Simon Cook

8/13/2019 Simon Cook

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Simon Cook

Hitotsubashi University Conference on Marshall and Industrial Economics

Some Historical Background to Marshalls Economic Thought

Introduction

This paper is intended as a contribution to our understanding of the genesis ofMarshalls thinking on industrial economics. The main part of the paper explores the

development in Marshalls historical thinking that occurred between around 1872 and

1875. The starting-point here is a revision of my own previous judgment that Marshalls

long historical essay of around 1872 contained an unresolved tension between two

different philosophies of history (Hegelian and comparative). It will be argued below

that in his essay Marshall in fact attempted to synthesise these two philosophies, but that

such a synthesis was not fully worked through. It will further be suggested that only in

1875 did he establish the conceptual resources which enabled him to arrive at a full

synthesis. Such a synthesis, however, entailed a redefinition of Hegels philosophical

categories and resulted in a social philosophy (as opposed to a philosophy of history)

which might be described as neo-Hegelian. From the point of view of such a social

philosophy the progress of modern society, since the Middle Ages but continuing into

present times, arose from an interaction between moral character and social institutions.

Crucially, this neo-Hegelian social philosophy understood economic life as a key

determinant of both factors (this in direct contrast to Hegels philosophy of history).

Variations in industrial conditions could therefore be expected to give rise to variations in

both character and institutions, which would in turn impact upon industrial life and hence

lead to quite different possible trajectories of social progress. In 1875 Marshall framed

this model in terms of the comparison of two political nations (England and America).

But by moving away from Hegels emphasis upon political institutions (such as the law)

and towards a new concern with social and economic institutions (such as companies,


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markets, and trades-unions), Marshall had in effect undermined the theoretical grounds

for supposing the political nation to be the appropriate unit of variation. In the last part of

the paper, then, it will be suggested that the 1875 model of national variation prepared the

ground for that subsequent development in Marshalls economic thought in which

regional variations within a nation were identified and held up as a fitting object of

economic analysis.

Marshalls Historical Synthesis

Around 1872 Marshall composed a long essay on the history of civilization. In

the introduction to my transcription of this essay in the Marshall Studies Bulletin, and

then again in the chapter on Marshalls early historical notes in the Elgar Companion to

Alfred Marshall, I described this essay as conceptually problematic. Specifically, I

stated that the essay as a whole was characterized by an unresolved tension between

two conceptions of the nature of historical progress.1 It is now clear to me that such a

conclusion was premature, and that it stands in need of revision. Before explaining why

this is the case, however, it will prove useful to appreciate the grounds upon which the

earlier judgment was founded. The first part of Marshalls long essay draws heavily

upon Hegels notion of universal history and his narrative of the unbroken development

of subjective freedom from Chinese, through Indian, Israelite, Persian, and then Greek

and Roman civilizations. But the second part, which is concerned with European history

in the Christian era, was informed by a more recent nineteenth-century historical

scholarship founded upon the comparison of the institutions of different peoples who

were supposed to belong to the same race albeit at different stages of social development.

In this more recent scholarship, the subject of progress was no longer humanity as a

whole, but one specific race or nationality. Marshalls long essay thus brings together

what appear to be two incompatible philosophies of history, and at first sight it is not at

all obvious how, if at all, he sought to reconcile them. On further reflection, however, it

1Raffaelli, Dardi, Becattini 2006: 34-5, and also the introduction to Cook 2005.


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becomes clear not only that Marshall was well aware of the potential conflict between

these two historical frameworks, but that he was also fairly confident that he was able to

reconcile them within a single historical narrative. 2 This reconciliation was to be

achieved by way of his slightly earlier studies in psychology.

Marshalls essay on the history of civilization can be read as a rendering of his

earlier psychological work into historical terms.3 In two papers of the late 1860s,

Ferriers proposition one and ye machine, Marshall had outlined a dualistic model of

the human mind. According to this model some mental operations were but automatic

reflexes of the lower level of the brain, others involved a higher level but stillmechanical - cerebral deliberation, and some mental capacities were dependent upon a

non-mechanical self-consciousness.4 In Marshalls vision of historical progress each of

these three levels of the psychological model (i.e. lower mechanical, self-consciousness,

and higher mechanical) can be seen to have been associated with a particular stage in the

evolution of human civilization. Primitive societies are for Marshall closely analogous to

a beehive or an ant colony; which is to say that behaviour is here determined by inherited

instincts, habits, and their social equivalent, customs.5 From the point of view of ye

machine such behaviour can be explained naturalistically in terms of the lower level

mechanical circuits of the mind. The history of civilization that Marshall traces from

China and India to the appearance of Christianity, however, is a history of the emergence

of self-consciousness and, what is for Hegel and Marshall the same thing, moral freedom;

as such the study of this history requires the a prioriinsights of the Hegelian philosopher.

After these natural and spiritual stages of development, the third phase of human

evolution, which is coextensive with the Christian era, involves, in addition to that

emergence of the modern state which will be discussed below, also the initiation and ever

2That Marshall was aware of the potential tension between these two historical approaches is demonstrated

by one of his early historical notes in which he records Max Mllers complaint that Hegel treats religions

as languages used to be treated; that is, he classifies them according to age, or place, or a stage of

advancement. They ought to be classified genealogically. M 4/10: f. 24 (the passage is copied fromMller 1867: 21).3Raffaelli, Dardi, Becattini 2006: 35.4See Raffaelli 1994, and for commentary Raffaelli 1991 and 2003.5In Marshalls lecture notes from this period we find: Instinct: bees require no instruction no purethought; close analogy between constitution of a hive & constitution of ancient civilisation (Cook 2005: M

4/10, f.2).


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increasing use of the higher circuitry of the mind as individuals deliberate upon particular

courses of action. Such deliberation presupposes the moral freedom that rests upon self-

consciousness, but can in and of itself be analyzed mechanically according to the model

of the higher circuit of the brain described in ye machine. As a matter of fact, this

psychological foundation of the long historical essay was noted in both of my earlier

discussions of Marshalls long essay. But what was overlooked in these discussions, and

what we must therefore explore here, is its significance for Marshalls treatment of the

third, Christian and modern, stage of human history.

In his long essay, Marshall is quite clear that with the advent of Christianity self-conscious moral deliberation replaced habit and custom as the starting-point of human

action.6 But the appearance of self-conscious deliberation did not mean that those

mechanical habits which had been built up over countless generations of human history

were suddenly annihilated. Rather, and for a long period, such moral deliberation had, of

necessity, to constantly struggle against and overcome the many habitual mental reflexes

inherited from the pagan past. Hence, and as Marshall quotes from Hegel, in order that

the heart, the will, and the intelligence may become true, they must be thoroughly

educated; right must become custom, habit; practical activity must be elevated to rational

action & then at length does the will of individuals become a truly righteous one.7

From Marshalls perspective, then, the history of the Christian era to date has consisted in

a long and slow process of collective reeducation, whereby the new fact of self-conscious

reflection and moral deliberation prior to the performance of any action has gradually had

the effect of rewiring and reconnecting the lower level automatic mental circuitry of the

progressive races. A moments reflection will now establish that, by means of this

distinction between the mechanical and the moral (i.e. self-conscious) components of

character development, Marshall had in fact established the grounds for, at least the first

step in, a synthesis of Hegelian and comparative philosophies of history.

6With the advent of Christianity, Marshall writes in his long essay, a deliberate appeal to conscience was

recognised as the proper commencement of any course of action; custom was dethroned (Cook 2005: M4/12, f.1).7Cook 2005: M 4/11: f.13; and see Hegel 1991: 338 (emphasis in original - both Marshall and Hegel).


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In the first instance (but only in the first instance) such a synthesis involved a

division of intellectual labour, such that the narrative and method of Hegelian universal

history gave way to comparative scholarship in the study of the Christian era. In light of

the psychological model that stood behind his philosophy of history it was quite possible

for Marshall to accept, with Hegel, that the development of self-consciousness (Geist) in

history has been quite independent of racial or national divisions. But it was also quite

possible to maintain that different races are characterized by specific sets of mechanical

habits or customs, and that over the course of history any one such national character

might develop quite independently of, and therefore also quite differently to, other

national characters. Indeed, if the history of the Christian era has consisted in a gradualprocess of rewiring of lower level automatisms, then it is quite plausible to posit that the

course of such mechanical re-education has as a matter of historical fact followed

different paths among different peoples. And the implication of this is that universal

history must give way to particular or racial history at the point where mechanical

circuitry, as opposed to pure self-consciousness, comes into play as a determining factor

of social progress. Hence Marshalls long essay follows Hegels account of the

development of self-consciousness from ancient China to the Christian era, but then turns

to the methodology, as well as the findings of comparative historical scholarship, in order

to trace the different paths taken by the different nations of modern Europe. In a word,

the progress of the spirit is universal, but that of mechanical circuitry is local.

But the full reconciliation of the two historical approaches was not quite as

straightforward as this. For, as opposed to the two earlier periods of human history, the

history of the Christian era in Marshalls philosophy of history is complicated, involving

as it does, not only the struggle between self-conscious moral deliberations with inherited

patterns of behaviour, but also the development of institutional freedom. This latter,

Hegel called objective freedom and treated as a further development of self-

consciousness. In Hegels philosophy of history the development of self-consciousness

reaches as it were a mid-point with the advent of the Christian religion and the birth of a

fully realized moral individual, but then continues until the state itself is remade

according to the inner logic of this newly realized moral autonomy. Put in the Hegelian


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terms which Marshall adopted - although, as we shall see, eventually partially redefined -

the history of civilization witnesses, first of all, the flowering of subjective freedom

through the coming into being of the morally autonomous individual, and then the

emergence of objective freedom by way of the rational organization of the institutions

of the modern state. The problem faced by Marshall, then, is that a full synthesis of the

two different philosophies of history in the modern period must entail, not so much a

replacement of the Hegelian by the comparative, but rather a fusion of the two. The

modern history of the Christian era, as Marshall is committed to conceiving it, involves

on the one hand the development of mechanical circuitry in the individual and the race,

and on the other the continued development of self-consciousness by way of therealization of objective freedom, which is to say, by way of the development of the

institutions of the rational modern state. The question that presents itself, then, is

whether Marshall considered that these two ontologically distinct historical processes

were independent of one another, or whether his vision of modern history involved an

interaction between spiritual and mechanical factors.

This question is complicated by the fact that in his long essay Marshall quite

deliberately departed from Hegels account of the development of objective freedom in

the modern world. For the young Marshall was far too full of republican and democratic

enthusiasm to accept Hegels ideal of constitutional monarchy as the culmination of

history. This is not to say, however, that Marshall simply abandoned Hegels notion of

modern historical progress as the unfolding of objective freedom. For it is clear that in

his accounts in the long essay of the Italian trading republics, the French towns of the

Middle Ages, and the English Magna Carta, he was providing an alternative history of

modern objective freedom. What such a history or rather such a series of histories

illustrates is that, for Marshall, objective freedom had been developed in at least three

different ways in the latter part of the Middle Ages. What Marshall does not do in the

long essay, however, is explore the ways in which these separate trajectories of objective

freedom might have been influenced by, or in turn influenced, the distinctive mechanical

development of different national characters. Hence, although it should now be clear that

this long essay was not in fact characterized by an unresolved tension between competing


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historical frameworks, it does seem correct to surmise that at the time of its composition

Marshall had not yet achieved clarity as to the nature of the interaction, or possible range

of interactions, between national character on the one hand, and modern political and

legal institutions on the other.

On this last point, it is quite striking to note the utter absence of such

considerations from Marshalls 1873 talk on the Future of the Working Classes, which

must have been composed in the immediate wake of that fairly intensive period of

historical study which gave rise to the long essay on the history of civilization. Even a

cursory glance at the long historical essay and the 1873 talk reveals the extent to whichthe latter was indebted to the former. But what Marshall took from his historical studies

into his talk was a fairly simple Hegelian (or perhaps it would be better, even at this point,

to say neo-Hegelian) philosophy of history. In the 1873 talk Marshall contrasts an

ancient world in which the good life of the few was founded upon the slavery of the

many, with a modern world in which it is widely believed that a proletarian class is

necessary. He then proceeds to argue that two factors differentiate the modern from the

ancient world. Firstly, the teachings of Jesus Christ have replaced those of Aristotle,

which is to say that the ancient pagan belief that nature decrees that some men are born to

be slaves has been replaced by a democratic belief in the equality of all men, both before

God and before the law. Secondly, he insists that by means of education it is now

possible to raise the mental level of the working classes; an improvement which in turn

will increase productivity and hence lead to higher real wages. Behind both of these

arguments stands a simple version of the psychological-historical framework outlined

above. That is to say, true moral freedom did not exist in the ancient world; but it exists

in the modern world, and if by means of education we can both rewire our surviving

pagan thought patterns (i.e. abandon Aristotle for the democratic message of Christ) and

in general improve the mechanical circuitry of the mass of the population, then

mechanical actuality will indeed have caught up with spiritual potentiality. This fairly

straightforward neo-Hegelian vision of progress was an early fruit of Marshalls

historical studies. Yet its very simplicity was undermined by a more complicated notion

of modern history as driven by an interaction of mechanical and spiritual factors, the


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contours of which there seems good reason to suppose that he had in fact already at this

date begun to trace.

Some of these contours can be identified in a number of Marshalls early

historical notes, the date of composition of which would seem to belong to the same

period as that of the long essay itself. In these notes we see how Marshall was content to

accept the general consensus of later nineteenth-century historical scholarship that it was

in the transition from feudalism to modern commercial society that national divergences

first appeared and developed, both on the level of objective freedom and on that of

national character. In both France and England the towns were understood to havebecome islands of free commercial activity surrounded by a sea of feudalism. But

according to the standard explanation of this time, the most immediate source of which

for Marshall was the writings of F. Guizot, French and English histories now diverged as

a result of the different set of alliances formed between the crown, the feudal lords, and

the emerging third estate. Thus, as Marshall copied out from J. H. Bridges France under

Richelieu and Colbert (1866):

In England the monarchical character of feudalism was exceptionally

strong; there too there was a quasi feudal element, that of the Saxon gentry,

who sharing the oppression of their countrymen in the towns shared too

their resistance & were ultimately joined by the great Barons. Hence the

peculiar character of the English constitution: aristocratic rather than

monarchic, provincial rather than metropolitan, localised not centralised.8

In France, by contrast, explained Bridges, the burghers of the towns had formed

an alliance with the crown against the feudal lords. Hence, where England had witnessed

Magna Carta, a balanced national constitution in which parliament exerted a check upon

the crown, and local government reflecting the power of the lords and local gentry,

8M 4/1: f. 287 and f. 289. The passage is a loose quotation from Bridges 1866: 13-4. It is taken from

Marshalls loose leaved book of the late 1860s (and therefore illustrates his historical reading andinterests in a period prior to his serious and systematic study of history - at which point Marshall would

again turn to Bridges book, as is illustrated by many of his historical notes).


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France had followed a road that led to royal absolutism and political centralization. But

in a country and a century that had deeply absorbed the lessons of Burkes Reflections on

the Revolution in France, such an explanation in terms of social classes and political

constitution could not but take on board lessons concerning the habits and customs of the

people.

It was de Tocqueville who seems to have provided for Marshall the key to

specifying a relationship between the political and legal institutions associated with

objective freedom on the one hand, and the mechanics of national character on the other.

In his Ancien Rgime (1856), de Tocqueville drew upon the conclusions of hisDemocracy in America in order to explain the apparent continuity of French history

before and after the revolution. For de Tocqueville, the long period of pre-revolutionary

absolutism and centralization had molded the feelings, habits, hearts and minds of the

French people in a manner that no mere political revolution could alter. An entrenched

national character, which was marked by individual conformity and lack of any sense of

public duty, had produced a society marked by uniformity and an inherent tendency

towards despotic rule and centralized administration. For de Tocqueville it was thus the

Physiocrats, who combined a call for economic liberty with a celebration of political

absolutism, rather than thephilosophes with their Anglophone political ideas, who were

the true eighteenth-century spokesmen of the coming revolution. As demonstrated by his

historical notes (and also his notes on the Physiocrats), Marshall read de Tocquevilles

Ancien Rgimevery carefully in the early 1870s. It would seem very likely, then, that de

Tocqueville provided him with a means of relating objective freedom and national

character in just that manner required by his philosophy of history. According to de

Tocqueville, in England the decentralized constitution had fostered habits of political

liberty and self-reliance that had become enduring features of the national character. In

France, by contrast, a tradition of royal absolutism and political centralization had not

only instilled habits and social instincts that were alien to political life, but had given rise

to the despotic ideology of the Physiocrats. In de Tocqueville, then, Marshall must have

found an account of precisely that kind of interaction of institution and character that

seemed to be called for by the psychological basis of his philosophy of modern history.


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It would not be long, however, before Marshalls thinking had developed to such an

extent that he had departed significantly in his conception of the shape of modern history,

not only from de Tocqueville, but also from Hegel.

In the summer of 1875 Marshall traveled to America. According to the

explanation offered in the lecture notes that he composed on his return, he had crossed

the Atlantic because he wanted to see the history of the future in America.9 In these

lecture notes, as also in the paper on American Industry that he read to the Cambridge

Moral Science Club in November of the same year, Marshall argued that many of the

differences in national character and social institutions of England and America could beascribed to differences in the industrial conditions of the two nations. At the same time,

he continued, and in consequence in part of the same set of causes, Political Economy

has to some extent changed its method. Political economists had once confined

themselves to deducing conclusions from a few simple premises. Now, however, they

were getting to regard human nature as more complex and the present condition of

human life as more variable, than they once had thought them. Consequently, and

because the economist could not utilize the experimental method of the natural sciences,

it was necessary to employ the Comparative Method:

By the Comparative Method, I mean the method of comparing

corresponding phenomena at different times and places, and under the

operation of different disturbing causes Thus economists have been led

to investigate history; the history of the past, and the more accessible

history of the present...10

In both his lecture notes and the paper on American industry Marshalls position

was that the different industrial conditions of England and America served to educate

different components of the mind. In England, a relatively settled way of life fostered

mutual trust and sympathy among workers, the result being that England was the home of

9Whitaker 1975: II, 345.10Whitaker 1975: II, 354-5.


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many well organized trades unions and a flourishing cooperative movement, both of

which provided labourers with a republican education in self-government and mutual

assistance. In America the extreme mobility of labour entailed that workers did not

develop sympathetic relationships with one another, and did not organize themselves into

trades unions or cooperative ventures. What American industrial conditions did provide,

however, was an education in self-reliance, independence, and trust in ones own private

judgment. American and English workers were thus recipients of quite different kinds of

industrial education. English industrial conditions developed the mechanical faculty of

sympathy, but by taking responsibility away from the individual and placing it in the

hands of a collective, failed to provide a complete education in spiritual freedom andhigher level mechanical deliberation. In America, by contrast, mechanical routines were

constantly interrupted as the individual changed trade while mechanical bonds of

sympathy were broken as individuals changed geographical location, but the moral

autonomy of the individual was fostered and a high level of individual mental

deliberation had become a conventional feature of ordinary life.

One explicit point of Marshalls 1875 paper was to correct de Tocquevilles

conclusions concerning the likely political future of America. Echoing J. S. Mills 1840

review of Democracy in America, Marshall noted how de Tocqueville had warned that

democracy might entail over-centralisation, social despotism, and even loss of energy.

With regard to America, Marshall argued that such a warning had been exaggerated. De

Tocqueville, he explained, had not regarded it as within his province to examine

minutely the influence which the daily occupations of men exert on their character, and

so had had spent little of his time, where I spent most of mine; in American

workshops.11 What Marshall had discovered in such places was that the restless and

migratory lives of American workers did not only educate them to rely upon their own

individual judgment in economic matters, but furthermore trained them to be good

citizens of the republic. An American, Marshall asserted, will use his own individual

judgment, more consciously and deliberately, more freely and intrepidly, with regard to

11Whitaker 1975: II, 357.


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Ethics than an Englishman uses his.12

And in a society such as America, where all

receive nearly the same school education, where the incomparably more important

education which is derived from the business of life, however various in form it be, yet is

for every one nearly equally thorough, nearly equally effective in developing the faculties

of men, there cannot but be true democracy.13

Marshall had corrected de Tocquevilles

conclusions by way of introducing economic considerations into the Frenchmans

political analysis. Such a conceptual move also contributed to a significant departure

from Hegels philosophy of history.

Marshalls 1875 report to the Cambridge Moral Science Club can be read as anattempt to articulate a neo-Hegelian social philosophy appropriate for the present age of

historical development. Positioning himself as one who was working his way towards

that ethical creed which is according to the Doctrine of Evolution,14

Marshall in this

paper argued that there are two principal factors of ethical growth. On the one hand, he

explained, there is that education of a firm will which occurs when every action is

submitted by the individual to the judgment of reason. This factor, which Marshall saw

to be dominant in America, he declared to be the precondition of what I take Hegel to

mean by subjective freedom. Such a usage accorded with both Marshalls earlier

notes on Hegels Philosophy of History, and with his account of the earlier stages of

history in his long essay. Nevertheless, the insistence that the preconditions of subjective

freedom and hence, one would surmise subjective freedom itself - can continue to

develop in the modern age appears to strikes a new note in his thinking, and also a

departure from Hegel. On the other hand there is that peaceful molding of character into

harmony with the conditions by which it is surrounded which occurs as mechanical

habits and customs are reeducated through participation in modern social organizations.

This second factor, which Marshall held to be dominant in England, he declared to be the

precondition of what I take Hegel to mean by objective freedom.15

This latter

interpretation of Hegels meaning was not readily squared with the definition of the law

12Whitaker 1975: II, 358.13Whitaker 1975: II, 373.14Whitaker 1975: II, 377.15Whitaker 1975: II, 375-6.


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of the modern state as the objectivity of spirit set down in his notes on Hegels

Philosophy of History (Law is the objectivity of Spirit, volition in its true form. Only

that will which obeys law is free; for it obeys itself it is independent & so free).16

What Marshall now meant by objective freedom was clarified when, in his talk,

he went on to explain that from the harmonious molding of character a true and

profound spiritual insight might develop. Learning from experience, Marshall suggested,

the English trades unions were beginning to grasp the moral force of Kants categorical

imperative:

unions generally are showing signs of beginning to ask themselves

whether any republic can be justified in adopting regulations, the general

adoption by the surrounding republics would be injurious to all. In asking

themselves this question they are giving themselves a great education.

From this particular education the American working man is almost

debarred.17

And by the same token, because groups of men who have got to know and trust

one another are rare in America, and because Americans are educated by their industrial

conditions to believe in their own independence and self-sufficiency, the present phase

of American industry is not well adapted for the slow organic development of

cooperation.18

Such statements illustrate the way in which Marshall had now

transformed Hegels notion of objective freedom. For the objective freedom which

English industrial conditions provide the precondition of is not that freedom which Hegel

found in the self-conscious relationship between the individual and the law of the modern

state, but rather a freedom that arises out of spiritual insight into the relationship between

the individual and the social collective.

16Cook 2005: M 4/10, f.4.17Whitaker 1975: II, 366.18Whitaker 1975: II, 367-9.


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In addition to his redefinition of objective freedom, Marshall in his talk was in

effect declaring that economic conditions could either foster or hinder the further

development of two different dimensions of self-consciousness. The very idea that moral

freedom has economic preconditions sits uneasily with Hegels notion that Spirit is

essentially the result of its own activity.19

Yet Marshalls revisionist rendering of

objective freedom was in many ways but a formal statement of the relationship between

political constitution and mechanical character already worked out in his earlier

comparison of the post-Feudal histories of England and France. Indeed, the basic

comparative insight set forth in the 1875 contrast of nineteenth-century England and

America was already contained in this earlier comparison of modern French and Englishhistories. This insight was that modern societies contain within them the seeds of two

different kinds of development, the one individualistic, the other collectivist, and that at

any one moment it is possible that a particular society is dominated by one such tendency

to the exclusion of the other. Yet there was also a crucial distinction between the two sets

of comparisons. In the earlier comparison Marshall had explored how a modern nation

state as a whole might follow a path to either liberty and decentralization or absolutism

and centralization. The starting-point of the comparison of present-day England and

America, however, was that broadly speaking both societies constituted liberal

democracies. As such, one might expect that both nations were already characterized by

both subjective and objective freedoms. Nor did Marshall deny this. What he did claim,

however, is that in both liberal democracies a further development of one or the other

(and ultimately of both) types of freedom is to be expected, and that such development

will be intimately connected to economic conditions. Such a vision of the histories of the

present and the future was clearly a significant departure from anything found in the

pages of Hegels Philosophy of History.

As is well known, Hegel proclaimed that the owl of Minerva flies only at dusk;

which is to say that the philosophical meaning of history can only be grasped once

history has come to an end. That is not to say, of course, that the future will be devoid of

some form of history. Indeed, Marshalls vision of Americas pioneering role in the

19Quoted by Marshall in his early notes on Hegels Philosophy of History(Cook 2005: M 4/10: f.47).


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history of the future was no doubt in part inspired by Hegels assertion that America is

the land of the future, where, in the ages that lie before us, the burden of the Worlds

History shall reveal itself.20 But from Hegels point of view, whatever the new burden

of the worlds history might be, the one thing that was certain was that it would differ in

kind from the history of the civilizations of Asia and Europe that he had outlined in his

Philosophy of History. Hence it might be suspected that Marshall was self-consciously

attempting to derive from Hegels philosophy of the past a new framework by means of

which to conceive of the history of the future. But in fact Marshall had already in his

long essay departed from Hegels account of modern history (beginning with his

interpretation of the significance of the Germanic invasions, and then morefundamentally in his reading of the political developments of the middle ages). Thus it

would seem to be more accurate to describe Marshall as positing that the history of the

future would be very much a continuation and intensification of that modern history that

had commenced in the medieval towns. Such a form of modern history could be said to

have begun only once subjective freedom and at least some rudimentary manifestations

of objective freedom were in existence. What Marshall now made clear was that the

subsequent paths along which modern history had and would continue to develop were

very much dependent upon economic conditions, and had involved, and would for some

while to come continue to involve, the further development of either subjective or

objective freedom, or possibly of both together.

To my knowledge Marshall did not again, after his 1875 talk on America, employ

the terms subjective and objective freedom. One might therefore argue as indeed

Peter Groenewegen has done that the influence of Hegel on Marshalls thought

declined after this date.21 An alternative reading, however, might claim that after 1875

Marshall left Hegel behind as he continued to develop his own neo-Hegelian social

philosophy, and subsequently proceeded to translate his philosophical thought into

scientific terms. At the heart of his developing social philosophy, it could be argued, was

20Hegel 1991: 86.21See Groenewegen 1990. Groenewegens method is to systematically trace the explicit references toHegel in Marshalls writings. Such an approach is liable to let slip through the net precisely that kind of

social philosophy which in the main text has been described as neo-Hegelian.


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the conviction that social progress was the product of an interaction between subjective

and objective freedom (as redefined in the 1875 paper). Translated into the language of

economic science, such an interaction occurred between the market and industrial

organizations. Markets, particularly the labour market (as Marshall had argued in his

1875 paper), were responsible for fostering what in the Principles of Economics were

declared to be the fundamental characteristics of modern industrial life: independence,

deliberation, and a habit of choosing ones own course for oneself.22

Industrial

organizations, by contrast, not only fostered the peaceful molding of character but, as

they became ever more complicated, served to educate the characters of all who worked

within them. But it would take Marshall many more years of intellectual labour beforesuch a social philosophy reached anything like a final form. Ultimately, I would suggest,

Marshall came to believe that the interaction of market and organization, which was

increasingly the hallmark of the modern historical epoch, might give rise to an historical

outcome quite other than that envisaged by Hegel. Consider, for example, the passage in

the account of the growth of free industry and enterprise in the Principles, in which

Marshall explains that

gradually we may attain to an order of social life, in which the common

good overrules individual caprice, even more than it did in the early ages

before the sway of individualism had begun. But unselfishness then will

be the offspring of deliberate will; and though aided by instinct, individual

freedom will then develop itself into collective freedom:- a happy contrast

to the old order of life, in which individual slavery to custom caused

collective slavery and stagnation, broken only by the caprice of despotism

or the caprice of revolution.23

Here, in this passage, we would seem to catch a clear glimpse of how Marshalls

mature philosophy of history moved beyond that which he had found in Hegel. The key

term is collective freedom, which has now replaced Hegels objective freedom as the

22Marshall 1961: 5.23Marshall 1961: I, 751-2.


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telos of the historical process. Such a replacement was already anticipated in the 1875

definition of the preconditions of objective freedom. But collective freedom is not

merely another name for what Hegel had meant by objective freedom. Marshall is in

effect positing that the end of history is not marked by the construction of a rational state

by moral individuals, but rather by the subsequent development of the self-interested

individual into the altruistic or publicly minded individual. Such a vision of collective

freedom, it is worth noting, is essentially the product of a dialectical contrast of pre-

modern social life, in which the individual does not yet exist, with a recent age of

supposedly untrammeled and selfish individualism. As such, Marshalls mature vision of

the philosophy of history appears in certain key ways more akin to that of Marx than tothat of Hegel. But such observations and comments on the shape of Marshalls mature

social philosophy must remain here on the level of suggestions and speculations. Given

the constraints of the present paper it is simply not possible to explore such issues further

(an exploration which would entail, just to begin with, an inquiry into how Marshall came

to develop his theory of industrial organization). What I want to do in the last part of this

paper, then, is merely to reflect upon the possible relationship between the development

of Marshalls historical thinking between around 1872 and 1875 and certain

developments in his economic thinking which seem to have occurred after 1875.

Economic Science

By turning to Hegel, Marshall in his historical work was in an important way

engaging with the criticism of the deductive tradition of political economy that Cliffe

Leslie had put forward in his Fortnightly Review essay of 1870, The Political Economy

of Adam Smith.24

For Leslie, Smiths method of deduction was grounded upon an

ancient conception of nature as an unchanging order which, he argued, was now

discredited. For this reason, Leslie argued, the entire tradition of deductive political

economy from Smith through to J. S. Mill must be rejected. By 1872 Marshall had

24Leslie 1870. For further discussion see the introduction to Cook 2005.


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clearly come to accept that political economy must reject a conception of nature which,

he fully agreed, was both ancient and outdated (and also, it might be added, both pagan

and immoral).25 But provided that deductive reasoning rested upon a modern, moral, and

historicist conception of character, there was no reason that it could not form a useful,

even essential, component of the work of the political economist. Clearly such

reasonings could not lay claim to any universal purchase. Yet in 1872 it seems that for

Marshall it still remained an open question to just what extent his new historicism

entailed the curtailment of the range of deductive economics. As we have seen, while the

germs of a sophisticated historicism were clearly laid already by this date, Marshalls

1873 talk on the Future of the Working Classes (and we might add, also his lectures towomen students earlier in the same year) incorporated a much simpler philosophy of

history. And this much simpler philosophy of history, although pointing to the need for a

revision of certain current deductive orthodoxies, certainly did not entail that deductive

theory had no purchase upon economic realities.

The earliest economic lesson that Marshall seems to have drawn from his

historical studies seems to have followed from his acceptance of the idea that the term

natural belonged to a pre-Christian, which is to say, pre-modern, mode of thought. The

first part of his long historical essay is essentially an account of the emergence and

ultimately the separation of a moral realm out of the natural order. As has already been

noted, Marshall was here quite explicit that trade, properly speaking, could not exist in

those earlier historical epochs in which civilizations were still natural organisations and

in which human beings had not yet developed a true moral personality. A science of

economics presupposed self-determination among individuals (Hegels subjective

freedom), and also the institutional safeguards of such self-determination, such as

property rights and equality before the law (Hegels objective freedom). In concrete

terms this meant that both the economy itself, and the science which studied it, did not

predate the European Middle Ages. Yet in practical terms the whole modern period since

the Middle Ages lay, in theory, open to exploration and explanation by means of the

techniques of deductive political economy. The crucial point to grasp here is that, while

25For a clear - albeit late - statement to this effect see Marshall 1965: I, 756-8.


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Marshall did indeed at this point already insist upon the variability of human nature in the

modern period, he essentially posits such variability as following a single path - a path

from lack of culture to possession of culture by way of the education of mechanical

circuitry. Hence, from the Middle Ages to the present day the tools of deductive

reasoning will prove more or less precise according to the extent to which the mental

mechanisms of the population as a whole are less or more educated. In actual fact,

however, Marshall was convinced that from the Middle Ages until the mid-nineteenth-

century the mass of the population had remained uneducated. It was only in his own day

that the promise of universal education was holding out the prospect of a significant

change in the mental capacities of the labouring classes. In other words, the olderpolitical economy provided fairly accurate theoretical tools for most of the post-Medieval

period, and it was only with regard to the present day that political economists were

compelled to refine their techniques and their methods. Such a historicism conceded to

Cliffe Leslie the need to discard Smiths ancient language of natural values, and yet

appeared to take much of the potential sting out of Leslies attack upon deductive

political economy.

Thus Marshalls initial simple historicism lent itself to the view that, in a revised

form, traditional economic doctrines concerning long period accumulation could still be

useful. In their traditional form they were no longer acceptable because the character of

the working classes was in a period of development (hence, for example, Malthusian

fears must give way to a new optimism concerning the possible positive effect of rising

wage-rates upon labour efficiency). Nevertheless, a revised form of traditional doctrines

might still be applicable to the present, the relatively recent past, and also the not too

distant future. Of course, by 1873 Marshall was not satisfied with either Mills

formulation of the orthodox theory of wages or, it would seem, with his own attempted

reformulation of this theory in on wages. But from the perspective of his early simple

reading of the philosophy of history it should have been possible, at least in principle, to

improve upon the essay on wages. In a word, this simple form of historicism was

eminently compatible with an intention to frame accounts of normal wages and normal

profits (rather than natural wages and natural profits) by means of a reformulation of


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the old Ricardian doctrines.26

This was in fact precisely what the Marshalls attempted to

do in the second book of the 1879Economics of Industry.

But as Giacomo Becattini and Marco Dardi have recently pointed out, in the third

book of theEconomics of Industrythe Marshalls paid much attention to local variations

in prices, profits, and wages. Indeed, they even suggested that within a single political

nation there was not always free migration of capital and labour.27

Here we have a

narrowing of the scope of deductive political economy which suggests a quite different

approach than that set out in the second book. In the secondary literature the origins of

this movement away from formal theory has been traced to the mid-1870s. Thus in JohnWhitakers opinion the theoretical chapters of Marshalls projected volume on Foreign

Trade constitute the high water mark of Marshalls achievements as a rigorous formal

theorist. But despite demonstrating in these chapters the powers and elegance of his

formal analysis, after 1875 Marshall increasingly repudiated such an approach as the

proper path to useful economic knowledge, seeking instead to remain in close touch with

economic reality and calling on formal arguments only to clarify restricted points.28

Marco Dardi supplements Whitakers position by arguing that Marshalls growing doubts

concerning the usefulness of all encompassing formal modes were fueled by Cliffe

Leslies analysis of the local forces that prevented the free movement of labour and

capital. Thus, Dardi suggests, from the early and uncompleted study of international

trade which Marshall commenced around 1873 or 1874, Marshall arrived at the belief

that the concept of an economic nation could also be applied to industrial sectors and

geographic regions within a single nation.29

It should immediately be clear that, in some

way, the developments noted by Whitaker and Dardi complement that account of

Marshalls move to a more sophisticated philosophy of history as outlined above. But the

nature of the relationship needs to be clarified. What I want to suggest is that, in relation

26The connection between Marshalls substitution of normal value for natural value and his

determination to free the language of economic science from eighteenth century metaphysical notions as toNature is clearly spelled out in a footnote to Marshalls 1885 Inaugural lecture (Pigou 1925: 157, note).27See the discussion by Becattini and Dardi in Raffaelli, Dardi, and Becattini 2006: 56, and also Becattinis

essay on Economic Nations in the same volume (pp. 203-9). In the early 1870s Marshall placed in his

collection of bound periodical articles two papers by Cliffe Leslie dealing with these themes.28See Raffaelli, Dardi, Becattini 2006: 42-3.29See the summary of Dardi 1984 in Raffaelli 2003: 40-3.


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to the social model set out in the 1875 paper on America, the developments noted by

Whitaker and, especially, Dardi constitute, as it were, the next step in Marshalls

development of a social philosophy.

The development that occurred in Marshalls social thought in and after 1875 can

usefully be framed in terms of his approach to the significance of custom in modern life.

In his Principles of Political Economy, J. S. Mill had argued that while custom had

regulated social and economic relations throughout most of human history, nevertheless it

had largely (but by no means entirely) been replaced by competition as the regulating

principle of modern industrial life.30

By way of his historical studies Marshall had by1875 moved far beyond Mills straightforward binary contrast of old custom and new

competition. In his long essay he had indeed posited a fundamental turning point in

human history as occurring when, at the close of the ancient world, subjective freedom

(or self-consciousness) had replaced custom as the basic ground of human action. Yet

such a contrast had arisen nearly two millennia ago, and could hardly be considered as

the defining hallmark of a modern industrial society. Nor did Marshall ever argue that

moral freedom had ever replaced custom tout court; rather he assumed from the start that

with the advent of moral freedom a whole new set of mental habits would gradually come

into play as human societies underwent a slow process of re-education. The crucial

development that occurred in his thinking in 1875, however, was that he now found a

way of specifying how different nations might follow quite different paths of re-

education - paths that were themselves related to the different paths of institutional

development taken by the respective nation. Indeed, and as was the case with England

and America, Marshall was now able to posit that two nations might enjoy a basic liberty

in both the economic and political spheres, and yet nevertheless be characterized by fairly

divergent patterns of political and legal institutions on the one hand, and local customs

and mental habits on the other. So, from an initial contrast of England and France as

illustrating different developments of objective freedom and national character, Marshall

30Mill 1865: 147-8. Mill argued that, while in nineteenth-century Britain competition by no means

exercised an unlimited sway, political economists nevertheless had a tendency to neglect custom andassume unlimited competition, because only by so doing was it possible to deduce hypothetical laws with

regard to rents, profits, wages, and prices.


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had found in the contrast between England and America that two nations which were

both characterized by subjective and objective freedom might witness significant local

variation in both institutions and character. From here it was but a small step to positing

that within any one political nation different regions might experience quite varied paths

of development.

Recognition of the possibility and significance of regional variation thus entailed

a somewhat modified application of the Comparative Method than that found in the 1875

paper on American industry. Rather than contrasting the economic conditions of one

kind of subjective freedom with one kind of objective freedom in two different nationstates, regional analysis involved paying close attention to variations in ethical

characteristics, in habits, and in customs in any one region within the modern economic

world. The transition towards regional analysis that Dardi identifies can thus be related

to an increasing awareness on Marshalls part of the fact that, while ultimately grounded

upon subjective and objective freedom defined in terms of moral autonomy and political

liberty, modern economic life was nevertheless always and everywhere also the product

of particular habits, and customs, and that variations among these latter preclude the

realistic application of a formal general equilibrium model to any one nation as a whole.

In a word, after 1875 Marshall increasingly moved from J. S. Mills basic contrast

between ancient custom with modern competition to a neo-Hegelian vision of modern

economic life as comprising a variety of combinations of freedom, traditional customs,

and modern industrial habits.

Bibliography

Becattini, G., Raffaelli, T., Dardi, M., The Elgar Companion to Alfred Marshall(Edward

Elgar, 2006)


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Bridges, J. H., France under Richelieu and Colbert(Edinburgh: Edmonston & Douglas,

1866)

Cook, S. J., Alfred Marshalls Essay on the History of Civilization,Marshall Studies

Bulletin, 9, 2005 (http://www.dse.unifi.it/marshall/welcome.htm)

Groenewegen, P. D., Marshall and Hegel,Economie Appliquee, 1990, 43: 63 - 84

Hegel, G. W. F., The Philosophy of History(translated by J. Sibree; Prometheus Books,

1991)

Leslie, T. E. C., The Political Economy of Adam Smith, Fortnightly Review, 8,

November 1870, 549-563

Pigou, A. C. (ed.),Memorials of Alfred Marshall(London, 1925)

Marshall, A., Principles of Economics (2 vols. 9th (Variorum) edition. London, 1961)

Mill, J. S., Principles of Political Economy(Peoples edition, London, 1865)

Mller, F. M., Chips from a German Workshop(London: Longmans, Green, 1867)

Raffaelli, T., 'The Analysis of the Human Mind in the Early Marshallian Manuscripts',

Quaderni di Storia dell'Economica Politica, 1991, 9: 30-58

Raffaelli, T., The early philosophical writings of Alfred Marshall, Research in the

History of Economic Thought and Methodology,Archival Supplement, 1994, 4: 57 158

Raffaelli, T.,Marshalls Evolutionary Economics, (Routledge, 2003)

Whitaker, J., (ed.), The Early Writings Economic Writings of Alfred Marshall (2 vols.


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London, 1975)

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