Jones G.S., Claeys G. The Cambridge History of Nineteenth-Century Political Thought
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Emma Rothschild
to depict the ‘full empirical reality’ of economic life (Grimmer-Solem and
Romani 1999). Economists associated with the multiple historical schools,
from Germany, Hungary, Ireland and England to India, Japan and the United
States, were actively involved in the invention of local, regional, national
and international statistical offices, and in the collection and dissemination
of statistical information (see Grimmer-Solem 2003 and Studenski 1958).
The duty of both ‘historical’ and ‘orthodox’ economists was no longer, in
Beatrice Webb’s description, to lecture ‘politicians on the worn out text
of laisser-faire’, and to ‘imagine themselves to be the schoolmasters of the
universe’. It was rather to provide scientific advice on factory legislation,
employer’s liability acts, compulsory registration of friendly societies, mer-
chant shipping bills, ‘Charity commissions, Societies for the prevention of
the enclosure of commons &c., &c’ (Webb 1886, 3: 35, 37, 52).
The idioms of statistical reasoning were common, by the late nineteenth
century, to Germans and English, free-traders and protectionists. Even James
Wilson, the founder of The Economist, had very little taste for the ‘more
refined abstractions’ of the ‘more specially scientific Political Economists’.
He had ‘what may be called a business-imagination’, his son-in-law, Walter
Bagehot, wrote in 1860; ‘he had a great power of conceiving transactions’.
Wilson had founded The Economist in 1843, as a ‘weekly Free Trader’. It
became profitable, influential and widely imitated; it included a ‘bankers’
gazette’, a ‘railway monitor’, and copious statistical information; ‘the best
shape of communicating information had to be invented in detail’, in Bage-
hot’s account. It employed a redoubtable collection of journalists, many of
them with connections to other economic media, including Bagehot him-
self, Herbert Spencer, who was sub-editor from 1848 to 1853, and R. H. I.
Palgrave, later of Palgrave’s Dictionary of Political Economy.ButThe Economist
was also a new kind of medium between economic doctrines and a public
opinion, English and worldwide, which was transfixed by economic news,
economic statistics and economic ‘questions’, ideologies, or ‘-isms’. ‘He was
agreatbelief producer’, Bagehot wrote of Wilson; he diffused the truths, or
the ideas, which were ‘“in the air” of the age’ (Bagehot 1860,pp.1289–91,
1293; Edwards 1993,pp.4, 15, 143–51).
4 Abstract and deductive ideas
The ‘belief in the Historical Method’ was by the 1880s ‘the most widely and
strongly entertained philosophical conviction at the present day’ (Sidgwick
1886,p.203). But the moment of triumph of historical-statistical political
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Political economy
economy was also a swansong. The historical or ‘social’ school of economic
thought became fairly suddenly, in the course of a few years, the subject of
destructive criticism (Guyot 1914). In the continuing dialectic of the eco-
nomic side of human life, the German economists’ parody of Smithianismus
was embraced, by a new generation of counter-counter-revolutionaries, as
scientific truth. Just as John Stuart Mill, in the 1830s, had accepted the
romantic parody of late eighteenth-century political economy, so the new,
‘psychological’ school of the 1870sandthe1880s committed themselves
to the abstract and egotistical individuals of the historical economists’ dire
imagination. As the late nineteenth-century history of economic thought
was summarised, on behalf of the American Economic Association, in 1901,
‘this sudden revival of abstracter or deductive economics, just as such studies
seemed to be growing into discredit, is one of the most remarkable chapters
in economic theory’ (Fetter 1901,p.237).
The initial moment of what was later identified as the revolution of the
‘marginalists’ passed almost without notice.
19
The three treatises with which
the movement was subsequently most identified were in three different
languages (Grunds
¨
atze der Volkswirthschaftslehre by Carl Menger, published in
1871 in Vienna; The Theory of Political Economy by W. S. Jevons, published in
London, also in 1871;and
´
El
´
ements d’
´
Economie Politique Pure; ou, Th
´
eorie de
la Richesse Sociale by L
´
eon Walras, published in 1874 in Lausanne) and they
were the outcome of three different sets of circumstances, in the expanding
world economy of the times. Menger had grown up in Galicia, on the
estate of his maternal grandfather, a merchant who had moved east from
Bohemia after making a fortune during the Napoleonic wars; he went to
the universities of Vienna, Prague and Cracow, and in 1871 he was a civil
servant in the ‘press department of the Austrian “Ministerratspr
¨
adium”’
(Hayek 1934, pp. x–xi). Jevons grew up in Liverpool, the ninth child of
an iron merchant, and emigrated as a very young man to Australia, after
the failure, in 1848, of the family business. He returned to England in
1859, where he devoted himself to preparing a ‘Statistical Atlas’ of diagrams
and plates of historical statistics; in 1871 he was a professor in Manchester
(Jevons 1972–81, i,p.180). L
´
eon Walras was in 1871 a professor in Lausanne;
he had grown up in Normandy, and was successively a mining engineer,
an economic journalist, and a novelist (Francis Sauveur, published in 1858,
was a narrative, inspired by Balzac, of the ‘generation of 1848’ and of
19 It was the historical economist and economic historian W. J. Ashley, in 1907, who identified Jevons,
Menger, B
¨
ohm-Bawerk and Wieser as ‘the marginalists’. Ashley 1907,p.476,andseeWinch2009.
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Emma Rothschild
‘nature . . . tortured with a ferocious energy’) (Walras 1858, pp. ix, xviii;
Jaff
´
e and Walker 1983).
The most conspicuous innovation of the new theories, in the view of
contemporary observers, was a preoccupation with the psychological foun-
dations of economic thought. ‘It would not at all surprise me if in the
future this school should come to be called the “psychological school of
political economy”’, the Austrian economist Eugen von B
¨
ohm-Bawerk, at
the time a high official of the ministry of finance, wrote in 1890 (B
¨
ohm-
Bawerk 1890,p.265). The science of political economy must be concerned
with the ‘Measurement of Feeling and Motives’, in Jevons’ account (Jevons
1888,p.12). The Irish barrister Francis Y. Edgeworth called his own trea-
tise of 1881 Mathematical Psychics, and it was an essay, in his description,
in ‘the application of mathematics to the world of soul’ (Edgeworth 1881,
p. 9). One of the prominent young Austrian economists of the turn of the
century, Ludwig von Mises, was later criticised, as an ‘extreme devotee of
the psychological school’, for seeking to identify even the foundations of
monetary theory in the ‘unknown strata of self’ (Lutz 1913,p.146).
A second common concern, much commented upon at the time, was
with the economic theory of consumption. Ricardian political economy
was a theory of production, and of the three ‘classes of the community’,
owners of land, owners of capital and owners of labour (Ricardo 1817,
p. iii). Menger’s Grunds
¨
atze was to a striking extent concerned with the
‘causal connections between things and human welfare’; with needs, desires
and the ‘world of goods’. It started with individuals and their ideas about
a multiplicity of goods, including telescopes, opera glasses, ‘medicines for
diseases that do not actually exist’, winter clothing, horse and water for
flower gardens. Walras’ central concern, too, was with ‘people and things’.
Economic life, for the theorists of the 1870s, was very much like the world
they had observed (in the information service of the Austrian ministry, or
the Australian mint, or the Paris commercial press); a world of millions of
consumers and millions of producers, connected by ‘the cotton reports of
Ellison and Haywood’ in relation to ‘America, India, Eygpt’, in Menger’s
illustration, or, in Walras’ expression, a ‘world [which] may be considered
as a vast general market’ (Menger 1976,pp.53, 70, 74, 93; Walras 1926,
pp. 18–19, 44–5).
The counter-counter-revolutionaries of the 1870s were concerned,
thirdly, to demonstrate, once again, the possibility of a science of politi-
cal economy. Only Carl Menger, of the new psychological economists, was
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Political economy
engaged in any sustained way in the continuing disputes over the methods
of historical and non-historical economics (in the Methodenstreit of 1880s,
during which he was subjected, by Gustav Schmoller, to the double insult
of ‘Manchesterthums’and‘Mysticismus’) (Menger 1884,p.84). But the objec-
tive of the ‘psychological school’ was to show that political economy was
a science, as much as physics, or chemistry, or mechanics, or psychology.
It was an exact science, of universal validity. It was not national, and it was
not concerned, in particular, with national policies; it was a science, even
more than the sciences imagined by Jean-Baptiste Say and John Stuart Mill,
of pure rationality.
These preoccupations with science, finally, were a return to John Stuart
Mill’s old spectre, of man considered ‘solely as a being who desires to
possess wealth’. All the ‘marginalist’ revolutionaries of the 1870smade
declarations of faith, in an abstract and universal conception of individual
existence. Economic theory was concerned with ‘economising men’, in
Menger’s description (Menger 1976,pp.48, 173), and it was unempirical
in the way that chemistry was unempirical. The ‘theory here given may
be described as the mechanics of utility and self-interest’, Jevons declared, and
its ‘method is as sure and demonstrative as that of kinematics or statics’
(Jevons 1888,p.21).
20
Walras described economics, in a letter of 1901 to
the physicist and mathematician Henri Poincar
´
e, as a ‘mathematical sci-
ence with the same claim as mechanics or astronomy’, to which Poincar
´
e
responded that ‘in mechanics, one often ignores friction and considers bod-
ies as infinitely polished. As for you, you consider men as infinitely egotis-
tical and infinitely farsighted’ (Poincar
´
e 1960,pp.11, 13). If the rationalists
of the late eighteenth century were the first revolutionaries, and Lamennais,
M
¨
uller and Southey the counter-revolution, and Ricardo and the Mills the
counter-counter-revolution, and the historical schools of political economy
the counter-counter-counter-revolution, then the course of nineteenth-
century economic thought had returned, here, to its universal origin.
5 Money, empire and race
Political economy, by the end of the nineteenth century, had become the
new, conquering discipline of academic life, in much of Europe, North
20 Kinematics is the science of motion, as in, to take a modern example, the kinematics of undulatory
swimming in the American alligator.
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Emma Rothschild
America and Asia. ‘In every sphere we find that the economic way of look-
ing at things is on the advance’, Max Weber said in 1895, in his own inau-
gural lecture as professor of political economy at Freiburg; ‘we economists
have “come into fashion”’ (Weber 1994b, pp. 17–18). Economists were
no longer vaguely French or vaguely subversive. They were employed, in
their thousands, in public administration, in statistical offices, in private and
public enterprises, and in imperial government. ‘In some respects economic
science is now at the height of its prosperity’, and ‘the trained economist
to-day finds a great and growing demand for his services’, the President of
the American Economic Association, Arthur Hadley, said in his end of the
century address. But the turn of the new century was also a time of anxiety.
For the economists had experienced, with their new prosperity, a ‘loss of
economic influence’. ‘In one vital respect the conditions are far less sat-
isfactory’, and ‘our practical politicians...have an ill-concealed contempt
for a class of men whom they regard as theorists and visionaries’, Hadley
lamented; ‘economics and politics have grown apart in the immediate past’
(Hadley 1899,pp.194–5).
The great political questions of the early twentieth century – about
money, empire and race – were to a disorienting extent both economic
and non-economic. They were the outcome of extraordinary or exogenous
circumstances, which were at the same time of determining importance for
the organisation of economic life. The separation of economics and politics
was a consequence, for Arthur Hadley, of ‘the excessive use of psychological
terms and conceptions’; economics had become ‘a subordinate department
of psychology rather than politics’ (Hadley 1899,pp.198–9). But the psy-
chology of financial and monetary crises, like the psychology of empire,
was non-economic, in the terms of contemporary economic thought. It
was external to the large dialectical history of economic science, and even
to the opposition between theoretical (or psychological) and practical (or
historical) political economy.
The periodic fluctuations in financial markets had been an illustration,
throughout the century, of the limits of economic understanding. The cri-
sis of 1797 was in David Ricardo’s account one of ‘those extraordinary
occasions, when a general panic seizes the country’, and ‘“which baffles
ordinary speculations”...I think it utterly impossible to provide against
the effect of panic, on any system of banking whatever’ (Ricardo 1951–73,
i,p.358, v,p.410). In the aftermath of the crises of 1825, 1837, 1866, 1873
and 1893, the collision of economic forces or laws with the melodramas
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Political economy
of economic opinion was again the occasion for painful reconsiderations of
the science of political economy. Even the histor y of financial crises was a
flourishing genre of nineteenth-century economic thought. As the Amer-
ican economist Henry C. Carey wrote in 1864, ‘the essential characteristic
of barbarism is found in instability and irregularity of the societary action’
(Carey 1864,p.4).
The related political question that was of consuming importance to
nineteenth-century economists, and which has been of much less subse-
quent interest to historians of economic and political thought, was money.
Of the many thousands of publications on economic subjects of the times,
there was a profusion of works on the gold standard, bullion, seigniorage,
inconver tible paper money, bimetallism, brassage and currency unions; more
than 200 works of which the titles contained the word ‘money’ in the 1890s
alone. Money was a subject, throughout the century, of the highest and
the lowest politics; even of the century’s most heroic enterprise in supra-
national politics, in the monetary union of the 1860s, which extended, at
least in prospect, from Greece to England, and from Sweden to Brazil (Ein-
audi 2001). It was also a subject of political excitement. William Jennings
Bryan was nominated for President of the United States in 1900, by ‘yelling
and perspiring delegates’, as a Hercules of bimetallism, who had strangled
the monster of imperialism by rising above ‘the selfish, worldly plane of
greed and gold’ (Bryan 1900,pp.21, 24). The demonetisation of silver
in India, and the Chinese–Mexican currency agreement, were matters of
intense excitement. ‘Cecily, you will read your Political Economy in my
absence. The chapter on the Fall of the Rupee you may omit. It is some-
what too sensational. Even these metallic problems have their melodramatic
side’, Miss Prism declares in The Importance of Being Earnest; ‘Horrid Political
Economy! Horrid Geography! Horrid, horrid German!’ (Wilde 1895,act2,
scene 1).
The even vaster political question of the nineteenth century – of war
and empire – was the object, too, of intense investigation by economists.
One of the endlessly repeated charges against the ‘cosmopolitical school’
of political economy was to have spoken only ‘incidentally’ of war – this
was List’s accusation against Smith – and to have founded entire theories
on ‘the idea of a perpetual state of peace’ (List 1909,pp.98, 107). But
the laws of exchange and the laws of naval conquest were not entirely
distinct, as was evident in Balzac’s Formicalian empire, and the economists
of the nineteenth century were preoccupied, like other political writers,
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with wartime mobilisations, pre-war expectations, and post-war expansions.
The ‘peacefulness of the modern spirit’ was much overrated, Thomas Cliffe
Leslie wrote in 1860 (in an essay called ‘The Question of the Age – Is it
Peace?’); he counted no fewer than 337 ‘Wars &c’ in the post-Napoleonic
period (Cliffe Leslie 1879,p.72).
The political economists of the nineteenth century had been involved
with the administration of empire since James Mill’s and John Stuart Mill’s
organisation of the East India Company’s correspondence, or Malthus’
lectures at the Company’s Haileybury College for officials on their way
to India, or Bentham’s exhortation to Emancipate your Colonies! (Bentham
1830). Wilhelm Roscher published a long study of colonies, colonial policy
and emigration in 1856, revised in subsequent editions; an enquiry into
‘German colonial policy, a postulate of German cultural and economic pol-
icy’ (Roscher and Jannasch 1885,p.357). The French economist Michel
Chevalier proclaimed in his inaugural lecture at the Coll
`
ege de France that
‘Europe subjects everything to its rule . . . to direct this civilizing invasion,
governments must wish to hear the advice of a sound political economy’
(quoted in Todd 2009).
But the ‘general principles’ of colonial political economy were elusive,
even for the ‘Committee on Colonies’ which the American Economic
Association established in 1899. A quarter of the entire 1900 volume of the
publication which later became the American Economic Review was devoted
to a study called ‘Essays in Colonial Finance’, which ranged from French
taxes on dynamite in Senegal to the Oriental Seminar in Berlin, colonial
companies in the Bismarck Archipelago, the verponding or tax on fish-
ponds in Java, the role of ‘race-pride and “megalomania”’ in Italian Eritrea,
the ‘Casa de contracion, or India House’ in Seville in 1503, constitutional
provisions for the use of Danish in the lesser Antilles, the ‘swarming negroes’
in Dominica, ‘the evils of internationalism’ in respect of cesspools and
indebtedness in Ottoman Egypt, the ‘hut tax’ in British Bechuanaland,
and municipal revenues from ‘boiling offal’ in Singapore. ‘By the sanguine
imperialist the collection will not be found exhilarating reading’, in the
summary of The Economic Journal.
21
Political economy, like all the social sciences of the time, was by the last
decades of the century deeply involved with biological theory in general,
21 ‘Essays in Colonial Finance’ 1900,pp.405, 420, 431, 438–9, 469–70, 494, 505, 532, 571, 573, 643–6,
658;Reeves1901,p.60.
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Political economy
and racial theory in par ticular.
22
Physics and Politics, the little book published
by Walter Bagehot in 1872, which was one of the publishing sensations of
the age, was a good illustration. Its objective was to apply the new ‘physical
knowledge’ of the nineteenth century – of natural selection, the relationship
between man and his environment, and Herbert Spencer’s philosophy of
the will and the world – to the two ‘old sciences’ of politics and political
economy. It was a drama of the improvement of the economic mind, which
was also the English mind. But it was expressed, to a striking extent, in
the language of empire and race. The ‘mixture of races’ was full of danger,
and ‘the union of the Englishman and the Hindu produces something not
only between races, but between moralities’. The experience of the English
in India showed that it was very difficult to change the characters of men;
‘the higher being is not and cannot be a model for the lower’. The progress
of mind and form, in which ‘the English not only possess better machines
for moving nature, but are themselves better machines’, was an aspiration
for everyone without exception; ‘we need not take account of the mistaken
ideas of unfit men and beaten races’ (Bagehot 1873,pp.1, 70–1, 145, 183,
208–9).
The economist Alfred Marshall was the most prominent exponent of
what he described as ‘the biological view of the science’, and his Principles
of Economics of 1890 was the embodiment of these ideas of mental and moral
progress. Its language, too, was strikingly racialist. There was anxiety, as in
the assertion that ‘good is mixed with the evil . . . especially in the case of a
parasitic race’.
23
There was sublimation, as in Marshall’s succinct history of
industry andrace;‘meanwhiletheEnglishcharacterwasdeepening...life
became intense and full of awe’. There was economic history (‘race history
is a fascinating but disappointing study for the economist’) and the history
of economic thought; David Ricardo, Marshall wrote, was ‘often spoken
of as a representative Englishman: but this is just what he was not . . . nearly
every branch of the Semitic race has had some special genius for dealing
with abstractions’. The great drama, once more, was of the mind and
the economy. The ‘special character’ of the book, Marshall wrote in his
preface of 1890, lay in its concern with ‘ethical forces’. It was inspired, he
wrote, by the ‘Principle of Continuity’, in its biological (or Spencerian)
22 See the chapter by Daniel Pick in this volume (Chapter 19).
23 ‘The fact that there is an economic demand for the services of Jewish and Armenian money-dealers
in Eastern Europe and Asia, or for Chinese labour in California, is not by itself a proof, nor even a
very strong ground for believing, that such arrangements tend to raise the quality of human life as a
whole.’ Mar shall 1890,pp.71, 303–4.
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Emma Rothschild
and historical (or Hegelian) manifestations, which could be expressed, in
turn, in the mathematical continuity of marginal quantities. The ultimate
promise was that the ‘“economic man”’ of ‘abstract science’, who was
also the Englishman of the nineteenth century, would evolve, continuously,
into a lofty and social nature; ‘unselfishness then will be the offspring of
deliberate will’ (Marshall 1890,pp.vi,34, 47, 60, 71, 248). There was a
‘growing perfection of scientific machinery in economics’, Marshall wrote.
But the enduring concern of economists should be with ‘the direction and
the rate of growth of human nature in the future’; with ‘social science or the
reasoned history of man, for the two things are the same’ (Marshall 1897,
pp. 117, 121).
These were the preoccupations, too, of the American Economic Associ-
ation. The association had in 1896 published an extended study of the ‘race
traits’ of the ‘American Negro’, which predicted the ‘gradual extinction’ of
the black population in consequence of the ‘immense amount of immoral-
ity, which is a race trait’, referred in passing to the opinion of a French
surgeon in Algeria that the ‘native Mussulman population would rapidly
disappear’, and was memorable principally as the occasion for one of the
earliest and most brilliant reviews by W. E. B. Du Bois of the ‘unscientific
use of the statistical method’ (Hoffman 1896,pp.95, 176, 196, 318;Du
Bois 1897,p.133). At its turn of the century meeting in December 1899,
the association established a new committee on the economic condition of
the American Negro; the result was another very long study, published in
1902, of ‘The Negro in Africa and America’, of which the conclusion, as
summarised by Du Bois, was that ‘the slave trade and slavery were a species
of natural selection in which “the race probably made a gain”’.
24
6 The politics of political economy
The histories of economic and political thought were intertwined at every
turn, as has been seen, in the course of the economic century. But political
economy had an odd and even subversive relationship to the most impos-
ing classifications of nineteenth-century politics: to the opposition between
24 The study declared in the first paragraph that ‘by excluding the Chinese we have avoided one
threatening phase of heterogeneity. But unfortunately no African exclusion act was passed in the
days when such action might have delivered us from the black peril.’ ‘Council Meetings’, in American
Economic Association Quarterly, 1900,p.43; Tillinghast 1902,p.1; Du Bois 1903,p.695.
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Political economy
right and left, or religion and doubt, or nationality and universality, or rever-
ence (for established institutions) and disrespect. The posthumous and ever-
shifting renown of Adam Smith was only the most incongruous illustration.
The cold-spirited economists of the laissez-faire system were criticised, at
one and the same time, for their almost religious faith in the benevolent
consequences of self-interested actions, and for their lack of faith in human
benevolence. The Irish historical economist John Kells Ingram accused
Adam Smith, in 1888, of having been ‘secretly led’ by ‘a priori theological
ideas’ about the harmoniousness of nature, and of ‘a certain deadness to the
high aims and perennial importance of religion’, a failure to ‘keep in view
the moral destination of our race’ (Ingram 1967,pp.102, 106).
The political positions of the various historical schools, and of their critics
in the ‘psychological school of political economy’ were similarly difficult
to classify. The historical economists had in common, for the most part, a
concern with the ‘social’ (and in many cases the ‘national’) as an object of
investigation and an object of policy. Some were socialists, and some, like
Hermann Roesler, saw in Smithianismus the origins of socialist extortion.
Carl Menger pointed out the extreme oddity of a tendency which on
the one hand espoused extensive social reforms, and on the other hand
favoured the epistemology of the historical school of jurisprudence, with its
conception of ahighernation whose ‘unconsciouswisdom...standshigh
above meddlesome human wisdom’, and from whose ‘conservative basic
principles’ were derived multiple political consequences, ‘highly useful to
the ruling interests’ (Menger 1883,p.84).
The political setting of the marginal revolution was itself very odd, in the
terms of late nineteenth- and twentieth-century distinctions. The heroes
of the new discipline whom Jevons described ironically as the ‘obnoxious
subject of mathematico-economic science’ were not, in general, conserva-
tives (Jevons 1888, p. xl). Walras’ hope was that ‘while being scientifically
entirely socialist’, he might ‘still find a way to be politically as deeply and as
sincerely liberal as it is possible for anyone to be’ (Walras 1896,p.16). To
set the individual, and his or her consciousness, at the centre of economic
thought was, as Menger observed, to do something very different from,
and in some respects more subversive than, the historical investigation of
social and political institutions. It was to be less than reverent in respect of
at least some of the policies of established institutions. One of the earliest
charges against ‘Smithian’ political economy was that it conceived of the
state as a ‘useful enterprise’, or an illicit union. The marginal or psycholog-
ical economists, too, found themselves dissecting the state; looking to some
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