PART III. The Presuppositions of Economic Theory

THE PRESUPPOSITIONS OF ECONOMIC THEORY

CHAPTER VIII

THE PHILOSOPHICAL AND PSYCHOLOGICAL PRESUPPOSITIONS

The connection between social philosophy, on the one hand, and metaphysics and epistemology on the other hand, has always been a close one,--a fact not always adequately recognized by writers in the field of social science, in economics, especially. Scientists often "ignore" philosophy, holding that their concern is simply with the world of phenomenal "facts," and that the injection of philosophic considerations is illicit and unscientific. And this is often well enough in the field of the physical, chemical, and biological sciences, where the procedure is primarily inductive, and the data are got from sense observation. But in the social sciences, where the procedure is so largely deductive, and where the data are often principles of mind, whose truth is assumed as a starting point for investigation, and especially in economic theory, such an attitude cannot be justified. For philosophical assumptions will creep in, and the scientist has no option about it. The only thing he can do is to be critical, and know definitely what philosophical assumptions he is making,--and most of our treatises on economic theory do not bear evidence that this critical work has been done.

There may be traced in the history of philosophy, in the ancient world, and also in the modern era, three main stages in philosophic thought, each accompanied by a distinctive set of ideas concerning the nature of society. In distinguishing these three stages, in showing the relation of each to social philosophy, and especially in tracing a parallel between the philosophy of the ancients and that of modern times, I recognize the grave dangers of giving a superficial treatment, and of distorting facts to make them fit a schematism. I recognize, further, that a host of details and a multitude of differences must be ignored in tracing the parallel I propose. Considerations of space, moreover, prevent such a detailed justification of the views here presented as would be required were this more than a minor phase of my subject. The need for this is lessened, however, by the fact that much of what follows is part of the commonplaces of the history of philosophy,--albeit a repetition of it seems needed in a criticism of economic theory. The three stages are: the dogmatic stage; the skeptical stage; and the critical stage. In Greek philosophy, the first stage is represented by the cosmological philosophers, as Thales, Anaximenes, and Anaximander, who, with perfect confidence in the power of their minds to solve the riddles of the universe, or rather, without questioning that point at all, proceeded to spin out poetical accounts of the origin and nature of things. The second stage is represented by the Sophists, who, struck by the manifold divergences in the philosophies of the earlier schools, and by the lack of harmony between the god-given laws and rules of morality which earlier tradition had handed down, and the needs of the social conditions among which they lived, found themselves unable to find truth readily, and reached the conclusion that each man is the measure of truth, that there are no universal criteria, or valid standards. The third stage begins with Socrates, who sought for a common principle of truth and justice in the midst of divergences, and this critical movement, continued by Plato and Aristotle, led to conceptions of unity once more.

Now the social philosophy which goes with the first stage is relatively undefined. It is for the most part content with the existing order, recognizes a supernatural basis for it, and raises few questions. The social philosophy of the second period is intensely individualistic. In the third stage, the emphasis upon social solidarity and upon a unified, organic conception of society, a society which is paramount to individual interests and rights, comes to the fore again. The extreme poles of thought are, on the one hand, an individualism which leaves scant room for any very significant social relations whatsoever, and, on the other hand, a socialism--like that of the Republic--which swallows up the individual. The compromise view, expressed in the Aristotelian doctrine of the relation between "form" and "matter," applied to the social problem, finds the individual very real, to be sure, but still real only in his social relationships. Individual activities are facts, but social activity is more than a mere sum of individual activities. Society and the individual are alike abstractions, if viewed separately.

The mediaeval conflict over realism and nominalism really derives its interest from the practical social issues involved, for the reality of the Church, as more than a mere aggregate of its members, and the validity of Christian doctrine, as more than the sum of individual beliefs, are at stake.

The cycle began again in modern times. As representatives of the dogmatic period in modern philosophy, DesCartes and Spinoza may be chosen. They were not, of course, naively dogmatic, for philosophy had learned much from its many disappointments, and DesCartes, especially, starts out with reflections which would seem to make him very much a skeptic. And yet each believed in the power of the mind to draw absolute truth from itself, and each proceeded in a highly rationalistic way to build up his system. The very title of Spinoza's great work indicates this attitude of mind: "Ethica more geometrico demonstrata." The conception of society which characterizes this period is, again, not naive, but still has a supernatural, or at least a superhuman, basis, for it is in a Law of Nature (capitalized and personified) that social institutions find their origin and justification. Critical reflections, starting with Locke, and passing through Berkeley to the absolute skepticism of Hume, bring in the second, or skeptical, period, in which the rationalistic-dogmatic certitude of Spinoza and DesCartes is banished. And going with this movement in philosophic thought comes the extreme individualism of Rousseau in politics, and Adam Smith in economics. The movement away from skepticism, beginning with Kant, puts the world, and especially society, back into organic connections again, and we have, in Hegel, especially, society to the fore, and the individual real only as a part of society. The organic conception, revived by Hegel, and vitalized by the positivistic studies which applied the Darwinian doctrine to social phenomena, has characterized the greater part of the social philosophy of the last half hundred years--of course, not without protest and highly necessary criticism.

Now all of this is, of course, commonplace. And yet a failure to recognize it has vitiated very much thinking in the field of economic theory. Economic thought is to-day very largely based on the philosophic conceptions which characterize the period in which economics began to be a differentiated science,--the skeptical doctrines of David Hume, the close friend of Adam Smith. The individual is all-important; his world of thought and feeling is shut off from that of every other man; social relationships are largely mechanical, and grow out of calculating self-interest on the part of the individual; social laws are conceived after the analogy of physical laws. Ethics and politics, however, have been far more influenced by later thinking, and the organic conception of society has largely dominated these sciences of late, while the new science, sociology, free to base itself more largely upon present-day epistemological, philosophical, and psychological notions, has gone further than any other in accepting the doctrine of the unity and pervasiveness of social relations, organically conceived. I think there are few things more strikingly in contrast than the conception of society which the student meets in most works on economic theory, and that which he meets in studying the other social sciences. That this is so is due precisely to the fact that the economists have too largely neglected philosophy and psychology, and have accepted uncritically the assumptions of the founders of the science. Doctrines accepted then have become crystallized, and still form part of the current stock in trade of economic science, even though rejected by philosophy itself.

To one of these faulty doctrines from the earlier time, attention has already been called. It is that the intensities of wants and aversions in the mind of one man stand in no relation to the same phenomena in the mind of another man, and that there can be no comparison instituted between them. The individual is an isolated monad, mechanically connected with his fellows, who are to him "a part of the non-ego," but spiritually self-sufficient and inaccessible. The doctrine appears in Marshall's statement: "No one can compare and measure accurately against one another even his own mental states at different times, and no one can measure the mental states of another at all, except indirectly and conjecturally, by their effects." Pareto I have quoted, as also Jevons, in