Milton Friedman Society
Two Worlds, One Revolution: 150 years of Marginalism
By Renato Lembe Agurto
Part 1: Jevons’ Mechanics
In 1871, a new approach to economics – especially in what concerns exchange and distribution – was eloquently presented by two economists: the Austrian Carl Menger and the British Stanley Jevons. With the additional support of Leon Walras in 1874, the so-called Marginalist Revolution emerged: the marginalists refuted core principles of Classical (and Marxist) economics and replaced its general approach with the modern marginal analysis.
On my part, it would be useless, and surely tedious, to explore the theoretical foundations of the Marginalist Revolution as such: very competent economists have examined it remarkably – Emir Kauder (1965) and Joseph Schumpeter (1954), to name but two.
What is seldomly noticed about it is that the joint, though independent, effort in refuting Classical principles resulted from two astonishingly different ways of perceiving the world. As this is not the proper place to evaluate these competing worldviews, we shall merely describe some relevant features and suggest practical implications. Let us begin with Jevons’ cosmovision, currently predominant in economic theory and policy.
In the subchapter “Capability of Exact Measurement”, Jevons (1888a) harshly criticizes those who deny the possibility of psychological notions, like pleasure and pain, to be measured – as if this unjustifiable pessimism would retard scientific development. From this excerpt, it is evident that, for Jevons, scientific knowledge on economics could advance only if its phenomena were mathematically assessed, just like the physical universe – which means that sciences in general deal primarily with quantities.
This view on science dates to the Cartesian distinction between res extensa [quantitative aspects, like length and weight] and res cogitans [unquantifiable aspects, like color and shape], inherited by Isaac Newton (Smith, 1984). According to it, quantities only are objective, in the sense that they really exist in external beings. Qualities, on the other hand, are subjective, creations of the human mind. Existing beings – such as water, gold and other economic goods – are quantities only, and thus are governed by mathematical laws. Unquantifiable aspects are not objective, and, as such, are out of the scientific scope: following quantitative methods’ language, they are unobservable variables (Gertler et al., 2016), as if they could not be perceived objectively in themselves.
It is true that Jevons recognized the validity of what he calls “logical sciences”, not conducted in mathematical terms. However, as he asserted somewhere else, logic is the science of human reasoning, dealing with the operations of the mind (Jevons, 1888b). External phenomena, subjected as they are to quantity, must be inquired by a mathematical science – otherwise it is not genuinely scientific. While logical sciences determine “merely whether a thing be or be not” (Jevons, 1888a, p. 7), observed facts may be and be not according to probabilistic relations, which are obviously quantifiable as Jevons asserted in the forementioned subchapter.
Although the economic science is all about measurement, the latter is not its ultimate goal. As Jevons (1888a) states, absolute precision, though desirable, is unattainable for any mathematical science, even for Astronomy. This limitation, however, does not undermine their validity and importance. Following his examples on mechanics and electricity, measurement approximations are tolerable to the extent that they provide scientists with control and technical mastery over studied beings. For Jevons (1888a, p. 23), “the object of Economics is to maximize happiness”, and not to understand or perfectly measure its phenomena. The technical prominence becomes clearer when he justifies, in the subchapter “Definition of Trading Body”, the use of infinitesimal calculus: despite recognizing that concrete individuals do not change their consumption by unassignable portions, infinitesimal adjustment is “practically true” in the case of a nations’ aggregate consumption and so must be employed (Jevons, 1888a, p. 89). Favoring aggregate analysis, Jevons is not interested in understanding the concrete means by which utility manifests itself, or how it concretely impacts price dynamics: ultimately, his science is intended to achieve a practical goal, “supplying the ordinary wants of man at the least cost of labor” (Jevons, 1888a, p. 27). The preference for aggregation, besides, indicates that social happiness, rather than individual, was the target.
Since economic phenomena result from human decisions, one might inquire how Jevons expects to fulfill his final objective. Unfortunately, he did not state it. Still, from his views on human nature described in the subchapter “Relation of Economics to Ethics” (Jevons, 1888a), it is possible to find a clue on his opinion about it.
On one hand, Jevons believes men to be substantially equivalent to any other animal: humans only are able to achieve “mental and moral feelings”, which are pleasures of a higher rank, but still, just like cats and sheep, they pursue pleasure, employing intelligence and reason to achieve it. Following Bentham’s Utilitarianism, Jevons believes rationality to be subordinated to pleasure and pain, so the latter should guide the former.
Moreover, Jevons asserts that pleasures of a lower rank (sensorial satisfaction) must be match to the extent that they do not undermine pleasures of a higher rank (moral feelings). In social terms, “each laborer is supposed to devote his energy to the accumulation of wealth” (Jevons, 1888a, p. 27), satisfying sensorial needs up to the point where “the safety of a nation” and “the welfare of great populations” are preserved. Statesmen and soldiers form a specific set of individuals responsible for assuring the latter, limiting the action of commoners.
Laborers are supposed to accumulate wealth… but what if they choose to devote their energy to something else? Or even, what if commoners’ habits and decisions represent threats to social welfare? In some passages, Jevons seems to credit self-love with the ability to induce individuals to behave in a socially useful way, like in Mandeville’s Fable of the Bees. However, as soon as Lord Keynes convinces statesmen that, besides limiting, they should guide individuals’ behavior towards a socially desirable result, unreachable by uncoordinated action, Jevons’ economy shifts from a productive machine to another in need of maintenance.
Although himself a liberal economist, Jevons’ cosmovision – shared by many late-Victorian economists – has provided most of intellectual and moral foundations for XX and XXI centuries’ massive interventionism, intended to correct individuals’ behavior in benefit of social welfare. Economic bureaucrats became social fine-tuners responsible for adjusting individual actions, as machinists correct gears or herdsman guide the oxen.
Kauder, E. (1965). A History of Marginal Utility. Princeton, USA: Princeton University Press.
Gertler, P. et al. (2016). Impact Evaluation in Practice. Washington, USA: World Bank.
Jevons, W. (1888a). The Theory of Political Economy. London, UK: Macmillan.
Jevons, W. (1888b). Elementary Lessons in Logic. London, UK: Macmillan.
Schumpeter, J. (1954). History of Economic Analysis. London, UK: Routledge.
Smith, W. (1984). Cosmos and Transcendence. San Rafael, USA: Sherwood Sugden & Co..