The Modern Cultural Revolution. What “funda-
mentally” happened in this transition was a culture-
historical or “spiritual” revolution, a “conversion” in
the general mental and social attitude. Such events are
characteristic of the history of Western Europe. Politi-
cally, its civilization first blossomed in Greek city-
states, which were succeeded by Hellenistic and Roman
empires—these in turn by the church-religion culture
of the Middle Ages joined with politico-economic feu-
dalism; this feudal order gave place in the Renaissance
to monarchic “stat-ism.” The Enlightenment replaced
the idea of “L'État, c'est moi” with the radically new
idea of individualism, i.e., freedom. The twin value of
freedom was progress—the two combined as progress
through freedom and freedom for progress, directed
by intelligence. This “Liberal Revolution” is perhaps
the greatest cultural overturn of history. A major result
is that modern men, set relatively free from tradition
and authority, are largely motivated by rivalry. But
this is in large part turned to constructive action by
several “invisible hands”: mutual “material” advan-
tage, sportsmanship, workmanship, and scientific
curiosity—along with public spirit, sympathy, and
benevolence. None of these factors was entirely new,
but the degree to which they burst forth and their
combination constituted a historical revolution.
The new “science” of political-economy was intro-
duced in 1776 by the Scot, Adam Smith, with his
famous book, The Wealth of Nations. Its main thesis
was practical and it dominated its field until about
1870, when the modern analytical science of economics
began substantially to develop. The pivotal idea of the
new movement also is freedom, but now as a scientific
postulate based on reason—the (inseparable) economic
and political aspects are more directly pertinent here,
though humanly less important than the religious and
cultural. (Smith's great manifesto for economic free-
dom was nearly simultaneous with Jefferson's Declara-
tion of American Independence, its counterpart in the
political field.) Apart from the fact that freedom itself
is a negative idea—the absence of coercion—it will
be more realistic and more in point to consider as
pivotal the fallacious ideas replaced rather than the
essentially obvious ones introduced.
A major lesson to be learned from the history of ideas
is to realize the “glacial” tardiness of men, including
the best minds, in seeing what it later seems should
have been obvious at the first look. This is strikingly
illustrated by the concept of economy. People have
always practiced it—have “economized,” in many
connections—but have been unaware of the principle,
much as the famous M. Jourdain in Molière's le Bour-
geois Gentilhomme had talked prose from childhood
but was surprised to learn the fact. People have even
specialized, and exchanged products in crude markets,
and for millenniums have used “money” of some form.
But in physical nature it also took many centuries to
grasp the idea of “inertia,” a fact seriously encountered
constantly in everyday life; Aristotle and later great
thinkers thought that any motion once started would
cease unless maintained by the continuous action of
some force—until Galileo showed the opposite to be
the case.
Adam Smith did not entitle his book “political econ-
omy,” presumably because this had recently been used
by his countryman Sir James Denham Steuart for a
major work, Inquiry into the Principles of Political
Economy (1767), which properly belonged more to the
preceding “mercantilist” school. Both economic and
political freedom had been developing through “his-
torical forces” for over a century, notably in Britain,
and Smith's book was essentially “propaganda” for
more complete economic freedom (later called “laisser-
faire,” now “laissez-faire”). Neither he nor his political-
economist followers argued their case in terms of what
is now considered rational economic analysis. They had
no conception of a maximum return from resources,
specifically as obtained through correct allocation
among alternative uses. (And they took little notice
of “technology,” though they wrote at the height of
the “industrial revolution,” in which that was the major
factor, and it is surely the crucial fact in the popular
conception of economy.) The two main themes of
economic analysis, price and distribution, were ap
proached by way of absurd presuppositions, especially
the second, which the writers failed to see as a matter
of pricing the means of production. They adopted a
moralistic or social-empirical conception of a division
of the social product into three “shares,” wages, land-
rent, and “profit,” the three forms of income popularly
recognized, which were wrongly assumed to come
from three distinct sources and to be received by three
different social classes.
