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Margaret Schabas and Carl Wennerlind, A Philosopher’s Economist: Hume and the Rise of Capitalism

Sheila Dow
p. 379-383
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Margaret Schabas and Carl Wennerlind, A Philosopher’s Economist: Hume and the Rise of Capitalism, Chicago: Chicago University Press, 2020, xv + 316 pages, 978-022659744-7

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1There have been many analyses of particular aspects of Hume’s economics, but this monograph by Margaret Schabas and Carl Wennerlind is the first comprehensive book-length account in English of Hume as an economist. The aim is to address what they see as an underappreciation of this aspect of Hume and to do so by exploring his economic ideas in relation to the full body of his work, in particular his epistemology and ethics. As noted Hume scholars, Schabas and Wennerlind are well-suited to the task and they provide insights drawn from their particular expertise in the philosophy of science and the history of money respectively.

2The book consists of an Introduction followed by seven chapters arranged by topic: Hume’s interest in economics and his philosophy of science (1 and 2); his analysis of the emergence of capitalism in terms first of property and commerce and then of economic and moral improvement (3 and 4); his specific contributions to economics, on money and banking, followed by international trade and public finance (5 and 6); and finally an assessment of Hume’s economics in terms of a range of interpretations (7).

3Hume’s primary reputation has been as a philosopher and a historian such that his contributions to economics tend to be treated as secondary. But Schabas and Wennerlind demonstrate that there was a continuing thread of concern with economic issues throughout Hume’s work, starting with his theory of human nature in the Treatise (1739-40). Hume subsequently developed economic ideas in greater focus in essay form, published in a series of collections. The first of these collections, the Political Discourses (1752) which contained eight essays on economic subjects, forged Hume’s substantial contemporary reputation as an economist.

4Schabas and Wennerlind’s depiction of Hume’s economics as a unifying thread reflects the nature of his philosophy, of which economics was an integral application. Like other Scottish intellectuals of the time, Hume drew on ideas from elsewhere, especially on the continent. But the particular circumstances of Scotland had meant that moral philosophy developed in a particular way which laid the path for Hume’s scepticism, his focus on human nature and his version of empiricism. The application of Scottish philosophy to economic questions was already evident in the work of Hume’s mentors, especially Francis Hutcheson. So in Hume’s formative years before he first left Scotland at the age of 23, engaging enthusiastically in debate and developing the ideas which would form the basis of the Treatise, Hume would have absorbed these influences. This period in Hume’s life is given less attention than others in this volume, but arguably it holds important clues as to how his economic thought developed.

5Like those around him, Hume was concerned with the issues associated with the early stages of the rise of capitalism. These issues ranged from trade policy to the evolution of banking to the debt-financing of war on the one hand to the moral and cultural factors in the rise of commercial society on the other. Schabas and Wennerlind trace the way in which Hume identified the conditions by which capitalism might succeed. Hume argued that there was a symbiotic relationship between the development of commerce, industry, the ‘arts’ (or problem solving) and prosperity on the one hand and enlightenment, refinement, virtue, peace and stability on the other. He saw the drawing of population increasingly into commercial interactions (particularly in towns and cities) as a civilising force, reinforcing moral conventions. These interactions would also serve, through international trade, to refine tastes in luxury goods more widely. In turn new industry would be encouraged elsewhere in an effort of import substitution, resulting in an international process of levelling-up. Hume thus countered active concerns that the growing commercialisation of society posed a moral threat.

6Schabas and Wennerlind show how many of Hume’s contributions to economics (in greater or lesser degrees of development) were important in foreshadowing later thought: for example, the division of labour and the extent of the market (164), the infant industry argument for restraint of trade (180), the principle of comparative advantage (181), the law of one price (146-148) and most notably (certainly in terms of degree of development and of influence) his contributions on money (142-176). They also outline some of the ways in which Hume’s economic thought was subsequently interpreted. Indeed interpretation is central to the whole exercise, and Schabas and Wennerlind take great care in their attention to Hume’s intellectual, economic and political context. Enhancing understanding of Hume in this way helps to clarify how we may consider the various interpretations made here and by others. In particular it helps us to address the claims to inspiration from Hume variously for general equilibrium theory, game theory and monetarism on the one hand and social economics, institutional economics and pluralist economics on the other.

7One of the particular contributions of this volume is in demonstrating that the connection between his economics and his philosophy is central to understanding Hume. The second chapter, devoted to Hume’s philosophy of science and its application to economics, is thus pivotal for the rest of the volume.

8Hume was a realist, but, given the evolving complexity of physical reality, he doubted that we could uncover empirically the causal mechanisms which underpinned our experience. Further Hume had concluded that reason alone was insufficient for knowledge of regularity or uniformity. While scientific knowledge therefore required belief in some underlying uniformity, it was the fallibility of such a belief that posed his problem of induction. Schabas and Wennerlind show that Hume believed that the scope for scientific knowledge was much greater in the moral (i.e. social) sciences than in the natural sciences. The faculties of introspection and imagination allow us insight into underlying behavioural mechanisms. Further, these mechanisms result largely in observable social conventions whose uniformity provides the grounding at the social level for individual behaviour. At the same time they provide the grounding for the (non-reductionist) core of Hume’s theory of human nature and thereby also for both his philosophy and his economics.

9In terms then of how economic enquiry might proceed, two particularly thought-provoking parts of this second chapter refer respectively to Hume in relation to Newton (58-59), and to his preference for thought experiments over models (182-185). How far Hume was a Newtonian is a matter of some debate. Schabas and Wennerlind challenge the Newtonian interpretation of Hume by noting how critical Hume was of Newton’s theory of gravity, on the grounds noted above with respect to any natural science. Newton had to build his theory of gravity on something which was unobservable: ‘etherial active fluid’. But this important criticism is not inconsistent with Hume applying Newton’s experimental methodology to greater effect in economics, given the faculty of introspection. I would argue therefore that, methodologically, Hume was to a considerable extent a Newtonian.

10The authors show how Hume throughout his lifetime was an avid collector of masses of statistical evidence ranged widely over time and space. This allowed a social-science version of Newton’s experimental method. In an application of Scottish philosophical history, patterns emerged from study of a range of contexts. These patterns formed the basis of provisional theories which could then be tried out in different contexts. While Hume aspired to establishing general principles in the abstract, he was cognisant of the variety of contexts and the scope for exceptions to these principles in practice. Taking provisional principles as a starting point, it was important to explore real-life exceptions in order to understand the wider processes at work.

11Hume is shown by Schabas and Wennerlind to favour theory development by means of thought experiments, devised to extract an understanding of a particular issue. Starting with a counterfactual, thought experiments draw on imaginative reason aided by introspection rather than observation to suggest causal mechanisms. Taking an example from Hume’s monetary theory, he worked through the consequences of an exogenous inflow of specie in a simplified version of the world. As a result he posited the specie-flow mechanism which ensured money neutrality in this abstract setting. But then he combined this general causal tendency with other, often context-specific, causal tendencies within a dynamic framework, to explain why money was not neutral in practice. Here an influx of specie was analysed as part of a process whereby higher productivity increased exports and thus export earnings, which in turn spurred on and financed greater efforts to enhance productivity.

12Hume argued that a formal model, in contrast, required a system which was closed by means of assumptions known to be false, but which was then applied to a range of different questions. This critique corresponded to the critique of the natural sciences as relying on unobservable assumptions. While use of such models was limited in Hume’s time, they became a key element of one strand of interpretation within general equilibrium theory. Hume’s argument about the neutrality of money referred to a tendency for international trade to cause money flows and thus price movements which offset the initial price advantage of the exporter, leading to the law of one price. It portrayed a global economy which gravitated to a general equilibrium of equalised prosperity as commercialisation extended internationally with its attendant spurs to industry and enterprise, fostering peace and stability. Yet for Hume these abstract equilibrating tendencies operated in practice within a dynamic, disequilibrating process of innovation and entrepreneurship. Further, while Hume’s economics was built on a theory of human nature which he took as general, nevertheless he emphasised how differently this nature might be manifested in different cultures and contexts. Further this behaviour was grounded at the social level and reflected moral sentiments as much as reason.

13Arguably Hume was over-optimistic about the epistemological power of introspection, not least on account of the scope he himself noted for differences in culture, language and convention. Indeed the natural sciences have proved to be remarkably productive in spite of their epistemological shortcomings. Further Hume’s optimism about capitalism has been challenged somewhat by subsequent history. It is not hard to find examples of trade encouraging conflict rather than cooperation and specialisation in production causing immiseration rather than refinement and virtue. Yet we need to remember the timing in relation to the industrial revolution which was only in its infancy in the first half of the eighteenth century and whose full consequences Hume did not anticipate. The negative effects of that revolution, such as the efforts to erode competition among producers and the decline in quality of life among the working class, were only slowly becoming evident.

14In any case, as Schabas and Wennerlind show, Hume was already well aware of ways in which capitalism might not follow the path he anticipated. In particular they draw attention to an exception to Hume’s optimism about capitalism which is of modern interest since it focuses on the increasing importance of financial capital (199). Hume was concerned about the issue of public debt primarily because of its main purpose at that time in financing and thus facilitating destructive wars. But he was also concerned about the growing stock of debt in general, substantially because it was fostering the emergence of a rentier class which traded in debt. Schabas and Wennerlind explain how Hume contrasted the industry and enterprise of the merchant class with the idleness and lack of spirit of the rentier class. Yet he argued that the latter’s growing wealth from debt trading would come at the expense of other classes, sapping their spirit and immiserising the nation.

15This volume succeeds in redressing the imbalance of attention to Hume’s economics. It does so in a way that integrates his economics with his philosophy, enhancing our understanding of both. The volume is rich in factual material and ideas and thus provides a good foundation for the development of further work in this area. Given the wide range of current economic ideas inspired by Hume there is much scope for further examination of these interpretations, taking Hume’s philosophy into account. It is easy to see how different epistemological approaches to economics have led to very different interpretations of Hume. Further analysis of interpretive differences needs to include interpretation of his philosophy and its integral connections with his economics.

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Hume, David. 1739-40. A Treatise on Human Nature, London. Edited by K. A. Selby-Bigge and P. H. Nedditch, second edition. Oxford: Clarendon, 1978.

Hume, David. 1752. Political Discourses. Edinburgh: A. Kincaid and A. Donaldson. Reprinted in Essays Moral, Political and Literary. Edinburgh: Cadell, Donaldson and Creech, 1777, and Indianapolis: Liberty Fund, 1985.

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Sheila Dow, « Margaret Schabas and Carl Wennerlind, A Philosopher’s Economist: Hume and the Rise of Capitalism »Œconomia, 11-2 | 2021, 379-383.

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Sheila Dow

University of Stirling.

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