PATTEN'S RECONSTRUCTION OF ECONOMIC THEORY1

HE first reading of Professor Patten's essay leaves one gasping. Surely this is post-impressionism in economics! Where is the unity? What is the drift? Brilliant and startling notions abound, but how are they related to each other? The reviewer, however, after reading the essay carefully three or four times, has found it, not indeed a unit, but at all events a collection of fairly distinct units, and he suspects that the author could, if he chose, point out relations that would make a unit of the whole.

There is, first of all, a delightfully personal introduction, in which Professor Patten reviews certain phases of American economic theory for the past thirty years—" quorum pars tertia fui"-and contrasts his own attitude with those of Professors Giddings and Clark. Professor Clark is "rational and “monistic"; Professor Patten is "pragmatic and "pluralistic." Professor Giddings, as a sociologist, necessarily holds, according to Professor Patten, that economic laws depend on more fundamental sociological laws, while he, as an economist, maintains that economic phenomena are primary. Monism in economics has failed. Neither Professor Clark nor Professor Marshall has succeeded, the author contends, in deriving dynamic laws from static laws. The Austrian effort to develop a general scheme of economics from the principles of utility has failed. Monism as a scheme survives only in sociology, where, however, it is coming out more prominently than ever before.

The reviewer questions the correctness of these contrasts. Doubtless the Austrian utility theory of economics is monistic, and the reviewer would agree that it has failed. But Professor Clark, if one takes into account his Philosophy of Wealth and the later chapters of his Essentials of Economic Theory, can hardly be called an economic monist. And if pragmatism means using scientific constructs as tools of thought, with a full consciousness that they are mere tools, then surely Professor Clark's "static state," based on "heroic abstraction," is essentially an employment of the pragmatic method. As to Professor Giddings, the contrast seems even less satisfactory. That "consciousness of kind" is the distinguishing fact and the peculiar theme of

'The Reconstruction of Economic Theory. By Simon N. Patten. Philadelphia, American Academy of Political and Social Science, 1912.-99 pp.

sociology Professor Giddings would not now maintain; and there are few economists who stress more strongly than he does the significance of economic factors. The reviewer questions, too, the principle of differentiation as between economics and sociology which Professor Patten implies in this latter contrast. The notion that the economist is bound to have one theory, while the sociologist is bound to have a different theory, to explain the same problem, is a confession of the bankruptcy of social science. If both are scientific, why can't they have the same theory about a given problem? The differentiation should come in the problems themselves. Neither has any monopoly of any set of facts which may be used for purposes of explanation.

Two other points are noted in connection with the development of American theory: one, the rise of the economic interpretation of history; the other, the increasing influence, since 1900, of socialism. In considering the first of these matters, Professor Patten gives an interesting statement of the essence of his own "genetic or "dynamic" viewpoint in economic theory: "static" laws can be determined under any group of social conditions, but dynamic laws can be found for any given phenomenon only by a study of the particular historical epoch in which the phenomenon is prominent. The various dynamic elements become prominent one after the other, and each gives an epoch its distinguishing character. History thus becomes a series of sharply defined epochs, each presenting itself in contrast with and in opposition to its predecessor. This notion, more fully developed in other parts of the essay, seems to have kinship with Ward's "sympodial evolution," and with the Hegelian dialectic. The rise of socialism Professor Patten thinks due in large part to Professor Seligman's Economic Interpretation of History, which he calls the "Bible of American Socialism." This view will probably commend itself neither to Professor Seligman nor to the American socialists. Socialists go to Professor Seligman rather than to Marx, Professor Patten declares, because the former has taken away the materialistic setting from the economic interpretation of history, and the American socialist is sentimental rather than materialistic.

Chapter ii is a discussion of certain contrasts in philosophical backgrounds and in emotional reactions. It is interesting, even though hard to understand. And the reviewer would question the inevitableness of the contrast which puts "spiritual or genetic " on the one side, while material or structural" constitutes the other term. It would seem that the contrast between spiritual and material should not be identified with the contrast between genetic and structural without some

argument to justify it. And " 'pragmatic and hence economic" in contrast with "dogmatic and thus sociological" is, again, not selfevident.

Professor Patten's estimate of Marx is acute and exceedingly interesting. "Marx Germanized English economics. . . . But for the prejudices of the German economists, these ideas would have become commonplaces in Germany, and would thus have prevented Marx from gaining position by utilizing them." Marx replaced the "theological " setting which these ideas had in English thought with the "material view" then prevalent in Germany. The theory of harmony of interests between laborers and employers Marx replaced with the doctrine of class struggle. The laborers were to be the surviving class into whose hands society was to come. "This position, however, became untenable through the rise of the theory of evolution. Darwinism does not prove that the world belongs to rabbits. It proves that the rabbits belong to foxes." From this comes Marx's dilemma, and Professor

Patten holds that much of Marx's later work consists in a further and unsuccessful effort to solve it. Professor Patten does not anticipate any such growth of socialism in this country as has taken place in Germany. "Assume that Germany is not ahead of us in development, and her 3,000,000 socialists afford no indication that our progress will bring a like development. Are we pacemakers in economic evolution or is Germany?" Other chapters are given to "Types of American Socialism," "Voluntary Socialism" and "The Avoidance of State Socialism."

American economic thought has roots both in Germany and in the economics of John Stuart Mill. Discussions of the errors which Professor Patten sees in both of these sources, together with an explanation of the origin of these errors in the personal and national environments of Mill and the German economists, occur in the earlier chapters. The reviewer must be content merely to mention these interesting side-lights. The central features of the essay are the attack on "natural law' and "static" theories of distribution and the effort to reconstruct the theory of distribution on a genetic basis. Not only theories of causation but categories also are to be reconstructed. The terms wages, interest, profits and rent are to be given up and new categories substituted. On this point Professor Patten's argument is not convincing, because he uses the current categories in unusual ways. Wages, for him, seems to mean the result of "toil," and toil seems to be identified with pain (pages 36-37, 39). Machine workers get, not wages, but rent of ability. Criticism of the familiar categories, when unfamiliar

The new

meanings are given them, seems to be beside the mark. categories which Professor Patten wishes to substitute appear to be chosen on the following principle: he wishes to emphasize certain causes affecting distribution which have not been adequately recognized in the past. For each new cause, he wishes a new distributive share. The categories, in other words, are to be chosen, not with an eye to the types of income actually received, but with a view to the causes determining the amounts of income. But this, the reviewer would suggest, makes agreement on terminology almost impossible, because it requires us first to come to agreement in our theories of causation. Definitions and categories should be, as far as possible, common ground. It is easier for us to agree what our problems are than to agree how they are to be solved. The distributive shares recognized in contract relations and actually received in practice constitute the problem, and hence constitute a norm for testing categories. That this norm requires changes in categories from time to time and that the prevailing categories do not exactly correspond with this norm the reviewer grants, but he maintains that they approximate it much more nearly than do Professor Patten's new categories. There may be scientific reasons which make departure from this norm inevitable, but the case must be made out. There is, however, a more fundamental difficulty to make a separate share for each cause is impossible, because no share depends exclusively on one cause, and no cause exhausts itself on one share.

More significant than the question of categories is the question of causes. Professor Patten would reject the theories which make distribution depend on natural law or "static" law. He would introduce the elements of struggle, monopoly, legal changes, changes in education, in morals, in standards of consumption; "distribution is thus complex, following no one law." As a criticism of the Austrian effort to juggle the whole story out of " marginal utilities," or of other "monistic "explanations of distribution, Professor Patten's case is made, even though he wastes part of his ammunition on discarded doctrines like the wages fund. In passing, a curious logical lapse may be noted in his criticism of a variant of this doctrine. The argument criticized is that superwages for one group of laborers come out of capital, hence out of the wages fund, and hence out of the wages of other classes of laborers. Professor Patten objects (1) that superwages come, not out of the capital in the wages fund, but out of superprofits (page 42), and (2) that capital comes, not from savings, but from superprofits (page 43). Had he been content with one of these propositions

127 alone, his case would be formally clear, but both points together put him back into the original difficulty. For the case now stands: ordinary wages come from capital, from the wages fund; capital comes from superprofits; hence wages come ultimately from superprofits; but superwages come from superprofits, hence from the same source from which ordinary wages come; hence they leave less for ordinary wages. But the general doctrine here is significant and timely. It is that there are no natural laws standing in the way of radically increasing the income of the laboring classes at the expense of the incomes of other classes; that the defenders of the existing distribution of wealth cannot hide behind a natural law, with the pious wish that it were different.

One factor which Professor Patten considers vital as working for a redistribution of wealth is "budgetary pressure." The idea which the phrase involves may be stated as pressure of a rising standard of living upon less rapidly expanding or even diminishing resources, as measured in family budgets. The budget plays a double rôle. In the first place, the budget is a registering machine, for scientific purposes, which is to supplement wholesale price quotations. Wholesale prices fail to reveal and measure all the necessary elements. But more significant is the psychological relation of budget and budget-maker. Only the man of imagination and moral energy will keep books and make arithmetical plans for the disposal of his family income. A budget-making laboring class is a progressive laboring class. The budget reacts in enhancing the very qualities which made it possible : imagination and definiteness of purpose are increased by it. The budget-maker knows definitely his grievances. When he acts, he acts toward a definite end. Budgetary pressure works in two main ways: it leads directly to political and other organized activity to increase class incomes directly; and it leads to the better education of the children of a family, in order that their income, added to the father's income, shall remove the deficit in the budget. Budgetary pressure leads more members of the family into industry. The going of a daughter into industry makes the father interested as a citizen in the general problem of woman labor, where before he was indifferent. To say that the static theory will account for the increase in family income due to better education of children, that the doctrine of class struggle is likewise not new, and that we already knew that wants are dynamic agents, by no means takes away the originality and significance of Professor Patten's emphasis on the phase of social psychology he has described. His doctrine is more than a mechanical synthesis of these elements.