American Economic Thought and Theory

Conditions at the Beginning of the Twentieth Century

American Economic Thought and Theory

Perhaps to some extent on account of the comprehensiveness and great influence of the American Economic Association, no such division into important schools existed prior to 1920 as, for instance, was the case in Germany. Or the fact may be due in part to the later development of activity in economic thought. Coming after the reaction against the extremes of the Historical School had set in, there was less occasion for the "schools" involved. Moreover, the absence of so widespread and acute a condition of class antagonism and the evils accom­panying it may explain in part the slight importance of Socialism down to 1921. It was characteristic of American economics at the end of the nineteenth century that relatively little difference of opinion was found as to the tariff and government control in general, neither being entirely condemned.

On the whole, there were but two great groups, with so many variations within both, and so shading into one another, that they cannot be called schools. One held to a large part of the teaching of Mill; the other followed the Austrian School or Professor Clark. Within the latter, a smaller third group had Professor S. N. Patten as its center. This was sometimes called the Pennsylvania group.

Accordingly, one finds, on the surface at least, wide differ­ence in the importance attributed to cost in value determina­tion, in the theory of interest, and in the treatment of land and the return from land. To mention but a few names: Pro­fessors J. B. Clark, Fetter, Fisher, and Patten emphasized the subjective point of view and the utility side of marginal utility, and criticized the Classical rent doctrine; Professors Bullock, Carver, Ely, Hollander, Laughlin, and Taussig laid more emphasis upon the objective side and upon costs, and held to an enlightened Ricardian doctrine of rent.

Professor Fisher of Yale was the leading exponent of the mathematical method. Other mathematical economists were H. L. Moore (b. 1869) and H. Schultz (1893-1938).

There can be no doubt of a strong tendency among American economists to emphasize psychological analysis. After 1885 the thought of Jevons and the Austrian School took firm hold, and American economics came to the place of prominence which it had acquired by 1915 largely through independent develop­ment of parts of this field. Accordingly, it is probable that four of the six leading theorists in 1915 were Clark, Patten, Fisher, and Fetter, whose thought may be briefly examined as typical of the most striking characteristic of American economics.