Chapter V: The Philosophy of Economy and the So-Called Science of Economy

[Sidenote: _Problem of the relations between Philosophy and Science of Economy._]

Internal observation, confirming at all points rational necessity, has rendered clear the existence of a special form of practical activity, the utilitarian or economic, and of a correlative Economic or Philosophy of economy. But however irrefutable may seem the demonstration that we have given, yet it will never be altogether satisfactory, while a very important point is left obscure: the relation between our _Philosophy of economy_ and the _Science of economy._

This is a system of doctrine that takes various names and forms, and is presented in turn as political, national, pure, or mathematical Economy; it is a system of doctrines which, although not without precedents in antiquity, has been gradually formed, especially in recent centuries, and is now in fullest flower. A saying of Hegel is often recorded, not without satisfaction, for even in his time he praised Economy as "a science that does much honour to thought, because it extracts the laws from a mass of accidentally."[1]

Has it the same object as our Philosophy of economy? If the reply be in the affirmative, how does it ever arrive at concepts altogether different? Or is it an empirical science, and if so, from what source does it derive the rigour and absoluteness by which it is removed from all empiricism and formulates truths of universal character? Two strict sciences with the same object are inconceivable; and yet as it seems, there must here be precisely two: hence the perplexity and disorientation that the affirmation of a Philosophy of economy must and does produce.

[Sidenote: _Unreality of the laws and concepts of economic science._]

If the economic actions of man be considered, in their uncontaminated and undiminished reality, with an eye free from all prejudice, it is never possible to establish even a _single one_ of the concepts and laws of economic science. Every individual is different at every moment of his life: he wills always in a new and different way, not comparable with the other modes of his or of others' willing. If A spent seven soldi to buy a loaf of bread yesterday, and to-day he spend the same amount in making the same purchase, the seven soldi of to-day are not for this reason those of yesterday, nor is the bread the same as that of yesterday, nor the want that A satisfies to-day the same as that of yesterday, nor is the effort that his action costs him identical with that of yesterday. If the individual B also spend seven soldi for a loaf of bread, the action of B is different from that of A, as that of the A of to-day was different from that of yesterday. If we lead the economist on to this ground of reality (or rather to the side of this Heraclitean river, in which it is not possible to dip the same hands twice in the same water), he will feel himself impotent, for he will not find any point of support for the edification of any of his theories.--The value of a piece of goods (says a theorem of Economy) depends upon the quantity of it and of all the other goods that are upon the market.--But what does "goods" mean? Bread, for example, or wine? In reality, abstract bread and wine do not exist, but a given piece of bread, a given glass of wine, with a given individual who will give a treasure or nothing in order to eat the one or to drink the other, according to the conditions in which he finds himself.--Any sort of enjoyment, when protracted, decreases and finally becomes extinguished.--That is the law of Gossen, one of the foundation--stones of economic theory. But what are these enjoyments that are protracted, decrease, and end by becoming extinguished? In reality there exist only actions, which assume different positions at every moment, owing to the continual changing of surrounding reality, in which the volitional individual operates. The difference is qualitative, not quantitative: if the individual A eat the bread that he has bought for seven soldi, when swallowing the second or the tenth or the last mouthful, he has a pleasure, not inferior to that which he had when swallowing the first, but different: the last was not less necessary for him, in its way, than the first; otherwise he would have remained unsatisfied in his normal want, in his habit, or in his caprice.--The economic man seeks the maximum of satisfaction with the least effort.--That is the very principle of Economy, but neither does this principle correspond with reality, most simple and general though it be. The individual A disputes for an-hour, in order to save two soldi in the purchase of an object, for which he has been asked ten lire, thus attaining the maximum satisfaction for himself with the least means that is naturally at his disposal on that occasion. The individual B, making boast of his magnificence, lights his cigarette with a banknote of a hundred lire, thus likewise attaining for himself the greatest satisfaction to which he aspired, with the least means that he possessed, namely, by burning that paper money. But if this be so, we have here a question, not of greatest and least, but of individual ends and of relative means adopted, or (owing to the unity of means and ends already noted), of actions individually different.

[Sidenote: _Economic Science founded upon empirical concepts, but not empirical or descriptive._]

Certainly, it is quite possible to abstract in a greater or less measure from the infinite variety of actions and to construct a series of types or concepts of classes and of empirical laws, thus rendering uniform the formless, within certain limits. Thus is obtained the concept of bread and of the consumption of bread, and of the various portions of bread and of other objects, for which a portion of bread can be exchanged, and so on. In this way are full philosophico-historical reality and the method of logical necessity and of realistic observation of facts abandoned for a feigned reality and for a method of arbitrary choice, which, as we know, has its good reasons for existing in the human spirit, and does great service by the swift recall and easy control of the requisite knowledge. And if Economy consisted in the establishment of a series of laws and examples in the above sense (or when understood in this way), it would join the number of the descriptive disciplines; and in that case there would be no necessity for us to speak of it further, for it would suffice to refer back to what has already been said of the relations of the Philosophy of the practical with practical Description, classes, rules, and casuistic. But economic Science is not descriptive, and is not developed according to the following formula: goods are divided into the classes _a, b, c, d, e,_ etc., and the class _a_ is exchanged with the class _b_ in the proportion of I to 3, the class _b_ with the class _c_ in the proportion of I to 5, etc. In such a formula is always understood the _up and down,_ the _for the most part,_ and _the very nearly:_ the classes _with their ups and downs_ are as stated; the exchanges take place _for the most part_ in the proportions stated; if things are to-day _very nearly_ thus, to-morrow they will be so _very nearly,_ in a different way.

On the contrary, the propositions of the Science of Economy are rigorous and necessary. "Granted that soils of different degrees of fertility are cultivated, their possessors will all obtain, besides the absolute rent, a differential rent, with the exception of the possessor of the least fertile soil" (Ricardo's law). "Bad money drives out good" (Gresham's law). Now, it is not conceivable in any case that soils of different fertility, all of them cultivated, should not give a differential rent. It will be said that the State can confiscate the differential rent, or that the possessor, owing to his bad cultivation or to his bad administration, may lose it; but the proposition does not remain less sound on this account. Nor is it possible that, when an unchangeable paper money is in circulation, gold coins should also circulate indifferently and on a par with it, when the total of the money in circulation lowers the value of the monetary unit beneath the metallic value of the better money. A madman who might be in possession of a hoard of gold pieces at the time of the circulation of the declining paper money (which causes poverty) would perhaps give it in exchange for the inferior money; but the wise man will keep it in his safe. The economic proposition expresses the rational necessity, not the madness, which is irrational. Those propositions, like all the others of economic science, are therefore certainly not descriptions, but _theorems._

[Sidenote: _Their mathematical nature._]

The denomination "theorems" makes us think at once of the mathematical disciplines, among which alone can economic Science find a place. The propositions of that science being excluded from philosophical, historical, or naturalistic science, there remains nothing that they can be, save _mathematical._ Yes, they are mathematical, but not pure mathematics, for in that case they would be nothing but arithmetic, algebra, or the calculus, that is, they would belong to the kind of mathematical disciplines called _applied,_ because they introduce into the paradigms of the calculus certain data taken from reality, that is to say, taken from without the purely numerical conception. Economic Science, then, is a mathematic applied to the concept of human action and to its sub-species. It does not inquire what human action is; but having posited certain concepts of action, it creates formulæ for the prompt recognition of the necessary connections.

[Sidenote: _Its principles; their character of arbitrary postulates and definitions. Their utility._]

It is not surprising that such propositions examined in their truth appear in one respect arbitrary and in another tautological. But it is not thus that they are examined, and it is not thus that propositions of mathematics are ever examined, for their value lies solely in the service that they render. Certainly Ricardo's law relating to land of varying fertility is nothing but the definition of lands of various fertility, in the same way that Gresham's law relating to bad money is nothing but the definition of bad money. The same may be said of any other economic law, as, for example, that every protective tariff is destruction of riches, or that a demand for commodities is not a demand for labour, since these, like the preceding, are simply definitions of the protective tariff, of the demand for commodities, and of the demand for labour. And it could be proved of all of them that they are arbitrary, because the concepts of land, tariffs, commodities, money, and so on, are arbitrary, and because they become necessary only when that arbitrariness has been admitted as a postulate. But the same demonstration can be given of any theorem in Geometry; since it is not less arbitrary and tautological, that the measure of a quadrilateral should be equal to the base multiplied by the height, or that the sum of the squares of a cathetic should be equal to the square of the hypotenuse. This does not prevent Geometry from being Geometry, or negate the fact that without it we should not have been able to build the house in which we dwell, nor to measure this star upon which we live, nor the others that revolve around it or around which we revolve. Thus, it would be impossible to find one's way in empirical reality without these economic formulæ, and that would happen which happened when economic science was still in its infancy; namely, that by its means measures of government were adopted, which were admirably suited to produce in the highest degree those evils which it was thought could be avoided by its help, a misfortune of which the Spanish government in Lombardy or in the Province of Naples in the seventeenth century, with its _cries_ and its _pragmatics_ in economic and financial matters, has left most excellent examples. Or what happens now, when ignorance, or deceitful interest, which profits by ignorance, proposes or causes to be adopted ruinous measures under the appearance of _publica salus,_ arguing that they are good, or that they are good for different reasons than those for which they could be maintained. Such, for instance, would be the proposal for fresh expenditure on public works that are useless or of little use during a period of economic depression in a country, and instead of relieving, increase the general depression; or the increase of protective tariffs, when industrial progress is slow, which ought to encourage industry, but on the contrary produce an industry that is unstable and artificial, in place of one that is spontaneous and durable.

[Sidenote: _Comparison of Economic with Mechanics, and reason for its exclusion from ethical, æsthetic and logical facts._]

The special form of application of mathematics, which we find in economic Science, has been compared on several occasions with that which takes place in Mechanics. "The economic man" of the first has seemed to be altogether like the "material point" of the second, and Economy has been called "a sort of Mechanics," or simply "Mechanics." All this is very natural, for Mechanics are nothing but the complex of formulæ of calculation constructed on reality, which is Spirit and Becoming in Metaphysic, and may be abstracted and falsified in Science, so as to assume the aspect of Force or a system of forces, for the convenience of calculation. Economy does the same thing, when it cuts off from the volitional acts certain groups, which it simplifies and makes rigid with the definition of the "economic man," the laws of "least means," and the like. And owing precisely to this mechanicizing process of economic Science, it is ingenuous to ask oneself why ethical, logical, or æsthetic facts are not included in Economy, and in what way they can be included. Economic science is the sum of abstractive operations effected upon the concept of Will or Action, which is thus _quantified._ Now since moral facts are also will and action, and since economic Science is not occupied with qualitative distinctions, not even with the quality itself of that economic fact which it employs as its material, it is clear that Science cannot lay any stress upon moral distinguished from economic facts, nor can it receive them in a special class, because its assumption is the indistinction of the two orders of facts, and they are included in that indistinction. As to æsthetic or scientific facts, these, taken by themselves, are not facts, but representations and thoughts of facts, and as such escape economic calculation: considered in the unity of the spirit, they are certainly facts, that is to say, volitional products, but as such are already found included with these in the indistinction of economic Science.

[Sidenote: _Errors of philosophism and historicism in Economy._]

As a mathematical discipline, economic Science is ultimately _quantitative,_ and it remains so, even when it makes use of the smallest possible number of numerical and algebraical signs (even when it is not _mathematical Economy_ in the strict sense of the word). The attempts, both of philosophism and historicism, which claim to deny Economy, by criticizing its abstractness and its arbitrariness, and to make it philosophical (or as they say _psychological_) and historical are therefore to be reproved. If Economy do not give the universal truth of Philosophy, nor the particular truth of History, Philosophy and History are in their turn incapable of making the smallest calculation: if Economy have not eyes for the true, Philosophy and History have not arms to break and to dominate the waves of fact, which would oppress man with their importunity and finally prevent him from seeing. Hence the absurdity of _philosophism_ and _historicism_; hence too, the sound tendency of Economy to constitute itself _pure_ Economy, free of _practical_ questions, which are also, it is clear, historical, not abstract and scientific questions.

[Sidenote: _The two degenerations: extreme abstracticism and empiristical disaggregation._]

But economy has in itself other enemies besides these that are external, in so far as it is certainly a mathematical discipline, but an applied mathematic, that is to say, one that assumes empirical data. These empirical data can be infinitely multiplied, and hence result infinite economic propositions, each distinct from the other; and on the other hand, they can be regrouped, simplified and unified, so as finally to return to the indistinct _x._ If the first tendency prevail, we have what is called economic empiricism, a cumbrous mass of disaggregated propositions; if the second, a very general formula, which sometimes does not even preserve the smallest vestige of that concept of human action from which it started, and becomes altogether confounded with the formulæ of arithmetic, of algebra and of the calculus. Sound economic Science must be at once abstract and empirical, in accordance with its nature, connecting and unifying disaggregate propositions; but it must not allow distinction to be lost in unity, for the one is as necessary as the other. Those who are unacquainted with the generalities of Economic Science, and those acquainted only with its details, are alike incapable, though for different reasons, of calculating the economic consequences of a fact. The first see all the facts as one single fact, the second, all the facts as different, without any arrangement by similarities and hierarchies. The question as to the relative proportion of generalities and particulars to be given in treatises, is one that has been much discussed, but since this has only a didascalic and pedagogic importance, it is only possible to answer it, case for case, according to the nature of the various scholastic institutions that are held in view. To maintain that Economy must stop short at this or that degree of abstraction, and for example be limited to what are called external goods or riches, excluding services; or to capital, as a concept distinct from land and human labour, without striving to unify these three concepts, is altogether capricious. Every unification, like every specification, can be useful, and haters of abstracticism are also abstracticists, but only half so.

[Sidenote: _dance at the History of the various tendencies of Economy._]

All those acquainted with economic studies will have recognized in the concepts that we have explained, the _logical motives_ of the history of Economy, the divisions, the polemics, the defeats and the victories of this or that school and the progress of that branch of studies. The quantitative character of economic science already appears in its classics; in the inquiries of Aristotle as to prices and value (_Politic_ and _Nichomachean Ethic_); and this is apparent also in the rare mentions by Mediæval and Renaissance writers. Economists have always been mathematicians, even when they have not spoken of mathematical Economy. Our writers of the nineteenth century, Galiani, Genovesi and Verri, were mathematicians in their methods; Francesco Ferrara, the greatest Italian economist of the nineteenth century, was a mathematician. The economic principle, which is all one with the excogitation of the economic man, was formulated by the head of the physiocratic school, Quesnay; and if the title of _political Economy,_ first given to the discipline by Montchrétien in 1615, prevailed, that of _social Arithmetic_ also sometimes made its appearance. Its progress has consisted, not only in the discovery of new economic theorems, but also in the connection and unification of those that had previously been posited in isolation, of material and immaterial goods, of the cost of production and of rarity, of gross and net produce, of agricultural rents and of all the others that are not agricultural, of the production, distribution and circulation of riches, of economic and financial laws, of social and isolated economy, of the value of utility and of the value of exchange. It has even been possible to unite with the body of admitted economic doctrines those of Marx, which seemed revolutionary, for these are only definitions of a particular casuistry founded upon the comparison of different types of economic constitution.

But to conquer empiricism was not enough; economic Science was menaced in its existence by the so-called _historical School,_ which refused to recognize abstract definitions and set up against them the infinite variety of historical facts; hence the strife with historicism conducted by Menger and the Austrian school. A consequence of the struggle against the political degeneration of economic science was the constitution of Economy as a _pure_ science (Cairnes). This was all the more necessary, inasmuch as by confounding the abstract with the concrete, and in the concrete itself, Economy with Ethic, there was a desire manifested upon several occasions among German economists (ethical school), and among Catholics of all countries, for an economic Science that should have as its base Ethic. The conception of Economy as a science deduced from the _egoistic_ hypothesis, has been the extreme form of the reaction against ethicism (for example in the treatise of Pantaleoni). The dangers arising from philosophism have been less, because recent times, in which that discipline has most flourished, have not sinned through excessive philosophy.

Of late, owing to the works of Jevons and of other Englishmen, of Gossen, of the Italians of the school of Ferrara, and of the Austrians, Economy has become at once more and more complicated and more simple, owing to the applications, extensions, and reductions that it has effected. But if with its progress it be able to become ever more exact and perspicuous, yet it will never for that reason become _organic;_ its character of a quantitative discipline, of an applied mathematic, in which the atomism of the postulates and of the definitions is insuperable, does not allow of such metamorphoses.

[Sidenote: _Signification of the judgment of Hegel upon the Science of Economy._]

In this connection and as the seal upon what we have just been saying, it is fitting to observe that the phrase of Hegel referred to above can only have been interpreted as expressing admiration for the degree of truth attained by Economy, owing to the ignorance of Hegelian philosophy that has become usual; as though Hegel meant that Economic science did much honour to the _thought,_ that is, to the speculative reason. Hegel wished to say, on the contrary, that Economy does much honour to the intellect, that is, to the intellect alone, to that _abstractive_ and arbitrary _intellect_ which he hunted down in all his philosophy: that it is not indeed true and philosophical science, but a simple descriptive or quantitative discipline treated with much elegance. This praise also contained the demand for a delimitation, which, however, he did not expressly enunciate, develop and execute.

[1] _Philos, d. Rechtes,_ § 189. _Zus._