Philanthropy and Education

Economics was Once Radical: Then It Decided Not to Be

Editors’ Note: Continuing the philanthropy & education forum, Marshall I. Steinbaum and Bernard A. Weisberger discuss the politics of knowledge in U.S. economics associations and universities in the late nineteenth century. Though the authors do not write directly on philanthropy, the piece provides an opportunity to think about the ways that, even today, cultural contexts and individual trustees and administrators (whether at universities or philanthropic organizations) play their part in shaping expert knowledge. 

Economics has a justifiably conservative reputation, although its leading professional organization, the American Economic Association, espouses nonpartisanship on “practical economic questions.” That was not always the case. When it was first formed in 1885, the AEA was a radical challenge to the orthodoxy of classical, free-market economics. A generation of young American economists trained at German research universities in the 1870s returned to find their field dominated by an establishment largely confined to Harvard and Yale. At the same time, new universities, were springing up with a different mission than educating the undergraduate sons of the nation’s elite. Those institutions sought out the German-trained cohort and initially supported their challenge to the status quo. The leader in the higher education revolution was Johns Hopkins University, endowed by the founders of the Baltimore and Ohio Railroad in 1876 with a gift of $3.5 million, the largest philanthropic gift in American history up to then.

That status quo was itself a reaction to the foundering of the Free Labor ideology in post-Civil War industrial strife. Free Labor began as the Northern self-conception of social mobility in contrast with Southern plantation slavery. Over the course of the war itself, Free Labor came to be extended from free white labor to freed slaves. Following the Panic of 1873 and subsequent economic turmoil, the ideology that won the war fell apart, with a significant, wealthier chunk of the northeastern establishment adopting classically liberal views implacably hostile to “class legislation” of any kind. Their organ was the American Social Science Association, founded in 1869 as a catch-all for journalists, politicians, and academics, foremost among the latter William Graham Sumner of Yale, the country’s leading Social Darwinist. Its journalistic outlet was The Nation, which was in those days firmly opposed to any challenge to incumbent wealth and power.

The initiative to found the AEA came from Richard Ely, an avowedly Christian Heidelberg-trained professor at Johns Hopkins with a calling to make economics a friend of the working man. His fellow Young Turks were similarly dissatisfied with orthodox economics doctrine that claimed there was no feasible alternative to the great wealth and grinding poverty of the Gilded Age. In Germany they had seen the contributions to public policy and industrial reform championed by public-minded economists with a wide following outside the ivory tower, and they sought to create a similar role for themselves in the United States. They included future eminences John Bates Clark, Edwin Seligman, and Henry Carter Adams.

As originally drafted, the opening platform of the AEA declared “We regard the state as an educational and ethical agency whose positive aid is an indispensable condition of human progress. While we recognize the necessity of individual initiative in industrial life, we hold that the doctrine of laissez-faire is unsafe in politics and unsound in morals,” and it went on to excoriate “the conflict of labor and capital.” The mission of the new organization was to promulgate empirical economics research, including the nascent concept of peer review, a powerful weapon in asserting the scientific superiority of the new school over the establishment’s dry, unshakable orthodoxy.

The foundation of the AEA coincided with the greatest period of social unrest up to that point in American history. Starting with the violently-suppressed 1877 railroad strike (largely against the same B&O Railroad whose founders endowed Johns Hopkins), but especially following the Haymarket Riot of 1886, there was a widespread sense that American society was threatened by social upheaval driven by radicalized European immigrants. Months after Haymarket, Adams was threatened with the loss of his livelihood following a lecture he gave at Cornell in which he accused industrial interests of xenophobic suppression of the free speech of organized labor’s leaders. An upstate lumber baron on Cornell’s board demanded that the university’s president dismiss him, after which Adams only gained tenure at the University of Michigan with a written pledge to have foresworn his radical views.

Also in 1886, Ely published The Labor Movement in America, a full-throated defense of unionization as the best hope of solving the problem of labor’s immiseration. Although Ely did not explicitly affiliate himself with any part of the labor movement, the book’s point of view was clearly aligned with that of the nascent American Federation of Labor: individual social mobility is a quaint relic in the industrialized economy, and the worker’s best hope of improving his lot is through unionization, collective bargaining, and self-help, only extending to industrial action when employer intransigence at the negotiating table was insurmountable. The book garnered a snarling, scathing anonymous review in The Nation, asserting that its author had no place teaching at a university. It was an open secret that its author was the naval astronomer and amateur orthodox economist Simon Newcomb, Ely’s senior colleague at Johns Hopkins. At the same time, Ely was actively engaged on the Chautauqua circuit of adult education in the Social Gospel tradition.

Meanwhile, Ely’s economics colleagues were moving in the other direction, and not simply under duress, as Adams had been. University presidents seeking stature for their institutions appealed to rich donors among the period’s Robber Barons, and that appeal was unlikely to be successful when rabble-rousers in the economics department were questioning the foundations of American capitalism, in particular the monopolization and labor exploitation that made the Robber Barons rich in the first place. At the same time, some of the more moderate members of the economics old school were making overtures to moderates in the new, recognizing the threat that manifestly improved scholarship posed to their authority in the field. Also in 1886, Charles Dunbar, the chair of the Harvard department, brought out the first issue of the Quarterly Journal of Economics, an alternative peer-reviewed channel to the AEA’s Proceedings (now the American Economic Review, to date the leading journal in the field), which was under Ely’s iron grip. His opening essay welcomed the empirics of the AEA’s cohort but denounced any tendency to political or social reform—a direct challenge to Ely.

Between 1886 and 1892, Ely’s control over the AEA weakened. Adams and Clark plotted to oust him from the Secretaryship in 1887, though they were dissuaded, and in 1888 the organization’s platform was modified to be more conciliatory over Ely’s objection. In 1890, a publications committee was put in place, expressly removing him from sole authority over the Proceedings. The final straw came in 1892, when Ely made a bid to re-assert authority by holding the AEA’s summer meeting at Chautauqua itself. That appeared to signal a public partnership between the professional organization and a popular reform movement. A compromise was brokered wherein at that meeting, Ely surrendered the Secretaryship and left the organization. The new regime was led by Dunbar himself.

What had happened was that economists realized there was much to be gained in terms of professional stature and influence from making themselves appealing to the establishment, so they banished those elements that tainted them by association. In 1895, one of Ely’s students, Albion Small, the founding chair of the new, Rockefeller-endowed University of Chicago’s Sociology Department, did not come to the aid of another Ely student, Edward Bemis, after the latter’s public criticism of the Chicago traction [streetcar] monopoly brought down the wrath of the university’s president William Rainey Harper and its conservative chair of economics, J. Laurence Laughlin. Despite episodes like those of Adams and Bemis, economics was by no means as conservative then as it eventually became starting in the 1970s, but neither would it countenance a direct challenge to the economic status quo nor affiliate itself with radical elements in organized labor or elsewhere. Even Ely himself eventually came around after his own notorious trial before the Wisconsin Board of Regents in 1894. He returned to the AEA as its President in 1900, and though he was long affiliated with the “Wisconsin Idea” and its progressive exponent, Governor Robert LaFollette, he was careful not to stray far from the new, milder orthodoxy.

What was lost in the eclipse of radicalism at the AEA? The economic tracts of that era began to enshrine the perfectly competitive market at the center of the intellectual firmament in economics—work then being formalized mathematically overseas by Leon Walras and Alfred Marshall, to be imported to the US by the likes of Clark and Irving Fisher and embellished by their successors in the mid-to-late 20th century. There has always been disagreement within the academic economics establishment, but it has largely adhered to the establishmentarian bent set down in 1892—and won itself great intellectual prestige in so doing. What political involvement there is in the field is almost exclusively on the Right, as attested by recent cases of donor influence on economics departments at Florida State, Kansas, and numerous others, aimed at routing out any challenge to free market orthodoxy. Much more notable than those cases of overt politicization is the broader alliance of economics with the country’s business establishment, in the form of lavishly funded business schools and research programs to the benefit of the field, far and above what’s available to any other discipline.

Looking back at The Labor Movement in America is an interesting exercise in light of that intellectual history. Amid the overtly Christian exhortations to brotherly solidarity with the worker—language likely to alienate even the friendliest of current readers among academic economists, should one be so bold as to pick up the book—is a strikingly lucid account of how the labor market works, an account that bears strong resemblance to contemporary labor economics in its apprehension of the importance of departures from canonical, perfectly-functioning competitive markets. It’s hard to escape the conclusion that in choosing to sideline left-wing elements among their own, economists gave up important if inconvenient empirical insights in favor of intellectual self-promotion, and that left them blind to the realities of inequality now back at center stage in the New Gilded Age.

-Marshall I. Steinbaum and Bernard A. Weisberger

This blog post is drawn from a longer article on economics in the late 19th century, forthcoming from Democracy in Spring 2016. Many sources were important to the research, but Mary O. Furner’s Advocacy and Objectivity: A Crisis in the Professionalization of American Social Science, 1865-1905 (1975) deserves special mention.


2 thoughts on “Economics was Once Radical: Then It Decided Not to Be

  1. Economics serve as the mechanism by which the economic victor writes history in what ever image will justify further victory. First and foremost it is an excuse for domination by the ruling elite


  2. Pingback: Economics—looking backward | occasional links & commentary

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