Allyn Young’s Role as a Critic: Criticism as a Method to Advance Theory

Abstract

Allyn Young’s wide knowledge of the economics literature placed him in an ideal position to critically review the work of others. His own attitude was that the discipline of economics was wide open for criticism, improvement, and refinement. He reviewed (or commented on) many authors such as William Stanley Jevons, Alfred Marshall, Arthur C. Pigou, Ralph G. Hawtrey, Irving Fisher, Francis Y. Edgeworth, Thorstein Veblen, Joseph Schumpeter, and John Maynard Keynes. Young used criticism as a method to advance and refine economic theory. For example, he criticized Marshall’s notion of consumers’ surplus and Pigou’s on social cost. He engaged in a long correspondence with Fisher on the theory of index numbers. He disagreed with Fisher that the general price level needed stabilizing. Young agreed with Veblen that economics needed an evolutionary approach and could be more fruitfully studied in terms of disequilibrium and cumulative causation, but disagreed that the discipline was based on a hedonistic psychology.

Keywords:

• Allyn Young
• Alfred Marshall
• Thorstein Veblen
• Ralph Hawtrey
• Economic Method

JEL Classification Codes:

• B10
• B13
• B15
• B25
• B31
• B41

Notes

1 See, for example, Sandilands (2000), Chandra and Sandilands (2005), Perala (2006), and Chandra (2020, 2022).

2 At Hiram College, apart from mathematics and physical sciences, he also studied Latin, French, and German (Blitch 1995, 5). Perhaps he had read through important economics works in these languages as is evident from the reference lists he provided to the various articles written by him. See for example his entries on “Economics,”“Capital,” “English political economy,”“Economics and war,” etc. in Mehrling and Sandilands (1999).

3 For example, his former Harvard student Howard S. Ellis, in a letter to Charles Blitch, dated November 1, 1973, wrote: “In my estimation, all students particularly interested in economic theory gravitated towards Young . . . I always felt that Young was a truly great man, original and productive in economic theory with a strong sense of relevance and importance . . . ” Similarly, another student, Seymour S. Harris, reminisced: “I wrote my thesis with Professor Young when I was at Harvard and knew him reasonably well . . . As soon as he came to Harvard, he virtually took over the graduate school, and all the bright students wrote their thesis under him . . .He was a charming man, a great teacher and a first rate scholar, though he did not write much.”

4 Regarding Young, Peter Newman (1987, 939) observed: “He was above all a great critic, and great critics, like great journalists and great wits, seldom survive into posterity.” In a letter to Young, dated January 7, 1927, Wesley Mitchell, in response to Young’s comments on his manuscript on index numbers, stated: “I appreciate the trouble you are taking the more highly because I know how busy you must be. Certainly you have a great gift of criticism and I count myself fortunate in being one of the beneficiaries (emphasis added).”

5 Lauchlin Currie (1990, 12, italics in original), Young’s student at Harvard, stated: “Perhaps the most enduring lesson I learned from Young was that the subject was wide open to modifications and improvements. He gave the impression of thinking as he went along. He continually opened up exciting vistas.” Similarly, another student Eleanor L. Dulles, in a letter to Charles Blitch, dated December 31, 1974, wrote: “Allyn Young was a professor who kept developing his ideas with his class. His students participated in this development—he was nearly a perfect teacher . . . Every year he progressed with new concepts in the field of monetary theory. None of his conclusions as to others’ views were frozen, all were to be re-examined in the light of new experience.”

6 By evolutionary approach, Young meant the application of “laws” (or generalizations) of economics or the role of the state were valid for a particular stage of society. For that reason he thought that various approaches to economics—deductive, inductive, historical, institutional, abstract—were complementary in seeking economic truth. He commended English political economy not for the finished doctrines it provided but for its apparatus or method which helped solve communal economic problems. Like Marshall ([1890] 1920), he also thought of an economic system as an organon and looked at the economic phenomenon in its togetherness. “The economic system grows and evolves, like a living organism, by means of successive adjustments and adaptations. But change breeds change, and every new adjustment paves the way for another” (Young 1929; Mehrling and Sandilands 1999, 411).

7 This is not to say that Young used criticism as the only method to develop new ideas. He was particularly fascinated by the abstract method of the classical political economy as well as the historical method of the German historical school. While the former had instrumental value in solving practical problems, the latter gave us wisdom in our efforts to seek economic truth. He however warned that the attempt made by members of the German historical school (except Karl Knies) to decipher economic laws from this approach akin to physical sciences was misguided.

8 This motto may be subject to various interpretations. In Industry and Trade, Marshall’s (1919, v) motto was “The many in one, and one in many.” “This motto supplements the motto of my principles which is: Natura non facit saltum: i.e. economic evolution is gradual and continuous on each of its many routes.”

9 Many of the quotations are from the archival material collected by Charles Blitch (for his biography of Allyn Young) and from his personal correspondence with Young’s former students. He left these materials with Roger Sandilands before his death and the present author took photocopies of these materials from Roger Sandilands. See also Blitch (1995), Chandra (2020), and Sandilands (2009) for the use of these materials.

10 “A perfectly abstract economics is impracticable. A system concerned merely with the relations of variables which are defined only by their mathematical attributes is not economics, any more than pure mathematics is mechanics” (Young 1928a; Mehrling and Sandilands 1999, 25).

11 Rather it was the opposed process of industrial differentiation which lay at the heart of industrial growth. Young (1928b, 537) stated: Much has been said about industrial integration as a concomitant or a natural result of an increased industrial output. It obviously is, under particular conditions . . . But the opposed process, industrial differentiation, has been and remains the type of change characteristically associated with the growth of production. Notable as has been the increase in the complexity of the apparatus of living, as shown by the increase in the variety of goods offered in consumers’ markets, the increase in the diversification of intermediate products and of industries manufacturing special products or groups of products has gone even further.

12 Young pointed out that if we look for increasing returns under individual firms or industries, even if they are large, we are likely to miss them. As the size of the market expands, industrial production splits up into a number of smaller specialized undertakings or industries. So it was industrial differentiation rather than integration (or consolidation) which was at the heart of increasing returns. Here he gave the example of printing trade which splits up into a number of specialized undertakings as production expands.

13 See Cheng and Yang (2004) and Houthakker (1956) for the role of organization and its link with Young’s contribution on increasing returns.

14 Young stated that economies of mass production or large-scale operations are not available for the taking. So-called rational economic reforms have their limits: “Pressed beyond a certain point they become the reverse of rational” (Young 1928b, 531). He observed that the American industry had been more effective than the British in the post-WWI period because of its larger market.

15 “We should be careful to observe . . . that land in itself does not constitute a monopoly despite many thoughtless assertions to the contrary. The ownership of land is, as a whole, minutely subdivided. There is hardly any other important productive good the ownership of which is so evenly distributed as the ownership of land. This is true despite the glaring differences in land ownership . . . There are differences in land, but differences do not constitute a monopoly . . . [O]ne piece of land may be better than another, but that does not give its owner a monopoly. As a matter of fact, the owner of the land in most cases will have paid for whatever differential superiority it may have” (Young 1929a; Mehrling and Sandilands 1999, 248).

16 Coase’s arguments however fail in case of large social ‘bads’ like atmospheric pollution or plastic waste. Besides, transaction costs in real life may not be zero.

17 Young (1913) lauded Pigou for his admirable discussion of various sorts of economic friction that tends to prevent the perfect equality of marginal net products, but his conclusions regarding the range and variety of considerations to be taken into account in public regulation of monopoly would have benefitted from a closer look at the work of American public utility commissions.

18 The only exception was Joseph Stiglitz (1986, 403–404) who stated that the Ramsey tax rate was inversely proportional to the sum of the reciprocals of the elasticities of supply and demand. See also Stiglitz (2015) on Ramsey’s contribution to the theory of optimal taxation.

19 See also Colacchio (2005) for the idea of “disproportionality crisis” in Young.

20 Long before Young, Adam Smith ([1776] 1976), in The Wealth of Nations, regarded the desire of the rich to acquire “baubles and trinkets” and indulge in a display of wealth for gaining approval of their fellowmen as a necessary motivating force of the system. In the Theory of Moral Sentiments, Smith ([1759] 1976) regarded the consumption of the rich as a way of distributing necessaries of life to the poor.

21 Young made a distinction between laissez-faire and competition. He stated that the message from Smith is not a completely hands-off approach to economic matters but competition. “[I]n fact, no first rate economist ever was an upholder of laissez faire—though some second rate economists were: e.g., Bastiat” (Young 1990, 26).

22 Earl J. Hamilton, in a letter to Blitch dated February 14, 1973, wrote: “One thing my notes taken in 1924–26 conclusively showed was that every worthwhile idea in E. H. Chamberlin’s subsequent work on imperfect competition had clearly been expounded by Allyn Young in class long before Chamberlin put pen to paper. Curiously, Young credited Cournot for most of what he said! He was an epitome of modesty.” Similarly, Milton H. Heath, Young’s student at Harvard, on his copy of Chamberlin’s (1933) book, noted on page 105: “This matter of excess capacity was a question grad. students discussed at length in early 20s at Harvard.”

23 Young (Ely et al. 1908: 447–448) stated: “Monopoly implies absence of competition. ‘Good will’ profits are to be attributed rather to imperfect working of competition, to the economic inertia and friction which result from the fact that buyers are guided to a very large extent by custom and habit rather than by conscious choice.”

24 If a British worker migrated to the United States, his earnings went up sharply with no increase in his technical effectiveness. The reason is that labor is relatively scarce in the United States in relation to other factors of production than in Britain.

25 “The commercial revolution preceded the industrial revolution, for with the growth of trade industrial specialisation became advantageous. The new industrial and economic situation led to inventions, not vice versa” (Young 1990, 18).

26 Many of these were published in obscure journals or encyclopedias and are now available in edited volumes. See, for example, Mehrling and Sandilands (1999).

Additional information

Notes on contributors

Ramesh Chandra

Ramesh Chandra is an independent economist in Glasgow, email address: [email protected].