1Industrial economics cannot be solely based on market prices at the risk of leading to incorrect academic results and policy recommendations, because prices could provide distorted signals and thus diverge from socially efficient prices. As Bhattacharyya et al. (2019) explained, “potential reasons for market prices to diverge from efficiency prices include, but are not limited to, controlled prices, externalities, imperfect competition, taxes, trade controls, etc.” (p. 485). To understand this fundamental principle of price formation in industrial economics, it is necessary to improve the integration of the social dimension of value in the determination of prices.
- 1 We drew certain sources relating to A. Small from original archival work that we conducted in the S (...)
2With this paper, we aim to present the thoughts of an underestimated social scientist from the turn of the nineteenth century: Albion W. Small (1854–1926). Based on Small’s personal archives, which were consulted in Chicago1, where he used to teach, we attempt to demonstrate the extent to which his vision of the relationship between value, valuation, and price is relevant and will likely pave the path for new research in this field.
- 2 In a way, this argument will be found in neo-Keynesian approaches to price stickiness (Azariadis an (...)
3According to Small, price information alone is insufficient to make business choices as it does not take into account what others think. Unlike neoclassicals, Small asserted that not all information is found in the market price. In contrast, one must look elsewhere to make business decisions. Indeed, individuals not only consider their own information, but also that of others and deal with multiple, exogenous pieces of data. This is why economic agents do not necessarily aim for the best industrial situation—and cannot always define it—because they are influenced by the behavior of others and form their anticipations from these human behaviors in a world of strong competition and imperfect market structures2. For Small, there cannot be an optimal allocation of resources by price mechanisms, and there is no link between price and money: The quantity of money does not play a role in the price formation process. Small hence proposed an endogenous vision of money.
- 3 See the work of March (1994) and March and Simon (1958) for an organizational point of view on pric (...)
- 4 We see here a methodological perspective that recalls the equilibrium model of Cournot (Cournot-Nas (...)
4Moreover, interactions between individuals can take time to form a price: The latter does not appear “spontaneously” because there could be a discrepancy between the demand and supply sides. Price in its totality does not precede trade; thus, it would have been wrong in Small’s perspective to consider price a perfect guide for rational individuals’ actions. Price is made “in”—not “by”—a market. However, price does not emerge spontaneously. Individuals, through interactions3, determine price; as such, they are a type of “price maker.” Individuals are not equal in this process since some have more power than others to influence price formation4. Therefore, price formation is about potential conflict, rivalry, cooperation, and then motion; it is not in the sense of perfect economic flexibility, meaning there could be a discrepancy in the short term between demand and supply (see Samuels and Medema, 1989). From this angle, price information can be strongly linked to market powers, a trend that we have observed in the last few decades, from which the monopolistic concentration of world firms has increased (see the works of Chassagnon, 2018).
5In this paper, first, we underscore Small’s conception of “political industrial economics” (Section 2) and then focus on the importance of the relationship between capital, value, and profit from both a sociological and economic standpoint (Section 3). In Section 4, we analyze price based on the notions of value and valuation, which is necessary to understand the price formation process in Small’s work (Section 5). In Section 6, we draw on previous elements to underline some of Small’s arguments for industrial economics. Section 7 concludes the paper.
6Albion W. Small founded the Department of Sociology of Chicago in 1892, the first in the world (Abbott, 1999). Although his mission was clearly to develop and institute this social science, Small dealt with political economy throughout his life. Indeed, he was accustomed to it during his scholarship. After reading Lieber’s work, he moved to Germany to study political economy; there, from 1879 to 1881, he followed the courses of Wagner and Schmoller in Berlin and Leipzig. He retained from their teachings the idea of the unity of the social sciences and the scientist’s role in advising a government (given that they were members of the Verein für Social-Politik).
7When he returned to the United States in 1881, he taught history and political economy at Colby College until 1888; he then went to John Hopkins in Baltimore in 1888–1889 to finish a PhD in history. There, he met important economists such as Commons and—above all—R.T. Ely, who was his professor in political economy, as well as a member of his thesis committee. Ely’s political economy influenced Small’s conception in many ways. Ely rejected both what he called the “old school” economists (see Fourcade, 2010 for a history of the profession of economists in the United States)—the American heirs of classical economists, such as James L. Laughlin, Simon Newcomb or William G. Sumner—and neoclassical economics, preaching by contrasting “embedded economics” in terms of social, historical, and political issues. Strongly influenced by Christianity, Ely was also in favor of a social gospel (Fine, 1951). An economy could help establish social policies to improve social welfare because of “progressive conservatism.” His aim was to create high industrial values while fostering the principles of work, brotherhood, and solidarity. His model was not the entrepreneur, but the artisan.
8Small was particularly interested in this vision because he was also a social progressive (Christakes, 1978). The son of a reverend, throughout his life, he remained under the influence of Christianity, as did Ely, to develop brotherhood. In a time when he believed that traditional Christian ideas had lost their influence, it was the role of sociology to be a “prophetic science,” permitting analysis of social change and the definition of “good” policies.
- 5 Although Veblen taught in Chicago as well between 1892 and 1906.
9Such a stance helps us to see that Small was close to academics, advocating for the recognition of the superiority of social forces over individual liberties, and government action to improve global well-being. In addition to Ely, we should mention John Dewey or John R. Commons. However, there are not many connections between Small and leading institutionalists of the time, such as Thorstein Veblen5 or Wesley C. Mitchell.
10In contrast, Small had little sympathy for social sciences scholars who supported the capitalist system as it was, and worse, those who were in favor of laissez-faire. This group included James L. Laughlin, Franklin H. Giddings, William G. Sumner—the “American echo of laissez-faire as represented in England by Herbert Spencer” (Small, 1916, p. 733)—Francis Walker, Irving Fisher (Sumner’s PhD student), and John B. Clark in his later years.
11In sum, Small claimed that the evolution of societies was not the fact of “natural forces” but instead relied on individuals’ actions, namely, “social forces.”
12The goal of sociology was to determine such “social forces” to regulate social change and the economy, allowing it to exist under what he called “social control.” More accurately, as social forces emerge during interactions between individuals with psychological motives, it is necessary to focus on each individual. Indeed, each human has an “interest” that corresponds to an unsatisfied capacity with respect to a given condition, pushing an individual to act to realize six desires: health, wealth, sociability, knowledge, beauty, and rightness. In Small’s mind, interest is not utilitarianism; interest is about a goal, namely welfare. Hence, by understanding them, the sociologist can define social valuations to motivate and define moral standards for society: moral—not moral and immoral actions. In other words, in Small’s mind, valuations manage values.
13Consequently, according to Small, sociology is crucial for industrial economics because it is helpful to think of the relationship between valuations and values, as well as how it appears and from which social mechanisms it transforms into prices.
- 6 Although Small criticized Smith’s approach to liberalism and the market, Small acknowledged Smith’s (...)
14Paying tribute to Adam Smith on that issue (Small, 1907)6, Small’s reflection on morals led him to think about value, valuations, and prices, which he asserted were linked. As indicated, Small maintained that by following individual interests, individuals form valuations of things that they desire, “and their conduct is always in the line of one or more valuations” (Small, 1910, p. 193). These valuations are subjective and entail the emergence of subjective values, meaning that “valuations are causes, values are effects” (Small, 1910, p. 193). In other words, the extent to which a capacity is unsatisfied for individuals leads to an increase in both their subjective valuations and value. However, because such a subjective stance only makes sense (according to Small) once it fulfills other individuals’ subjective values in their interactions, this is when values become objective, and the social valuation of things also only emerges through the association of people. The latter occurs in the market, which transforms social values into new social valuations and then to price: “Valuations are the power generators that keep the process of achievement in action” (Small, 1910, p. 193).
15However, this is only part of the price because in Small’s view, price also depends on the remuneration of factors. According to Small, there are three factors of production: labor, capital, and land. Similar to Marx, who Small considered to be “one of the few truly great thinkers in the history of social science” (Small, 1912, p. 804), Small had an affinity for the labor theory of value: He believed that only labor creates more value than it costs. In a metaphor, he wrote that it was as if a dollar deposited in a savings bank drew interest that had “not been produced by any effort of the depositor” because the bank “forwards the dollar to some point where some workers convert it into more than a dollar” (Small, 1914a, p. 740).
16Thus, capital and rent only transmit their value to price and do not have the power to create overvalue. They need an association with labor to create wealth, as quoted above: Per se, they neither bring anything new nor earn anything. They only have value because they are “saved up labor” (Small, 1905, p. 268), meaning that “profits are merely wages in disguise” (Small, 1905, p. 269).
17Nevertheless, unlike Marx’s conception, Small affirmed that profit—and, to a lesser extent, rent—was integral to capitalism. Small wished to elaborate on this issue because he said, “I am as genuinely convinced as Marx was that there are centers of deadly infection in capitalism” (Small, 1925, p. 440), and if Marx had made a “correct diagnosis of the evils of our present property system,” then “his plan for correcting the evils is neither the only conceivable alternative nor the most convincing one” (Small, 1912, p. 816).
18Notably, Marx and Marxists should have distinguished between “profit” and “overprofit” (Small, 1912). The “profit” is acceptable if it corresponds to the remuneration of capital, as well as being oriented toward investments or subsidies, allowing labor to increase its capacity for production. In these cases, profit has a social utility, which some industrial capitalists that Small admired demonstrated (e.g., Rockefeller and Ford).
19Small even argued that the degree of control over the use of capital should be proportionate to the extent to which the labor, or the contributions of people other than the owner, are required to make capital productive: “The capitalistic ultimatum is that property is property, whether it is a hoe or a house or a railroad, a dollar or a thousand dollars or a thousand million dollars. The dictum belongs in the ‘important-if-true’ class. With only the rudiments of objective social analysis, one may discover that it is not true. by contrast, it would seem to be axiomatic that in the degree in which the industrial partnership of other men besides the owner is necessary to make a type of capital possible and efficient, [the] corresponding partnership of those other men in control [of] that capital is indicated” (Small, 1914a, p. 752).
20He distinguished between “tool capital” (which only the owner uses), “management capital” (“used by the owner in some sort of dependence upon the acts of others”), and “finance capital” (used “wholly by others than the owner, and under conditions which he does not and could not maintain by his own individual power,” especially banking and financial institutions (Small, 1914a, p. 728).
21However, in the case of “overprofit,” the latter becomes “a rape of justice” (Small, 1913, p. 353) because the sharing of value added—and consequently price formation—is biased. Rent is the same: If it must exist just as human beings need soil to produce, landowners have the right to earn remuneration; it is fair only when it is invested to improve the efficiency of labor.
22Hence, from this perspective, this part of the price is about economics as well as sociology. Indeed, the “technical” (“technological” in Small’s world) determination and measure of the costs is of concern to economists. However, because the three factors interact in an evolving society, as described above, there is a social context that must be considered since it exerts an influence on agents’ decisions. More accurately, capitalism must move from “struggle” to “moralization” and ultimately to “socialization,” the pacified state corresponding to the “ethical state” with maximum cooperation (Small, 1905). Hence, part of the remuneration of factors depends on the types of relationships between individuals (struggle, moralization, or socialization).
23Small gave an example of rent: “There could be no more clear-cut illustration of the facts that, in the first place, there are social problems in which the economic factor constitutes only one of the terms; and, in the second place, that the economic factor is necessarily the decisive term” (Small, 1907, p. 1289). As such, “the rights that people shall accord to each other in appropriating rent […] must tend to reflect more and more people’s valuations of one another, not their consideration merely of rent” (Small, 1907, p. 1296). This means that although the determination and measurement of rent is primarily an economic issue, the property of rent is undoubtedly a sociological matter.
24More broadly, this demonstrated for Small that income distribution always deals with social concerns, because what affects one factor necessarily affects others and then the general interest. Given that “every point in every man’s life is related to every point in every other man’s life” (Dibble, 1975, p. 101), “none of the activities of men occur in isolation from one another, they form an interlocking process; they are therefore factors at last in the whole system of moral cause and effect which presents the problems of sociology. The consideration of economic activities from the sociological point of view is not therefore a matter of choice if we admit the obligation to learn the whole truth about industrial facts. The more–than–economic in the relations is just as real [of an] element in economic activities as the simply economic” (Small, 1907, p. 1381).
25From this angle, a precise explanation of price can emerge only through the cooperation of economists and sociologists: “Consequently, when an economic inquiry is started, the only alternatives are first, to arrest the process of inquiry arbitrarily with the partial products or trial divisors reached by economic analysis; or, second, to press the inquiry as far as it can be carried into the whole moral situation which sociological methods try to formulate” (Small, 1907, p. 1389). Therefore, “there is no proper incongruity between economic and sociological theory, and that sociological inquiring in no sense challenges the authority of economic technology, within the field of its proper authority” (Small, 1907, p. 1304).
26According to Small, price depends on both the production sphere (the costs of production influencing valuation) and the circulation sphere (interactions in the market between individuals who have interests linked to values), as Small’s quote on the formation of aggregate demand sums up: “It has been proverbial for more than a generation with certain German economists that economic demand is a section of the moral standard of the nation (that particular formula was Schmoller’s in 1872). By this [it] is meant that economic demand is created on one side by the quality and intensity of human desire, and on the other side by objective facts about the availability of things desired. A change in either term will change the equation of demand at a given time. Applied to the moral standard term, this means that a raising or lowering of the moral standard of a nation respecting certain economic goods or services will affect the status of those goods or services in the market” (Small, 1914b, p. 153).
27We go further by highlighting another dimension that Small added to fulfill an individual’s interest. This dimension refers to the social cost of the creation of the market, which is included in prices: “Whether such items as these are sufficient to cut much figure in economic theory, they are significant indices of the constant fact that economic processes are always carried on in a larger social medium, and are more or less modified by influences that are external to the economic process itself” (Small, 1907, p 1052). More accurately, “everyone who perceives that the last valuation of everything in this world must be in terms of people, not in terms of commodities, is beginning to draw the inference that there is always an open question whether the current scale of prices takes sufficient account of human values to approach as near as possible to normal price” (Small, 1907, p. 1127).
28The problem is that economists do not consider this dimension. In Small’s view, economic theory cannot distinguish between the exact contribution of each factor of production—the principle of remuneration at marginal productivity is open to criticism because the output of a factor depends on the others—and fails to consider moral issues regarding property rights.
29In particular, a part of price is related to institutions, meaning that the “natural price” and the “market price” will probably differ (Small, 1907, p. 1082); the latter refers to considering such institutions. Hence, this part of prices embodies the moral choices of society, what Small called “conventionalities” (Small, 1907, p. 1120), which are not “natural” but “social.” “Conventionalities” manage the “civic economy” (Small, 1907, p. 1986), especially because taxation can be related to them. Indeed, “taxation is in no strict sense simply an economic process. It is a function of the total life of the people” (Small, 1907, p. 2017).
30Having such a scientific perspective on “conventionalities” was important to Small. Inspired by Ely, Small wanted the social sciences to scientifically analyze social change to guide social reform in steps. For this reason, Small wanted an equilibrium of society that would benefit all the factors of production and, by extension, all classes to promote the “harmonious satisfaction of interests” (Small, 1905, p. 194). If he was aware of the poor conditions of the workers of his epoch, he did not want to sacrifice global wealth to benefit the poor. Moreover, as he attempted to find a way between capitalism and socialism through the corporatist view, he thought that capitalists and workers had to be able to work together to shape a new cooperative industry.
31Hence, we understand why establishing a new (i.e., wider) theory of value and price formation was important: Its scientific assessment would possibly render a better and fairer society. Indeed, it would permit the definition of a better explanation of capitalism and its reconstruction on a more just basis. This is the goal of science, namely, “a superior type of manhood, capable of superior cooperation” (Small, 1895a, p. 6). If not, some classes (especially workers) could turn to revolutionary ideas. Small condemned in his time that “the social system in which we live and move and have our being is so bad that nobody can tell the full measure of its iniquity. In this age of so-called democracy, we are becoming the thralls of the most relentless system of economic oligarchy that history thus far records. That capital from which most of us directly or indirectly get our bread and butter is becoming the most undemocratic, inhuman and atheistic of all the heathen divinities” (Small, 1899a).
32For this reason, thinking about values, valuations, and prices is a scientific and political task. Indeed, from Small’s perspective, these concepts oblige an individual to think of ethics and rightness, which is particularly useful in determining the economic and social standards aimed at defining a path for society to reach well-being
(Small, 1903).
33To develop this assertion, Small returned to Smith, who in his eyes focused too much on “natural price” and tended to forget such “conventionalities”: “the moment price becomes a moral question, by being brought into the arena of conflict between groups with antagonistic interests in distribution, then the previous question is always in order: How much of customary market valuation is not natural but unnatural? To what extent have the conventionalities of society interfere[d] with the natural equilibration of the claims of all the members of society?” (Small, 1907, p. 1120).
34Small used to distinguish between three types of price: “customary price,” the part of price established from the meetings of supply and demand; “market price,” which incorporates the “cost of institutions”; and “normal price,” a combination of the first two (Small, 1907, p. 1127). Hence, “everyone who perceives that the last valuation of everything in this world must be in terms of people, not in terms of commodities, is beginning to draw the inference that there is always an open question whether the current scale of prices takes sufficient account of human values to approach as near as possible to normal price” (Small, 1907, p. 1127).
35Therefore, the market is a central institution on the condition that it is socially regulated, given its importance in society. More accurately, a market is one of society’s “social organs,” emerging from the functional combinations of people and the right to own property. Such a social organ relies on three general functional systems: (1) a sustaining system: the desire to produce wealth; (2) a transporting system, which conveys wealth to where it is needed in society; and (3) a regulating system, which is concerned with producing and communicating psychological influences that create social forces essential to achieving progress.
36Consequently, once again, regarding the “circulation sphere,” if the prices that determine the process are always an economist’s first task (“technological”), economic theory must incorporate sociology, given that it has the tools to determine the parts of the price tied to institutions and then to fix a “normal price” (Small, 1907, p. 1036). For Small, economists tend to focus too much on the production sphere in its technical dimension at the expense of the consumption sphere, which refers to moral and human affairs. If we focus on individuals who that a social scientist must do so, then analysis of the production sphere becomes partial.
37According to Small, Smith had such intuitions. Indeed, “the whole of the Book III […] appeals to social occurrences to explain variations in the action of economic forces” (Small, 1907, p. 1634). Moreover, “he saw, as economists half a century after him had become almost incapable of seeing, that economic processes are, and must be, at last, incidents of larger moral processes” (Small, 1907, p. 1772).
38However, Smith failed in his excessive focus on “natural prices” and on capital private property. What is certain is that Smith developed a socially and politically embedded economic theory in which moral issues are central, and that he was aware of the “whole social process” (Small, 1907, p. 1420). Unfortunately, he did not insist on “conventionalities,” which would have allowed him to understand that wealth is not always about welfare, given that the latter is wider and more complex regarding values and human behavior. It was a mistake not to investigate to what extent (the extent to which) social forces linked to conventionalities can improve economic efficiency.
39When economists deal with important matters such as price formation, they must question all the social forces behind it: “How may we know when the problem of the utmost production of material resources becomes subordinate to other questions about human needs? This question actually does arise whenever we propose to pass from mere[ly] knowing the physical causes and effects involved in production to doing anything by way of applying this knowledge with this proviso, to which we return in a moment, we may say that there is an ethic of economic production in the strict sense” (Small, 1914b, p. 120). Moreover, “What ends or system of ends are indicated by the forgoing exhibits of human resources? What is the apparent goal toward which human cooperation tends, and toward which it may be directed?” (Small, 1905, pp. 94–95).
40Indeed, price formation is part of the economic process, which is “the process by which prices are made and an exchange of value is affected” [Small, 1900, p. 506]). This also depends on the social process and institutions influenced by social forces. Hence, it was a mistake for classical and neoclassical economists to ignore this aspect of prices: “By estopping investigation of these larger relations of economic activity, the classical economists turned a dignified division of Smith’s system into, not only a dismal, but a dangerous sectarianism” (Small, 1907, p. 1242).
41Thus, the correct equation for price formation would have taken the following form for Small:
P = rLab + rK + rLan + S (= Si + Sc),
where P is price; rLab, rK, and rL are, respectively, the remuneration of the factor of labor, capital, and land, which essentially depends on the cost of production (the labor theory of value). Additionally, where S gathers, all the elements managing society must be included in prices: valuations of consumers linked to their interests and values (Si = interactions), the social costs of coordination between the three factors of production, and the social costs of market implementation and regulation (= Sc). For Small, the classical and neoclassical conceptions of price formation are mistaken because they tend to reify it. To consider the S part would be real progress because “men are not constant terms in a world equation. Men are not, like the atomicities and specific gravities of chemical elements fixed and unchanging. Men are evolving combinations of quantities and capacities” (Small and Vincent, 1894, p. 145).
42Moreover, the “S” part is an incentive to consider the social responsibilities of producers linked to the production process. In Small’s view, production has a moral dimension since technical economic production affects the rest of society (Small, 1907, p. 1519). Indeed, “the economic production which the classical economics had in mind was the production, not of the actual human beings whose essential moral relations were fairly apprehended” (Small, 1907, p. 1757). The problem associated with the latter is that economists too often consider not only that every human issue deals with production and wealth issues, but also that the solution of every human problem lies in production and wealth issues.
43Then, this social dimension as a whole must be considered in the price. In modern terms, we would say that Small had already thought about how to “internalize the externalities,” as Pigou (1920) did after him.
44The aforementioned elements determine to what extent Small’s thinking is original and underestimated regarding the relationship between values, valuations, and prices. In Section 6, we discuss his insights into industrial economics.
45Small’s lessons for industrial economics fall into two categories: The first deals with his vision of capitalism, and the second is more about an epistemological issue.
46Regarding the first category, notably, Small was corporatist in the sense that he was both against liberal capitalism and socialism. In his vision, employees and employers must define new ways of working together, what he called the “golden means of corporatism” (Small, 1899b, p. 335).
47On that point, Small was inspired by his mentor Ely, who advocated for a “Golden Mean” program with a view toward reforming American Society through a “new industrial deal.” Ely’s main objective was to change the unequal order resulting from industrial society through three main keystones: preserving capitalists’ capacity to invest in their industry, to prevent poverty related to workers’ conditions from arising, and to avoid class warfare (Bradizza, 2013).
48Importantly, at the time, a large array of proposals and actions emerged with the aim of promoting new types of cooperation in the production sphere. In addition to proposals such as Small’s, we should note projects of cooperatives, especially in rural parts of the United States. The goal of these cooperatives was to support new forms of labor organization between workers, whose objective was to foster both cooperation and to create economic wealth (and newly associated profit sharing). More broadly, these cooperatives were perceived as institutions capable of forging new economic and political ties between workers and the government (Blin, 2020). However, Small’s corporatist view did not focus on cooperatives. He believed that cooperation would mainly come from changes within large firms through the establishment of the aforementioned cooperative councils (see Chassagnon and Vallet, 2020).
- 7 To some extent, although there is no evidence on correspondence between Small and Durkheim, Small’s (...)
49Indeed, Small advocated for cooperative councils, gathering both in each firm7; he was also in favor of workers’ participation in administrative councils and on firms’ boards of directors. However, Small, an elitist, would not have afforded each the same power in such a council, considering as he did that this system would foster cooperation because “partnership without representation is undemocratic” (Christakes, 1978, p. 94).
50At the national level, he ascribed a role to the state in controlling them. However, this does not mean taking over the means of production, except for special cases (electricity, gas, water, transportation at the local level); it would not be “plausible, probable, desirable or possible” (Small, 1913, p. 379). The state, in particular, plays a role in limiting stakeholders’ dividends (Small, 1925), in taxing overprofit and legacy, and exerting control over “finance-capital.” This was justified by his fear that capital “becomes a titanic superman, incomparably superior to the natural persons who find their interests challenged by this artificial being” (Small, 1905, p. 303). The income from these taxes would be used to increase wages or to finance a national bank that would provide access to loans for cooperative firms in the national interest. This new system would reconstruct capitalism on a more efficient, moral, and unitary basis. Moreover, if reality is about unity, the social sciences, in charge of its analysis, must also work in unity. This was his second lesson, which applies particularly to industrial economics.
51Hence, regarding the latter, Small stressed the need to reconstruct economic theory and practice on a more ethical basis (Small, 1924). For this reason, sociology is useful “for scientific dealing[s] with social relations [including] psychology, anthropology, political economy and political science. The task of social science in general or the cooperation of these techniques is to make human phenomena intelligible, and eventually as far as possible controllable” (Small, 2015a, p. 5). In other words, “An objective science of economics without an objective sociology is as impossible as grammar without language” (Small, 1907, p. 19). Indeed, in Small’s view, complexity goes hand in hand with objectivity: The more holistic a science is, the more it takes care of reality, and the more objective it is.
52Small was aware of the problem of science that Weber underlined, namely, hyperspecialization, which he called “special social sciences” and which leads to insularity and then reductionism, preventing the researcher from capturing the meaning of the social process: “Each one of these special divisions of research might be objective to the limit of its means and still be abortive in the degree in which its procedure and its findings remain insulated from the procedures and findings of other investigators” (Small, 2015b, p. 15).
53The latter applied in particular to economics because it “ceased to be predominantly a wisdom about more or less arbitrarily delimitated ‘provinces’ and it has become first and foremost a technique of managing ‘problems’” (Small, 2015b, p. 29). Consequently, “in brief, don’t feed yourselves with the idea that your type of research is the final pattern of research. Don’t imagine that your type of research problem is to become the capstone of the arch of knowledge. Don’t imagine that your sort of findings will turn out to furnish the missing clue to complete [the] explanation of human affairs” (Small, 2015b, p. 16).
54Although Small considers it necessary for each social science—and science—to specialize, it must also cooperate: “All research shall become cooperation research, knowledge is limited in the degree in which cooperation research falls short of covering the entire range of the knowable” (Small, 2015b, p. 15). In the case of economics, this means cooperation with history in particular, but above all with psychology and sociology: “The differences are matters of methods, and division of labor, rather than fundamental purpose” (Small, 1923, pp. 89–90). This is strongly relevant for the identification of price formation, because Small used to consider that the capacity of the human spirit is limited by nature. Thus, it is difficult for an economist to consider the totality of price components. Hence, according to him, specialization and cooperation are related: “My argument is that these processes [specialization] must be reinforced by the process of synthesis, which shall organize all the partial results that abstraction and analysis reach” (Small & Vincent, 1984, p 105). Further, according to Small, sociology can be especially helpful to industrial economics in terms of focusing more on empirical research, which is often absent in economics.
55Consequently, although the “political economy deals with things as they are, sociology deals with things as [the sociologist thinks] they ought to be” (Small, 2015a, p. 13), Small was opposed to this distinction. Economics would have much to gain from this cooperative work because it would be able to advance its capacity of explanation, since when a causal relationship is complex, it requires deep investigation before moving toward generalization (Small, 1898): “The beginnings of scientific political economy didn’t begin down deep enough and don’t make the investigations that are basic to all of our judgments about the economic realm simple and deep enough to serve as a foundation that we need” (Small, 1914b, p. 109).
56If the economists following Smith had considered social factors in their reasoning, perhaps “there would have been little room for divergent schools of economic theory and scarcely an appreciable demand for the differentiation of sociologists” (Small, 1907, p. 1634). Conversely, “this presumption alone damned the classical economy. Economic activities are merely fractions of the total self-expression of men whose moral relations are in a perpetual flux of readjustment. A fundamental sociological problem is that of determining the formulas to which these economic and moral activities are varying functions of one another” (Small, 1907, p. 1764).
57Small’s ideas on price formation could be notable for industrial economics to (1) rethink the price formation of environmental goods (the questions of externalities, of hedonist/non-hedonist prices, such as rendering insightful Small’s proposals) and to (2) rethink an agent-based model for their reaction to price.
58However, if economists’ conclusions regarding price components are incomplete, they cannot consider that an agent could react properly to it. Indeed, Small insisted on the need to take human valuations into account and tackled the issue: “Does action always follow the strongest motive? This is a quite problem. The chief sociological contribution to the methodology of social science consists, in a word, of emphasizing the implications of the fact that human valuations are efficient social forces. These implications may be summarized in a simple proposition: to explain human experience, it is necessary to know human valuations and their workings” (Small and Vincent, 1894, p 200).
59For this reason, Small criticized the Homo oeconomicus model, which he called “the economic man” and which has advantages in terms of abstraction, but is too limited in scope: “The conception of ‘the economic man,’ a human calculating machine operated solely by the impulse of material gains, misinterprets high and low in actual affairs as grotesquely as Opper’s caricatures misrepresent both the magnates and the plain people” (Small and Vincent, 1894, p. 124). Small and Vincent concluded that “an absolute standard of anything, for limited minds, is a chimera” (ibid., p. 235).
60Clearly, there was no consensus on the interest of sociology for industrial economics in Small’s time, just as there is none today; for instance, the lively debates between him and the economist Patten at the 1894 meeting of the American Economic Association (AEA; Small, 1895b). On the one hand, Patten was skeptical about the utility of sociology to economics; on the other hand, he was totally opposed to Small’s idea of the submission of the latter to the former. Other AEA meetings were strained, as in New Orleans in 1903. There were also strong opponents, in particular Laughlin, among economists in Chicago when Small was at the head of the Department of Sociology (Small, 1916).
61Further, this raises several fundamental issues. The first concerns the status of morals in science. According to Small, if the content of science is “value-free”—because scientific questions are, in principle, different from value questions for extrascientific reasons—then science as a social institution may not be an ivory tower, but may serve humans through ethical goals. Is this still the case, or should it be so today? Moreover, do economists share this vision?
62Second, in the case that there is a consensus that the social sciences must cooperate, the issue of a hierarchy between them remains, as the debate between Patten and Small indicates. On this point, Small evolved his thinking. If he considered at the beginning of his career that sociology had to be the leader in this cooperation—creating lively debates with some economists, as quoted in the first part—he later nuanced this point of view: “Sociology thus defined is, and must remain, more a point of view than a finished body of knowledge” (Small, 1904, p. 287). Hence, “the sociologists are contending for a program, a perspective, and a method. They ask for correlation and cooperation for sciences, not for liberty to substitute a new science. They propose integrating social investigation so that, taken altogether, it will report the social reality, instead of dissecting lifeless parts abstracted from the reality” (Small, 1898, p. 166). His project involved creating institutes of social sciences that could gather researchers from different fields, embodying “the tree of social sciences.” This cooperation would have a positive influence on capitalism.
63Finally, perhaps Dibble has the correct attitude regarding knowing what to do with Small’s thinking: When societies are not in turbulent times, social sciences can specialize and be independent. In contrast, Small’s holistic vision is useful and helpful, particularly in times of crisis (Dibble, 1975), including for industrial economics (see Chassagnon and Vallet, 2019). We can nevertheless conclude by quoting that formula by Small: “If all men saw things from the same point of view, there would be no social problems, and consequently no progress. The wiser we are, the more we may add both to our knowledge and to our value for our fellow men by looking often at life through the eyes of our opposites” (Small, 1913, p. 6). This last argument is crucial for industrial economics in a world undergoing perpetual institutional change, which increasingly requires moving beyond economics and integrating social and informal factors (e.g., the development of experimental economics applied to industrial problems) in the understanding of capitalism and its main institutions: the firms (see Chassagnon, 2014).