simon cook
TRANSCRIPT
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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)