The Economic Point of View: An Essay in the History of Economic Thought

6

Economics and Economizing

Something of a turning point in discussions on the nature of economic science and of economic affairs came in 1930 with the appearance of Robbins’
Nature and Significance of Economic Science. Professor Robbins brought to the problem a method of attack that clearly revealed the logical inadequacies of earlier conceptions of the economic sector of affairs. At the same time he set forth his own positive definition of economics with effective simplicity and persuasive literary charm. The problem of definition
was treated by Robbins as an integral part of the exposition of his general views on the appropriate tasks and methodology of economics. As such, the book as a whole and Robbins’ definition of economics attracted widespread attention. Although Robbins claimed no originality for his definition, he effectively presented to the English-speaking world a group of earlier views with a clarity and a vigor that made them the focus of a newly awakened interest and unmistakably left his own stamp on the formulation he espoused. Since the publication of his book, discussions of the problem of definition have invariably tended to revolve around Robbins’ definition, or at least to take it as a starting point.

The Economics of Professor Robbins

“Economics,” wrote Professor Robbins, “is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”
*1

From the point of view of the economist, the conditions of human existence exhibit four fundamental characteristics. The ends are various. The time and the means for achieving these ends are limited and capable of alternative application. At the same time the ends have different importance. Here we are, sentient creatures with bundles of desires and aspirations, with masses of instinctive tendencies all urging us in different ways to action. But the time in which these tendencies can be expresed is limited. The external world does not offer full opportunities for their complete achievement. Life is short. Nature is niggardly. Our fellows have other objectives. Yet we can use our lives for doing different things, our materials and the services of others for achieving different objectives.

Now
by itself the multiplicity of ends has no necessary interest for the economist. If I want to do two things, and I have ample time and ample means with which to do them, and I do not want the time or the means for anything else, then my conduct assumes none of those forms which are the subject of economic science…

Nor is the mere limitation of means
by itself sufficient to give rise to economic phenomena. If means of satisfaction have no alternative use, then they may be scarce, but they cannot be economised…

Nor again is the alternative applicability of scarce means a complete condition of the existence of the kind of phenomena we are analysing. If the economic subject has two ends and one means of satisfying them, and the two ends are of equal importance, his position will be like the position of the ass in the fable, paralysed halfway between the two equally attractive bundles of hay.

But when time and the means for achieving ends are limited
and capable of alternative application,
and the ends are capable of being distinguished in order of importance, then behavior necessarily assumes the form of choice. Every act which involves time and scarce means for the achievement of one end involves the relinquishment of their use for the achievement of another. It has an economic aspect.
*2

Several highlights stand out in Robbins’ conception of the nature of economic affairs. Central to the whole idea is the concept of
scarcity. The limitations that prevent the attainment of the desired ends fundamentally affect the character of all activity directed towards these ends. The importance of the role assigned to scarcity as a governing condition of realizing ends makes possible the rejection of the idea that economics is concerned with specific
kinds of ends. Robbins’ definition rejects the identification of economics with certain
kinds of behavior; it attempts, on the other hand, to bring out the economic
aspect of behavior of all kinds.
All kinds of behavior that occurs under the shadow of inadequate means present such an economic aspect to the observer.

In fact, the recognition that there can be distinguished in human actions a pattern of behavior that depends for its uniqueness, not on any one type of end pursued, but on the economizing aspect of actions directed at ends in general, led Robbins several years later to take yet a further step. Having emancipated economics from the bonds that tied it to particular ends, Robbins was led to suggest that the “economic” motive refers precisely to actions that are
not directed to any particular ends. By saying

that a man’s motive in doing a certain thing is wholly economic, what we really mean is simply that
he regards it only as a way of securing means for satisfying his ends in general. If he does it with only one end in mind, we do not regard his motive as economic;
we regard it as having the character of the end to which it is specific. But if he does it with the desire to increase his power to satisfy ends in general, then we regard it as economic…
*3

The core of Robbins’ conception is thus the act of economizing scarce means with regard to numerous, differently valued ends. A considerable body of literature has grown up in the past few decades in which this central concept has been subjected to careful scrutiny by economists generally, and economic methodologists in particular. The implications of these ideas for the substantive content of economic science have been thoroughly investigated; and the minute dissection of Robbins’ definition has provided several distinct topics for debate. In this chapter we shall proceed to survey the area covered by this literature, after briefly glancing at some earlier ideas to which Robbins’ definition owes its source.

Scarcity and Economics

Economists had long recognized, at least to some extent, the role played in economic phenomena by the factor of scarcity. The physiocrats had excluded from their subject matter “free goods” (such as air) because, being abundant, they were not objects of exchange. Among classical writers, Lauderdale explicitly required a degree of scarcity for individual (but not public) wealth;
*4 most of the classical economists succeeded, in one way or another, in excluding from the scope of the science of “wealth” those goods whose supply was unrestricted. In the classical use of the “law of supply and demand,” what was relevant was the
scarcity of the supply.
*5

With the movement away from the objectivism of the classical science of wealth and with the increasing interest, during the second half of the last century, in man and his behavior, the idea of scarcity as a factor conditioning human action assumed ever greater importance. Economists who recognized the uniqueness of the maximization-pattern of behavior and the paramount position of the so-called economic principle could hardly fail to be aware of the fact that the basic source of both is to be found in the
phenomenon of scarcity. A clear understanding of the fundamental character of scarcity as a condition of human action began with the work of Carl Menger.
*6 Menger still considered economics as concerned essentially with goods, but his definition of “economic goods” and of “economizing” placed the condition of scarcity in the forefront. The four components of the activity of economizing, Menger explained in 1872, are called into play only when “the requirements of men for many goods are greater than the quantities available to them.”
*7

It is of some importance that writers such as Menger used the criterion of scarcity as a refinement of the definition of economics couched in terms of goods. This circumstance throws light on the relation of the idea of scarcity to the emergence of a clearly recognized “economic principle.” Such a relationship was perceived very soon. Dietzel, in attacking the notion that the economic principle provides a valid means of describing the scope of economic science, remarked that the criterion of scarcity suffers from the same inadequacies as the economic principle, to which it is, indeed, equivalent.
*8 It is obvious that conformity to the economic principle is called forth by scarcity. In fact, what the economic principle is to economics, considered as the analysis of
behavior, scarcity is to economics, viewed as the analysis of goods.

Although several German writers, including Schäffle and Cohn,
*9 had laid stress on the phenomenon of scarcity and its importance for economics, there is reason to believe that this did not imply the recognition of the role of “economizing” in Menger’s sense. Scarcity can be associated with economic affairs, not necessarily as a means of genuine demarcation, but merely as a simplifying device for the theorist. Anything appertaining to the satisfaction of material wants, let us say, may be considered as economic, but in order to facilitate analysis it may be necessary to confine attention to scarce goods. Determinate solutions of economic problems, it is found, are yielded only when scarce goods are involved. And this property of scarce goods may be employed in marking out the scope of economic science without seeing scarcity as affording any real means of distinguishing the economic from other phenomena. The accident that makes scarce goods particularly amenable to
theoretical manipulation may not lead to the discovery of any uniqueness in the act of economizing at all.

Something of this seems to underlie Neumann’s treatment of the definition of economics in terms of scarcity. In his survey, made in the eighties of the last century, of attempts to define economics, Neumann rejected the criterion of scarcity on rather surprising grounds, which reveal his limited appreciation of the real nature of this criterion. Scarce goods, Neumann asserted, are sometimes used for noneconomic purposes, e.g., for artistic ends. Moreover, Neumann added, there are cases of economic activity that involve only nonscarce goods. Thus, when an entrepreneur acquires sea-water, a nonscarce commodity, for the purpose of renting out sea-water baths, he is surely engaged in economic activity, even though he is dealing in what, according to Menger’s definition, is a “noneconomic” good.
*10 It is fairly obvious that an understanding of the nature of the act of economizing would have prevented Neumann from offering these objections. In so far as sea-water baths are scarce, their provision surely entails economizing and is hence an economic activity, no matter how plentifully one of the materials may be obtainable in some other situation. And in so far as the materials for the expression of artistic impulses are scarce, their provision is also governed quite as powerfully by the economic principle.

Outside Germany there were, before the turn of the century, far fewer references to scarcity as a possible criterion for defining the nature of economic activity. Walras was one of the few writers who stressed this criterion. He required that what he called
richesse sociale be both useful and scarce. It is not an accident that “Walras’ term for marginal utility is
rareté. One writer has remarked that “Walras’
rareté appears to be a truer concept than the common notion of marginal utility, for…he gives clear recognition to the fact that supply limitations are included and expressed in it.”
*11 For the rest, the focusing of attention by mathematical economists generally on the role of maximization must be accompanied by a lively awareness, even if not explicitly expressed, of the restriction of such behavior to cases admitting of a finite
maximandum.

During the present century scarcity definitions of economics have become decidedly popular. Precursors of Robbins’ formulation in terms of the act of economizing scarce means for the attainment of competing ends include a number of prominent figures. Besides Menger (in the last century), Robbins himself cites such writers as Wicksteed, Mises, Fetter, Strigl, Schönfeld and Mayer in this regard. Moreover, Robbins’ formulation has been described as in some degree akin to ideas expressed by Spann and Oppenheimer. Both Voigt and Max Weber paid explicit attention to this point of view.
*12 Any number of writers could be mentioned who, without endorsing Robbins’ definition of economics, yet ascribe the central economic role to scarcity. In fact, one or two writers have felt bound, in reaction to this trend, to moderate the general enthusiasm for the conception of scarcity by asserting the possibility of an economics of “abundance.”
*13 It must be admitted that these writers do not demonstrate any partiality to the notion of “economizing,” from the standpoint of which abundance is meaningless in any other than a relative sense.

There was thus a long tradition in economic literature in which the importance of the limitation of resources was recognized, and there were, moreover, many indications pointing to the possibility of using the administration of scarce means as
the distinguishing criterion of the economic.
*14 In pressing the scarcity of means into service as the very core of everything economic, and by discovering in the effects of coping with such scarcity an economic aspect to activity in general, Robbins was crystallizing ideas that had already been in ferment for some time. Perhaps the most useful service afforded by the fresh formulation lay in the clarity with which the conception of economic activity as consisting in “economizing” was contrasted with the older definitions. Perhaps never before had the notion of the allocation of scarce means among competing ends been so consciously and vigorously presented as independent of the particular nature of the ends and means that may be involved.

Economizing and Maximization

But while the allocation of scarce means among competing ends can be subsumed under the concept of maximization, the converse is not true. And the differences between the two classifications of action, maximization and economizing, are perhaps even more significant than their similarities. Robbins himself pointed out in a footnote that the “maximization of satisfaction” simply replaces
the array of “ends” of action by an ultimate goal, viz., satisfaction, to the achievement of which our “ends” are to be regarded as proximate.
*15 The scarcity of means then enforces the relinquishment of some of our “ends,” at the same time that the task of maximizing satisfaction determines the way in which the available means are disposed among the various “ends” chosen. Maximization, with one ultimate end in view, is thus the source of economizing limited resources among alternative subordinate “ends.” This description of the relationship between maximizing satisfaction and economizing reveals several features of the former category of action that restrict its usefulness as a characterization of the nature of economic activity and perhaps helps to explain the limited part played by the concept of maximization in the line of thought that led to the allocation view of economics.

In substituting an ultimate end such as satisfaction for the intermediate “ends” chosen as conducive to it, the conception of economic activity as maximizing behavior suffers from two weaknesses. On the one hand, it involves setting up such an ultimate end, with the presumption that it can be meaningfully “maximized”; on the other hand, it ignores the multiplicity of intermediary “ends” and the effects that their very number has on the allocation of resources. The first weakness, the postulation of an ultimate “satisfaction” that can be maximized, is brought into relief by the way in which the alternative notion of economizing scarce resources among competing ends avoids altogether this awkward idea of “quantities” of satisfaction. The concept of economizing dispenses with the necessity of assuming that men act as if they were constantly scanning a potential “store” of satisfaction and striving to accumulate the largest possible stock. Instead, this concept recognizes that men act to change their situation until no further action promises to lead to a condition preferred to the present one. The advance in economics from the stress on maximizing satisfaction to that on economizing thus parallels the advance from the older utility analysis (especially where it involved cardinal utility) to the more recent indifference techniques.

The second weakness of the concept of maximization, that it ignores the multiplicity of intermediate “ends,” is a consequence
of the fact that it abstracts too drastically from actual economic activity. It may be true to say that the economizing of resources is merely the maximization of a more ultimate satisfaction, but to speak in such terms is to miss one of the really significant features of economic activity, the
allocation of these resources among the
different uses clamoring for these limited means. The whole idea of the allocation of limited resources and their economic distribution among the competing demands for them is hidden under the facile phrase, “the maximization of satisfaction.” The constraint to
administer resources, to apportion them judiciously among alternative uses by the careful comparison and weighing of relative degrees of importance—a necessity imposed by the fact that the intermediate “ends” are numerous—is overlooked in the maximization formula. By its stress on allocation as the characteristic feature of economic activity, the concept of economizing, on the other hand, leads directly to the appreciation of the significance for economics of the idea of
price and
exchange at the margin. Hence, this formulation is eminently suitable for characterizing the subject matter of economics.

The Character of Robbins’ Definition

Robbins was at some pains to point out that the conception of economics that he expounded had an entirely different character
from that of the previously accepted conceptions of the subject. The earlier definitions had almost invariably been
classificatory, marking off certain kinds of behavior, i.e., behavior directed to certain types of ends, as the subject matter of economics. Robbins’ own formulation, on the other hand, is
analytical. It “does not attempt to pick out certain
kinds of behavior, but focuses attention on a particular
aspect of behavior, the form imposed by the influence of scarcity.”
*16 Hitherto it had been believed possible to describe certain acts and activities as being “economic”; Robbins’ definition, however, does not consider the adjective “economic” as at all appropriate for the description of any act as such, but sees it as singling out a point of view from which actions may be examined. Whereas the earlier definitions of economic affairs had searched for criteria sufficiently comprehensive, and yet sufficiently exclusive, to describe accurately a given
class of acts, Robbins’ definition sets forth the particular interests that actuate the singling out of the economic aspect of an act. An act pertains to economic science in so far as it reveals the consequences of a compulsion to allocate scarce resources among conflicting ends. Robbins’ formulation thus differs from others perhaps less in its choice of a criterion for definition than in its radically different conception of the kind of idea that is to be defined.

The critics subjected this feature of Robbins’ contribution to close attention and expressed a wide range of opinions concerning its validity and significance. Writers who hailed Robbins’ book as an auspicious turning point in the conception of economic science and who viewed his definition as a final and definitive pronouncement on the particular problem with which it grappled saw one of its principal merits in this concern with an aspect of action rather than with a particular kind of action.
*17 Writers assessing the difference between Robbins’ definition and earlier attempts recognized this approach as one of the most significant features of his contribution.
*18 Those who have described (and deplored) Robbins’ definition as the “dominant academic doctrine” have had especially in mind its lack of concern with the particular ends involved and its concentration on viewing action from a given “aspect.”
*19

A. THE “BREADTH” OF ROBBINS’ DEFINITION

The former of these two implications led to immediate attacks on Robbins’ definition condemning it as being far too wide, i.e., as bringing within the scope of economics phenomena in regard to which the economist has no professional competence and to which economists have historically paid no attention whatsoever. Some writers have tended to see in this alleged shortcoming an opportunity to indulge their wit in describing the problems—whether literary controversies, games of chess, or even affairs of the heart—with which Professor Robbins, on the basis of his own definition of economics, should, as an economist, be equipped to deal.
*20

Ultimately these attacks and the consequent pronouncements
rejecting the concept of economizing as a criterion for defining the nature of economic phenomena provide yet another instance of the similarities between the conception of economics as a science concerned with economizing and the conception of it as a science concerned with maximization. Writers in the eighties of the last century who had considered the essence of economic behavior to consist in the impulse toward maximization had found themselves vulnerable to the objection that this propensity characterizes
all human activities. The fact that economizing, like maximization, is an operation capable of being performed in widely differing situations means that the use of such a concept as a criterion for defining the nature of the economic cuts across many traditional boundaries. But clearly if a definition is to be rejected as too wide, some area must be accepted as the standard of reference. The stress that economists in the past have laid on the phenomena of the market as the area to which their researches applied makes suspect a definition that sees an essential economic unity existing in activities ranging far beyond this area.

Nevertheless, there is an important sense in which the definition of the economic in terms of economizing is less suspect in this regard than that couched in terms of maximization had been. The latter had been used in the form of the so-called economic principle, which was seen as essentially a principle of
explanation. Market phenomena were explained on the hypothesis of the existence of such an economic principle. The concept of a form of behavior characterized by maximization was found to yield the results required to understand the real economic world. From this point of view, the definition of economics as the science concerned with the maximization pattern of behavior drew the boundaries of the subject in such a way as to include all phenomena that admitted of explanation on the hypothesis of the existence of such a principle. Any activity that involved maximization was thus
prima facie economically relevant. And here the objection was immediately raised that such a criterion embraced all human behavior, including areas in which maximization did not lead to “explanations” such as economists had successfully provided in what was then accepted as the domain of economics.

Robbins’ definition of economics in terms of economizing was in a somewhat different case. The concept of economizing was not being used as an explanatory device at all, but only as a means of characterizing certain behavior. The fact that such behavior proved more amenable to economic analysis in regard to market phenomena than in other cases does not necessarily void the use of this definition, since the latter is not predicated on its suitability for this kind of economic analysis. At most, the criticisms aimed at Robbins’ definition could cast doubt on its suitability for readily characterizing the day-to-day problems to which economic theory is most frequently applied. Professor Robbins himself has presented the case for his exemption from this type of criticism.
*21

B. THE “FORMALISM” OF ROBBINS’ DEFINITION

This view found its most forthright expression in Souter’s bitter essay in 1933 fiercely defending the “Living Classical Faith,” reverently associated with the name of Marshall, against the “Austrian” position as set forth by Robbins. Apparently Professor Robbins came to be identified as a “juggler with a static verbal logic” and a “profane sunderer of ‘form’ from ‘substance.'” Perhaps the principal target for Souter’s scathing denunciation was the attempt to define economics as distinct from other disciplines in terms of its
attitude towards a subject matter that it shared in common with these other disciplines. Souter’s attack on Robbins’ “formalism” arises from his burning belief in the status of eco-
nomics as a member in a “society” of sciences, each of which can be sealed in an airtight receptacle only on the penalty of death.
*22 The issue raised by the “formalistic” approach to economics is whether the science “is to enter upon the fatal path of fastidious withdrawal from organic intercourse with its fellows; or whether it will have the courage and honesty to assume its rightful place in the
society of sciences.”
*23 As a member of such a society, economics is “necessarily and inevitably dependent upon sociology, upon psychology, upon technology,”
*24 and progress in economics must derive from “organic” relationships with the other disciplines.

All this leads to the almost emotional rejection of Robbins’ conception of ends that the economist treats from the outset merely as data. Economics may legitimately take over from ethics or psychology the finished results of their study of the determination of the concrete means and ends involved in human action. But any attempt to consider economic analysis or the conception of an economic aspect of a problem as possible without taking into account such factual information concerning the content of action is “mere hocus-pocus.”
*25 To treat the concrete ends of action as “given,” in the “perverted” sense of not affecting economic analysis, is a display of instincts that are “corruptly sophisticated”
*26 and involves the bartering of the Mecca of “economic biology” for the mess of pottage of an illusory “static precision.”
*27

Professor Parsons, in a paper following shortly after that of Souter, provided a calmly reasoned appraisal of the issues involved in the Robbins-Souter controversy. Parsons pointed out that the “formalism” that Souter denounces is not quite the same formalism that Robbins is rather pleased to find in his conception of economics. According to Robbins, economics is formal in the sense that it is abstract, making use of “logic,” which is not confined to specific historical situations. Souter, on the other hand, attacks Robbins’ definition on the grounds that it makes economics a “purely formal science of implications” in the sense of “having no reference whatever to empirical facts.” If exception is taken to Robbins’ view of economics as necessarily abstract because it involves the use of logical reasoning, then the road is open to a
complete “empiricism” and
Historismus.*28 The only room left for debate on Robbins’ formalism is the fruitfulness of the particular abstractions that Robbins requires for his conception of economics.

Such criticisms of Robbins’ view of economics, objecting to the degree to which it makes abstraction from reality, have, of course, been made. One writer has recently deplored the fact that by “eliminating
economic ends
per se, the concept of ‘economizing’ has diverted attention from the really significant aspects of behavior in modern economy (for example, pecuniary thinking and acquisitive drives)…”
*29 But there is some difference between this kind of criticism and that of Souter. In the type of complaint that is voiced here there is room for recognition of the validity of an independent category of economizing. There is even room for recognition of the fundamental and possibly universal character of the category in its significance for economic problems. It is only objected that too-exclusive concentration by the economic theorist on this aspect of action may hinder adequate recognition of the particular, empirical content of a concrete economic problem. When the economist comes to apply his professional skills to the understanding of actual economic phenomena, it is argued, his attempt may be handicapped by the attitude with which he approaches the task. His conception of the nature and role of economic theory may prevent recognition of the actual facts of the situation the understanding of which could explain matters, whereas treating it purely as a case of economizing does not lead to an immediate solution. In other words, this objection does not necessarily question the validity of the concept of economizing as a criterion, but merely condemns it as inadequate in its application to the problems of the real world because of the “misleading” or “unfruitful” abstraction that it may make from significant elements of these problems. Souter, on the other hand, is objecting to theory, not in this way, as unsuitable for practical application, but altogether. He is opposed to the conception of a theory that has no reference to the phenomena of the real world. Yet, as Parsons pointed out, the alternative to the “aspect” type of definition propounded by Robbins must consistently lead all the way in an
empiricist direction to the ultimate repudiation of the legitimacy of analytical abstraction to any degree and for any purpose.

The Nature of Ends and Means

Apart from the more general considerations surrounding the “formal” character of Robbins’ definition, couched as it is in terms of abstract ends and means, there has been some discussion of a narrower and perhaps more technical character concerning the nature and validity of the concepts of ends and means.
*30

Several writers have seen the relationship of ends and means in terms of which Professor Robbins defines economic science as an artificial schema that does violence to the true nature of human action. In a book in which the concept of an end of action is used many, many times, Robbins devoted very little space to explaining the nature of an “end” and to elucidating the difficulties that the notion involves. Robbins had described human ends as associated with “tendencies to conduct which can be defined and understood.” This description was seized upon as typical of a certain “positivism” that critics believed themselves to have detected in Robbins’ position. Robbins is eager, it is contended, to invest a study of economizing—which is a subjective notion—with the objectivity of science. He has sought to achieve this by pressing human action into a mould involving ends and means that can be defined and understood. Ends are in this respect conceived of as quite analogous to the definite “external” resources of nature that constitute means. Ends, that is, are considered as “external” to the actor. The relationship between the definite means, on the one
hand, and equally definite ends, on the other, defines the scope of economic science. This view of Robbins on the nature of ends has been severely criticized by several writers.

The critics, among whom may be named Souter, Parsons, and Macfie, pointed to a number of inadequacies in Robbins’ schema.
*31 The concept of
purpose as fundamental to human action seems to be wholly excluded. Ends are simply correlates of “tendencies to conduct”; this draws attention completely away from the conscious
aiming that pervades economic activity. By squeezing the element of purpose out of action, Robbins’ structure of ends and means is “timeless” in the sense that it ignores the fact that ends are never presented to the actor coincidentally with the means. If an economic act apportions resources among desired ends in much the same way as a pie is shared among a hungry family, then the economic act does not exist. Ends can be conceived as observable states of affairs only
after their achievement. At the time of the contemplation of action, ends are to the actor only anticipations of future hoped-for states of affairs.
After an action has been completed, it can be described as having achieved a certain allocation of resources among ends, but to characterize an action on these grounds as having involved the subjective notion of economizing is to consider the action from a merely behavioristic standpoint.
*32 This indictment of Robbins on the charge of “behaviorism” and “positivism” gains in interest in the light of the contribution of the praxeological conception of economics, to be taken up in the following chapter.

In addition to the criticisms of Robbins’ concretization of ends, some debate has developed on the very obvious relativity of the ends-means schema. It has been pointed out that ends may be considered as means to further ends, and that means may be equally well considered as the ends of earlier actions. Consciousness of this flimsiness in the ends-means dichotomy must necessarily raise doubts about the validity of a category such as economizing whose claim to a definite status is based exclusively on the relationship between ends and means.

It may be observed that the facile manner in which Robbins assumes the existence of definite ends, without careful discussion
of the fact that ends are, as a rule, set up merely as intermediate to the achievement of further chains of ends, is to some extent to be expected from his unconcern with the
purposive element in action.
*33 We have noticed criticism of Robbins’ formulation on this score, and there appears to be a direct link between this attitude and the postulation of absolute categories of ends and means. Felix Kaufmann has drawn attention to the fact that it is because of the element of purpose in human conduct that immediate ends are only the means to further ends.
*34 Kaufmann sees the lack of agreement concerning the definition of the subject matter of economics as arising out of the three possible “levels” of ends that may be considered relevant: the end of acquisition of goods, the further end of consuming them, and the supposed ultimate end of increasing one’s happiness. But what is of moment in appraising Robbins’ definition is not so much the particular “levels” into which ends may more or less arbitrarily be classified; it is rather the fact that ends, in so far as economic activity is described as directed towards ends, are such only relatively to the particular and immediate context of the action.
*35

This consideration of itself would not, of course, seriously threaten Robbins’ conceptualization of action in terms of means and ends. Parsons,
*36 following up a classification of the chains of means-end relationships into “ultimate ends” of action, “ultimate means,” and an intermediate sector (in which actions involve both the means to more nearly ultimate ends and the ends of previous preliminary actions), has shown how economic action finds its place in the intermediate sector.

But while the concept of economy and the operation of economizing does not depend on the “absolute” status of an “end” of action, at least one writer has shown the weakness of the ends-means dichotomy as a method of separating the science of economics from technology. It had been one of the principal merits of Robbins’ formulation that it provided an elegant and conceptually neat device for distinguishing between problems of economics, on the one hand, and problems of technology, on the other. Where alternative definitions of economics, being classifi-
catory in character, failed to provide a satisfactory means of excluding technology, the analytical definition advanced by Robbins enabled him to use Mayer’s distinction: “The problem of technique arises when there is one end and a multiplicity of means, the problem of economy when both the ends and the means are multiple.”
*37

There will be occasion later in this chapter to review some criticisms of the validity of this distinction; at this point the objection must be noticed that the very nature of the concepts, ends and means, makes the distinction inadequate. In a recent paper Rivett
*38 has contended that while Mayer’s distinction is valid in itself, “it cannot be used to separate the science of economics from the science of technology, pushing some relationships into the first field and others into the second.” This is ultimately due to the fact that any course of action undertaken to achieve a desired end thereby becomes itself an end intermediate to the achievement of the originally conceived end. In Rivett’s example, if a pencil is picked up in order to accomplish the end of writing, there has been introduced an additional, subordinate end of picking up the pencil. Pursuing this line of thinking, Rivett has no difficulty in demonstrating that the attempt to attain the single end—which, according to the Mayer-Robbins view is the problem of technology—may involve the intermediate pursuit of various subordinate ends that may well conflict with one another. The same problem of securing the single end, a problem of technology from the point of view in which the subordinate ends are seen merely as means, thus becomes a problem of economy from the point of view of a more minute scrutiny in which the harnessing of any of these means is recognized as itself possessing all the qualities of an end.

Once again Robbins’ disregard of these considerations seems in consonance with his lack of concern for the element of purpose in human action. Once an end has been postulated as the goal of action, then all the actions undertaken with this end in view can,
ex post facto, be grouped in a separate class from that of the end. All the chains of subordinate ends and means leading up to the
final goal can be telescoped together to form a homogeneous pool of “resources” and “means” for the final goal. But from the point of view of the actor, such a dichotomy is in no sense unique or even especially significant. To him these resources, means, and subordinate courses of action are all arrays pointing purposefully to the final end, but at the same time and for the same reason containing subpatterns of purposefully ordered arrays, within each of which the
ex post facto dichotomy betweens ends and means could be distinguished with equal validity.

These criticisms of Robbins’ formulation in terms of ends and means may perhaps be most illuminatingly summed up by reference to the very interesting discussion by Tagliacozzo.
*39 In the course of an exhaustive analysis of the nature of economic “error,” i.e., of “uneconomic” behavior in failing to resist the temptation of the moment, Tagliacozzo points out that in full reality action necessarily involves the complete identity of ends and means. Tagliacozzo’s work has especial relevance for the praxeological view of economics and will be discussed more thoroughly in the succeeding chapter. At this point we note Tagliacozzo’s contention that when the economic agent succumbs to a fleeting temptation (e.g., the purchase of wine) at variance with a prearranged economic program, his “error” exists only as relative to the arbitrarily postulated goal of the program. To judge his action as “uneconomic,” because it involves an inappropriate disposition of “means,” is to impose
from the outside an ends-means schema that does not conform to the real situation. Seen from the standpoint of full reality, the purchase of wine, as an autonomous act, involves the full identity of the end and the means. Without becoming involved at this point in the significance of these ideas for the concept of economic “rationality,” this discussion focuses attention very clearly on the weakness of Robbins’ ends-means formulation. Ends and means are clearly
imposed categories artificially dissecting the elements of action; recognition of the relativity of these categories leads to the demand for their far more careful use in attempts to define the nature of economic activity and the scope of economic science.

“Given” Ends and Means

Implicit in the formulation of the nature of economic activity in terms of the allocation of scarce resources with regard to alternative ends is the assumption that the ends of action are merely “data” for the economist investigating economic activity. This property of Professor Robbins’ definition, that is, its treatment of wants as given (and, for the purpose of a given economic problem, constant), has been accorded considerable attention. It has, of course, already been noticed in this chapter that an important and widely discussed characteristic of Robbins’ definition was its identification of the economic by singling out an
aspect of phenomena. This, too, is closely related to his treatment of ends and wants as data. Where earlier definitions had identified economic activity with action directed toward certain more or less well-defined ends, Robbins cultivated an unconcern for the nature of the ends involved in action. Necessarily this meant the removal of these ends from the range of phenomena to be studied and their relegation to the realm of given information upon which the problem to be investigated is based. All this, of course, gave rise to criticism on the part of those wishing to see the economists, in close collaboration with students of the neighboring disciplines, pay more attention to the realities of concrete action.
*40

But apart from the complaint that the treatment of ends as mere data is an unholy attempt to extrude from economics the contributions of the psychologist and the sociologist, this notion of ends implies a profoundly important outlook on the very nature of human action and the possibility of its scientific explanation. In the full reality of human action the values of men and the ends to which they direct their energies are continually changing, continually becoming modified under the impact of outside changes as well as through the effect of changes wrought by the very action aimed at the original ends and by the very effort of pursuing those ends. The attempt to introduce scientific explanatory analysis into the study of human action has involved the isolation, from the
tangled intricacies of the web of action, of an element in it that we call its economic aspect. According to Robbins’ conception of the precise nature of this element, its isolation involves the analysis of action in terms of its relation to the array of ends as they are esteemed at a given moment in time. Any proposition deduced from the fundamental concept of the economic act will thus have relevance only within the particular frame of reference relatively to which the economic aspect of action has meaning—i.e., the ends whose respective values were the data of the problem.

The danger in the conception of ends as data has already been commented on in this chapter. To construct a model of action in terms of ends so conceived may well lead one unwittingly to disregard the fact that to the actor himself ends are not data at all, but have been purposefully
chosen and are constantly in danger of being supplanted by newly prized ends.
*41 In viewing economics as concerned with preselected ends that are the ultimate frame of reference for a particular economic problem, one must exercise constant care not to transform these chosen ends into objective “pulls” similar to physiologically conditioned “needs,” for this would turn economic activity into a series of reflexes responsive to quasi-biological tropisms.

Several writers have pointed out that from the economic point of view it is not only the ends that are data, but also the means. The economic element is the
coordination of given ends and means whose substance economic analysis does not and cannot attempt to explore. Professor Knight especially has deplored the unfortunate habit of describing economics as concerned with means, but not with ends. In any sense in which ends are data for economics and are thus not the concern of the economist,
means are no less “given” and beyond the range of the economic problem.
*42

In this respect it is interesting to examine the formula with which Max Weber attempted to distinguish between economics and technology. The problem of expressing such a distinction seems to have exerted some fascination, as attested by the recurrence of passages in Weber’s writings discussing this question. Weber brought the distinction into clear relief by asserting that “economic action is primarily oriented to the problem of choosing the end to which a thing shall be applied; technology, to the problem, given the end, of choosing the appropriate means.” A genuinely economic character is that which “takes account of alternative ends and not only of means for a given end.”
*43 This way of expressing the distinction may at first give the impression that in economic action the means are given, and the ends are still to be selected, whereas in technology the ends are given, and the means are to be selected.
*44 It would be an error, however, to draw the conclusion that Weber in any way disagrees with the writers who stress that in economics the ends as well as the means are given. Weber too recognized that the economic view of action takes the actor’s valuation of ends as a datum. After all, it is this idea that is the cornerstone of the concept of
Wertfreiheit that Weber championed as the proper setting for the analysis of economic activity. Weber too is thinking of a given array of ends ordered by the (not-to-be-studied) valuations of the actor. What he has in mind, of course, in describing economic action as the choice of ends to which given means are to be applied is simply the fact that a given ordering of ends will necessitate the allocation of means among these ends in a manner peculiarly consistent with this given order of estimation. Ends are to be “chosen,” not in the sense of being arranged in order of relative esteem, but in the sense of their receiving allocations of resources. With alternative ends competing for given means, these means must be allocated by “choosing” for each resource an end such that its allocation is in harmony with the (already) adopted ordering of ends.

The conception of the ends of economic action as data involves, we have noticed, two corollaries. It is implicit in this conception
that the selection and ordering of ends do not constitute an economic problem; and it follows that for the duration of any economic problem its analysis must assume constancy in the relative urgency of the wants that economic action seeks to satisfy. Both these implications of Robbins’ formulation are revealing. It requires no great insight into the affairs of the world with which economists largely deal to realize that if the economist is to work under the restraints imposed by these implications, he must, in his capacity as an economist, renounce interest in perhaps the most fascinating and important aspects of the data with which he works. The economist
qua economist (and this phrase of Robbins has been used by critics with characteristic, but hardly deserved, sarcasm) must ignore the fact that tastes and values are swiftly changing variables and must avert his eyes from the intensely interesting and important processes whereby men arrive at their judgments of value.

These limitations on the scope of the economist’s area of competence have, of course, been condemned again and again by historically-minded and institutionally-conscious critics of economic theory. The fact that the validity of these limitations follows rigorously from Robbins’ definition of economics reveals the close faithfulness with which this definition of the subject mirrors the procedures that economic theorists have, in fact, been following all the time. What the explicit recognition of the fact that the phenomena with which the economist deals are data does achieve is the appreciation that self-restraint by economic theorists does not spring from blindness to the facts of economic life. The “abstractions” of the economists, against which realistically-minded critics have so vigorously rebelled, are inherent in the nature of the problems to which they address themselves. Their subject matter forms a distinct field precisely because there exists an element in action that is distinct from the nature of the ends of action and at least conceptually independent of the processes whereby ends are selected and ordered. It must surely be regarded as a merit of Robbins’ definition that it isolates this element with clarity. A grasp of the character of this element in action makes it immediately evident that the severely circumscribed applicability
of the propositions enunciated by the economic theorist, far from being the necessary result of a crudely unrealistic methodology, is but the properly incomplete contribution of the specialist whose skills have been developed by a judicious and fruitful division of labor. Specific policy recommendations on economic affairs may require long and careful study of the actual attitudes of human beings, their wants, valuations, and expectations. Crucially important though such information may well be, the research and scholarship involved in its compilation is
different from the application of economic reasoning. Robbins’ definition brings this distinction into sharp focus.

Single End and Multiple Ends

It was the conception of economic activity as involving numerous ends that enabled Robbins to adopt Mayer’s distinction between economics and technology. Technology involves selection among means for the attainment of only a single end, whereas economics necessitates comparing the urgency of several competing ends.
*45 At this point attention must be turned to the question of the actual multiplicity of ends which, it is alleged, are to be found in economic action, and, on the other hand, of the extent to which the idea of an underlying single ultimate end is to be considered
essential to the Mayer-Robbins conception of economizing. The problem arises partly from the very premise from which the Mayer-Robbins formulation starts—the existence of a given ordered array of variously prized ends.

It was seen in the previous section that given wants in Robbins’ sense implied an ordering of ends separate from the economic act itself. It is on the assumption of previously ordered ends that the process of allocation of resources can proceed. Professor Knight, among others, has repeatedly stressed, however, that the comparison of ends as to their importance and the allocation of resources consistently with such a comparison imply “quantitative comparability in the final results of all uses of any ‘resource'”; they imply, in other words, that “there is really only one end.”
*46 It would have to be admitted, if this argument be accepted, that economic action too is merely a matter of technique in so far as the ultimate (single) end of action is concerned.

It must be noted that the reservations that these considerations inspire concerning the validity of the notion of a multiplicity of ends are rather different from those expressed by Souter and Parsons on the same topic. The latter writers too laid stress on the unified character of systems of ends, whether of the individual or society; but their criticisms focused chiefly on Robbins’ exposition of the ends of individual economizing in terms of psychological “pulls” that, when unified into a “system,” seem to contradict the very concept of economy.
*47 The points raised by Knight, on the other hand, do not at all lose their force even if the nature of the ends of action is set forth in less “positivist” terms. If ends can be compared and arranged in order, it is argued, there must be some common denominator relating them to one another. However revealing and significant it may be to break down this single ultimate end of maximization into the numerous intermediate ends of economizing, the elegant Mayer-Robbins distinction between economics and technology seems difficult to salvage.

It is interesting to draw attention at this point to a somewhat different characterization of economic activity as directed to a single end, which was developed by Robbins himself, and which has been used with great effect by Hayek. This is the view that
recognizes the economic motive as “merely desire for general opportunity, the desire for power to achieve unspecified ends.”
*48 Money has come to be linked with the economic motive, according to this view, because it offers the means to enjoy the widest choice of goods and services that we may desire. (One is reminded of a century-old definition of wealth that saw it, not as particular goods and services, but as the “power” to command goods and services in general.)
*49

The relation between this understanding of an economic “end” and the economic aspect of activity in general is clear. We have, in the description of the economically motivated act as one directed at gaining the power to achieve
unspecified ends, the view precisely opposite to the older notion of economic activity as directed to a single, sharply defined end (such as material goods and the like). The first step taken by Robbins away from the older type of definition was the recognition of an economic aspect to activity in general, regardless of the concrete nature of the particular ends involved. With the adjective “economic” freed of positive association with specific ends, Robbins is now able to press still further and identify the economic motive with activity distinguished precisely by the
lack of any specifically selected ends.

It is unnecessary to examine the doubts that have been expressed whether Professor Robbins has in fact been able to salvage a scientifically acceptable notion of an “economic” objective distinct, let us say, from military and political objectives.
*50 What is of interest in the present connection is the significance of the very conception of an activity distinguished by its orientation to ends-in-general rather than to particular ends. The view of economic activity as the effort to gain power to obtain ends that are to be selected only later represents an analysis of action that is intriguingly parallel to that which ignores altogether the multiplicity of ends in human action. We have seen that activity, as analyzed from the economic aspect, may be described in terms of one of two patterns. Either it may, with Robbins, be seen as the allocation of means with regard to numerous, ordered ends; or it may, with Knight, be seen as the technique of maximizing, with given resources, the single ultimate end, “satisfaction,” in terms
of which alone the numerous intermediate ends can conceivably be compared. The concept of an activity directed at ends-in-general involves the isolation of one kind of activity, which is, indeed, related to numerous, desired ends, but in which the latter have been superseded by a single end, not as their resultant, but as the
preliminary to their attainment. Action was entirely deprived of its economic aspect, in the Robbins-Mayer view, when the ends of action were replaced by the end of “satisfaction,” to which they are conceived as being subservient. Where many ends were supplanted by a single end, viz., the
resultant of them all, activity became merely a question of technique with regard to this single, ultimate end. Now, on the other hand, we have isolated an activity in which numerous desired ends are superseded by the single
intermediate goal of attaining power in general to command the as-yet-unspecified further ends.

The recognition that a large part of human activity, that directed at gaining general purchasing power in the form of money, does, in fact, conform to this pattern is highly revealing. The maximization of money income, of “wealth,” as the essence of economic activity was one of a group of concepts underlying many older definitions of economics. The maximization of some less specific entity, such as satisfaction, utility, welfare, and the like, came to be identified with economics as a result of the introduction of subjective thinking into the discipline in the latter part of the previous century. Robbins’ formulation of the economic aspect of activity in terms of the allocation of scarce means among numerous alternative ends is now seen to occupy a very special position in respect to these two types of maximization. It begins by pressing on to the multiplicity of ends of action that lie behind the quest for wealth. It sees the economic aspect of action to exist precisely in the circumstances brought about by this multiplicity of real goals and action. But it is, on the other hand, able to retain its grip on this economic aspect of action only by deliberately refraining from submerging the multiplicity of these ends into a single, more ultimate end. The economic aspect of affairs, as seen by Robbins, is predicated on an interpretation of action that, while reaching beyond the false homogenization of ends implicit
in the definition of all economic activity as the maximization of the single end, “wealth,” is able to resist the parallel homogenization of ends in terms of their resultant that is implicit in the characterization of action as the maximization of “satisfaction.”

Economics and Ethics: the Positive and the Normative

The demand that the economist preserve a scientific neutrality with regard to the desirability of particular situations explored by his analysis has been maintained with a fair degree of consistency. Nineteenth-century economic methodologists had stressed the distinction between the
science of political economy and a possible
art of political economy. “Almost all leading economists, from N. Senior and J. S. Mill onwards” had made pronouncement “that the science of economics should be concerned only with what is and not what ought to be…”
*51 By the turn of the century the relationship between economics and ethics had become a lively topic for discussion in the German literature. Heated controversy over the place of the
Werturteil (value judgment) in economics culminated, at the famous Vienna meeting in 1909 of the Verein fürSozialpolitik, in what Schumpeter describes as almost amounting to a row.
*52 It was at this time that Max Weber was vigorously campaigning for professional and academic
Wertfreiheit in the social sciences. What Robbins injected into this time-honored issue was the claim to have demonstrated that such ethical neutrality on the part of the economist follows with rigorous necessity from the very definition of an economic problem.

Previously, the question of freedom from judgments of value
on the part of the economist had been debated chiefly from considerations of scientific propriety. Weber had devoted great pains to demonstrating that investigation into the “cultural sciences” is not incompatible with an attitude of detachment. Now Robbins had attempted to make it clear that ethical considerations can, by definition, in no way affect the economic aspect of affairs. The economic point of view is concerned with a concept of the act in which the ends of action have been previously determined and for the duration of which those ends are not permitted to change. The content of these ends is completely irrelevant to the economic aspect of the act and hence to economic analysis. Introduction of judgments of value into the consideration of the economic consequences of action thus constitutes deliberate transgression of the proper scope of economic inquiry.

In Robbins’ exposition, this point of view found its expression in the emphasis on the distinction between “positive” studies, on the one hand, and “normative” studies, on the other.
*53 Between these two fields of enquiry Robbins saw a “logical gulf,” and it is this unbridgeable chasm that separates economics from ethics. The two fields of study are “not on the same plane of discourse.” “Propositions involving the verb ‘ought’ are different in kind from propositions involving the verb ‘is.'” “Economics deals with ascertainable facts; ethics with valuations and obligations.”
*54

Several years before the publication of his
Nature and Significance of Economic Science, Professor Robbins, in objecting to Hawtrey’s postulation of the ethical character of economic propositions, had been able to declare that Hawtrey’s position was contrary to the general agreement of economists.
*55 However, Robbins’ more extended discussion in his
Nature and Significance and especially his postulation of the gulf between the positive and the normative met with far from general agreement. Two streams of sharp dissent may be distinguished in the subsequent literature. The one group of critics, with Souter, denied the validity of Robbins’ positive-normative dichotomy on the ground that it is a part of a wholly unacceptable view of the nature of economic activity and economic science. Their condemnation of this distinction followed consistently from fundamental disagreement with Robbins’
principal theses. On the other hand, several writers, with Macfie, have built solidly on the general framework constructed by Robbins, but have reached conclusions on the possibility of a normative economics that are sharply at variance with those developed by Robbins himself.
*56

Souter’s’ rejection of Robbins’ characterization of economics as a “positive” science is closely connected with his previously cited condemnations of Robbins’ entire position as “positivist.” The treatment of the ends of action as abstract might indeed justify a distinction between two levels of inquiry: one concerned with the concrete ends of action taken as the “norms,” and the other wtih the “positive” disposition of means with regard to these ends considered in the abstract. But the norms themselves may be studied quite as “positively.” The rules of logic, for example, offer a field of study altogether as “positive” as does the “psychology of reasoning,” even though the former deals with how we “ought” to reason (with truth as our norm), and the latter with how we do.
*57 The distinction between positive and normative levels of discourse is thus seen to be only a relative one, not at all necessarily warranting the withholding of the name “science” from normative disciplines.
*58 Moreover, as we have seen, Parsons forcefully pointed out that Robbins’ conception of a positive end in the abstract, free of any normative tinge, contradicts the very nature of an end, which necessarily involves the notions of effort and purpose. While the circumstance that men do
try to economize
can be described and analyzed in “positive” terms by abstracting from the normative aspect of action, such an abstraction must necessarily pass over the essential quality of purposive action.
*59

The Souter-Parsons critique of Robbins’ dichotomy and especially of its application to problems of economy thus has its source in a fundamental disagreement with the conceptual framework into which Robbins has fitted the economic act. Of quite a different character is the position taken up by Macfie with regard to the possibility of a “normative” economics. Macfie vigorously pursues his theme, which leads him to the conviction “that economics is fundamentally a normative science, not merely a positive science like chemistry.”
*60 But Macfie arrives at this conclusion,
diametrically opposed to that of Robbins, by enthusiastically accepting Robbins’ general framework and building solidly upon it as the foundation for his own position. In acknowledging his indebtedness to the work of Robbins, Macfie expresses the belief that Robbins’ essay is final, “within its chosen scope.” Macfie’s own contribution he regards as a “superstructure” erected on it.
*61

But the superstructure that Macfie has erected would turn the concept of economy and the entire science of economics in a direction completely different from that envisaged by Robbins. Macfie accepts the analysis of economic action as the allocation of means with regard to given alternative ends. He endorses with fervor the rejection of the view linking the concept of economy with specific types of ends. He, too, relies heavily on the notion of economy as an aspect of
all kinds of human endeavor. Although Macfie stresses the purposive character of human action far more than Robbins does, he too stresses the essential homogeneity of the economic element in action regardless of the particular type of motivation involved. Where he parts company with Robbins and attempts to embark on the construction of his own “superstructure” is in his elevation of the idea of “economy” into a “value” in its own right.
*62

With earlier writers the concept of economy was treated simply as the neutral expression of the concrete purposes of action. Where given ends were the motives of human endeavor, the desire to encompass these ends in the face of inadequate resources enforced the application of “economy,” of careful comparison of ends and means, simply in order to fulfil the given goals of endeavor as completely as circumstances would permit. The practice of economy fulfilled only the originally selected goals of action; the content of these goals having been selected
before the economic act, analysis of such an economic act could be “positive,” i.e., unconcerned with the nature of the ends of action.

What Macfie introduced into this schema was the idea that, with given competing ends of action and with scarce resources, economy is enforced on the economic agent as an end and final value in itself. By acting rationally to achieve the optimum satisfaction
of his previously selected desires, economic man is realizing a reasonable objective. “And the realisation of an objective which is reasonable is in some sense good in itself.”
*63 The principle “that scarce means should not be wasted, or should be used to the best advantage” is seen as a universal human value that fundamentally affects all kinds of endeavor, whether singing, writing, or activity in the market. If this view of the nature of economy is accepted, then the economic act becomes immediately more than merely the allocation of limited means in order to achieve specific competing ends. Economy, the fitting of scarce means to ends, is imposed not merely by force of the originally selected ends, but “under the persuasiveness of a value, to maximize total satisfactions.” Economics does not “just accept human desires, and give them back unchanged. The principle of economy itself transmutes them through its criticism.” The choice that emerges from subjecting competing desires to judgment in terms of the value, economy, is something quite different from the originally selected ends. Ends cannot remain “constant” throughout economic action because such action in itself injects a new “end” into the system of the agent’s desired ends.
*64

Economics as Macfie conceives it thus emerges as an essentially normative discipline, analyzing the impact on numerous desired ends of a new end, viz., the value, economy, which is introduced through the presence of scarcity. This view has found favor with Professor Knight,
*65 among recent writers, but the basic thesis is not new. Macfie’s value, economy, is strikingly reminiscent of Veblen’s “instinct for workmanship.” In Veblen’s view there is in the human character “a taste for effective work and a distaste for futile effort…a sense of the merit of serviceability or efficiency and of the demerit of futility, waste, or incapacity…”
*66 Man is “possessed of a discriminating sense of purpose, by force of which all futility of life or of action is distasteful to him…It is not a proclivity to effort, but to achievement—to the encompassing of an end….Within the purview of economic theory, the last analysis of any given phenomenon must run back to this ubiquitous human impulse to do the next thing.”
*67 In this discussion of what
he calls the “pervading norm of action,” Veblen, in what, coming from his pen, must be considered a remarkable passage, is clearly covering the same ground as Macfie.

The Nature of Economic Science and the Significance of Macroeconomics

In a chapter devoted to the discussion of Professor Robbins’ definition of economic science, attention must be paid to the complaint that his formulation excludes from the subject the entire field of the “consideration of the general level of economic activity.”
*68 In an era in which investigation into the causes of general unemployment of resources has assumed the most prominent place in the work of economic theorists and policy-makers, such a complaint, if well founded, would be a serious limitation on the practical usefulness of Robbins’ definition.

The point at issue has been raised by several writers. Robbins’ definition is predicated on the necessity, imposed by the scarcity of resources, to economize in order to satisfy most fully alternative human wants. The concept of economy depends on the necessity of comparing alternative ends. This is so because the allocation of resources for any one selected end involves the necessary withdrawal of these resources from possible allocation to another, alternative end. Where, for example in the case of a resource that is a free good, the devotion of the resource to a particular use does
not require its withdrawal from an alternative use, no economy is called for and no concept of economic “efficiency” can be applied. What critics of Professor Robbins have pointed out is that the same absence of “economy” that characterizes the use of a free good may quite as certainly characterize the use of a “scarce” resource if there is, for any reason, a demand insufficient to bring the resource into employment. “Efficiency in the use of underemployed scarce resources is as irrelevant as it is in the administration of free resources…”
*69 “The problem of utilizing these [i.e., idle] resources fully is not a matter of deciding whether they should be devoted to use A or use B, but of how they can be used at all.”
*70

Parallel to the use of this criticism to deny altogether the adequacy of Robbins’ definition of economics is the view that the prevalence of idle resources renders inapplicable the conventional economic analysis of which Professor Robbins’ formulation is the (correct) definition. It cannot be too strongly emphasized, Barbara Wootton has declared, that the absence of scarcity (through underemployment) of resources “renders inoperative, irrelevant and unreal the
whole corpus of economic studies as defined by Professor Robbins and as embodied in the classical analysis and its contemporary elaborations and refinements.”
*71

The question that is here being raised relates, of course, to the impact that the demand for the reconstruction of economics implicit in Keynes’
General Theory must have on the conception of the very nature of economic analysis. On the basis of the “classical” concept of the economy, according to which the idleness of resources could be only a temporary phenomenon of disequilibrium, economic science as defined by Professor Robbins could adequately analyze the economic problems of the real world. In the real world the use of a resource for any one purpose does, in fact, mean its withdrawal from some alternative purpose. But the economics that Barbara Wootton has in mind takes serious account of the Keynesian proposition that resources may be unemployed for reasons other than the fact that too much is asked for their use. This would certainly undermine the whole assumption of scarcity
*72 and cast a definite shadow on Professor Robbins’ definition of economics. It would be inconvenient indeed if the validity of a definition of economics were to be made dependent on the particular view taken of a proposition advanced by an economic theorist, no matter how controversial that proposition might be.

The identification of Robbins’ conception of the nature of economic science with “classical” economics and its assumption of full employment must be considered, moreover, from yet another angle. As expounded by Robbins, the analysis of economic affairs proceeds exclusively from the consideration of economizing by individuals. A problem is economic because it involves the necessity for an individual to reconcile his numerous desires with the
limited resources available to him. A social problem has an economic aspect only in so far as it affects the conditions in the light of which individuals are constrained to economize. The consideration of the general level of economic activity and the degree of employment of a nation’s resources would thus be excluded by definition from an individualistic ends-means economics. Economics, as Professor Robbins conceives it, must, it would seem, remain exclusively a microeconomics.

Despite these misgivings concerning the problems falling within the scope of Robbins’ conception of economics, it has been shown by Rivett that it is quite sufficiently elastic to embrace the problems of idle resources. In the relevant sense, it is pointed out, unemployed resources
are scarce. While they may be abundant in relation to effective demand, they are most certainly scarce relatively to desire. The doctrine that a deficiency in the effective demand for services is a result of a lack of purchasing power associated with
low prices for that factor of production does not necessarily deny that idleness would be removed by sufficiently low prices. “If labor were not scarce relative to demand and were expected never to be scarce again, wages would be nil and…all labor would soon be employed”
*73.

The point is, of course, that it is precisely from the perspective of microeconomics that problems of unemployed resources are most obviously seen to be economic problems in Robbins’ sense. If it is an economic problem whether to devote resources to use A or to use B, this is not because the uses A and B are valued, but because they are
differently valued. Where the problem is how idle resources can be utilized, not for one or another use, but
at all, then society is facing the tragedy of total waste of the means that could be applied to secure desired ends. What seems a resource robbed of its scarcity is clearly a valuable means, which, instead of being allocated to the most prized purpose, has been allocated by a breakdown in the economic system to no end at all. From the point of view of the ends of the members of society, a resource involuntarily idle represents, not a quasi-free good, but scarce means unprofitably withdrawn from a potentially fully-employed economy.

The determination of the circumstances tending to bring about the tragic misallocation (or rather nonallocation) of precious resources must, of course, be one of the principal tasks of a discipline dealing with the way in which the members of society, through the division of labor, concertedly economize the resources at their disposal, with respect to their desired ends.