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Doc 11366.Pdf SE PROHIBE Subrayar y/o margina,- esta lb" en " sub.nyatia, SE CC r. E DE SU 11MOR f.t 41.1 n7:7, COPYRIGHT 1976 JOSEPH EDWARD KECKEISSEN Propleded de le 1.1111PERSIDAD FRANC15(0 MARIN1111 THE MEANINGS OF ECONOMIC LAW JOSEPH EDWARD KECKEISSEN " ‘\‘10 A thesis presented to the Faculty of the Graduate School of Business Administration, New York University, in partial fulfillment of the requirements for the degree of Doctor of Philosophy. 1976 -76 3 10. PREFACE ZLI It is a distinct source of satisfaction to be able to present to New York University this dissertation entitled "The Meanings of Economic Law." It covers a subject, which though close to the heart of economic theory, has been long neglected in the journals. It presents, for the first time in a single work, an orderly compilation of the many notions that economists have held about law, and attempts to sound out the underlying reasons for and the logic behind such a variety of opinions, perhaps suggesting an answer to that tantalizing question as to whether there are economic laws after all. To accomplish this task it was necessary to research large samplings of the literature of two centuries, at least of that part that is available in English. Unfortunately, it was not possible to broaden this investigation to analyze terms other than law, which might be used to describe the generalizations of economics. Nor could a complete epistemo- logical study be made at this time of what economic law "should" really mean. Hopefully, such studies will not be long in forthcoming. The author wishes to express his utmost thanks to Professors Robert A. Kavesh and Joseph S. Keiper of New York University, who over many years have been an inspiration ii both in the classroom and out. Likewise, a sincere word of appreciation is due the memories of the late Ludwig Von Mises and Herman Krooss, who long ago prepared the ground for this endeavor. Its most immediate guide, however, has been Professor Israel Kirzner, who shared with the writer his vast store of culture and tirelessly ploughed through • the manuscript from the formative stages. The writer, however, accepts full responsibility for the omissions and inaccuracies in the text. Neither could this study have been completed without the assistance of Father Edward and his staff at Salesian Missions, who provided me with the facilities in which to work, to my own Universidad Francisco Marroquin in Guatemala, for extending me the necessary time off, as well as to the Alpha Kappa Psi Foundation for generously awarding me its first fellowship award. Immense thanks are also due to Joan Senno, who graciously undertook the laborious task of typing the manuscript, to Elaine Restieri and staff, who helped tie together the many loose ends, and to Maria Auxiliadora, without whose help nothing would have been accomplished. It is hoped that this first attempt at a synthesis of economic law will spark a renewed interest on the part of economists in the study of the epistemology of the science. iii This will help carry on the tradition long followed by Cairnes, Neville Keynes, Menger, Jevons, Mises, and many other pathbreakers in economics. September, 1976 iv TABLE OF CONTENTS Page PREFACE ii CHAPTER I ECONOMIC LAW TODAY - PREVIEW 1 CHAPTER II ECONOMIC LAW UNDER ANALYSIS 18 Law in the Natural and Social Sciences Influence of the Law of Nature on Economic Laws Basis for the Classification of Economic Laws - A Roadmap for the Analysis. CHAPTER III ECONOMICS WITHOUT LAW 89 Historians Against Law - Institutionalists Against Law - Law as a Reflection of Special Interests - Modern Economists and Social Scientists Against Law - Philosophy Against Law - Generalizations that are not Laws - Milton Friedman - All Laws are Guesses - Karl Popper - Law and Complex Phenomena - Frederick Von Hayek - Economics Without Law in Retrospect. CHAPTER IV WEAK ECONOMIC LAWS 142 Empirical Laws - Quantitative Laws - Econometric Assumptions - The Meaning of Econometric Law - Qualities of the Econometric Laws - The Purpose of Econo- metric Law - The Historical Laws - Types of Historical Laws - Assumptions and Epis- temology Underlying the Historical Laws - Qualities and Purpose of the Historical Laws - Says' Law, Keynes, and the Macro- economists-Law in the SocialSciences - Weak Laws in Retrospect. TABLE OF CONTENTS Page CHAPTER V NORMAL ECONOMIC LAWS 232 The Assumptions of the Normal Law Economists - The Nature of Economic Science - Economic Assumptions - The Meaning of Law - Deduction and the Qualities of the Normal Laws - The Purpose of the Normal Laws - The Normal Laws in Retrospect. CHAPTER VI STRONG ECONOMIC LAWS 323 Strong Economic Laws - Austrian A Priori Laws - Austrian Assumptions - Meaning of Austrian Laws - Marxian Laws - Marxian Assumptions - Strong Laws in Retrospect. CHAPTER VII ECONOMIC LAW TODAY - POSTVIEW 373 BIBLIOGRAPHY 401 vi CHAPTER I ECONOMIC LAW TODAY - PREVIEW ...But you can recollect as well as I can, when a deputation of us went up to a member of parliament--one that was reputed a phi- losopher, and a political economist, and a liberal--and set before him the ever- increasing penury and misery of our trade and of those connected with it; you recollect his answer--that, hawever glad he would be to help us, it was impossible--he could not alter the laws of nature--that wages were regulated by the amount of competition among the men themselves, and that it was no business of government, or any one else, to interfere in contracts between the employer and employed, that those things requlated themselves by the laws of political econamy, which it was madnons and muicide to opposo. ne may have been a wise man. I only know that ho was a rich one. Every one spoaks well of the bridge which carries him over. Every one fanciss the laws which fill his pockots to be Ood's laws. But I say this: If neither government nor members of parlia- mont can help us, wo must help oursolves. Help yoursolves, and Heaven will help you. Combination amonq ourselves is the only chance. One thing we can do--sit still.' "And starvol" said somo ono. "Yos. and •tarvel Better starve than sin. I say, it is a sin to give in to this systam. It is a sin to add our woight to tho crowd of artisans who are now choking and stranglinq each other to doeth. es the prisondare did in the black hole of Calcutta. 1 -2- Let those who will, turn beasts of prey, and feed upon their fellows; but let us at least keep ourselves pure. It may be the law of political civilization, the law of nature, that the rich should eat up the poor, and the poor eat up each other. Then I here rise up and curse that law, that civilization, that nature. Either I will destroy them, or they shall destroy me. Charles Kingsley, Alton Locke, Ta4or and Poet, An Autobiography-L Suchwas the legacy of fear bequeathed by the in- exorable laws of economics, as recounted by a novelist of the mid-nineteenth century. It was the "dismal" science of political economy that allegedly spawned such notions upon mankind. However, about the same time in history, we find another author emphatically telling us that: The general laws of the social world are har- monious, and they tend in all respects toward the improvement of mankind. 1 Charles Kingsley, Alton Locke, Tailor and Poet, An Auto- biography (Harper & Brothers, N. Y. 1858). Republished by (Scholarly Press, Inc., St. Clair Shores, Mich_ 1972), pp. 99-100. 2 Frederic Bastiat, Economic Rarmonies, trans. W. Hayden Boyers, George B. de Huzar (Ed.), (D. Van Nostrand Co., Princeton, N. J., 1962), p. 395. original edition: Les Harmonies Economiques (Guillaumin, Paris, 1850). -3- Authors like McCulloch and Carey were extolling the beneficence of the laws of economics, while a Cliffe Leslie or a Thorold Rogers would be denouncing their fallacies. Yet the greatest economist of the mid-century was able to make the following statement: • Happily, there is nothing in the laws of value which remains [1848] for the present or any future writer to cleir up; the theory of the subject is complete. In the meantime, there was grawing opposition to the rigidity of the classical laws on the part of the Socialists and the historical economists. In the eighties, one of the greatest of the methodological debates in the history 3 John Stuart Mill, Principles of Political Economy with Some of their Applications to Social Philosophy, Sir W. J. Ashley(Ed.),(Longmans , Green, and Co. London, 1910), p. 436. This will be referred to as the Ashley edition. Reference will also be made to John Stuart Mill, Principles of Political Economy, abridged, with critical, biblio- graphical, and explanatory notes, and a sketch of the History of Political Economy, by J. Laurence Laughlin; (D. Appleton and Co., New York, 1910). This will be used for some interesting comments on economic laws by Laughlin; it will be referred to as the Laughlin edition. Original edition 1846. -4- 4 of the science was held between Carl Menger of Austria 5 and Gustavus Schmoller of Germany, Menger upholding the validity of theoretical laws and Schmoller opposing them. After the end of the Methodenstreit, however, tempers calmed and general discussion of the role of laws in economics eased up. In the thirties of this century, dis- cussion temporarily revived in the debate between Lionel 2 Robbins 6 and T. W. Hutchison, until the advent of the Keynesian revolution absorbed the attention of the economic world. If one were to browse through a modern textbook of 4 Carl Menger, Problems of Economics and Sociology, Louis Schneider (Ed.), trans. Francis J.
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