Specific Changes Of Economic Doctrines
From all these general comments, however, on the achievements and the limitations of the "mathematical" and the "psychological" aspects of all that was "new" in neo-classical as compared with Ricardian-classi-cal economic theory, I turn now, finally, to a different, over-all comparison of the old and new systems of economic "doctrines."
The Psychological Aspect
In a sense the "neo-classical" phase of the history or development of economic theory involved not only the beginning of the still continuing, progressive "mathematicization" of much economic theory, but also the beginning of the trend, which I have just been deploring, toward general prevalence of the mistaken view or supposition that all economic theory
The Mathematical Aspect
On its formal side then, all "neo-classical" economics represented an early stage of the long, slow development, which still is going on today, of "mathematical economics" or what may be called a gradual "mathematicization" of economic theory. Yet in a sense the real origins or "roots" of this development are very old;
Neo-Classical Economic Theory, Marginal Analysis,
Or The Revolution In Value and Dıstribution Theory
As I have said, this era (1870 to 1914) witnessed, along with renewed prevalence of the liberal ideology, a great renaissance, and array of new, further advances of economic theory of the main-traditional, liberal-and-scientific, general kind. There had been, as regards the progress of such theory, a relatively sterile interlude of about two decades after the first appearance of Mill's Principles. The Ricardian-classical theoretical system as expounded and improved by Mill had become, for all concerned with it, substantially a finished, static body of doctrine, repeated in the textbooks but no longer undergoing much further progressive growth and improvement. Outside the circle of its "orthodox" exponents, a good many other economists were dissatisfied with it, and various minor, scattered, and isolated theorists did produce, within that otherwise sterile interval of time, little-noticed studies which in various degrees and ways anticipated or resembled the new developments that were to conquer and dominate the field after 1870. In fact, the list of forerunners of those later developments runs much farther back, into the quite early nineteenth century. Diverse scattered writers in various countries, unconnected with the early classical school and unknown, until much later, to most economists, had done bits of work on the "mathematical" and "psychological" lines (see below) and had already made some of the same "discoveries," which were later independently renewed and more fully developed in the big theoretical "revolution" of the era that I speak of. Probably Von Thünen Gossen, and Coumot were the most important of those earlier forerunners; but therevolution," i.e., its impact on the whole profession began when, in 1870-1871, W. S. Jevons in England, Karl Menger at the University of Vienna, Leon Walras in Switzerland (University of Lausanne), and (though he did not publish any of his work until much later) Alfred Marshall at Cambridge, England, all about simultaneously, and independently of one another and of those forerunners, struck out on their differing individual variants of the new lines of economic-theoretical research involving, centrally, what came to be known as "the marginal utility theory of value."
As it appears now in retrospect, the totaTimovement which thus began exhibits as a whole a striking unity-in-variety. In all it produced or included a large "family" of similar-and-different systems of economic theory, created in different countries and centers by different economists and "schools" or groups of them, as schemes of analysis differing among themselves in many important detailed respects, but all involving, in a broad sense, the same general theoretical vision. Although in the following classification which in part is rather arbitrary, some of the groupings make less sense—have more internal diversity and less distinctive characters as entire groups—than others, one may perhaps speak of the Jevonian, Austrian, Walrasian, Scandinavian, American, and Marshallian "schools," or varieties or variants of the "new" kind of economic theory, of this era.
W. S. Jevons led the way in England, and the later English theorists whose styles and views most nearly resembled his and who may perhaps be grouped with him or called "Jevonian"—even though these two were in many ways unlike each other and unlike Jevons, and though all three were equally brilliant, original, and independent—were Philip Wicksteed and F. Y. Edgeworth. Meanwhile, in Austria, at the University of Vienna, there came on the scene at the same time with Jevons, but of course independently—these men and Jevons at first knew nothing of each other's work or ideas—the trio of first-generation leaders of the famous, still continuing, "Austrian school" of economists, Karl Menger, Eugene von Bohm-Bawerk, a.nd Frederick von Wieser. Meanwhile again, at Lausanne, Walras—at the Same time with Jevons and with Menger et a]., but again in complete independence and isolation from them all—was producing his unique and impressive system of economic theory which, however, was to gain any wide vogue or influence only in a later time and slowly, because it was fully "mathematical" in substance and expression, and intricate and difficult, and hence was at first and long remained beyond the reach or ready comprehension of most economists. "Walrasian" theory did fairly soon begin to spread among Continental European economists of diverse nationalities, and find here and there among them various able adherents and exponents who went on improving it and adding to it or developing it further on their own lines; and the ablest of all these later Wal-rasians was the great Italian figure, Vilfredo Pareto. In the English-speaking world, Walrasian (and Paretian) economics have only quite recently begun to be really widely studied and appreciated. But we are only halfway through my list of six general "groupings" of the great economic theorists of the last decades of the nineteenth century.
In the Scandinavian countries, two Swedish leaders became most widely known and influential, beyond as well as within those countries: the earlier and greater of these two was Knut Wicksell, and the later and less original, Gustav Cassell; but there have been many others in that able group. In the United States, the important theorists in the era that I speak of were fairly numerous and diverse and do not all belong in any single "school." J. B. Clark, F. W. Fetter, T. N. Carver, H. J. Davenport, and others developed systems considerably resembling that of "the Austrian school" and somewhat indebted to it, though each had much originality. F. W. Taussig remained, as a theorist, closer than others to the old, classical, Ricardo-Mill tradition, and only half absorbed or accepted the "new" ideas of his generation; but he had great wisdom, produced much good work, and taught and formed a great many younger American economists of outstanding merit. Irving Fisher stood out as the one great American mathematical economist—on his own, not Walrasian, lines. And now having glanced at all these groups I circle back to England and speak last of Alfred Marshall (of Cambridge University) and his pupils, admirers, and followers, the "Marshallian" school. This makes sense because Marshall, though he started to form his own system back in the time of the first appearance and impact of the work of Jevons, and included in it ideas similar to those of Jevons though arrived at independently, did not publish any of his main work or make his system as such known beyond the small circle of his Cambridge pupils until much later—1890—so that all the other "schools" I have mentioned were already flourishing before his emerged, so to speak, onto the world's stage. As we shall see hereafter, the Marshallian system was in some ways a broad "synthesis," combining elements or features of several of the other "new" ones of this era and of the old Ricardian classical tradition generally, more fully discarded in the other new schools.
Now I shail adopt here a doubtless arbitrary and criticizable, but fairly common and convenient, usage of the terms classical and neo-classical for designating general tvpes of economic theory, and use these terms as follows. By the "classical" theory of economics I mean the old, early-nineteenth-century theoretical structure which was created mainly by Ricardo and given on the whole its best full formulation or elaboration, with his own (Mills) revisions and additions, in J. S. Mill's Principles.And I use the term "neo-classical" in two different senses: in a very broad sense all the diverse, late-nineteenth-century theoretical structures that I have referred to, can, I think, be called "neo-classical"; whereas the Marshallian system, alone or uniquely, was "neo-classical" also m a narrower, special, strict, and emphatic sense.
The Jevonians, Austrians, Walrasians, and Americans (with the exception or Taussig), and generally the Scandinavians (partially ex-ceptmg Wicksel) were prone to lay exclusive stress on their disagreements with and departures from the Ricardian-classical tradition, and regard their innovations or new concepts and analyses as making up a complete intellectual "revolution" or "new economics," having very little in common with the old Ricardian-classical economics. But this I trunk resulted in all these cases from a too narrow or exclusive concentration of attention on the (indeed important) issues, questions, or matters of relatively detailed and technical, conceptual and logical significance, involved in all the innovations or new advances; and from a tendency to take for granted" and not fully realize the large amount of continuity that was there at the same time, as regards the broad, basic, underlying general outlook that was—with some changes even here indeed, but largely-carried on. All (in the broad sense) "neo-classical-economic theory had in common with the old Ricardian-classical type or theory, in the first place, the economic-liberal outlook and hence the same general conception of the province or field and over-all task of economic theory as such, i.e., to develop a full understanding or explanation of the abstract general "laws" or "principles" of the operation, functioning or processes of the liberal economy, or system of "free," private, producing enterprises and consuming households and competitive markets. And this carried with it, also, continuing work on much the same rangeof theoretical problems, concerning the "determinants" and modes of determination," in the working of that system, lof the exchange values or relative prices of the different products, the changing allocation of all productive efforts and resources into different em-pJovments and resulting outputs or supplies of the different products, and the distribution" or division of all income, or the value of all output, into the "shares" going as wages, profits, interest, rent, etc., to the contributors of the different kinds of "factors of production" or productive services. In all the varieties of "neo-classical" theory, new and different and generally superior analyses of these problems were developed, with the aid of new "conceptual tools" and reasonings, which led to largely or partly new and more "correct" and fuller "solutions" of the old problems. But there was to a great extent retention or continuation of the early "classical" vision of the general character, structure, and mode of operation of the liberal economy, and of the array and the interrelations of the main problems which should be investigated. Among all the "neo-classical" systems in that sense, the Marshall-ian system was "neo-classical" also in the special sense that it retained or carried on, and combined with (Marshall's version of) the "new" ideas, important elements of the old Ricardian-classical, distinctive analytical scheme, which the other "new schools" either wholly or more largely discarded.
All of the "new schools" together achieved a very considerable advancement or improvement of the science on its abstract and "technical," conceptual and logical or theoretical side; an advance beyond the primitive or rudimentary, Ricardian-classical theoretical analysis of economics, which had achieved little more than a relatively clear and systematic formulation of "common-sense" ideas about the subject matter, to a much more truly or fully "scientific" kind of analysis. The latter, in other words, was more fully precise and rigorous, thorough, penetrating, and logically unified, and could yield many insights not readily evident or available to the "common sense" of generally informed and intelligent but not specially trained or mentally equipped observers of and reasoners about economic affairs. There was still not very much truly scientific empirical research in economics, or effective work toward making the inquiry an empirical as well as a logical science; but the advances made in this era in theoretical research were also required and useful steps toward making more scientific empirical research possible later on. Yet along with all the real and important gains or advances that were achieved, there was I think a partly offsetting loss of some of the somewhat greater or relative "realism" in a meaningful sense, which Ricardian-classical theory, with all its crudity and deficiencies, had possessed. Although the latter had not spelled out so well, with full precision and logical rigor," all the implications of its basic insights; it had embodied on the whole a better intuitive grasp of the most important factors and connections in the real processes of the operation and development of the real economy. The "neo-classical" systems, in the process of improving theory as such, made it more abstract; and the new preoccupation with the work of perfecting the conceptual and logical details of the analysis, and working out all the exact implications of various possible sets of assumptions, or conceptual-visions of imaginable situations, entailed a partial withdrawal of attention from the effort to form and adhere to a realistic vision of the real world. Moreover, there was also, in neo-classical as compared with the old classical theory, an increased and excessive concentration on just "value and distribution" theory, or analysis of the competitive market system's way of determining the relative prices of the economy's different products, and productive services and resources, and allocating the latter among different industries. There was no adequate continuing development of "aggregative" theory, of the whole economy's total output or income and the places and relations within that of total consumption, saving, investment, etc.; and theory of economic growth or development. Perhaps, however, all these limitations of "neo-classical" eco-nomic theory were or made up only the unavoidable and not excessive "price" of all its new, real, and great achievements, which on the whole outweighed them. And it would be futile to deplore the fact that the new advances made economic theory, as it had not been in earlier times, too intricate, "technical," and esoteric to be readily intelligible to a very wide public; although this change probably reduced its influence on public opinion and actual governmental economic policies. Wot of course the "science" still did not gain enough prestige to make the public willing to accept the recommendations of economists without understanding the analyses behind them. Economics had to go through this phase of its development, which was of more value for its still later, further progress than for its current usefulness within this era.
Now I turn to consideration of the two main aspects of the innovations or novel elements in neo-classical as compared with Ricardian-classical economic theory. In a sense all these innovations were mathematical in form, i.e., in their conceptual and logical nature—even "hen expressed in ordinary language, not in the special "language" of athematics. And in substance the most important substantive innova-ions were in a sense "psychological," i.e., were comprised in the new analysis of "utility" or all the human wants and satisfactions, subjective eelings, and comparative estimates of the amounts of "utility" of differ-nt goods or goals or gains, or in short "motives," thought of as under-ying, producing, and directing human economic behavior. In other words, on its formal side, all the "new" economic theory systematically carried out—although often entirely or mainly in ordinary verbal lan-guage—applications of the concepts and logic of integral and differential calculus to the task of analyzing the relations among the changes of variable economic quantities—"inputs" of work and of other re-"purces in production and "outputs" of products, and market supplies, emands, prices, costs, incomes, spendings, savings, investments, etc. and with the help of this new conceptual and logical apparatus, as applied in this particular field, the attempt was made to analyze fully—as Ricardian-classical theory had not tried to analyze—the psychological or subjective backgrounds of consumers' demands, and evaluations of products, and the backgrounds in the same sense of all economic choices or decisions and actions; as well as greatly to improve on the older "classical" analysis of the other, not human-psychological, but physical or material part of the economic subject matter—the relations among the changes of the "tangible, objective" economic quantities or variables.
The Political And Policy Ideas Of The Liberal Economists Versus Those Of The Businessman
Here the difficulty is that as a rule the social philosophies of the liberal economists were not made at all fully explicit in their writings. "Political economy" was already beginning to change—become contracted or narrowed down—into "economics"; economists were becoming more strictly specialized, or concentrating their efforts, with a new intensity, on just working out a full, precise, and rigorous development of their own body of abstract theory of the potential working, or processes, of the "free" and competitive business economy. Many of them indeed also made contributions to the kinds of empirical research connected with that, which were beginning to advance beyond the early rudimentary stages to more modern scientific forms or methods and achievements. But the main emphasis was still on theoretical research in economics; and the social-institutional ideals and assumptions or presuppositions of liberal-and-scientific economic theory tended as a rule, in the new development and expositions of the latter, to be more latent than explicit. But a glance at what generally were their explicit views on some particular issues about proper governmental economic policies will serve to bring out the rather wide distance separating their (more consistent) liberal ideals from those which were then dominant in the business community and generally in the ruling climate of opinion of that era.
The business community's and general public's form or version or .understanding of economic (laissez-faire) liberalism was naturally not really self-consistent or fully in line with the authentic tradition of thought of the liberal political economists. For of course "practical" men have always tended to demand, simultaneously, ample freedoms for themselves, from public control of or interference with their acquisitive activities, and restrictions, for their protection or benefit, of the freedoms of others to invade their markets or fields of opportunity as new competitors on even terms. Hence the spread among the Western world's businessmen, after the age of mercantilism ended, of inclinations to support laissez faire in general never made them all supporters, e.g., of international free trade—or made this part of the consistent program generally popular among them, outside of mid-nineteenth-century England, where the special, local, and temporary situation of the English manufacturers of that time did lead them to support this also, in their own self-interests. But in other countries and very generally in this slightly later time of which I am speaking, tariff protectionism was, inconsistently, a part of the program of public policies strongly supported among businessmen devoted in (some) other respects to laissez faire. Nor was there in the business world ever a prevailing, full, consistent awareness of the fact, and the implications for public policy of the fact, that within each national economy there could be a real harmony of all private business interests with the common or public economic interest of that whole community only if the economy in question had in it no monopolies, and no impediments limiting the mobility of labor, capital, and resources of all kinds out of the less and into the more productive and demanded and rewarding fields of employment for them. Public policies designed to foster and maintain full prevalence of real, complete "free competition" in that sense, throughout each national economy, have always been included in the policy programs of the liberal economists, but were not generally supported by businessmen in this era. On the contrary, the latter generally wanted the governments of their countries and localities to not only tolerate but actively assist their efforts to achieve and maintain more or less monopolistic power positions for their enterprises, and put obstacles in the way of their would-be competitors. In short, they really wanted the state to be active in all the ways seen as helpful to their own business interests; and laissez faire to them meant only a ban against all the kinds of reform legislation or state intervention that were beginning to be demanded by spokesmen for labor, social service workers and reformers, discontented agrarian groups, etc.
Now the views of the leading "orthodox" economists of this same era, as to what public policies should be, were in almost complete opposition, on all these points, to the views prevailing in the dominant business and political circles. The economists continued, with virtually complete unanimity, to argue for complete freedom of international trade, or free development, and full use of the benefits, of the international division of labor. Also, they all realized and stressed the need for either nonexistence or public control of monopolies, and full mobility and "free competition," as the precondition of realization of "the economic harmonies." Hence, all at least opposed public policies or measures seen as aiding growth or maintenance of private monopolies; while many, especially in the United States, where governmental "antitrust" or antimonopoly legislation began to develop in this era, saw its consistency with the spirit of true economic liberalism, and strongly supported it. Nor did the economists only thus, in these two areas, of foreign-trade policy and policy with respect to domestic competition and monopolies, uphold the full, consistent, laissez-faire tradition and oppose the tendencies of business-community sentiment that were inconsistent with its applications in these areas. The economists or many of them also, in varying degrees, themselves departed from adherence to strict laissez faire in some of the other fields or directions in which the businessmen most strongly insisted on it, and supported many of the reforms most vigorously opposed in the business world. Among these were inspections of factories and mines and enforcement of laws to safeguard the health and safety of the workers; restrictive regulations of female labor and child labor, and compulsory education; workmen's compensation for industrial accidents and diseases; and legalization of previously illegal labor-union activities. Also they generally favored public regulation of the services and charges for the services of such both publicly essential and naturally monopolistic enterprises as the railroads and (later) light and power companies; and monetary policies that would allow adequate expansion of the supplies of money and credit along with the growth of production and trade, and be just to debtor as well as to creditor classes. All these and many other such issues found the leading economists, more often than not, aligned with the democratic, popular, and progressive reformist elements, and against the conservative businessmen. Thus, all in all, there was already in that time a tendency among the latter to regard the academic economists generally as "subversive radicals."
A few among the economic theorists of the time, moreover, gave still more ground for that charge against them by giving favorable theoretical consideration to the possibilities and possible merits of thoroughgoing socialism as a regime or system alternative to free and competitive capitalism. But these were exceptional; although the range of differing political views among the economists was fairly wide, the majority were firm believers in the liberal capitalist system and the program of liberal public economic policies already indicated here. Whether and how far my term "conservative liberal' applies to them is perhaps an open question; certainly they were as a rule much less "conservative" for more "progressive," perhaps even "radical" in many cases and on inany issues, than were most of the businessmen and upper- and middle-class peonle of the. time.. But I think, that on the whole the greater number of the eminent theoretical economists of this era can be classified as tending to be in slight degrees at least "conservative" liberals in their over-all social, moral, and political outlooks. They were adherents of the traditional liberal vision, of the good, "free" society and economy with its limited role for the state and large role for the "free play" of private interests and initiatives, competition, voluntary adjustments among individuals and groups, etc.; and adherents of that vision who thought it was on the way to progressively fuller realization in the world around them. Thus they viewed that world with considerable optimism, and argued for preservation of its essential features and against all really radical, socialist, and other programs for change away from them. There was often too little realization, by these economic theorists, of the real width of the gap between their ideals and those that were dominant in the business community and were exerting more influence than their own on the current evolution of the real, existing order. But I have said enough about all these matters; it is time to turn to the new developments, in this period, in or of economic theory itself
The Variety Of Viewpoints, Especially Among “Intellectuals”
Yet I must now immediately "qualify" that too simple or single account of the liberal outlook of this era, which rather describes the relatively most conservative variant, or part of the rather wide spectrum of differing "shades" that in fact coexisted in different quarters. The variant just described was indeed widely prevalent, especially among the rich and the men of business, but never universal even among them. In other quarters there were many exponents of other outlooks considerably unlike that—often much more universally and impartially humane-liberal, and progressive or reformist on various lines, and in some cases quite "radical." The very stability, security, confidence, and optimism that prevailed favored tolerance of dissent, and there were many viewpoints and much free discussion. My whole effort in the first part of this chapter, to portray the general climate of opinion of the era, is designed only as a prelude to discussion of the new developments, within it, of liberal-and-scientific economic theory, which were influenced by and related to that climate. But there were important differences, as I will hereafter indicate more fully, of the (varying) political views of the eminent economists who carried out those new developments, from the views or sentiments predominant in the business community and already generally characterized here. Nor were the economists alone in "deviating," in various ways and degrees, from the standpoint of just that body of conservative-liberal opinion. It is, for my purpose here, an awkward fact that systematic, broadly comprehensive, articulate, social-philosophical thinking and writing, or political theory in that sense, was already declining in this era, which produced few important political philosophers and, among them, fewer still who had much knowledge or understanding of or interest in economic problems and affairs as such. The on-going growth of intellectual specialization was further separating the newer developments of economic analysis, on the one hand, from those of political reflection, on the other, in some ways to the detriment of both. Hence most of the writings, by noneconomist intellectuals, in the broader field of general social, moral, and political philosophy, that I might refer to here, did not in fact have much clear relevance to the problems of main interest to us. But it may be worthwhile to refer very briefly in passing to a few such writers and their points of view.
Herbert Spencer's extreme individualism and antistatism, and "social Darwinist" theory of all social "evolution" (identified with "progress"), glorifying the unmoderated competitive struggle among men and groups and societies as "nature's" method of producing progress through innovations, conflicts, and "survival of the fittest," had a wide vogue among the successful and especially conservative, conservative-liberal businessmen and other people in this period. But Spencer went, in these matters, to an extreme position far beyond the views of most economic-liberal economists, and his outlook must not be confused with theirs. How far "liberal" thought, within this same era, could diverge or differ from Spencer's variety is well shown by the example of the Oxford political philosopher, T. H. Green, a humane-idealist reformer who wanted the state to do a great deal, to create and maintain for all men the conditions—involving many restrictions of their "freedoms" in the simplest, ordinary meaning of the word—under which all would be enabled and helped to develop in themselves the good human characters that would make them "free," in a deeper sense, from the inner compulsions of their evil passions, and from the frustrations the unwise run into. But Green's interesting philosophy, also, had little relevance to or connection with the liberalisms of the era's liberal political economists.
And the same must be said even of the different political ideas of the essayist, Walter Bagehot, despite the fact that Bagehot was himself a respectable economist in his way and on the side. His Lombard Street, a study of the workings of the London money market, deservedly became a classic in its field; and his short essay on The Postulates of Political Economy gave an excellent statement of the conditions and limits of the empirical validity of the traditional assumptions and resulting "laws" of economic theory. But Bagehot's social and political philosophy expressed a point of view and an array of insights which lay (alas!) beyond the mental horizons of this era's leading economic theorists. His political outlook was conservative-liberal (with the main accent on "conservative"), in a way or sense which meant that he and they had little in common. He had a fine blend of two different visions, not often combined. On the one hand, he had the Burkeian and romantic-conservative vision of the socially useful and necessary, though non-rational, emotional, and imaginative foundations of social unity or cohesion, order, and voluntary deference and loyalty from below upward, and responsible humaneness from above downward in the social hierarchy. And with that he combined the liberal-individualistic, rational and practical (economic and utilitarian) vision stressing free pursuits and fulfillments of and adjustments among the self-interests of all, in the competitive economy and in the political system of the democratic state, as they could work within the limiting, modifying, and protecting milieu of that other part of the spiritual, cultural, or moral, social order. Adam Smith could have understood Bagehot—indeed these two had much in common—but the fields of awareness of the liberal economists of this later time did not, I think, generally extend far into this other area. It is time now to turn to what can be said about their social philosophies or outlooks.
The Conservative Tinge In The Renascent “Liberalism”
But now, having compared the renascent liberalism of this epoch with the original, late-eighteenth-century liberalism, with regard to the optimism that was present in both but made even more pronounced in the later version by its inclusion of the fully developed liberal theory of progress, I am going to compare and (in a measure) contrast the two in a different respect, in a way which may at first confuse the reader-or seem to be in conflict with a part of what I have just said. As compared with the original eighteenth-century form of the classical liberalism, the revival-and-revision of it which was the late nineteenth century's ruling climate of opinion was, I think, in a not great but significant degree, less "radical" or more "conservative"—in a sense now to be explained. The liberal vision of the good society of free individuals was now (in the later period) less a vision of a new order still to be achieved through emancipative reforms or a throwing off of stilj existing and strong, old, traditional restraints; it was more nearly or largely just a favorable, theoretical depiction and celebration of an order thought of as already largely achieved or existing, or well on the way to full realization, and an armory of arguments in its defense, against new, incipient threats to it, arising from the advance of democracy and expanding activities of democratic governments, the growing strength and demands of labor or the working class, and the continuing socialist movements. But to clarify, explain, and defend all that I have in mind about this, I must say more about the historic meanings and relations of "liberalism" and "conservatism."
The expression "conservative liberalism" can seem self-contradictory only if one thinks, in the far too simple but common way, of "liberal" and "conservative" as words with simply, directly opposite meanings, i.e., of the "liberal" simply as the "progressive" person, favoring reforms or changes (of just any kind, or all kinds?), and of the "conservative" simply as the standpatter or opponent of all changes away from whatever is the status quo in his particular time and country. But the absolute relativism to which this leads makes little sense; e.g., it implies that, in a Communist country, the orthodox Communist is the true "conservative." And of course it has long been abundantly clear to the reader of this book that "liberalism" in the classical sense cannot be equated with reformism or progressivism of just any or every kind. Throughout its history or development, "liberalism" in this more definite sense has always been a particular vision of "the good society," mainly stressing its ideas of the proper liberties or freedoms of all individuals, which for everyone must be extensive but limited for the sake of the similar freedoms of all other men, and an equitable balance of the freedoms of all; and a scheme of institutions harmonizing the free activities of all, in pursuit of their own ends, with the requirements of their common welfare. Indeed, an ideal of progress also has always been inherent in this liberalism—but progress, first (from all older, non-liberal starting points) to the fullest possible realization of that vision; and then continuing progress mainly through free, private efforts and innovations by all in all departments of life, and competitive selection of many among those for general or widespread adoption and continuance; with later, new, institutional reforms or changes only as made necessary by emerging new conditions, for continuing realizations of the old, enduring, liberal ideals. This liberalism, then, was relatively "radical" in the contemporary setting when it first appeared as a fully formed and articulate "vision," in a still very nonliberal actual world, and implied or called for a sharp break with or away from the dominant nonliberal traditions; and the same liberalism became, in the altered setting of a later time, relatively more "conservative," when its "vision" was, or was being, largely realized. All this, however, still does not fully bring out my meaning in referring to "Victorian conservative liberalism"; let us look, next, at the also not very simple historic meaning of "conservatism."
The old European conservatism that was dominant most of the time through long ages before the Enlightenment, and resurgent for a time just after it, was rooted in the nonliberal conviction that extensive freedoms for all individuals would be certain to prove incompatible with, and would destroy, any good or tolerable order in society. For this outlook stressed the inequality or diversity or unlikeness of men, i.e., the existence, in many grades, of naturally superior and inferior kinds of men—as regards all kinds of intellectual, practical, and moral capabilities; and the necessity of control of inferiors by superiors, as the sine qua non for a well-ordered society. There must be firm government by an elite of the wise and good, a definite and (by all) accepted social hierarchy, fixed statuses and roles for all men, and strict subordination of all private individual desires to a common conception of "the common good" and the duties of all in relation to that, imposed by the ruling elite; in short, in this sense, an "organic" society. From Plato to Burke, this outlook in different forms had many great exponents. There is a clear contrast between its basic assumptions and those of liberalism, which stress the near-equality or similarity or "common human nature" of all men, and attribute to (nearly) all alike innate, potential capacities for adequate rationality and decency, or wisdom and virtue. Obviously the liberal assumptions lead to the liberal belief in the possibility and desirability of achieving and maintaining all needed order and harmony in society, through a free agreement and collaboration among all in developing and supporting the necessary institutions to make secure the freedoms of all, and justice among all, and the growth of a system of exchanges or mutual services aligning their private with their common interests. At the respective foundations of the two outlooks lie, above all, liberal optimism and conservative pessimism about the native mental and moral capacities of most men—all ordinary men—or "the many."
Now by no means all eighteenth-century liberals—advocates of a great enlargement of the individual liberties or freedoms of "the many," or a general abolition of most of the old conservative restrictions upon those—were conscious "radicals" in like degrees. Many did not at all fully realize how "radically" or greatly the old order might be transformed in the long run by the results of the carrying out of their program; for they tended to suppose that when all became "free," their behavior in most respects would change but little from what it had been under the traditional controls, which they regarded as simply unnecessary. In particular the structure or hierarchy of the social classes, and he roles and relations of and attitudes between the upper and lowet classes, were not expected by many to be greatly changed. Even under the new conditions, of absence of the old compulsions, and freedom of all individuals to follow the dictates of their own interests or desires, there would still be leadership by those best qualified to lead, and sufficient, voluntary deference to them by the majority; for as intelligent and decent individuals, all would see their own interests as best served by these relations. The liberals in any case were not complete, extreme, all-out, or absolute libertarians in the manner of the anarchists; nor were they (generally) egalitarians like the socialists. The most moderate among them envisioned continuing, general, "free" acceptance of a social order on the whole more like than unlike the old familiar one, or involving only a few limited departures from it.
But in the early nineteenth century, the state of things became, in fact, greatly altered. Partly in consequence of the new individual freedoms and the uses made of them by growing numbers of self-made captains of industry, and workingmen, and others, and partly in consequence of changes of conditions which would have occurred to a great extent in any case, there appeared to most observers to have been a great growth of widespread distress, disorders, and disharmonies in the working of the "free" societies—new tensions and conflicts, and so on. Hence there were, in different quarters, the strong resurgence of the old conservatism, the growth of radical, Utopian socialist dreams and agitations, and the tendency of even liberal thought to become strongly tinged with unwonted pessimism. The still later improvement of conditions, already described above, toward the latter part of the nineteenth century, brought about the revival of very widespread acceptance of the liberal outlook, and of its confident optimism; but the trial it had gone through, and the lasting effects of the earlier, renewed preaching of the old conservatism, left a mark upon it. The body of liberal-individualistic belief in the late nineteenth century, in the upper and middle strata in Western societies or among all the most influential people in them, was a liberalism that had absorbed and been modified by a little of the outlook of the old conservatism, so that it was a relatively conservative liberalism, more consciously than that of the late eighteenth century had been. The composition of the really governing class or classes had changed. The men of business and wealth, more than those of high birth, were now dominant; but they tended to imitate the old aristocracy or take on many of its attitudes and views, to believe in the right and duty of their class to exert the main influence in society and the state, and to consider it the duty of the members of the lower classes to accept subordination to them. At the same time, the growth of political democracy was transferring potential, predominant political power to those lower classes; hence the laissez-faire maxim of economic liberalism became primarily a demand that democratic governments be not allowed to enlarge their spheres of authority and activity, and invade or restrict the spheres of the independent authority of businessmen and organizations over their affairs and employees or subordinates, and/or do things contrary to their strong desires.
Victorian Conservative Liberalism and NeoClassical Economics
The Late Nineteenth Century’s Ruling Climate Of Opinion
The intellectual scenery now changes, abruptly and radically, as we turn our attention away from Marxism to the main new developments in our field of interest in the last few decades of the nineteenth century: the resurgence of the classical liberalism, which again became (with some new modifications), the ruling climate of opinion in the Western world; and the associated new advances of the main-traditional, lib-eral-and-scientific kind of economic theory. In fact the outlook that prevailed most widely in this final part of the nineteenth century— and on into the present century, down to the First World War— was not only extremely unlike the outlook of Marx. It was also, although less markedly, considerably unlike any of the diverse outlooks that had been widely prevalent, in different quarters, in earlier parts of the nineteenth century, and expressed or reflected in such diverse intellectual productions as the political economy of Malthus and Ricardo, romantic-conservative political philosophies, early (pre-Marxian) socialism, and the composite pattern of the views of J. S. Mill. And the changes, from the early and middle parts to the latter part of the century, of the background of prevailing, real economic and social conditions and popular attitudes undoubtedly helped to produce this change of the intellectual climate.
Until rather late in the nineteenth century, industrial capitalism, the bourgeois civilization, and democracy were all still young or incipient, immature, raw or crude, at once promising and disturbing, distress-laden, and diversely received, controversial affairs. Hence the times produced a wide range of rival philosophies and programs. At about the center of that range stood the classical liberalism—expressed as a whole most fully in Benthamism—and the liberal, classical political economy; but they were under strong and widespread, hostile, critical attacks from both sides—from romantic-conservative or reactionary critics to the "right" of them, and from the early radical prophets of socialism to the "left" of them. Moreover, even the liberal economists —Malthus, Ricardo, and their followers—presented a rather largely and deeply pessimistic view of the current operation, tendencies, and prospects of the liberal capitalist economy, and the current and prospective state or condition of society and the people. They thus expressed a sense of the existing and prospective evils, or widespread miseries, which was not entirely unlike the impressions that underlay and motivated those other rival creeds and gospels, even though the liberal economists alone regarded those evils as resulting from unalterable "laws of nature" and not from the liberal system or institutions, which they favored as the best attainable.
But later, when time and the further evolution of the modern Western societies had moved on into the last few decades of the nineteenth century, industrial capitalism and the business civilization and democracy had become well established, mature, successful, and much more generally or widely accepted. Prosperity was unmistakably both rising and spreading to more and more of all the people everywhere. The old European-conservative kind of opposition or resistance to the liberal-individualistic outlook and regime had declined or moderated to the point of making its peace with the latter and, so to speak, entering into a kind of synthesis or symbiosis with it, which modified it in a measure only. And the socialist outlook, although still flourishing and developing in its own circles, was now, for the time being, a less widely prevalent and potent, not immediately menacing, rather small minority affair. Thus the (slightly modified) classical liberalism as a general outlook or point of view not only was resurgent but attained the greatest degree of prevalence, secure predominance, and practical influence it has ever had. Moreover, the tone of most liberal thought was now again more optimistic, as it had been in the time of its origin, the late eighteenth century; the element of pessimism, which had been introduced by the views of Malthus and Ricardo, faded away. This again may be explained by the background change of real conditions. Population pressure was being relieved by the results of the opening up of great new areas of fertile land as sources of food for the European peoples, a rate of continuing technological and economic progress such as Malthus and Ricardo had by no means fully foreseen, and a falling birth rate. Thus events were wot fulfilling Ricardo's gloomy forecast; the real wages of labor were rising generally, the rates of profit on new capital investments were not falling seriously, and the land-rent share of the value of output was not growing relatively or at the expense of the other income shares; and there was no sign of the approach to "the stationary state." Most important, in this new and more comfortable (for most people) state of the Western world, the earlier prevailing sense of the pervasive presence of inevitable, grim class conflicts over income-distribution tended to decline, and allow a full or nearly full renewal of the still earlier (eighteenth-century) faith in "the economic harmonies" in the "natural" operation of the liberal economy, that is, in the full conduciveness of a universal "free play" of individual self-interests (within the limits of liberal legal justice among all) to the economic and general welfare of all the people.
Furthermore, the liberal outlook in this period was optimistic in another way, which had not been fully paralleled in the eighteenth century: the idea of ever-on-going, all-around, inevitable, automatic, human-social progress, which had been "born" but not fully developed within the Enlightenment, and had been hardly able to develop freely or win general outright acceptance amid the troubled conditions prevalent in the earlier parts of the nineteenth century, now came into its own. I speak here in particular of the simple liberal theory of progress in that sense, which was unlike the Hegel-Marx theory of a tortuous, fluctuating, eventual progress through a series of alternating phases of improvement and deterioration, grim struggles or conflicts, wars or revolutions, new forward surges, and so on. The simpler and different liberal theory involved merely the idea of a rather steady or continuous cumulative growth and advance of all knowledge and wisdom or "enlightenment," and of application of that to all social problems, and hence progress in solving the latter or improving institutions and practices in all the ways shown by advancing knowledge to be needed to make them bring about the best results for human welfare. There was failure to realize the great limitations within which progress of that kind is confined; that it always has been clear-cut only in a restricted range of fields—the strict sciences and the techniques based on them, economic, "material" production, medicine and public health, etc.—and depends, even in these fields, on the presence of the right social and cultural conditions, thus far prevalent in human history only in the last few centuries of Western civilization, and by no means certain to become universal or endure forever. It was not realized that in the even more vital fields of aesthetic and ethical insight and achievement—prevailing discernment or appreciation, pursuit, and realization of the highest values, or wisdom in the choice of ultimate ends and thus in the use of all progressive knowledge or the knowledge that is power—that here such "progress" as there has been in history has been at best only occasionally recurrent through brief intervals, or highly fitful, and subject to frequent, long, disastrous declines or. reversals; or in short, that. the. chances of widespread and enduring achievements in this most vital sphere are always highly precarious.
Moreover, the much too simple and absolute, overoptimistic, Iate-nineteenth-century liberal theory of progress greatly exaggerated the power or ability of the best intellectual and spiritual achievements to control the actual conduct and course of practical affairs and the evolutions of societies. The dynamics of objective social evolution or history are extremely complex and still by no means fully understood by anyone; certainly they were not fully or correctly understood by Marx, though he had some insights absent from the liberal theory in question here. The effects of intellectual progress on social reality are subject to much counteraction and complication by developments running in the other direction, i.e., effects of changes of "material" conditions, through consequently prevailing attitudes, upon all intellectual and cultural life and achievement. The nonrational, emotional factors in all human behavior, and the power struggles among groups, classes, nations, etc., play important and often antiprogressive or progress-reversing roles which the liberal theory of progress never sufficiently allowed for. This phase of the optimism that was prevalent, to an extent now hardly conceivable, in the late nineteenth and very early twentieth centuries, has been rudely shattered since then by two world wars, and we live now in a world pervaded by a mood of pessimism verging on despair that I think is equally, in the opposite direction, excessive and unwarranted. In spite of all that I have said and all that needs to be said in adverse criticism of that confident, hopeful, progressive oudook, it is easy now to despise it much too completely and respect it much too little. It inspired much steady, intelligent work to help along all the progress believed in, and thus much progress was achieved.