Economics as a Science. Economics, as noted before,
describes “economic” behavior and an “economic”
social organization, insofar as human conduct conforms
to certain rules, assumed to be known axiomatically,
but not excluding other motives. Since its root idea
is “economy,” which is relative to intentions and these
are not observed by the senses, it is not a strictly
empirical or inductive science. People economize—use
means more or less effectively to achieve ends—but
as certainly, they do not succeed completely in achiev-
ing their ends to the maximum degree possible with
the means under their control; and the ends may not
be ideally good. Ignorance and error play much the
role of “friction” in mechanics, to which science the
study of economics bears a fairly close analogy in
methodology. Motives play the role of forces, which
also are metaphysical, not observed but inferred from
effects—though the basis of knowledge is different in
the two cases. (Friction may be useful, and “efficiency,”
the objective in economizing, is harmful if the end is
bad.) To reduce economic friction (ignorance), men
develop the role of “expert,” and agency relations
permeate free society. Freedom relates largely to
choice of agents, in economics and politics. The main
source of economic knowledge, i.e., of people's minds,
is communication, chiefly by language—the rational
use of which is the special attribute, and mystery, of
man.
The pivotal new logical idea of the subjective-value
revolution is what came to be called “marginalism,”
which happened to be “discovered” first in consump-
tion (later seen to hold in production also). It dawned
on a few minds that the classical rejection of use-value
as a cause of price had been an error because the
economic value of a good reflects the use-value of an
increment (acquired or given up), not that of the com-
modity in the abstract; also that this value depends
on the amount of the good used or transferred, de-
creasing as this amount increases. That is, wants are
satiable (the want for any one good, “other things being
equal”).
This may (and should) seem trivial, but its publica-
tion started controversy, and not all the implications
are yet settled. The simplicity is marred by the fact
(finally recognized) that any good is wanted (used) in
combination with others, hence an increase or decrease
in quantity is a change in proportions, and goods may
be complementary or antagonistic. This does not
weaken the principle of appraisal “at the margin,”
which is valid under all conditions. Proportioning to
equalize marginal utilities clearly “maximizes” the
total: if an increment yields more satisfaction in one
use than in another, the total will be increased by
moving some of it into the field of greater yield, until
equality, for equal indivisible increments, is reached.
The principle had really been expressed by several
writers decades before it got wide recognition through
the works of William Stanley Jevons, Carl Menger, and
Léon Walras—most notably perhaps by N. W. Senior
and W. F. Lloyd in Oxford (in the 1830's); also earlier
by Jules Dupuit and C. J. Garnier in France, H. H.
Gossen in Germany (1854), and others.
In this period also the idea found parallel application
in the field of production and the yield of productive
services—distribution in the modern and relevant
meaning. Diminishing returns (incremental yield—
often misstated as proportional yield even by Alfred
Marshall, in his Principles of Economics [1890], p. 153)
from increasing application of one agent to a given
combination of others takes the place of diminishing
marginal utility. The increments of physical yield de-
cline, and the value product still more. (In this connec-
tion notable contributions had been stated by Senior,
the German J. H. v. Thünen, and M. Longfield, to be
recognized later.) Near the end of the century, the
incremental principle was applied especially to distri-
bution by P. H. Wicksteed in England and J. B. Clark
in the U.S.A., Wicksteed for the three traditional “fac-
tors,” Clark for two, labor and capital. A controversy
arose as to whether payment by marginal increments
would exactly exhaust the product. This is strictly true
only under subtle mathematical conditions; it is
roughly true empirically, since producers must act on
the principle, and the product does get distrib-
uted—after a fashion.
