Methods of Political Economy
Epigraph to Book I
Though but an atom midst immensity,
Still I am something, fashioned by Thy hand
I hold a middle rank 'twixt heaven and earth --
On the last verge of mortal being stand
Close to the realms where angels have their birth
Just on the boundaries of the spirit land!
The chain of being is complete in me --
In me is matter's last gradation lost,
And the next step is spirit -- Diety!
I can command the lightning, and am dust!
-- Bowring's translation of Dershavin
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The Science of Political Economy
Book I, The Meaning of Political Economy
Methods of Political Economy
Showing the Nature of the Methods of Investigation That May Be Used In Political Economy
Deductive and inductive schools -- New American Cyclopedia quoted -- Triumph of the inductionists -- The method of induction and the method of deduction -- Method of hypothesis -- Bacon's relation to induction -- Real error of the deductionists and the mistake of the inductionists -- Lalor's Cyclopedia quoted -- Result of the triumph of the inductionists -- A true science of political economy must follow the deductive method -- Davis's Elements of Inductive Logic quoted -- Double assurance of the real postulate of political economy -- Method of mental or imaginative experiment
A misconception of the fundamental law on which a science is based must lead to divergences and confusions as the attempt to develop that science proceeds. In the case of political economy, the result of the assumption that its fundamental principle is human selfishness is shown in disputes and confusions as to its proper method. These began shortly after it was recognized as deserving the attention of the institutions of learning, and are an increasingly noticeable feature in economic literature for some sixty or seventy years. Adam Smith and the most prominent of his successors followed the deductive method. But ere long there began to be questionings as to whether the inductive method was not the proper one. Having on their side the weight of authority, the defenders of the deductive method, or "old school" political economy, as it began to be called, held for a long time their formal position, though compelled by the incongruities of the system they were endeavoring to uphold to make damaging deductions and weakening admissions; while the opposition to them, called by various names, but generally known as inductive or "new school" economists, gathered strength.
What lay beneath this contest, which was largely verbal, and in which there was confusion on both sides, I shall have occasion to speak of hereafter; but as to how it seemed to stand in the scholastic world at the beginning of the seventh decade of our century I quote from the article "Political Economy" in the New American Cyclopedia (1861), which, as written by an opponent of the then orthodox school (Henry Carey Baird), with an evident desire to be entirely fair, will I think better show the actual situation at that time than anything else I can find:
blockquote>The progress thus far made in political economy has been slow and uncertain, and there is in its entire range hardly a doctrine or even the definition of an important word which is universally or even generally accepted beyond dispute. . . . Amid all their discords and disagreements it is possible to divide political economists under two general heads: those who treat the subject as a deductive science, "in which all the general propositions are in the strictest sense of the word hypothetical;" and those who treat it by the inductive or Baconian method. Of the first -- named school are all the English economists and most of those of continental Europe who have acquired any reputation. As the representatives of the last, Mr. Henry C. Carey and his followers are most prominent.*
Thus, in 1861, the deductive method, even to the view of an adherent of the opposing school, still formally held sway in the scholastic world. But at present, as the century nears its close, it has so utterly lost its hold that so far as I can discover, there is not now a prominent college or university anywhere in which the professed teachers of what is reputed to be political economy adhere to what was then called the deductive method.
Yet this triumph in scholastic opinion of the advocates of what is called the inductive method is in reality but the triumph of one set of confusions over another set of confusions, in which the determining element has been the vague consciousness that the previously authoritative political economy was not a true political economy. Where a new set of confusions is pitted against an old set of confusions, the victory must finally and for a time remain with the new; for the reason that on the old lies the burden of defending what is indefensible, while the new has for a while only the easier task of attack. What this passing phase of economic thought really shows is the utter confusion into which the whole scholastic political economy has fallen from lack of care as to first principles. In my view of the matter those who have said that the deductive method was the proper method of political economy have been right as to that, but wrong in principles from which they have made deductions; while those who contended for the inductive method have been wrong as to that, but right as to the weaknesses of their opponents.
As to the course of what has been called the science of political economy and the destructive revolution which it has of late years undergone, I shall have occasion to speak in the next book. I am here concerned in clearing only what might be a perplexity to the reader in regard to the proper methods of the real science.
The human reason has two ways of ascertaining truth. The first of these is that of reasoning from particulars to generals in an ascending line, until we come at last to one of those invariable uniformities that we call laws of nature. This method we call the inductive, or a posteriori. But when we have reached what we feel sure is a law of nature, and as such true in all times and places, then an easier and more powerful method of ascertaining truth is open to us -- the method of reasoning in the descending line from generals to particulars. This is the method that we call the deductive, or a priori method. For knowing what is the general law, the invariable sequence that we call a law of nature, we have only to discover that a particular comes under it to know what is true in the case of that particular.
In the relation of priority the two methods stand in the order in which I have named them -- induction being the first or primary method of applying human reason to the investigation of facts, and deduction being the second or derivative. So far as our reason is concerned, induction must give the facts on which we may proceed to deduction. Deduction can safely be based only on what has been supplied to the reason by induction; and where the validity of this first step is called in question, must apply to induction for proof. Both methods are proper to the careful investigation that we speak of as scientific: induction in its preliminary stages, when it is groping for the law of nature; deduction when it has discovered that law, and is thus able to proceed by a short cut from the general to the particular, without any further need for the more laborious and, so to speak, uphill method of induction, except it may be to verify its conclusions.
There is a further method of investigation, which consists in a combination of these two original methods of the reason, and which has been found most effective in the discovery of truth in the physical sciences. When our inductions so point to the existence of a natural law that we are able to form a surmise or suspicion of what it may prove to be, we may tentatively assume the existence of such a law, and proceed to see whether particulars will fall into place in deductions made from it. This is the method of tentative deduction, or hypothesis.
The inductive method is sometimes, as in the last quotation I have made, spoken of as the Baconian method, and the great name of Bacon has been freely used to give plausibility to what the advocates of the "new school" in political economy have called the inductive method. But whatever originality there may have been in his classifications and devices, Bacon did not invent the inductive method. It was by that method that man's reason has from the first enabled him to apprehend laws of nature that he has subsequently used as bases for deduction. It was thus that he must have learned what we are accustomed to think the simplest of nature's uniformities -- such as, that after an interval a new moon succeeds the old moon; that the sun, after apparently tending to the south for a while, turns again to the north; that fire will burn, and that water will quench fire. What Bacon did was not to invent or discover the inductive method, but to formulate some rules for its application and to apply it to the investigation of fields of knowledge from which it had been long shut out by a blind reliance upon authority -- by a false assumption that wiser men who had gone before had taught all there was worth knowing on certain subjects, and that there remained for those who came after nothing further to do than to make deductions from premises their predecessors had supplied.
Where the application of the inductive method was really needed in what is now called by the "new lights" the "classical" political economy was to test the premises from which its deductions were made, and to clear them of what had no better warrant than a disposition to use political economy to justify existing social arrangements. It was not needed to take the place of the deductive method, where that was applicable. For the deductive method, when applied to the further extension of what has already been validly ascertained, constitutes the most powerful means of extending knowledge that the human mind can avail itself of.
In its use of the deductive method after its premises had been settled, the classical political economy was not in error. The error that gave insecurity to its whole structure lay deeper still, in the insufficient inductions on which those premises rested. But, instead of addressing themselves to these flaws in its accepted premises, the various schools of economists generally classed as inductive have denied that there were any general principles that could with certainty be laid down as the basis for deduction. Thus, if such a question be asked them as, does free trade or protection best promote a general prosperity? or, what is the best system of land-tenure? or, what is the best system of taxation? or, what are the limits of governmental interference with industry, or trade -- union regulations? no general answer can be given. It can only be said that one thing may be best in one place and time, and another in another place and time, so that the matter can be determined only by special investigations. In other words, to quote the phrase of Professor James, of the University of Pennsylvania, an adherent of the "new school" (article, "Political Economy," in Lalor's Cyclopedia of Political Science, Political Economy and United States History, 1884), they have opposed "the theory which seeks eternally valid natural laws in economics, and which considers the natural condition of unlimited personal freedom as the only justifiable one, without regard to the needs of special times and nations."
The result, therefore, of the triumph of the "inductionists" over the "deductionists" in the accredited organs of economic teaching, has been to destroy in the "new" political economy even the semblance of coherency that it had in the "old," and to decompose it into a congeries of unrelated doctrines and unverified speculations which only its professors can presume to understand, and as to which they can dispute and quarrel with each other in the wild abandon that results from the absence of any recognized common principle.
But to me it seems clear that if political economy can be called a science at all, it must as a science, that is to say from the moment the laws of nature on which it depends are discovered, follow the deductive method of examination, using induction only to test the conclusions thus obtained. For the particulars which are included in its province are too vast and too complex to admit of any hope of bringing them into order and relation by direct induction.
To quote from the latest elementary text-book of logic of which I know, Professor Noah K. Davis's Elements of Inductive Logic (Harper Bros., New York, 1893), p. 197:
The great object of the scientist is to obtain by rigid induction the laws of nature, and to follow them by rigid deduction to their consequences. A science at first wholly inductive becomes, as soon as a law has been proved, more or less deductive, and as it progresses, rising to higher and wider but fewer inductions, the deductive processes increase in number and importance, until it is no longer properly an inductive, but a deductive science. Thus, hydrostatics, acoustics, optics and electricity, commonly called inductive sciences, have passed under the dominion of mathematics, from inductive to deductive sciences and mechanics has a like history. Celestial mechanics as founded in the Principia of Newton is mainly inductive, as elaborated in the Mécanique Céleste of Laplace, is mainly deductive. By pursuing this latter process it has multiplied its matter and reached its present high perfection. A revolution is quietly progressing in all the natural sciences. Bacon changed their method from deductive to inductive, and it is now rapidly reverting from inductive to deductive. The task of logic is to explicate and regulate these methods.
Now the law of nature which forms the postulate of a true science of political economy is not, as has been erroneously assumed, that men are invariably and universally selfish. As a matter of fact, this is not true. Nor can we abstract from man all but selfish qualities in order to make as the object of our thought on economic matters what has been called the "economic man," without getting what is really a monster, not a man.
The law of nature which is really the postulate of a true science of political economy is that men always seek to gratify their desires with the least exertion, whether those desires are selfish or unselfish, good or bad.
That this is a law of nature we have the highest possible warrant, wider in fact than we can have for any of the laws of external nature, such for instance as the law of gravitation. For the laws of external nature can be apprehended only objectively. But that it is a law of nature that men seek to gratify their desires with the least exertion, we may see both subjectively and objectively. Since man himself is included in nature, we may subjectively reach the law of nature that men seek to gratify their desires with the least exertion, by an induction derived from consciousness of our own feelings and an analysis of our own motives of action; while objectively we may also reach the same law by an induction derived from observation of the acts of others.
Proceeding from a law of nature thus doubly assured, the proper method of a political economy which becomes really a science by its correct apprehension of a fundamental law, is the method of deduction from that law, the method of proceeding from the general to the particular; for this is the method which will enable us to attain incomparably greater results. To abandon that method and resort to what the "new lights" of political economy seem really to mean by induction, would be as though we were to discard the rules of arithmetic and endeavor by direct inquiries in all parts of the world to discover how much one number added to another would make, and what would be the quotient of a sum divided by itself.
Thus, in the main, the science of political economy resorts to the deductive method, using induction for its tests. But in its more common investigations its most useful instrument is a form of hypothesis which may be called that of mental or imaginative experiment,** by which we may separate, combine or eliminate conditions in our own imaginations, and thus test the working of known principles. This is a most common method of reasoning, familiar to us all, from our very infancy. It is the great working tool of political economy, and in its use we have only to be careful as to the validity of what we assume as principles.
* As illustrating the looseness with which the words "inductive" and "deductive" have been thrown around in this discussion as to the proper method of political economy, it may be worth mentioning that the same Henry C. Carey, who is here cited as the most prominent representative of the inductive school, as opposed to the deductive school of Smith, Ricardo and Mill, is in the biographical notice of him in the latest successor of the "New American Cyclopedia," the revised edition of "Johnson's Universal Cyclopedia" (1895), said to be "the founder of a school of political economy whose principles are anti-socialistic and more deductive than those of Smith, Ricardo and Mill."
** See lecture delivered by me before the students of the University of California on "The Study of Political Economy," April, 1877, reprinted in Popular Science Monthly, March, 1880.
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