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The Political Economy of Opulence*

Published online by Cambridge University Press:  07 November 2014

Harry G. Johnson
Harry G. Johnson*
Affiliation:
University of Chicago
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Extract

“Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” Lionel Robbins' well-known definition of their subject is one which most economists would probably accept, at least as a description of their workaday activities. The definition allows—and it was specifically framed by its author to allow—for the pursuit of other ends than purely material ends; but in practice economists devote themselves predominantly to the study of the allocation of material means between ends conceived and defined in material terms. Inherent in the way economists set about their task is the implicit assumption that material means are scarce and material wants are pressing—in short that economic society is materially poor, and resources must not be wasted.

This assumption permeates the theoretical apparatus of the subject; it also directs what economists have to say about economic policy. In the debate which has been going on over the general problem of inflation, for example, economists have been divided between those who stress the loss of production and potential growth of output that results from anything less than full employment of labour, and those who stress the loss of production and potential growth of output that results from the misallocation of resources brought about by inflation. Again, in making comparisons between the Russian and Western economic systems, economists have generally tended to accept as their standard of performance the rate of growth of output per head, a standard which gives away most of the positive points on the Western side. In both cases, the adoption of the output standard implicitly assumes that the economic problem is of prime importance.

Type
Articles
Information
Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 26 , Issue 4 , November 1960 , pp. 552 - 564
Copyright
Copyright © Canadian Political Science Association 1960

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Footnotes

*

This paper was presented at the annual meeting of the Canadian Political Science Association in Kingston, June 10, 1960.

References

1 Robbins, Lionel, An Essay on the Nature and Significance of Economic Science (2nd ed., London, 1935), 16.Google Scholar

2 London, 1958.

3 The Affluent Society, chaps, XVIII–XXV.

4 Ibid., chap, X, sec. 4, pp. 115–18.

5 Cambridge, 1960. An abridged version, under the title “Rostow on Economic Growth,” may be found in the Economist, CXCII, no. 6051, Aug., 1959, 409–16.

6 Cf., e.g. Marshall, Alfred, Principles of Economics (8th ed., London, 1920), xxxiv + 871 pp.Google Scholar

7 Ibid., 89.

8 See his The Ethics of Competition (London, 1935)Google Scholar, esp. “Ethics and the Economic Interpretation,” 19–40.

9 Kahn, R. F., “Some Notes on Ideal Output,” Economic Journal, XLV, no. 177, 03, 1935, 1–35, esp. 24 ff.CrossRefGoogle Scholar

10 For a more extended discussion of the problems raised for both normative and positive economics by the creation of wants, with particular reference to advertising, see my “The Consumer and Madison Avenue,” Current Economic Comment, XXII, no. 3, 08 1960, 3–10.Google Scholar

11 See Packard, Vance, The Hidden Persuaders (New York, 1957).Google Scholar

12 See Whyte, W. H., The Organization Man (New York, 1956).Google Scholar

13 Boulding, K. E., A Reconstruction of Economics (New York, 1950), esp. chap. VIII, 135–54.Google Scholar

14 Marshall, in a letter to Edgeworth dated April 26, 1892, explains that he “deliberately decided that temporary demand curves … would not be of any practical use.”

15 For a fuller analysis of the theory of demand for consumer durables, see, e.g., Cramer, J. S., “A Dynamic Approach to the Theory of Consumer Demand,” Review of Economic Studies, XXIV(2), no. 64, 02 1957, 73–86 CrossRefGoogle Scholar; Stone, Richard and Rowe, D. A., “The Market Demand for Durable Goods,” Econometrica, XXV, no. 3, 07, 1957, 423–43CrossRefGoogle Scholar; Neisser, Hans, “The Pricing of Consumers' Durables,” Econometrica, XXVII, no. 4, 10, 1959, 547–74CrossRefGoogle Scholar; Harberger, Arnold C., ed. The Demand for Durable Goods (Chicago, 1960).Google Scholar

16 I am indebted for this notion to Elliott, G. A., “The Impersonal Market,” this Journal, XXIV, no. 4, 11, 1958, 453–64, esp. 461–2.Google Scholar

17 Chamberlin, E. H., The Theory of Monopolistic Competition (Cambridge, Mass., 1933).Google Scholar

18 Marshall, , Principles of Economics, 315–17.Google Scholar

19 Cf. Papandreau, A. G., “Some Basic Problems in the Theory of the Firm” in Haley, B. F., ed., A Survey of Contemporary Economics, II (Homewood, Ill., 1952), chap. v.Google Scholar

20 New York, 1959, chap, x, 88–100, esp. sec. 4, pp. 93–5.

21 For a critique of modern theory stressing this aspect of the Ricardian system, see Dobb, M. H., Political Economy and Capitalism (New York, 1945).Google Scholar

22 Marshall, Principles of Economics, Book V, chaps, VIII–XII.

23 Fisher, Irving, The Nature of Capital and Income (New York and London, 1906).Google Scholar

24 Schumpeter, J., The Theory of Economic Development, trans. Opie, Redvers (Cambridge, Mass., 1934)Google Scholar; Knight, F. H., Risk, Uncertainty and Profit (Boston and New York, 1921).Google Scholar For an interesting reformulation of the theory of profit on Schumpeterian lines, see Triffin, R., Monopolistic Competition and General Equilibrium Theory (Cambridge, Mass., 1940), esp. chap. v, 158–87.Google Scholar

25 Ricardo, David, On the Principles of Political Economy and Taxation in Sraffa, P., ed., The Works and Correspondence of David Ricardo, I (Cambridge, 1951), 67.Google Scholar

26 Cf. Robinson, Joan, The Economics of Imperfect Competition (London, 1933), chap. VIII, 102–19.Google Scholar

27 E.g. Harrod, R. F., Towards a Dynamic Economics (London, 1948)Google Scholar, and the voluminous journal literature which has grown from it; Fellner, W. J., Trends and Cycles in Economic Activity (New York, 1956)Google Scholar; Robinson, Joan, The Accumulation of Capital (London, 1956).Google Scholar

28 See Kalecki, M., “The Determinants of Distribution of National Income,” Econometrica, VI, no. 2, 04, 1938, 97–112 CrossRefGoogle Scholar; also Kaldor, N., “Alternative Theories of Distribution,” Review of Economic Studies, XXIII(2), no. 61, 02 1956, 83–100.Google Scholar Whether the share is constant enough to pose a problem is a matter for legitimate scepticism: cf. Dunlop, J. T., Wage Determination under Trade Unions (New York, 1944)Google Scholar, chap. VIII, 149–91, and Solow, R. M., “A Skeptical Note on the Constancy of Relative Shares,” American Economic Review, XLVIII, no. 4, 09, 1958, 618–31.Google Scholar

29 This remark is not inconsistent with the fact that interest in both problems is an outgrowth of the Keynesian Revolution, since Keynes was extraordinarily classical in his treatment of production, as evidenced by his use of the wage unit.

30 This point has been mentioned in connection with the constant share problem by Solow (“Skeptical Note,” 630).

31 The identification of development with capital accumulation permeates the folklore of development planning, with its emphasis on investment programming, capital: output ratios, “infra-structure,” industrialization, “balanced growth,” and the like.

32 Burnham, James, The Managerial Revolution (New York, 1941)Google Scholar; Riesman, David, The Lonely Crowd (New Haven, Conn., 1950)Google Scholar; Young, Michael, The Rise of the Meritocracy, 1870–2033 (London, 1958)Google Scholar; see also Packard, Vance, The Status Seekers (New York, 1959).Google Scholar

33 The argument is that ownership of capital in these two forms, and also in the form of financial assets, promotes the independence necessary for effective democratic citizenship; also that participation in the capitalist system is pluralist. It can, however, be argued on the other side that wealth breeds indifference and self-indulgence, exemplified in the opulent society by the problems of alcoholism, obesity, divorce, and automobile accidents; cf. the pessimistic views of Gabor, Dennis, “Inventing the Future,” Encounter, XIV, no. 5, 05, 1960, 3–16, esp. 14 ff.Google Scholar