Chapter IX. The Present State of Opinion

CHAPTER IX

THE PRESENT STATE OF OPINION

THUS even in our days very many and very different opinions are struggling for mastery. The final issue of the struggle is certainly not yet decided. But the battle has not remained stationary. Many an undoubted success and many an undoubted defeat have been witnessed on this vast field of conflict. Certain views have clearly pushed into the foreground and are advancing, while others are retreating or are engaged in a difficult defence of some unfavourable position in the rear, the strongest fortifications of which have already fallen. If I should venture to draw a picture of the present state of the combat as it appears to me, I would draw the lines as follows:—

On one of the main fronts of the many-sided and much-divided battlefield the exploitation theory on one side has been fighting with the different theories favourable to interest on the other. Here the issue seems to me to be no longer doubtful. The exploitation theory is vanquished. On account of the compulsory abandonment of the theory of value upon which it was based, it has been forced into an untenable position. To be sure the battle will be continued for a time by its adherents, and the dogma of exploitation will not be likely soon to vanish from that part of the party platforms designed for purposes of agitation. But science will probably soon place it forever in the list of errors which have finally been overcome. The “vulgär-ökonomische” branch of this theory, of which we have spoken, can hardly possess sufficient motive power to be able to regenerate and fruitfully to develop the dying doctrine.

The conflict between the rival theories which are favourable to interest, if I may use this brief but not fully adequate phrase for theories unassociated with parties, has not remained without lasting results. I think that nowadays it may be considered as a recognized truth that the final causes of the phenomenon of interest are to be found on the one hand in certain facts of the technique of production, and on the other in the postponement of enjoyment, precisely or very nearly as Professor Marshall has expressed himself in his popular catchwords, the “prospectiveness” and the “productiveness” of capital. Those branches of theory which stand outside of this truth or are not affected by it in the course of their explanations do not seem to me to enjoy any prospect that a backward movement will turn the course of development into the side path which they now occupy. This is the case, I think, with several varieties of labour theories and with the genuine, outspoken productivity theories. These latter particularly, which once played such an important rôle in economic theory, viewed from our modern standpoint, have two principal defects which are daily becoming more and more generally recognized and acknowledged. They cannot reach their goal by a logical path without turning a logical somersault, and without leaving completely out of consideration a full half of the actual causes of the phenomenon of interest. It seems to me to be a distinctive symptom of the hopeless condition of these theories that attempts have lately been made,—as I think, in violation of the actual condition of things and of historical truth,—entirely to deny their existence and to impute to their representatives other ideas which more nearly approach modern views of the problem.¹

The most vigorous part of the development tends by common consent toward one goal, the correctness of the choice of which,” at least as an object of knowledge, only a few at the present time will doubt; and which will surely be reached sooner or later, however much one may waver and hesitate regarding the choice of the most direct route thereto. The aim is to find an explanation so appropriate to both groups of causes,—the productive-technical facts and the psychological facts connected with the postponement of gratification,—that not only every part of the explanation will be in itself incontestable from the standpoint both of facts and of logic, but that both halves of the explanation will constitute a whole, formally and logically faultless.

Of the different theories which are rivals in the struggle for the attainment of this goal the use theory is one to which it must be conceded that, correctly and completely understood, it is connected with both groups of causes, and is, therefore, sufficiently comprehensive; but in the course of its explanations it encounters weighty objections in the realms of both fact and logic, which it seems to me are at the present time being felt and appreciated as such in ever widening scientific circles.

The abstinence theory also finds difficulties of fact and of logic in the method of explanation it has adopted. These I have tried in the above pages to make more distinct than hitherto, and on this point it seems to me that the manner in which they attempt to do justice to “productiveness” side by side with “prospectiveness,” which gives the characteristic stamp to their explanation, is not calculated to lead to a happy coalescence into a really united theory.

The eclectics naturally have to contend with the special weaknesses of each theory taken into the eclectic combination as well as with the resistance of the incongruous elements to coalescence into a harmonious whole.

Since the time of Rae the postponement of gratification has been understood in a way which is free from the objectionable interpretations of the abstinence theory. Yet in the second part of his explanation Rae remained entangled in the mistakes of thought and assumption characteristic of the productivity theories. Jevons again was more fortunate in this second part, but less so in the treatment of “prospectiveness,” since he here turned back into the paths of the abstinence theorists, and altogether missed the prime requisite of a logically harmonious combination of the different grounds of explanation.

The youngest member in the series of rival interest theories, the agio theory, has made an experiment, which, however its outcome may be regarded, has at least aimed to keep clearly and consciously before our eyes the goal to be attained, namely, a coherent explanation of the phenomenon of interest derived from a comprehensive consideration of all the final causes which have an influence upon it.

No one will doubt that it has remained true to the first part of the programme. A characteristic piece of evidence regarding the comprehensive consideration it has given to both “productiveness” and “prospectiveness” is the fact that some of the friends of these ideas have accompanied their approval of the “agio theory” with the remark that it is in its essence a theory of productivity, and others again with the remark that it is really an abstinence theory.¹ Perhaps a still more striking bit of evidence along this line is a certain reproof expressed by one of my most prominent adversaries. When Professor Marshall reproaches me with attaching an exaggerated importance to the differences of opinion of my predecessors in the theory of interest, and in proof calls attention to the fact that the consideration of “prospectiveness” and “productiveness” as of equal importance is to be found in their expressed views, it is evident that he regards this method of treatment as common to both doctrines, and is consequently by no means inclined to deny it to mine.

Whether the agio theory has also been successful in the second part of the programme, or at least more successful than its rivals, will be made evident in the continued discussion of the subject. The closer the results of previous investigation and criticism have drawn the lines within which the paths leading to the goal must be sought and laid out, the more careful in the future will be the search and the investigation within this region. We know our way approximately, or, as J. B. Clark, perhaps somewhat optimistically but not entirely incorrectly, said not long ago in an inspiring survey of the “Future of Economic Theory”: “Explanations of interest that cannot be far from the truth have been offered.”¹

From now on the problem will be to test the different paths which we have been invited to take by the rival theories of the present day, as to their direct and continuous connection with the goal toward which we are travelling. . This test must be applied with more boldness, severity, and discrimination, than formerly, since we already possess sufficient orientation of the casual sort, and no further directions of a roundabout and not strictly accurate character can at the present time advance us on our way. Whatever may be the final outcome of this critical development of doctrine in the future, one thing seems to me already certain, namely, that the now awakened critical spirit will not be content with any solution which does not satisfy the severest scientific demands, and that the danger that rest may be found in one of those shallow solutions which are easily embodied in convenient catchwords but cannot be systematically thought out to the end, is forever past.

¹ See my Preface to the 2d ed. of “Capital and Interest.”

¹ In a detailed review of my “Positive Theory” in De Economist, March, 1889, p. 217, Pierson says: “Our author stands wholly on the ground of the productivity theory.” Macfarlane, on the other hand, denotes a special paragraph (107) of his work “Value and Distribution“ to the demonstration of the proposition that “abstinence is recognized in the exchange theory.”

¹ Quarterly Journal of Economics, October, 1898, p. 1.