[168] Ibid., p. 62.
[169] Pol. Econ., 1888 edition, p. 5.
[170] Principles, bk. II, chap. I.
[171] Professor Clark seems to desire to exclude all phases of social life except the "pure economic," from his static conception, as indicated by the footnote which follows, taken from page 76 of his Distribution of Wealth: "The statement made in the foregoing chapters that a static state excludes true entrepreneurs' profits does not deny that a legal monopoly might secure to an entrepreneur a profit that would be as permanent as the law that should create it—and that, too, in a social condition which, at first glance, might appear to be static. The agents, labor and capital, would be prevented from moving into the favored industry, though economic forces, if they had been left unhindered, would have caused them to move to it. This condition, however, is not a true static state, as it has here been defined. Such a genuine static state has been likened to that of a body of tranquil water, which is held motionless solely by an equilibrium of forces. It is not frozen into fixity; but as each particle is impelled in all directions by the same amounts of force, it retains a fixed position. There is a perfect fluidity, but no flow; and in like manner the industrial groups are in a truly static state when the industrial agents, labor and capital, show a perfect mobility, but no motion. A legal monopoly destroys at a certain point this mobility [so would a law forbidding the manufacture of, say, opium or liquor, or any law or moral force that prevents the individual's using his labor and capital in the manner most advantageous to himself regardless of public consequences], and is to be treated as an element of obstruction or of friction that is so powerful as not merely to retard a movement that an economic force, if unhindered, would cause, but to prevent the movement altogether." This would seem to leave economic forces working in vacuo in Professor Clark's static state—if "unhindered" is to be taken literally. It is probably a juster interpretation, however, to hold that Professor Clark has in mind a constant legal situation, in which absolutely free competition is assured by law. But even in his scheme for an economic dynamics, there is no place for legal or ethical changes. There are five general sets of dynamic changes which Professor Clark mentions, whose operation is to constitute the subject matter of economic dynamics. They are (Essentials, p. 131, and Distribution, pp. 56 et seq.): (1) population increases; (2) capital increases; (3) methods of production change; (4) new modes of organizing industry come into vogue; (5) the wants of men change and multiply. These five categories are all, primarily, at least, economic in character. While legal and ethical changes would doubtless influence them, they certainly cannot comprehend the full influence of these legal and ethical changes, especially those affecting the ranking of men, and the distribution of wealth. There seems to be a marked difference between Professor Clark's point of view in his Distribution of Wealth and that of his earlier Philosophy of Wealth, and I must confess my preference for the earlier point of view. In saying this, of course, I am far from impeaching the masterly economic analysis which the later book contains—rather, I join heartily in the general estimate which counts that book as of altogether epoch-marking significance. My point is, rather, as will be indicated more fully in the chapters on the relation between value-theory and price-theory, that the presuppositions and significance of such a study as Professor Clark's need clarification and interpretation in the light of a theory of value which takes account of the rich complexity of social life.
Professor Joseph Schumpeter, of Vienna, carries out economic abstractionism to its logical limits, both in "statics" and in "dynamics." For an estimate of his statics, vide Professor Alvin S. Johnson's review of Schumpeter's Das Wesen und der Hauptinhalt der theoretischen Nationalökonomie (Leipzig, 1908), in the Journal of Political Economy, 1909, pp. 363 et seq. His dynamics is also to be "reinwirtschaftlich." An essay in economic dynamics, the introduction to which sets forth his general point of view, appears in the Austrian Zeitschrift für Volkswirtschaft, etc., 1910, under the title, "Das Wesen der Wirtschaftskrisen." In this Professor Schumpeter narrows, by a process of exclusion, the conception of what would constitute a "pure economic" explanation of crises virtually to a pinpoint—and then fails to carry out his program of giving us a "reinwirtschaftlich" theory. For, in order to get any periodicity into his economic movement, he is obliged to bring in, from the field of sociological theory, the factor of imitation—he does not use the term, imitation, though he does use the verb, "kopieren." (Vide esp. pp. 298-99.) Professor Schumpeter very explicitly recognizes the existence of factors other than the "reinwirtschaftlich," but counts them as "external" factors.
[172] Cf. Professor Marshall's discussions in his sections on economic law and method, and Professor Davenport's classification of the factors in the economic environment (Value and Distribution, pp. 514-15).
[173] The danger of the abstract individualistic study, from the entrepreneur's viewpoint—a useful enough method within limits—is well illustrated by Professor Davenport's contention that "men as employees are passive facts, mere agents under the direction of managing producers, and are therefore only potentially directing forces. The problem of production and of marginalship is, accordingly, an entrepreneur problem." (Op. cit., p. 279, n.) This is set forth as a limitation on the doctrine, stated in the paragraph which precedes it, that "man is to be conceived as the subject and centre of economic science, etc." Surely Professor Davenport's contention is an impossible abstraction from the rich facts of social control. The managing entrepreneur knows better, when he deals with union rules and walking delegates. And the economist, tracing the subtler forces that underlie values, and so motivate the direction of industry, should know more, rather than less, than the entrepreneur.
[174] Principles, 1905 ed., pp. 147 et seq.