Popular Science Monthly/Volume 26/April 1885/The Character and Discipline of Political Economy

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Popular Science Monthly Volume 26 April 1885  (1885) 
The Character and Discipline of Political Economy
By J. Laurence Laughlin




APRIL, 1885.




WALTER BAGEHOT once said of certain literary economists, who had no bent for practical affairs, that they were "like astronomers who had never seen the stars." In fact, no small number of people believe that this applies to all political economists; that they do very well as students of books, but are unable to keep their heads in the midst of facts and actual business; and that only the "hard-headed" merchant is competent to explain the causes of what he sees to the uninitiated. As in many general beliefs, there is something just and right in this; and yet there is something too which is not included in it, which leads the holder of the belief to narrow and illiberal conclusions in regard to a very important study. A fair and candid consideration should be given to the qualities of mind called into play by the study of political economy, and then we may more easily judge of the character of the work demanded of an economist, and of the way in which these demands have been met.

It is axiomatic that not every person can succeed in political economy any more than in art or music. Some people, although admirably equipped in other directions, have attacked political economy with great zeal, only to realize finally that anything beyond a certain general knowledge and use of its principles is denied to them. Any hint, therefore, although imperfect as mine may be, of a knowledge of the mental qualities requisite for success in such a study, will at least set to thinking those who propose to begin it, and possibly lead those who do not intend to study it to consider whether they have formed a right judgment upon the work already accomplished by economists.

The mental qualities brought into use by political economy are of two seemingly opposite kinds; and, simply because of this distinct opposition between them, few persons combine them both, and consequently few persons have achieved great success in the study. To illustrate best the mental operations required, let me first recount briefly the process followed in an economic investigation. Certain phenomena are observed, and their accuracy ascertained; an hypothetical explanation, or a statement of the cause operating to produce the observed phenomena, is made on the best possible ground known to the investigator; a process of verification then follows, wherein the hypothetical principle is applied to other observed economic facts; and, if it explains the given conditions in all known cases, the law is considered established—just as we proceed to discover a law in physics (although the economic law is not capable of quantitative accuracy in statement like the physical law). First, there is observation, then deduction, and lastly inductive verification, with a severe and exacting standard. Or, to again use the words of Bagehot, we act as if a man were arrested under suspicion of murder: a murder was known to have been committed, and the doer of the crime has been suspected; and then, if, on resort to legal and just proof, the suspicion is found correct, he is declared guilty. Likewise, when economic phenomena are observed, the law expressing the relation between cause and effect is suspected; and if, on comparison with the facts, this law is wholly substantiated—as it were, "found guilty"—it is considered established.

By the deductive part of the process, the logical and reasoning powers are called forth in a marked degree. Hence economic study needs, and in its processes gives, the discipline of the severer logical and mathematical subjects. And many years of observation in the classroom warrants the statement that, as a rule, he who enjoys and masters mathematical and logical work will succeed with political economy, provided he has to some extent also the other necessary mental qualities. What these other qualities are may be seen by considering that, in the inductive part of the process above described, an imperative need exists for an honest, practical appreciation of facts, such as is possessed by merchants and men of affairs, coupled with an economic intuition, a faculty which is more or less innate, and not very much, in my opinion, a matter of cultivation. The capacity to collect and arrange facts is a book-keeper's function; but the ability to see through the confusing mass of details and trace the operation of a governing principle, requires an intuitive regard for facts and their causes possessed in a large measure hitherto by only a few men. If this analysis be a true one, it will appear distinctly how it is that qualities almost diametrically opposed to each other are necessary for the equipment of an economist of the first rank. On the one hand, he must have the power of close, sustained, and logical reasoning; on the other, he must have a most thoroughly practical spirit, without vagaries and nonsense. The former he gains chieily by his academic training; the latter, by general maturity and an intuitive or practical knowledge of the world of business. In short, he must be at once a (so-called) "doctrinaire " and a "practical man." To be without one set of these faculties is to seriously and fatally prevent any great usefulness. A purely "practical man," without the logical training, can no more achieve economic success than a railway-locomotive, no matter how great its steam-power, can continue to run and reach its destination without rails. And yet, a bookish and literary economist, without the practical intuitions, can accomplish nothing more than a finely finished and most perfect engine in the hands of an ignoramus who does not know how to get up steam. We here find the explanation of a very common belief among the wide ranks of the busy and successful men of affairs in the United States—a class who have generally had little academic training—that economists are mere "doctrinaires," whose assumptions are all a priori, all in the air, and above the level of every-day work; who had better make a fortune in pig-iron, or fancy dress-goods, before they set up to instruct the community. Merely making money, however, does not at the same time make one logical. It is as if we should demand that every scientific physicist or chemist should have first put his knowledge into practice by inventing some application of electricity, or a patent-medicine, before he is competent to impart the principles of his science to others. The contempt of the practical world for (so-called) "doctrinaires" is as great a mistake as for the speculative writers to set themselves above the men of affairs. As in most things, the correct position lies somewhere between. If an economist is an abstract thinker, and nothing else—unable to verify his deductions—then he justly merits contempt; but in that case he is not a properly equipped man, as we have described him above. On the other hand, it is common to see merchants or manufacturers showing great energy in studying and writing upon economic subjects, who, so long as they confine themselves to the range of facts within the limits of their own horizon, make most valuable and effective contributions to the verification of principles; but, when, without accuracy, logical power, or a grasp upon governing principles, they begin to generalize upon their limited data, they are very apt to be less effective and useful than they are dogmatic. He only is truly an economist who, eagerly studious of facts, not in one occupation or place only, but in as many as possible, applies scientific processes to his investigation, and produces that which becomes the world's truth, the property of men of all times—not the petty sum of thought which has grasped only a small fraction of the facts. In other words, when a wide-awake man goes to books, he really goes to get the experience of the best observers of all countries with which to correct himself against false and narrow inferences drawn from his own limited experience.

In order to show how far this analysis is based on experience, some appeal to the history of the work of the most successful economists will give results of an interesting and instructive kind. Adam Smith, Ricardo, Mill, and Cairnes combined in a high degree the two almost opposite kinds of powers needed for their success; and these men have contributed the most to the progress of our knowledge of economic principles. It would be hard to name an author who has wielded a greater influence by his writings than Adam Smith by his "Wealth of Nations" (1776). His work was a great and admitted success, as tried by any tests, whether of popularity or permanent influence on men's minds. But on his tombstone will be found inscribed the name of an extensive ethical work ("The Theory of Moral Sentiments") as an equal claim to distinction with the "Wealth of Nations." What is worth noting is that the great writer was a Professor of Moral Philosophy in Glasgow, and had planned an extensive course of lectures in which political economy formed but one part; and we find that by training, by aptitude, by study, he was a skillful master of logic; he had the power to separate the temporary and unimportant from facts, and educe an abstraction of the truth unweighted by the accidents of the form in which he found it; and knew how to secure a firm grasp upon principles apart from their illustrations, which gave him later a scientific and systematic control over his subject, and enabled him to weld it into a compact and cohering whole. It was this power which made it possible for him to lay the foundations of a science of political economy. It widened his views, and made it easy for him to see the essentials of any concrete phenomena. In short, he possessed in a remarkable degree the first of the two requisites for successful economic work. But, then, to an almost equal extent, he honestly reverenced industrial and commercial facts; he studied them eagerly, and made his book an extensive collection of data on many special subjects. Everywhere one meets with the analysis and study of particular industrial phenomena; and in them the keen, observing Scotchman, with a subtile, economic instinct, saw the operation of laws where the ordinary man of affairs saw only a crowd of familiar and monotonous details of business. The practical nature of his work is so well known that it seems unnecessary to call further attention to this side of his make-up. So well is this understood, that the late Cliffe-Leslie claimed for Adam Smith that his method of working was solely inductive, that is, starting from facts alone. It was, therefore, without question, his philosophic and logical faculty, united with a true and correct instinct for facts and the laws working in them, which lay at the bottom of Adam Smith's world-wide success in his "Wealth of Nations." He had the power to see the universal in the concrete; to disclose the operating force; to shake off the incidental circumstances of its concrete envelope, take out the principle, and formulate it for use by others in subsequent explanations. The great Scotch "doctrinaire" was at once the most practical man of his time.

Curiously enough, while Adam Smith approached political economy from the side of abstract and metaphysical studies, his "homely sagacity" led him constantly to practical results; but, although Ricardo was a rich banker and a successful man of business, who had early retired with a competence, he it was who, above all others, went farthest in attempting to formulate the principles he had arrived at from facts in a form which should state abstractly the general truths independent of the changing conditions in which these principles worked. So that in Ricardo we have a man of business intuitions of the most practical kind, but one who early showed a fondness for mathematics and logical studies. Knowing only too well the myriad shapes in which facts arise before us, he was urged forward by a desire to express truth in a form as succinct and universal as possible. This tendency, taken in connection with unusual terseness and no great literary skill in exposition, has deceived people into thinking that his conclusions were all deduced by an a priori process (because of his dry and peculiar method of stating them); while, as a matter of fact, he was a hardheaded man of affairs, living at a time when the Bank of England restriction act and the duties on corn led him to try to find out the fundamental principles which were governing the value of money and the price of corn. The results of these practical investigations were seen in the doctrines of the "Bullion Report," and the economic doctrines of "Rent" and "International Trade." In this way, the work of the Scotch Professor of Logic, who had a great deal of practical insight, was supplemented by the study of a successful man of affairs who had a strong passion for concise and abstract statement of economic principles. We can not properly say of the man who was introduced to the details of the money market at fourteen, was in business on his own account at twenty-one, and was a wealthy man at twenty-five, that he was a doctrinaire wholly given over to abstract speculations.

John Stuart Mill illustrates what we have said in a different way. To him the fascination of abstract reasoning was so great, and the bent of his mind so strongly metaphysical, that this part of the economist's equipment preponderated in his make-up; his attention to the facts of practical life was not excessive. And this exposes the real weakness of his book. Perhaps no other systematic writer ever gained such a success by perspicuous treatment, and a certain geometrical symmetry in the connection of parts with a whole, as did Mr. Mill in his "Principles of Political Economy," and this quality has greatly added to the value of his work. But, while the abstract character of many of his chapters excites admiration for a power of sustained reasoning which they showed, yet it must be confessed that they are too often ill-adapted to the common apprehension. Had he possessed more knowledge and acquaintance with practical business life, been nearer to the monotony of details, his work would have been imbued with a smack of practicality which would have redeemed its abstractness, and made it vastly more useful. Moreover, he would, as in the discussion of the wages question, have adapted his principles more correctly to the truth, and gained positions less likely to be assailed after others had noted their too great symmetry and too few limitations. His early training accounts for his book as it stands, and explains his faults. Account must, however, be taken of the life Mill led as a servant in the East India Company's office, which widened his horizon, gave his mind practical employment, and furnished him with a great field of experience in men and things. This, without doubt, exercised a strong and steadying influence on his thinking, which had some of the faults of English insularity, and, taken together with his robust philanthropy, gave that practical direction to his work which, while it was inadequate, yet redeemed him from the charge of being too entirely given to abstractions. Had he had an interest in work-a-day things which equaled his fondness for metaphysics and abstract thinking, he would have succeeded even more than he did, and he made a great success. His treatment of international values is a conspicuous example of his faculty for extended reasoning, but, had he put it more as a practical man of affairs, he could have made an exposition of the principles quite as well as he did, and gained vastly in his hold upon the reader. Does it not become evident, then, that mere philosophic acumen is not sufficient in the model economist? Nor, on the other hand, is the mere man of affairs able to grasp the workings of principles in the confusion of details. These two powers must be, and always are, combined in him who accomplishes the best economic work.

The personality of Mill's great successor, Mr. Cairnes, is a very interesting one. He both knew and thought much. Members of Parliament would come to sit by his invalid's chair, in which he was confined by a painful disorder, finally ending in an untimely death, and find him more learned than they in the details and facts of certain legislation; and yet with this accumulation of practical knowledge, for which he had a peculiar aptitude, no one since Ricardo has shown so vigorous a faculty for investigation, and the power of keeping his head while in the pursuit of principles. He was not befogged by metaphysical niceties, but followed his way through the multiplicity of actual business life with as sure and certain a grasp upon the actuating causes, and with as clear and definite a view of the principles in operation, as an expert accountant when adding a column of figures. His logical and philosophic side is most admirably seen in his little volume, "The Logical Method," in which he lays down his ideas as to the processes to be followed in an economic investigation. Nowhere else does he seem more clearly to show how essentially he had the power to handle a purely abstract question, such as that of method. And yet, on the other hand, it is to be noticed in his "Leading Principles," that the whole criticism, by which he amends Mr. Mill's positions—his study of value, the wages question, and international trade—shows how much more appreciation he had of the real facts of trade than Mr. Mill. Under his economic penetration the cold columns of Australian statistics, and American exports and imports, glow with brilliant illustrations of general economic laws. Armed with this firm grasp upon principles, and the ability to see their operation in practical affairs, he examined the facts of our foreign trade before 1873, and came to the conclusion that we were rapidly accumulating the material for a great financial explosion, and actually prophesied the panic which came in that year. Scarcely anywhere is there a better illustration of the success arising from the possession of these two almost wholly unlike powers of mind which I have been trying to show are essential for the highest achievement in political economy. Mr. Cairnes was an economic tight-rope walker; he could go with a cool head through airy spaces where other men became dizzy or fell to the ground. And, at the same time, he had the Englishman's sturdy respect for facts, with more than the ordinary Englishman's willingness to acquaint himself with social systems different from his own.

These economists, whose powers I have attempted to analyze, have been the ones who have contributed most to our knowledge of the principles of political economy, as they are understood to-day. Above all other writers, these men have possessed a useful economic intuition, and a respect for facts, which have given peculiar strength to their clear, abstract generalization of results in the form of universal principles. Wherever other students and writers have accomplished less, it will appear that weakness arose from their entire or partial lack of one or both of these two sets of faculties. It explains some other things also. French writers are unexcelled in the power of lucid statement; but the generalizing and less practical French are not so likely to be good economists as the more commonsense English. Therefore, while the French have never much assisted the progress of political economy, they have stated results in the most admirable way. It is, then, reasonable also to expect that the practical Americans, with their keen insight and thoughtful disposition, may also furnish the material for excellent economists, whenever they set themselves seriously to get the proper training.

It may now be worth while to explain briefly some of the evident ways by which the study of political economy disciplines the mind. It may seem somewhat startling to say of so practical a subject that, in a pre-eminent degree, it calls for the exercise of imagination. "That is just what we have always said," the scoffers at political economy say at once; "so does novel-writing call for imagination, and a novelist is about as well fitted for the economist's position as the usual abstract thinker who masquerades as a teacher of political economy." To this it is to be replied that imagination is one of the chief requisites for mathematical study also; that a novelist is not necessarily a good mathematician, goes without saying. The simplest propositions of solid geometry require the exercise of imagination, as, for example, in the picturing of forms and solids with intersecting planes. The most logical student of the severest mathematical processes is called on for the exercise of this species of imagination. And so it is in political economy. In learning the subject, the perception of a simple general principle is often absurdly easy, but, for its assimilation into our own thinking, it is necessary that it should have become an interpreter of facts everywhere about us. To this end, it is essential for us to apply the abstraction, or general principle, in every possible case, to some concrete phenomenon. Very often, in order to show the action of this single principle operating by itself, we must separate all conflicting agencies from the situation—just as the physicist experiments in a vacuum exhausted of air, for the purpose of learning the full effect of a force, like gravity, when acting by itself. The economist, however, is not able to reproduce a given situation to the eye or ear, as is the physicist. He can not pile before him the exports of the United States or England, or summon before him the laboring-class or the capitalists of a country; he must, therefore, picture to himself the actual facts, just as the geometrician does the solid, and see how the operating principle works. This is very far from "theoretical dreaming." It is at once a most difficult process, and a most excellent discipline in learning how to think on such subjects. To illustrate my meaning in a simple way, it is one thing to say that in order to have value a commodity must satisfy some desire, and be hard to get; and quite another thing to be able to call up in the mind an image which will show the application of the principle. For example, to a shipwrecked sailor on a rocky island a bag of gold has no value, for it can not keep him alive. It is largely by such mental exercise as this that a student best succeeds in assimilating the body of principles which make up the science of political economy. It has been frequently said to me, "I can understand the statements of the writer easily, but I do not seem to be able to use the idea when called upon to explain things in a different connection." This is exactly the difficulty, as it is also, by struggling with the difficulty, the disciplinary gain of our study. To understand an abstract principle, without the ability to see it in the concrete form, and test its truth, is of little gain to any one. This would in truth make a "doctrinaire." The only "practical man," in any conceivable sense, is he who, while seeing general principles, can best interpret the facts around him. To follow through a course of political economy without this attempt to think out the principles by use of the imagination, and by constant application to familiar facts, is like trying to climb a perpendicular slope of ice—the student will not catch hold.

In the next place, the disciplinary power of the study is very much that which is gained in the study and pursuit of the law. The beginner first gets an understanding of the principles, and he is then constantly engaged in turning with them to the economic phenomena around him as an exercise in their application. Or, struck by some new or interesting fact, he studies to find the law which explains the observed effects. In thus applying general principles to explain special facts, the economic student is doing almost exactly that which he does when, in the profession of the law, he applies legal principles to particular cases, or considers whether the interpretation of the law in one decision applies also to the special case he has in hand. The modern theory of legal teaching no longer recognizes the plan of simply filling the mind with statements of what the law now is, but aims to force the student, under oversight, constantly to apply principles to multitudes of cases, or to discover the principle running through the studied cases. It will, then, be seen that this process is much the same as in political economy. Consequently, quite apart from the "usefulness" of our study, its training is an excellent preparation for legal work, and strengthens the powers which are most called into play in that profession.

Moreover, this kind of mental exercise is continually calling upon one for the ability to see the pivotal part in any statement, whether of fact or principle. Not to see the essential bearing of an exposition is a species of mental blindness; but exercise will gradually give clearer vision. Nothing is more common in the replies of untrained students to questions than the happy-go-lucky kind of answers which bear upon the general subject, but are aside from the point. Persons may write or speak about the question, but do not answer it; what they may say may be quite true in itself, but it is irrelevant. The faculty of hitting a point is one, in my opinion, like concentration of mind (to which it is nearly allied), which is largely capable of cultivation and growth. And the discipline of rigorous study in political economy is one of the best means of acquiring it. In my experience, there have been some interesting illustrations of this analysis. Trained lawyers have, by heredity, transferred this faculty of directness of thought to their sons; and it has been possible, sometimes, without further data, to pick out the sons of lawyers from reading their examination-books in political economy. These sons "hit the nail on the head," and made clean work of their answers, without any mental shuffling, or avoidance of the essential point.

To make progress in such a study, the student must necessarily gain exactitude and clearness, both in writing and speaking. Nothing is more striking to the instructor, as he faces a new class, than the limited powers of expression possessed by young men who have, in most cases, had a very extended course of classical training. It is largely due, of course, to vague and loose thinking. He who has clear ideas can generally manage to convey his meaning, in varying degrees of force, correctness, and elegance. The necessity, however, of making clear distinctions between things, which at first seem all alike, to see forces operating where none were seen before, stimulates unused faculties, and then progress becomes distinctly visible. Men who at the beginning expressed themselves in halting, inexact, and timid words, with a seeming passion for brevity, will, at the end of the course in which they have been constantly pushed to express themselves, talk easily and freely on subjects which would at first have frightened them by an appearance of abstractness. In this respect, the training must be much like that in the study of metaphysics. Under constant criticism looseness of words and definitions will disappear—as clearness of ideas comes in. In no other study is inexactitude and lack of precision in words or facts more likely to stir up criticism and ridicule than in political economy, because in no other study are persons more concerned with things which affect all the world in every day of its existence, and in which absurd results and stupid mistakes are more easily seen by everybody. The economist must be vigilant and correct; and the results of this requirement are such as tend to keep him as careful and exact as is possible. The effect of training under such conditions is admirable.

One other marked result of the study of political economy deserves at least passing mention. Persons who by nature are unfitted for other kinds of academic work, and yet by custom or authority have trodden the beaten educational paths with a dull sense of discouragement and incapacity, have, in many cases, been awakened to a hitherto unknown interest in study by the practical and interesting nature of the subject. Economic questions confront them everywhere, and they meet with the discussion of them over the table, on the walk, and in the newspapers. It, consequently, stimulates even a sluggish disposition to find that he can know something valuable about such practical matters of every-day importance. Livy or Thucydides may pall on his incapacity, but his curiosity may be piqued by having the functions of money explained to him. The purchasing power of his yearly allowance is something which comes home even to him. As enlarging the field for willing mental activity, and giving new and interesting objects for intellectual effort, political economy forms one of the most effective factors in the movement which in these latter days is liberalizing our courses of study, and is freeing us slowly from the cramped tyranny of a traditional training, still demanded, because, forsooth, it once seemed good to the school-men. Willing, enthusiastic study, because it interests and fits the faculties, is a better thing for discipline than the serfdom of drudgery in a subject which excites no spontaneous response, and stirs an unwilling effort. And this is true, also, without any thought of undervaluing other branches of study. We must all admit that some minds are better fitted for one thing than for another, and that we can not do all things equally well. There is, therefore, a place for different studies so long as human abilities remain of a varied kind, and room should not be denied to any branch of learning which, apart from its "usefulness," is effective for mental discipline.

A warning, however, should be given at the outset which may save later disappointment in some cases. No one would think of becoming an accomplished chemist or geologist in one course pursued for one year; but many persons conceive that they can easily know all of political economy that is necessary for a sound judgment on passing questions in a less time than that. It is true that they can read over the statement of principles in a less time, but they can not become economists so easily. To have been trained until these principles become familiar as the alphabet requires time—time not merely for the intellectual efforts of applying the principles, but time for the mind to mature under the exertion and to digest its food slowly; since only by growth and experience does there come any development of the economic intuition, and a power to call readily upon any part of one's acquisitions for instant use at any moment. An elementary course will serve a distinct purpose as part of a liberal education for every citizen, but it will not make an economist "teres atque rotundus" at once; although honest work in a course for a year will give students no small advantage over those who have not had it. A brief course in chemistry may not enable the student to contribute at once to a new theory of heat, but it may give him a highly useful knowledge of the chemistry of every-day things. We must not, therefore, expect more from political economy than we do from other serious studies.

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