Thorstein Veblen and Socialism

Abstract

This article is the first comprehensive account of Veblen’s views on socialism. While Veblen had strong socialist sympathies, his views on socialism and its feasibility shifted slightly during his lifetime. The article also connects Veblen’s opinions on socialism with his theoretical analysis, including his dichotomy between pecuniary and industrial employments. This dichotomy is consistent with his socialism, but the dichotomy itself is open to criticism. Veblen’s stress on the habit- and community-based nature of knowledge could raise questions about its transferability and tacitness, and about the possibility or otherwise of comprehensive socialist economic planning, which relies on the gathering together much relevant knowledge. It is noted that John Dewey also held a habit- and community-based view of knowledge, and he became a socialist in the 1930s. But others have suggested that the tacit nature of much relevant knowledge makes comprehensive socialist planning highly problematic. This leaves open the question whether Veblen’s socialism was consistent with an adequate understanding of the nature and role of knowledge. Veblen’s views on socialism are both revealing and enigmatic.

Keywords:

• Thorstein Veblen
• socialism
• planning
• pecuniary-industrial dichotomy
• tacit knowledge
• collective knowledge
• habits
• John Dewey

JEL Classification Codes:

• B14
• B15
• B31
• B52
• P20

The purpose of this essay is to explore the views of Thorstein Veblen on socialism. While there is a large literature on Veblen’s life and ideas, relatively little of it is devoted to his political views and even less to his detailed views of socialism. We examine Veblen’s words on the nature and feasibility of socialism and his normative views on its desirability. Veblen’s depiction of the nature of knowledge, and his dichotomy between business and industry, also have implications for the feasibility of socialism, even if he failed to draw these out.

The word socialism was first adopted in English by followers of Robert Owen (Bestor 1948; Hodgson 2019). It meant the abolition of private property and its replacement by a system of common ownership. There have been several attempts to moderate or change its meaning, but the original Owenite meaning has endured. For example, the Collins English Dictionary defines socialism as a “system in which the means of production, distribution, and exchange are owned by the community collectively, usually through the state.”¹

Few other leading early American institutional economists were socialists. Many of them, including John Maurice Clark, John R. Commons, Morris A. Copeland, Walton H. Hamilton, and Wesley C. Mitchell, supported a regulated capitalism with a welfare state. Veblen was an outlier on this issue. That is another reason why a more detailed excavation and assessment of his views on socialism is overdue.

Works focusing on Veblen’s political views are relatively rare. H. J. Hodder (1956, 347) argued that “Veblen’s political and social thought can be most clearly understood and evaluated in terms of philosophical anarchism.” But while there is plentiful evidence of Veblen’s critical stance against traditional authority, this does not imply that he was an anarchist. Other than his anti-authoritarianism, his qualms about state socialism and his frequent wariness of the state, there is no clear support for this anarchist interpretation of his politics. By contrast, in their book on Veblen’s politics, Sidney Plotkin and Rick Tilman (2011) assumed (rightly in my view) that Veblen was a kind of socialist. But their book includes few direct quotes from Veblen on this topic and offers little further detail on his socialist opinions. Their volume does not mention Veblen’s (1901a, 231–232; 1904, 337–339) criticisms of the general vagueness of socialist proposals for a future society, and it overlooks Veblen’s (1923, 9) move away from socialism in his final years.

The following two sections assemble and discuss direct quotes from Veblen on socialism and related issues, mostly in chronological order. These citations vary in length and importance. He also devoted much attention to Marxist theory, but these instances are relevant to our discussion here only insofar as they relate to the nature of socialism and its feasibility.

Veblen was generally reluctant to reveal his normative view on socialism, and much of his published material on this topic is descriptive or analytic. While Veblen was at the University of Chicago in 1892–1906, and at Stanford University in 1906–1909, he taught courses on socialism. He made his students aware of varied works, including some that are critical of that doctrine. Joseph Dorfman (1934, 247, 253) claimed that during his courses on socialism Veblen never revealed whether he was for or against such a system. Even in the company of his first wife “he preserved his usual non-committal attitude towards socialism.” This normative reticence adds to our difficulties in exhuming Veblen’s views on the topic. But he does give us several clues about his political alignment.

Veblen’s Early Statements on Socialism: 1881–1899

In 1881, while a student at Carleton College, Veblen produced an essay on “J. S. Mill’s Theory of the Taxation of Land.” No known copy exists, but a brief summary is available. It is clear that Veblen then advocated a redistribution of wealth and “almost universal nationalization of land” (Camic and Hodgson 2011, 53). This was shortly after the publication of Henry George’s influential Progress and Poverty. George (1879) was not strictly a socialist, but he did advocate land nationalization. It seems that Veblen followed George on that issue.

When Edward Bellamy’s (1888) novel sketching the socialist utopia of the future swept America, Veblen and his wife read it together (Dorfman 1934, 68). But we have to wait ten years after his essay on Mill for Veblen’s stance on socialism to be revealed in more detail. In his article entitled “Some Neglected Points in the Theory of Socialism,” Veblen (1891, 345) addressed Herbert Spencer’s critique of socialism. Veblen explicitly avoided the question of the “present feasibility of any socialist scheme.” Instead, he raised “a point not adequately covered by Mr. Spencer’s discussion, and which has received but very scanty attention at the hands of any other writer on either side of the socialist controversy.”

In this essay, Veblen (1891, 346–355) charged that Spencer misunderstood the drivers behind the demand for socialism. Veblen traced this source to the modern industrial system that “is based on the institution of private property under free competition,” and engenders a “struggle of keep up appearances by otherwise unnecessary expenditure” on tokens of “economic success” and shows “of luxury”—a struggle that breeds, among the poorer, some considerable “emulation and … jealousy.” But “with the abolition of private property,” socialism will end this “wasteful” process. Veblen did not consider whether much greater economic equality within a system of private enterprise would be an adequate remedy. But he signaled here the issues of emulation and conspicuous consumption that were to become prominent features of his work. He also revealed some sympathy for socialism.

Veblen (1891, 357–358, 361) also rebutted Spencer’s claim that socialism meant “compulsory cooperation … identified with the system of status and defined as the subjection of man to his fellow-man.” Veblen objected that private enterprise and state compulsion were “not logically exhaustive” as options. He claimed that socialism could instead be conjoined with “modern constitutional government—the system of modern free institutions.”

The possibility of combining large-scale socialism with democracy has long been controversial (Schäffle 1874; 1885; 1892; Hayek 1944; Hodgson 2019). It is not enough to outline the logical options. The question is whether the desired combinations are feasible. The possibility also has to be considered that a concentration of economic power would lead unavoidably to a despotic concentration of bureaucratic and political power. If that were the case, then widespread public ownership would undermine the countervailing politico-economic powers required to sustain democracy. Veblen never discussed this argument.

Veblen then mentioned socialism in four book reviews, all appearing in the Journal of Political Economy, of which he was then editor. Veblen (1893a; 1893b) briefly reviewed two histories of socialism, without adding much further insight on his own opinions on the subject. Veblen (1894a) reviewed a book by Karl Kautsky, where the author defended representative and parliamentary democracy. Veblen saw Kautsky’s position as a limited accommodation to existing institutions. Otherwise, Veblen gave little indication of his own views. In another review, Veblen (1894c) praised a bibliographic reference work on socialism and communism by Joseph Stammhammer.

Veblen’s (1894b) note on the “Army of the Commonweal” referred to a major protest march of unemployed American workers in that year. It reveals a little more about Veblen’s own views. While sympathizing with the plight and aims of the protestors, Veblen (1894b, 458) noted that their appeal was very much for the state machine to act on their behalf. Such an outcome would be “extremely doubtful” because it would involve a “paternalism, or socialism, on a scale that is not borne out by the experience of the past.” Veblen (1894b, 459) noted that their appeal was “to the general government, and through the general government to all the rest of the community, without intermediation of any lower or local body.” This failure to consider local and other intermediate institutions reminded Veblen (1894b, 460) of “the Socialists of the Chair, whose point of departure is the divine right of the State; whose catch-word is: “Look to the State;” whose maxim of political wisdom is: “‘The State can do no wrong.’ … It is the spirit of loyalty, petition, and submission to a vicarious providence. This position has been euphemistically termed State Socialism, but it is, in principle, related to socialism as the absolute monarchy is to the republic.” Here, more clearly than before, Veblen distanced himself from state socialism. But he did not elaborate on the institutions and conditions that would be necessary for socialism to be decentralized. He never provided an institutional sketch of a decentralized socialism along these lines.²

This was a major omission. A key question is through what mechanisms the devolved, small-scale socialist units coordinate with each other, and how resources are distributed nationally and globally. If this is to be done by state planners, then the system becomes a form of state socialism, despite devolutionary sentiments to the contrary. The alternative option is to embrace markets as coordinating mechanisms, with a diminished role for the state. Arguably, it is only with markets that small-scale socialism can remain viable (Hodgson 2019). But Veblen, like many other socialists, rejected all markets.

A further eight reviews in the Journal of Political Economy are mostly on texts about socialism. Veblen’s (1895) review of Socialism by Robert Flint raises a number of objections to Flint’s arguments against socialism and laments his lack of impartiality. There is also a mention of Albert Schäffle’s (1874; 1885; 1892) work, which contain important early arguments on the unfeasibility of democratic socialism (Hodgson 2007 and 2010).³ Veblen (1896) then published a combined review of Marx’s Misére de la Philosophie and Enrico Ferri’s Socialisme et Science Positive. Passing quickly over Marx’s work, Veblen devoted more attention to Ferri’s juxtaposition of the ideas of Darwin, Spencer, and Marx. I have argued elsewhere that this review played a significant part in Veblen’s development of his Darwinian version of evolutionary economics (Hodgson 2004, 140ff.; Camic and Hodgson 2011, 49–50). But we focus here on the issue of socialism. Ferri defended socialism against what he saw as Darwinian objections, including the evolutionary emphasis on competition, struggle, differentiation and inequality. But Veblen (1896, 100–101) saw Ferri’s depiction of Darwinism as “illegitimate.” He countered Ferri with this argument:

The struggle for existence, and therefore the fact of a selective adaptation, is a fact inseparable from the life process, and therefore inseparable from the life of mankind; but while its scope remains unaltered, the forms under which it expresses itself in the life of society change as the development of collective life proceeds. The most striking general modification … is seen in transformation of this struggle for existence … into a struggle for equality…. This struggle for equality, as is to some extent true of any other expression of the struggle within a given society, takes the form of a struggle between classes, and necessarily so. It is therefore a struggle for existence on the basis of solidarity and co-operation.

Hence, by echoing the place of cooperation in Darwin’s (1871) theory of human evolution, Veblen saw socialism and Darwinism as compatible. Veblen’s next review is of a German text on socialism by Richard Calwer. Among other things, Veblen (1897a) highlighted Calwer’s insistence that socialism should ideally come by peaceful means. The following four relevant reviews by Veblen (1897b; 1897c; 1898a; 1898b) provide relatively little illumination on his own views on socialism, other than by indicating his rejection of the labor theory of value.

Veblen’s essay on “The Beginnings of Ownership” is relevant to this discussion only insofar that its author distanced himself from the Marxist notion of primitive communism. For Veblen (1898c, 358) “no concept of ownership, either communal or individual, applies in the primitive community. The idea of communal ownership is of a relatively late growth.” In a review in a politics journal, Veblen (1899a) gave socialism a very brief mention. Veblen’s (1899b) first book, entitled the Theory of the Leisure Class mentions neither socialism nor communism in its text.

Veblen’s Later Statements on Socialism: 1900–1929

The next significant mention of socialism is in a 1901 essay. There Veblen (1901a, 231–232) referred near the end to “what is vaguely called socialism” and “socialist vagaries,” thus gently chiding prominent advocates, including perhaps himself, while noting that “socialistic thinking … contemplates … the elimination of the institution of property.” Veblen (1901b) also noted Gustav Schmoller’s hostility to socialism, but without much further comment.

The discussion of socialism in Veblen’s The Theory of Business Enterprise (1904) is longer than in any other of his works. There Veblen (1904, 331–356) devoted twenty-six pages to socialism and trade unionism. But these pages are more about the causes of these social movements, than of the nature, feasibility, or validity of socialism. Veblen (1904, 338) made it clear that his discussion addressed the “causes of the socialist disaffection; it does not concern the profounder and more delicate point, as to the validity of the socialist contentions.”

Nevertheless, he did make some brief revealing comments on socialist doctrines. Veblen (1904, 337–338) noted: “[t]here is little agreement among socialists as to a programme for the future. Their constructive proposals are ill-defined and inconsistent and almost entirely negative…. Current socialism is an animus of dissent from received traditions.” In a footnote Veblen (1904, 339n.) added that socialism “demands a reconstruction of the social fabric, but it does not know on what lines the reconstruction is to be carried out.” These remarks again highlight Veblen’s worry that socialists had “little to offer” beyond vague generalities.

In the same footnote he expressed another concern: “it is difficult to see how any scheme of civil rights, more or little, can find a place in a socialistic reorganization.” This was another vital insight, especially in the light of later revolutionary events in Russia and elsewhere. The problem of “vagueness” of proposals concerning the nature and organization of a socialist society, plus the concern about the compatibility of socialism with civil rights, were some years later to be dramatized after the Bolshevik seizure of power. The Bolsheviks found that the socialist literature offered little guidance on policies. And civil rights were quickly eroded.

Some pages later, Veblen (1904, 355–356) made another important claim: “[t]he political bias of this unmitigated socialism is always radically democratic … The state is doomed in the socialistic view. The socialist antagonism to the state takes various forms” and “socialist malcontents” have the conviction that “the community can best get along without political institutions.” Here Veblen highlighted versions of socialism based on direct community democracy, which is supposed, somehow, to eventually dispense with the state and all political institutions. But Veblen offers no institutional detail on how this would work. Here he suffered from the same “vagueness” that he found in others.

We now turn to Veblen’s (1906b; 1907) two-part essay on “The Socialist Economics of Karl Marx and His Followers.” This important work offers a penetrating critique of Marxist theoretical analysis, but it provides very little on the nature or feasibility of socialism. In one important passage, Veblen (1906b, 582) attacked the teleological view of history in Marxism with “the assumed goal of the Marxian process of class struggle, which is conceived to cease in the classless economic structure of the socialistic final term. In Darwinism there is no such final or perfect term, and no definitive equilibrium.” Veblen (1907, 309) added: “[i]t is quite impossible on Darwinian ground to foretell whether the ‘proletariat’ will go on to establish the socialistic revolution or turn aside again, and sink their force in the broader sands of patriotism.” Hence Veblen rejected notions of socialist inevitability or proletarian destiny. In a note on the extent of public ownership after the socialist revolution, Veblen (1907, 309) reported that “the peasant. proprietors will not be disturbed in their holdings by the great change. The great change is to deal with capitalistic enterprise.” In a footnote Veblen (1906b, 578n.) referred to Schäffle’s (1874; 1885; 1892) publications (which argue that democratic socialism is not feasible) but without any further exploration of Schäffle’s argument. Veblen’s two-part essay on Marxism has huge strengths, but exegesis on the nature and feasibility of socialism is not one of them.

No substantial discussion of socialism is found in any of Veblen’s works from 1908 to 1920 inclusive. Veblen’s 1921 book on The Engineers and the Price System is a collection of papers that Veblen published previously in The Dial. There Veblen (1921a, 87–88) wrote: “[n]o movement for the dispossession of the Vested Interests in America can hope for even a temporary success unless it is undertaken by an organization which is competent to take over the country’s productive industry as a whole, and to administer it from a more efficient plan.” But it is not shown how such comprehensive planning would be compatible with the extensive democracy that he advocated previously, or how it could avoid the state socialism that he had warned against (Veblen 1894b, 458–460; 1904, 355–356).

Veblen (1921a, 134) added: “[t]he chances of anything like a Soviet in America, therefore, are the chances of a Soviet of technicians” but this “is at the most remote contingency.” Edwin Layton (1962) argued persuasively that Veblen had earlier put his radical hopes in the engineers, but he had mis-read nature and motivation of their professional organizations in the United States. It is also symptomatic that Veblen saw the operation of an economic system as largely a matter of technical knowledge and efficiency, and not additionally of devolved incentives and of the institutional processing of dispersed knowledge. The failure of Veblen’s project to recruit and energize the engineers seems to have added to his mood of despondency concerning the possibility of socialism after the end of the First World War.

A substantial shift in Veblen’s stance on socialism was revealed in an article he published in a non-academic journal in 1921. In “Between Bolshevism and War” he compared the failures of “orthodox” socialism with the success of the Bolsheviks in Russia. As in previous works, he referred to the abolition of “absentee ownership” as the vital goal of any radical movement aiming to improve conditions. Veblen (1934, 440–441) wrote:

In such a movement to dispossess the absentee owners the Soviet also displaces democracy and representative government, and necessarily so, because democracy and representative government have proved to be incompetent and irrelevant for any other purpose than the security and profitable regulation of absentee ownership.

Here, in contrast to his 1891 essay on Spencer quoted above, Veblen seemed willing to sacrifice parliamentary democracy as well. Veblen (1934, 441) tried to persuade his American readers by assuring them that “the Soviet appears to be very closely analogous to the town-meeting as known in New England history.” But at best the analogy is loose. Soviets were based on the workplace and excluded non-employees. The Russian Soviets became dominated by the Communist party-state. By contrast, New England town meetings are open to all citizens, within a multi-party democracy. Veblen (1934, 442) returned to his comparison between orthodox socialism and Bolshevism: “Socialism is a dead horse; whereas it appears that Bolshevism is not … The Socialists had hoped to preserve the established political organisation intact, and eventually to take it over for their own use; the Bolshevists appear to harbor no such fancy.” Veblen (1934, 447–448) concluded his 1921 article on this climactic note: “[t]he established order, economic and political, rests on material circumstances which ceased to exist some time ago … The experience of the past few years has shown plainly enough that the established businesslike system of ownership and control will no longer work.”

But it is unclear whether Veblen’s brief celebration of Bolshevism was anything more than the result of despair after the failures of orthodox socialism during and after the war, in obvious contrast to revolutionary success in Russia. In a letter dated August 26, 1922, to editor W. P. Noon, where he declined to review for the Political Science Quarterly two books on socialism, Veblen wrote: “[b]ooks on socialism … do not interest me. [In] my opinion Socialism is a dead issue. Too dead to be a live topic, and too lately dead for objective historical treatment.”⁴

Veblen (1923, 9) briefly mentioned socialism in his book on Absentee Ownership: “[t]he standard formalities of ‘Socialism’ and ‘Anti-socialism’ are obsolete in face of the new alignment of economic forces. It is now not so much a question of equity in the distribution of incomes, but rather a question of expediency as regards the absentee management of productive industry.” Here Veblen suggested that new thinking was required that went beyond the label of socialism itself. But again he was very unclear about the details. By that time, Veblen was cut adrift from academia and lacking in political moorings. His excavations of socialism had ended years before. He died in 1929.

Socialism and the Pecuniary-Industrial Dichotomy

We now turn to aspects of Veblen’s theoretical writings that may indirectly provide clues on how he dealt with issues that related to socialism and its workability. Veblen is widely associated with the idea that institutions come into conflict with technological development. According to Clarence Ayres (1973, v), Veblen “made the dichotomy of technology and ceremonialism his master principle.” Ayres (1961, 30) also saw institutions as essentially ceremonial, and hence the “Veblenian dichotomy” between institutions and technology entered the literature (Waller 1982 and 1994).

Veblen’s writings tell a slightly different story. His position is different from that which Ayres attributed to him. There is no clear “dichotomy of technology and ceremonialism” in Veblen’s writing. Likewise, there is not much evidence in his writings of a general dichotomy between technology and institutions (Hodgson 2004, chap. 17). The more persistent dichotomy in his work is between “industrial” and “pecuniary” activities, or between “industry” and “business.” Veblen (1899c, 114; 1901a, 206) explained that this distinction between “pecuniary” and “industrial” employments “marks the difference between workmanship and bargaining,” or production and distribution. For Veblen, “industrial” employment includes labor and management leading to production. “Pecuniary” employment relates to the valuation, marketing and distribution of that which is produced.

Veblen (1899c, 113) explained that the aim of this distinction is “to indicate the different economic value of the aptitudes and habits of thought fostered by the one and the other class of employments.” As Veblen himself suggested, this dichotomy has its precursors in the classical distinctions between productive and unproductive labor, and between use value and exchange value. Veblen (1899c, 115) also referred approvingly to John Stuart Mill’s claim that production—by contrast to distribution—is essentially a matter of the laws of nature.⁵

Marx had a similar view. Gerald A. Cohen (1978, 108–111) showed that the separation (by Mill and others) of the “natural,” “material,” or technological content of production from its (historically specific) social form is equivalent to Marx’s distinction between “forces” and “social relations” of production. Cohen also showed that Marx’s attempt to criticize Mill’s account is a failure. It is possible that Mill influenced Marx on this issue. It is also possible that Veblen took on board the dichotomy between technology and social relations from Marx as well as from Mill.

Cohen (1978, 105) highlighted the significance for Marx of this distinction between socio-economic form and material content, “[b]y inviting focus on the material process operating within the capitalist economic form, it discredits capital’s pretension to being an irreplaceable means of creating material wealth.” Veblen also thought that capitalism was replaceable. He focused on historically specific social relations in a market economy, including those that gave rise to pecuniary goals. Hence Veblen’s distinction between “industrial” (material) and “pecuniary” (specific socio-economic) employments was used in attempts to discredit markets, private property, and pecuniary motivation.

While technology was seen as subject to the laws of the natural sciences, both Marx and Mill saw alternative arrangements concerning distribution and social organization as possible. But they differed on what they saw as possible or desirable. Marx promoted a form of state socialism, without markets. By contrast, Mill ([1871] 1909, 209–217, 792; [1879] 2009, 221–279) favored worker cooperatives but insisted that they should also be private ownership and market competition. While sharing, with Mill and Marx, their separation of “physical” productive forces from social organization and distribution, Veblen took an unclear, third normative position. He embraced socialism but rejected both state socialism and markets.⁶

According to Veblen (1899c, 114), pecuniary employments “rest on the institution of private property” while industrial employments “rest chiefly on the physical conditions of human life.” Similarly, Veblen (1901a, 205) suggested that while business centers on the “higgling of the market,” industrial employments are aimed at “the shaping and guiding of material things and processes.” Industry is “primarily occupied with … material serviceability … rather than … exchange value” and is to be understood in terms of “[p]hysics and the other material sciences.”

A problem with this argument, which derives from Mill and Marx, is that (physical) industrial output depends upon and is affected by the (social) organization of the firm. Social relations permeate industrial as well as pecuniary employments. Even if we avoid the extremes of social constructivism, there is a large literature testifying to the interaction and inseparability of social technology and organization.⁷ From this viewpoint, production is necessarily institutional, and it cannot be reduced to physical conditions without the inclusion of organizational and motivational matters as well.

Veblen (1901a, 205–206) admitted that pecuniary and industrial activities interact and “business activity may … effect an enhancement of the aggregate material wealth of the community, or the aggregate serviceability of the means at hand.” He acknowledged that particular business arrangements often lead to greater industrial output. Veblen (1901a, 209–210) went as far to admit that “shrewd business management is a requisite to success in any industry that is carried on within the scope of the market. Pecuniary failure carries with it industrial failure … In this way industrial results are closely dependent upon the presence of business ability.” Here Veblen admitted that technology was tied up with matters of management and ability that affected its outputs.⁸

But this 1901 admission has two defects. First, despite his institutionalism, he accounted for differences in output that are due to different business arrangements on output in terms of the “business ability” of individuals. He omitted the nature or structure of organizations. Technology is bound up with social relations and organizations as well.

Second, while assuming that it is possible, Veblen avoided the question of how industry could be organized outside “the scope of the market” and whether a greater or lesser industrial output would result. While he was normatively disposed towards non-market solutions, he did not explain in detail what they are, or how they would work. Veblen (1914, 24n.) wrote that the “all-pervading modern institution of private property appears to have … grown out of the self-regarding bias of men in their oversight of the community’s material interests.” This suggests that “the community’s material interests” are not served by private property. But Veblen failed to give an account of how an alternative society could be organized without private property or markets—how knowledge would be tapped and used, how decisions would be delegated and made, how people would be incentivized to work effectively, and how the rewards of production would be distributed. Hence the institutionalist John Maurice Clark objected:

As for the technical processes, neither Veblen nor anyone else has ever shown how social efficiency can be organized on a technical basis alone…. Veblen’s antithesis [between business and industry], valuable as it is as a challenge to orthodoxy, cannot serve the purposes of a constructive search for the line of progress. This calls for an evolution of our scheme of values, not for a ‘technocracy’ which ignores value. (Clarke and Bye 1925, 57)

Veblen (1921a, 100) declared: “Twentieth-century technology has outgrown the eighteenth-century system of vested rights.” But he did not describe the system of economic organization and coordination that was appropriate for twentieth-century technology. He never gave a detailed picture of an alternative mode of organization of modern industrial society, other than his vague references to a “Soviet of engineers” or an “industrial directorate” of experts (Veblen 1921a, 144). With his insufficiently grounded presumption that private property and markets are entirely dispensable, Veblen converged with Marxism, despite his other analytical differences with that doctrine.

If production is inseparable from organization and motivation, then we have to face the question of organizational and other incentives. In modern economies, are private property and markets essential spurs to innovation, entrepreneurship and economic growth? No-one has yet provided an adequately detailed and viable account of how a large-scale, complex, modern economy can be organized without some private property and some markets. Arguably incentives could be maintained in a mixed economy where the state also plays a major role, as found in many modern economies. These questions are of course controversial. Sadly, on such matters, Veblen is of little help. Like many socialists of his time and ours, he simply assumed that markets are dispensable.⁹

Implications for Socialism of Veblen’s Views on Knowledge

Veblen had a highly sophisticated view of the role of productive knowledge, which compares well with the views of many of his contemporary economists. Following Charles Sander Peirce, William James, and others, Veblen stressed that all knowledge is rooted in ingrained habits. He argued that the social complex of interacting individual habits constituted a social stock of knowledge that could not be associated with individuals taken severally. As Veblen (1898c, 353–354) put it:

Production takes place only in society—only through the co-operation of an industrial community. This industrial community … always comprises a group, large enough to contain and transmit the traditions, tools, technical knowledge, and usages without which there can be no industrial organization and no economic relation of individuals to one another or to their environment. The isolated individual is not a productive agent. What he can do at best is to live from season to season, as the non-gregarious animals do. There can be no production without technical knowledge; hence no accumulation and no wealth to be owned, in severalty or otherwise. And there is no technical knowledge apart from an industrial community.

Veblen (1908a, 539–540) argued that learning and experience are accumulated within a community:

These immaterial industrial expedients are necessarily a product of the community, the immaterial residue of the community’s experience, past and present; which has no existence apart from the community’s life, and can be transmitted only in the keeping of the community at large.

Veblen (1914, 103) repeated this point, referring to technological knowledge and its storage in the social group:

Technological knowledge is of the nature of a common stock, held and carried forward by the community, which is in this relation to be conceived as a going concern. The state of the industrial arts is a fact of group life, not of individual or private initiative or innovation. It is an affair of the collectivity, not a creative achievement of individuals working self-sufficiently in severalty or in isolation.

Nevertheless, he made it clear that the collective domain of knowledge devalues neither the role of the individual, nor the fact that knowledge is always held by individuals and is a matter of individual experience. As Veblen (1908a, 521) put it:

The complement of technological knowledge so held, used, and transmitted in the life of the community is, of course, made up out of the experience of individuals. Experience, experimentation, habit, knowledge, initiative, are phenomena of individual life, and it is necessarily from this source that the community’s common stock is all derived. The possibility of growth lies in the feasibility of accumulating knowledge gained by individual experience and initiative, and therefore it lies in the feasibility of one individual’s learning from the experience of another.

The individual and the social aspects of knowledge are connected because the social environment and its “common stock” of experience provide the means and stimulus to individual learning. The social environment is the result of individual interactions, but without this social environment the individual would be stultified. The above quotations make it clear that Veblen saw the social domain as part of the storehouse of knowledge. Veblen (1906a, 592) wrote of “habits of thought that rule in the working-out of a system of knowledge” being “fostered by … the institutional structure under which the community lives.”

With these arguments Veblen made a radical break from the view that production is entirely a result of owned factors of production—such as land, capital, and labor—whose owners can be remunerated according to their marginal products. Veblen (1921a, 28) argued that production depended on a “joint stock of knowledge derived from past experience” that itself could not become an individually owned commodity, because it involved the practices of the whole industrial community. Producers were interdependent and it was difficult to separate their individual contributions. This is part of Veblen’s (1908b) powerful critique of neoclassical economics, and in particular of its theory of distribution.

But here we are concerned with the relevance of Veblen’s view of knowledge for his theory of socialism. Friedrich Hayek’s (1944 and 1948) argument that comprehensive and effective central planning are thwarted by the impossibility of bringing together all relevant knowledge at the disposal of the central planners—as if in a single head—is well known. Hayek argued that much knowledge is irretrievably dispersed. Like Michael Polanyi (1967), Hayek (1952 and 1988) stressed the importance and permanence of tacit knowledge.

Veblen’s argument is different in some respects, but it could lead to similar conclusions about the difficulties inherent in central planning. Veblen’s argument concerning the habitual nature of knowledge could be augmented by some notion of its unavoidable tacitness. But this addition is not automatic. For example, John Dewey (1922)—who was an influence on Veblen—also stressed that knowledge was grounded on habits. But Dewey (1916, 401; 1927, 158, 209) argued that, in principle, knowledge could be widely shared and made available to others. This might seem to make a nationwide system of socialist planning possible. Sure enough, from the 1930s Dewey advocated a guild socialism that attempted to combine some national planning with workers’ control of industry, as G. D. H. Cole had proposed earlier (Cole 1920; Westbrook 1991, 249, 455–457). We can only speculate whether Veblen would have taken a similar view if he had studied guild socialist writings. Guild socialism reached its zenith in the early 1920s, after Veblen had become disillusioned with conventional socialism.¹⁰

On deeper reflection it is difficult to reconcile Dewey’s view that knowledge is readily transferable with his view that it is rooted in habits, which are never fully available to our conscious mind. But that is what Dewey tried to claim. The economist Frank Knight (1936, 230) criticized Dewey’s view that much relevant knowledge could be readily shared as a “vague mystical conception … a kind of intellectualized gregariousness.” There is no clear indication whether Veblen would have followed Dewey or Knight on this issue. Given his affinity to Dewey, we might guess the former. But any admission of the tacitness and restricted transferability of much knowledge would have blocked the Deweyian option. According to one analysis of the nature of tacit knowledge, its strongest and least transferable form is associated with the complexities and ambiguities of language in the context of socialization: “Society, which is responsible for all our collective tacit knowledge, runs on socialization and language” (Collins 2010, 170).¹¹ This undermines Dewey’s view of the eventual transferability of most relevant knowledge, but chimes with Veblen’s insistence of its collective nature.

If Veblen had gone further to consider the roles of language and socialization, then his emphasis on the collective and community-based nature of much knowledge might possibly be used to show further difficulties in the way of central planning. But Veblen did not go further in his writings. Yet it is possible, as a matter of conjecture, that Veblen’s apparent (intuitive) preference for small-scale socialism, established in communities and workplaces, may have been grounded in part on his community view of knowledge. More textual evidence would be required to turn this conjecture into a sustainable proposition.

Conclusion

Veblen’s sympathy for socialism is clear in his writings from the 1880s to the First World War. He was aware that socialism meant the abolition of private property, as Karl Marx and Robert Owen had also made clear. Veblen regarded the system of private property as “wasteful.” His reluctance to be more explicit about his normative views on the topic is explicable in terms of the academic nature of most of his writings on this issue, and his desire not to give more ammunition to academic authorities who had readily fired socialists and other radicals in his time.

Several analytical themes emerge from his writings on socialism in this period. His 1891 essay on Spencer suggested that socialist public ownership could be combined with democratic institutions. But while Veblen was aware of Schäffle’s (1874; 1885; 1892) argument that democracy and widespread nationalization were incompatible, he did not explicitly concur with that conclusion. Veblen did have strong qualms about state socialism and excessive concentrations of central power. His 1894 essay on the “Army of the Commonweal” calls for local organs of democratic representation. In 1904 he identified socialism with direct community democracy and in a 1921 book he called for “soviets” of engineers (Veblen 2021a). Consequently, while Veblen did not take the anarchist step of immediately rejecting state legitimacy and power, he was concerned to build socialism on democratic local organizations. But by the 1920s he was despondent about such possibilities.

Veblen repeatedly criticized other socialists for being unclear about the detail of their proposals. Instead, according to him, socialists offered little explanation beyond vague generalities. But despite this repeated criticism, Veblen himself offered no institutional sketch of how socialism could work in detailed terms.

It is also revealing how Veblen’s views on socialism relate to other key aspects of his thought. It is argued here that his dichotomy between “business” and “industry” (which derives from Mill) played a role in his rejection of markets (as in the similar case of Marx). But the view of industry that is shared by all three authors plays down its organization character. Industry is as much about institutions and social relations as it is about the laws of physics and chemistry.

Although Veblen had a sophisticated view of knowledge, emphasizing its embeddedness in the community, as well as the role of individuals as its repositories, he is much less clear on the question of its tacitness and transferability. These issues relate closely to the question of socialism and the possibility (or otherwise) of large-scale comprehensive planning. If large segments of knowledge relevant to planning cannot be accessed by the center, then planning cannot adequately fulfill the socialist objectives of efficiency, fairness, and need satisfaction.

Much of Veblen’s legacy would remain if the aforementioned flaws were corrected. His stress on institutions, his sophisticated psychological analysis, his perception of the importance of Darwinism for social science, and his powerful criticisms of mainstream economics and Marxism, would all endure, alongside much else of enormous value. But the recognition that production is a social as well as a technological process, thus requiring organizational structures and incentives, would undermine the presumed dichotomy with “business” and the consequent blanket rejection of private property and markets. Likewise, any emphasis on the tacitness and problematic transferability of knowledge would move us in a similarly skeptical direction on the question of socialism (as both traditionally and currently defined) and of its feasibility. We might become even more cautious about socialist possibilities than Veblen was in his later years.

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Additional information

Notes on contributors

Geoffrey M. Hodgson

Geoffrey M. Hodgson is Emeritus professor at Loughborough University, London. The author thanks Bill Waller and anonymous referees for helpful comments on a previous draft of this essay.

Notes

1 www.collinsdictionary.com/dictionary/english/socialism. Accessed January 16, 2022.

2 Veblen was writing before the rise of the guild socialist movement (Cole 1920). Elsewhere (Hodgson 2023) it is argued that Cole’s model of decentralized power with public ownership is unfeasible, and, despite his intentions, it would lead to concentrated power at the center.

3 Notes taken by his students, including those of John G. Thompson (held in the Joseph Dorfman archive at Columbia University), Schäffle’s The Impossibility of Social Democracy came to the attention of the students attending Veblen’s lecture course at the University of Chicago in October-December 1903. The same book (copies of which are extremely rare) can be found in the library at Stanford University. Note that, in Schäffle’s time, social democracy and socialism were virtual synonyms. Schäffle’s book would be better titled today as The Impossibility of Democratic Socialism. In the twentieth century, the term social democracy shifted in meaning, and it came to be associated with the promotion of a mixed economy with markets, alongside a strong and redistributive welfare state. This major change was clear in the policy declarations of the German Social Democratic Party (SPD) at its Bad Godesberg Congress in 1959 (Hodgson 2021, 10–13).

4 In Joseph Dorfman Papers, Columbia University, quoted in Tilman (1996, 197) and in Camic (2020, 468). Underlining as in the original.

5 Mill ([1871] 1909, 199) wrote: “[t]he laws and conditions of the Production of wealth partake of the character of physical truths. There is nothing optional, or arbitrary in them.”

6 See Hodgson (2019, chap. 2) for arguments that viable decentralized socialism requires markets.

7 See, for example, Suchman (1987), Button (1993), Star (1995), Collins and Kusch (1998).

8 In a later publication, Veblen moved slightly closer to a view that technology is inextricably entwined with social relations. Veblen (1923, 280) wrote: “[t]he technological system is an organisation of intelligence, a structure of intangibles and imponderables, in the nature of habits of thought. It resides in the habits of thoughts of the community and comes to a head in the habits of thought of the technicians.”

9 For further arguments and evidence on these points see Hodgson (2019).

10 See Hodgson (2021, 15–16) for remarks on Dewey’s views on knowledge and socialism. Hodgson (2023) shows that the guild socialists proposed nationalization rather than devolved common ownership and that their system had an unavoidable centralizing dynamic.

11 For other views on tacit knowledge see Reber (1993), Collins (2010), Oğuz (2010), Gascoigne and Thornton (2013).