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Thursday, August 8, 2013

The Millians

If Mill was able to disarm much of the opposition from the original enemies of Ricardian economics, he was able to establish the dominance of his own muddled version by converting the youth – always the first group to adopt an important new trend or system of thought, for good or ill. At Cambridge the powerful secret Society of Apostles immediately took up the Principles for extensive study and discussion. The Apostles of 1848 included: James Fitzjames Stephen (1829–94), later an eminent journalist and attorney; E.H. Stanley (later Lord Derby) (1826–93), a conservative who would twice become foreign secretary; and Vernon Harcourt (1827–1904), later a Liberal MP and Whewell professor of international law at Cambridge. A little later in the early 1850s there came to Cambridge such young Millians as Stephen's brother Leslie (1832–1904), who would later teach at Cambridge and then retire to write works of history and philosophy, including his three volume masterwork, The English Utilitarians (1900). This Millian group also included Henry Fawcett who, although blinded in a hunting accident in his mid-20s, went on to become professor of political economy at Cambridge, and to write his Manual of Political Economy (1856) as a way of making Mill's Principles easier for students and laymen. Fawcett's Manual was used as a textbook in British and American Colleges for many years, and went through six editions. Fawcett later became an MP and postmaster general.
While Mill did not have quite the impact on Oxford as he did on Cambridge, we are assured that by the early 1850s, Mill was already ‘a classic, both as a logician and as a political economist’.

Two young economists who hailed the Principles in book reviews, became strongly influenced by Mill. One was insurance executive William Newmarch (1820–82), who collaborated in the last volume of Thomas Tooke's History of Prices; and the other was Walter Bagehot (1826–77), who would become an extremely influential journalist and financial economist. Bagehot was particularly happy to see Mill weaken the laissez-faire precepts of political economy by making his mischievous distinction between ‘production’ and ‘distribution’. It is particularly unfortunate that this cynical semi-statist, an attorney who joined the business of his banker-father, became the son-in-law of James Wilson, and succeeded Wilson as editor of The Economist shortly before he died in 1860. This change meant a fateful shift from a militant laissez-faire policy to a statist advocacy of, among other things, the aggrandizement of the Bank of England over the monetary system. Along with the abandonment of laissez-faire by Bagehot came an increasing abandonment on his part of even Millian economic theory, and a shift toward a nihilistic and historicist institutionalism.

Unfortunately, Millianism came to hold sway, not only over Cambridge and Oxford, but even over Trinity College, Dublin. For almost two decades the Whately chair at Trinity had been the great stronghold of utility theory as against Ricardianism. But first, succeeding William N. Hancock in the five-year Whately chair, in 1851, was Richard Hussey Walsh (1825–62), who returned to a cost-of-production theory of value while pursuing his interest in monetary problems. Walsh had graduated from Trinity in 1846, and his lectures were published as An Elementary Treatise on Metallic Currency (1853). Being a Roman Catholic, Walsh was legally barred from a permanent academic career at home, and so after his term as Whately professor was over, he went to the colony of Mauritius as an administrative and census official.

The important successor to Walsh was John Elliott Cairnes (1824–75), who became by far the most important Millian in academia. Born in Ireland, Cairnes studied at Trinity College, and, after graduation, was admitted to the bar. He acceded to the Whately chair in 1856, and the following year Cairns won his spurs by publishing his most important work in economics, The Character and Logical Method of Political Economy. So far he followed the pattern of Whately chair-holders, but then he broke the mould by being the first of the Whately professors to follow with a lifelong career in university teaching. In 1859, Cairnes was appointed professor of political economy and jurisprudence at Queen's College, Galway; seven years later, he moved to University College, London until forced to resign by ill health in 1872.

J.E. Cairnes has been known as ‘the last of the classical economists’; after Mill's death he assumed the mantle of outstanding British economist in the minds of the public, and in 1874 he lashed out in incomprehension at the revolutionary marginal utility theory of William Stanley Jevons (in Cairnes's Some Leading Principles of Political Economy). Cairnes was a determined cost-of-production theorist, granting his only significant exception in his well-known ‘theory of non-competing groups’. This theory recognized that where factors of production, in particular labour, did not immediately and fully compete with each other, the prices of the factors are determined by demand rather than by cost. Unfortunately, Cairnes lifted the theory from Longfield's Lectures on Political Economy without giving him credit; we know that this was not a case of ignorance of a distinguished predecessor, since Cairnes assigned Longfield's work in his own classes.

Cairnes's work of most lasting value, his Character and Logical Method, while including some Millian positivism, was essentially a methodological work in the great Nassau Senior-praxeological tradition. Thus Cairnes, after agreeing with Mill that there can be no controlled experiments in the social sciences, adds the important point that the social sciences, nevertheless, have a crucial advantage over the physical sciences. For, in the latter, ‘mankind have no direct knowledge of ultimate physical principles’. The laws of physics are not themselves evident to our consciousness nor are they directly apparent; their truth rests on the fact that they account for natural phenomena. But, in contrast, Cairnes goes on, ‘the economist starts with a knowledge of ultimate causes’. How? Because the economist realizes that the ‘ultimate principles governing economic phenomena’ are ‘certain mental feelings and certain animal propensities in human beings; [and] the physical conditions under which production takes place’. To arrive at these premises of economics ‘no elaborate process of induction is needed’. For all we need to do is ‘to turn our attention to the subject’, and we obtain ‘direct knowledge of these causes in our consciousness of what passes in our own minds, and in the information which our senses convey... to us of external facts’. Such broad and basic knowledge of motives for action includes the desire for wealth; and everyone knows ‘that, according to his lights, he will proceed toward his end in the shortest way open to him...’.

Cairnes also demonstrates that the economist uses mental experiments as replacements for laboratory experiments of the physical scientist. He shows too, that deduced economic laws are ‘tendency’, or ‘if-then’, laws, and furthermore that they are necessarily qualitative and not quantitative, and therefore cannot admit of mathematical or statistical expression. Thus the extent of a rise in price due to a drop in supply cannot be determined, since subjective values and preferences cannot be precisely measured. In his preface to the second edition of the Character, written two decades later in 1875,  Cairnes warns against the growing use of the mathematical method of economics, in this case levelling a just criticism at writers like Jevons. For mathematics, in contrast to its use in the physical sciences, cannot yield new truths in economics; and, further, ‘unless it can be shown either that mental feelings admit of being expressed in precise quantitative forms, or, on the other hand, that economic phenomena do not depend upon mental feelings, I am unable to see how this conclusion can be avoided’. In the course of his methodological inquiries, and in his battles against Jevons, John Cairnes moved closer to subjective value theory and further from Mill than perhaps he realized.
Austrian Perspective on the History of Economic Thought (2 volume set)

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