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Today I stumbled upon a very interesting footnote by Rothbard in his magnum opus “Man, Economy and State” on Alfred Marshall’s misguided approach to value theory which pointed to an interesting paper by one Emil Kauder (“The Retarded Acceptance of the Marginal Utility Theory”) from 1953 which proposes the thesis that the economists who originally elaborated the labor theory of value (Locke, Smith, etc.) were seriously influenced by Protestantism (and Calvinism in particular).
The main subject of the paper is why virtually all of the British classical economists, starting with Adam Smith, were so stubbornly fixed on a fallacious ‘objective’ labor theory of value, instead of adopting the much more accurate in comparison, prototypes of a marginal utility theory developed by their continental counterparts in Italy and France (e.g. Turgot).
It turns out, there was an obvious religious divide between the English and the French and Italian economists of the 17th and 18th centuries. Both Locke and Smith, the most prominent early adopters of the labor theory of value were Protestants, or had gone through protestant education, while economists like Turgot (in France) and Galiani (Italy) were Catholics or had received a catholic (i.e. a Thomistic-Aristotelian) education. Now, some of these economists, like for example Smith, were deists in their religious beliefs, but Kauder emphasizes on the difference in the education they received in their adolescence which, to quote him:
“leaves its permanent impresdon on our minds, regardless of how we may change our convictions at a later date. These indelible fundamentals created spedfic social outiooks which separated the two camps.”
He then gives a brief summary of the Calvinist view of the importance of labor – Calvin and his followers placed labor at the very center of their social theology, thus:
“Any social philosopher or economist exposed to Calvinism will be tempted to give labor an exalted podtion in his social or economic treatise, and no better way of extolling labor can be found than by combining work with value theory, traditionally the very basis of an economic system.”
John Locke wrote that God had commanded man to labor and Smith despite being a deist did show a considerable sympathy for Presbyterianism, notes Kauder. And of course Adam Smith’s metaphor of the ‘invisible hand’ is most definitely inspired by the concept of the ‘hand of providence’.
Now, this is not to say that the British economists were not influenced by the Thomistic-Aristotelian scholastic economic theory. Both the British and the continental French and Italian economists were influenced by that theory but the latter were not influenced by Puritanism. The result of this difference in religious and thus, at the time, educational background, led them to emphasize different aspects of scholastic economics. For example, Locke and Smith focused on the ‘fair-price’ concept of the scholastic economic tradition and combined it with the Calvinist glorification of labor, while for authors like Turgot and Galiani labor did not have the same importance. In the scholastic education that they got, labor was not at the center of economics life, but instead moderate pleasure seeking and happiness were. As everyone familiar with Aristotle knows, for him, moderate pleasure seeking was an important part of the good life. This Aristotelian approach of the scholastics, uncontaminated with any Calvinist exaltation of labor, had a profound influence on the direction which economic thought took in France and Italy in the 18th century:
“If pleasure in a moderate form is the purpose of economics, then following the Aristotdian concept of the final cause, all prindples of economics including valuation must be derived from it. In this pattem of Aristotelian and Thomistic thinking, valuation has the function of showing how much pleasuro can be derived from economic goods. “
Kauder notes that later in the 19th century the intellectual conditions are quite different and the acceptance or non-acceptance of the marginal theory of value, as fully developed in the early 1870’s by economists like Carl Menger, William Stanley Jevons and Leon Walras, cannot be explained merely by such a religious divide. However, it does help explain Alfred Marshall’s unwillingness to accept the marginal theory in full and his desire to combine it with some form of the ‘objective’ labor theory.
Marshall’s father was a devout Evangelical and Evangelicalism was basically a Calvinist revival in America and Britain in the 19th century. Marshall was himself agnostic, but, as Moldbug has convincingly argued, one can be a devout protestant without believing in a personal God. Kauder provides this quote by Marshall:
“Work in its best sense, the healthy energetic exercise of faculties is the aim of life, is life itself,” comfort is “a mere increase of artificial wants”
Kauder further remarks:
“On the one hand, Marahall was one of the independent discoverers of marginal utility. On the other hand, his glorification of labor attracted him to the cost problem. The result was the unbalanced character of his price and value theory. He failed to make fullest use of the marginal utility theory, and he defended valiantly Ricardo’s objective value theory.”
Reading this paper made me check Rothbard’s section on Calvinism in the first volume of his “Austrian Perspective on the History of Economic Thought” which I hadn’t looked into up until now. There he notes (following Kauder’s thesis) the contrast between the catholic-scholastic and the Calvinist views of economic life:
“The Scholastic focus was on consumption, the consumer, as the goal of labor and production. In contrast, a rather grim emphasis on work and on saving began to be stressed in Calvinist culture. This de-emphasis on leisure of course fitted with the iconoclasm that reached its height in Calvinism — the condemnation of the enjoyment of the senses as a means of expressing religious devotion. One of the expressions of this conflict came over religious holidays, which Catholic countries enjoyed in abundance. To the Puritans, this was idolatry; even Christmas was not supposed to be an occasion for sensate enjoyment.”
He also emphasizes the importance of Aristotle with regards to Scholastic theories:
“The Aristotelian balance, or golden mean, was considered a requisite of the good life, a life leading to happiness in keeping with the nature of man. And that balanced life emphasized the joys of consumption, as well as of leisure, in addition to the importance of productive effort.
He builds upon Kauder’s thesis (and references it extensively) and agrees that the fundamental difference between the French/Italian and British approaches to economics was the result of the religious divide between scholastic Catholicism and Calvinist Protestantism, respectively.
It is hardly surprising of course, that leftist economics, just like leftist politics, is likely massively influenced by some form of Protestantism. Modbug himself traced the origins of modern anglo- leftism through Unitarianism, colonial Puritanism, all the way back to Calvinism. The most leftist modern economic theory, Marxism, is of course based on the labor theory of value. You would think that modern mainstream economists have fully abandoned any sort of an objective cost/labor theories of value, proven fallacious a century and a half ago, but that is not entirely true. Actually one of the main criticisms that any contemporary Austrian Economist will levy against a large chunk of the modern mainstream academic economists is their reluctance to let go of objective cost/labor theories completely (Alfred Marshall is after all considered one of the fathers of modern economics). Although all Keynesians and Neoclassicals do broadly accept the marginal theory of value, some traces of an objective cost/labor approaches to value theory are still (sometimes) found in their thought.