Kenneth Ewart Boulding Theory

Part II – Kenneth Ewart Boulding Theory

IN POLITICS, he began as a socialist. While still in second­ary school, under the influence of Shaw and Wells, he was drawn to the socialist platform of the Labor Party. At Oxford he joined the Labor Club and contributed to an undergraduate socialist journal called The Plan. Jubilant at the victory of the Labor Party in the election of 1929, he was appalled by its defeat in 1931:

This disastrous election! The work of thirty years undone in a day by the stampede of unintelligent voters. It makes me weep. . . . The day of Social Reform is past: we have come up against the Rock of Private Property, and we or it busts, to put it concisely if ungrammatically.

Yet by 1931, Boulding was drifting away from socialism, largely as a result of reading Karl Marx. The graduate stu­dent, confident of the clarity of his own reasoning powers and knowledgeable about the current state of economics, found himself forced to reject that cornerstone of Marxian eco­nomics, the tlieory of surplus value, which was based on David Ricardo's long discredited labor theory of value. This theory postulates that the value of a commodity is propor­tional to the amount of labor going into its production. Boulding saw this proposition as simply bad economics, in­capable of sustaining a revolutionary doctrine.

Even more upsetting to Boulding was Marx's vision of historical change; the harsh dialectic of class conflict and brutal revolution repelled the young pacifist. At a time when many young intellectuals in England were starting to look with sympathy upon the Communist regime in the Soviet Union, Boulding was edging out of the socialist camp. In an article for The Plan, he urged that the transition to socialism be made very gradually—only after a long period of school­ing the masses in their responsibilities under the new order.

After receiving his baccalaureate degree, Boulding ob­tained a renewal of his economics scholarship and spent an additional year at Oxford doing postgraduate work. Then, in 1932, he won a lucrative Commonwealth Fellowship for two years of study abroad. That fall he traveled for the first time to the United States and took up residence at the University of Chicago. At Chicago, Boulding studied with Frank Knight, the dean of American conservative economists. He found Knight stimulating and learned a great deal from him, partic­ularly regarding the theory of the firm, Knight's specialty. But Boulding disliked the fragmentation of the American univer­sity curriculum into innumerable short courses and examina­tions. From the beginning, he was struggling to see and de­velop the unity of knowledge, and he resented its being parceled out and marketed on separate counters.

But Boulding was fascinated by the new country. In the summer of 1933, he set out with a couple of friends on an automobile tour of the American West. The trip was cut short when he received word that his father had died. Back in England he disposed of the bankrupt family estate and settled his mother with a relative. Then, depressed, he sailed off for the second and final year of his fellowship in the United States. He spent the fall semester of 1933 at Harvard studying with Joseph Schumpeter. From the Austrian emigre who had once expressed the desire to be "the best horseman in Vienna, the best lover in Europe, and the best economist in the world," Boulding acquired a tolerance for monopoly, an appreciation of the importance of entrepreneurial skill, and a conviction that the great problem of capitalist society was its inability to elicit people's moral allegiance. The semester at Harvard was suddenly interrupted in early December when Boulding suffered a collapsed lung. His mother arrived around Christmas to look after him and together they went out to Chicago for the remainder of the academic year.

In the summer of 1934, his fellowship expired, Boulding was back in Liverpool, faced with the necessity of finding a job. Britain was in the depths of depression; there were few academic positions available. He finally obtained an ill-pay­ing post as an assistant at the University of Edinburgh. There he spent the next three years, living with his mother in a small flat overlooking the Firth of Forth.

For Boulding, the department of economics at Edinburgh was both institutionally and intellectually unpalatable. A rigid academic hierarchy severely limited communication between junior and senior faculty members; the atmosphere was formal and, to those at the bottom, oppressive. Even worse, the economics being purveyed there was outdated. The mathematical techniques which Boulding had learned at Chicago were frowned upon.

This galled Boulding, especially since he had recently be­come accustomed to discussing economic questions with lead­ing economists as an equal. At Chicago, Knight had encour­aged debate, and Boulding had responded enthusiastically, taking up the cudgels on behalf of the concept of the period of production. One of the earliest notions about capital was that it constituted a fund for supporting other factors of pro­duction over a period of time. Boulding had sought to mod­ernize the concept of the productive period, which he thought had relevance to an understanding of the changing economic process. To his delight, the debate on the issue he had raised was now being carried on in the economic journals. As far as Knight was concerned, the whole notion was useless; capital was too homogeneous and economic events too complex for the discussion of discrete periods of production to be mean­ingful. His response to Boulding's article, "The Application of the Pure Theory of Population Change to the Theory of Capital," was an article entitled, "Mr. Boulding and the Austrians"—heady stuff for a young economist. Boulding in turn issued a reply, and then published a couple of other articles incorporating a time variable into the theory of in­vestment. While sticking firmly to the belief that time inter­vals were important considerations in production and invest­ment processes, he finally conceded that, in all probability, "any physical 'average period of production' is not capable of measurement." In due course the debate subsided, and Boulding moved on to other economic questions. The experi­ence, however, had been exhilarating, and he resented his treatment at Edinburgh as an immature underling.

But if his academic life was unrewarding, Boulding was finding fulfillment in religious activities at Edinburgh. Since his Commonwealth Fellowship, he had again drifted away from the Methodist fold; in Chicago he had been an active member of the 57th Street Quaker Meeting. Upon moving to Scotland, he became deeply involved in the life of the Quaker community there. He organized a Young Friends group and participated in various pacifist organizations, including the Friends Peace Board and the Peace Pledge Union. He also helped to set up a Quaker work camp, recruiting young peo­ple for manual labor and discussion sessions in impoverished Scottish communities. Finally, in 1937, he was sent as a rep­resentative of the General Meeting of Scotland to the Friends World Conference in Philadelphia. This proved a turning point in his career; while in America, he was offered an in-structorship at Colgate University. He accepted, and made plans to emigrate.
Boulding's decision to leave Great Britain was hardly sur­prising. His assistantship at Edinburgh had expired, and there was little chance of its being renewed; a speech of his, attack­ing the Scottish university system, had aggrieved his superi­ors. Attempts to gain fellowships at Oxford had failed, and the job market was still extremely tight. All in all, he was happy to seek his fortune in the United States,

Boulding was delighted with his new surroundings. His col­leagues were congenial, and the pleasant village of Hamilton in upstate New York was a happy change from the cramped urban quarters of Liverpool and Edinburgh. In 1938 he ac­quired a little house and sent for his mother. Both Bouldings were warmly welcomed and immediately accepted into the life of the small community. Mother and son felt that the American dream had, for them, come true.

Once at Colgate, Boulding embarked on the great task of writing an economics textbook. His reason for wanting to engage in such a project is not hard to find; it went beyond the simple desire to make money. More than other fields, economics has revolved around a highly distinguished series of textbooks. The first and greatest of these was Adam Smith's Wealth of Nations; appearing in 1776, it held sway for close to fifty years. Subsequently, the great debate be­tween David Ricardo and Thomas Malthus was resolved by the victory of Ricardo's Principles of Political Economy and Taxation over Malthus's Principles of Political Economy. The next generation of economists in the English-speaking world grew up on John Stuart Mill's own Principles of Politi­cal Economy, which appeared in 1848. In the early twentieth century, economists—including Boulding himself—were weaned on the Principles of Economics, by Alfred Marshall. All of these impressive tomes sought to demonstrate the es­sential coherence of the whole range of economic life by ap­plying to it a relatively small but increasingly sophisticated set of analytical concepts and techniques. The prospect of paint­ing the total picture anew has understandably appealed to many economists, including the young Kenneth Boulding and, shortly afterward, to Paul Samuelson. Samuelson's text carried off the major prizes, and swept the world as the new economics. Yet Boulding's text was also a worthy achieve­ment in rigorous analysis and clear presentation—as far as it went.

Up to the point of writing his text, Boulding had been a nearly pure theoretician. In a decade of studying economics, he had done but one piece of empirical or public policy re­search: a study of the problems of British meat and milk production. In a somewhat pompous preface, he made a vir­tue of his predilections:

It is my belief that a work on principles should compete with neither the popular magazines nor the encyclopedias. Conse­quently I have not endeavored to write a compendium to cur­rent economic problems, for the reason that by the time the student has to face economic problems those of today may no longer be current. ... It also seems to me that it is unwise to crowd a principles course with masses of factual material in special studies—labor, marketing, etc.—merely for the sake of giving the work an air of factuality. The place for, such factual studies is later in the student's career, when he has acquired the techniques for interpreting the monstrous riddle of the factual material.

Economic Analysis was thus organized not according to subject matter but according to the mode of analysis em­ployed. The first half of the book relied on the concepts of supply and demand as the principal tools for analyzing price determination and distribution, as well as the theory of money, banking, international trade, and the business cycle. The second half brought in the more sophisticated marginal analysis, showing how it underlay the supply and demand curves and using it to explain the theory of the firm, con­sumption, imperfect competition and monopoly, and the formation of capital. Although he did not push his case too strongly, Boulding continued to stress the importance of in­corporating a time variable into the theories of production and of the firm; his concerns were developed in two chapters, "Time, Production, and Valuation" and "The Equilibrium of an Enterprise in Time." Boulding campaigned in his text for the American economist Irving Fisher's "equation of ex­change"; he chided his fellow economists for their unwilling­ness to recognize the usefulness of Fisher's concise expression of the relationship between the supply of money and its veloc­ity of circulation on one side, and the price level and volume of economic transactions on the other.

There was one great curiosity about Boulding's text: like Sherlock Holmes's hound of the Baskervilles, it did not bark. There is no mention of Keynesian macroeconomics in Bould­ing's first edition of Economic Analysis, though the book was published in 1941 and Keynes's General Theory of Employ­ment, Interest, and Money was published in 1936. This omis­sion merits explanation. Boulding, in fact, had every reason for not immediately jumping on the Keynesian bandwagon.

As an undergraduate, he had been at Oxford rather than at Keynes's Cambridge. In the United States, Boulding had stud­ied with Frank Knight, who was to become a leader of the opposition to Keynes; indeed, the whole "Chicago School" fiercely resisted the Keynesian revolution and, when the rev­olution had apparently succeeded, sought to stage a counter­revolution against it. At Harvard, the center of the Keynesian revolution in America, Boulding had studied with Schum-peter, who also refused to serve under the Keynesian banner. At Edinburgh, an academic byway, Boulding had had little exposure to the intense debate that Keynes had provoked elsewhere. But, ultimately, Boulding takes responsibility upon himself for simply being unable to make sense of the book when it first came out. Many years later, recalling his problems with Keynes's difficult General Theory, Boulding said, "It's an appalling book. Keynes didn't understand every­thing he was talking about. It shows an immensely creative muddle-headedness. I certainly didn't understand it." Bould­ing therefore remained aloof from the great debates, prosely-tizings, and sortings-out of the late 1930s, writing his book as if the great revolution in modern economic thought were not going on outside his window. The dust cleared in time for the second edition; when a renovated Economic Analysis came out in 1948, it was a Keynesian textbook.