Wisconsin "Government and Business" and the History of Heterodox Economic Thought: Volume 22

The following three sets of notes were taken in courses on “Government and Business” and “The Economic Role of Government” given by Edwin E. Witte and Robert Lampman at the University of Wisconsin in the mid-1950s.

Business is any legally permissible economic activity for gain. The first relation between government and business is that government determines by law what are the illegal activities, e.g. fraud, crime, violence. Government is the rule maker.

: Immigration in the colonial period was almost exclusively English plus geographically scattered others. Little immigration until after the War of 1812, still mainly English speaking. After 1840, a heavy influx of German (1850–1880), Irish, later Scandinavian immigrants in large numbers, especially after, but also during, the Civil War, 1860–1865. The heaviest immigration was from 1890 through 1910 up to World War I: Polish, Italian, Slavic, Russian and Romanian Jews, generally East European. Most immigrants were young people. Since World War I immigration has been light, due in part to restrictive policies after 1920, especially after 1927. Only slight immigration during the 1930s but more emigration, resulting in net emigration. Since World War II, considerable immigration but nothing like the period prior to World War I; relatively geographical distributed: refugees, nationals, displaced persons, etc., including the families of servicemen who married abroad.

In the discussion groups subjects will be taken up which are not dealt with in the lectures. The subjects to be taken up in the discussion groups of each week and the assignments relating thereto will be announced well in advance of the meetings.

: The textbook used in this course is:

A conference on the history of heterodox economics in the twentieth century was held during October 3–5, 2002 at the University of Missouri-Kansas City. The conference organizers were Frederic S. Lee and John King. Several papers presented at the conference are published below, several in significantly revised and/or expanded form, together with one paper distributed at but not formally presented at the conference. Malcolm Rutherford’s paper, “On the Economic Frontier: Walton Hamilton, Institutional Economics, and Education,” will be published in History of Political Economy. All of the papers published here have been reviewed.

The emergence and maturation of the social sciences is an important component of the expansion of institutions of higher learning in the 20th century. The discipline of Political Economy, increasingly institutionalized in various Canadian universities in the early decades of the century, secured a Chair at the University of Manitoba in 1909. After 1914, its title became “Political Economy and Political Science” and the department subsequently served “as the great mother department to which were attached newer social science disciplines until it was deemed appropriate to let them launch out on their own” (Pentland, 1977, p. 3). Political Science became independent in 1948, Geography in 1951, and Sociology and Anthropology in 1962 (p. 4). Agricultural Economics, which was taught in the Manitoba Agricultural College, became its own department when the college joined the university in 1924. In the 1930s, Agricultural Economics was absorbed into Department of Political Economy. However, according to Pentland (pp. 4–5) it was not until the late 1940s that agricultural economics became a significant “sub-department.” It subsequently separated itself from Political Economy and, in 1954, became an independent department in the Faculty of Agriculture (p. 5). The result of these disciplinary developments was that the faculty of the Department of Political Economy had, from time to time, members whose expertise lay outside the increasingly well-defined terrain of economics. Despite this, however, they did not seem to have any long-lasting direct impact on shaping and defining the curricula in Economics. Since these other disciplines left and became independent when they had reached a certain size or degree of influence, Economics was left to define and pursue its own agenda unencumbered by the needs of these former associates.

Repression is an integral part of a class-based society. In these societies a relatively small number of people own a very large share of productive resources. This concentration of asset ownership inevitably leads to a highly unequal distribution of income and with it a division of society into a small number of haves and a much larger number of have-nots. The haves constantly fear that the have-nots will seize their property either by outright force or through legislation. Over the centuries they have devised methods of social control to preserve the existing property relationships.

The first Wisconsin Ph.D.s who came to MSU with an institutional bent were agricultural economists and included Henry Larzalere (Ph.D. 1938) whose major professor was Asher Hobson. Larzalere recalls the influence of Commons who retired in 1933. Upon graduation, Larzalere worked a short time for Wisconsin Governor Phillip Fox LaFollette who won passage of the nation’s first unemployment compensation act. Commons had earlier helped LaFollette’s father, Robert, to a number of institutional innovations.⁴ Larzalere continued the Commons’ tradition of contributing to the development of new institutions rather than being content to provide an efficiency apologia for existing private governance structures. He helped Michigan farmers form cooperatives. He taught land economics prior to Barlowe’s arrival in 1948, but primarily taught agricultural marketing. One of his Master’s degree students was Glenn Johnson (see below). Larzalere retired in 1977.

The Department of Economics at the University of Oklahoma (Norman) began its Doctoral program in Economics under the Chairmanship of Jim E. Reese [Brinker, 4]. The Department graduated its first Doctoral student in 1951, a student who had received his Masters Degree of Science in Chemical Engineering, 1948. From 1951 to 1995, the Department has granted approximately 101 Doctoral degrees in Economics according to records. Its graduates teach in 62 Universities, foreign and domestic; work for or have worked for the Federal Reserve Bank; The Comptroller of the Treasury of the United States; The Council of Economic Advisors to the President; and The International Monetary Fund. Included are one sitting Congressman and one 1996 Vice Presidential candidate, as well as persons employed in private practice, business, or consulting. There have been 12 women granted the Doctoral Degree which places the Department above the national average.

Universities traditionally have had two primary cultural functions. One is to maintain the “eternal verities” of the tribe. The other is to “advance the frontiers of knowledge.” While not wholly antithetical, these two functions do at times pose a delicate balancing act. To advance the so-called frontiers of knowledge may well undermine the very foundations of conventional tribal wisdom and appear to undermine the instituted hierarchy or status system of the society. This can provoke outrage on the part of the beneficiaries of the hierarchy; it may also disturb the cultural contentment of all the rest of the tribe upon whom complicity in the faith is essential for domestic tranquility. Although one might wonder at the outrage of those who might well be viewed as victims of the system, on reflection it is easily understood. To admit that which they believe is a hoax would mean that they were dupes. And no one likes to think that he or she has been taken. In other words, the British people do not like to be reminded of the cultural sham of a Royal Family.

The University of Utah is located in Salt Lake City, the home of the Church of Jesus Christ of Latter Day Saints (LDS or Mormon). This conjunction has led some to believe the University is Church-run, or at least Church dominated. In fact, the University, state-financed from the beginning, has been wholly autonomous since an incident in the early 20th Century. In that incident several faculty members were discharged for their unorthodox religious and political views. This led to an uproar and subsequent protracted controversy, the resolution of which did not reinstate the discharged faculty members but did establish the complete autonomy of the University from the Church.

In 1978, Philip Klein wrote about institutional economists of the Veblen-Commons-Mitchell-Ayres variety: Whatever we call ourselves, we are not given much credit generally among our fellow economists, but I think there is evidence that an ever-wider group of economists has begun to hear what we are saying and to accept a number of our premises…institutionalism must be viewed as either never having died or as being in the process of a resurrection which I suggest will endure (Klein, 1978, p. 252).Klein’s optimism seems justified by the following quote from Joseph Stiglitz’s new book, Globalization and its Discontents: Old-fashioned economics textbooks often talk about market economics as if it had three essential ingredients: prices, private property, and profits. Together with competition, these provide incentives, coordinate economic decision making, ensuring that firms produce what individuals want at the lowest possible cost. But there has also long been a recognition of the importance of institutions (Stiglitz, 2002, p. 139; emphasis in original).Klein and other original institutionalists should be buoyed when they hear such a statement from a recent Nobel Prize winner. One problem, however, is that the “old-fashioned textbooks” are still being published in 2003. The quote also raises a question: just who recognized the importance of institutions and when did they recognize it? Statements such as the above by Stiglitz irk original institutionalists, but why? Is it because he underestimates the prominence of perfect competition in current texts, because he is understating original institutionalists’ positions as “keepers of the faith,” or both? In any case, we may not be able to hoist the V(eblen)-C(ommons) banner and claim total victory but, increasingly, more of economics today is institutional economics. A recent article by Allan Schmid demonstrates that indeed though everyone is not an institutionalist in the Veblen-Commons mold, “good economists find it useful to embrace some of its various elements” (Schmid, 2001, p. 281).

In 1938 Barbara Wootton published Lament For Economics, an indictment of the state of contemporary economic theory. She complained that economics was of no use to anyone, and unintelligible to all except a small minority of specialists. Economists were unable to agree; they ignored reality, and often served as apologists for capitalism. Thus, economics was not a science, and could contribute little or nothing either to the understanding of capitalism or to the organisation of a future socialist society. Wootton’s criticism made no impact at the time, and she soon abandoned economics and became an eminent criminologist and social theorist. However, many of her arguments were repeated, 62 years later, in the French students’ manifesto that led to the formation of the Post Austistic Economics movement.

This paper traces the path of Marxism in the 20th century with special focus upon its place within political economy. It argues that the emphasis upon Marxism as a political economy has been directly connected to movement away from Marxism as a theory of class struggle. It begins by establishing how and why, in Marx’s view, all history is a history of class struggles and integrates this perspective with his work in Capital. It is argued that political economy was one of the things Marx was critiquing and that he was attempting to show political economy to be a product of capitalism rather than seeking to establish a Marxist political economy.

This article identifies the concept of market value as a standardizing concept that coordinates the actions of market participants in relatively inefficient real estate markets. The paper also identifies different levels of discourse that reflect the organizational/institutional complexity of the real estate appraisal profession. The standardizing effect of market value includes a cognitive and fiduciary component. Using this framework, the paper traces the influence of Richard T. Ely’s institutional economics – and its legacy in the form of the research program of Urban Land Economics at the University of Wisconsin – on the formation and development of the standards of appraisal and ethical practice. This complexity is traced historically from the early part of the 19th century to the formation of the professional organizations and the establishment of their standards, and also through a series of reform efforts in the 1960s and 1980s that were articulated in the academic community. The paper illustrates the manner in which Institutional Economics has been influential in the continuing development of the real estate appraisal profession and suggests reasons for its continuing relevance.