1.Full Economics and the Idea of Natural Laws

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THE

QUARTERLY JOURNALOF

ECONOMICSNOVEMBER, 1929

ECONOMICS AND THE IDEA OFNATURAL LAWS

SUM M A R YI. Dubious notions suggested by eighteenth-and n ineteenth-centuryconceptions of the "laws of nature" are being discarded from naturalsciences, and should be discarded from econo mics, 1. II. Evolutionof the idea of natural laws, since the seventeenth century; in the

natural sciences, "mechanical philosophy," belief in harmonious Orderof Nature, fatalism, and the modern view that scientific laws may beonly statistical laws, 6. III. Corresponding evolution in economicthought. Eighteenth-century moral sciences mechanistic, but notrigidly deterministic Economic optimism and fatalism. Modern viewof the nature of economic laws, 16. IV. Economic tendencies aretoward adjustment, but not necessarily any ideal adjustment. Socialwelfare depends on human motives and on institutions. This wasrecognized in eighteenth-century philosophy of the moral "Law ofNature" (jus Naturae), accepted by Physiocrats and Adam Smith, 34.I

ECONOMIC theory of the traditional type has alwayspurported to be a "scientific" statement of the mostgeneral "laws" of society's econom ic life. Not long ago,respectable economists were still boldly calling these"laws" of their science "natural laws" or "laws ofnature." But the idea of natural laws, w hich so largelydominated scientific and philosophical thought in theeighteenth and n ineteenth centuries, has in recent dec-ades lost something of its former freight of m eaning,and p erhaps of its former prestige. Philosophers have

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2UARTERLY JOURNAL OF ECONOMICSbeen criticizing the no tion wh ich the phrase conveyedto the nineteenth-century mind, and especially theuses that were made of it in psychological and social"sciences"; and even physical scientists have beenrevising their conceptions of the nature and significanceof scientific "laws." The laws which the naturalsciences discover are still called "laws," but there is adisposition, perhaps growing, to stop calling them "lawsof nature," on account of the dubious inherited con-notations of that phrase.' At all events, whateverterminology is em ployed, there is at least a new scep-ticism toward some of the notions which the generalidea of laws o f nature carried w ith it in the m id-nine-teenth-century mind. The tendency of present-dayeconom ists, even of the more "orthodox" type, to speakw ith m ore m odesty and caution about the " laws " o ftheir own science, and to drop all rhetorical languageabout the "natural laws" of economic life is thus inharmony w ith current tendencies in other sciences.

1. P. Struve, in his article "Lid& de loi naturelle dans la science eco-nomique " (Revue d'econom ie politique, 1921), refers to W indelband andR ickert, and the earlier w ork of R enouvier, as having specially contrib-uted to the modern critical revaluation of the idea of scientific "laws."W indelband and R ickert have been especially concerned with criticismof attempts to apply it in historical and social studies. E. Boutroux,work ing in the general tradition of Ren ouvier, has written keenly on thenature of laws in science generally. A. N. Whitehead, Bertrand Russell,and som e other English philosophers have, I believe, attacked the prob-lem on rather different lines. A n indication o f the present state of thediscussion in physical science may b e obtained from A . S. E ddington'sThe N ature of the Physical World (1928 ).The article by Struve, referred to here, and again below in the text, dis-cusses brilliantly some aspects of the problems considered in the presentarticle. But my approach is different, and my indebtedness to him is notgreat. I should perhaps apologize for the accidental similarity of myopening remarks to his, which seemed inevitable.2. "The conception of the ' working hypothesis,' provisional, ap-proximate, and merely useful, has more and m ore pushed aside the com-fortable 18th-century conception of 'laws of nature.'" BertrandR ussell, in Preface to H. Poincare's Science and M ethod, trans. M ait-land, p. 6.



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4UARTERLY JOURNA L OF ECONOMICSin the minds both of econom ists and of contemporaryworkers in other sciences were not adequatelythought out and expressed by anyone, but w ere merelyan elusive part of the "mental climate" or "atmos-phere." 3 The student must undertake the dangeroustask of m aking fully "explicit" ideas wh ich in part arem erely "implicit" in the w ritings of the Physiocrats, ofA dam Sm ith, and of the classical econom ists; for w ith-out making them more fully explicit than they are inthose writings, it is impossible to criticize them intelli-gently. This undertaking w ould be a dangerous one inany case; but a sufficient knowledge of the developmentof the whole outlook and philosophy of the epoch mightmake it possible to penetrate to the half-hidden founda-tions of its theory of the "natural" organization andlaws of society's economic life, and then to separate whatwas soundly "scientific" in that theory, according tomodern standards, from w hat was m erely dubious andmisleading speculation.Numerous scholars have, of course, made historicalstudies covering som e of the ground that needs to becovered. Som e A m erican readers will think at once ofThorstein Veblen's contribution. 4 But this, brilliant asit is in its way, can hardly be supposed by any one torank as a serious piece of historical and critical scholar-

3. W hitehead (Science and the M odern W orld, pp. 4, 5, 10, 11, andpassim) emphasizes the importance of the "climate of opinion" and the"secret imaginative background" w hich colored the fundamental con-ceptions of the creators of m odern p hysical science. Possibly this w aseven more important in the case of the pioneers in economics, who w ereless closely tied down, so to speak, to perfectly definite facts, and whowere not yet thinking in terms of m athematics. But I do not think thisinfluence of half-hidden "preconceptions," to use Veblen's term, upon awriter's theories, means that they are wholly a m ere product of an his-torically transient intellectual and social environm ent, and co ntain noelemen ts of permane ntly valid "truth."4. I refer, of course, to The Place of Science in the Modern World, andOther Essays, especially the essay on "The Preconcep tions of the OlderEconomists."



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ECONOMICS AND THE IDEA OF NATURAL LAWS 5

ship. It is an impressionistic and polem ical sketch, andis, I believe, biased by a serious misunderstanding of theideas of the older econom ists. Of more importance arethe studies of several European writers. The work ofNeumann 5 is, of course, a classic in the field; but itshistorical part is subordinate to his critical discussion ofthe relation (of resemblance or difference) of economiclaws to the laws of the natural sciences; and this, Ithink, is only a part of the problem. H asbach's mono-graph on the "philosophical foundations" of the teach-ings of Quesnay and of Adam Smith, 6 reflects muchcareful research; but is concerned with other prob lemsin addition to the special one of understanding andcriticizing their conceptions of "natural laws," andtherefore does not deal as directly or as adequately withthat problem as could be w ished. P. Struve, a Russianscholar, in a brilliant article in the Revue d'economiepolitique, 7 has applied the ideas of neo-Kantian phi-losophy to a critique of " l'idee de loi naturelle dans lascience econom ique," whose historical development heoutlines. Other studies might be m entioned. 8 But noone seems to m e to have dealt with all of the important

5. F. J. Neu m ann, " Naturgese tz and W irtschaftsgesetz," in Zeitschr.f i lr die ge s. Staatswiss. (1892). Also " Wirtsch aft liche G esetze n ach -f r ithere u nd jetz ige Auf fassung," in Jah rbiicher f t ir Nat ionalOkon. u.Statistik (1898), 3rd series, vol. xvi. The form er of these m onogra phsis praised by Marshall, Principles of Economics, footnote, p. 33.6. W . Hasba ch, Die allgem eine phi losophischen Gru ndlagen dervon F. Qu esnay u . A. Smith begri indeten Politischen Okonom ie (Leipzig,1890). I owe a good de al to this work, and som ething also to the sam eauthor's U ntersuchun gen Ober A. Sm ith.7. See note on p. 2 above.8. The R evue d'economie polit ique has pu blished a nu m ber of goodarticles on this s ubject, and others close to it, of which I n ote the follow..ing: B. Rayn aud , "Les discu ssions su r l 'ordre natu rel au xviiie sicle,"vol. xviiii (1905); E . Allix, "Le ph ysicism e de s Ph ysiocra tes," vol. xxv(1911) a particularly excellent article; and the sam e auth or's " Des-tutt de T racy, econ om iste," vol. xxvi (1912), which has little on econ o-m ic laws, but shows h ow this ideologist connected a qu ite orthodox typeof theory with h is system of psychology and i ts men tal " laws."



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6UARTERLY JOURNAL OF ECONOMICSaspects of the history and meaning of the idea, or tohave attained the point of view from which all of itsaspects can be sim ultaneously grasped, and thereforeproperly criticized.The present article attem pts no m ore than to m akesuggestions in this field of inquiry. It does not, ofcourse, pretend to be even a part, however small, of theadequate historical study which I have called for. It israther a preliminary survey of the ground and the prob-lems, and an effort to indicate some very tentativeconclusions. II

T he belief that all events, including hum an actions,are subject to strict "laws of nature" can be tracedback to antiquity, and has p layed an important role inthe philosophies of at least some leading thinkers innearly every epoch in the history of European thought. 9But in the seventeenth century, it attained a som ewhatnew prom inence, a new and more definite shade of mean-ing, and a new fruitfulness for scientific thought, w hichhave m ade it a main element in the scientific mentalityof the last three centuries. In the eighteenth century,the idea pervaded all disciplines, including the "m oral"or psychological and social as well as the "natural"sciences.' In the course of the nineteenth century, its

9. A good brief survey of the history of the notion, from antiquitydown, is given by R. Eucken in Main Currents of Modern Thought,trans. M. Booth (New York, 1912), art. "B. 3-Law." Windelband'sHistory of Philosophy has brilliant sections on the roles it played inancient, medieval, and seventeenth- and eighteenth-century thought.The first chapter of W hitehead's Science and the M od. W orld is sugges-tive on the probable nature of the debt of m odern science, for its con-ception of strict laws of nature, to ancient philosophy and even tomedieval theology.1. I cannot crowd much evidence in support of this statement into afootnote. Som e evidence is given in the text and notes below. Standardhistories of philosophy that deal ex tensively with the seventeenth andeighteenth centuries recognize the prevalence, especially in the latter,



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sphere gradually became limited, in effect, for manyminds, to the natural sciences. Students of the socialsciences became conscious of difficulties in the way of itsuse in their field, of which the eighteenth-century mindhad been less acutely aware. 2 This was due, I believe, toan imp ortant change in the connotations of the idea.Even in the history of the natural sciences, since theearly seventeenth century, the content of the generalbelief in "laws of nature" has been slowly changing.Throughout the whole period of three centuries, it istrue, the idea in this field has implied the doctrine ofdeterminism; and it is almost certain that a "mechan-istic" metaphysics or cosmology has lurked som ewherein the background, when not exp licitly accepted as thestarting-point, of scientific thought. 3 The seventeenth-century pioneers who created classical physics con-ceived the physical universe as almost literally a 'ma-chine"; a mass of particles of matter spread throughspace and perpetually moving and impelling one an-other to move, in accordance with the laws of me-chanics. Robert Boyle, the great pioneer chemist,adopted the "m echanical hypothesis" as the basis alsoof efforts to discover and formulate, and of the belief in, natural (causal)laws of human action (psychological and social laws); Windelband,HO ffding, Levy-Bruhl, and others. Condillac in France, and H artley inEngland, started the most definite systems of psychology, on this basis,on lines suggested by Hobbes and Locke. All the French philosophes Diderot, D'A lembert, Condo rcet, Helvetius, Holbach, and the rest were full of the idea; and Hutcheson, Hum e, Adam Sm ith, and othershad it, tho they did not parade it so mu ch.2 . I do not mean that talk of "social laws," historical laws, and thelike, became less prevalent; it became steadily more prevalent. But Ithink the efforts which this came to involve, to assimilate social sciencemore completely to the character of natural science, and the simulta-neous decline of the old religious "humanization of nature" as it hasbeen called, combined to produce an increasing dissatisfaction with thewh ole proceeding. This is not the kind of thing that one can prove bya few citations in a footnote.3. W indelband, W hitehead, and many others stress the importanceof the "m echanistic" assumption.



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8UARTERLY JOURNA L OF ECONOMICSof his ow n science, and defended it in volum inous es-says. 4 Most of the students who were advancing thevarious biological sciences also adopted it, and regardedthe bodies of animals and men as "machines." 5 In theeighteenth century, the idea was almost universallyaccepted. The whole universe, including living or-ganisms, was pictured as a vast "machine," whoseoperations are all explainable and predictable by thelaws of m echanics.6 And the doctrine of mechanisticdeterminism has remained until very recently a firstarticle in the creed of the natural scientist.In the eighteenth century, however, this idea was stillcom bined w ith the theological idea of an harm onious"O rder of Nature," in wh ich every thing or being hasa definite, ideal function to fulfill in the wisely plannedeconom y of the cosmo s. T he w orld-machine was ad-mired as a wise contrivance of the Deity for causingevery part of the whole to fulfill its function. Hence the"laws of nature," tho conceived as law s of m echanicalcausation, were also and at the sam e time conceived as"canons of conduct" providentially imposed uponthings. E. Mach, the great historian of the science ofmechanics, has shown how eighteenth-century phy-sicists, who followed up and completed the work ofNew ton, were often actually led to their formulationsof the laws of mechanics by setting out from theological

4. R. Boyle, Works (ed. of 1744, in 5 vols), iii, 450 ff. This particularessay is entitled "O f the Excellence and Grounds of the Corpuscular orMechanical Philosophy." Half the titles in the five vols. contain thewo rd "mechanical."5. H. Driesch, History and Theory of Vitalism, trans. Ogden (1914),pp. 22 ff.6. E. Mach, The Science of Mechanics, trans. M cCorm ack (Chicago,189 3), pp. 463, 464. "The French encyclopedists of the eighteenth cen-tury imagined that they were not far from a final explanation of theworld by physical and mechanical principles; . . . the world-concep-tion of the encyclopedists appears to us as a m echanical mythology incontrast to the animistic."



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postulates about the wisdom , simplicity, economy, andharmony of the "plan" of nature's operations. Thelaws, Mach says, were valid, and were afterward re-stated so as to get rid of the theo logical im plications.'In the course of the nineteenth century, the notionssummed up in the phrase "the Wisdom of Nature"were gradually discredited, and m ore or less com pletelyeliminated from scientific thought. Eventually thetheory of evolution came along, to exp lain the adapta-tions or harmonious adjustments found in nature asproducts of a blind h istorical process of "natural selec-tion"; and this theory also em phasized the imperfectionor incompleteness, at every stage of the probably eternalprocess, of the resulting "harmony." The conceptionof natural laws as providential ordinances for maintain-ing harmony in the universe, faded away, and all thatw as left of the idea, was the doctrine of determinismT he beautifully harm onious w orld-mechanism of theeighteenth century's imagination became the blind,ruthless, purposeless m echanism w hich oppressed theimaginations of so many n ineteenth-century poets andphilosophers. 8

7. E. M ach, op. cit., pp. 446-465. The great historian of this funda-men tal natural science here gives what is surely one of the m ost illum -inating discussions to be found anywhere of its early relations withtheology.8. A perfect picture of a mind that had only half completed thistransition is afforded by Huxley's famous lecture on "Evolution andEthics" (Evolution and Ethics and Other Essays, N. Y ., 1909). Huxleyupholds the idea of an Order of N ature, in which parts are made to func-tion harmoniously in the life of the w hole. But he finds that in the or-ganic world, the harmony is marred by the presence of pain, "a balefulproduct of the evo lutionary process," and by a com plicated struggle thatis most intense in the soul of m an and in society. He goes on to arguethat the "ethical process" in society, tho it is a product of, is yet in con-flict with, the "cosmic process"; an ethical civilization is built up no t by"natural" forces (which he takes to mean the forces of man's lowernature), but by unceasing "artificial" resistance to such forces. Hetherefore damns laisser-faire individualism as heartily as it is damned byCarlyle.



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10UARTERLY JOURNAL OF ECONOMICSIn the last few decades, physics itself appears to havebeen moving away from the rigid doctrine of deter-minism A layman can, of course, say nothing with con-fidence upon this matter, but it seems clear at least thatsomething is happening to the old idea of " inexorable "laws of nature. The v iew is expressed by high authori-ties that all scientific laws may be only "statisticallaws "; that is, laws of the average behav ior of things orentities in "crowds," which leave the behavior of in-dividual entities partly a matter of real "chance," andw hich m ay even leave room , in the case of the higherorganisms, for " free w ill." s Th e who le m atter is underlively discussion among physicists. Determinism, if notuniversally abandoned, at least is under fire. Mean-while, teleological ideas crop up w ith renew ed strengthin some quarters. The general position seems to be thatwhile there undoubtedly are " laws " for science to dis-cover and m ake confident use of, the implications of thisfact, and the nature of these laws, are open to a generalreconsideration.N ow it is clearly the mid-nineteenth-century concep-tion of purposeless but inexorable "laws of nature,"which has caused most of the trouble in the socialsciences. The belief in, and effort to discover, scientific"social laws" w as bound to lead to confusion, so longas it was supposed that all scientific laws m ust be of thistype. It is true that there have alw ays been those w hocould persuade themselves that no violence need bedone to our experience of the nature of human thought,emotion, volition, conduct, and social life, by the hypo-thesis that every mental and social event is mechani-cally caused and determ ined by antecedent events, thechain of which leads back into the physical environment,

9. A. S. Eddington, The Na ture of the Ph ysical World (1928), is m ychief authority for this statem ent.



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ECONOMICS A ND THE IDEA OF NA TURAL LA WS 11

and the physical organisms upon which the environ-ment acts. Some economists may be able to believe thatmen in business life are automatically impelled intogiven courses of action by a balance of external stimuli;and some historians to suppose that the course of historyis mechan ically determined by the action of the materialsurroundings of m en upon their bodies and m inds Butsuch notions clash w ith the persistent habits of thoughtdeveloped in practical life, and the usual blending of thetwo sorts of notions in social theories introduces a sadconfusion. In any case, social determinists have not at-tempted to get down to the level of close studies of themechanical causation of the actions of individuals, anddevelop sociology from physiology, as their view shouldlead them to do. They have been content as a rule withvague and sweeping generalizations about social andhistorical processes, which can hardly pass muster as"scientific laws." Meanwhile, the bias introduced bythis whole way of thinking has caused the know ledge ofmen's motives and purposes which w e acquire in practi-cal life to be neglected, because the notions of practicallife do not square with the dogma of mechanistic deter-m inism . It m ay be that the change now in progress inthe philosophy of the natural sciences will in time p ro-duce a "mental clim ate" more favorable to the unem -barrassed progress of the social sciences.In the history of the social sciences themselves, duringthe past three cen turies, the belief that there are "nat-ural law s" of hum an behav ior and therefore of the lifeof society, has not always been as closely identified withthe doctrine of determinism as belief in such law s hasbeen in natural science. In the seventeenth and eigh-teenth centuries, numerous w riters who tried to developgenetic or explanatory psycho logical and social scienceswere at the same time defenders of the doctrine of "free



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12UARTERLY JOURNAL OF ECONOMICSw ill." Even the notion of the m ind as a "mechanism,"and of society as a "m echanism" in wh ich the wills ofindividuals are the forces that interact, did not alwayscarry with it an acceptance, in the psychological sphere,of the "principle of necessity." Ho bbes, who w as oneof the first to construct what w as virtually a system ofpsychology and sociology on "m echanical" principles,'w as a rigid determ inist. But not all of the later writerswho tried to use the same method, accepted thedoctrine. Descartes and his followers were strict deter-minists in the sphere of "natural philosophy," but, in-sisted that the human will is "free." Yet they tried toanalyze the mechanics or dynam ics of the intellectualand emotional life, merely insisting that if the mentalm echanism is to work properly, the will must functionproperly, that is, under the control of "reason"; andthat its failures to do so , for which the individua l is toblame, are the sole causes of human sin and m isfortune. 2This, incidentally, was precisely the doctrine of Ques-nay, who professed himself as in metaphysics a discipleof M alebranche; yet Quesnay conceived society's eco-nom ic system as a "m echanism." 3

1. See Ha rding, Hist. of Mod . Phil., Book III, chap. 4; an d best of all,G. Croom Rober tson ' s B iography o f Hobbes , chap. 4 a nd passim.Robertson, the highe st authority on Hobbes, is very explicit on the im-portance of the m echan ical idea, der ived from the n ew physics of thetime, as the basis of Hobbes' work; and one need read no m ore than thefirst part of Leviathan , to see that it was the basis.2. See W indelband , op. cit., pp. 410-4 20 and passim; and H. A. P.Torrey's The P hil . of Descartes in E xtracts from h is W rit ings (1892),pp. 15-34 (Prof. Torrey's excellent introdu ction an alysis), and pp. 275326 (Descartes ' writ ings on Ph ysiology an d Ps ychology) .3. In Q uesna y's tim e, the philosophies of Descartes and M alebranchehad largely gone out of fashion in France, and m ost of les philosophesagreed w ith Voltaire in professing to take Locke instead of Descartes astheir master. Hence the Physiocrats, who l iked to quote M alebranche,were despised by ma ny as rel igious and m etaphysical dream ers. Thean xiety of E. All ix, in the artic le referred to ab ove on p. 5, n. 8, toclear them of this charge, leads him to go too far, I think, in den ying thereality of their debts to Malebranche. See Quesnay's Works (ed.



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ECONOMICS AND THE IDEA OF NATURAL LAWS 1 3

Of the Scottish school in the eighteenth century, towhich Adam Smith belonged, it is more difficult tospeak with confidence. They were in the traditionstarted by Lock e; and the sensationalists, association-ists, and ideologists of the later eighteenth century, whoalso professed to build upon Locke, were strict deter-minists. But Dugald Stewart claimed that they allm isunderstood Locke, and that the philosophy of theScottish school w as really the logical development of hisideas; and Stew art, tho he believed in psychological andsocial "laws ," believed also in "free w ill:" 4 The great-est of the group, Hum e, maintained that the "principleof necessity," or causality, cannot be proved; our re-liance upon the "laws of nature" rests only on "customand h abit "; but there is, I think , no ind ication that inpractise he abandoned determinism in psycho logy orelsewhere.' Hutcheson and A dam Sm ith are silent onOn cken), p. 745, where O ncken in a footnote brings together the chiefpassages in which Quesnay speaks of, and draws upon, Malebranche. Thearticle on Liberte (same volume, pp. 747 ff.) develops a form of the C ar-tesian doctrine of free will; and I agree w ith Onek en's estim ate of thegreat importance o f this in the Phy siocratic system. Q uesnay finds inthe power of "reason" to weigh, analyze, and modify "motives," some-thing that makes hum an conduct more than a merely mechanical pro-cess. The ideas of a m ental and of a social mechanism are plainly presentin the essay, but he insists that "reason" is free to play, or not to play,its part well in the process o f the equilibration o f "mo tives"; and thatthe course of events is beneficent for human w elfare only if it does playits part well. The doctrine of "l'ordre naturel" cannot be understoodwithout a study of this essay.4. D. Stewart, Works (ed. Hamilton) vol. i, A Dissertation on theProgress of Metaphysical, Moral, and Political Philosophy, since theRevival of Letters, pp. 258-272 , 279-280, 2 95-307, 311-313, 431-449,489, and passim. Th is work is mo st valuable to the student of eight-eenth-century thou ght, written as it was just after the close of the cen-tury by one who shared all of its most typical ideas, and knew almostthe w hole of its literature. It w as w ritten as a su pplem ent for the firstnumb er of the Encyclopedia Britannica, finally published in 1 825.5. Th e doctrine of determinism is sometimes identified with the no-tion which Hume did demolish and reject, namely, that causation issomething other than em pirical sequence or correlation; that we k nowwhy a cause produces its effect, and can prove that it must always do so.



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14UARTERLY JOURNAL OF ECONOMICSthe matter; but in their theories of the psychologicalgenesis of "moral sentiments," they always speak astho men were free to act or not to act in accordance withthe "m oral sentim ents" wh ich their experience gener-ates through the w orking of their mental "mechanisms."These exam ples w ill perhaps suffice to indicate the fre-quency with which belief in psychological and social"laws of nature," or in " mechanically " explainablepsychological and social processes, was divorced in theeighteenth century from any full acceptance of the doc-trine of determinism.'It was in the early nineteenth century that deter-minism, as applied to psychology and sociology, becamethe really prevalent and fully realized concomitant ofthe application in this sphere of the idea of "naturallaws." Professor Rogers, in his history of Englishphilosophy in the nineteenth century, brings out theway in which this doctrine seized upon the imaginationsof many in the early decades of the century, and becamewith some a kind of gospel.' The Benthamites, whoBut a "faith" that exact laws of sequence will always hold true, wherethe same conditions are present, is, I think, determinism; if one is notprepared, in practise, to admit exceptions, his lack of logical ground forhis faith makes no difference. Hume's explanation of this "faith" waspsychological; and I can see little difference between this and the Kant-ian doctrine that determinism is a "necessity of thought," arising, so tospeak, from the way our minds are made, instead of from the way inwhich the universe is made. The very explanation that Hume gives ofour belief in the reliability of the laws of physics, involves psychologicaldeterminism in the form of a belief in laws of the "association of ideas."6. Even the eighteenth-century writers who were professed deter-minists, often distinguished between physical and psychological causa-tion in a way intended to save what the "free will" advocates werefighting for. See some of the passages in Stewarts' Dissertation, citedabove, especially pp. 272, 305-307. Perhaps the essential difference be-tween most eighteenth- and most nineteenth-century conceptions ofpsychological and social "laws" lies in the fact that the eighteenth cen-tury was building on "introspective" psychology, and was thereforetrying to apply the new "mechanical" conceptions without being untrueto the realities of what the Germans call man's "inner experience."7. Rogers, English and American Philosophy Since 1800, pp. 128 ff.



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ECONOMICS AND THE IDEA OF NATURAL LAWS 1 5

utilized in their philosophy the association psychologyof H artley and Jam es M ill, were determinists; and thisgroup, of course, included the Mills and some of theother econom ists. At the sam e tim e, the R om anticistsof the period, building w hat systematic philosophy theyhad largely upon what they knew of the teachings ofKant, Fichte, and Schelling, upheld "free will"; anddenounced the deterministic and mechanistic philosophyas the work of the hated eighteenth century.' In France,after the death of "ideology," some romantic philo-sophies, and the idealistic philosoph y of C ousin, wh odrew heavily upon the Scottish school, championed"free w ill"; but there were Com te and many others touphold the opposite doctrine, or at least to talk of socialand historical laws in terms which clearly implied it.'Psychological and sociological determinism gainedground rather than lost it, as the century advanced.Y et the protest also gained ground, and gained sobrietyand philosophical penetration, as trained philosophersbegan to attack the whole idea of "inexorable" law s ofnature. T ow ard the end o f the century, a large part ofthe educated pub lic lost much of its earlier naive faithin the theories and "laws" of the psychological andsocial scientists. W hat we now need, I believe, is an ap-proach to social science more like that of the eighteenth-century writers, who, despite the fact that naturalscience in their time was rigidly deterministic, as it isperhaps ceasing to be in our time, were able to conceiveof social "laws" in a w ay that did not com m it them tothe treatment of men as mere automata.

8. I am, of course, referring here to the English Romanticists Co leridge, Carlyle, W ordsworth, Ruskin, et al.9. L. Levy-Bruhl, M odern Philosophy in France, chaps. 11, 12.



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1 6UARTERLY JOURNAL OF ECONOMICSIII

The evolution of the idea of "laws" in economics hasclosely paralleled its evo lution in the natural sciences;except that, as in other social sciences, it did not untilthe nineteenth century come to carry so strongly therigidly deterministic connotation.The central notion of economic theory of the "ortho-dox" type has always been the conception of a society'seconomic system as in some sense a mechanism. Labor,capital, business ability, goods, and the m oney of con-sumers, have been pictured as "gravitating" to theirbest markets, with resultant interactions of supplies,demands, prices, and incomes taking p lace according todefinite "laws." The recent development of mathemat-ical formulations of the general theory has m ade clearerthan ever its formal resemblance to the theory of m e-chanics. But of course the analogy with mechanics,and the conception of the economic system as a mechan-ism, do not need to be taken too seriously. I shallargue below that they can be used w ithout at all imply-ing acceptance of a mechanistic metaphysics, or of adeterministic theory of h um an behav ior. But their usein the past has undoubtedly often tended to foster akind of economic fatalism, which some critics have mis-takenly supposed to be a necessary consequence of theorthodox type of theory.In the eighteenth century, and by m any w riters in thenineteenth, the econom ic mechanism was regarded as awise device of the Creator for causing individuals, whilepursuing only their own interests, to prom ote the pros-perity of society; and for causing the right adjustmentto one another of supplies, demands, prices, and in-com es, to take p lace automatically, in conseq uence ofthe free action of all individuals. This doctrine of " eco-



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ECONOMICS AND THE IDEA OF NATURAL LAWS 17nom ic harmonies" was entirely in accord w ith the cor-responding notions of contemporary natural, as well asm oral, scientists. The notion that the m echanical lawsw hich "control" nature's operations, and enable us toexplain and predict them, are calculated to insure theharmonious mutual adjustment and proper functioningof things, did some harm in scientific thought, but didnot prevent men who held it from making scientific dis-coveries. M ach's remarks about the eighteenth-centuryphysicists were referred to above. Back in the seven-teenth century, Robert Boyle, in a remarkably cautiousand critical essay on the ph ilosoph y of "final causes,"said that Harvey, the physiologist, had told him that hearrived at his discovery of the circulation of the b loodby thinking that the valves of the heart must have a"purpose," and then look ing for it.' A nd there is littledoubt that the m inute study of the functions of organsin living organisms, which was prom pted by the desireof Paley and his predecessors to bolster up the " design "argument for a Deity, did much to promote the progressof biology. So the doctrine of economic harmonies,w hile definitely misleading in som e of its imp licationsand ch ildish in its extreme forms, was not necessarily ahindrance in the early stages of the search for regulari-ties or laws, and natural processes of adjustment, insociety's economic life.R icardo and h is imm ediate followers did not particu-larly emp hasize the notion of econom ic harmonies. In

1. Boyle's W orks, iv, 517 ff. This truly rem arkable essa y wa s writtenat the request of the Secretary of the Roya l Society, whose m em bers( including B oyle, New ton, and others) had discusse d the problem ofwhether n atural scientists should take any stock in the idea that N atureworks to certain discoverable, divinely appointed, ends; and wan tedBoyle to wr i te out h is v iews (see pre face of essay) . Boyle supportsthe idea ca utiously, as Newton d id also (see last few pages of the Prin-cipia) . Boyle found ed a lectureship in "natural theology" wh ich func-t ioned throug h m ost of the eighteenth cen tury.



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18UARTERLY JOURNA L OF ECONOMICSfact the pessimistic tendency o f their reasonings aboutpopulation grow th, dim inishing returns, and w ages andprofits have caused them to be contrasted with theoptimists, not without justice. It is true that they stillsupposed that self-interest, or the search for profits,would generally lead individuals to turn their effortsand investments into the channels in wh ich they woulddo m ost to increase national wealth; and also that the"natural" prices, wage-rates, and rates of profit, result-ing in the long run from the free play of demand andsupply, would all reflect and promote a better use of thenation's resources in m eeting its wants than w ould belikely to be produced by legislative "interference" w iththe flow of things to their best markets. But their pic-ture of the natural working of the econom ic machine,and of its outcome, was hardly rosy enough to leadthem to think that it suggested the presence behind thescenes of a benevolent, divine gu iding hand. In fact theR om antic poet and essayist, Robert Southey, attackedMalthus precisely because he had denied this hypo-thesis and had propounded a theory savoring of the lateeighteenth-century French do ctrines of "brute m ech-anism, blind necessity, and blank atheism." 2 Theclassical economists, in fact, shifted the em phasis fromthe beneficence to the inexorability of econom ic law s.The tone of their teaching was deterministic. The eco-nom ic machine was in effect represented as grinding outdefinite amounts of w ages, profits, and rent for the threesocial classes, almost w ith the precision and inevitabil-ity of a literal physical machine.Modern theorists, however orthodox in their generaltendency, are aware that economic laws do not havethis precision and inexorability. We are ready, I think,for the view that the general laws at which theory ar-

2. R. South ey, E ssay s M oral and P olitical (1832), pp. 77 ff.



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rives, tho it arrives at them in the first instance withoutthe help of statistical studies, are of the nature of "sta-tistical laws "; that is, they are laws of the averagebehavior of men in the m ass, in response to econom icconditions w hich their behavior in turn m odifies. Or, ifthis view is preferred, they are laws of the average" behavior " of prices and the like, under the influence ofsuch hum an behavior. 3 Experience of human m otives,of the kind that is gained in practical life, enables us tomake rough predictions of the ways in which, on theaverage, men will react to the changing physical andmarket conditions which affect their business plans.Since each man's actions affect the data of the calcula-tions of numerous other men, there are causal sequencesthat link business developments in one region or in-dustry, with those that follow it elsewhere; and thetheory of these processes can be worked out, with somehelp from the calculus, on lines somewhat remotelylike those of the theory of m echanics. But, of course, theextremely general laws of pure theory do not specifyany actual quantities, nor the actual forms of the func-tions supposed. The formulation of laws that can beused to m ake definite predictions requ ires the coopera-tion of the theorist and the statistician, and we are justbeginning to explore the possibilities and surmount someof the difficulties of this undertaking. It is not possible

3. Of course in saying that the laws of theory are of the nature ofstatistical laws, I am not denying the imp ortant and familiar differencebetween the "curves" o f theory and actual statistical correlation curves.Theory "isolates" its variables as the statistican cannot. But I amarguing that even if the coe teris paribus assumption were to hold good ina particular case in "real life," the conformity of the outcome of theforces at work in that situation to any definite "law" that had b een de-rived from a study o f similar cases or situations (in which the assum p-tions also had been realized) would be only approximate; and would bedue, not to identical similarities in all hum an behav ior occurring at dif-ferent times or in different places but under identical (external) condi-tions, but only to broad similarities in reactions of masses of men toidentical economic "stimuli."



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2 0UARTERLY JOURNAL OF ECONOMICSto suppose that even w ith the help of the best statisticaltechnique, we shall ever be able to make any very exact,or any very long range, economic predictions. A ll this isfamiliar. The point to be em phasized here is that it in-volves, not an abandonm ent of the method of "ortho-dox" theory, but a very definite abandonment of thenotion of "inexorable" economic laws; since that notionimplies that the choices of individuals are so strictlydetermined by external events (e. g., price-changes) asto be exactly predictable.Some economists might maintain that the laws oftheory are "of the nature of statistical laws," withoutadmitting the reason w hich I have assigned, that thebehavior of particular individuals is not strictly "deter-mined" by their economic situations; that they havenot only "non-econom ic m otives" which mod ify theirreactions, but also something like "free wills." Theeconom ist who, as a philosopher, feels that the doctrineof determinism is a "necessity of thought," may saythat our laws are only laws of average tendencies,m erely because our know ledge of the characters of in-dividuals, and of their econom ic situations, is imperfect;but that "in reality," all actions of men in the econom icworld, and therefore all economic events, are strictlydetermined by the action of econom ic situations uponhum an m inds. Personally, I cannot accept such a state-m ent about a "reality" adm ittedly unknow n to us; nordistinguish this doctrine from a hopeless econom ic fatal-ism. But at all events, this question does not affect thecharacter of the actual " laws " of economic theory.These are only laws of average tendencies, resultingfrom the average behavior of men in the mass; and aretherefore not "inexorable laws."There are some other connotations of the notion ofeconomic laws as inexorable laws of nature, which have



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little or no thing to do w ith the m atter of psychologicaldeterminism. Business m en som etim es speak of theselaws as if they w ere impersonal but active and irresist-ible forces, which control all prices, rates of wages andthe like, in the econom ic system, quite independently ofall hum an w ills, desires, and ideals. T hey m ay say, forinstance, that they cannot, if they wish to, pay theiremployees higher wages, because the market rate ofwages, which they have to accept, is controlled by eco-nomic laws. Modern economists should perhaps bedoing m ore than they are doing to dispel this notion,which has no doubt been encouraged by the too exclu-sive preoccupation of theorists in the past with the w orldof "pure competition." If the actual economic worldwere the world of pure competition, there would besome excuse for the attitude of the business men re-ferred to.' In that world, no employer could have awage-policy, or a price-policy. He could not, out ofbenevolence or a sense of justice, pay higher wages thanhis competitors were paying; nor, out of a more thanaverage hardness and greed, pay lower wages. But inthe actual economic world, every business man, andevery trade union or similar group, is in a situationwhich gives him or it what may be called, by a usefulrefinement of theory, some degree of monopoly pow er.Econom ic friction, to use the older term, leaves every-one free w ithin limits to have a "policy" in regard to hisprice; and to try to exact for himself, in his dealingswith others, a little more than the gains that wouldaccrue to him under "pure competition"; or, on thecontrary, to treat others a little more generously thanhe w ould or cou ld in that regime. This, of course, is a

4. Not, of course, for the notion of laws as external constrainingagencies, but for the idea that the individual employer in a labor marketcannot in the least degree deviate from, n or influence, the market rate ofwages.



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22UARTERLY JOURNAL OF ECONOMICSfamiliar qualification of the idea of rigid econom ic laws,to which even the classical econom ists were not entirelyblind; but they did not attach enough importance to it.A still m ore serious and m ore absurd error than theone just mentioned, which econom ists of the past haveunwittingly encouraged in the minds of laymen andopponents, is the notion that econom ic laws are sup-posed to describe an inevitable course of events whichneither the state nor any other hum an agency can pre-vent or alter. O f course the laws are on ly supposed todescribe what will happen under given conditions, theabsence of " interference " by the state being assumedas one of the conditions. But the impression that ortho-dox theory has always tended to discourage such " inter-ference" as likely to be futile, or pow erless to change thecourse of events, is not altogether baseless. It has al-ways tended to lead its votaries to a belief that there arerather narrow limits upon the pow er of society to alterthe direction and outcom e of the "natural" econom ictendencies at work within it. The foundations of thisbelief can only be touched upon here; but I shall havem ore to say about them in a future article.In the seventeenth century, Dudley North antici-pated what was nearly the outlook of the classicaleconom ists of the nineteenth century, in asserting t

Documents

1.Full Economics and the Idea of Natural Laws