in Am. Ec Review, March, 1919, pp. 316-17; Parry, C. E., in P. <| P. of Amer. Econ. Assoc, March, 1921, pp. 128-29. For a defense of hedonism see, e.g., Whitaker, A. C, in Pol. Sc Quarterly, 1916, pp. 433-44.

For German literature against hedonistic theory of valuations see: Schmoller, G., in his Jahrb., 1883, pp. 975-94; Simmel, G., "Einleitung in die Moralwissenschaft," 1892-3, vol. I, ch. 2; Boehm-Bawerk, E., "Positive Theorie des Kapitals," edit, of 1909, vol. I, pp. 311-29; Schumpeter, J., "Wesen und Hauptinhalt der Theoretischen Sozialoekonomie," 1908, passim,; Weber, M., in Archiv. f. Sozialw. und Pol., 1908, pp. 548-54; Cassel, G., "Theoretische Sozialoekonomik," edit, of 1921. For a statement on logical place of psychological premises in economics see, e.g., Wieser, F., in SchmoUer's Jahrb., 1911, p. 924, dissenting from Schumpeter.

ican output was but little delayed, and not a whit less pronounced in candor of treatment.

Hardly a tenet of economics, but it has been restated or impugned as to its correctness 1 ^ Not a crucial point in the arguments on price,^ production, and distribution,^ but reservations in accepting it have been offered, often with much feeling or aplomb, as if with a premonition of logical implications. Whether price® (and factorial shares) are the central problem of economics, whether competition ^ is really the milieu of price-fixing, whether

*See for sweeping general criticism: Davenport, H. J., "Value and Distribution," p. ix; Hoxie, R. H., in /. of Pol. Ec, 1906, pp. 337- 61; Young, A. A., in Qu. J. of Ec, 1911, p. 424; Haney, L. H., "History of Economic Thought," edit, of 1920, pp. 557, 566; Anderson,

B. M., "Value of Money," p. 83; Clark, J. M., in P. ^ P. of Am. Econ. Assoc, March, 1921, pp. 132-43, article on "Soundings of Non- Euclidian Economics." For noteworthy article on "Extension of Value Theory," see Friday, D., in Qu. J. of Ec, February, 1922.

•Fetter, F. A., in Am. Econ. Rev., December, 1920, and Hamilton, W. H., in /. of Pol. Ec, 1918. On refutation of doctrine of a single price see: Watkins, G. P., in Qu. J. of Ec, 1915-16, p. 684; Hoxie, R. H., in /. of Pol. Ec, 1906, p. 425. For a much earlier statement by a French sociologist see Tarde, G., "La Logique Sociale," 1896, p. 365.

' Hobson, J. A., "Economics of Distribution," 1900, pp. 16-22, and the same author's "Industrial System," 1910, p. 136.

»Padan, R. S., in J. of Pol. Ec, 1904-05, p. 392; Anderson, B. M., "The Value of Money," p. 49; Persons, C. E., in Qu. J. of Ec, 1912- 13, p. 547; also: Davenport, in Am. Ec. Rev., 1911, p. 750; Perry,

C. E., in P. and P. of Am. Ec Assoc, March, 1921, p. 124; Stolzman, R., "Grundzuege einer Philosophic der Volkswirtschaft," 1920. Liefmann, R., in Archiv. f. Sozialw. und Pol., 1912, pp. 1-54, and 406-69. On functional correlation of prices see Schumpeter, J., "Theorie der Wirtschaftlichen Entwicklung," 1912, pp. 61 ff, and 166-67.

"Stolzman, R., in Conrad's Jahrb., 1918, pp. 303, 1-27, 145-66, 273- 304; Anderson, "Value of Money," pp. 570, 559 (also same writer's "Social Value," 1911); Cooley, Ch. H., in Qu. J. of Ec, 1915-16, p. 7; Perry, R. B., in Qu. J. of Ec, 1915-16, p. 464; Davenport, "Economics of Enterprise," pp. 92 et seq.; Diehl., K., in Conrad's Jahrb., vol. 51, 3d Ser., pp. 399-426; Zwiedineck, O., in Zeitschr. f. Oes. Staatsw., 1908, pp. 587-654, and for year 1909, pp. 78-128. On idea of an average social value and its rejection see Anderson, "Social Value," esp. chs. 7, 11, 17; Davenport, in /. of Ec, 1906, pp. 143-69;

conventional price-analysis ^° can avoid making a vicious circle because of, or irrespective of, a statiis quo in distribution, whether value is individual or social,^ whether scarcity ^" rather than utility is determinative of price, what purchasing-power ^^ signifies as compared with personal preferences, how expenses ^^ figure in price or compare with non-pecuniary costs, what a "factor" ^^ in production should signify, how capital ^* is formed and to be used in its several meanings as loan-fund or production-goods or as sheer right to income, whether ^® margins of utility apply to all goods or not, and what

Wieser, F., "Natural Value" (transl. by Malloch, 1893), Bk. II, ch, 3; and Simmel, G., "Die Philosophic des Geldes," edit, of 1907, pp. 476-77, where a Marxian viewpoint is taken.

"See Liefmann, R., "Grundsaetze der Volkswirtschaft," 1917, vol. I.

"Simpson, K., in Qu. J. of Ec, 1921, p. 287: "Price approximates buik-line or marginal cost under normal conditions of competition," gross profits of all producers in a given industry being about 10 per cent of the invested capital. See also Stolzman, in Conrad's Jahrb., 1919, p. 340; Esslen, J. B., in SchmoUer's Jahrb., 1918, pp. 1075-1123. On subjective view of cost as economic motive see Liefmann, R., in Conrad's Jahrb., 1913, pp. 603-51 where Nutzen minus Kosten gives Rein^ertrag ; Kraus, O., in Jahrb. der Philosophie, 1914, p. 45. For a rejection of individualistic cost concept see Haney, L. H., in Am. Ec. Rev., 1912, pp. 590-600. For other discussions of the same topic see Cassel, G., in Zeitschr. f. Ges. Stattsw., 1901, pp. 68-100; Clark, J. M., in Qu. J. of Ec, 1913-14, p. 770; Bell, Sp., ibidem, for year 1918, p. 523; Knight, F. H., in /. of Pol. Ec, 1921, p. 317.

** Cassel, G., "Nature and Necessity of Interest," 1903, pp. 74 and 85. See also Davenport, "Economics of Enterprise," ch. 22.

"Tuttle, Ch. A., in Qu. J. of Ec, 1904, pp. 54-96; Borght, R. v. d., in Conrad's Jahrb., 1903, pp. 596-607, on capital as a loan-fund. See also Veblen, Th., in his "Theory of Business Enterprise," 1904, chs. 5-6; Davenport, "Economics of Enterprise," ch. 18; King, W. I., in Am. Ec Rev., December, 1920, p. 754; Friday, D., in P. and P. of Am. Econ. Assoc, March, 1919; Moulton, H. G., in J. of Pol. Ec, 1918, pp. 484-508, 638-63, 705-31, 849-81, and the same writer's "Financial Organization of Society," 1921, ch. 10.

"Wieser, F., "Ursprung und Hauptgesetze des Wirtschaftlichen Wertes," 1884, pp. 198-200; Flux, A. W., "Economic Principles," 1905, p. 23; Watkins, G. P., "Welfare as an Economic Quantity," ch. 9; Haney, "History of Economic Thought," 1920, p. 568.

their role as price-determinants, whether incomes ^* are prices or not, whether one law ^"^ governs all prices of goods and services, what the number of sharers in the distributive process, ^^ how productivity ^^ as against valuations or impatience fixes certain shares — such and other questions were raised anew of recent years, the answers varying so greatly that it would be the height of complacence, of lazy indifference, to present economic science as having attained a secure foundation.

The wave of criticism has swept the whole western world, not merely one country or one school of economists. The crest of the wave may have passed, in the eyes

^' Hobson, "Economics of Distribution," 1900, p. 76, and the same writer's "Industrial System," 1910, p. ix and 274. See also Davenport, "Value and Distribution," p. 274; Anderson, "Value of Money," pp. 83, 112, 119; Veblen, Th., in /. of Pol. Ec, 1909, pp. 620-36, and for 1908, pp. 147-95; Carlile, W. W., "Monetary Economics," 1912, chs. 5-6; Englaender, O., in Schmoller's Jahrb., 1920, pp. 399-450, 709-39; Stolzmann, R., in Conrad's Jahrb., 1918, pp. 1-27, 273-303.

" See Simiand, F., "La Methode Positive en Science Economique," 1912; Tugan-Baranowsky, "Soziale Theorie der Verteilung," 1913; Hobson, "Economics of Distribution," 1900, ch. 10; Davenport, "Economics of Enterprise," in discussing shares versus costs of production; Cannan, E., in Qu. J. of Ec, May, 1905. For a general disavowal of distributive analysis up to date see Fisher, I., in P. and P. of Am. Ec. Assoc, March, 1919, p. 11. For a defense of classicism in this matter see Kleene, G. A., "Profit and Wages," 1916, ch. 9.

"Clark, J. B., "Distribution of Wealth," 1899; Hollander, J. H., in Qu. J. of Ec, 1903, pp. 261-79; Schumpeter, J., "Wesen und Hauptinhalt," p. 390; Kellenberger, in Zeitschr. f. die Oes. Staatsw., 1912, pp. 658-70.

^ Davenport, "Value and Distribution," p. 471 ; Adriance, W. M., in Qu. J. of Ec, 1914-15, pp. 149-76; Hobson, in /. of Pol. Ec, 1903-04, pp. 449-72; Aftalion, A., in Revue d'Economie Politique, 1911, pp. 145-84, 345-69. See also Parker, U. S., in J. of Pol. Ec, 1907, pp. 231-37; Davenport, "Value and Distribution," p. 364; Kellenberger, E., in Zeitschr. f. Oes. Staatsw., 1912, pp. 658-70. For controversy on determinants of interest-rates see, among others, Davenport, "Economics of Enterprise," p. 380; Knight, F. H., in Qu. J. of Ec, 1915-16, pp. 298, 310; Brown, H. G., in Qu. J. of Ec, 1912-13, p. 650; Veblen, "Instinct of Workmanship," 1914, p. 47, note. See also McGoun, A. F., in Qu. J. of Ec, 1917, pp. 547-70.

of some, but indications are not altogether to that effect. What is more, there are outward signs of revolt, of dissension or despair that must attract all those engrossed in economic speculation. For one thing recent literature everywhere, though voluminous and suggestive in particulars, has carried on no consistent development of the main body of doctrines. For another thing, the study of business life, of cycles ^^ of production and profit, has gained greatly at the expense of erstwhile static surveys, a tendency that may be welcomed, no doubt, but none the less provides food for thought if one is familiar with past preachings and the possibilities of the future. In the third place, colleges in America have of late favored an emphasis on description rather than on a teaching of laws, so much so in places, that one wonders whether the science of economics is held worthy of serious cultivation or not. The demands of business have crowded out of the class-room the urge of a quiet, contemplative, nonutilitarian diagnosis of events, and what is widely preferred is a near-by, practical acquaintance with the competitive norms ruling our producers. And, finally, there is reappearing among us a political economy whose pri-

"The literature on business cycles, especially from a statistical standpoint, has grown greatly in the United States, as elsewhere. Among American books on the subject may be mentioned these: Jones, E. D., "Economic Crises," 1900; Burton, Th. E., "Crises and Depressions," 1902; Hull, G. H., "Industrial Depressions," 1911; Moore, H. L., "Economic Cycles, Their Law and Causes," 1914; Mitchell, W. C, "Business Cycles," 1913; Bilgram, H., and Levy, L. E., "The Cause of Business Depressions," 1914. Noteworthy are also the investigations of special committees maintained by large industrial plants and banks for purposes of business forecasts and such organized, strictly scientific, efforts as those of the Harvard University Committee on Economic Research in Cambridge, Mass., and of the National Bureau of Economic Research Incorporated in New York City.

mary aim is national development on partly collectivistic lines, it being sometimes openly conceded that price and income laws are too hypothetical or unpractical or vague or variable to deserve attention as much as descriptive accounts and precepts for political application.

Now, this world-wide ferment directed against orthodox economic principles is bound to engage our solicitude. One is prone to ask : What is wrong with traditional doctrine regardless of its premises in psychology, logic, or environment? To what extent has the analysis of price and shares, which has so preoccupied us for nigh a hundred years, failed in accomplishing its declared purposes, in yielding the regularities or generalizations that are the boast of all science? What may be said about the psychic facts alleged to be back of pricing, no matter whether we cling to sensationalism or not? Are the terms demand and supply quite clear? Were they used so as to give us a self-consistent view of the pricing mechanism? How should our notion of a determining factor in a causal sense be shaped, and what do we mean by fixing or measuring prices?