Thorstein Bunde Veblen Pecuniary

"Matter of Fact" versus Animistic Preconceptions, Veblen Pecuniary

In a long and brilliant critical essay entitled "The Preconceptions of Economic Sci­ence" (first published in the Quarterly Journal of Economics in 1899-1900), Veblen attacked the philosophical foundations of economic orthodoxy. He argued that Adam Smith was, in part, possessed of a matter-of-fact, empirical preconception, though he was guilty of fostering an "animistic" view of the world in economic science. In an animistic preconception, the ultimate ground of reality is a design of God, a tele­ological natural outcome. Thus we find Smith (and other classical economists) dis­cussing a natural or equilibrium price, which, when disturbed, would return through an assumed natural order. In Veblen's words:

The animistic preconception enforces the apprehension of phenomena in terms genetically iden­tical with the terms of personality or individuality. As acertain modern group of psychologists would say, it imputes to objects and sequences an element of habit and attention similar in kind, though not necessarily in degree, to the like spiritual attitude present in the activities of a personal agent. The matter-of-fact preconception, on the other hand, enforces a handling of facts without imputa­tion of personal force or attention, but with an imputation of mechanical continuity, substantially the preconception which has reached a formulation at the hands of scientists under die name of conservation of energy or persistence of quantity. Some appreciable resort to the latter method of knowledge is unavoidable at any cultural stage, for it is indispensable to all industrial efficiency. All technological processes and all mechanical contrivances rest, psychologically speaking, on this ground. This habit of thought is a selectively necessary consequence of industrial life, and, indeed, of all human experience in making use of the material means of life. It should therefore follow that, in a general way, the higher the culture, the greater the share of the mechanical preconception in shaping human thought and knowledge, since, in a general way, the stage of culture attained de­pends on the efficiency of industry ("The Preconceptions of Economic Science," p. 141).

According to Veblen, the utilitarianism of Bentham and Mill simply substituted hedonism (utility) for achievement of purpose as a ground for legitimacy. The result was that utilitarian philosophy made economics a science of wealth, in which the in­dividual is inert, because human nature and institutions are given and values are there­fore eliminated. Economics became (and remained, Veblen thought) a determinis­tic and categorical discipline that attributed all good things (good = normal = right) to a functionless and static, but beneficent, competitive system. The outcomes of all interferences with, or departures from, this competitive system, based upon an in­cessant quest for monetary gain, were predictable, and the effects of the removal of interferences were equally predictable.3 One of Veblen's persistent themes was that the instincts and habits emerging from pecuniary hedonism characterized American society both on the supply and on the demand sides. Absentee ownership and con­spicuous consumption and leisure were the expected responses to a pervasive utili­tarian preconception that created a "consumption economy." (This matter is inves­tigated in greater detail below.)

From a methodological point of view Veblen's critique may be summarized as follows. First, he argued that the orthodox neoclassical view of the economic sys­tem, and the theoretical superstructure it supported, was sterile and essentially use­less! But he did not argue, as is sometimes supposed, that neoclassical analysis was invalid, given its assumptions. One difficulty was its simplistic view of human na­ture—Bentham's concept of "pecuniary rationality"—rather than an instinct-habit conception, and another was its outmoded concept of change. Second, in a positive vein, Veblen based his own theory upon (1) an implicit hypothesis that historical events (social, economic, and political) are determined and best described by group characteristics formed by the sum of instinct-habitual human behavior, and (2) a Dar­winian (evolutionary), not a deterministic, view of change as the appropriate tool for dealing with social and economic phenomena.

Veblen's assumption regarding group behavior is common to many dissident writers. His Darwinian view of change, an insight of genuine originality, is based upon his belief in a causal sequence or process. Consider a movement from some situation A to some state B. Given some displacement from, say, competitive equi­librium at state A, the determinist would argue that when the factor causing the dis­placement was removed or permitted to impact upon the situation for a long period of time, equilibrium either would be restored or would change in some predictable way. That is, assuming that fundamental economic data (utility functions, costs, in­stitutions, etc.) do not change from A to B, the effects of a single disturbing change may be analyzed. (See the Marshallian method of ceteris paribus discussed at length

In Veblen's concept of causal sequence, the mere cessation of inter­ference with the system or the introduction of a single "permanent" change at state A will not leave the outcome the same as if no interference had taken place. More­over, the effects of single changes at A will not be predictable. Because tastes, tech­nology, and institutions are constantly changing, states A and B are not comparable in any meaningful way. Orthodox economic analysis, since it employs a determin­istic method, requires that the underlying data of the system remain the same over the period of analysis. Veblen, on the other hand, described a system of constant and ineluctable change. To him, economics was most accurately described as a process, or as a "proliferation."