The Price System and Social Management

Abstract

The problems of reconstruction are commonly thought of as a matter of deep concern to applied economics, and so they are; but more recently there is coming to exist in the minds of those who have taken the matter of reconstruction to heart a feeling that reconstruction must mean more than a mere application of the present economic theory--that it is going to call into question nearly the whole of that theory; that the first step in reconstruction will be not to apply the existing theory, but to develop a theory that will be able to cope with the problems before the world. There is nothing very surprising in this view of the case. It has been apparent for an appreciable term of years that there was something wrong or at least incomplete in economic science as it stands. With adolescence of the machine regime the old political economy became inadequate. It was both too wide and too narrow. On the one hand, it failed to put sufficient emphasis on the business phenomona, so that practical men of affairs would have none of it; on the other hand, it failed to go deep enough into the social structure to be in any sense an explanation of the economic life of the group, or to allow opportunity for the development of any theory of group welfare. The Marginal Utility School cut economics to fit the business facts, and so made of it a glorified system of accountancy, in which the market was the beginning and the end. The business men are now satisfied or should be. Where there are conflicts between the economic point of view and the business point of view, most of these conflicts are mere disputes over terminology. Thus the economist is likely to insist on the separation of the factors of production according to the traditional method, while the business man knows (and he is entirely right) that for his purposes the factors of production can