Walras and Naturalism

[Note: I am republishing this, as the vicissitudes of the internet have deleted it.  Alas.] 

I started reading Walras recently, which I’ve been wanting to do for a while.   This is part of a general project of mine to trace the intellectual history of the idea of the market as a natural phenomenon, or of "market forces" as something akin to natural forces.

Walras is complicated in this respect.  So far, he seems self-contradictory to me, but perhaps I simply haven’t read enough yet.

At the beginning of “Elements of Pure Economics” he criticizes JB Say (and several others) for declaring the whole of political economy to be akin to a natural science.  Say (as quoted by Walras) defines political economy by saying that “…the aim of political economy is to show the ways in wealth is produced, distributed and consumed.”  Walras criticizes Say for forgetting the fact of free will: “From Say’s definition it would seem that the production, distribution and consumption of wealth take place, if not spontaneously, at least in a manner somehow independent of the will of man, and as though political economy consisted entirely of a simple exposition of this manner of production, distribution and consumption.”  (emphasis in original) Walras goes on to note how useful this “naturalistic” view is to those who would argue against socialism:

“What has proved so pleasing and at the same time misleading to economists in this definition is precisely its characterization of the whole of political economy as a natural science pure and simple.  Such a point of view was particularly useful to them in their controversy with the socialists.  Every proposal to reorganize production, every proposal to redistribute property was rejected a priori  and practically without discussion, not on the grounds that such plans were contrary to economic well-being or to social justice, but simply because they were artificial arrangements designed to replace what was natural…Such an attitude led Prouhdon to hurl the epithet fatalistic at this school of economists.”(Elements at 54-55)

Walras is quite clear that such this “point of view” or “attitude” is incorrect.  That is, one cannot label one form of economic organization any more “natural” than another.  And the reason for this is the existence of human will.  That is, through the exercise of our will, we can choose different socioeconomic institutions, and none is more natural than any other. I quote the relevant passage at length:

“Unfortunately, convenient as this point of view is, it is mistaken. If men were nothing more than a superior species of animal, like bees that live and work together instinctively, then, to be sure, the description and explanation of social phenomena in general and of the production, distribution and consumption of wealth in particular would be a natural science. Indeed, it would be a branch of natural history, viz. the natural history of man, a sequel to the natural history of bees.  But this is not the case at all. Man is a creature endowed with reason and freedom, and possessed of a capacity for initiative and progress. In the production and distribution of wealth, and generally in all matters pertaining to social organization, man has the choice between better and worse and tends more and more to choose the better part. Thus man has progressed from a system of guilds, trade regulations and price-fixing to a system of freedom of industry and trade, i.e., to a system of laisser-faire laisser-passer; he has progressed from slavery and serfdom and from serfdom to the wage-system.  The superiority of the latter forms of organization over the earlier forms lies not in their greater naturalness (both old an new are artificial, since they came into existence only by supplanting the old); but rather in their conformity with material well-being and justice. The proof of such conformity is the only justification for adhering to a policy of laisser-faire, lasser passer.  Moreover, socialistic forms of organization should be rejected if it can indeed be shown that they are inconsistent with material well-being and justice.” (55) 

At least for me, I found this pronouncement quite surprising, coming from one of the founders of neoclassical thought.  That is to say, given that I read neoclassical thought as having the ideological function of (covertly) supporting the view that capitalistic arrangements are natural (and I am using the Marxist notion of ideology here), I was taken aback to find one of its founders explicitly criticize this ideology  (or “attitude” as he puts it).

At the same time, what Walras giveth, he appears also to taketh away.  When we come to Walras’ discussion on value in exchange, he is adamant and explicit that he is investigating a natural phenomenon.  That is, any science investigating the exchange-value of a commodity is, he believes, on the exact same ontological and epistemological footing as the natural sciences.

Here is Walras on the subject (using the exchange-value of wheat as an example):

Wheat is worth 24 francs a hectoliter.  We observe, first of all, that this partakes of the character of a natural phenomenon.  This particular value of wheat in terms of money, that is to say, this price of wheat, does not result either from the will of the buyer of from the will of the seller or from any agreement between the two. Though the seller would like to sell at a higher price, he cannot do so because the wheat is not worth any more. …Thus, any value in exchange, once established, partakes of the character of a natural phenomenon, natural in its origins, natural in its manifestations, and natural in its essence. If wheat and silver have any value at all, it is because they are scarce, that is, useful and limited in quantity – both of these conditions being natural.  If wheat and silver have a definite value with respect to each other, it is because they are, each of them, more or less scarce, that is, more or less useful and more or less limited in quantity – again the same two natural conditions mentioned above.(69)

Walras goes even further to say that, if we were to fix the price of wheat we would be substituting an “artificial value for a natural one.” (Id) This is an exceptionally striking sentence, given that, just a few pages earlier, he rejects the natural/artificial distinction outright.

A number of criticisms can be leveled at this line of reasoning.*  But in the present context, what I want to highlight is that it seems to overlook the fact that the very existence of exchange-value depends on a social institution, i.e., of private property.  Indeed, Walras himself insists that private property is a social fact, and not a natural one: “The appropriation of scarce things or of social wealth is a phenomenon of human contrivance and not a natural phenomenon.  It has its origins in the exercise of the human will and in human behavior, and not in the play of natural forces.” (76) He goes on to explicitly contrast “communism” and “individualism” as distinct ways of appropriating and distributing social wealth, judged according to different sets of ethical criterion.  Accordingly, he argues that the science studying these systems is a moral science, not a natural one: “Appropriation being in essence a moral phenomenon, the theory of property must be in essence a moral science.” And again, as noted above, Walras notes at the very outset of Elements that no socioeconomic arrangement is more natural than another.  So, on the one hand, he argues that neither communal nor individual property arrangements can be regarded as “natural.” On the other, he regards exchange in the market as a natural phenomenon.  So does Walras contradict himself?

Here’s the best I can make of this. Walras is attempting to say that that institution of private property is no more natural then that of, say, communal  property, but that if the former institution exists, then the “definite values” of commodities produced under it are determined by the “natural qualities” of those commodities.   

But I’m not convinced that this is an adequate solution to the contradictions that appear in his text.  It just seems too generous a reading.  Indeed, he does not merely claim that exchange-values are “natural,” he further says that “the pure theory of economics is a science that which resembles the physico-mathematical sciences in every respect.” (71) He equates this “pure economics” with the study of market exchange.  He distinguishes this “pure theory of economics” from “applied economics” (which he deems the study of industry) and “social economics” (which he deems the study of private property).   His goal is to delineate these three branches, which he believes his predecessors failed to do. 

The problem is that he simply is not taking his own reasoning to its full conclusion.  If indeed no socioeconomic organization is any more natural than any other, then the study of “pure economics” simply cannot be relegated to the study of exchange on the market.  It is quite obviously not “pure economics” but the study of a particular kind of economic system, to wit, capitalism.  And, while it seems that Walras wants to avoid, quite explicitly, the notion that capitalism is natural, he feeds right into that notion by arguing that the study of markets is “pure,” that it is the study of a natural phenomenon,  and that, as such, it “resembles the physico-mathematical sciences in every respect.”

A note on my own investigations here. I first saw this quote from Walras (re “physico-mathematical” sciences) in “From Political Economy to Economics” by Milanokis and Fine.  From this and other quotes, I got the very strong sense that Walras was entirely on board with the naturalist impulse in economics.  Then I finally read him, and find that he wants to critique that impulse.   But, despite himself, he seems ultimately to endorse it.

There are a number of other exceptionally interesting issues raised by Walras (among them the relation of “free will” to utility and the laws of demand), but I’ll perhaps take them up elsewhere.

[* Among them is the notion that the “usefulness” is solely a function of a commodity's “natural” qualities. Commodities take on social meanings as well; hence the significance of the advertising industry]