4.6 Nassau Senior, the Whately connection, and utility theory

During the late 1820s, Nassau W. Senior delivered a series of lectures as Drummond professor at Oxford, some of which were collected in Senior's only published book, his Outline of the Science of Political Economy (1836). Senior carried forward Bailey's subjective utility theory; how much he was influenced by Bailey is difficult to say, since, like all too many economists of his era, Senior acknowledged virtually no like-minded colleagues or influences upon his own work.

Senior did acknowledge J.B. Say, however, and began his value analysis by stating that value depends on utility and scarcity, thus returning to the continental tradition. Senior added that utility is relative to human desires and to different persons, and is not intrinsic in objects. Utility, he pointed out:

denotes no intrinsic quality in the things which we call useful; it merely expresses their relations to the pains and pleasures of mankind. And, as the susceptibility of pain and pleasure from particular objects is created and modified by causes innumerable, and constantly varying, we find an endless diversity in the relative utility of different objects to different persons, a diversity which is the motive of all exchanges.

Scarcity, or the natural limitation of supply, was for Senior the main influence on relative utility. In the course of his discussion, Senior virtually came to formulate the law of diminishing marginal utility:

Not only are there limits to the pleasure which the commodities of any given class can afford, but the pleasure diminishes in a rapidly increasing ratio long before those limits are reached. Two articles of the same kind will seldom afford twice the pleasure of one, and still less will ten give five times the pleasure of two.

While he was completing his studies at Oxford, young Senior acquired as his tutor a young man, only three years older than himself, recently appointed as a fellow at Oriel College, from which he had graduated several years earlier. The Rev. Richard Whately (1787–1863), philosopher and theologian, and son of an Anglican minister, was to become Senior's close and lifelong friend. Even though Senior became an attorney, he remained a central part of the Oriel College circle clustered around the charismatic Whately. The circle engaged in literary studies and pursuits, with Senior publishing several literary articles and launching a short-lived literary and intellectual quarterly, the London Review. Whately published what was to become the standard text on logic, the Elements of Logic (1826), in which Senior included an appendix on ‘Ambiguous Terms Used in Political Economy’. Indeed, Whately was probably responsible for injecting an unfortunate tendency in Senior towards word-chopping and logomachy, which helped dampen the influence of the great Senior in the world of economics. At any rate, Senior learned philosophy and theology from Whately, and the latter economics from Senior.

In Oxford, the Oriel circle was becoming a highly influential centre for Liberal and Whig views within the Anglican Church, a remarkable influence indeed in that traditionally high Tory and High Church university.¹⁶ When the Drummond professorship in political economy opened up in 1825, Whately secured the post for Nassau Senior, and when Senior's term expired five years later, he recommended and obtained the position for Whately as his successor. Whately's Drummond lectures, the Introductory Lectures on Political Economy (1831, 2nd edition, 1832) continued and expanded the Senior tradition, particularly in value theory.

Indeed, methodologically, Whately went further than Senior. His linguistic and philosophical interests led Whately to see that the concept and terminology of ‘political economy’ tended to confuse and conflate these two distinct fields. This confusion hindered the scientific development of economics; hence Whately proposed substituting a new word, catallactics, the science of exchanges, for political economy. Whately defined man as ‘an animal that makes exchanges’, pointing out that even the animals nearest to human rationality did not have ‘to all appearance, the least notion of bartering, or in any way exchanging one thing for another’. Focusing on human acts of exchange rather than on the things being exchanged, Whately was led almost immediately to a subjective theory of value, since he saw that ‘the same thing is different to different persons’, and that differences in subjective value are the foundation of all exchanges. Moreover, Whately pointed out that ‘labour [is] not essential to value’, and noted that pearls do not ‘fetch a high price because men have dived for them; but on the contrary, men dive for them because they fetch a high price’.

Whately saw that the economic realm, and particularly exchange activity on the market, deserved its own sphere of analysis and inquiry. Even if integration later takes place, as analysis is applied to the political realm, there must first be a separation to allow the reasoning process its head.

But after separation and analysis, integration; and Richard Whately understood that the very fact that a separate sphere was secured for catallactic analysis meant all the more that integration with moral and theological analysis was required in order to come to policy conclusions. In his Drummond lectures, Whately was concerned to show, first, that, contrary to Oxford Tories, political economy was not sinful, materialistic, or opposed to Christianity. In the first place, political economy is not to be considered, as had Smith and the classicals, a study of wealth; it is instead a study of human exchanges. But even a study of wealth is not sinful; in the first place, it is not sinful per se to examine the means of increasing wealth. There is no need for the political economist to step beyond his role as a scientist or catallactician, and advocate policy as a means of acquiring wealth or on any other grounds. Indeed, once he does so, he advocates public policy not as a political economist but in some other capacity. Whately also denounced, in their turn, the attempt to monopolize economics by the aggressively atheistic, secular, and ‘anti-Christian’ Ricardian circle. Certainly the latter adjective would not be excessive for people like James Mill and the Benthamite radicals. Whately also believed Ricardian teachings to be dangerous and ‘anti-Christian’ in the sense that they implied inherent class conflict between capital and labour, and between landlords and everyone else, and therefore denied the essential laissez-faire insight of a harmonious social order, an order that testifies to the existence of divine wisdom. In short, for Whately laissez-faire harmony and Christian insight into a divine order meet on a broad integrative level. Thus, while economic analysis is scientific and value-free, and cannot directly imply political conclusions, such analysis will lead to laissez-faire conclusions and, as such, is perfectly consistent with Christian insight into a beneficent divine order.

In addition to his subtle exposition on the nature of and distinctions among positive and normative economics, Whately denounced the naive fact-gathering methodology of the Baconian Cambridge inductivists, led by Richard Jones and William Whewell. The role of fact-gathering, Whately perceptively pointed out, was not in framing theory but in applying it to specific conditions. Looking at facts without the guidance of theory in their selection is virtually impossible. Scientific advances, Whately correctly noted, come not from gathering more data, but from looking at old facts in new ways – an example was modern insight into the nature of the circulation of the blood.

In 1832, Richard Whately left his Drummond chair prematurely on getting a surprise appointment to the high post of Anglican archbishop of Dublin, where he scandalized the evangelical faithful by refusing to be anti-Catholic and by insisting on being joyous on the Sabbath. The position of archbishop carried with it being one of the two ‘visitors’ of Trinity College, Dublin, the two who formed the ultimate appeals court for all intra-College disputes. Whately used his clout at Trinity to drive through, over fierce opposition, the establishment of a new chair of political economy at Trinity, under terms closely modelled on the Drummond chair. For the rest of his life, Whately examined and selected candidates for the post himself, and paid the salary of the professors.

The opposition from the board and the provost of Dublin University was based on a fear of the alleged radicalism of political economy. The provost wanted Whately to guarantee that the holders of the new chair would have ‘sound and safe conservative views’, to which the archbishop indignantly replied that he was ‘appalled at such a suggestion, involving as it did the introduction of party politics into the subject of abstract science...’.

It was a subtle but important distinction that Whately was trying to convey – on an issue that plagues academia to this day. He was saying that it was proper – indeed important – to select a professor with the correct view of the broader implications of his subject as well as of its strictly scientific aspects. Yet it was decidedly not proper to judge the professoriat on the basis of their direct positions on narrow political issues, which Whately lumped together as ‘party politics’. Thus, in gaining agreement on the Whately chair, the archbishop closely quizzed and selected the professors on the basis of their commitment to the Christian-liberal view of the harmony of the universe in general, and of the free market in particular; and to the Senior subjective utility theory of value as against the Ricardian labour theory.

Whately himself wrote a bit more on economics, reiterating his ideas in his Easy Lessons on Money Matters; for the Use of Young People (1833), an enormously popular work for children, that went into 15 editions in the next 20 years, and was translated into many languages. Remarkably, in this primer Whately hinted at another huge theoretical advance: generalizing the theory of pricing for all factors of production: ‘If you consider attentively what is meant by the words Rent, Hire, and Interest, you will perceive that they all, in reality, signify the same sort of payment.’¹⁷ But, unfortunately, Whately did not apply himself further to economics, and insights into value or distribution theory became scattered and fragmentary. From now on, he would have to rely on Whately chair holders to pursue the subjective tradition more systematically.

The first holder of the Whately chair suited the archbishop's requirements admirably. Samuel Mountifort Longfield (1802–84), the son of an Anglican vicar in County Cork, Ireland, had graduated from Trinity College a decade earlier and had won a gold medal in science for particular excellence in mathematics and physics. Longfield later won a coveted fellowship at Trinity, a post concentrating on mathematics and sciences – areas in which Trinity was far stronger than Oxford and Cambridge, which were just now enlarging their exclusively classical curriculum to enter the modern world. While serving as fellow of the college, Longfield entered Dublin Law School, and, graduating in 1831, became assistant to the Dublin professor of feudal and English law. Not only that: Longfield delivered a series of public lectures on the common law that was highly favourably received.

Mountifort Longfield more than fulfilled Whately's expectations. Not only did he use the leisure and the stimulus of the chair to hammer out a remarkably complete subjective and even marginalist theory of value and distribution – a genuine alternative to Ricardianism; he also imparted his stamp and the tradition of a subjective value theory alternative on Dublin University, leaving worthy successors to his chair. The brunt of Longfield's system was presented in his first published series of lectures, Lectures on Political Economy (1834). During the rest of his term, Longfield published two more sets of lectures; in 1836, he left the Whately chair to resume his legal career, becoming Regius professor of feudal and English law at Dublin University. Later he became a member of the Queen's Council. Longfield was an expert in real estate law, and in 1849 he was appointed as one of the three land commissioners in Ireland. A decade later, he became the prestigious judge of the landed estates court in Ireland. From then on he was known widely in Great Britain as ‘Judge Longfield’ for his efforts on behalf of land reform in Ireland. Aside from a few articles on banking, Longfield had no further leisure to pursue economic studies, and so his remarkable contributions to economics were crammed into his four years in the Whately chair. At the end of his life, Longfield returned to his early interest in mathematics, publishing a mathematical text, An Elementary Treatise on Series, in 1872.

Longfield's broad perspective of market harmony was quite similar to Whately's. In his Lectures, he wrote that the ‘laws according to which wealth is created, distributed, and consumed, have been framed by the Great Author of our being, with the same regard to our happiness which is manifested by the laws that govern the material world’. Furthermore, Longfield was disturbed by Ricardo's pessimistic theory of distribution, and his portrayal of inherent class conflict between workers, capitalists, and landlords, with the former two being doomed by an inevitable rising lion's share of the product accruing to the unproductive class of landlords.

In value theory, Longfield worked out the subjective theory of value and price more fully than had been accomplished before in Great Britain. He concentrated firmly on market price as the important consideration rather than long-run price, and also showed that both are in any case determined by supply and demand. Longfield broke important new ground in his detailed marginal analysis of demand. Here he worked out the concept of consumer demand as a schedule, related to sets of prices, and even developed the idea of individual falling demand schedules as the fundamental basis of aggregate market demand. Even more fully than John Craig, Longfield showed that market demand curves are constituted by a spectrum of supramarginal, marginal, and submarginal buyers, each with different intensities of demand. Furthermore, ‘the measure of the intensity of any person's demand for any commodity is the amount which he would be willing and able to give for it, rather than remain without it, or forego the gratification which it is calculated to afford him’. Yet, of course, despite the different intensities of demand, all exchanges will be at the same market price. If, then, ‘the price is attempted to be raised one degree beyond this sum, the demanders, who by the change cease to be purchasers, must be those the intensity of whose demand was precisely measured by the former price... Thus the market price is measured by the demand, which being of the least intensity, yet leads to actual purchases’. In short, the marginal demand becomes a key to the determination of price.

In his analysis of supply, Longfield showed that the supply relevant to the real, day-to-day market price is a previously produced stock of a good now fixed for the immediate present period (in short, what would now be called a vertical supply curve for the immediate market period). Furthermore, Longfield saw clearly, in contrast to Ricardo, that cost of production in no sense determines price; at most, it contributes indirectly to that determination by affecting the extent of supply. His analysis comes close to the later Austrian theory by brilliantly pointing out that the effect of cost on supply comes from the expectations of producers in deciding how much of a good to make and put on the market. Thus the cost of production acts by its influence on the supply, ‘since men will not produce commodities unless with the reasonable expectation of selling them for more than the cost of producing them’.

Professor Laurence Moss, a biographer of Longfield, has deprecated the latter's contribution to value theory as not a marginal utility theory.¹⁸ Moss complains that while Longfield realized that utility was the source of all demand, he did not analyse utility beyond that, and stuck merely to an analysis of marginal demands and the demand schedule. This revisionist view seems merely to quibble over terms; while Longfield did not use the term marginal utility or break ‘utility’ down into individuals or groups, his doing so for demand and the degrees of demand goes most of the way towards a complete utility theory. Professor Moss is in danger of mistaking the term for the substance. It is true, however, that an unfortunate lingering Ricardianism led Longfield to endorse labour as a measure of value, a concept which is every bit as fallacious as the labour theory of value itself.

In Ireland, as we shall see, Mountifort Longfield, aided by Whately, left an important legacy of subjective value theory and anti-Ricardianism to his successors in the Whately chair at Dublin. But, unfortunately, he had no influence in England, where he was ironically well-known as Judge Longfield the Irish land reformer and unknown as an important and challenging economist. Senior, though closest in doctrine, knew of Longfield but only referred to him once on a trivial point and displayed no signs of being influenced by him. This neglect was intensified by the extreme provinciality of English economics in the nineteenth century. Generally, they would not deign to notice foreign writers, especially ‘colonials’ like Irishmen and Americans from whom they might have profited.

But Mountifort Longfield did succeed, at least, in establishing a utility-value tradition in Ireland. His successor in the Whately chair, Isaac Butt (1813–79), proudly called himself a disciple of Longfield, and advised his students to read, above all in economics, Longfield, Say and Senior – a worthy trio indeed. Like Longfield, and even more so, Butt's economic contributions were confined to the 1836–40 term of his Whately chair, his most important publications, Introductory Lecture (1837) and Rent, Profits, and Labour (1838), consisting of lectures delivered at Trinity. As we shall see below, Butt's main contribution was generalizing Longfield's marginal productivity theory of factor pricing and integrating Say's utility analysis with that theory. In utility theory proper, Butt corrected Longfield's Smith-like error in referring to consumption per se as ‘unproductive’. Butt also noted that the labour theory of value might be in a sense applicable if labour were the only scarce resource, and if, moreover, it were homogeneous and costlessly mobile between industries. But such conditions are of course impossible.

Isaac Butt began as a precocious classical scholar and translator of Virgil. He was named to the Whately chair at the early age of 23, and, while teaching there, he took his bar examinations. After his term was over, Butt became an eminent attorney, and soon became an alderman of the City of Dublin. Later Isaac Butt denounced British policy during the Irish famine, and went on to became a famous and hard-hitting advocate of Irish home rule. Butt defended leaders of the Irish rising of 1848 in court, as he did the Fenian rebels in the late 1860s. Butt was also the founder, leader and chief organizer of the Home Rule Party, serving for a while in Parliament. His published writings after his Trinity period dealt with the Irish land question, where Butt advocated land reform on behalf of the Irish tenantry. As a tenants' advocate, Butt took the poorly paid side of these legal disputes, and hence was never well off and was often deeply in debt. His main publications on the Irish question were A Voice for Ireland — the Famine in the Land, What Has Been Done and What is to be Done (1847), and The Irish People and the Irish Land (mi).

Isaac Butt's successor in the Whately chair, James Anthony Lawson (1817— 87), was also an attorney involved with the Irish question, but he took the opposing route to Butt, becoming a stern advocate of British law and order and suppression of his rebellious countrymen. Lawson also became the holder of the political economy chair at a remarkably early age (24), serving the full term from 1841 to 1846. Lawson entered Parliament, and rose to become solicitor-general and then attorney-general for Ireland, becoming a judge of the Common Pleas in 1868. There he meted out punishment for land rebels and Fenians; while Richard Cantillon remains as the only possibly murdered man in the history of economic thought, Lawson suffered an attempted assassination on the streets of Dublin in 1882.

Lawson's productivity in economics followed the same restricted path as that of his predecessors. His only published book was his Five Lectures on Political Economy (1844), consisting of some of his Trinity lectures; in later years, he occasionally printed some of his lectures on legal topics, the best-known being on mercantile law in 1855.

Unfortunately, the series of Lawson's lectures on value have been lost, his only published reference to them being contained in a brief appendix to his Five Lectures. We know enough, however, to see that Lawson was decidedly in the Trinity utility tradition, and even made a distinguished contribution to that doctrine. Thus Lawson declared that it was subjective utility and utility alone that determined the price of all goods. Lawson declared that ‘It is a proposition always true, and of universal application, that the exchangeable value of all articles depends upon their utility, that is, upon their power to gratify the wants and wishes of man’. (Italics in original.) All other attempted explanations of value he saw as only partial. Demand and supply, for example, can only influence price by way of their effect on utility. In dealing with the effect of an increase of supply, Lawson arrived flatly and notably at the law of diminishing marginal utility. Thus, if someone's supply of a good increased,

this will generally diminish its utility to him, or the degree in which he desires its possession, for as our particular desires are capable of being satisfied, it is obvious that we may have more of an article than we wished to use, therefore retaining the possession of that surplus is less desirable to us.

When coming to the cost-of-production theory of value, Lawson pointed out that the utility of a product, and not its cost, determines how much anyone will pay for it. While price may sometimes equal cost of production, this does not mean that cost determines the price. On the contrary, the coinciding of cost and price, Lawson added, can only come about ‘through the medium of a change in supply and when this cannot be brought about, there is no such coincidence and no tendency toward it’. In that way, Lawson arrived at Stanley Jevons's newly hacked-out value position of a generation later.

In his Five Lectures, Lawson also developed the Whatelyan idea of economics as catallactics, as the study of exchanging man. In his first lecture, Lawson declared that economics views man ‘in connection with his fellow-man, having reference solely to those relations which are the consequences of a particular act, to which his nature leads him, namely, the act of making exchange’. In his second lecture, Lawson failed to continue this line, and fell back on older discussions of political economy as the study of ‘wealth’.¹⁹

The next holder of the Whately chair, William Neilson Hancock (1820–88), a student of Whately at Oxford, taught at Trinity from 1846 to 1851, and was also an attorney. He was a particularly scholarly lawyer, and in the last two years of his Trinity term he simultaneously held the chairs of jurisprudence and political economy at the new Queen's College, Belfast. Afterwards, Hancock was a secretary to many government commissions on land and education matters, and held posts as court clerk, ending his career as clerk of the Crown and Hanaper in Dublin. He was the principal founder of the Statistical Society of Ireland in 1847, and the Social Inquiry Society of Belfast four years later.

In contrast to the other Trinity chair holders, Hancock was interested in statistics and empirical work; he had graduated from Trinity in 1842 with a first in mathematics. He published a host of articles and pamphlets on empirical questions. Several dealt, almost inevitably, with the Irish land question, where, like Longfield and Butt but unlike Lawson, he championed the rights of the Irish tenantry and deplored the effect upon their condition of the British-imposed system of land tenure: e.g., The Tenant-right of Ulster (1845); Impediments to the Prosperity of Ireland (1850); and Two Reports for the Irish Government on the History of the Landlord and Tenant Question in Ireland (1859, 1866). Other pamphlets dealt with taxation and local government, in which he advocated a single tax on income, including the inheritance of wealth. A third group of articles advocated stricter control and supervision of the savings banks. Hancock's statistical work was done under the influence and guidance of Thomas Larcom, a land surveyor and statistician who filled many government posts, becoming under-secretary for Ireland in the 1850s.

While better known for applied economics, Hancock did publish a valuable theoretical work consisting of his Introductory Lecture on Political Economy, 1848 (1849) delivered at Trinity College. He began by noting the ambiguity that had pervaded the use of the word ‘value’, and made clear that ‘the word “price” is fortunately free from all ambiguity, and always means the exchangeable value of a commodity, estimated in the money of the country where the exchange takes place’. He proposed, then, to use the word price exclusively instead of exchange value. Price, furthermore, can change either ‘from the side of things’, or ‘from the side of money’. Treating the former, he notes that such changes can only take place as a result of one or both of the following causes: ‘either a change in the degree in which its possession is desired, or in its desirability; or a change in the force of the causes by which its supply is limited, or, in other words, by which it is made scarce’. Turning to demand, Hancock added that ‘the degree in which the possession of a commodity is desired, is measured by the number of persons able and willing to purchase at each amount of price’. Hancock's utility, or quasi-marginal utility, analysis, emphasized a slightly different aspect than did that of his predecessors: namely, another aspect of what we would now call the falling demand curve. For he noted that ‘it is observed that for commodities in general, their desirability increases very rapidly as their prices fall’.

On supply, Hancock again stressed limitations of supply rather than cost; and the limitations, or scarcities, of supply are dependent on the scarcities of the various factors of production. He implied that the returns to these factors is a question of their prices, and that any explanation of the prices of the factors must treat them uniformly, in accordance with the influences upon their demand and supply, i.e., ‘by the application of the laws already stated with regard to other prices’.

But while Hancock was clearly in the Trinity utility tradition, we see already a falling-back, a loss of interest and a greater vagueness in the discussion of value or, indeed, of theory in general. And indeed, William Neilson Hancock was destined to be the last of the distinguished line of Irish subjective utility theorists at Trinity College.