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Friday, March 23, 2012

Philip Wicksteed on the Scope of Economics

Today’s TGIF, “The Ubiquity of Economic Phenomena,” credits Philip Wicksteed, the “British Austrian,” for being one of the first thinkers to realize that economics applies to all purposeful action, not just the pursuit of material wealth. Here is a section of the introduction to Wicksteed’s book The Common Sense of Political Economy.

It will easily be shown that the [marginal utility] principle laid down by [William Stanley] Jevons is not exclusively applicable to industrial or commercial affairs, but runs as a universal and vital force through the administration of all our resources. It follows that the general principles which regulate our conduct in business are identical with those which regulate our deliberations, our selections between alternatives, and our decisions, in all other branches of life. And this is why we not only may, but must, take our ordinary experiences as the starting point for approaching economic problems. We must regard industrial and commercial life, not as a separate and detached region of activity, but as an organic part of our whole personal and social life; and we shall find the clue to the conduct of men in their commercial relations, not in the first instance amongst those characteristics wherein our pursuit of industrial objects differs from our pursuit of pleasure or of learning, or our efforts for some political and social ideal, but rather amongst those underlying principles of conduct and selection wherein they all resemble each other; for only so can we find the organic place of industry in our conception of life as a whole.

Having made our preliminary study of the psychology of choice, or the principles which regulate our selection between alternatives, we shall proceed to the special application of these principles to the commercial and industrial life, and to the characteristic phenomena which it manifests. It is not surprising that our definition of the area of the industrial and commercial or economic life should demand some revision when approached from this point of view. If earlier generations of investigators were chiefly intent on sharply defining Political Economy as a separate and self-contained area, and if our present tendency is to regard it as an integral part of the general life of society; if former generations were anxious to emphasise, and even hypothetically to magnify, the difference between the economic life and all that lay outside it, and if we, on the other hand, are intent on rediscovering in every branch of commercial and industrial life the identical motives and principles with which we are familiar elsewhere, it is not surprising that the old definitions of the economic life itself should prove unsatisfactory to us.

No Motive Ruled Out

Accordingly, I shall try to shew that it is time frankly and decisively to abandon all attempts to rule out this or that “motive” from the consideration of the Economist, or indeed to attempt to establish any distinction whatever between the ultimate motives by which a man is actuated in business and those by which he is actuated in his domestic or public life. Economic relations constitute a complex machine by which we seek to accomplish our purposes, whatever they may be. They do not in any direct or conclusive sense either dictate our purposes or supply our motives. We shall therefore have to consider what constitutes an economic relation rather than what constitutes an economic motive. And this does away at a stroke with the hypothetically simplified psychology of the Economic Man which figured so largely in the older books of Political Economy, and which recent writers take so much trouble to evade or qualify. We are not to begin by imagining man to be actuated by only a few simple motives, but we are to take him as we find him, and are to examine the nature of those relations into which he enters, under the stress of all his complicated impulses and desires—whether selfish or unselfish, material or spiritual,—in order to accomplish indirectly through the action of others what he cannot accomplish directly through his own.

We shall find that the economic relations constitute a machinery by which men devote their energies to the immediate accomplishment of each other’s purposes in order to secure the ultimate accomplishment of their own, irrespective of what those purposes of their own may be, and therefore irrespective of the egoistic or altruistic nature of the motives which dictate them and which stimulate efforts to accomplish them. And the things and doings with which economic investigation is concerned will therefore be found to include everything which enters into the circle of exchange—that is to say, everything with which men can supply each other, or which men can do for each other, in what we may call an impersonal capacity; or, in other words, the things a man can give to or do for another independently of any personal and individualised sympathy with him or with his motives or reasons.

A full realisation of this, while bringing home to our minds the fundamental importance and the wide area of these relations, will at the same time convince us of the impossibility of permanently isolating them in practical life from the non-economic relations into which they perpetually play.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.