Epochs in the Evolution of Economic Thought.
Before taking up the transition to analytical economics,
it seems in order to relate the whole development to
West-European history by distinguishing its main
stages. Such a scheme will fit the recognized historical
periods, and happens to present a neat cross-dichotomy
—two main divisions, each with two subdivisions,
which may be labelled I-A, I-B, and II-A and II-B. The
main changes affect the objectives attributed to people
by writers and thought to be proper as ends of social
policy. In the first major epoch, extending from the
beginnings in Greece through the Middle Ages (I-A
and I-B), the aim was social and may be called idealistic
or spiritual, in contrast with later “individualism” and
“materialism.” Ends were stressed, rather than means.
(Max Weber thought the Greek spirit that of comrades
in arms.) Writers looked to the persistence and pros-
perity of the small city-state with its culture, which
bequeathed to later times a great literature and
art—and the word “democracy,” though not the fact
as now conceived.
The next sub-epoch (I-B) begins with the decline of
imperial Rome and conversion to mystery cults, finally
to ecclesiastical Christianity. (Gibbon called it the
triumph of barbarism and religion.) The purported end
of living was “salvation,” for a future eternal life, this
world being given up as a vale of tears and man as
born to sin, curable only by supernatural action. The
political order—while waiting for the Parousia (Second
Coming, end of the world) was a theocracy, i.e., a
clerocracy, headed by the autocratic Pope of Rome.
As typical for authoritarian regimes, its first real con-
cern was its own power. In the West, “feudalism” was
variously joined with this; in the East, several patri-
archates were subject to the Emperor in Constantinople
(new Rome) until the rise of Islam. This church-state
conquered most of the old Roman empire, though
turned back by the Franks at Tours in 732; in 1453
the Turks took Constantinople, ending the Byzantine
Empire (and for some it marks the end of the Middle
Ages).
The transition to the second major epoch (II-A) was
made at the “Renaissance”—in many ways more a new
birth than a rebirth. In Northern Europe it was marked
by the Protestant Revolt (“Reformation”). Feudal
power became concentrated in nominally “absolute”
monarchies, and in the ensuing Wars of Religion, polit-
ical (and economic) interests increasingly predomi-
nated. None of the protagonists wanted religious toler-
ation, let alone general freedom, and the main result
was a transfer of authority from the Church to new
states, monarchies under sovereign by divine right.
Social thinking became state centered, aimed at na-
tional aggrandizement. However, the states were sev-
eral, and rivalry for power forced them to tolerate,
even encourage, freedom in trade and industry and
hence in science, for the sake of the new wealth they
yielded, which the monarchs could tax.
Political authority, though also historically sacred,
has been less bound by sanctity than the priestly, and
secularism increased. Passing over details of the history,
most pertinent here is the fact that for a few centuries
“economic” thought was nationalistic—the doctrine of
mercantilism, noticed before. But policy and formal
government were gradually liberalized, specifically in
Britain, notably by the victory of Parliament, defeating
Stuart absolutism, in the Civil War, the “glorious revo-
lution” of 1688, and the ensuing settlement.
The next stage (sub-epoch II-B) begins at the En-
lightenment, the late eighteenth century, centered
largely in France; with American independence, that
new nation took the lead, while in France, revolution
was followed by reaction, causing a setback for liberal-
ism in Britain.
It is the age of individualism, hence of freedom, and
in economic thought, of “laissez-faire.” But from this
viewpoint, it should be subdivided: first came a century
of “political economy”—propaganda for laissez-faire—
extending from Smith's Wealth of Nations of 1776 to
the rise of objective economic analysis in the “subjec-
tive-value revolution” of around 1870—promoted in-
dependently by W. S. Jevons, Carl Menger, and Léon
Walras. The major premiss of individualistic philosophy
is that the only value is personal well-being, and each
is the best judge of his own and of the action that will
promote it—particularly in contrast with the state.
(Other groups, notably churches, were in liberal theory
reduced to voluntary associations, without authority—
science and criticism having destroyed the supernatural
appeal.) The state is practically a means only, its chief
function to maintain freedom by preventing “preda-
tion” i.e., force and fraud. (Adam Smith had added two
other functions, defense and “certain public works.”)
In politics, liberalism introduced democracy—self-
government through laws made by freely chosen rep-
resentatives—meant chiefly to prevent government
from trespassing on liberty, and at the time to reduce
greatly its scope of action with that of law. Necessary
sweeping qualifications of the liberal credo have been
recognized and will be noticed here in due course.
