The indetermination of senior (or the indetermination of Wagner) and Schmoller as a Social Economist

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N9 212

TBE INDETEBMINATION OF SENIOR (OR TBE INDETERMINATION

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WAGNER) AND SClDl)Ia:R AS A SOCIAL ECONOMIST

---Prof. Antonio

~ria

da Silveira

THE INDETERMINATION OF SENIOR (OR THE INDETERMINATION OF WAGNER) ANO SCHMOLLER AS A SOCIAL ECONOMIST

Antonio M. Silveira

SYNOPSIS

The propoaitiona of pure economica, whatever be their generality and their truth, do not authorize normative concluaiona, but cannot be ignorado The latter, namely what ought not to be done, ia derivable from aocio-economica. The derivation ia to be qualifiad by the apecificitiea of the caae.

I have callad thia the Indetermination of Senior; Wagner and Marahall were quite aware of it. The habit of ignoring it ia the Ricardian Vice; Schmoller'a fight . . y have been a reaction again.t the l.tter. The Metbod . . . treit waa the fir.t great paradigmatic conflict between pure and .ocial economiata.

JEL: BOO Methodology and Hiatory of Bconom1c Thought. ltEYWORDS: Real iam, Applicability of Theoriea, Ricardian Vice, Socio-Bconomica, Metboden.treit.

*profe.aor of the Fundaçaõ Getúlio Varga. and the Univeraidade Federal do Rio de Janeiro. Thia paper waa given at the "COnference on Schmoller and wagner" held in Heilbronn, Germany, October 15-18, 1992, and will be included in the forthcoming book •••• y. in BODOur of Ou.ta. .on Scblloller &Dei Adolf W.gner (1917-1992). The author thanka, with no implication, Jamea Mulholland for a quick reviaion of hia Engliah, the CAPBS (COOrdenaçàó de Aperfeiçoamento de Peaaoal de Nível Superior) and IPBA (Inatituto de Planejamento Econômico e Social) for financial aupport.

THB IHDBTERMIRATIOR OI' SBRIOR (OR THB IHDBTBRMIRATIOR OI' WAGRBR)

ARO SCBMOLLBR AS A SOCIAL BCOROMIST

Antonio M. Silveira Mathematics is a general and logical capital good for the construction of empirical science. Pure empirical science (e.g. Growth Theory) is a loqical but spacific capital good for the construction of applied empirical science. The latter (e.g. Theory of Bconomic Development) is a dialogical and specific capital good for the improvement of the art of science. The complementarity among these distinct spheres of knowledge is obvious. It is howaver obscured by the economists' Ricardian Vice.

The Ricardian Vice was deacribed and namad -- after David Ricardo (1772-1823) -- by Schumpeter (1986, pp. 540, 1171):

They (Senior (1790-1864), Mi11 (1806-1873) and othere] merely meant that queatione of economic policiee alwaye involve eo many noneconomic elements that they should not be dealt with on the basie of purely economic considerations ••• one could only wish that the economists of that (or any) period had never forgotten this piece of wisdom -- had never been guilty of the Ricardian Vice •

••• what we have called above the Ricardian Vice, namely, the habit of piling a heavy load of practical conclueione upon a tenuoue qroundwork, which wae unequal to it yet seemed in ite eimplicity not only attractive but also convincing.

The Vice is the habit of ignoring nothing less than a major indetermination of all sciences. I have termed it the Indetermination of Senior, even though for all reasons but precedence it should be called the Indetermination of Mill (Silveira 1990b, p. 9).

fte proposi~ioas of pare ~ics, wJaate.er be tJaeir ~ra1i~7 &Dd tlaeir ~ruth, do ao~ authori.e aoraati.e coac1usioas, but c~ be igDOrecI.

a.

1atur, . . . . 17 ... t ougJa~ DOt to be . . . . , is cleri.ab1e froa soeJ.o-ecoaa.ics. fte deri.a~J.oD is to be qua1ified b7 tJae specificities of tJae case.

Thie papar is part of an inveetigation on prominent economiste who have not forgotten "this piece of wisdom". Marshall (1842-1924) stands out in the Bnglish hietory of economics, as much as Wagner (1835-1917) does in the German

side. 80th of th.n have in Reville Xeynes (1852-1949) the consolidation of their methodoloqical view.

On the other hand, the Method . . streit wae the first great paradiqmatic conflict between pure and socio-economists. And it s&.ns 1eqitimate to speculate that Schaaoller's (1838-1917) fight might have been a reaction againat the pure economista' Ricardian Vice.

So ve have toqether the three qreat ~s. Section one suaD&rizee the relevant aspacts of my previous worka. 8ection two covers Wagner and Marshall. Section three reviews Schumpeter's writinqa on Schmo11er and the

lIetbodeas~reit. The papar haa ita skeleton in ten exhibits. They vere constructed and ordered in a self-explanatory faehion, ao that an initial I ~ qlance at them allowa a qraap of the whole argumento

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2 - ARTBCBDBRTS

Three exhibits make up the skeleton of this section and exemplify the expoeition. Bxhibit I shows the Indetermination in the verde of Senior and Mill. It is eaaily seen that I have updated and generalized Senior' s assertion. The readily perceivable forward step was the replac_nt of his dichotomy, science and art of seience, by the trichotomy which aubdivides the formar in pure and applied science.

Senior and Mill recoqnized the fact that art requires many -subservient Sciences". But both of them stopped short of defining applied seience as the locus of positive eombination or intertwinement of the relevant scienees. The

aecond quotation of Mill indicates what is needed for the art of science but cannot be found in the pure and applied scientific knowledge.

Science aims at the explanation of phenomena only in terms of the elements which are perceived as general and necessary for their occurrences. By definition, specific and occaaional factors are ignored. The generalizations of theory abstract from apecificities, however large the potential influence they may exert in the real world.

The confuaion of "generality and necesaity" with "importance" is an error, a general but unnecessary one, which leads to the Ricardian Vice. The awareness of the error is highest among the general practitioners of medicine who put matters in terms of an ethical precept: there are no diseases, there are patients. The specificities of each organism may be more important in many cases, and novelty may evolve from combinationa of specificities with general features of the diaeaae -- aee ltuznets (1972, p. 320) on the unexpected results of the adaptation of technological innovations by a follower country.

The practitioner treata the patient in his wholeneaa, while the medical scientist atudies the diaeaae in its partiality. The study isolates the univeraal elements which characterize a diaeaae. By definition then, the changing wholeneas with which the phenomenon (the diaeaae) occurs ia lost. So, the applicability of science depends upon the recovery of a complete viaion of the real case (of the patient), in alI its individuality or parochiali ...

Bxhibit 11 is a general reference framework~ The laat column shows the diatinction between science and its arta. The l~tter are ex~lified by the works of three prominent professional economists who were deliberately chosen at the prehistory of economic science. The work of Sul1y (1560-1641) has a cloaer counterpart within the modern practice of economica. As mini ater of Benry IV, he conducted one of the outstanding fiacal policies of France, -he knew -- which is the criterion of greatneaa in a fiacal adminiatrator -- how to make fiscal policy an el_nt and tool of general economic policy ••• Nothing can be more obvious than that this man was entirely innocent of any theory whatever" (Schumpeter 1986, p. 169).

Sully waa intereated in the lmaw-bow. Se waa coaaitted to practice. During an extraordinary dialogue with Benry, in 1603, Sully advocated freedom of trade in terms of what later became the concluaiona of Ricardo's theory of comparative advantage. On the same occasion, however, he vehemently condemned freedom of consumption. This waa not a contradiction, notwithatanding the verdict of the acientific mentality. One cannot demand doctrinaire coherence

in practice.

The profeaaional's language is advocacy. In hia project, the professional advocates a solution, taking into account his local and temporal apecificities, uaing his experience and whatever doctrines, sciences, theories or ideas prove th . . aelves relevante It is along theae lines that Pasinetti defends Galiani (1727-1787) and the moral philoaophera against the charges of theoretical contradictions raiaed by modern academica (a . . Bxhibit 111).

Fernandez (1929) endeavora to demonstrate that aimilar chargea againat Machiavelli (1469-1527) are alao baseless -- in the words of Buchanan (1985,

p. 39), Machiavelli is the "ultimate father" of the theory of public choice. Machiavelli's project (passion) was the unification of Italy, and he took aa exogenous the political regime. Se developed precepts for the republican government, when at ita aervice, and for the abaolute monarchy, when this became a clatua.

My experience in politica is perhapa more to the point. I temporarily became Technical OOnaultant to the Federal Senate, on the ataff of Senator E. Suplicy, from September 1991 to January 1992. My work concentrated on the revision of Bill N. 80/1991, a minimum income program under the form of negative income tax, and ita a4yocaer among aenatora and their conaultanta.

During the aecond phaae, I aaked academic economiata, from all achools of thought, to write poaition papera about the programo They were publiahed in newapapera and later collected in a book (Suplicy 1992) -- the BUl waa

approved by the Senate in December 16, 1991. The idea waa the obvioua fact that a proqram gaina credibility aa it ia ahown to be defendable within diatinct linea of thought. Not ao obvioua waa the underlying premiae that each achool haa ita partia1ity or, in other worda, ita half-truth, no more.

COherence ia uaually made viable by partiality. Anyway, coherence ia the great virtue of the acientific activity. In fact, it ia the tool for the conatruction of the worlda of acience. But when the diatinction between pure and applied acience ia needed, one haa to recognize further that the language of the formar tenda to be reduced to logical coherence, while that of the latter necesaarily embracea organic coherence or dialogic.

The motivation of the pure acientiat, exemplified by Debreu, Paainetti and Solow in Bxhibit lI, ia the know-why. The aim ia for theory in the hypothetical-deductive formo The coaaitment ia to OCcam'a Razor: loqical conaiatency and fertility, multiple connection, aimplicity, elegance, etc. The concepta are aimplified in order to .atisfy the Principle of COntradiction of logic.

Rigoroualy apeaking, "frictionlesa movement" and "perfect competition" are conatructa with no real world exiatence. Aa aimplificationa which permit the use of logic, they are entitiea of worlda of pure scienee. These pure entitiea may become so diatant from their real counterpart. that the apecialiat may even lo.e the perception of the applicability of hia knowledge -- aee Debreu in Bxhibit III, reproduced frem Silveira (1992, p.17).

The motivation of the applied acientist, exemplified by Simon, Kuzneta and Anaoff in Bxhibit 11, ia also the know-why, but a know-why which takea into account the know-how. The aim is atill theory, but it haa to be articulated in directly applicable form, i.e. intertwining the distinct aciences which are relevant for each art.

To integrate logically the knowledge of econemica, political acience and aociology which illuminatea the art of economic development, or any of the ahort run policiea, would be to conatruct a new pure science. It may or may not be a utopia in the future, thi. ia not my point here. The fact i. that auch a theory doea not exi.t today. And let me ob.erve that hiatory and ethics are the most important kinda of knowledge, aa Knight say. in Bxhibit III.

In terma of interdiaciplinary work, all that i . poasible ia the dialogical intertwinement of knowledge; Kuznets' theory of economic development and Simon'a behavioral theory of the firm are good examplea. I call dialogic what aeisenberg terma quantum logic, and Georgescu-Roegen denominatea dialectic (a . . Bxhibit 111) -- it ia neither deairable to evoke Marx and Hegel, nor necea.ary to use such a strong word; more simply, dialogic concepta do not have unitary meaning even in the world of ideas: they are not "diacretely diatinct" -- aa Georgeacu-Roegen (1967, pp. 21-31) demonatratea, all economic concepta fit into thia category.

Let me emphasize that applied science differa from what ia usually underatood by applied economica, i.e. the .et of more specialized, cloae to reality, fielda witlliD economica. It ia then advisable to maintain thia meaning for applied economica, and to call .ocial economica, or aocio-economica, the applied iDterdi.cipliDary acience which illuminatea a11 the economic and noneconomic syatematic elementa of the economic phenomena.

2 - WACNER ANO MARSBALL

Three exhibita cempoae the akeleton of thia aection and provide the foundationa of my poaition. Bxhibit IV evidencea that Wagner waa aa conacioua of the Indetermination aa Senior himaelf. In particular, note hia indication of the art of economica aa the fifth chapter of science. The attention to ap8cificitiea ia ahown in hia "careful analy.i. of facta as they are".

wagner reducea what ia general and neceaaary in human behavior to five determinant elementa. The Bconomic Man ia juat the f irat among them. Notwithatanding ita importance, thia dimenaion of the human peraonality

variably combines with the other four. And the changing combinations distinguish individuals and peoples over time, space, and circumstances.

Note also that Wagner does not talk about all kinds of human behavior. He addresses himself to deliberate and industrious actions, leaving outside passionate and spontaneous behavior. Naxt, Wagner identifies two methoda of doing acience (belonging to pure and aocial econemica reapectively), and the errora of their apecialists during the . . tbod . . . treit.

The errors are uaual today. Repreaented by the historian, the aocio-econemist's error ia the resiatance to accept the Economic Man aa one of the general (universal) and neceaaary dimenaiona of human behavior -- it would be correct, however, to underatand that the other dimensiona may neutralize the Economic Man, or reduce to negligible terma ita influence, depending upon the circumatances, the sort of phenomenon, the culture, etc. The pure economist'a error ia the refusal to perceive the other four dimensiona -- thia ia a graat atep toward the Ricardian Vice.

The endemic character of the Vice demanda more than a reference to the poaaible neutralization of the Economic Man. suppose, for the sue of the argument, that the "law of economica" (the Economic Man) haa the univeraality and necesaity of the gravitational law. The latter doea not prohibit the human being frem flying: the profassional angineer neutralizaa the gravitational effect, notwithatanding ita aignificance, using other effects in tha design of his plane.

I do not s . . the need of saying more. An example in businasa, perhaps: take as "plane" the marketing tachniquaa and observe the Economic Man (Bgo, "Adul t") being neutralized by the Spontaneoua Man (Id, "Child") ; this "experiment" can be done by an effort of memory -- introspection --, by the observation of friands or, more formally, in marketing or psychology (Berna 1964) booka -- some of thasa teach how to do it.

The first and sacond Wagnarian chaptars comprisa most of what ia s . . n today aa economic science. 80th are approached frem the two levela of abstraction, pure and social econemics. The latter necassarily daala with the ethic of the econemic agent, tha atlU.c of the ob.aneel not that of the observar, "the senae of duty and the faar of consciance", the fifth dimension of human behavior in wagner'a analysis.

In a reduction to tha logic of Wagner'a first economic behavior, neoclasaical (pura) econemica ignora a the ethical dimensiono Sciantific rigor would then require the explicit postulation of "athiclass behavior", just lika the phyaicist'a antacedant clausa of "frictionlass movement" -- a figurati.a way of doing it is to postulate that the agant' s ethic is nothing but rhetoric; Brunner (1978, p. 663) does it, but frem a differant perapective.

The antecedent clause makes clear the indiract applicability of the theory. It ia up to the socio-econemic sciantist to make, not the critique of the pura clause, but the dialogical incorporation of the ethical dimenaion in the agant'a behavior. Thia ia exactly what the engineering scientist doea in hia dialogical models of "friction movement".

Lat me emphasize that this haa nothing to do with the obsanar's atlU.c, i.e. the value judgmenta of the socio-economic acientist. Today it ia generally accepted that value judgmenta which conscioualy detarmine "what ought to be done" are outaide the chaptera of all aciancea -- it ia ganerally accepted but not alwaya followed.

Science determining what ought to be done ia tachnocracy, the modern version of theocracy. It is science replacing religion in opposition to damocracy. Thia "tachnocratic vice" waa still usual, and not viewed aa a fault, during wagner'a lifetime. When not duly qualified, the third and fourth Wagnerian chaptera revaal today exactly thiB fault.

To qualify iB to recognize that value judgmenta which conacioualy determine what ought to be done ara axoganoua to aconemic Bcience. They are given by politiciana in democraciea, by despota in dictatorshipa, and by economista in technocraciea.

Another important a.pect of the queation ia included in the Indetermination of Senior: pure normative economica ia pure Ricardian Vice. Duly qualified, normative aocio-economica ia what can be underatood by the sci.nc. chapter which informs normative economics. Giv.n the value judgments, it mak.a sense to derive normativa propoaitions for th. real world only from th. sphere of sci.ntific abstraction which tak.a into account all the syatematically relevant elements, the .conomic and the non.conomic on.s. Riqoroualy apeakinq, however, normative .conomics belonqa to the art chapt.r.

Exhibit V shows much of the Ind.termination of Senior in the words of Marshall. What I offer as th. most reduced, ev.n if incompl.te, form of the Indetermination de.erves to be repeated: "Political Bconomy will anawer acarcely any .ocial qu.ation but acarc.ly any .ocial queation can r.ceiv. anawera independ.nt of Political Bconomy".

Th. a ••• rtion was in his fir.t lectur. notes -- a apecial r.coqnition is due to Growneweq.n for ita r.v.lation, as well as for th. editinq of Mar.hall's fir.t writinq:

"on

th. Method and Bi.tory of Bconomic.". Mar.hall was a confirmed socio-.conomi.t. Th. partiality of pura .conomice is cl.arly and firmly .xpo.ed. Let me formulat. a hypoth.si. if I am allowed to postpone its corroboration: the charqes of vacillation, (supposedly tmproper) mediatinq attempts, and ind.finiten.ss rai.ed aqainat him have th.ir oriqin in his .xtreme awar.ne.s of the Ind.termination.

Hotwith.tandinq, waqner accu •• s Mar.hall of a po.sibl. addiction to th. Ricardian Vice, a. Bxhibit VI reveals. Bafor. qoinq into that, howev.r, Wagner identifies him •• lf with Mar.hall in the que.tion of method and ecope of .conomics: Hevill. Keyn.s consolidates their way of thinkinq. Let me mention th.ir point that th. scienc. can only be underetood as th. union of pura and .ocial .conomics. Th. distinction is, howev.r, •••• ntial for -th • • olution of practical and theor.tical controv.r.i •• ••

It is of mor. fundamental importance to ~ha.iz. thi. a.pect nowadaye. The inteqrated vision of Bxhibit 11 nullifiee many controv.r.ie •• That q.n.ral r.fer.nc. framework is particularly qood at di •• olvinq an infinity of qu.stions and mi.under.tandinge.

Cominq back to Bxhibit VI, under the head of 1 imitation. of pura .conomic. I quota Wagner in what I read as th. qreat awar.ne.s of th. Ind.t.rmination in the German .conomic tradition. It follows what looks lik. Wagn.r accusinq Marshall of addiction to the Ricardian Vice, within the Bnqli.h tradition.

De.pit. the located character of th. fault, th. accu.ation is valid in a treatiee which i. suppoaed UDiyer.al. But .till, it . . . advi.able to furth.r inve.tiqat. the accu.ation and . . . whether the fault i. eyet . . . tic. It i. true that nobody can expect, or .uppo •• , that a man be able to .urpa •• hi. time and location in mor. than a few que.tione. A .tronq.r .urpri.e was to . . . Mill accused of th. Vic. by Tol.toy (1876/1981, p. 366) -- in th. aame work, Tolstoy magnificently de.cribes the di.crimination of women in his soci.ty, and r.vea1. the exten.ion to which h. wa. able to overcome ita

"In th. politico-.conomic book., in Mi1l, for in.tanc., which h • • tudied fir.t with ~n.e ardor, hopinq to find out at any moment an anawar to the prob1ems that preoccupi.d him, h. found a number of 1aws that had been deduced from the stat. of Buropean aqricultur.; but he couldn't e . . at all why th ••• law., inapplicabl. in Ru.eia, wer • • uppo.ed to be univ.rsal".

(Let me thank Mauricio Fuks for thi. quotation.)

Bxhibit VI follow. with a .iqnificant acknowledqment of pure .conomic., and Waqn.r's and Mar.hall's positioning about mathematics. In r.trosp8ct, it is v.ry .asy to accuee their error. It is obviou. that th. importance of the mathematical method cannot be r.duced to "illu.tration" and "preci.ion". The construction of th. pure neoclassical loqic by mathematical .conomi.ts was one of th. outstandinq achievements of .conomics in th. century after Wagn.r and Marshall.

need for more, not leaa, mathematical economica for the advancement of aocio-economica. It aufficea to recall that the pure mathematical economiata have not yet formulated the "riaing aapirationa" of the human being, aa in Simon's Adminiatrative Man; nor have they developed the 8imultaneoua treatmant of even two of the four egoiatic dimen8ions of the Wagnerian indu8trioua behavior.

I atrongly aupport this the8is in apite of Debreu'8 doubta (1991, pp.5-6). But this presuppo8es acceptance of Wagner's and Marsha11's correct statement in the same spot. In the terms here developed, pure mathematical economics "has no value on its own"; it is of indirect applicability "for the solution of our problem8", and can do no more than illuminate 80cio-economic8. To apply it directly is to .uccumb to the Ricardian Vice. The latter i8 a lack of acientific 8en.e, which doea not exi.t8 among phY8iciat8, wh08e diffu8ion wa8 accelerated by the mathematical neocla •• ica1 economi8t8.

3 - SCHUMPETER OH SCHMOLLBR ANO TBB IIB'.mODBlf8DBI~

Four exhibits compoae the framework of thi8 .action. In Exhibit VII I quote Schumpeter in 8Upport of both the pure economic8 in it8 lO9ic and the 80cio-economic8 in it8 dialO9ic. There follow8 a brief characterization of the historical 8chool a8 hi8tori8m during the . . tbod . . . treit.

I have been regarding the hi8torical achool a8 80cio-economic8. Obviou81y, the latter i8 not reducible to the formar. The formar embrace8 Simon'8 behavioral theory and !tuznet8' develop;aent theory, a. exemplified above. Another example i8 reproduced from Silveira (1992, p. 19) in Bxhibit VIII. In it8 more recant version, An80ff'8 theory of corporate .trategy belong8 to 80cio-economics.

Anaoff'8 theory i8 a1.0 a chapter of management 8cience. Kany chaptar8 of the lattar 8ati8fy very well the definition of .ocio-economica à la Mil1. other8 belong to applied econom~cs, lUte tha raady applicable moda18 of inventory controlo The fir8t ver.ion of An80ff'. theory itaelf may be thought of as fitting into applied aconomic. -- it i. an exten.ion of tha behavioral theory of the firm, but haavily based on the neocla •• ical theory, illuminating on1y the economic rationa1ity of corporata strategy. But thare were probl . . . .

The phenomenon i. complex to the point of requiring interdi.ciplinary modeling. An80ff .uccumbed to the Ricardian Vice in hi8 attempt8 to apply directly a 8emi-interdi.ciplinary theory. The 8uccassive fai1ure8 led him to a reatatement, to the con.truction of the .ocio-economic rationality of the phenomenon. Hi8 evolution ShOW8 the practical relavance of the Indetermination of Senior. And hi8 proce.8 of laarning by doing va • • 0 affective that mo.t of the Indetermination can be raad in his own words, in Bxhibit VII.

In a way, Ansoff . . . . himaelf in the frontier between the academic and the profe8sionaL On the other hand, the economic historian i8 usua11y the neate8t example of the academic. But economic hi8tory doe8 not neatly fit into the acientific activity, at lea8t from the viewpoint vhich reduce8 8cience to what ia univer.al. Here, however, lie8 the rea80n why art mu8t be included in the taxonomy of .cienca.

I do not impose di8crete di8tinction on the general reference framework of Bxhibit 11. If I did, I would be dealing with the lO9ic of re8earch, as Popper (1961) doe.. I work on the dialogic of 8cientific re8earch. So, I maintain the nebulou. frontier in attention to the vaquene.. with which the scientific work permit8 itself to be cla88ified -- 8 . . how Schumpeter (1986, p. 753) .dea18 with the periodization of hi8tory, in particular with hi8 1870-1914 period of economic analY8is; by the way, all cla8aification8 of non-Hewtonian phenomena nece8sarily di8play non-empty and non-di8cretely distinct frontiers (George8cu-Roegen 1967, pp. 21-31).

In the last in8tance, science's reason for being i8 its art. But a part of the latter 8till lies within the academic and .cientific raalms. The hi8torian fita into thi8 protuberance of sciance over the sphere of its art: the aim i8 to under8tand the phenomenon in its wholene8s, and not the use of

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science for the control of reality. Many "case studies" equally belong to socio-economic protuberances.

In the llet.h04_streit, the historical school was not wrong in emphasizing the relevance of specificities for the understanding of the phenomenon, in the individuated wholeness of real occurrences. The error, the historiam, was the exclusive reliance on the historical method. Schmoller was the leader, and Bxhibit IX introduces him in the words of Schumpeter. There is neither questioning of Schmoller's excellence in his specialization, nor of the propriety of his method. As Schumpeter says again in the first quotation of Bxhibit IX, the problem was Schmoller'a criticiam of the hypothetical-deductive method, which is equally peculiar to pure economics, a distinct specialization.

Bxhibit IX proceeda with Schmoller' a perception of economic history. This justifies the classification of the field into art and socio-economics, or a socio-economic protuberance OVer the sphere of its art. No surprise here, but the following quotation may cause to wonder. To put together Mill .and Schmoller, even after the latter's revised methodological position, does require the status reached by Schumpeter.

I understand the llet.h04_streit as the first great paradigmatic conflict between pure and social economists. It is obvious. Pirst, note the last paragraph of Bxhibit IX, where Schumpeter restates, with Mill, that the economic method invol ves both deduction and induction, and reqrets that the failure to accept this caused the dispute. He also refera to Mill's "acathing criticism" of the Ricardian Vice.

Second, Bxhibit X atarta by a aimilar reqret. Wagner reatates the advantaqe to science of qualitati"e differencea of abilitiea, benta and methods, in short, the benefita of specialization. Wagner'a criticism, howaver, ia addrea.ed to the socio-economist in his hegemonic aspiration of excluding the pure economist from the realm of science.

Third, Schumpeter then qives an explanation for the di.pute, .toppinq short of describinq it as a paradigmatic conflict. I am talkinq about an extension of Kuhn's evolutionary theory of scienca. The di.sent between pure and applied .cienti.t. is of the . . . . nature as that which occurs between two factions of pure .cienti.ta durinq revolutionary period ••

Pure and applied scientists have distinct educations and cOlllllUnities, different motivation., coamitments and languages, as Bxhibit 11 showa. In ahort, pure acienti.ts have the OCcam' s Razor paradigm as oppo.ed to the applicability paradigm of the applied scienti.ta.

80th cOlllllUnitiea reveal .ci_tific bliDdae.s (Kuhn 1971, pp. 37, 61). The practitioners of acience do not lag behind with their professioaal bliadDess, which i. al.o a fruit of education, but of job education. Reqreta and plaaa are not effective. Bxhibit X proceeda with typical displaya of the blindneas, now in updateel veraiona.

Solow is unconsciously revealinq a scientific blindne.a in his criticiam of the .ocio-economi.t Adam Smith. Moreover, there is indication of the Ricardian Vice, in a grave stage: Solow ia able to derive normative propoaitiona only from pure economica. Buchanan'a theoretical contribution haa been in the highest deqr.. of abstraction in pure economica (the fact that it is cast in elementary mathematica ia obviously irralevant). The paraqraph quoted, however, ia typical of the aocio-economiat'a blindneaa (Silveira 1990a) •

A century after the Neth04_streit, the pure economiat'a heqemony ahowa an inversion of positiona, no more. The conflict remaineel in different intensitiea and in distinct locations: institutionalista (almost typical socio-economista) "ersus neoclassicala, post-Keyneaians (cloae to socio-economists) ".rsu. neoclassical Keyne.iana, and Uno Kozo and his Karxiat theory of level of analyaia (Morris-Suzuki 1991, pp. 116-21) -- a Society for the Advancement of Socio-Bconomics (SASB) qrows in the USA, a hopeful development which seema to avoid the paradiqmatic conflict (the aim is not the

criticism of the neoclasaical school).

After Popper (1961), and in a period of the pure economist' a hegaaony, it aounda improper to talk about the inductive method. But Popper'a most diatinguiahed methodological contribution, which cannot be ignored, ia in the field of pure science. And this contribution was almoat always addresaed to the field of inert matter. By the way, there are no hegemonic struqqles between phyaicists (correspondinq to pure economists in Bxhibit II) and enqineerinq acientiBtB (Bocio-economiBtB). But the aame paradiqmatic conflict exiBtB, and is clearly revealed in the day-to-day activity of inteqrated BchoolB.

It is perhaps poasible to overcome the conflict in the field of economics, and to achieve the union advocated by Waqner. Aqain, regrets and pleaB will not do it, deBpite all the potential Bynerqic benefitB. These appeals to "the senBe of duty and the fear of conBcience" (Wagner'B fifth dimension of the personality, in Bxhibit IV), but only if the problem iB theoretically asaimilated by the competitorB. And epiBtaaoloqy is what matterB here. Two other elamentB saem more Biqnificant in the ahort run.

FirBt, the Bconomic Han: in the Wagnerian analytic atyle, "one'B own induBtrial advantaqe" iB more at Btake now. The "Report of the commiaaion on Graduate Bducation in BconomicB" (ltrueqer et al 1991) diaplays BignB of a aiqnificant criBiB in the market for new pure economicB doctoratea. The CommiBBion itaelf termB the new colleagueB "idiot savantB", because of their inability to relate theory and practice.

The CoaIIliBBion did not conclude that the nonacademic and the applied BchoolB' demandB are for Bocio-economista, but the indicationB are clearly there. OOmpriainq more than fifty percent of total demand, thia seqment of the market tendB to be occupied by the applied or social economistB qraduated from the applied achools.

The Becond Bhort-run elament iB perhapB identifiable with wagner's third dimenaion of induatriouB behavior. ODce the community underatandB that the "idiot savanta" are just addicts to the Ricardian Vice, qrowinq exponentially because of the curriculum, the "Bense of honor and the fear of diaqrace" may additionally become the crucial determinant.

COBCLUSIOB

It aaemB appropriate to conclude with a aynopsia of the evolution of thiB reBearch, presentinq some of the problema and solutions which led me to the Indetermination of Senior. Firat, in a study about Wagner, Marshall and, particularly, Schmoller, I have reaorted to Schumpeter BO much that I cannot fail to acknowledqe in my own practice that history matterB. Second, problemB and temporary aolutionB are the form of qeneratinq knowledqe (Popper 1978, pp. 13-15), and the form aayB much about itB plauBibility (Simon 1968, p. 458).

An initial problem waB the senaation of knowinq nothinq after completion of thr . . couraeB: enqineerinq (1963), induBtrial adminiBtration (MS/1968) and economicB (PhD/1971). I attended qood BchoolB and studied hard. So, the Benaation waB a problem whoae Bolution only occurred to me in 1992, when forced to write an academic memoir. Good BchoolB teach qood theorieB, leavinq aBide apecificitieal the aenBation tendB to occur if there iB no knowledqe of the latter, or no epiBtemological explanation of the problem to the atudent.

AB faculty member of an inteqrated Bchool in the field of inert matter, InBtituto Tecnologico da Aeronautica (1964/1966 and 1971/1974), and qraduate Btudent of another in the Bocial field, Carneqie-Hellon Univeraity (1966/1971), I had a common problem: what vere pure and applied scientiBtB doinq together, if they diBaqreed BO much? I deeply felt the paradiqmatic dissent -- let me Bpecify a bit of the C-MO case: my admiration for professorB Allan H. Keltzer (my adviBer), Herbert A. Simon (I developed the habit of readinq hiB paperB to recover myBelf frem the dull required readinqB) and H. Iqor Anaoff waB almoBt unbounded.

I just could not accept the labela (Schumpeter indicatea aome in Bxhibit X) which used to be affixed to the different kinds of reaearch done by these professors (my feelings are well expreaaed by Wagner in Bxhibit X, even though at the time I could not phrase them we11). When I finally discovered ltuhn (1971) -- in the late 1970s --, I read it anxiously in the expectation of confirming the temporary solution that I had reached by myself.

Bafore that, an effort had contributed to the organiaation of my thoughts. It was a criticism, that I ended up writing (Silveira 1974a), of the first Braailian "Baaic Plan for the Development of Science and Technology". I found out that the plan gave no consideration to pure science and was biaaed toward art in the little attention given to applied acience.

After some other considerations, I concluded that the plan would damage the universitiea; the latter were erroneoualy being preaented as the prime beneficiaries. The general reference framework of Bxhibit 11 had ita embryonic veraion in that papar. I waa, at the time, far ahead in my study of Toynbee (1962). Although unfinished, thia work changed my world viaion. Xy a!m wa8 modesto I waa trying to aaa!milate acme aenae of hiatorical perspective, an effort only taken up again five yeara ago with Toynbee (1976).

Xy doctoral theais waa an econometric work on Braailian inflation (Silveira 1973a/b, 1974b). It happened that in 1973 the coat of living indexea, among other8, were oatenaibly falaified. From the academic viewpoint, the problem was the comprehenaion of the nature of economic data. I only reached a aolution with Korgenatern (1963) in the late 1970s (Silveira 1984a/b) •

Keanwhile, I changed to theoretical work. I understood it as a lack of integrity to continue working in econometrica, uaing data that waa potentially falaified to an unknown extent. But the obaervation of economiata in government gave way to another major problem: they were not acting in accordance with the theoriea they themaelvea uaed to advocate. The probl_ became crucial when I also got into the art of economics, as consultant to the private aector.

The solution was growing in the . . nae of the pettineas of economica, particularly on the occaaiona in which the little that I knew about history and management acience ahowed itaelf more u . . ful in the art of economica. I was looking for a solution in the philoaophy of science when I read Georgescu-Roegen (1967).

I hopefully turned to econoll)ic philosophy inatead of abandoning economica -- I waa beginning to aaaociate a aenae of charlataniam to economica, which I no longer waa a . . ing aa a acience. After Georgeacu-Roegen, a aketch of the solution cama to my mind in the form of the Indetermination of Senior. Georgescu-Roegen introduced me to Beiaenberg (1963) and ltnight (1936). In the precesa of reconatructing the Indetermination, I then lacked a definition of aocio-economica to replace applied economics in BXhibit 11, and I had to explain the raiaon d ' etre of pure economics. The for.er waa well formulated in Silveira (1986), but the latter had to wait for my readinga of ltnight (1960) and Schumpeter (1986). The latter introduced me to Xill (1877) and Senior (1938).

This was a long proceaa of scientific revolution, notwithstanding it8 individual character. The anomaliea were met in practice, particularly in the following up of economic policies and the atate of the economy. But I did not move from my neoclaasical-monetariat poaition to another school of thought. Thia would be the uaual outcome. Xy move waa toward the criticiam of a11 schools, followed later by the acceptance of them all aa temporary half-truths.

In the laat inatance, it waa the need to underatand economic policy, the ahort-run chapter in particular, which led me into economic philosophy. The Indetermination of Senior emerged as the aolution to a problem in the art of economics. So, I think that I offer a teatimony of the importance of methodology and the hiatory of economic thought in practice.

EXHIBIT I - MILL ANO SERIOR

Art of Science (profe •• ional or nonacademic economi.t) - Mill (1877, p. 155):

Ro one who attempt. to lay down propo.ition. for the guidance of mankind, however perfect hi. .cientific acquirement., can di.pen.e with a practical knowledge of the actual mode. in which the affair. of th. world ar. carried on, and an .xt.n.iv. peraonal .xperi.nc. of th. actual id.aa, feeling., and int.ll.ctual and moral t.nd.nci •• of hi. own country and of hi. own ag ••

Applied Scienc. (applied or .ocio-economi.t) - Mill (1877, p. 152):

Each art pr.auppo ••• , not on. aci.nc., but .ci.nc. in g.n.ral; or, at leaat, many diatinct aci.ncea.

Abatract Sci.nc. (abatract or pura .conomi.t) - Senior (1938, p. 3):

But hia [Political Economi.t) conclu.iona, whatever be their g.n.rality and th.ir truth, do not authoriz. him in adding a .ingl. ayllabl. of advic •••• Th. buain.aa of a Political Economiat ia ••• to .tat. gen.ral principlea, which ia fatal to negl.ct, but n.ither advi.able, nor perhap. practicable, to u.e aa th • • 01., or even the principal, guidea in the actual conduct of affair •••• To d.cid. in .ach caa. how far tho •• conclu.ion. ar. to be acted upon, belong. to th. art of government, an art to which Political Economy i. only on. of many .uba.rvient Science ••

EXHIBIT 11 - TAXOHOMY OF DONLBDGE: GBDRAL REDRERCE FRAKEWORK

ICHOWLEDGE EXAKPLES

ABSTRACT D.br.u SCIEHCE pa.in.tti

IKOTlVATIOR

know-why

I

COMKITKBHT ILAHGUAGE IOBJECT theory: OCcam logic

Solow univer.al --- and APPLIED SCIERCE ART OF SCIERCE S1mon Xuzn.t. Anaoff know-why/know-how (non.conomic .lamenta) Maquiavelli know-how Sully Galiani theory: applicability product. and dialogic, organic coh.r.nca proc ••••• , advocacy ca.e.; pati.nta n.c ••• ary univ.r.al, n.c •• aary, .pecific

BXHIBIT 111 - GEHlRAL REFERENCE FRAMEWORK: A DIVISION OP SCIENTIPIC LABOR USBACT OR P1JRB seI_a (phyaica, pure econemica)

Debreu (1984, p. 46):

Yet a acientiat knowa that hia motivationa are often weakly related to the distant conaequencea of hia work. The logic rigor, the generality, and the simplicity of hia theoriea aatiafy deep peraonal intellectual needa, and he frequently aeeka them for their own aake.

APP.LIBD SeI_a (engineering acience, aocio-economica) Ohlin (1972, p. 299) on Kuznets:

Kuznets, of courae, makea u.e of models which demonstrate the connections between atrategic elaments in the econemic .ystem, but he showa a very limited .ympathy for abatract and generalizing models ••• Be choo88a and defines concepts which correspond a. closely a. po.aible to what can be ob.erved ••• Within the framawork of the.e models, regard is also paid to in.titutional and non-economic factor. -- for example, chang.s in population growth, in technology, in industrial structure and in market forms.

Kuznet. (1961, p. 119):

In the social sciencea field, in particular, the foremo.t aim of ordered [and tested] knowledge ia to enrich the direct experience of current generations with those of the pa.t, and to wid.n the horizon of experience of a giv.n nation by the experience of others.

Simon (1979, p. 289):

But the important thing about the .earch and satisficing theory ia that it showed how choice could actually be made with rea.onable amounts of calculation, and using very i:ncompl.te information, without the need of performing the impo.aible -- of carrying out thia optimizing procedure. Knight (1960, p. 111):

Now to say a little more about the unr.alism of pure economic theory... All the .ciencea of man and .oci.ty are involved if one pr ••••• the qu •• tion [of .ocial action, public choice, policy deci.ion] furth.r and further back -- particularly hiatory, and posaibly even more ap8cially, ethics.

George.cu-Roegen (1967, pp. 23-4):

we muet accept that ia c.rtaia ia.taDc.. at leaet, • i. botll A aDd DOD A ia

the ca.e ••• Though th.y are not di.ccet.ly di.tiact, dial.ctical concepts are neverthel •• s di.tiact. The difference ia this. A penumbra aeparates a dialectical concept frem its opposite.

Bei •• nberg (1963, p. 156-7):

In clas.ical logic it ia asaumed that, if a .tatement has any meaning at all, either th. statement or the negation of the statement must be correct... t.niaa DOD datllr, a third po •• ibility does not exi.t... In

quantum theory thia law t.rtiaa DOD datllr is to be modUiad ••• Clasaical

logic would then be containad as a kind of limiting caae in quantum logic •••

~ OP seI_a (professional engineering and profesaional econemica) Paainetti (1986, pp. 411, 414):

They [the moral philoaophers] were not aiming at propoaing theoriea. They were trying to atate standards of ethical behavior and -- given thia purpo.e -- it was not contradictory for them to try to set out, not one, but many separate arguments, provided that they all helped, in varioua casea and occasiona, to achieve the final effect. Par frem conaidering these varioua argumenta aa contradiction with one another, they regard them aa enriching their discuasions.

carriad away by our modern theoriea -- we tend to . . . contradictiona among the various principlea he [Galiani] has ao remarkably anticipated.

BXBIBIT IV - THB IRDBTBRMIRATIOR OP SBRIOR OR

THB IRDBTBRMIRATIOR OP WAGRBR (1986):

(Economic Man)

OUr industrial action ••• is determined by a variety of motives •••

The different motives can be reduced, I believ., to five ••• Bach pre.ents it.elf in two aspects. The four egoistic motives are: (1) one's own industrial advantage and the fear of want for one's self; (2) the fear of puni.hment and the hope of approval, perhaps of reward; (3) the sen.e of honor and the f.ar of di.grac.; (4) th. impul •• to activity and to the .x.rcis. of power, and th. f.ar of the r •• ults of inactivity. Th. non-egoi.tic motive is th. s.n •• of duty and th. f.ar of con.ci.nc ••••

Th. univ.r.al .lement, cOlllDOn to all humanity, is mer.ly the fact that th ••• motiv.s ar. abl. to d.t.rmin. our action, and do d.t.rmin. it; and, again, that diff.r.nt combinations of motive. and diff.rent degr_ •. of .tr.ngth in them can and do occur. Th • • lement that vari •• in th. hi.tory of a giv.n population, vari.s with diff.r.nt individuals, and vari •• in the .ame individual under diff.r.nt circum.tanc •• , i. that th. combination of motives chang., that the individual motiv •• chang. in r.lativ • • tr.ngth; and, th.r.fore, our industrial action vari •• (p. 117).

(Th. X.thods-Languag.s of Bconomics)

Th •• e, th.n, ar. th. two m.thod.: on th. on. hand, d.duction from p.ychological motiv •• , -- fir.t and foremo.t, deduction from th. motive of individual advantage, th.n from the oth.r motiv •• ; on th. oth.r hand, induction from hi.tory, from .tatistic., and from th. l •• s exact and 1 ••• c.rtain, y.t indi.pen.abl., proc... of cOlllDOn ob •• rvation and .xperi.nc •• With both method. we are to approach th. various problema of political .conomy, and to .olv. them . 0 far a. we can (p. 124).

(The Metb04eo.treit)

In con.id.ring th. modification. of indu.trial •• lf-int.r •• t in diff.r.nt individual., diff.r.nt p.opl •• , at diff.r.nt tim.s, its various combination. with oth.r motiv •• , th.y (th. hi.torical economi.ts) forg.t that th.r. i., after all, a univ.r.al element of humanity in thi • •• lfi.hn.... Th. purely deductiv. economi.ts cOllllllit th. le •• mi.tak. of negl.cting th. modification. of •• lf-intere.t, and it. variou. combination. with other motive., -- the 1 ••• mi.take, y.t .till a gr.at and calamitous mi.take (PP. 118-9).

(The Scope of Bconomic.)

Th ••• fiv. problema, -- to a.c.rtain and de.cribe .conomic ph.ncmena; to .xplain th.ir cau.e; to judg. of their .ocial merit; to •• t up an a1m for .conomic progre •• , to point out th. way for reaching thi. a1m, -- the.e, th.n, ar. th • • ingl. parts of the gr.at g.n.ral problem of political .conomy... Only the fifth, wh.re we hav. to d.al with th. practical qu •• tion. of an art, can be cl.arly di.tingui.hed from the r •• t. I .hould be in favor of r.taining th. first four for the g.n.ral or theor.tic part of a system of '.ocial economy' (p. 128).

(The Art of Bconomic.)

The proper cour •• of action in any .pecific ca.e can only be d.termined on th. ba.i. of a careful analy.is of facts as th.y ar., and, so far as po •• ible, in the light of comparisons with the industrial laws and habits of oth.r peopl.s and oth.r times (p. 127).

EXHIBIT V - THE INDBTERMIRATIOR OF SERIOR OR THE INDETERMIRATIOR OF MARSBALL.

GROEHEWEGBR (1990) OR MARSHALL (c. 1870):

Mar.hall (in Groeneweg.n, pp. 5-6):

OUr knowledg. of .conomical doctrin.s and of .conomical ph.nomena must go toqether and the .conomical and all other aocial and political phenomena of a period are inextricably int.rwov.n with anoth.r. It is not nec.a.ary to inquire into th. r.lativ. importanc. of a knowledg. of .conomical ph.nomena and of oth.ra; any mor. that we need .nquir. a. to th. rel.tiv. importance of th. h.art and th. lungs .s compared with oth.r vital organs .11 of which are nec ••• ary to • man's .xistenc •• If any part of th • • oci.l phenomena of an .g. be iqnored we h.v. not hi.tory; though we may h.v. mat.ri.ls which may .id th. historian. Of cour •• the qu.stion may be r.ised -- i. a di.e •• e of the h.art or of the lungs mor. prejudicial. But .v.n to this no g.n.ral .nd direct .nawer c.n be r.turn.d: we mu.t consider the special circum.tances of th. c ••••

Groeneweq.n (p. xvii):

For Marshall, this is not just • declar.tion of the hi.toric.l r.l.tivity of .conomic ide •• , .nd th. limit.tion. thia pl.c •• on their futura .pplic.tion, • view h. very atrongly endoraed. It .1.0 refers to th.t limit.tion in .cope of politic.l economy of never h.ving the capacity to provida the sole anawer for a particular problem, de.pite its rel.vant, if not essenti.l, contribution for its .olution.

Marsh.ll (in Groeneweg.n, p. xiv):

Political Economy will .nswer acarcely any soci.l question but acarcely .ny social qu.stion can r.ceive answer. independent of Politic.l Bconomy.

M.rsh.ll (in Groenewegen, p. 4):

Of coura. we may tre.t Political Bconomy as • deductive and purely abstr.ct sci.nc.. Th.t ia, we may tak. c.rt.in arbitrary aasumption. and deduce from them l.ws of value. Such enquires h.ve th.ir utility: but if we seek to know political economy bec.u.. we want help in our attempt. to under.tand Soci.l Philosophy, this personal .lemant becom&s .s important in reading a book on political .conomy .s in reading on. on anY other branch of Social or Ethical Philosophy.

BXBIBIT VI - WAGRBR (1891) OH MARSBALL' S PUJlCIPLBS OP ~C8:

C The Scopa and Hethod of Bconomic.)

I can qive the aaaurance that numerou a German colleaque. join me in adoptinq that mediatinq attitude in regard to acopa and method of political economy which is tuen, for example, in the recent excellent book of [Neville] Keynes, on TIle 8cope asu:l . . tbocS of Political BcoDoIly... ror myaelf, I aqree with Keyne. almo.t throuqhout, and therefore can testify to my hearty appreciation of the qreat value of Harahall's volume; for in the matter of method and scopa Har.hall alao take. thia mediatinq attitude (p. 321) •••

Not 'practical' political economy alone, auch aa the younqer German hiatorical achool ia diapoaad to content itaelf with, nor theoretical political economy alone, auch a. ia uaually off.rad in Bnqland, but the two toqeth.r form political .conomy a. a aci.nce (p. 327).

(The Heed of Distinquishinq Pure and Social Bconomica)

The aecond book [of Marahall' a prillciplea of kODoaica] conaiders aome 'fundamental notiona' ••• Hy main criticiam ••• i. that in the whole aeriea of concepta we muat di.tinquish batween the purely .conomic point of view -- the loqical or abatract point of view ---- and the hi.torical and legal point of view. I think auch a diatinction of fundamental importanc. for the aolution of practical and theor.tical controv.raiea (pp. 330-1).

(Limitationa of Pure Bconomics)

It is true that moat of ua in Germany... point to the nHd of induction aide by aid. with daduction; that we warn againat haaty -generalization, aqainat excluaiv. reaaoninq on the baaia of econemic aelf-int.reat; that in practical probl . . a we hav. no faith in any abaolut. solutiona, and insiat upon the principle of relativity (p. 320).

Barrinq a few incidental remarka, Maraball aaya nothinq of th. orqanization of induatry, or of law and the legal foundationa of aociety ••• Like moat Bngliah economist., Marshall treat. private induatry, and tbat orqanization of induatry which reata on privat. property, aa mattera of coura., qiv.n by 'nature', ao to apau; treatinq the inatitution of property aa aomethinq abaolute or purely .conemic, and not aa aomethinq which bas developed by historic qrowth ••• As Profeaaor Marahall treata it, political economy i. still limit.d to the inveatiqation of production, .xchanq., and distribution under the .yatem of private induatry and of fr.. competition

(p. 333).

CLimitationa of Socio-Bconemica)

In th. fifth book, th. equilibrium of demand and aupply ia conaid.rad ••• I aqr . . with Marshall almoat .v.rywh.r •••• Ria tr.atment is a t.llinq exampl. of what can ba achieved by hi. method of apeculative daduction -- the adequat. aolution of probl . . s which, partly frem their v.ry natur., and partly bacaua. of th. unmanaq.abl. mas. of th. inductiv. material, cannot ba aolved by th. method of th. hiatorical and stati.tical induction Cpp. 336-7) •

CHathematical Bconemic.)

Marshall's theor.tical diacuaaion follow., a. a rule, th. lin.s of th. mathematical tr.atment of Cournot and oth.r •••• I would not d.ny that thi. mode of tr.atinq th. aubj.ct ha. it. juatification, nor that th.r. ar. advantaqea in th. use of diaqrams and of th. formula. of differential calculus. But I do not bali.v. that thi. moda of treatinq th. subject ha. an independent valu. of ita own for aolvinq our probl.... Indeed, Marahall hima.lf admits a. much. R. ha. uaad diaqram. and formula. only for purpo.e. of illu.tration and for qr.ater precision of statement CP. 327).

EXHIBIT VII - SCHOMPETER (1986) OH THB NBrBODSRsr.RBIT:

(The Pure-Econemic Kethod-Language: logic)

as regards the method of 'isolating' econemic phenomena or motives, or of abstracting from noneconomic ones, not only the practice of the 'cla.sics' but even their methodological rationalization of it wa. fr.. from .eriou. error. •• Of cour.e this .tat_nt mu.t be under.tood to r.fer to the principles of i.olation and ab.traction per .e as the 'cla •• ic.' applied them for tia. ptrpo.. of caniAg out tia. cIoIIaiA of ptrely ecoDOIIic re . . . rch ••• But I do not maintain that individual 'cla.sic' writers, when reasoning within that domain, always 'isolated' relevant factors and

'abstracted' frem others faultl ••• ly (pp. 537-8) •••

(A Socio-Economic Kethod-Language: dialogic, organic coher.nce)

we mu.t not overlook that, though .uch [monographic hi.torical) re.earch plu. a co-ordinating study of its r •• ult. ~ill n.ver produce articulate theorems, they may produce, in a mind appropriately conditioned, .omething else that is much more valuable. Th.y may exude a aubtl. meaaage, conv.y an intimate under.tanding of .ocial or of apecifically .conomic proc ••••• , a a.nae of hiatorical per.pective or, if you pref.r, of th. organic coherence of things, which is extr_ly difficult, perhap. impo •• ible, to formulate

(p. 812-3).

(Historiam)

The basic and di.tinctiv. articl. of the hi.torical .chool's methodological faith was that the organon of .cientific economics .hould mainly -- at first it was held that it ehould .xclueively -- consist in the results of, and in generalizations from, historical monograph.... By means of this

[historical) technique, which was all the sci.ntific equipment he needed, he should dive into the ocean of economic history in ord.r to investigat. particular patterns or proc... in all their live detail., local and temporal, the flavor of which he should learn to reli.h. And the only kind of general knowledge that is attainable in the social scienc.. would then .lowly grow out of this work (pp. 807-8).

BXBIBIT VIII - NBOCLASSlCAL THBORY OF THB FIRM (Pure Bconemics) and the THBORY OF CORPORATB STRATBGY (Socio-Econemics)

Ansoff's Ricardian Vice, by Anaoff himself (1980, pp. 5-6):

Corporate strategy (publiahed in 1965) is a prescriptive logical analyaia of how business firms should think through their adaptation to the environmant ••• many practical applicationa of preacriptions similar to mine have come to grief, the apread of strateqic planning haa been slow, and it is only now, ten yeara later, that the practice of genuine strateqic planning is emerging.

The Indetermination of Senior or the Indetermination of Ansoff (1980, 1987): Strateqic planning is focused on business, econemic and technological variables. Strategic management broadens the focus to include psychological, sociological and political variables (1987, p. 265).

80th experience and literature on psychology show that individuals will resist change when it makes them insecure ••• Political science literature, as well as coamon observationa, shows that groups: coalesce and act as power centers within the rest of the organization... 80th sociological literature and practical experience show that: groups of managers who share common tasks and preoccupa~ions develop, over a period of time, commonalities of behavior and outlook... (and) a consensus, which sociologists call a model of reality, on which behaviors produce desirable results and which do not (1987, pp. 241-2) •••

S_n frem the point of view of a strateqy analyst, resi.tance is a manifestation of the ' irrationality' of an organization, a refusal to recognize new dimensions of reality, to reason logically, and to carry out the consequences of logical deductions. But ._n frem the viewpoint of a behavioral or political acientist, resistance is a natural manifestation of different rationalities, according to which groups and individuals interact with one another (1987, p. 238).

Our concern in this book is with the behavior of cemplex organizations in turbulent environments ••• Host available theoretical insights are partial, refracted through the optic of a particular theoretical discipline from which they are derived, be it economics, psychology, sociology, political science, or general system theory ••• The major aim (of thia book) is to bridge the gap betW8ttn theory and practice by providing an explanatory science... In natural sciences such explanationa go under the nama of applied theory -- an intermediate level of knowledge between pure science and engineering ••• The theory is au1ti-cliscip1iDary in the sense that it seeks an optic appropriate to the problem and not to a particular scielltific discipline. There are two patha to auch an optic. one is to attempt an inteqration of the available disciplinary inaighta into a coherent whole. The other ia to work back frem the 'real world' problem, abstract the featurea which appear critical to explanation of behavior, and then selectively borrow from theoretical insighta which may be available

EXHIBIT IX - SCRMOLLER AS A SOCIo-EOONOMIST. SCHUMPETER (1986) ON SCHMOLLER:

(Schmoller on Pure Economics)

Schmoller alwaya prot.sted against an ' iaolating' analyaia of economic phenomena he and hia followara spoke of a 'method of iaolation' -- and held that we loae their esaence aa aoon aa we iaolate them. Thia view, of eourse, waa atmply the eonsequenee of hia reaolve to feed eeonomiea exeluaively on hiatorieal monographa. Por their material a as well as their resulta are obviously refractory to any attempt at isolating -- in moat eaaea, in faet, they baeome meaningless if iaolated (p. 812).

(Sehmoller on Socio-Eeonomics)

This ia the seientifie meaning of the label that Sehmoller affixed to his 8ehool. He did not eall it hi.torieal stmply, but historieo-ethieal ••• the .ehool profesaed to study a11 the faeets of an eeonomie phenomenon; henee a11 the faceta of eeonomie behavior and not merely the eeonomie logie of it; henee the "bo1. of human motivations as historieally displayed, the speeifieally eeonomie onea not more than the rest for whieh the term 'ethieal' was made to serve, presumably beeause it seems to stress hyperindividual eomponents (p. 812).

(Sehmoller and Mill):

I am tempted to aum up by saying: think of J. S. Mill'a treatise; imagine another that bastavs as mueh emphasis and eompetenee on the institutional aspeeta as Mill bestowed upon theory in the traditional sense, and reduee eorrespondingly the spaee and thought allotted to the latter; and you have Sehmoller's GraDdriss, barring of eourse politieo-philoaophieal baekgrounds, whieh do not eoneern ua here (pp. 813-4).

The atandard method of eeonomiea waa what he (Mill) ealled the Conerete Deduetive Method supplemented by the Inverse Deduetive or Historieal Method for r •• eareh into historieal ehanges of the social set-up aa a whole. Bad this been properly appreeiated, the pointle.s later squabble of eeonomists over induetion versua deduetion would have been avoided. The 'purely theoretieal' set of problems was tak.n aeeount of by his ' abatract or geometrical' method, the miause of whieh for direet applieation to praetieal problems he made the target of seathinq10 eritieiam.

~OThia adjeetive is I think justified, though Mill'a invariable eourtesy,

in aome eaaea reinforeed by filial reapect, made him tone down hia wording. It will read surprisingly but ean be strietly proved that the methodologieal doetrine that Mill preaehed does not differ at all from the poaition eventually (though not at firat) adopted by Sehmoller (p. 452).

BXHIBIT X - PARADIGHATIC CONFLICT, SCIBNTIPIC OR PROPBSSIORAL BLIRDNESS Wagner (1886, pp. 114-5):

Hothinq is, in my opinion, more harmful for the true advance of knowledqe than that a qiven tendency in it, which happens to fit the abilities, the turn of mind, the training of individual sCholars, which may indeed be fruitful and necessary, is carried so far as to demand for itaelf an exclusive control, and to pretend that in it is the true science ••• OUqht it to be so hard, and, above all, for men of science, to admit that there may be not only different deqrees of ability, but different kinds of ability, and, therefore, differencea of inclination, of tendency, of use of method? And, moreover, to graap the immense advantaqe of such differ.nc.s in a many-sided cultivation of the fi.ld of knowledqe? •• Bach tendency has its strenqth and weakness, its merits and defects.

Schumpeter (pp. 814-5):

The quarrel waa about precedence and r.lative importance and miqht hav. been .ettled by allowing ev.ry type of work to find the placa to which its weiqht .ntitled it. The r.aaona why, for a time, neither part felt ab1e to adopt thia atandpoint are important .nouqh for the aocioloqy and hiatory of science -- of any acience -- to require explicit statement. The firat thinq to be obaerved about all controveraiea between- acientific partiea ia the large amount of mutual miaund.ratanding that entera into them ••• Secondly, the aituation is mad. wor.. by the fact that methodological cla.hes often are claahea of temperamenta and of intellectual benta ••• there are typea of minds that take delight in all the colora of hiatorical procesa.a and of individual cultural patt.rna. Ther. ar. oth.r typ8a that prefer a neat theorem to everythinq el.e... Moreov.r, every dec.nt worJaDan lov.s his work. And thia alone, for some of ua, impliea dialik. for other 'methoda' in a perfectly irrational and impulaiv. way. Third, we lDUat nev.r forqet that qenuin. achoola ar • • ociological realities -- livinq beinqa. Th.y hav. th.ir atructur. -- r.lation. between lead.ra and followera -- their flaqa, their battle criea, their moeda, their all-too-human int.reata ••• They will try to appropriate labela that are conaidered honorific -- in our caae,

both parties laid claim to auch .pith.ts as 'empiric', 'r.alistic', 'mod.rn', '.xact' -- and to affix derogatory labels 'apeculative', 'futil.', 'subordinat.' -- to th. work of th. enemy.

Pure Bconomist - Solow (1989, pp. 37-8):

COland.r and many critica would have us go back to .arlier days wh.n philoaophy and other aocial aci.nc.a wer. int.rtwined. B. even arqu.a that we should qo back to the vaque qeneralizationa of Adam Smith. I yi.ld to a doz.n peopl. or ao in my admir.tion for Adam Smith, which ia not unbounded. I do not regard ~. We.lth of •• tioa • • a • theory; I do not reqard it .a anythinq with policy implic.tiona... I need aomethinq mor. precia. --somethinq l.ss amorphous, leaa v.qu ••••

"Socio-Bconomiat" - Buchanan (1985, p. 14):

As it is practiced in the 1980a, economics is a 'science' without ultimat. purpoa. or meaning ••• In • v.ry real a.n •• , the .conomiats of the 1980. are illit.rate in the basic principl.a of th.ir own disciplin •••• Th.ir inter.at lies in the pure intell.ctual properti.s of th. mod.ls with which th.y work, .nd they aaem to get th.ir kicka from the diacov.ry of proofa of propoaitions relev.nt only for their own f.nt.sy l.nda ••• I do deplore the w.ate that auch inveatment of human c.pital r.flects.

Profeaaional Bconomist - A well-known proverb: "Thoa. who c.n, do; thoae who c.nnot, teach".