Economics is often dismissed as ideological, reductionist, and mendacious. In the United States we see these criticisms increasingly from both the political left and right. This should come as no surprise as the lessons of economics have implications for the prudential decisions that make up much of our political life. Ideologues of all parties chafe at constraints.
Carl Menger, one of the driving forces behind the marginal revolution in economics, was no stranger to these sorts of criticism. His essay, ‘The Social Theories of Classical Political Economy and Modern Economic Policy (1891),’ relates how in his own day political ideologues successfully devalued and dismissed the contributions of classical economics:
Classical political economy really has been struck by this fate. The role that the school plays in current public opinion in Germany has been “created” by its hateful opponents, by agitators pursuing practical goals, by Friedrich List, and in other respects by Ferdinand Lassalle. This reputation of classical political economy has been eagerly reinforced by the scientific opponents of the progressive bourgeoisie, working in the spirit of Prince Bismarck. Thereafter in German science classical political economy is regarded as capitalistic, atomistic, abstract, and against the people, it is considered to be refuted and dismissed.
Menger goes own to argue against these caricatures of the tradition of the economic way of thinking. In particular he singles out for criticism the claim that classical economics privileges the rich over the poor:
In every conflict of interest between the rich and the poor, the strong and the weak, Smith sides without exception with the latter. I use the term “without exception” with proper consideration, as one cannot find one single instance in the works of Smith in which he represents the interests of the rich and the powerful against the poor and the weak. As highly as Smith praises the free initiative of the individual in economic matters, does he energetically promote state interventions to abolish laws, or the execution of the laws, which oppress the poor and the weak in favor of the rich and the powerful.
So classical political economy certainly does not lag behind the newer school of Social-Politik in its worker-friendly inclination, and with respect to the correct insight into the causes of the more or less satisfactory fate of the propertyless classes, classical political economy is far superior. Classical political economy does not overlook the importance of capital, the entrepreneurial spirit, and commercial intelligence for the well-being of the working class. It is free from doctrinaire spitefulness towards capital and enterprise, which the newer doctrines of the Social-Politiker have adopted from socialist agitators. It does not lose sight of the fact that even an unequally distributed wealth of capital is less harmful for the working classes than is a lack of capital, and that the worker is never more helpless than when the “cursed money” dries up for the entrepreneurs, or when an intimidated entrepreneurial spirit shies away from capital investments.
The entire essay is well worth reading and only recently available in English thanks to the excellent work of Erwin Dekker and Stefan Kolev.
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