Louisiana State University LSU Digital Commons LSU Historical Dissertations and Theses Graduate School 1941 The onC tributions of Richard T. Ely to Economic Thought. Samuel Elliott rC anfill Louisiana State University and Agricultural & Mechanical College Follow this and additional works at: https://digitalcommons.lsu.edu/gradschool_disstheses Part of the Economics Commons Recommended Citation Cranfill, Samuel Elliott, "The onC tributions of Richard T. Ely to Economic Thought." (1941). LSU Historical Dissertations and Theses. 7843. https://digitalcommons.lsu.edu/gradschool_disstheses/7843 This Dissertation is brought to you for free and open access by the Graduate School at LSU Digital Commons. It has been accepted for inclusion in LSU Historical Dissertations and Theses by an authorized administrator of LSU Digital Commons. For more information, please contact [email protected]. MANUSCRIPT THESES Unpublished theses submitted for the master's and doctor's degrees and deposited in the Louisiana State University Library are available for inspection. Use of any thesis is limited by the rights of the author. Bibliographical references may be noted, but passages may not be copied unless the author has given permission. Credit must be given in subsequent written or published work. A library which borrows this thesis for use by its clientele is expected to make sure that the borrower is aware of the above restrictions. LOUISIANA STATE UNIVERSITY LIBRARY 1 1 9 -a THE COroaBOTICES OF RICHARD T. ELY TO ECCSQMIC THOUGHT A Dissertation Submitted to the Graduate Faculty of the Louisiana State University and Agricultural and Meehanioal College in partial fulfillment of the requirements for the degree of Doctor of Philosophy In Tho Department of Economics 97 Samuel E llio tt C ra n fill A* B*, Georgetown College, 1920 }U km. U niversity of Michigan, 1925 1 9 4 1 UMI Number: DP69221 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. UMT Dissertation Publishing UMI DP69221 Published by ProQuest LLC (2015). Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code ProQuest ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106- 1346 ACDKHnJSBGBlffiHT I wish to acknowledge ay appreciation for the helpful criticisms extended me by certain members of the Graduate School Faculty of Louisiana State University. Harlan L. McCracken, Head of the Depart­ ment of Economics, has supervised the work, read and evaluated the m anuscript, and o ffered many valuable id e a s. James B. T rant, Bean of th e College o f Commerce, Stephen JU Caldwell, P rofessor of Economics, ?• lyzm Smith, Head of the Department of Sociology, and James A. McHlllen, Professor of Library Science, have made suggestions that proved helpful. Through personal interviews and correspondence I have received some help in the work from Richard T. Ely, himself* For every suggestion and criticism I am deeply grateful. S. E. Cranfill l /2 3 o < L /?<// ‘dZ'ikli'j W E OF CONTENTS Chapter X* BIOGRAPHICAL SKETCH 1 Chapter II* VIEWPOINT AND METHODS 16 Chapter XII* THE RELATIONSHIP OF ECONOMICS TOOTHER FIELDS OF IB01B,EDGB 55 Chapter IV* MONOPOLY VERSUS COMPETITION 51 Chapter V. SOCIAL ISSTITUTIOiS AND GENERALKELFARE 64 Chapter VI* DYNAMICS VERSUS STATICS 82 Chapter VII* NATIVITY AND EVOLUTION VERSUSABSOLUTISM 90 Chapter VIII* VALUE AMD DISTRIBUTION 111 G iapter I I . ECONOMIC TELESIS 151 Chapter X* CONCLUSIONS 165 Bibliography 169 i l l ABSTRACT primary purpose of this study is to analyze the ri tings of Eiohard T. Ely and present his basic System of Economic Thought in compari­ son and contrast with his contemporary economists. The brief biographical sketch aims to point out the major events and influences in hie life that definitely helped to determine his thinking and the course of his aoitivities* 81y*s politioal eoonomy was broad in its approach and inclusive in its materials* It was the science of wealth—getting and wealth-using, but, first of all* it was a science of human relationships. Sly allied - economics closely with sociology* law, ethics, history, psychology, philosophy, and religion. In fact, it dealt with ary and all social phenomena, but from an economic point of view. It was viewpoint tin t -■ distinguished it fro® the other social sciences. II© looked upon sociology as the science whioh dealt with society as a whole. Economics and the other social sciences were specialised fields of this larger science. * Ely, who acknowledged Karl Knies as his master, was trained in Gensan imi varsities in an atsiosphere of the Historical School of economic thought* Be followed what he has called the look and see method whioh included ~ induction, deduction, observation, e x pe riment ation, statistics, careful historical analyses, and any combination of those methods, sc long, as he got at actual conditions and fa : ',8 of life. Ely was familiar with the classical econoiuic doctrines of value which explained value in terns of the amount of labor embodied in the comjiodity, the amount of labor commanded by the commodity, or the labor and capital costs which went into the good, but he leaned heavily in the-* direction of the Austrian School of thinkers who believed that valiae ms in the minds of the buyers« Utility and scarcity were the basio fac tors iv Is market value* Production was th© creation of utility, and production wa« not only hgf ran but for nuu utility determined value in th© market — over shorW ua periods of time, although costs had their influence, indi­ rectly, and* over long-run periods of time. In the long-run, if marginal i producers oould not get their costa back in the sale price of the goods, a sufficient quantity of goods would not com© into the market to supply the desires of the defenders for the goods. Marginal producers wore those who would withdraw from production, or, materially reduce their production, unless prices in the long-run were high enough to cover all of their expenses including necessary profits, Ihe amount of costs that one had - expended upon a product had nothing in itself to do with the Value of the product. It was tbs value of the product that induced the costs to be in c u rre d . As to economic rent Ely was in his early writings a close follower of Ricardo, He believed that, as population increased and the demand for mere and mere products of land arose, the land-owners would cultivate poorer and poorer grades of land. As these poorer kinds of land came into cultivation, rent arose on the better grades, and was measured by the difference in productivity of these better grades compared with that land whose product sold on th© market for an amount barely sufficient to pay the costs of production. In hie later writings Ely came to feel that lan d , e sp e c ia lly urban land, was becoming more and more lik e c a p ita l, on account of a ll the elements which man had to put into it in order to make it useful for specific economic purposes. As to interest Ely hold to an - agio or time-preferenoe theory that interest had to be paid as a reward for ” Atiae in order to induce men to save. As to profits in th© competi­ tive field of business, Ely thought they were partly residual, partly payment© for special abilitioa and do term' ned- somewhat lik e r e n t, and v portly duo to luek and chance (oonjunctur e),, In the f i e l d of monopoly, profit® appeared as & surplus value over and above the costs of produo* tion of the goods* Wages mere determined largely by b a rg a in in g , sorae- where between the standard of life (the number and character of the wants whioh a usaa ccneidared wore important than marriage and family) and the discounted value of the marginal produst of the workers employed* Kly*s aajor o ontribution was perhaps in connection with what he * called Institutional Economics. There were five social institutions which Sly called fimdasent&lc of first ranks Property, Inheritance, Contract, ' Seated Bights, and Perscnal Conditions* There were also five forces which operated upon these five institutions to bring about di e tribution and to determine value* Ely called these the fundamentals of second ranks Custom, Competition, Monopoly, Authority, and Benevolence. The over­ lapping and interacting fundaioentals always played a significant part in a ll economic transactions, especially in commodity prices, rent, interest, and wages* General we Hare always took precedence over individual benefit® If any of these institutions or fundamentals got so much out of line that undue advantages in bargaining were ^iven to any particular group of individuals in society, it became the obligation of the State and its agencies such as the legislature and the courts to step in on the side of the weak bargainers. Mo value could be fair or reasonable and no distri­ bution could bo just if the social institutions became so maladjusted as to render the contracting parties unequal in bargaining strength. Ely believed in social progress toward a condition under which each member of society secured equal ox>portun!ty to develop to the full extent o f his capacity* All members of society were m utually in ter- ’.upondent and equally responsible.