Academic journal article Journal of Economic Issues

John Rae and Thorstein Veblen

Academic journal article Journal of Economic Issues

John Rae and Thorstein Veblen

Article excerpt

All that the possessor of the luxury desires, is, to have a means of showing that he has acquired the command of a certain amount of the exertions of other men.

--John Rae, Statement of Some New Principles on the Subject of Political Economy

Rae's "Accumulation"

Many of Thorstein Veblen's ideas in The Theory of the Leisure Class ([1899] 1998) are found in John Rae's Statement of Some New Principles on the Subject of Political Economy: Exposing the Fallacies of the System of Free Trade, and of Some Other Doctrines Maintained in the "Wealth of Nations" ([1834] 1964). Rae was born near Aberdeen in Scotland in 1796 and emigrated to Canada in 1821, to Boston and New York in 1848, and then to the Sandwich Islands in 1851; after a life of teaching, headmastering, writing, inventing, farming, and financial straits, he died in New York City in 1872. He was a freethinker and linguist who worked on the evolution of human language in general and the Polynesian language in particular. Rae influenced Nassau Senior, John Stuart Mill, W. Stanley Jevons, Eugen von Bohm-Bawerk, Alfred Marshall, Irving Fisher, Frank Taussig, and Joseph Schumpeter (Mixter 1905, xxxii; Edgell and Tilman 1991, 731). (1)

Rae's subjects were capital formation--accumulation as opposed to prodigality ([1834] 1964, 118-29, 199, 206; Mixter 1902)--and technological progress through knowledge and invention (Spengler 1959). Accumulation is of "instruments" of slower or quicker return according to the labor put into their formation, their capacity of return, and the "length of time ... elapsing between their formation and exhaustion" (Rae [1834] 1964, 100-01,278), as well as by their efficiency and absolute durability (109-17). Instruments include not only tools but also houses and arable fields (86-89, 170-171). (Veblen's "accumulation" is closer to mere "acquisition" [(1899) 1998, 25-41,230]). For Rae "knowledge" and "provident forethought" distinguish us from "inferior animals," and together these cause a better future (Rae [1834] 1964, 81; Veblen [1899] 1998, 10, 20, 74, 93, 227). The genesis of economic stratification is that frugal people become richer than prodigal ones (Rae [1834] 1964, 198-207).

Rae took as human givens not only concern for offspring but also "the interests of society" and the ability "to provide for the wants of futurity" ([1834] 1964, 81, 89, 119-125, 158-160). These emotions aid the effective desire of accumulation, which satisfies future "real wants" (265, 271,289, 290). Within terms of the central category of time, a cost is "the sacrifice of some smaller present good" and a benefit is "the production of some greater future good" (118, 121, 136, 138). By building a well-insulated dwelling, for instance, with good cupboards, this greater good is the fuel, food, wearing apparel, and metabolized body energy which is thereby not "wasted" (200-03, 313-19); for Veblen also, to say the least, waste is a crucial category ([1899] 1998, 15, 59, 83-85, 91, 97-101, passim).

Because it is truistic that "all men prefer a greater to a less" and the future good or saving is obviously greater, the time factor must be invoked to explain prodigality, or nonfrugality. Not only do we not live forever but the exact date of our demise is uncertain, and thus this "desire of accumulation" is contravened by our natural preference for present pleasure (time preference, discounting the future)--"to spend is easy, to spare, hard." That capital which does get formed is thus a function of a person's net factor of "the effective desire of accumulation" (Rae [1834] 1964, 118-21, 129, 206-07). Strengthening the hand of present over future enjoyment even more are both our covetous glances at the "rank immediately above" us (which we perceive as "rolling in superfluous extravagance") and our desire for the "articles ... necessary to [our] condition" or "rank" (Rae [1834] 1964, 120; Veblen [1899] 1998, 1-3, 22-34, 140-41). …

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