What’s Left for Economics?: A Comment on Appleby

I should admit straightaway to partiality for the interpretive approach of Joyce Appleby. It is why I sought her guidance in my graduate-student years. Understanding the moral and intellectual roots of capitalism has been a considerable part of her work as well as the work of Liberty Fund, the foundation where I have spent most of my professional life. The subject is valuable precisely because it touches on so many aspects of change through time and forces one to think about human nature, beliefs, and actions. It is Appleby’s treatment of these questions that I find most intriguing.

I agree with Appleby’s argument that Enlightenment conceptions of nature unleashed enormously liberating forces. I share her view that in trying to understand capitalism, it is necessary to understand the ideas behind it. I fairly endorse most of her narrative about the rise and development of industry and markets. But I am here more interested in the theoretical issues that impinge on the definition of capitalism. On this subject I have less certainty about our agreement. More particularly, given her criticisms of economics as a discipline, some guidance as to what remains valid and useful in the economist’s understanding for historians seems necessary. Even if we grant that markets are essential but insufficient to the definition of capitalism, we must still know how far we can go in applying economic understanding to history. Or are we to assume that every aspect of economics is bounded by time and place?

Some time ago I had the pleasure of working on an interview of Max Hartwell conducted by Liberty Fund. The interviewer was his former student and critic, Patrick O’Brien, and the exchange was as pleasant as it was illuminating. Going back over his famous—some would say notorious—exchanges with Eric Hobsbawm on the benefits of industrialization, Hartwell spoke eloquently about the application of basic economic principles to historical data. One of those basic ideas is that exchange occurs because both parties to a transaction perceive a benefit to themselves. From this notion, it seems natural to presume an increase in general utility when faced with a quantifiable increase in commercial and productive economic activity. But O’Brien pressed Hartwell on this point. No quantum, O’Brien argued, could reach a measure of utility that was subjective. Here perceptions counted, not some quantifiable relation.

A detail of Louis Philippe Boitard’s The Prodigals Nurse; or Modern Heir, 1750. Library of Congress, Prints and Photographs Division [reproduction number, LC-USZ62-132014].

Appleby raises much the same issue when she addresses the work of economists. They assume the naturalness of capitalism, giving the impression of “mathematical precision” in their analyses. But in the process, they screen out the messiness in economic relations. “Without studying the market’s entanglement with society and culture,” she writes, “we have difficulty penetrating its logic.”

A good deal of scholarship now appears to be headed in this direction, carrying not only historians along with it, but economists as well. As Appleby notes in The Relentless Revolution, the debate goes back quite a ways. Max Weber is perhaps best remembered for making the case for culture, not so much for his particular answer (or answers). He is remembered, writes Appleby, for clearly identifying “Smith’s ceaseless economic striving [as] a peculiar form of behaving that had to be explained, not taken for granted” (18). Two very recent works, Joel Mokyr’s The Enlightened Economy, and Dierdre McCloskey’s Bourgeois Dignity, offer new cultural explanations for what capitalism is, and how it came to be.

Like Appleby, McCloskey and Mokyr study the diffusion of ideas and values through society. They see capitalism as a transformation that welled up from the ground floor of traditional communities, changing the perceptions and actions of individuals. It is at this critical point, the defining moment of change, that certain essential aspects bearing on the definition of capitalism come to the fore.

According to Appleby, capitalism came from a mixture of particular practices and ideas. It arose from the unlikely combination of...