Economists From England

"The substitution of industrialism for warfare is not... understood to imply a diminution of individual enterprise, but an alteration in its application."

"As nations advance towards civilisation it becomes less needful for them to contend with one another for land and food to support their increasing numbers, because their increased control of the industrial arts enables them to gain what they want by conquering nature instead of conquering their fellow-men."

"Nations are represented not merely as self-centered, independent moral systems, but as, in some degree, mutually repellent systems. This notion is partly the product of the false patriotic teaching of our schools and press, which seek to feed our sense of national unity more upon exclusive than inclusive sentiments. Nations are represented as rivals and competitors in some struggle for power, or greatness, or prestige, instead of as coöperators in the general advance of civilization."

"This practical condition, together with the failure of international-political theories to provide either convincing explanations or serviceable guidance for research, has provided adequate temptation to pursue reductionist approaches. The economic theory of imperialism developed by Hobson and Lenin is the best of such approaches. By "best" I mean not necessarily correct but rather most impressive as theory. The theory is elegant and powerful. Simply stated and incorporating only a few elements, it claims to explain the most important of international-political events-not merely imperialism but also most, if not all, modem wars-and even to indicate the conditions that would permit peace to prevail. The theory offers explanations and, unlike most theories in the social sciences, predictions as well. Moreover, it has successfully performed the other tasks that a good theory should accomplish: namely, stimulating and guiding research and· provoking counter-theories that claim to account for the same phenomena. All in all, the literature that can be attributed to the Hobson-Lenin theory of imperialism, both in support of the theory and against it, is as extensive and as sophisticated as the literature associated with any other school in the field of international politics."

"Under socialized industry progress in the industrial arts would be slower and would absorb a smaller proportion of individual interest, in order that progress in the finer intellectual and moral arts might be faster, and might engage a larger share of life."

"All progress, from primitive savagedom to modern civilisation, will... appear as consisting in the progressive socialisation of the lower functions, the stoppage of lower forms of competition and of the education of the more brutal qualities, in order that a larger and larger proportion of individual activity may be engaged in the exercise of higher functions, the practice of competition upon higher planes, and the education of higher forms of fitness."

"[T]he tendency of growing civilisation on the national scale has been more and more to divert the struggle for life from a struggle with other nations to a struggle with environment, and so to utilise the fruits of reason as to divert a larger and larger proportion of energy to struggles for intellectual, moral, and aesthetic goods rather than for goods which tax the powers of the earth, and which, conforming to the law of diminishing returns, are apt to bring them into conflict with other nations."

"This is, in fact, the philosophical defence of progressive socialism, that human progress requires that one after another the lower material animal functions shall be reduced to routine, in order that a larger amount of individual effort may be devoted to the exercise of higher functions and the cultivation by strife of higher qualities."

"Ramsey... had a most uncommon power of explaining clearly to others what he thought and why... But sometimes... he fails to explain things as clearly... simply because... he does not realize that what to him seems perfectly clear and straightforward may to others, less gifted, offer many puzzles. ...But even where you cannot understand him completely you can often understand him enough to find him extraordinarily interesting. ...even if he was wrong, [he] had very good reasons for the opinions at which he had arrived."

"With Ramsey’s young death, the world of learning was robbed of one of its most glittering stars. It is now time that he receive his due. What is needed is a thorough biography that would describe and place in intellectual history his important contributions to economics, mathematics, and philosophy, while keeping an eye out for what Virginia Woolf called the “fertile facts” that would reveal to us not only the impressive mind, but also the somewhat elusive personality of this extraordinary man."

"He was an extraordinarily clear thinker: no-one could avoid more easily... the sort of confusions of thought to which even the best philosophers are liable, and he was capable of apprehending clearly... the subtlest distinctions. He had... an exceptional power of drawing conclusions from a complicated set of facts. ...his subtlety and ingenuity did not lead him, as it seems to have led some philosophers, to deny obvious facts. ...he could see which problems were the most fundamental, and it was these... which he was most anxious to solve. ...I almost always felt, with regard to any subject which we discussed, that he understood it much better than I did."

"[M]y teacher Frank Ramsey... showed that if a scientific system was so completely precise that you could replace every word in it, such as "electrons," by the totality of all observations on the electron, then you could never discover anything new. ...Ramsey's theorem is really equivalent to all the Tarski-Turing theorems in essence because it says that if you push the symbolism even in a word like "mass" so that you say, as operationalists do... mass is everything you do when you weigh the mass, you are never going to discover that mass and energy are interchangeable. You have closed the system to new discoveries."

"When he did descend from his accustomed stony heights, he still lived without effort in a rarer atmosphere than most economists care to breathe, and handled the technical apparatus of our science with the easy grace of someone accustomed to something far more difficult. But he has left behind him in print only two witnesses to his power - his papers published in The Economic Journal on 'A contribution to the Theory of Taxation' in March, 1927, and on 'A Mathematical Theory of Saving' in December, 1928. The latter of these is, I think, one of the most remarkable contributions to mathematical economics ever made, both in respect of the intrinsic importance and difficulty of its subject, the power and elegance of the technical methods employed, and the clear purity of the illumination with which the writer's mind is felt by the reader to play about its subject. The article is terribly difficult reading for an economist, but it is not difficult to appreciate how scientific and aesthetic qualities are combined in it together."

"[A]lthough my attempted reconstruction of the view of Whitehead and Russell overcomes, I think, many of the difficulties, it is impossible to regard it as altogether satisfactory."

"But what we can't say we can't say, and we can't whistle it either."

"The loss of Ramsey is... to his friends, for whom his personal qualities joined most harmoniously with his intellectual powers, one which it will take them long to forget. His bulky Johnsonian frame, his spontaneous gurgling laugh, the simplicity of his feelings and reactions... his honesty of mind and heart, his modesty, and the amazing, easy efficiency of the intellectual machine which ground away behind his wide temples and broad smiling face, have been taken from us at the height of their excellence and before their harvest of work and life could be gathered in."

"[T]he formalist school, of whom the most eminent representative is Hilbert, have concentrated on the propositions of mathematics, such as '2 + 2 = 4'. They have pronounced these to be meaningless formulae to be manipulated according to arbitrary rules, and they hold that mathematical knowledge consists in knowing what formulae can be derived from what others consistently with the rules. ...for example...'2' is a meaningless mark occurring in these meaningless formulae. But... '2' occurs not only in '2 + 2 = 4', but also in 'It is 2 miles to the station', which is not a meaningless formulae, but a significant proposition, in which '2' cannot conceivably be a meaningless mark."

"The death... is a heavy loss—though his primary interests were in Philosophy and Mathematical Logic—to the pure theory of economics. ...If he had followed the easier path of mere inclination, I am not sure that he would not have exchanged the tormenting exercises of the foundations of thought, where the mind tries to catch its own tail, for the delightful paths of our own most agreeable branch of the moral sciences, in which theory and fact, intuitive imagination and practical judgement, are blended in a manner comfortable to the human intellect."

"[W]e shall be concerned with the general nature of pure mathematics, and how it is distinguished from other sciences. Here there are... two distinct categories of things of which an account must be given—the ideas or concepts of mathematics, and the propositions of mathematics. ...the great majority of writers on the subject have concentrated their attention on the explanation of one or the other... and erroneously supposed that a satisfactory explanation of the other would immediately follow."

"The formalists neglected the content altogether and made mathematics meaningless, the logicians neglected the form and made mathematics consist of any true generalizations; only by taking account of both sides and regarding it as composed of tautologous generalizations can we obtain an adequate theory."

"Philosophy must be of some use and we must take it seriously; it must clear our thoughts and so our actions. Or else it is a disposition that we have to check, and an inquiry to see that this is so; i.e. the chief proposition of philosophy is that philosophy is nonsense. And again we must then take seriously that it is nonsense, and not pretend, as Wittgenstein does, that it is important nonsense!"

"It is worth pausing for a moment to consider how far our conclusions are affected by considerations which our simplifying assumptions have forced us to neglect."

"The object of this paper is to give a satisfactory account of the Foundations of Mathematics in accordance with the general method of Frege, Whitehead and Russell. Following these authorities, I hold that mathematics is part of logic, and so belong to what may be called the logical school as opposed to the formalist and intuitionist schools. I have therefore taken Principia Mathematica as a basis for discussion and ammendment; and believe myself to have discovered how, by using the work of Mr Ludwig Wittgenstein, it can be rendered free from the serious objections which have caused its rejection by the majority of German authorities, who have deserted altogether its line of approach."

"Tautologies and contradictions are not real propositions, but degenerate cases. ...Clearly, by negating a contradiction we get a tautology, and by negating a tautology a contradiction. ...A genuine proposition asserts something about reality, and it is true if reality is as it is asserted to be. But a tautology is a symbol constructed so as to say nothing whatever about reality, but to express total ignorance by agreeing with every possibility."

"The assimilation of tautologies and contradictions with true and false propositions respectively results from the fact that tautologies and contradictions can be taken as truth-functions just like ordinary propositions, and for determining the truth of falsity of the truth-function, tautologies and contradictions among its arguments must be counted as true or false respectively. ...Are the propositions of symbolic logic and mathematics tautologies in Mr Wittgenstein's sense?"

"The first problem I propose to tackle is this: how much of its income should a nation save? To answer this a simple rule is obtained valid under conditions of surprising generality; the rule, which will be further elucidated later, runs as follows. The rate of saving multiplied by the marginal utility of money should always be equal to the amount by which the total net rate of enjoyment of utility falls short of the maximum possible rate of enjoyment."

"If thoughtful individuals, well read in contemporary economic theory in the 1920s, had been asked at that time which economist was most likely to revolutionise twentieth-century monetary economics (and indeed had already started doing so), it is likely that, without hesitation, they would have given the name Ralph Hawtrey, rather than that of his rival, which we would now give, John Maynard Keynes."

"We were at an age when our beliefs influenced our behaviour, a characteristic of the young which it is easy for the middle-aged to forget, and the habits of feeling formed then still persist in a recognisable degree. It is those habits of feeling, influencing the majority of us, which make this Club a collectivity and separate us from the rest. They overlaid, somehow, our otherwise extremely diiferent characters-—Moore himself was a puritan and precisian, Strachey (for that was his name at that time) a Voltaircan, Woolf a rabbi, myself a nonconformist, Sheppard a conformist and (as it now turns out) an ecclesiastic, Clive a gay and amiable dog, Sydney-Turner a quietist, Hawtrey a dogmatist and so on."

"Mehrling: So you didn’t read at that time the classic banking texts, for example, Bagehot’s Lombard Street? Volcker: Well I read some of Bagehot, and I read a lot of Hawtrey. I remember I read a lot of Hawtrey. Mehrling: Currency and Credit? The Art of Central Banking? Volcker: I don’t remember the names of the books, just being in London. In those days I used to read The Economist and the Financial Times, so I kept up with what was going on in the money markets."

"Hawtrey, I think one can see, came to favor the other way out. It is the fixed rate of exchange which imposes the international constraint; if that is abandoned, the Bank can recover its authority. A system in which the rate of exchange is free to move, while internal stability is maintained by a relentless application of the Bank Rate mechanism, is theoretically conceivable, and as a model is instructive. But it would seem to depend for its working upon the maintenance of confidence in some normal rate of exchange, from which the current rate would be supposed to diverge only more or less temporarily; and it is not easy to see how such confidence could be engendered."

"I regard Mr. Hawtrey as my grandparent and Mr. Robertson as my parent in the paths of errancy, and I have been greatly influenced by them."

"Man is a rational animal, and if human affairs are hard to regulate, his twofold nature is usually the cause. Reason is something ultimate; it would be the same in another planet, or in another universe, as it is here. Animal nature is something contingent; it might have been different. Our life is a compromise, a blend between the animal and the rational."

"Indeed it would have been a mean-spirited course to go back on the century-old standard on account of so trifling a premium on gold, a premium which, as it turned out, the action of the market wiped out in a few months, before any of the provisions of the Act of 1819 had come into operation."

"If each member of society can be induced or impelled to do his allotted task by associating it with some motive that appears to him adequate, then he need never know how he is contributing to the real end, and need not even be aware of the end at all. It is this problem of organization that we shall call the Economic Problem. It is in fact the real subject matter of political economy."

"The total effective demand for commodities in the market is limited to the number of units of money of account that dealers are prepared to offer, and the number they are prepared to offer over any period of time is limited according to the number they hope to receive."

"Scientific treatment of the subject of currency is impossible without some form of the quantity theory … but the quantity theory by itself is inadequate, and it leads up to the method of treatment based on what I have called the consumers’ income and the consumers’ outlay – that is to say, simply the aggregates of individual incomes and individual expenditures."

"The use of money does not disestablish the normal process of creating credit. Money, it is true, is always being paid into the banks by the retailers and others who receive it in the course of business, and they of course receive bank credits in return for the money thus deposited. But for the manufacturers and others who have to pay money out, credits are still created by the exchange of obligations, the banker's immediate obligation being given to his customer in exchange for the customer's obligation to repay at a future date. We shall still describe this dual operation as the creation of credit. By its means the banker creates the means of payment out of nothing, whereas when he receives a bag of money from his customer, one means of payment, a bank credit, is merely substituted for another, an equal amount of cash."

"Economic theory, in every branch, deals with practical affairs. Its subject is human welfare, and it is never entirely dissociated from the practical question of how human welfare is to be promoted. But it is a special characteristic of the art of central banking that it deals specifically with the task of an authority directly entrusted with the promotion of human welfare. Human welfare, human motives, human behaviour supply material so baffling and elusive that many people are sceptical of the possibility of building a scientific edifice on so shifting a foundation. But however complex the material, and however imperfect the data, there is always an advantage to be gained from systematic thought."

"When credit is expanding, the rising price level and high profits bring about a high rate of interest. When the expansion has reached, the limit permitted by the stock of gold, the rate of interest is put still higher in order to bring about a fall in the price level. When the fall in prices takes effect, a low rate of interest becomes appropriate, and when credit contraction has proceeded so far that a redundant supply of gold has accumulated, the rate of interest is depressed still lower in order to bring about a renewed rise in the price level. Thus a high rate of interest corresponds first with rising, then with falling, prices, and so synchronizes with high prices. A low rate of interest corresponds first with falling, and then with rising, prices, and so synchronizes with low prices."

"Banks lend by creating credit. They create the means of payment out of nothing."

"To unstable money are to be traced nearly all our economic troubles since 1918: the unemployment of the inter-war period; the over-employment and scarcity of labour since the Second World War; the labour unrest incidental to perpetual wage demands; the hardships and dislocation caused by the declining value of small savings, annuities and endowments; the vexation of continual price rises even for those whose incomes on the whole keep pace with them; the collapse of the prices of Government securities through distrust of the unit in which they are valued."

"Once the gold standard was suspended, there could be no doubt of the purpose of that step. In face of the exchange risk the high rate could not possibly attract foreign money. It could only be intended as a safeguard against inflation. Fantastic fears of inflation were expressed. That was to cry, Fire, Fire, in Noah's Flood. It is after depression and unemployment have subsided that inflation becomes dangerous."

"Marshall did something much more effective than changing the answer. He changed the question. For Ricardo the Theory of Value was a means of studying the distribution of total output between wages, rent and profit, each considered as a whole. This is a big question. Marshall turned the meaning of Value into a little question: Why does an egg cost more than a cup of tea? It may be a small question but it is a very difficult and complicated one. It takes a lot of time and algebra to work out the theory of it. So it kept all Marshall’s pupils preoccupied for fifty years. They had no time to think about the big question, or even to remember that there was a big question, because they had to keep their noses right down to the grindstone, working out the theory of the price of a cup of tea."

"Though a skilled mathematician, he used mathematics sparingly. He saw that excessive reliance on this instrument might lead us astray in pursuit of intellectual toys, imaginary problems not conforming to the conditions of real life: and further, might distort our sense of proportion by causing us to neglect factors that could not easily be worked up in the mathematical machine."

"And thus the law may be worded:— The of a commodity to anyone diminishes with every increase in the amount of it he already has."

"If we compare one country of the civilized world with another, or one part of England with another, or one trade in England with another, we find that the degradation of the working-classes varies almost uniformly with the amount of rough work done by women. The most valuable of all capital is that invested in human beings; and of that capital the most precious part is the result of the care and influence of the mother, so long as she retains her tender and unselfish instincts, and has not been hardened by the strain and stress of unfeminine work."

"[E]ach several want is limited, and... with every increase in the amount of a thing which a man has, the eagerness of his desire to obtain more of it diminishes; until it yields place to the desire for some other thing, of which perhaps he hardly thought, so long as his more urgent wants were still unsatisfied. There is an endless supply of wants, but there is a limit to each separate want. This familiar and fundamental law of human nature may pass by the name of the Law of Satiable Wants or the Law of Diminishing Utility. It may be written thus:— The Total Utility of a commodity to a person (...the total benefit or satisfaction yielded ...by it) increase with every increase in his stock of it, but not as fast as his stock increases. ...[i.e.,] the additional benefit ...from an additional increment of his stock of anything, diminishes with every increase in the stock ..."

"The increment of the commodity which he is only just induced to acquire (whether by... direct labor or by purchase) may be called its Marginal Increment; because he is on the margin of doubt whether it is worth his while to incur the outlay required to obtain it. And the benefit-giving power, or Utility, of that increment to him may be called the Marginal Utility of the commodity to him."

"Our understanding of how markets and businesses operate was passed down to us more than a century ago by a handful of European economists — Alfred Marshall in England and a few of his contemporaries on the continent. It is an understanding based squarely upon the assumption of diminishing returns: products or companies that get ahead in a market eventually run into limitations, so that a predictable equilibrium of prices and market shares is reached. The theory was roughly valid for the bulk-processing, smokestack economy of Marshall’s day. And it still thrives in today’s economics textbooks. But steadily and continuously in this century, Western economies have undergone a transformation from bulk - material manufacturing to design and use of technology — from processing of resources to processing of information, from application of raw energy to application of ideas. As this shift has occurred, the underlying mechanisms that determine economic behavior have shifted from ones of diminishing to ones of increasing returns."

"I have not been able to lay my hands on any notes as to Mathematico-economics that would be of any use to you. I have very indistinct memories of what I used to think on the subject. I never read mathematics now: in fact I have even forgotten how to integrate a good many things. But I know I had a growing feeling in the later years of my work at the subject that a good mathematical theorem dealing with economic hypotheses was very well unlikely to be good economics: and I went more and more on the rules—(1) Use mathematics as a shorthand language, rather than as an engine of inquiry. (2) Keep to them till you have done. (3) Translate into English. (4) Then illustrate by examples that are important in real life. (5) Burn the mathematics. (6) If you can’t succeed in (4), burn (3). This last I do often."