History of Economic Analysis part 121

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History of Economic Analysis part 121. At the time of his death in 1950, Joseph Schumpeter-one of the major figures in economics during the first half of the 20th century-was working on his monumental History of Economic Analysis. A complete history of humankind's theoretical efforts to understand economic phenomena from ancient Greece to the present, this book is an important contribution to the history of ideas as well as to economics.

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Editor’s appendix 1162 toward the end of December 1949, J.A.S. began to go through Part III systematically. In addition to penciled corrections on the typescript, there was a little pile of notes on several sheets still attached to a pad with the heading ‘Reading III? 30.xii.49.’ These were undoubtedly suggestions for changes. Then or earlier he had also removed some pages from the end of Chapter 5 (sec. 5c, The Model, and sec. 6, The ‘Classic’ Conception of Economic Development). Clipped to the first of these pages was a sheet of shorthand notes with the comment ‘Ch. 5, sec. 5 becomes quite loose!’ There were not so many ‘early versions’ for Part III as for the preceding part. There was a ‘Chapter II: The Political and Intellectual Scenery,’ a few pages of which were used in the final version of Chapter 3; there was a ‘Chapter III: Scope and Method,’ a few pages of which were used in the final version of Chapter 5; and there was the material (with no title) on Senior’s Four Postulates which, without being rewritten, became the first section of Chapter 6. The first and last of these three were typed in December 1943. The editorial note on page 575 explains that J.A.S. would have revised the material on Senior’s postulates and integrated it with the rest of the chapter. But how do we know this? The rest of this chapter was written rather late—probably in 1948. There were 161 typed pages, but it began with section 2 (Value). The first page of section 2 was page 1 of the typescript. The material on Senior’s postulates in a folder was put at the beginning of the chapter. In discussing the plan of Part IV on page 758, J.A.S. wrote ‘Chapter 7 (Equilibrium Analysis) corresponds to Chapter 6 of Part III and assigns the same piloting function to Walras that was assigned to Senior in Part III.’ There was also another problem—that of a title for Chapter 6. All the other chapters in Part III were complete with titles, section titles, and in many cases subsection titles. All of Chapter 6 from section 2 on was complete with section titles and subsection titles. But section 1, not having been revised, lacked a title and so did the chapter, since the chapter title appears at the beginning of section 1. Here again the Plan of the Part provided a solution. This time it was the plan of Part III on page 383 where J.A.S. explained that he proposed ‘to draw a picture of analytic developments with reference to a cross section… represented (in Chapter 5) by J.S.Mill’s Principles’ and that he would simplify matters ‘by reserving the details of pure theory and of money…for two separate chapters (6 and 7).’ Hence the titles for Chapters 5 and 6—General Economics; A Cross Section and General Economics: Pure Theory. Part IV may be considered a development of the fourth part or chapter of the Dogmengeschichte (The Historical School and the Marginal Utility Theory) but only so far as the broad subject matter is concerned. In the early sketch, this material required only 27 pages; in the History, it required nearly 400 pages. At one time this Part was to have consisted of ten chapters; then the number was reduced to nine and finally to eight. This was not the result of any elimination of material but rather the result of the consolidation of Chapters 4 and 5 into Chapter 4 and of Chapters 8 and 9 into Chapter 7, the intervening chapters having changed their numbers. Because this confused me at first and because it may confuse others using the manuscript and notes deposited in the Houghton Library, I shall quote from Chapter 1 of Part IV as it was originally written—before being edited. Probably the first three chapters of Part IV and the parallel chapters in Part III had been written and typed not later than early 1947. After commenting on the first three chapters, the outline for the Plan of the Part on page 758 read as follows:
Editor’s appendix 1163 Then follow comments on two allied groups of men and ideas that lend themselves to separate treatment, the group whose work centered in the contemporaneous interest in social reform and whose leaders were with singular infelicity dubbed ‘socialists of the chair’ (Kathedersozialisten); and the group that was called, and called itself, the historical school (Chapters 4 and 5). The much-debated question of economists’ value- judgments will conveniently be touched upon in connection with the former and the famous ‘battle of methods’ (and its American counterpart, the institutionalist controversy) in connection with the latter. To some extent, this arrangement impairs our picture bceause when we go on to a brief survey of the men, groups, and developments in ‘general economics’ (Chapters 6 and 7), we shall have already eliminated two of the most important influences upon this ‘general economics.’ Let me hence entreat the reader to peruse these chapters in their order. The last three chapters of the Part deal with sets of topics that it has seemed best to reserve for separate treatment. Chapter 8 corresponds to Chapter 6 of Part III and assigns the same piloting function to Walras that has been assigned to Senior in Part III. It aims at presenting the emergence of the elements of modern pure theory in a manner that will, I am afraid, prove as unsatisfactory to the modern theorist as it will seem overloaded to the non-theorist. The latter may be right in contenting himself with what he will have read on these matters in Chapters 6 and 7. Chapter 9, on the fortunes of utility theory and its successors to the present day, stands by itself or almost so and should only be read by those who take special interest in the matter. Segregation of the topics of money, credit, saving and investment, business cycles in the last chapter (10) calls but for this remark: segregation imposed itself for reasons of exposition as it did in Part III. The manuscript and typescript of Chapters 1–5 were found in a file box. In the folder with Chapter 4 were notes and reprints to be used in the rewriting of this chapter. The manuscript, typescript, notes, and discarded bits of manuscript for Chapters 6 and 7 were found in another file box. There were also a few bits from Chapter 7 found in the desk at Littauer. After mid-1948, the carbons were no longer deposited in the attic on Acacia Street so that it was somewhat more difficult to find out just what had been done and where it belonged. J.A.S. had glanced over the typescript of most of the chapters in this part very hastily and made small corrections in pencil. He certainly had not read through the early chapters systematically as he was approaching the end of his work. For example, he had not corrected the numbering of the chapters in the Plan of the Part quoted above. Part IV presented no real difficulties except with reference to Chapter 4 (Sozialpolitik and the Historical Method), Chapter 7 (Equilibrium Analysis), and the concluding section of Chapter 6 (sec. 6: The Contribution of the Applied Fields), all of which were unfinished. Chapter 4 as printed consists of two early versions typed in 1943, which would have been extensively revised. The long editorial note on pages 800–801 says all that is necessary about this chapter. Chapter 6 was written and typed relatively late but
Editor’s appendix 1164 seems complete except for the final section on the applied fields which was only sketched out. Of the five subsections, two had headings only and another—that on public finance—was unfinished. This material was found in manuscript and typed after the death of the author. Chapter 7 (Equilibrium Analysis) aimed ‘at presenting the emergence of the elements of modern pure theory,’ assigning the piloting function to Walras. There is a brief early treatment typed in February 1943. It consists of 29 typed pages with many blank spaces for footnotes to be filled in later. The concluding paragraph, summing up and appraising the contribution of Walras to scientific economics, breaks off in the middle of a sentence. J.A.S. had read the first typescript8 and made many penciled notes in the margins and other blank spaces. These were not corrections but suggestions for elaboration of the argument. The final version is a long chapter of over 200 typed pages (123 printed pages) which covers essentially the same topics as those discussed in Economics 203, the course in Advanced Economic Theory given by the author. Much of this chapter was written a few pages at a time during the second half of 1948 and the whole year 1949—possibly after a return from a classroom discussion of the subject. This last fact explains to some extent the existence of a number of abandoned ‘early versions’ for some sections and the existence of alternative versions for other sections. It was a little confusing in the beginning to choose from among these, but the choice was made easy in some cases by the fact that an early version was revised and extended to form a final version (sections 4 and 6, for example). The plan of the chapter and the numbering of the sections was always perfectly dear with the single exception of the position of the material on Welfare Economics which will be explained below. The first six sections of Chapter 7, the first six sections of the Appendix to the chapter (Note on the Theory of Utility), and the section on Welfare Eco-nomics were typed during the academic year 1948–9.9 Sections 1, 2, and 5 were left as they had been typed with minor corrections and revisions in pencil on the typescript. The typed version of section 3 was abandoned by the editor, two alternative versions in manuscript being used in its place. Sections 4 and 6 were revised and added to by the author. The final version of section 6, part of section 7 (sub a, b, and c), and section 8 were typed in the last quarter of 1949. The version of Welfare Economics typed in 1948–9 was abandoned by the editor for another found in manuscript, which became section 8 of the Appendix (Note on Utility). (It may be a little confusing that both Chapter 7 itself and the Appendix to the chapter have eight sections.) We now comment on the sections in their numerical order, omitting sections 1, 2, and 5, which—as has been stated—presented no particular problems. Section 3 (The Concept of Equilibrium) presented several problems. There were no less than four different 8 This typescript together with the manuscript will be deposited in the Houghton Library at Harvard. This arrangement had not been made in the late spring of 1950 when Richard M.Goodwin read the various sections of this chapter. He wished to incorporate it at the end of section 1.
Editor’s appendix 1165 versions with four different titles—the typed version of 1948–9 and three alternative versions in manuscript to which J.A.S. had clipped a page of shorthand notes with the comment ‘There are now three alternative formulations of [section] 3 [undecipherable shorthand] for the purpose of inevitable rewriting of 3.’ The title of the typed version was ‘3. Statics and Dynamics. Determinateness. Stability. Equilibrium.’ I labeled the three alternative formulations (3a), (3b), and (3c). Their titles were as follows: (3a) The Concept of Equilibrium; (3b) Statics, Dynamics, and the Stationary State, Evolution; (3c) Determinateness and Equilibrium. Stability. There was a great deal of repetition of the problems discussed in these four versions, and yet no single one of them was complete. I abandoned the typed version for reasons to be discussed in the next paragraph but one. I decided to use alternative formulations (3b) and (3c), which were roughly complementary, whereas (3a) tended to repeat what was treated more comprehensively in (3b). At first it was my intention to publish (3a) and some other early and alternative versions in this appendix. The arrangement whereby they will be deposited in the Houghton Library at Harvard makes this unnecessary. In the editorial note at the beginning of the chapter on Equilibrium Analysis, I explained that it had first been put together with the assistance of Richard M.Goodwin. This was done in the late spring and early summer of 1950 before Parts II and III and the preceding chapters of Part IV had been edited because Goodwin was leaving for Europe. In dealing with section 3, he used parts of all four formulations, arranging them so as to give as much coherence and continuity as could be achieved. Later, after much work on the earlier portions of the History, I decided to present it as nearly as possible as it had been written. This meant, of course, no mixing and rearranging of different 9 At this point, I should like to correct certain implications as to dating made in the editorial notes on pp. 951–2, 983, and 1068–9. The first four sections of Chapter 7 were written, I believe, during 1948 and not ‘long ago’ as stated. The Note on the Theory of Utility was typed in 1948–9 but written earlier. Section 8 of this Note (Welfare Economics) was written at about the same time as the first six sections of the Note. These corrections are based partly on a careful study of the typing; to some extent they are due to the realization that the Appendix on utility was once Chapter 9.
Editor’s appendix 1166 treatments of the same subject, even in the interest of more complete coverage. I found no manuscript for the typed version of section 3, which was so general and so completely lacking in specific footnote references that I began to wonder if it could have been dictated. Later on I had the same feeling for the same reasons about the typed version on Welfare Economics. As I have pointed out on more than one occasion, J.A.S. first wrote all the History in his own hand. Occasionally he bemoaned the fact that there was so much to do and so little time in which to do it. When during 1948–9 he had adequate secretarial assistance for the first time, I remember encouraging him to attempt to dictate some of the material he knew so well with the idea that he could revise it later. He reported that the experiment was not successful. Section 4 (The Competitive Hypothesis and the Theory of Monopoly) affords an example of the difficulties encountered when the manuscript pages were not numbered at all and several bits of typescript were each numbered independently with no hint of their order. The final version of this section consisted of four different installments, written at different times. Three (the first two and the last) had been typed in 1948–9 and one existed only in manuscript. Actually the first two followed directly after one another despite the fact that the pages were numbered 1 to 8 and 1 to 5 respectively. First J.A.S. read and revised in pencil these two typed installments; then he added several pages in manuscript with the last paragraph of the typescript continued on the first page of the new manuscript. Finally the fourth installment (3 typed pages) seemed to follow the last paragraph of the new manuscript installment although this last is not absolutely certain (see note, p. 983). To further confuse the situation, there was found among the notes another treatment in manuscript entitled ‘Monopoly, Oligopoly, Bilateral Monopoly.’ This was apparently a brief first attempt that had been discarded without ever being typed. There were three versions of section 6 (Partial Analysis), all typed from manuscript, two in 1948–9 and one in the last quarter of 1949. The first of these (5 typed pages) had obviously been discarded; typescript and manuscript were found folded up together in the closet of the Taconic study. The other two versions were found in the file box with the rest of the material for this chapter. The second version (8 typed pages) was read and revised and had several pages of new manuscript added to it. It was then retyped and became the third version (12 typed pages). This last version had not been read and corrected by the author after it was typed. Now we come to section 7 (The Walrasian System of General Equilibrium), which was unfinished and most of which had not been typed. Fortunately, since this was to be the pivotal section of the chapter, a good deal of it was found in manuscript. Perhaps it would not be out of place to recall here the comments made on the work of Walras on page 827 above: ‘His system of economic equilibrium, uniting, as it does, the quality of “revolutionary” creativeness with the quality of classic synthesis, is the only work by an economist that will stand comparison with the achievements of theoretical physics… It is the outstanding landmark on the road that economics travels toward the status of a rigorous or exact science and, though outmoded by now, still stands at the back of much of the best theoretical work of our time.’
Editor’s appendix 1167 The editorial note on page 998 explains how this chapter was put together from six different installments, two of which were typed and four of which existed only in manuscript. For the most part there were no subsection titles. The two typed installments (of 9 pages each) were found with their manuscripts. They had not been read by J.A.S. These are now subsections 7a, 7b, and 7c. Five different installments were found in manuscript with pages unnumbered. I numbered them 1–3, 4–7, 8–24, 25–36, and 37–55. The first 3 pages were used as the introduction to the section, pages 4–7 were discarded, pages 8–36 became subsection 7d (Walras’ Theory of Production), and pages 37–55 became subsection 7e (The Introduction of Capital Formation and of Money). The discovery of this last important section of manuscript was rather dramatic. It had been overlooked when the section was first put together. I was going through the file box in September 1951 in the hope of finding a few discarded paragraphs on this subject. I did find a few preliminary pages and I was having them typed when suddenly I came upon pages 37–55. These last subsections must have been written in the second half of 1949. There is a reference on page 1021 to Leontief’s ‘Input and Output Analysis,’ Papers and Proceedings, American Economic Association, May 1949. Section 8 (The Production Function) was typed in the last quarter of 1949. It must have been written during that year—possibly in the summer—since there is a reference (p. 1040) to a controversy in the Quarterly Journal of Economics for February 1949. (The February number probably appeared in March.) J.A.S. had scarcely more than glanced at the typed copy and had not made the usual corrections in pencil. He had been very busy in December 1949—writing the article on Mitchell for the Quarterly Journal, putting down notes for ‘The March into Socialism’ for the December meeting of the American Economic Association, preparing an outline of the Walgreen Lectures to be given in Chicago in January, along with the usual lectures and consultations at Harvard. It is for this reason that none of the material typed in late 1949 was read carefully and corrected. Finally we arrive at the appendix to the chapter. The first six sections of the Note on the Theory of Utility and the version of Welfare Economics (printed above as section 8 of the Note) had been written earlier than other parts of the chapter. It will be recalled that the account of ‘the fortunes of utility theory and its successors to the present day’ (which at one time was to have been ch. 9) had been written but not typed when I had my first interview with J.A.S. on the state of the History during the latter part of 1947. The six sections of the Note were numbered, but the first four did not have titles. Section 7 (The Consistency Postulate) and the beginnings of a new section 8 (The Corpse Shows Signs of Life) were apparently written later and had not been typed at all. For reasons given in the editorial note on page 1068, I believe that Welfare Economics was originally to have been section 8 of the Note on Utility and I have placed it in that position. Since the new section 8 (The Corpse) consisted of only a single paragraph and a few notes, I have put it in the editorial note already mentioned. The version of Welfare Economics actually used was not the one typed in 1948–9. The latter was rather general and lacked specific footnote references with one exception. Moreover, I could find no manuscript corresponding to this treatment. As ‘I have already explained, I had the impression that, like the early version of section 3, it might have been dictated. There was another version in manuscript, which had never been typed. It was writtten in ink and corrected in blue pencil and lead pencil as were the first six sections of the Note on Utility; it certainly looks as though it had been written at the same
Editor’s appendix 1168 time as the latter. The section numbers for the Note (1–6) were in parentheses; there was a pair of parentheses with no number inserted before the title, Welfare Economics. Finally, the latest reference in this version of Welfare Economics, as originally written, was to an article by Tintner in Econometrica, January 1946. Later a reference to Samuelson’s Foundations (1947) was added in pencil. This is consistent with the probable time of writing of the first six sections. The manuscript version was more specific than the typed version; each version had certain things the other lacked. Goodwin suggested a composite version, using some pages from both treatments; but, as a matter of editorial policy, for reasons already given, I had ruled against this solution. I finally decided—with qualms, to be sure—to use the manuscript version. Chapter 8 (Money, Credit, and Cycles) was probably the first of the money chapters to be completed; it was certainly the first to be typed. Apparently when J.A.S. sent it off to be typed he was not happy about it. (Of course, he was never really satisfied with his own work; if only there were time, he felt, it could be improved in so many ways.) Clipped to the first typescript, which had been hastily read and corrected by the author, were a number of small pieces of paper with names, outlines, and shorthand notes. On the outside was the comment ‘Now this was reserved as containing necessary additions and corrections—they are not carried out and were thus left when I sent the chapter off in despair.’ For this chapter, I supplied some titles for subsections which will be easily recognized from the fact that they are enclosed in the usual square brackets. I also divided section 8 on Crises and Cycles into two sections (8 and 9) so that I could preserve the subtitles under Non-Monetary Cycle Analysis. Part V (Conclusion: A Sketch of Modern Developments), like the introductory Part I, was intended to be brief. Its function was to help the reader understand how modern work links up with the work of the past. J.A.S. was working on Parts I and V at the time of his death. There was a file box in the Cambridge study containing ‘Notes and Brief Plan for Part V.’ It is from the two pages of notes reproduced on the next two pages that we know what were to be the main lines of discussion. Unfortunately the plan itself is mostly in shorthand. It indicates eight items of which at least the last three—Developments from Marshall, Business Cycles and Dynamics, and Keynes—had actually been written up. The list of ‘Things still entirely lacking in V’ is perhaps more revealing because more of it is in longhand. Only a fragment of an introduction to the Part existed. It was for this reason that a summary of the Mexican Lectures (see editorial note, p. 1140) on the
Editor’s appendix 1169 Progress of Theoretical Economics during the Last Twenty-five Years was published in Chapter 1. Chapters 2–5 were written in 1949. Chapters 2–4 were typed in late 1949, but Chapter 5 (Keynes and Macroeconomics) was not finished and was not typed until after the author’s death. Of these chapters, only Chapter 4 (Dynamics and Business Cycle Research) had a title. This seems also to have been
Editor’s appendix 1170 the only one of these chapters read by the author after it was typed. The other chapter titles and all the section titles were supplied by the editor. E.B.S.
List of Books Frequently Quoted (WITH EDITIONS USED) WHAT FOLLOWS is by no means a complete list of the books quoted in the History or even a list of the books quoted several times. The list is confined to books which are quoted repeatedly or to books for which the edition used is important and where specific information about the edition is not given on each occasion the book is quoted. Allen, R.G.D., Mathematical Analysis for Economists, London, 1938. Aquinas, Saint Thomas, Summa Theologica [Latin, 6 vols.], Turin (Italy), Libraria Marietti, 1932. Böhm-Bawerk, Eugen V., Capital and Interest: A Critical History of Economical Theory [1st German ed. 1884; English trans. 1890], Reprint, New York, 1932. Böhm-Bawerk, Eugen V., The Positive Theory of Capital [1st German ed. 1889; English trans. 1891], Reprint, New York, 1923. Bowley, A.L., The Mathematical Groundwork of Economics: An Introductory Treatise, Oxford, 1924. Cairnes, J.E., Some Leading Principles of Political Economy Newly Expounded, London, 1874. Cannan, Edwin, A History of the Theories of Production and Distribution in English Political Economy from 1776 to 1848 [1893], 3rd ed. 1917; 4th printing, London, 1924. [Cantillon, Richard], Essai sur la nature du commerce en général [1755], Reprinted for Harvard University, Boston, 1892. Chamberlin, Edward Hastings, The Theory of Monopolistic Competition: A Re-orientation of the Theory of Value [1933], 5th ed., Cambridge, Mass., 1946. Cournot, Augustin, Researches into the Mathematical Principles of the Theory of Wealth [1st French ed., 1838; English trans. by Nathaniel T.Bacon, 1897], New York, 1927. Custodi, Pietro, Scrittori classici italiani di economia politica (50 vols.), Milan, 1803–16. Fisher, Irving, Mathematical Investigations in the Theory of Value and Prices [1892], New Haven, 1926. Hayek, Friedrich A., The Pure Theory of Capital, London, 1941. Heckscher, Eli F., Mercantilism [1st Swedish ed. 1931], London, 1935. Hicks, J.R., Value and Capital: An Inquiry into Some Fundamental Principles of Economic Theory, Oxford, 1939. Jevons, W.Stanley, Investigations in Currency and Finance [papers written 1862–82], ed. with introd. by H.S.Foxwell, London, 1884. Jevons, W.Stanley, The Theory of Political Economy [1871], 2nd ed., rev. and enlarged, London, 1879. Keynes, John Maynard, Essays in Biography, London, 1933. Keynes, John Maynard, The General Theory of Employment, Interest and Money, London, 1936. Keynes, John Maynard, A Tract on Monetary Reform, London, 1923. Monetary Reform (American ed. of above), New York, 1924. Keynes, John Maynard, A Treatise on Money (Vol. I, The Pure Theory of Money; Vol. II, The Applied Theory of Money), London, 1930. Malthus, T.R., Principles of Political Economy Considered with a View to Their Practical Application, London, 1820. Marget, Arthur W., The Theory of Prices, New York, 1938–42. Marshall, Alfred, Principles of Economics [1890], 4th ed.; London, 1898.