The Economics of John Rae (review)

The Economics of John Rae. Edited by O. F. Hamouda, C. Lee, and D. Mair. London and New York: Routledge, 1998. xvi; 288 pp. $90.00.

John Rae was a Scot who, after studies in Aberdeen and Paris, emigrated to Canada in 1822. He pursued a varied career there and in the United States, where he died in 1872. His main work, Some New Principles on the Subject of Political Economy Exposing the Fallacies of Free Trade and Some Other Doctrines Maintained in the “Wealth of Nations,” was published in 1834 and has been widely recognized as containing important ideas, notably on the infant industry argument for protection and the theory of economic growth and development. His ideas were praised by Nassau Senior, John Stuart Mill, Irving Fisher, Eugen von Böhm-Bawerk, and Joseph Schumpeter. Mill compared Rae with Thomas Malthus, and Fisher described himself as building on foundations laid by Rae. However, despite these acknowledgments, Rae’s work was ignored by most economists and has been ignored by many historians of economic thought.

This volume arises out of a conference held to mark the bicentenary of Rae’s birth and comprises (if we count the introduction) sixteen chapters on various aspects of his work. It covers methodology (Hamouda), the theory of the history of technological change (B. B. Price), conspicuous consumption (Roger Mason), saving and capital and technical progress (Syed Ahmad; Anthony Brewer; Thomas K. Rymes; Michael J. Gootzeit), and trade and protection (Robert W. Dimand; Andrea Maneschi). There are also two chapters on the relationship of Rae’s work to that of Adam Smith, of whom he was a strong critic (Samuel Hollander; Masazumi Wakatabe) and several papers that try to provide a broader perspective on his work (R. Warren James; S. A. Drakopoulos; Alexander Dow, Sheila Dow, Alan Hutton, and Michael Keaney; Douglas Mair and Anthony J. Laramie). The introduction and James’s “Birthday Greetings to John Rae” discuss aspects of his life, but elsewhere the emphasis is on textual exegesis, focusing mainly on Rae’s New Principles.

The book establishes that Rae was an original thinker whose ideas deserve more attention. In that it achieves this objective, the book is a success and ought to be read. Of particular importance are the chapters on Rae’s theory of innovation and growth, in which invention rather than capital accumulation was the driving force. The book makes the case that historians should pay more attention to Rae, not because his work was neglected, but because it was so influential. It may be true that few nineteenth-century economists read his work, but the high caliber of those who did and who were influenced by it more than compensated for its small readership, even if, like Mill (as explained by Dimand), their acknowledgment appeared to come late and was insufficiently noticed.

Praise for the book, however, needs to be qualified. There are several respects in which I was disappointed by the volume. The most obvious of these is that it has faults that beset many edited volumes. Mason and Hollander both discuss Rae on conspicuous consumption, but neither references the other. Dimand, Maneschi, and Hollander similarly offer separate analyses of the infant industry argument. There are also numerous links between the chapters on supply and demand for capital; invention; capital and growth; and savings, invention, and investment supply. The result is an element of repetition and a lack of clarity on how the various contributions fit together. There was also the problem that I was sometimes not convinced that Rae’s remarks could bear the weight of interpretation placed on them. It may be the case, as Mason contends, that it was not till the “Gilded Age of ostentatious display” in late-nineteenth-century America that people were open to ideas of conspicuous consumption, but I am not convinced that any injustice is done by associating that idea with Veblen rather than with Rae. Similarly, I wonder whether Drakopoulos makes too...