E.K. Hunt on Rationalistic Subjectivism, part 2

Lisa Rogers eqwq.lrogers at state.ut.us
Fri Feb 9 13:31:18 MST 1996

E.K.Hunt 1992 _History of Economic Thought: a critical perspective_

Ch.6 Rationalistic Subjectivism: The Economics of Bentham, Say, and

Summary by Lisa Rogers

[begin part 2/3]

	Jean-Baptiste Say on Utility, Production, and Income Distribution
Say (1767-1832) considered himself a disciple of Adam Smith, but his
'correction' of Smith's minor errors really abandoned much of Smith's
work, especially the LTV.  Say's most important work was _A Treatise
on Political Economy_ (quotes from the 4th edition, 1821).

According to Say, prices / exchange values depended entirely on
utility / use values.  In rejecting the LTV, he wiped out the
distinction between the types of income received by different
classes.  It was not labor alone that produced goods / use value, but
three "productive agencies" combined were coequally responsible.
"[H]uman industry, with the aid of capital and of natural agents and
properties" created "every kind of utility, which is the primary
source of value."  There was no qualitative  [significant] difference
between the *exertion* of human labor and the *ownership* of land,
capital and property.

Say defended the similarity of working and owning by arguing that
commodities were "invested with value by the necessity of giving
something to obtain them", i.e. all were obtained by sacrifice [or
quid pro quo].  Obviously workers had to work, but owners had to be
"frugal" in order to buy capital rather than consuming all their
income.  Thus workers and owners were equally morally entitled to
their incomes, as earned by their similar sacrifices.

Say also argued that wage and profit rates were determined by the
relative contributions to utility creation made by labor and capital.
 This theory of income distribution was later fully developed by John
Bates Clark.

All notions of class conflict were evaporated.  Say claimed that once
people really understood capitalism "people, becoming more
enlightened as to their true interests, will perceive that these
interests are not at variance with each other."  The study of
political economy "proves that the interest of the rich and poor ...
are not opposed to each other, and that all rivalships are mere
folly."  All property ownership was "sacred and indisputable" and the
question of
	"whether the actual owner ... or the person from whom he derived its
possession, has obtained it by prior occupancy by violence, or by
fraud, can make no difference whatever in the business of the
production and distribution of its product or revenue."

	Say's Law of Markets
Like Smith, Ricardo and early Bentham, Say claimed that a free market
would always adjust automatically to an equilibrium in which all
resources - including labor- were fully utilized.  Economists who
disagree include Malthus, later Bentham, Marx and Keynes.  Say said
that temporary gluts of some commodities would always be quickly
resolved by the movement of capital away from production of the less
profitable [over-supplied] commodities.  The freer and more
competitive the market, the quicker and smoother the adjustments.

	Nassau Senior's Social Orientation
Senior (1790-1864) also selected certain ideas of prior economists,
modified some and added ideas of his own, to develop a consistent
theoretical justification of the status quo of 19th c. capitalism.
He was a lawyer, an intimate friend of many prominent members of the
Whig party, and the party's general adviser on social and economic
questions.    In 1825 he was appointed to the first chair of
political economy at Oxford.  He was most interested in the condition
of workers and the causes and consequences of poverty.  His ideas
changed a great deal in 1830, and his work after that time was his
most influential.

Before 1830, he was politically conservative, but a reformer with
hope for improving the 'pauper problem'.  His _Two Lectures on
Population_ pub. 1828, argued against Malthus, that increases in
productivity could be accompanied by improvements in the "moral
character" of workers, so that they could rise above bare
subsistence.  He supported moral education as the hope for
eliminating poverty.

>From 1829 to 1842, there was increasing labor "difficulties".  Early
industrialization had reduced the English working class to
unprecedented levels of exploitation and suffering, and in the 20's
and 30's, labor began to fight back.  Massive efforts to [illegally]
unionize met with harsh repression, resulting in widespread strikes,
riots and sabotage, which terrified Senior and others, especially
what he called "the fires and insurrections which terrified the south
of England in the frightful autumn of 1830."  He became convinced
that the poor laws and the dole were the principal *causes of
poverty* and a threat to the very existence of English capitalism.

He was no longer concerned with the misery caused by poverty, but
with "the threat of an arrogant laboring class, resorting to strikes,
violence and combinations [unions], a threat to the foundations not
merely of wealth but of existence itself."  Poor laws gave allowances
based on family size, and Senior thought that this decreased the
incentive to work and created the arrogant attitude of workers that
*their families had a right to exist* even if the workers themselves
did not or could not find work.  In not checked, Senior was sure that
the anger, arrogance and fanaticism of the poor would eat up all
rent, tithes, profit and capital and result in famine, pestilence and
civil war.

Senior deplored the increasingly popular socialist ideas of Hodgskin,
Thompson and Owen, arguing that equality could only mean equally poor
and miserable.  "[T]hough it is in the power of human institutions to
make everybody poor they cannot make everybody rich."

In 1832, he was made a member of the Poor Law Inquiry Commission, and
he largely authored the report released in 1834, which was the basis
of the new poor law, passed in 1834.  It implemented the following
1. workers should accept _any_ job the market offered
2.  the unemployed should be gen barely enough to survive
3.  the dole must be substantially lower than the lowest wage offered
on the market, and should be make so miserable and socially
stigmatized as to motivate him to take any job, no matter what.

	Senior's Theoretical Methodology
His economic analysis was most completely developed in _An Outline of
the Science of Political 'Economy_ 1836.  The first chapter states
his methodology, important for three reasons.
1.  It is the first explication of the method which has been very
influential among conservatives ever since
2.  It attempts to hide the normative foundations of the economic
3.  It appears to give theory the authority of a detached, objective,
neutral and scientific foundations, free of bias toward anyone's

Senior believed that controversy could be avoided by studying wealth,
not social welfare and happiness.  Ethics were not subject to
scientific confirmation or disproof, so they should be left out of
the way of scientific advancement, economics would be value-free, and
economists should refrain from giving advice.  The social uses of
economic principles and conclusions would be left to moralists and

Proper science would be deduced from basic premises that
	"consist of a very few general propositions, the result of
observation, or consciousness, and scarcely requiring proof, or even
formal statement, which almost every man, as soon as he hears them,
admits as familiar to his thoughts, or at least as included in his
previous knowledge; and his inferences are nearly as general, and if
he has reasoned correctly, as certain as his premises.  Those which
relate to the Nature and Production of Wealth are universally true."

[end part 2 / 3]

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