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The Natural Origins of Economics
By MARGARET SCHABAS The University of Chicago Press
Copyright © 2005
The University of Chicago
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ISBN: 978-0-226-73569-6
Chapter One Before "the Economy"
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. -John Maynard Keynes, The General Theory of Employment, Interest and Money
Daily references are made to the economy, whether in speech or in print. Most economists (and many politicians) maintain that virtually everything we do is governed by the economy. We are deemed to be producers or consumers at every moment of our lives. Every interaction can be defined as an act of exchange with an implicit price. Every object or service is potentially evaluated in terms of other goods and, thus, part of our so-called utility calculus. Even seemingly noneconomic activities such as marriage, suicide, or substance abuse have fallen under the lens of neoclassical economists, Gary Becker most famously. Paradoxically, just as we have come to see every human activity in economic terms, we have also come more and more to embrace the belief that we can control the economy, that it can be stabilized by monetary and fiscal measures. John Maynard Keynes's remark of economists and political philosophers-that "the world is ruled by little else" (1936/1973, 383)-has only grown in credibility and import.
If one goes back a few centuries, however, it is by no means clear that people, even the learned communities of Western Europe, perceived such an entity as the economy. Collectivities such as markets and nation-states were well recognized, and "intricately interconnected" (Rothschild 2001, 29). But the majority who wrote on political economy defined their subject as an investigation into money, trade, and wealth; they rarely spoke of economies per se. Commerce connoted civil transactions between individual merchants and consumers and was not, by and large, used in the aggregate sense. Moreover, it was not just that early modern thinkers rarely referred to an economy, either national or international. Rather, their emphasis was much more on specific phenomena-the interest rate, for example-than on an overarching system by which the pieces fit together. Moreover, wealth was essentially a property of the physical world; the principles that governed its growth and distribution were said to be natural and could be augmented much as a forest might extend its reach into a meadow. Wealth was readily equated with the fruits of the earth and sea, with minerals, fish, and exotic plants. For Carl Linnaeus, the epitome of wealth, and, hence, the primary objective of the science of economics, was the domestication of foreign plants such as tea and cinnamon (see Koerner 1999, 2, 80, 150). At the end of time, humankind would restore the abundance and complete leisure of the Garden of Eden. Early modern conceptions of wealth were strongly wedded to prelapsarian ideals, whether one reads John Locke, Jean-Jacques Rousseau, or Thomas Jefferson, and were a far cry from more recent conceptions of wealth in terms of maximizing utility.
Only gradually, over the course of the late eighteenth century and the mid-nineteenth, did economic theorists come to posit and identify an economy as a distinct entity and maintain that it was subject, not to natural processes, but to the operation of human laws and agency. The main thesis argued here is that, until the mid-nineteenth century, economic theorists regarded the phenomena of their discourse as part of the same natural world studied by natural philosophers. Not only were economic phenomena understood mostly by drawing analogies to natural phenomena, but they were also viewed as contiguous with physical nature. Economic discourse was, in short, considered to be part of natural philosophy and not, as we would now deem it, a social or human science. It did not then address an autonomous sphere as it does today.
How and why political economists came to see the economic domain as severed from the physical world, as the product of human action, human deliberation, and human institutions, is the story imparted here. This denaturalization of the economic order, as I would like to call it, took place gradually and, in certain fundamental respects, has never been completed. But, if one were to juxtapose the conception of the economic realm articulated by leading theorists in the 1770s to those articulated in the 1870s, the differences are, I think, patently obvious. There is in both cases a strong conviction that economic phenomena such as money and trade are orderly and, thus, subject to the operation of laws, only the mechanisms by which those laws operate, and the source of the phenomena in general, stem from two different worldviews. For Adam Smith, nature was wise, just, and benevolent, whereas, for John Stuart Mill, it was imprudent, unjust, and cruel. For François Quesnay, wealth was a gift of nature, whereas, for Alfred Marshall, it could be defined only in terms of property claims and, thus, in terms of human institutions. For Quesnay, wealth was a physical entity, grain for our nourishment, whereas, for Marshall, it was a state of mental well-being or utility. For Smith, the best policy was to dismantle human designs and allow the "natural progress of opulence" (Smith 1776/1976, bk. 3). For Marshall, and even more for his student Keynes, the best policy was one of intervention, of fiscal management and economic planning.
Postwar economists, via manipulations of the interest rate and the money supply, have widely sought to stabilize the economy and dampen the oscillations of the business cycle. In short, there is now a sense that the economy can be engineered, if not entirely controlled. As a quick perusal of any macroeconomics textbook since the 1970s makes evident, economists are unequivocally committed to "stabilization policy." The only area for dispute is which "tools" to employ to achieve stabilization. Exogenous and often unpredictable shocks beset the economy, but, through fiscal and monetary measures, economic planners are able to steer us along a path of steady-state growth and stability. The rhetoric is very much like that of civil engineers. Wind shears or earthquakes or ordinary frost might threaten the stability of bridges, but engineers can overcome these shocks given the right plans. Macroeconomists convey a similar degree of confidence in our ability to achieve a national economy of low inflation and unemployment coupled with healthy economic growth.
For the eighteenth-century savants, there was no such separate domain. Facets of their world, manifest as trade, population, or wealth, received analysis, and specific measures such as taxation could be used to achieve specific ends, but there was no overarching concept of an economy as an integrated system of production, distribution, and consumption. There were goals, to be sure-perhaps to increase the national treasury as a means to wage war-but there was no collective thing to stabilize or engineer.
It is important to grasp just how recent is our configuration of an economy as an autonomous set of relations-only two hundred years old. Economic phenomena, by contrast, have been discerned and analyzed in their own right since antiquity. Aristotle's Politics and Nicomachean Ethics, for example, contain some remarkable analyses of money, market exchange, and household production. Moreover, the terms oikonomike or oeconomia, or the art of household management, and chrematistike, or the more dubious activity of commerce, were established before Aristotle: arguably by Homer and most certainly with Xenophon's Oeconomicus of ca. 400 B.C. (see Booth 1993, pt. 1).
The term oeconomy became more prevalent in the early modern period, although more often in the context of natural history and physiology than in discussions of commerce and trade (see Schabas and De Marchi 2003). The oeconomy of nature became a commonplace term ca. 1700 and spawned many variants as well. Bryan Robinson, an Irish naturalist, published A Treatise of the Animal Oeconomy in 1734; François Quesnay issued his well-known Essai phisique sur l'oeconomie animale in 1736. Charles Bonnet appealed to an organic oeconomy to explain growth and generation in terms of the interaction of the different parts of an organism (see Daston 2004, 120). There were dozens of texts with similar titles throughout the mid-eighteenth century, even one, by the physician John Armstrong, entitled The Oeconomy of Love (1736). Oeconomy was also used to denote frugality or the wise management of one's household, but only in rare instances did it refer to the national economy at large. Jean François Melon's Essai politique sur le commerce (1734) uses the term but once, in the sense of a set of riches: "A better oeconomy produceth more Men, and a greater Plenty of all the Products of the Earth" (Melon 1734/ 1739, 54). Richard Cantillon had used the term once to refer to the arrangements of a slave plantation (see Cantillon 1755/1964, 33), and James Steuart's Principles of Political Oeconomy (1767), the title notwithstanding, makes only one reference to an oeconomy as we understand it (see Steuart 1767/ 1966, 1:16).
David Hume and Adam Smith rarely made reference to the oeconomy of a nation-state. In his History of England, Hume mostly used the term to mean individual frugality. In his Dialogues concerning Natural Religion, he used it in the sense of an orderly system, particularly in nature. Philo (Hume's spokesman) asks: "Is there a system, an order, an oeconomy of things, by which matter can preserve that perpetual agitation, which seems essential to it, and yet maintain a constancy in the forms, which it produces? There certainly is such an oeconomy" (Hume 1779/1947, 183). Philo extrapolates to "the whole oeconomy of the universe" (191) but also sees oeconomy in the structure of each animal (207) and even in the layout of a building (204). Only once, in his essay "Of Public Credit," did Hume remark on the "whole interior oeconomy of the state" (Hume 1777/1985, 354). Ironically, Smith used the term more in The Theory of Moral Sentiments than in The Wealth of Nations. There are again references to the oeconomy of a person, meaning his frugality, but more often the word appears as the oeconomy of nature (see Smith 1790/1976, 50, 77-78, 183, 321).
These are all signs that, until the late Enlightenment, the natural and the economic realms were one and the same. Even in the 1790s, Goethe claimed that "nature was the perfect economy" (see Jackson 1994, 411). Concepts and methods from natural history and the physical sciences shaped and governed the analyses of wealth offered by eighteenth-century thinkers such as Hume, Quesnay, and Smith. And none had a concept of an economy as we denote it at present or even as Ricardo devised, namely, a self-contained and self-regulating system of the production and distribution of commodities that can be more or less efficient and that can grow or decline. Indeed, as we will see in the next chapter, the most detailed account of an oeconomy during the mid-eighteenth century was the Linnaean oeconomy of nature, which encompassed human production, the web that joins animals and plants, the earth's surface (including fossils), and what we would now call the hydrologic cycle (see Worster 1977, 34-35).
For Smith, moreover, political economy as a pursuit was defined as the "science of the legislator," not a full-fledged study of economic phenomena (see Winch 1996, 409). Only in the first half of the nineteenth century did the concept of the economy emerge as an autonomous entity. John Stuart Mill was pivotal in rendering explicit the role of human agency as the framework for economic analysis, as the preliminary remarks to his Principles of Political Economy reveal: "In so far as the economical condition of nations turns upon the state of physical knowledge, it is a subject for the physical sciences, and the arts founded on them. But in so far as the causes are moral or psychological, dependent on institutions and social relations, or on the principles of human nature, their investigation belongs not to physical, but to moral and social science, and is the object of what is called Political Economy" (Mill 1871/1965, 1:20-21). Mill thus captures the very transition that took political economy from the physical to the social domain.
Several caveats need to be issued. For one thing, the term social science was coined only in the 1780s, by Condorcet, and did not enter the English language until the early nineteenth century (see Baker 1964; and Cohen 1994, xxvii). The factors that led to the emergent field of social science were part and parcel of the process by which economics detached itself from natural philosophy. For another, economic theorists have always embraced specific notions, either explicit or implicit, about human nature. I do not wish to imply for a minute that such notions were absent in the early modern period. Rather, they were refracted through the prism of physical nature, at least in the eighteenth century and the early nineteenth. While it would be imprudent to define nature-clearly the term has multiple meanings even at a given point in time-I will most often use the term to mean physical nature, the domain commonly studied by natural philosophers at the time under consideration. The phenomena under investigation might belong to the science of mechanics, or to experimental physics, or to natural history. For the sake of my argument, human nature, or the phenomena known as the will, the intellect, the sentiments, and the passions, is to be set apart from the rest of the natural world, even though there are some obvious points of overlap, human physiology most notably. I propose that, while human agency was not emphasized as the primary or proximate cause of economic phenomena in the mid-eighteenth century, that notion is, nonetheless, present in economic writings of the period.
Hume wisely remarked that no word "is more ambiguous and equivocal" than nature (Hume 1739-40/2000, 304). The passage of 250 years has done nothing to improve the situation. Raymond Williams commences his efforts at definition with the caveat: "Nature is perhaps the most complex word in the language" (Williams 1976, 184). It is not just the ambiguity and complexity of the word nature that make it one of the most elastic and evasive terms in our language but the wide array of definitions. Familiar distinctions-such as those between natural philosophy and moral philosophy, physical nature and human nature, nature and artifice, the natural and the supernatural-are, ultimately, drawn in sand, if only because no two philosophers have ever ascribed exactly the same meanings to those terms. Williams rightly distinguishes one enduring set of meanings that maps nature onto the material world, but it is an open question where to place human beings. Even if one were to separate human agency from physical nature, in a manner embraced by modern science, there is, perhaps, no place, at least in the sublunar realm, that is untainted by human activity. The ozone layer, Bruno Latour has argued, is a political object; the distinction between nature and society, he argues, is completely devoid of meaning (Latour 1993). It is not just that everything that exists is part of nature but that everything is also part of the social realm. As Lisbet Rausing has recently observed: "In its full brittle complexity, nature exists only on our sufferance" (Rausing 2003, 173).
(Continues...)
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