Clapham and Economics
What was Clapham’s attitude to economics and above all to the work of Marshall which was strongly criticised by Cambridge historical economists? Clapham commented in his Inaugural Lecture that Marshall ‘was a greater economic historian than he let the world know. He had discarded as irrelevant to his main purposes more historical knowledge than many men acquire’ (Clapham 1929: 8). This assessment was more generous than that of Cunningham, who severely castigated Marshall’s outline of economic history in the Principles. One view is that Clapham was a ‘minor Marshallian’ who was willing to be critical when necessary and to provide assistance in modest ways. For example, Marshall thanked Clapham for checking his historical reflections in Industry and Trade (Groenewegen 2012: 79-80; Marshall 1919: Preface). Alon Kadish is right to say that Clapham cannot be called a disciple of Marshall, but he did provide economists with a factual account of recent economic history in a less partisan manner than Cunningham (Kadish 1994: 225).
How, then, did Clapham fit into the debates that were dividing Cambridge at the start of his academic career, between the historical economists—above all Foxwell and Cunningham—and the more theoretical approach of Marshall and Pigou? Clapham shared some of the concerns of the historical economists for historical specificity, without going so far as them in their strident hostility, and without entirely accepting their condemnation of individualism and laissez-faire economics. He shared many of Marshall’s assumptions about a liberal, free trade economy that could deliver benefits to most people, while retaining a sceptical attitude towards the economists’ assumptions of homo economicus and their generalising theories. Whereas Foxwell and Cunningham mounted a vigorous challenge to inductive theory which they feared would destroy historical economics, Clapham was not so partisan. He did query theoretical economics in 1922, but had accepted by 1929 that historical economics was no longer viable. He simply turned away from any formal engagement with economics, retreating into a form of economic history that did not challenge the prevalent assumptions of neoclassical economics. The ideological war between historical economics and theory gave way to mutual indifference between economic history and neoclassical economics.
Although Marshall is often seen as the creator of theoretical neoclassical economics, he was sympathetic to the German Historical School (Hodgson 2005). He studied in Germany with members of the School and continued to value their work. He was aware of the need to consider historical specificity. In his Inaugural Lecture of 1885, in his Principles of 1890, and in his essay on ‘The Older Generation of Economists and the New’ of 1897, Marshall made the point that economics differed from the constant and unchanging laws of physics, and could not be applied without modification as society changed: ‘Though economic analysis and general reasoning are of wide application... every change in social conditions is likely to require a new development of economic doctrine’ (Marshall 1949: 30-31). Marshall quoted Gustav Schmoller with approval: ‘Induction and deduction are both needed for scientific thought as the left and the right foot are both needed for walking’ (ibid.: 24, and see also Marshall 1890: 72-77). Marshall argued that
[e]ach study supplements the other: there is no rivalry or opposition between them; every genuine student of economics sometimes uses the inductive method and sometimes the analytical, and nearly always both of them together. There is a difference in proportion between different students; as one may eat more solid food and another drink more fluid: but everyone must both eat and drink under pain of starving or dying of thirst (Marshall 1897: 133).
Deduction should rely on short chains of reasoning so that it did not escape from reality; equally, induction should not rely on facts to speak for themselves, without appreciating the implicit theories and assumptions that led to their selection:
When...it is said that a certain event in history teaches us this or that, an element of deductive reasoning is introduced, which is more likely to be fallacious the more persistently it is ignored. For the argument selects a few out of the group of conditions, which were present, when the event happened, and tacitly, if not unconsciously, assumes that the rest are irrelevant. The assumption may be justifiable: but it often turns out to be otherwise (Marshall
1925: 166).
Although Marshall spent his own intellectual energies developing ideas that were of wide application, he saw the need to understand through induction how society (and economic ideas) changed over time. His comments on the teaching of economics at the London School of Economics (LSE) brought out his approach. He told the Director—W.A.S. Hewins, himself a historical economist—that he ‘holds Economics to be an organic whole, and has as little respect for pure theory.as for that crude collection and interpretation of facts without the aid of high analysis which sometimes claims to be part of economic history’ (Marshall to Hewins, 12 October 1899, quoted in Whitaker 1996a: 256). Pure theory was no more than ‘elegant toying’ and he urged an approach to economics as ‘the application of powerful analytical methods to unravelling the actions of economic and social causes, to assigning each its part, to tracing mutual interactions and modifications; and above all to laying bare the hidden causas causantes (Marshall to Hewins, 29 May 1900, quoted in ibid.: 280).
Despite these nods to the historical method, Marshall’s instinct was for theoretical, neoclassical models which combined Ricardo with later economists. The historical economists in Cambridge were fiercely critical. We have seen that Foxwell was a constant irritant to Marshall over teaching, in part because of their intellectual disagreements (see the chapter on Foxwell in this volume). Cunningham similarly rejected the cosmopolitan liberalism of Marshall. Foxwell summed Cunningham up as ‘a great National Economist, the modern representative of an old English tradition, unfortunately interrupted by the atomism and premature cosmopolitanism of the laissez faire age’ (Foxwell quoted in Koot 1987: 135). He looked to the restoration of an organic society based on the state. Like Foxwell, Cunningham rejected Ricardo’s abstractions and the reduction of human motives to homo economicus. Free trade was the epitome of everything he detested: individualism, cosmopolitanism, materialism, and laissez-faire. In Growth of English Industry and Commerce, especially the later editions, Cunningham portrayed the Tudor period as a time when church and state came together to create a ‘national consciousness’. He was guarded in his interpretation of mercantilism which led to war and selfish interests, but he saw it as a means of securing national power. He was critical of the replacement of Tudor regulation of wages and prices by competitive individualism and laissez-faire, and he saw that free trade was just another selfish policy for industrialists to sell British goods to foreign markets. He welcomed the return in his own day of a policy of ‘national husbandry’ (Koot 1987: 136-142, 150-153).[1]
Cunningham was combative, once declaring in a sermon that the joys of Heaven would not be complete without the pleasure of conflict (Maloney 1976: 441). Not surprisingly, he created discord over the teaching of economics, for he did not accept the balance between deduction and induction proposed by Marshall. In his opinion, facts had primacy, and economics was an empirical science. He challenged Marshall with Political Economy Treated as an Empirical Science: A Syllabus of Lectures in 1887 and again in ‘The Perversion of Economic History’ in 1892. In his view, the role of theory was to produce taxonomies:
Instead of aspiring to be a sort of pure physics of society which assuming a single force—the individual desire for wealth—states the laws of the operation of this force in the supply and demand of different articles of value, political economy might for the present be content to observe and classify and describe and name as other sciences have been ... No real advance can come from the statement of laws of phenomena which only hold good when a considerable number of cases are excluded as abnormal; if political economy is to rank with other empirical sciences one must try to classify the widely varied phenomena of industrial life.as an empirical science in its classificatory age (Cunningham quoted in Hodgson 2005: 339; italics in original).
Cunningham objected to the assumption of neoclassical economics that ‘economic principles have mathematical character of being true for all times and places alike’. He rejected the idea
[t]hat the same motives have been at work in all ages, and have produced similar results, and that, therefore, it is possible to formulate economic laws which describe the action of economic causes at all times and in all places . If this assumption were sound, it would seem to follow that these economic laws could be most conveniently studied in the present, under our own eyes, as it were; but that when once recognised and stated, they serve to explain the past ... If we already understand the principles which explain industrial and commercial affairs, all that we need do is to look to history for illustrations of what we already comprehend clearly (Cunningham 1892: 493; italics in original).
In Cunningham’s view, ‘economic doctrine about the actual world we live in is all built up as a branch of empirical knowledge; it has no universality’ (ibid. and Cunningham quoted in Hodgson 2005: 340). There was ‘no royal road by which we may get to comprehend the evolution of social structure and of economic conceptions’, yet economists with no experience in weighing historical evidence, and on the basis of a few badly chosen books, ‘will decide the most difficult problems off hand, or sketch you the history of the world with easy confidence’—a jibe directed against Marshall’s outline of economic history in the Principles (Cunningham 1892: 491—492). One example of error was Marshall’s use of Ricardo’s theory of rent to explain the determination of rent in all ages, regardless of actual evidence.[2] Cunningham was also critical of scholars such as Thorold Rogers who collected facts, but then misinterpreted them by too easily assuming the pursuit of self-interest by economic man, and the isolation of economic phenomena from other considerations (Cunningham 1892: 498). Economics had to involve the wider context and move beyond individualistic, atomistic, rational ‘economic man’ to appreciate economic action through membership of collectivities, and above all the nation. Cunningham rejected what he called ‘Cosmopolitan Economic Science’ and argued instead for a political economy that proceeded through understanding ‘the particular needs and ambitions of a particular polity, and can only indicate the means to procure wealth-as-conceived and wealth-as- desired by that nation, not wealth in general’ (Cunningham quoted in Green 2002: 58, and see the discussion of historical economics contained therein, pages 56-64 and Green 1995: 162-183).
In his response, Marshall accepted that history was necessary for economic theory and argued that the Principles was ‘indeed occupied mainly in showing how similar causes acting on people under dissimilar conditions produce more or less divergent results’. But he also claimed that theory was needed to understand causation in history, without which economic history would be reduced to ‘a mere series of facts’. People in the past might be influenced by custom and have different habits of mind, with different means to attain their ends—yet there might still be opportunity to pursue private gain. The point was to study the limits of custom and the opportunities for change, and to realise that the theory of rent imposed an upper limit on what a landowner could demand from the tenant. Negotiations between landlord and tenant over the amount of rent ‘offer unconscious illustrations of the law of rent; just as the expert cricketer fielding at slip, or the sailor bringing up his craft neatly to her buoy, does of the laws of mechanics’. The use of such concepts might assist the economic historian in knowing where to look in the past (Marshall to Foxwell, 27 March 1899, quoted in Whitaker 1996a: 251, and Marshall 1892: 508-511).[3]
Marshall’s conflict with Cunningham was less about hostility to the Historical School than to concerns about his extreme and naive empiricism (Hodgson 2005: 340-342). Indeed, Cunningham’s position was seen as exaggerated even by William Ashley, another leading historical economist, who realised that Marshall’s Principles ‘brings a message of conciliation to divergent schools, and it makes it possible for “deductive” and “historical,” “scientific” and “ethical” economists to work together in harmony’ (Ashley 1891: 489). The conflict was also about the nature of human personality: Marshall and Rogers were liberal rationalists who saw the slow working of rational calculation overcoming prejudice and custom; Cunningham was a romantic conservative who disliked individualism (Maloney 1976: 447). These points led to divergences over economy policy. Marshall was strongly committed to the gold standard and to free trade which could be seen as the triumph of the abstract principle of comparative advantage. By contrast, Cunningham argued that economics related to the particularities of time and place rather than abstract laws. Whether gold or silver, free trade or protection was desirable therefore depended on the assessment of precise circumstances, and not on the application of abstract reasoning.
In the nineteenth century, the ‘cosmopolitan ideal’ of free trade was in harmony with British national interest, because it seemed possible ‘to dump English manufactures on every other part of the globe for all time’. But circumstances changed with the rise of economic nationalism which meant that British adherence to cosmopolitan free trade was harmful (Cunningham quoted in Green 2002: 58). Tariff reform should be linked with regulation of the domestic economy. These international and domestic policies were connected, for the state was not opposed to individual interests, and was more than an aggregate of individual interests. Rather, ‘the State is the embodiment of what is common to the different persons in the nation, it expresses the spirit which each shares ... We cannot represent the State as antagonistic to the individual citizens. The State is concerned with the general interest—with what is common to all’ (Cunningham quoted in ibid.: 59). The historical economists therefore had a different reading from liberal economists of the relationship between the State and the individual, with major consequences for the understanding of Britain’s future and for economic policy. Neomercantilist tariff reform could solve both the problem of international economic rivalries and domestic social problems by creating employment and prosperity (Green 2002: 60-61). The stakes were high, and the conflict was not merely about induction versus deduction: it was about the very future of Britain and its empire.
The disagreement reappeared in the debate over the Economics Tripos in 1903 and the teaching of economic history in the History Tripos in 1909. Cunningham had been a candidate for the Professorship of Political Economy to which Marshall was appointed in 1884, and in 1888, he resigned from his Lectureship to avoid Marshall’s authority. He was elected to a Fellowship of Trinity College in 1888, which he held alongside appointments as Vicar of the University Church and Archdeacon of Ely, and Professor of Economics at King’s College, London, between 1891 and 1897. However, he continued to be a troublesome presence in Cambridge. In 1903, Cunningham challenged both the claims of the new Economics Tripos and free trade ideology by offering a series of lectures on ‘The Rise and Decline of the Free Trade Movement’ which were advertised as ‘a dispassionate survey of the main issues involved in the present controversy’ for those ‘who have never given special attention to fiscal questions, and who have no time for systematic reading’. Not surprisingly, the Economics Board was concerned that Cunningham was Director of Studies in economics at Trinity: the Board complained that he was in opposition to their approach, and urged the College to rely on teachers who were ‘in harmony with the spirit of the Tripos’ (Kadish 1994: 217-218; Hodgson 2005: 341).
Conflict resumed in 1909 when the Special Board for History and Archaeology proposed revisions to the History Tripos. As the regulations stood, students had to choose between economic history and political economy in Part I; candidates could avoid the need to take a theoretical paper, with the ‘effect of encouraging the habit of accumulating facts instead of interpreting them’. In order to cure this defect, the preamble to the Report proposing the revisions said that there should be ‘greater stress on the requirement of an elementary knowledge of Economic Theory in the paper on Economic
History’, and the separate paper on economic theory would be dropped in Part I. The proposed new regulation stated that ‘In English Economic History candidates shall be required to shew [sic] some knowledge of elementary Economic Theory in relation to History’. Clapham was a signatory (Cambridge University Reporter, 4 May 1909: 820-827).
The Report provoked a discussion in Senate House which was printed in the University Reporter. Not surprisingly, Cunningham took exception to the Board’s comments on the teaching of economic history with its imputation that the teachers were ‘quite incapable of preventing men from merely cramming’. In his view, the Board’s proposal to introduce an element of theory rested on ‘an entirely false antithesis’:
[T]here was no alleged fact that might not lead one furiously to think, and think to good purpose; to think first of all whether it was a fact, to think of its far reaching significance, and of the connexion [sic] of things physical and moral which might have brought about that occurrence. Every single fact in History could be treated in such a way as to give the opportunity for plenty of thinking, and the antithesis between fact and theory seemed to him [Cunningham] to be entirely mistaken ... There were two ways of treating Economic History, either as an attempt to follow the growth of the economic life of a people from the beginning, or by viewing it from the modern standpoint and picking out incidents in the history of the past that can be used for the illustration of modern economic theory. The Board appeared to prefer the second mode of treatment .
It really misled. Instead of the student’s being encouraged when he came across an alleged fact to weigh the evidence and consider whether it was a fact or not, he felt that if the incidence was merely an illustration it did not matter whether it was a fact or not. It entirely changed the character of the study (ibid.: 26 May 1909: 973).
Clapham sought to reassure Cunningham that economic history was not to be studied merely to illustrate ‘modern principles’. Rather, the aim of the reform ‘was directed to bringing the theoretical element into close harmony with the History ... [W]hat they meant was that it should be studied as in Dr Cunningham’s own works, where Theory was introduced at points where it became important’ (ibid.: 974). The Board compromised, agreeing to drop the proposed regulation on economic history and to continue with the existing regulation that ‘in the paper on English Economic History. questions involving some knowledge of Economic Theory shall be included’ (ibid.: 1 June 1909: 1,011).
Marshall was happy to assign the understanding of historical specificity to Clapham who approached the task from the left foot of induction without hostility to the right foot of deduction. The appointment of Pigou as Professor of Political Economy in 1908 marked a shift towards a much more theoretical approach to economics with less attention to historical specificity than Marshall—a change that was encouraged by the weakness of the Historical School in Britain compared with Germany. In the words of Geoffrey Hodgson,
None of the leading figures of the British school was able to build an alternative methodology or theory, and they remained largely entrapped by an empiricist methodology ... [T]he historical school failed to establish an enduring bridgehead in the British Isles. Gradually pushed aside in academic argument, several members of the British historical school made their way into the discipline of economic history, embraced empiricism, and abandoned economic theory to the theorists (Hodgson 2005: 343).
This interpretation applied to Clapham who moved towards a somewhat resigned coexistence with economics. He rejected the German Historical School, remarking in 1929 that ‘as economists, I believe that the German historical school have gone bankrupt’ as a result of their aim ‘to dissolve economics into history’. The problem with Schmoller’s Principles of 1900-1902 was that it proposed that ‘historical delineation can become economic theory’. Clapham wrote on the flyleaf of the book: ‘He solves nothing’. He had similar doubts about Sombart’s Modern Capitalism, pointing out that he was ‘neither precisely historian nor precisely economist (he isolates too much for the first and narrates too much for the second)’. Sombart’s main success was historical, but he ‘has not as yet taught us very much about the contemporary functioning of capitalism’ (Clapham 1929: 26-27, 30-31). Both Schmoller and Sombart, it would seem, had forgotten the need to keep the right and left feet marching together in harmony.
Clapham’s most developed and explicit statement about economics was his article ‘Of Empty Economic Boxes’ in 1922 when he expressed doubts on the utility of modern economic theory, particularly as developed by Pigou who was more assertive about the power of deductive economics than Marshall. To Clapham, such concepts as diminishing returns and increasing returns to scale were ‘empty economic boxes’. He suggested that economists could be divided into those who studied things and those who studied concepts and had great difficulty in filling their empty boxes with complex reality. He argued that empirical research should not be controlled by theoretical categories, and implied that facts should be studied prior to theory. He complained that ‘a great deal of harm has been done through omission to make clear that the Laws of Return have never been attached to specific industries: that we do not, for instance, this moment know under what conditions of returns coals or boots are being produced’ (ibid.: 312; italics in original). He took hats as an example. Returns could not be defined just in terms of the industry’s own output. What of inputs—coal, rabbit fur from the Australian outback, shellac, leather, or wood pulp for the hatbox? Did coal always experience diminishing returns? It might in Britain but did this apply in the USA? Rabbit fur had elusive internal and external economies; it was difficult to say what applied to wood pulp. Hence the returns in producing hats were very complex. He accepted that car production had increasing returns, but it was difficult to decide on locomotive manufacturing or—returning to his earlier work on Yorkshire—the production of combed woollen tops. Clapham’s approach was through cautious, painstakingly detailed understanding of individual trades and their organisational structure, with complex and changing interconnections, all resting on uncertain statistical foundations. He saw ‘grave danger to an essentially practical science such as Economics in the elaboration of hypothetical conclusions about...human welfare and taxes’ (ibid.).[4] [5] In this sense, he was closer to Cunningham’s deductive approach, but without the rancour and without feeling that the disagreement was a matter of deep importance for the future of the discipline or country.
Keynes felt that Clapham was ‘barking up the wrong tree’ (Keynes quoted in Deane 2008: 799), and Pigou responded by defending the use of ‘empty boxes’. Both methods could be used and more scholars should be produced in the mould of Jevons with ‘the qualities required for conducting a detailed intensive study of particular industries’, in addition to being ‘well versed either in the more intricate parts of economic analysis or in modern statistical technique’. Until such paragons were produced, it was better for economists and historians to ‘work together in combination and not.. .waste time quarrelling’ (Pigou 1922: 465; Kadish 1994: 239-241).11 In fact, the two disciplines went their own ways in peaceful coexistence or even indifference rather than the combative hostility of Cunningham or the integration of historical economics. The battle of methods was over. Clapham’s tone was one of resignation: peace rested on accepting the task assigned to him by Marshall of filling empty economic boxes with empirical fact, even if the new generation of economists was less interested:
Here in Cambridge.. .economist and economic historian are at peace. We know our limitations. We can sit happily side by side under Adam Smith’s great umbrella labelled An Inquiry into the Nature and Causes of the Wealth of Nations. The Professor of Political Economy will not cry out because I do not read a mathematical article (which, for the rest, I might not understand) dealing with taxation ‘in a purely competitive system with no foreign trade’, though, for all I know, it may throw much light on the Nature of Wealth and its taxability. I shall not resent his indifference to what I take to be the final demonstration, just completed by archaeologists and air-photographers, that the now familiar strips of the medieval open-field were unknown in Roman or Celtic Britain; although the change to the strips—being connected with an improved plough—was no doubt in its time a Cause of a Nation’s Wealth (Clapham 1929: 32).
Clapham read very little economics beyond the works of Malthus, Ricardo, and other classical economists as part of his understanding of economic policy in the early nineteenth century, and of Marshall. He never read The General Theory, for he concluded from discussions with Keynes that it would be too difficult (Clark 1946: 348). Equally, economists showed little interest in the open fields of medieval England. They were two different disciplines, with different concerns. What, then, was Clapham’s approach to economic history?
- [1] Cunningham’s views on the economic history of England were developed in the later editions of The Growth of English Industry and Commerce. The second edition covered The Growth of English Industry andCommerce in the Early and Medieval Ages (1890), and there were two volumes on the modern period, TheMercantile System (1890) and Laissez Faire (1892).
- [2] See Cunningham (ibid.: 494) on Ricardo and more general attacks on pages 495-498. In 1889Cunningham criticised Marshall’s use of Ricardo instead of accepting descriptions of medieval or Indianeconomic forms as they actually were (see Cunningham quoted in Maloney 1976: 441).
- [3] Cunningham’s riposte to Marshall appeared in the form of letters in The Pall Mall Gazette on 29September 1892, and the Academy on 2 October 1892. However, Marshall left the matter, as he explainedto Neville Keynes, and ‘shall not even suggest that Cunningham has read his history almost as hastily ashe has his Ricardo and my poor little self’ (Marshall to Neville Keynes, 10 October 1892, quoted inWhitaker 1996a: 82-83).
- [4] The debate with Pigou can be traced through Clapham (1922a), Pigou (1922), and Clapham (1922b).Seel also Kadish (1994: 229) and Groenewegen (2012: 77—79).
- [5] Piero Sraffa felt that Clapham gave up too soon and had, without realising it, found a fatal error inMarshall (Sraffa 1926).
