Rational Economic Man and the Ignoble Savage

Whatever the value of their exotic fact gathering, modern anthropologists have been too ignorant of the history of economic ideas to make a serious contribution to the revision of economic orthodoxy. —Keith Hart, Beyond the Marketplace: Rethinking Economy and Society

Heath Pearson has provided us with an informative account of three approaches to the “psychological substrate of primitive economics” over the 1859–1945 period. While one could quibble about omissions—Alexander Chayanov comes to mind—the author’s treatment is praiseworthy for its coverage of the German literature. I want to elaborate on, and provide alternative perspectives to, the last section of the article, which tries to come to grips with why “the encounter with primitive man did not shake classical economic theory to its foundations.”

The start of Pearson’s period coincides broadly with the decline and fall of classical political economy. Classical economics fell into the doldrums in the middle decades of the 1800s, and there was growing dissatisfaction with it from the other sciences. There was a perception that the classics were too eclectic and ambiguous on policy issues (e.g., on the value of the colonies) and that there was a need to make the subject more scientific. Vague pronouncements had to be replaced by precision.

Attacks on the classics came from many quarters. Often the criticisms reflected misunderstanding of the basic classical ideas. Humanists (such as Charles Dickens, John Ruskin, Thomas Carlyle, and Samuel Taylor Coleridge) reacted to the perceived association of classical economics with selfishness and narrowness. Others equated the classics with the advocacy of doctrinaire laissez-faire. Marx highlighted the contradictions in capitalism and noted that income distribution was the outcome of class struggle. This attack was reinforced when John Stuart Mill admitted that the classics could explain the laws of production but had little scientific to say on income distribution. The utopian socialists were dismayed by the severe social outcomes associated with industrial growth. Historically inclined researchers rebelled against the overly deductive and abstract theorizing of those like David Ricardo. Analytical critics took issue with theoretical inconsistencies (e.g., Mill’s abandonment of the wages-fund doctrine) and the lack of demand in classical price theory. All of this was not helped when a number of classical predictions—movement to the stationary state, Thomas Malthus’s population projections, wages tied to subsistence, and the deleterious effects of the corn laws—did not appear to come to fruition.

Perhaps as a consequence of these criticisms and technical developments in other disciplines, the scope and boundaries of the subject were considerably narrowed in the decades after 1870. There was a significant change of emphasis and direction as political economy became economics. The professionalization of economics—in terms of economic societies, texts, core curriculum, and journals—dates from this period. The early marginalists (except Alfred Marshall) saw themselves as departing radically from the classics, focusing on demand rather than supply in the determination of prices, using mathematical techniques, and showing little interest in empirical research. Relative price determination and resource allocation with fixed supplies of the factors of production became the economic problem, setting aside all questions about changes in the quantity and quality of productive resources over time. Efficiency and optimization became the key concerns. Some commentators summarize the marginal revolution as a change from the macrodynamics of the classics to microstatics. Analytical problems of exchange and scarcity occupied the marginalists as they searched for universal laws of choice between alternative uses. Economics became more and more a logical, deductive, and mathematical pursuit.

The marginalists abstracted from the historical and institutional context to derive perfectly general results from a minimum number of assumptions. While it was an analytical and methodological advance, it also represented a decisive change in the direction and nature of the discipline. This change did not please everyone. For some, marginalism represented a narrowing of the scope of economics down to a purely mathematical discipline with little...