What has been done in the way of inquiry into this economic life process? The ways and means of turning material objects and circumstances to account lie before the investigator at any given point of time in the form of mechanical contrivances and arrangements for compassing certain mechanical ends. It has therefore been easy to accept these ways and means as items of inert matter having a given mechanical structure and thereby serving the material ends of man. As such, they have been scheduled and graded by the economists under the head of capital, this capital being conceived as a mass of material objects serviceable for human use. This is well enough for the purposes of taxonomy; but it is not an effective method of conceiving the matter for the purpose of a theory of the developmental process. For the latter purpose, when taken as items in a process of cumulative change or as items in the scheme of life, these productive goods are facts of human knowledge, skill, and predilection; that is to say, they are, substantially, prevalent habits of thought, and it is as such that they enter into the process of industrial development. The physical properties of the materials accessible to man are constants: it is the human agent that changes,—his insight and his appreciation of what these things can be used for is what develops. The accumulation of goods already on hand conditions his handling and utilisation of the materials offered, but even on this side—the "limitation of industry by capital"—the limitation imposed is on what men can do and on the methods of doing it. The changes that take place in the mechanical contrivances are an expression of changes in the human factor. Changes in the material facts breed further change only through the human factor. It is in the human material that the continuity of development is to be looked for; and it is here, therefore, that the motor forces of the process of economic development must be studied if they are to be studied in action at all. Economic action must be the subject-matter of the science if the science is to fall into line as an evolutionary science.
Nothing new has been said in all this. But the fact is all the more significant for being a familiar fact. It is a fact recognised by common consent throughout much of the later economic discussion, and this current recognition of the fact is a long step towards centering discussion and inquiry upon it. If economics is to follow the lead or the analogy of the other sciences that have to do with a life process, the way is plain so far as regards the general direction in which the move will be made.
The economists of the classical trend have made no serious attempt to depart from the standpoint of taxonomy and make their science a genetic account of the economic life process. As has just been said, much the same is true for the Historical School. The latter have attempted an account of developmental sequence, but they have followed the lines of pre-Darwinian speculations on development rather than lines which modern science would recognise as evolutionary. They have given a narrative survey of phenomena, not a genetic account of an unfolding process. In this work they have, no doubt, achieved results of permanent value; but the results achieved are scarcely to be classed as economic theory. On the other hand, the Austrians and their precursors and their coadjutors in the value discussion have taken up a detached portion of economic theory, and have inquired with great nicety into the process by which the phenomena within their limited field are worked out. The entire discussion of marginal utility and subjective value as the outcome of a valuation process must be taken as a genetic study of this range of facts. But here, again, nothing further has come of the inquiry, so far as regards a rehabilitation of economic theory as a whole. Accepting Menger as their spokesman on this head, it must be said that the Austrians have on the whole showed themselves unable to break with the classical tradition that economics is a taxonomic science.
The reason for the Austrian failure seems to lie in a faulty conception of human nature,—faulty for the present purpose, however adequate it may be for any other. In all the received formulations of economic theory, whether at the hands of English economists or those of the Continent, the human material with which the inquiry is concerned is conceived in hedonistic terms; that is to say, in terms of a passive and substantially inert and immutably given human nature. The psychological and anthropological preconceptions of the economists have been those which were accepted by the psychological and social sciences some generations ago. The hedonistic conception of man is that of a lightning calculator of pleasures and pains, who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift him about the area, but leave him intact. He has neither antecedent nor consequent. He is an isolated, definitive human datum, in stable equilibrium except for the buffets of the impinging forces that displace him in one direction or another. Self-imposed in elemental space, he spins symmetrically about his own spiritual axis until the parallelogram of forces bears down upon him, whereupon he follows the line of the resultant. When the force of the impact is spent, he comes to rest, a self-contained globule of desire as before. Spiritually, the hedonistic man is not a prime mover. He is not the seat of a process of living, except in the sense that he is subject to a series of permutations enforced upon him by circumstances external and alien to him.
The later psychology, reënforced by modern anthropological research, gives a different conception of human nature. According to this conception, it is the characteristic of man to do something, not simply to suffer pleasures and pains through the impact of suitable forces. He is not simply a bundle of desires that are to be saturated by being placed in the path of the forces of the environment, but rather a coherent structure of propensities and habits which seeks realisation and expression in an unfolding activity. According to this view, human activity, and economic activity among the rest, is not apprehended as something incidental to the process of saturating given desires. The activity is itself the substantial fact of the process, and the desires under whose guidance the action takes place are circumstances of temperament which determine the specific direction in which the activity will unfold itself in the given case. These circumstances of temperament are ultimate and definitive for the individual who acts under them, so far as regards his attitude as agent in the particular action in which he is engaged. But, in the view of the science, they are elements of the existing frame of mind of the agent, and are the outcome of his antecedents and his life up to the point at which he stands. They are the products of his hereditary traits and his past experience, cumulatively wrought out under a given body of traditions, conventionalities, and material circumstances; and they afford the point of departure for the next step in the process. The economic life history of the individual is a cumulative process of adaptation of means to ends that cumulatively change as the process goes on, both the agent and his environment being at any point the outcome of the last process. His methods of life to-day are enforced upon him by his habits of life carried over from yesterday and by the circumstances left as the mechanical residue of the life of yesterday.
What is true of the individual in this respect is true of the group in which he lives. All economic change is a change in the economic community,—a change in the community's methods of turning material things to account. The change is always in the last resort a change in habits of thought. This is true even of changes in the mechanical processes of industry. A given contrivance for effecting certain material ends becomes a circumstance which affects the further growth of habits of thought—habitual methods of procedure—and so becomes a point of departure for further development of the methods of compassing the ends sought and for the further variation of ends that are sought to be compassed. In all this flux there is no definitively adequate method of life and no definitive or absolutely worthy end of action, so far as concerns the science which sets out to formulate a theory of the process of economic life. What remains as a hard and fast residue is the fact of activity directed to an objective end. Economic action is teleological, in the sense that men always and everywhere seek to do something. What, in specific detail, they seek, is not to be answered except by a scrutiny of the details of their activity; but, so long as we have to do with their life as members of the economic community, there remains the generic fact that their life is an unfolding activity of a teleological kind.
It may or may not be a teleological process in the sense that it tends or should tend to any end that is conceived to be worthy or adequate by the inquirer or by the consensus of inquirers. Whether it is or is not, is a question with which the present inquiry is not concerned; and it is also a question of which an evolutionary economics need take no account. The question of a tendency in events can evidently not come up except on the ground of some preconception or prepossession on the part of the person looking for the tendency. In order to search for a tendency, we must be possessed of some notion of a definitive end to be sought, or some notion as to what is the legitimate trend of events. The notion of a legitimate trend in a course of events is an extra-evolutionary preconception, and lies outside the scope of an inquiry into the causal sequence in any process. The evolutionary point of view, therefore, leaves no place for a formulation of natural laws in terms of definitive normality, whether in economics or in any other branch of inquiry. Neither does it leave room for that other question of normality, What should be the end of the developmental process under discussion?
The economic life history of any community is its life history in so far as it is shaped by men's interest in the material means of life. This economic interest has counted for much in shaping the cultural growth of all communities. Primarily and most obviously, it has guided the formation, the cumulative growth, of that range of conventionalities and methods of life that are currently recognized as economic institutions; but the same interest has also pervaded the community's life and its cultural growth at points where the resulting structural features are not chiefly and most immediately of an economic bearing. The economic interest goes with men through life, and it goes with the race throughout its process of cultural development. It affects the cultural structure at all points, so that all institutions may be said to be in some measure economic institutions. This is necessarily the case, since the base of action—the point of departure—at any step in the process is the entire organic complex of habits of thought that have been shaped by the past process. The economic interest does not act in isolation, for it is but one of several vaguely isolable interests on which the complex of teleological activity carried out by the individual proceeds. The individual is but a single agent in each case; and he enters into each successive action as a whole, although the specific end sought in a given action may be sought avowedly on the basis of a particular interest; as e.g., the economic, æsthetic, sexual, humanitarian, devotional interests. Since each of these passably isolable interests is a propensity of the organic agent man, with his complex of habits of thought, the expression of each is affected by habits of life formed under the guidance of all the rest. There is, therefore, no neatly isolable range of cultural phenomena that can be rigorously set apart under the head of economic institutions, although a category of "economic institutions" may be of service as a convenient caption, comprising those institutions in which the economic interest most immediately and consistently finds expression, and which most immediately and with the least limitation are of an economic bearing.
From what has been said it appears that an evolutionary economics must be the theory of a process of cultural growth as determined by the economic interest, a theory of a cumulative sequence of economic institutions stated in terms of the process itself. Except for the want of space to do here what should be done in some detail if it is done at all, many efforts by the later economists in this direction might be cited to show the trend of economic discussion in this direction. There is not a little evidence to this effect, and much of the work done must be rated as effective work for this purpose. Much of the work of the Historical School, for instance, and that of its later exponents especially, is too noteworthy to be passed over in silence, even with all due regard to the limitations of space.
We are now ready to return to the question why economics is not an evolutionary science. It is necessarily the aim of such an economics to trace the cumulative working-out of the economic interest in the cultural sequence. It must be a theory of the economic life process of the race or the community. The economists have accepted the hedonistic preconceptions concerning human nature and human action, and the conception of the economic interest which a hedonistic psychology gives does not afford material for a theory of the development of human nature. Under hedonism the economic interest is not conceived in terms of action. It is therefore not readily apprehended or appreciated in terms of a cumulative growth of habits of thought, and does not provoke, even if it did lend itself to, treatment by the evolutionary method. At the same time the anthropological preconceptions current in that common-sense apprehension of human nature to which economists have habitually turned has not enforced the formulation of human nature in terms of a cumulative growth of habits of life. These received anthropological preconceptions are such as have made possible the normalized conjectural accounts of primitive barter with which all economic readers are familiar, and the no less normalized conventional derivation of landed property and its rent, or the sociologico-philosophical discussions of the "function" of this or that class in the life of society or of the nation.