1 - The crisis of classical political economy and attempts at reconstruction, 1870–1885

Summary

The 1870s and 1880s were the formative years of English historical economics. The late 1860s and the 1870s have been called the crisis of the old English political economy. Until the publication of Marshall's Principles in 1890, the immensely popular economic writings of J.S. Mill remained the dominant work in economics and served to shore up the illusion that the classical postulates, deductive methodology, and policy conclusions inherited from the Ricardians remained valid into the last third of the nineteenth century. As we will see, however, Mill's methodology, theory, and policy conclusions seriously compromised the Ricardian structure. Indeed, the economic views of Mill offered a significant opening for the heretical views of several of the historical economists. The last of the classical economists, J.E. Cairnes, sought to repair what he saw as dangerous tendencies in Mill's work by returning to a more rigorous deductive method and by disassociating economic theory from its popular policy maxims. Cairnes's efforts, however, only deepened the crisis of classical economics. Finally, during these same years the brilliant work of W.S. Jevons and Alfred Marshall laid the foundations for neoclassical theory. Before 1885, however, neoclassical theory had not yet become the dominant school of economics in England.

The crisis of political economy

To celebrate the one-hundredth anniversary of the publication of the Wealth of Nations, the Political Economy Club, itself nearly a half century old, held a centenary dinner at the Pall Mall Restaurant on May 31, 1876.