Economics and the Historian

The Economics of Choice: Neoclassical Supply and Demand

The Economics of Choice Neoclassical Supply and Demand DONALD N. McCLOSKEY NEOCLASSICAL ECONOMICS IS THE STUDY OF CHOICE A century ago the English economist Alfred Marshall began his exposition of what is now called neoclassical economics with a definition:economics , he said, is the study of humankind in the ordinary businessof life. The definition covers the non-neoclassical approaches, too—Marxist , Austrian, Gandhian, institutionalist. All these are part of the conversation of economics since the seventeenth century about the business of humankind. Marx was a follower of David Ricardo, who was in turn a follower of Smith. Marshall himself and the neoclassicals are another branch of this tree, the dominant branch in modern economics. The specifically neoclassical definition, which was made central in British economics in the I9zos and was committed to mathematics in the 19405, is that economics is the study of choice in the ordinary business of life. To study choice is to fail to study other things (which is in fact a neoclassical way of putting the matter). Neoclassical economists are fond of preaching that to take one road in a yellow wood is to sacrifice the other. Intellectual choices are no exception. The Marxist study of Power, the institutionalist study of Habit, the Austrian studyof Creativity are more or less subordinated in the neoclassical approach to what the neoclassicals are pleased to call "maximization under constraints ." 122 The Economics of Choice 12.3 Neoclassical are obsessed with Choice, and see choice where others see subordination or necessity. They would urge the historian not to jump hastily to a diagnosis that peasants follow their plows by custom alone or that traders trust each other on grounds of solidarity alone. That is the main payoff to thinking neoclassically about history. The historian will be able to see choices where she did not before. The businessperson must choose between markets at home and abroad; the consumer must choose between buying in the village or in the town; the male laborer must choose between a factory or an apprenticeship; the female homeworker must choose between making homespun or entering the market. Neoclassical economics, in other words, completes sociology and anthropology , because it studies a motivation unattractive to those fields: choice under constraint. Whether analysis of choice under constraint is more useful for writing history than the analysis of symbols in the late medieval French monarchy or the analysis of tension between the classes in late nineteenth-century Massachusetts towns remains to be seen. But it can be part of most histories. The economists are not the only students of society to emphasize choice. Their pa cables were anticipated by writers of fiction in the age of the bourgeoisie. Charles Dickens peopled his novels with monsters of calculation among whom his prerational and Pickwickian heroes swim. Jane Austen was writing novels of domestic maximization—marriageseeking mothers and status-seeking fathers—about the same time that Jeremy Bentham was holding forth on the maximizing model of man. And Daniel Defoe, a pioneer of the genre, saw in Robinson Crusoe a Choosing Man: "having considered well what I most wanted, I first got three of the Seamen's Chests" (41). Crusoe's raft is not of infinite size; at any moment the weather can change, and sink the wreck; this may be the only trip. Crusoe cannot have everything, and so must make choices. He takes only the clothing "wanted for present use," because there were "other things which my eye was more upon" (42).That is, he chose to have fewer clothes and more carpenter's tools. He could not in the circumstances have both. He is a commercial man making choices under conditions of scarcity. Details of the style reinforce scarcity in Robinson Crusoe—a contrast to the stories of shipwrecks in the Odyssey or the Aeneid, over which hover gods willing to perform miracles of abundance. The miracles in Crusoe's world are naturalistic, reflecting always Adam's Curse. The story is filled with realistic disappointment, signalled often by an omi- 12-4 Donald N. McCloskey nous "but." "There had been some Early and Wheat together" on the wreck, "but, to my great Disappointment, I found afterwards that the Rats had eaten or spoil'd it all" (41). The wreck had "a great Roll of Sheet Lead: But this last was so heavy, I could not hoise [sic] it up to get it over the Ship's Side...