Home > Uncategorized > Schumpeter about Wesley Claire Mitchell, 1952.

Schumpeter about Wesley Claire Mitchell, 1952.

Wesley Claire Mitchell (1874-1948) was an USA institutional economist who founded the NBER, the National Bureau for Economic Research. His methods for business cycle estimation and analysis still have direct influence on the methods used today (outside of academia). He is not the only institutionalist who played a decisive role in developing the concepts and estimation methods to track and understand our economy, look here for Clarence Ayres (the definition of capital) – and who are more or less forgotten. More knowledge of the ideas of Ayres would have enhanced the work of Piketty as it would have helped him to understand the concept and nature of capital – using the textbook ‘definition’ (if this is available at all, I checked!) is not enough. In 1952 Schumpeter wrote a glowing obituary for Mitchell, mainly about the importance of his work and methodology for economics, in a way warning for the Piketty mistake mentioned above. Below, an excerpt, about the confused state of economics around 1900 It’s a pleasure to read the whole thing.  

The 1890’s were the first of the three decades of what may be called the Marshallian epoch. However, since not every reader, and especially not every American reader, will agree with all that this phrase implies, let me spell out what I mean by it. Three tendencies then came of age and produced the New Economics of 1900. There was first a novel preoccupation with, and a novel attitude toward, problems of social reform, best exemplified by German Sozialpolitik. Second, economic history, amidst surf and breakers, established itself within the precincts of academic economics. Third, a new organon of economic theory—it is really difficult to decide which of the names affixed to it, marginalism, neoclassicism, etc., is the least misleading one—came into its own after a struggle which had lasted for a quarter of a century. But, with the possible exception of England where Marshall’s leadership succeeded to some extent in uniting all, those three tendencies were at war everywhere not only among themselves but also with the views and methods of a period to which large parts of the national professions clung tenaciously. In the United States in particular, where the economic profession enjoyed tropical growth, the backward glance discerns little else but the outmoded textbook—improved no doubt by the work of such men as F. Walker but outmoded nevertheless—and, for the rest, chaos—fertile chaos perhaps, but still chaos. Without meaning disrespect to forgotten or half-forgotten worthies, we can easilyunderstand that a youngster entering the Chicago department of economics around 1895 found nobody there to show him the wealth of ideas and research that lives under the smooth surface of Marshall’s Principles, the only work from which Marshall’s teaching could have been learned then without going to Cambridge and listening to him. And it would have taken a teacher of supreme ability to present, in 1895 or even later, J. B. Clark’s teaching in any really useful manner. So Sozialpolitik went by default, economic history remained on a side track, the new theoretical organon was easily disposed of as “marginalism” or “neoclassicism,” and the dry-as-dust textbook—more or less shaped on the Millian model—triumphed to drive, more active minds into “institutionalist” revolt. The curve on which Mitchell’s own work was to move can, I believe, be readily interpreted as the intersection of two surfaces: one which represents these environmental conditions and another which represents the propensities of his own mind. A man of his ability was bound to be dissatisfied with the state of things he beheld, a man of his type of ability was bound to look for the remedy in the ocean of social facts of which economists seemed to him to absorb but a few miserable inlets. He wanted to swim and not to wade, to explore and not to turn round and round on a small piece of arid land. And two more points will finish off the picture. First, he was as suspicious of logical rigors as the colt of bridle and saddle and soon spied behind the work of the tillers of that arid plot not only unrealistic “postulates” framed for the sake of methodological convenience and to be discarded at will, but also “preconceptions” (ideologies) which enslave the research worker instead of serving him. Second, quite apart from this, his type of mind was not made to enjoy or to appreciate what he called “playing” with the postulates: the work on this arid ground was vitiated by political prejudice or metaphysical beliefs; but even if it had not been, it would still have seemed to him otiose. If this defines the institutionalist position, then Mitchell was and always remained an institutionalist. I do not wish to enter the discussion about the precise meaning of that elusive concept, a discussion that still flares up from time to time and has produced such gems as the statements that Veblen was no institutionalist at all or that he was the only one. This would be the more unprofitable because everyone who participated in the “revolt” alluded to above filled in the blanks left by its negative criticism with a positive program of his own. But Mitchell’s own methodological position can and must be scrutinized more closely both because of the outstanding importance of his work and because it has repeatedly, and even recently, been discussed in a manner that seems to me not entirely satisfactory. We have to consider three different things: Mitchell’s views on the proper attitude of the scientific economists toward “policy”; his views on the proper method of protecting the scientific result from ideological vitiation; arid his views on “theory.” His opinions on all three subjects changed but little throughout his adult life. And we may conveniently survey them now.

  1. anmayhew
    March 19, 2016 at 8:54 pm

    Thank you for providing this. Those who have not read Mitchell’s Presidential Address to the American Economic Association (1924) should do so, and even if you have it is worth rereading for Mitchell’s clear statement of what he wanted the discipline of economics to be about. I am sorry to say that it makes for sad reading today.

    • merijnknibbe
      March 20, 2016 at 9:19 am

      Thanks,

      I spent some time on the internet searching for the presidential adress but could not find it (even the contents of issues of the AER from before 1999 are gated…). Do you have a link?

      Merijn

  2. Blissex
    March 19, 2016 at 9:48 pm

    «And it would have taken a teacher of supreme ability to present, in 1895 or even later, J. B. Clark’s teaching in any really useful manner.»

    As to JB Clark, M Gaffney argues convincingly that he was determinant in driving the success of the marginalist school. The argument is that JB Clark was very attentive to the aims of his sponsors, and these wanted to expunge from Economics the issue of land rent, which was important in “classical” political economy, and he used marginalism to classify land as just another embodyment of “capital”.

    http://www.jstor.org/stable/3487107
    http://www.masongaffney.org/publications/K9-StabileHGInfluenceonJBClarkMGComments.CV.pdf
    «Clark’s main objective was to fuse and confuse land with capital, to undercut George’s case for taxing land while exempting capital. To this end, it was necessary for him to “rediscover” the theory of marginal productivity in a new framework where land was merged with capital. If that involved cribbing, well, his powerful academic friends overlooked it.»

  3. blocke
    March 21, 2016 at 8:01 am

    “The 1890’s were the first of the three decades of what may be called the Marshallian epoch. However, since not every reader, and especially not every American reader, will agree with all that this phrase implies, let me spell out what I mean by it. Three tendencies then came of age and produced the New Economics of 1900. There was first a novel preoccupation with, and a novel attitude toward, problems of social reform, best exemplified by German Sozialpolitik. Second, economic history, amidst surf and breakers, established itself within the precincts of academic economics. Third, a new organon of economic theory—it is really difficult to decide which of the names affixed to it, marginalism, neoclassicism, etc., is the least misleading one—came into its own after a struggle which had lasted for a quarter of a century.”

    Schumpter’s 1952 characterization of the New Economics leaves important elements out of the discussion. It is possible to say that the “new organon” intended to turn economics into a prescriptive science, where econometrics and neoclassical theory could be used to manage the real world. It is also possible to say that the intent in the “new organon” was to make those who studied economics active agents in carrying theory into practice, as, for example, in the financializatiion of the global economy. Readers of this blog know that this intent has failed.

    As for the preoccupation with social reform, German Sozialpolik, and economic history neither had much of a future in economic studies, especially after WWII, because the “new organon” excluded them from the discipline on the grounds that neither, methodologically, was of any use as prescriptive science, nor those educated in them employable as economists. People in praxis were not interested, despite their fame, in giving jobs in the economy to economists (Volkswirte) who studied economic history under Schmoller or Brentano, or joined the Verein for Sozialpolitik, because such studies did not qualify them for occupations in the real world.

    The missing element in Schumpeter’s characterization of the New Economics of 1900 appeared in the US in business schools and in Germany in business economics (Betriebswirtschaftslehre as opposed to Volkswirtschaftslehre). Since everybody knows the great influence that neoclassical economics has exercised in the development of management studies in US business schools, the importance of business economic in Germany can be mentioned here. Economists’ ignorance of these studies in Germany prevents them from understanding the prescriptive role BWL has played in German business and industry. In this regard, BWL has been much more successful in making economic studies prescriptive (Praxisnah) than management schools influenced by the “new organon” in Anglo-saxonia.

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