Chapter I

THE SCIENCE OF PRICE

IN EVERY SCIENCE new ways of thinking are the result of a general social process in which the whole community participates. This is true even of the most specific discoveries. It is a commonplace of the history of science that no discovery is ever made that is not in some sense and to some degree anticipated by earlier work. It is also well known that discoveries which result from refinements of laboratory technique commonly depend upon refinements of tool materials and of basic machine tools which science derives from related industries and those industries from industry in general, which in turn relates to science in general. And what is true of particulars is even more obviously true of universals. The larger conceptions in terms of which science does its thinking are projections of the thinking of the whole community. Only in a community, for example, in which the idea of change had assumed paramount importance could the origin of species have come to be a problem of the highest order of significance.

In the case of economics this relationship between the thinking of the professional student and that of the community is further intensified by the fact that the ideas of economists can take effect only through the action of the community, action to which the community must in some sense or other give assent. This also is true to some degree of every science. We must not exaggerate our common ignorance. Armchair philosophers are fond of calling this an age of faith in which people trust their lives to machines they do not understand: whereas the truth is that a great many people do understand the machines they use a great deal better than the philosophers suppose­­ a great deal better, one suspects, than the armchair theorists themselves. Nevertheless it is true that very few of the vast army of amateur radio technicians, for example, understand the physical science of electronics; and it is not necessary to be even an amateur radio technician in order to listen to a broadcast. Scientific discoveries need to be fully understood only by a few in order to be used with comparatively slight scientific understanding by a great many. But even in such cases the whole community to some degree understands and accepts the basic scientific principles of which the new discovery is an application or extension. Basically radio is only a telephone instrument and an electric light bulb put together in a box. Even the most innocent philosopher knows that the box contains nothing occult, only a maze of wires. The community understands and accepts without reservation the principle of conduction of electricity by wires. In the case of economics it is these basic principles or elements which are in doubt, and the doubt is shared by the community at large.

Like other disciplines, economics is more than a field of inquiry; it is a way of thinking. Physics for example, occupies a field of inquiry; but the way of thinking which characterizes modern physics is very different from the lucubrations of the ancients concerning earth, air, fire, and water. The way of economic thinking which has prevailed during the last five generations or so, follows the pattern or system of ideas or set of principles which achieved general acceptance during the eighteenth century. The common definition of economics as the science of wealth, with the implication of money values which the term "wealth" carries in the modern world, is both an expression of this way of thinking and a corresponding identification of the world of commerce as the field of inquiry in which it prevails. Among economists this system of ideas is known as the classical tradition to distinguish it from other ways of thinking which various people have proposed from time to time both before and after the appearance of the science of wealth.

For some little time and with progressive acceleration in recent years this way of thinking has been falling into disrepute, and for obvious reasons. There was a time when the economic life of the Western world seemed to be atomistic. Whether it really was as atomistic as it seemed is very doubtful, but that is not the point. It seemed so to the community at large, to whom therefore the idea of a community of interests achieved by the canceling out of discrepant individual interests in competition made a tremendously powerful appeal. Commerce itself, the exchange of goods and services in "the market," thus acquired an extraordinary significance by virtue of which it monopolized attention to the almost total exclusion of even the most closely related industrial processes. It was of course this state of mind which gave pertinence to classical political economy. But with the passage of time the concentration of control has become increasingly extreme and therefore increasingly obvious. The community has continued to hymn the praises of competition but the singing has become more and more perfunctory as the spectacle of the financial concentration of control of industry has become more and more obvious and inescapable. At the same time the machine has become increasingly conspicuous. Industry, as distinguished from commerce, has forced itself upon the attention of the community to a steadily increasing degree until the time has arrived when people generally have come to realize the utter dependence of modern civilization upon the efficient use of the machine. The spectacle of idle machines during the decade following 1929 has done more than all the academic criticism of the preceding generations to cloud the confidence of the community in a way of economic thinking which is so exclusively preoccupied with commerce that it scarcely ever makes mention of machines.

As a result of these developments the state of mind which now prevails throughout the community at large is one of uneasy anticipation of substantial change. This sense of the imminence of economic change is of course heightened by the contemplation of cataclysmic political changes. Whereas in years gone by senators have intoned the doom of quite trivial reforms as violations of the "eternal and inalterable laws of a beneficent nature," the present generation has seen nations maintain themselves for years and even embark on a program of world conquest without even the vestige of a gold reserve. The possibility that present world disorders may be ushering in some sort of "managerial" economy and the virtual certainty that the future will bring a steady enlargement of the economic functions of government are matters of more or less uneasy concern to thinking people everywhere.

The uneasiness people feel in the contemplation of such inevitable change is due in large part to not knowing what to think about it. The community at large is well aware of being intellectually unprepared for change, and it is the persistence of the old ways of thinking which is responsible for this intellectual unpreparedness. Our confusion goes much deeper than immediate issues of economic policy. Whatever understanding of the complex pattern of the modern industrial system the community has been able to achieve has been in terms of free price adjustment in the market, the very point on which the whole process of economic change seems to pivot. The possible alternatives vary widely, having only this in common, that none of them is intelligible in terms of the classical conception of an economy of free price adjustment. However willing the community may be to adjust its thinking to the requirements of the times, it is simply unable to do so for the reason that the only general conception of the meaning of the economic organization of society is inapplicable to the forces which now seem clearly to be shaping the economic organization of the future.

The persistence of a way of thinking which somehow fails to take account of what are proving to be the basic realities of modern economic life is itself one of the great economic mysteries of our civilization, a mystery upon which many students of economics have reflected. In certain quarters the prevailing explanation has always been that of prejudice. Many circumstances contribute to this interpretation. For example, nothing could be more favorable to the growth of monopoly than the doctrine that business men must be free from governmental "interference" in order to compete. The growing dominance of business men throughout the period of ascendancy of the classical system of ideas would be enough to suggest their special interest even if they had not been all along the most ardent advocates of those ideas. But advocacy does not explain origin.

The susceptibility of social philosophers to class interest is also explicable in terms of the structure of the society from which, after all, social philosophers are drawn. The classical tradition has never been altogether uncontested. On the contrary, every generation has provided powerful arraignments not only of prevailing economic situations but of the system of ideas by which those situations were so powerfully buttressed. But the arraignments passed unnoticed and have been largely forgotten even by scholars while the traditional way of thinking has continued to persist. This state of affairs has never been described more clearly or temperately than by Mr. J. A. Hobson in a passage which deserves a wider circulation than it has yet enjoyed.

What other conclusion can be drawn [he asks] than that the suppression of the former and the survival of the latter were due to the complexion of the Committee of Selection, that is to say, the academic, journalistic, and other intellectual advisors of the general reading public? And this Committee of Selection made its choice because it "sensed" correctly the intellectual needs and desires of the ruling and owning classes. This sense on the part of the committee of their solidarity of interests with the rich and powerful classes need not, indeed must not, ascend to the level of clear consciousness. For such clear consciousness might evoke in ordinarily honest teachers, writers, and reviewers, a hampering sense of intellectual dishonesty. The professor, or director of studies, the publisher, the editorial writer, the professional critic, librarian, or lecturer, must not believe or feel himself to be servile to outside authorities. And these authorities must take care that the pressures or other inducements they bring to bear in the selection or rejection of economic theories and opinions, are so unobtrusive that the subjects of this influence can easily be "unaware" of its exercise. Certain cruder forms of influence, no doubt, are always operative in particular cases. But the subtler, more indirect, and less conscious forces, making for the selection of safe, conservative, or otherwise convenient theories, and the rejection of disturbing and inconvenient theories, are the most formidable enemies which the "disinterested" Science of Economics has to meet . . .

So plain, immediate, and powerful, are the reactions upon economic practice of thought and feeling embodied in economic theory, that business practitioners must constantly desire that certain economic theories shall prevail, and must be disposed to use their influence upon the organs of public information and opinion to make them prevail...

[Thus it came about that] the main concern of a theory subservient to the new capitalism was to furnish "laws" conducive to abundant and reliable supplies of capital and labor at "reasonable" prices.

But this explanation of the persistence of the classical tradition is not altogether satisfactory. However powerful such prejudicial interests may have been and however much they may have determined the uses to which price theory has been put, they fail to explain the existence of the preconceived notion of which such use was made. The most striking evidence of the universality of this way of thinking is provided by the fact that even the bitterest arraignments of classical orthodoxy made use of it. Price theory is all things to all men. Mr. Hobson has himself called attention to "the looseness of structure and the discursiveness" of The Wealth of Nations, defects which "exposed Adam Smith's great work to grave abuses by later thinkers less imbued with his scientific spirit."

It was a "baggy" system [he continues], in that you could pick it up at various points, and it would fall into quite different shapes. For labour­men, it furnishes an armoury of passages assigning labour as the original source of wealth, and condemning the excessive gains which merchants and manufacturers obtain at the expense alike of workers and consumer by their combinations to keep prices high and wages low. For radical land reformers there is a keen analysis of differential and monopoly rents, a plain admission that landlords "are the only one of the three orders whose revenue costs them neither labour nor care" and a powerful condemnation of their selfish Corn laws and other instruments of class protection . . . .

A number of able and trenchant critics of the new capitalism, and the established landlordism, used materials from Smithian and Ricardian queries, not only for weapons against the monopoly of land and capital, but for corner­stones in some hastily improvised system of constructive socialism^.

These efforts, critical and constructive, found their consummation in the work of Marx; and since Marx himself described Das Kapital as Ricardo in reverse, he also provides the consummatory case of the paradox of price theory. Of no other way of thinking has it ever been more completely the case that "When Me they fly, I am the wings."

The amazing persistence of the classical tradition illustrates something more than "the power of the dominant economic class to deflect a social science from its straightly rational course into supplying intellectual and a moral supports for special group interests." It is no less clearly a manifestation of extraordinary intellectual toughness and resiliency. How else shall we explain the demonstrated ability of this way of thinking to absorb it critics? What, after all, is the straightly rational course of economics? If, as Mr. Hobson remarks, "it must not be supposed that these early makers of Political Economy were heartless or inhumane men," and if they were not complete fools, surely some among them must have felt the force and recognized the merits of earlier criticism and must therefore have been moved to further investigation and elaboration of the points at issue; and this is even more likely to have been the case with later students. When has the criticism hot been cumulative? Why does a critic like Mr. Hobson himself, whose thoughtfulness and humanity have been so fully attested, mention Thompson, Gray, Bray, and Hodgskin as men who tried to steer economics back to its true course, and then make no further reference to their work? Have we nothing to learn from them? Is there no critical tradition by which the present generation might be guided? Apparently there is none. Anthologies of social criticism do exist, but they are chiefly distinguished by their inconsecutiveness and inconclusiveness. We have a tremendous literature of treatises and textbooks bearing witness to the consecutive character of the classical way of thinking form the middle of the eighteenth century to the present time; but on the critical side, nothing that is in any sense comparable. Such a record is not fully explained by social prejudice.

Furthermore the critics themselves are continually reabsorbed into economic orthodoxy, in many cases apparently without their being aware of this singular conversion. If the axioms and theorems of the classical tradition could somehow be tabulated, it would be found that there is no once of them which has not at some time or other undergone critical demolition. Even today critics of classical orthodoxy complain bitterly that it is a Hydra. Classical Theory presents no one head upon which a lethal blow might be delivered; instead, wherever criticism scores a stroke the particular expression that is under attack is forthwith abandoned and two more are straightway developed to virtually the same effect. But these means of course that criticism has produced no Hercules. Almost without exception attacks on the classical principles have been piecemeal efforts. Critics of the concept of utility have accepted the conventional factors of production, and critics of factorial analysis have accepted the concept of utility, and so on, with the results in each case that the effect of the criticism has been nullified.

Classical price theory has also managed to absorb the opposition. The most inclusive attack on this whole way of thinking was that of Thorstein Veblen, who dismissed price analysis altogether as a pre­Darwinian taxonomy and tried to focus the attention of students of economics upon the state of the industrial arts and the institutions of organized society. It was of course his constant emphasis on institutions as determinants of the economic pattern which resulted in his followers coming to be known as "institutionalists." But Veblen's contempt for price theory produced among his own followers a contempt for theory as such which has led them to eschew "abstract" thinking and to concentrate their efforts upon empirical studies of actual economic situations. But what are actual economic situations? Taking problems as they come means taking them in the form they habitually assume, which means in the guise of the conventional way of thinking, which means as price problems. In this fashion the "institutionalists" as a group have come to concern themselves almost altogether with empirical studies of various special types of price problems, with results which are not clearly distinguishable from the work of students who have never strayed from the classical fold, as the latter never tire of pointing out.

Meantime the orthodox insist that no one has ever denied the importance of institutions or of the state of the industrial arts. In the economic literature of the present generation there is scarcely a treatise or a textbook which fails to make some reference to institutions and the industrial arts. The prevailing opinion seems to be that whereas the classical and the institutionalist "schools" were once thought to be diametrically opposed, economists now "recognize" the difference to be only one of emphasis. "Institutionalism" is generously credited with having called attention to the importance of matters which no economist should completely overlook although they do lie outside the field of economic analysis since they are not measured by price. Needless to say, Veblen wold have repudiated this interpretation. His attack on John Bates Clark, for example, affords no ground whatever for the presumption that the only difference between Clark's way of thinking and his own was one of emphasis. The easy eclecticism into which this controversy has relapsed can only mean that Veblen's criticism of the whole classical system has somehow spent itself, leaving the old way of thinking still in possession of the field.

Among professional economists the victory has been complete. When future historians of the movement of thought in the twentieth century survey the academic writings of our time they will probably designate the fourth decade as one of classical revival. At no other time has theoretical discussion been more intense or theoretical literature more profuse, and at no other time has economic thinking been more abstract­­ not to say abstruse­­ or more single­mindedly concerned with price analysis. This is true notwithstanding the flurry induced by the writings of Mr. J. M. Keynes. However disturbing may be the polices which Mr. Keynes has advocated, many students have pointed out that his "struggle of escape form habitual modes of thought and expression" has been somewhat less mountainous than he seems to suppose; and his adherents (for example Mrs. Joan Robinson) have not seemed to feel that their espousal of Keynesian doctrines involves any general repudiation of their other labors in what has certainly been commonly taken to be neo­classical price theory.

Nevertheless this victory may still prove to have been Pyrrhic, and for reasons which have little in common with directly felt class interest. History will also record a growing impatience among the rank and file of the profession, and especially among the younger men, with the outpourings of the pundits. Even on the part of those who make no pretension to knowing what to do about it, there is a growing sense of the futility of subtle mathematical analyses of wholly imaginary price situations and even more of impatience with the materials with which the profession is provided by its leaders for the instruction of the young. No one knows better than the rank and file how languidly the young respond. Publishers testify that teachers everywhere are seeking help in making a more realistic approach to the study of economic problems than that of the conventional texts.

A similar reaction may be observed throughout the community at large. Not only is the general public increasingly aware of the importance of the machine process; there is also increasing disillusionment with the dogmas of finance. The gold standard, for example, is no longer the fetich it used to be. Only a few years ago "sound" economists were assuring the world that Germany and Japan could not possibly sustain all­out war since neither had an adequate gold reserve. Not only have we seen them do so nevertheless, we have also learned that possession of the greater part of the world stock of monetary gold by no means insures victory in war. The story is being widely told of the financier who on being informed of the burning of an aluminum plant replied, "Well, it was fully covered by insurance, wasn't it?" The folly of that way of thinking is now apparent to all thoughtful people.

This general reaction goes far beyond the academic criticism of the details of classical price theory. We are approaching the middle of the century with a dawning realization that what has been wrong with economic thinking is its obsession with price. It has seemed to be axiomatic that ours is a price economy. To explain price has been accepted by virtually all economists as their appointed task. That is why the criticism of classical price theory has failed. So long as economics has remained by common consent the science of price, any particular aspersion upon any particular principle could only be followed by the elaboration of other principles to substantially the same effect.

But is it a price economy? No one doubts that price exist and play an important part in the life of the modern Western world. The question is not whether prices exist or not, nor even whether this range of phenomena is or is not extraordinarily widespread. Machines also are extraordinarily widespread. Textbook writers have fallen into the habit of inducting their readers into the study of economics by inviting them to contemplate the degree to which everyone is concerned with prices. The implication is that price is the only matter of economic significance with which everyone is thus concerned, and so the generalization seems to be justified that price is the sole agency by which the economic activities of all members of the community are related and knit up into an economy. But this is plainly false. Tools and machines and technological skills and knowledge are certainly no less widespread throughout the economy than prices and no less a matter of general concern and an agency of community organization; and the same is also true of the institutions o organized society. Surely the obsession of the modern community with price has a sounder basis than this!

It can be argued somewhat less naively, that price is the central concern of economic thinking because it is only by selling their products and services in the market at a price that all members of the community make their living. But even this is true only in a very limited sense. While there are some business men who engage in virtually no other occupational activity but buying and selling, they constitute only a tiny fraction of the community. Most people devote most of their time and energy to doing other things. It would be ridiculous to say that a farmer or a physician is "primarily" a business man. However true it may be that the fortunes of farmers are affected by price movements over which they have no control, no one would argue that a farmer's market operations are more important to the community or to him than sowing and reaping. Doubtless farmers would do well to study the market, and any individual farmer who had achieved notable skill in this exercise might do better to give up farming altogether and become a broker. But a nation of brokers would raise no crops.

The range of economic studies may of course be arbitrarily limited to brokerage. However far short of the whole effort of the community to make a living the activities of buying and selling may fall, there is no reason why they should not be the object of systematic study­­ as, indeed, they are. Price forecasting is of course a quite legitimate occupation. Hitherto it has been regarded more as a profession than a science, since it has been a paid service rendered to clients by commercial organizations. Techniques of business forecasting have also been part of the course of training offered by schools of business administration. But however important such studies may be, they are of a very different character from what has been recognized historically as the science of economics. No one could possibly conclude from a reading of The Wealth of Nations that it had been written for the guidance of business men or even of common citizens in their business capacity. It is rather an exposition of the meaning which was supposed by Adam Smith to inhere in the "natural" uninstructed acts of all the members of the community. The assumptions which such an exposition makes can hardly be said to be justified by the special interests of business men, however legitimate they may be.

In recent years, to be sure, certain economists have proposed to identify the science of economics with price analysis ostensibly with full knowledge of the limitations they are imposing on the range of economic studies. They have done so avowedly in the interest of scientific precision. In effect they seem to say that however narrow may be the range of price phenomena they constitute the only economic data which are by nature quantitative and hence accessible to the precise, quantitative analysis of scientific method. The clear implication is that such a conception of economic science is dictated not by any particular way of thinking but by the fact of price, an impression which is further heightened by the lavish use of mathematical techniques. This all seems to mean that the modern "quantitative science of price analysis" is just as empirical as business forecasting, that it is engaged in analyzing data which are actually given in the operations of the market. But curiously enough this is not true at all. What the practitioners of this "science" mean by exact mathematical analysis is, first the definition of quite imaginary price situations and then the reduction of these situations to mathematical notation in some such fashion as this: "If there were a business in which demand could be represented by a certain curve and cost by a certain other curve, then these curves would intersect at yonder point and the whole situation could be represented by the following simultaneous equations."

Nothing could be less empirical­­ less responsive to the supposed actualities of a price economy­­ than the sort of mathematical analysis with which so many contemporary economists have occupied themselves. It is, to all appearances, first­rate mathematics. But as economics it is concerned not with the analysis of empirical data but with the refinement and elaboration of theoretical devices which, as every student of the subject knows, have played the stellar role in classical theory for three­quarters of a century. As Mr. Maurice Dobb has remarked:

. . . so long as mathematical technique retains its servitude to a particular mode of thought, the concepts which it fashions are calculated to veil rather than to reveal reality. For this mode of thought, what is enshrined in the subjective theory of value, first creates for us a realm where disembodied minds hold communion with etherialized objects of choice, and then, unmindful of the distance between this abstract world and reality, seek to represent the relations which it finds in this realm as governing the relations which hold in actual economic society and as controlling the shape which events must have under any and every system of social institutions.

That ours is in fact a price economy is not established by reiterating traditional beliefs even in the language of mathematics.

This is not to deny that important uses may be made of empirical price data, and not only by business men. The statistical importance of price data is of course very great indeed. Since price data are numerical, and since many commercial transactions are matters of public record, or can be made so, data of this character are peculiarly accessible and peculiarly amenable to tabulation and statistical summary. No one, whatever his way of thinking, would question these facts or deprecate the efforts of statistical agencies to collect and analyze empirical price data. But facts have a way of becoming an obsession. No one would condemn parents for recording the growth of their children, since parents are not likely to fall into the habit of mistaking their children's height and weight for their intellectual and moral character. But statisticians are singularly prone to this mistake. Because price data are amenable to their analysis they find it easy to suppose that price is therefore the essential stuff of the economy.

They can even become rather impatient with theoretical inquires which seek to raise the question what the data mean. This way of thinking has recently been stated so clearly, and by a statistician and public administration of such eminence, that his words are worth quoting.

It would be laughable [he writes], if it were not tragic, to watch the stream of books and articles, attempting to solve the exceptionally complex problems of present­day economics by theoretical arguments, often without a single reference to the observed facts of the situation. . . There is room for two or three economic theorists in each generation, not more. Only men of transcendental powers of reasoning can be candidates for these positions. Restatements of economic theory, of which we are offered so many, are only occasionally needed, as factual knowledge advances and institutions change.

The rest of us should be economic scientists, content steadily to lay stone on stone in building the structure of ordered knowledge. Instead, it seems to be the ambition of nearly ever teacher of economics to put his name to a new formulation of economic theory. The result is a vast output of literature of which, it is safe to say, scarcely a syllable will be read in fifty years' time. But the discovery of new facts, and of generalizations based on them, is work for all time.

In his capacity as a statistician with the author of these words might perhaps have raised the question whether the extraordinary abundance of theoretical studies may not be an indication of the rapidity and magnitude of institutional changes now going on, and even perhaps of advances of factual knowledge. Although he does not actually say so, the gist of his remarks seems to be that we have quite enough theory for present purposes. How far this is from being the case has never been shown more clearly than by the statistical studies of Mr. Colin Clark. At every point his figures indicate the presence of Veblen's "larger forces moving obscurely in the background": the incidence of technological development upon the economic life of the community, and the obstruction of economic progress by institutional rigidities, such as "the marked difficulty experience by sons, under present laws, customs and economic stresses governing apprenticeship and education, in entering any occupation better paid than that of their fathers." Like Mr. Keynes he advocates a policy of low interest rates and reduction of the present extreme inequalities in the distribution of income. Surely he realizes how utterly repugnant such ideas must be to the way of thinking which still prevails quite generally among economists and still more in the community at large!

To what, then, is the continued prevalence of this way of thinking due? There is no a priori ground for believing and no statistical evidence to prove that our economy is of its own essential nature a price economy which therefore can be understood only in terms of price analysis. Our economic thinking has centered upon price for one reason and only one: the significance which has been imputed to the price system by the theories of Adam Smith and Ricardo, "The argumentive Scot and the 'stupid bothering stockbroker.'" Even so we must not be too hard on the founders of the classical theory. Theirs was a tremendous task: to find meaning in "the blooming, buzzing confusion," as William James might have called it, of modern economic life. They could get little or no help from the wise men of earlier ages, since the ancient philosophers were not confronted with any such manifestation as that of the commercial age. Inevitably they had to work with the intellectual materials at their disposal, those of the seventeenth and eighteenth centuries, the inadequacy of which has long since been recognized. Small wonder their results fell short of perfection. The amazing thing is that their ideas should have been as cogent, as persistently convincing, as they are.

Classical political economy was convincing because it achieved a prodigious feat. It found meaning of a sort in the hurly­burly of modern economic life. The chaos of the economic struggle for existence, it seemed to show, is really an ordered chaos in which all things work together inadvertently for the best. This meaning still motivates the contemporary exponents of price analysis. If we ask them, "What is it that your are trying to do? You say you are simply trying to understand how prices are formed, but why should you want to know this? Why should society support you in this effort ?" ­­ there can be only one answer: "Because it is in the analysis of price that we find the meaning of the economy." The price system derives its significance from the conception of the economic life of modern times as an economy, "the economy of free private enter-prise." This conception is no mere academic plaything. It is of course one of the key ideas of modern civilization, of the same order as the idea of democracy, to which indeed it is closely linked. The fate of democracy itself seems to many people indissociable from that of "the economy of free private enterprise." Neither is a simple scientific datum an "observed fact" which emerges directly from the statistical evidence. That is why we cannot be "content steadily to lay stone on stone in building the structure of ordered knowledge." It is futile to lay stone on stone except in terms of some preconceived design. And that is why criticism of the classical design has been so completely futile. Whatever the defects of the classical design, it still remains the only over­all design we have, and will remain until another conception of the meaning of the economy has taken form.

Before this can happen two conditions must be met: a new set of ideas must be found with which to make a fresh theoretical start, and the old way of thinking must be abandoned altogether, price analysis and all. Whether we are ready to meet these conditions can be determined only by trying. Reference has already been made to the tremendous advances which have been achieved since the eighteenth century in every line having to do with man, his nature, his behavior and its physical and social determinants, the nature and history of culture, the structure of society, and the process of social change. It would be strange indeed if our new knowledge were without significance for economics. But which of these materials is of most compelling economic significance? At what point does our present knowledge diverge from the ideas by which the classical tradition was conditioned?

Answers to these questions can be found only in a reconstruction of the processes by which the classical tradition was originally formed. Criticism is not the object of this reconstruction. All that criticism could do has long since been done, without success. Indeed it is doubtful if intellectual liberation is ever won by criticism. What economics needs today is psychoanalysis: a rehearsal of the experiences by which the intellectual trauma came about. If we could see just how our obsession with the price system came about, we might be able to recognize it as an obsession and so free our minds for work with other and sounder materials.

It is to this effort, accordingly, that we must now address ourselves.

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