Scientific Management, Institutionalism, and Business Stabilization: 1903-1923
Bruce, Kyle, Nyland, Chris, Journal of Economic Issues
The greatest economic event of the nineteenth century occurred when Frederick W. Taylor first held a stop watch on the movements of a group of shovellers in the plant of the Midvale Steel Company.
Rexford Tugwell (1)
The nexus between institutionalist economists and the Taylorist or scientific management movement founded by Frederick W. Taylor has been explored by Chris Nyland (1996) in a study that examined the role played by John R. Commons in the publication of Robert Hoxie's 1915 Scientific Management and Labor. This connection has been similarly investigated by Janet Knoedler (1997) and Knoedler and Anne Mayhew (1999) in the context of Thorstein Veblen's somewhat controversial musings concerning the engineering profession. Taylor, an engineer from Philadelphia, emphasized the application of the scientific method to the selection, training, and utilization of workers, highlighting the need for planning and management based on empirical investigation rather than "rule of thumb" or tradition. This emphasis on empiricism and planning found a particularly receptive ear among members of the institutionalist school, many sharing misgivings about neoclassical economics' deductivist method and its laissez-faire philosophical underpinnings.
In this paper we extend the exploration of this intellectual interface by examining the association between Wesley Mitchell and the Taylor Society. In utilizing the Society as a vehicle to explore the link between scientific management and institutionalism we take up a suggestion advanced by Rexford Tugwell. He advised that no better way exists "of understanding the progress and diffusion of the [scientific management] movement than in tracing it through the files of the Bulletin of the Taylor Society, which has been hospitable to suggestions, from every source, for increased efficiency and which has recorded the chief successes and failures of the great variety of experiments in recent years" (1927, 122). The Taylor Society was founded in 1912 by former business school deans Edwin Gay and Harlow Person and by a small group of engineers close to Taylor. Its raison d 'etre was to develop and diffuse the management ideas and practices Taylor pioneered. Up until the middle years of the century the Society acted as the hub for an intellectual network linking progressive engineers, business figures, and social scientists. Though Mitchell never formally joined the Society, he remained closely associated with the organization throughout the interwar years. We argue in this paper that a key issue aligning this pioneering institutionalist with the Taylorists was their shared concern with the stabilization of the business cycle. (2) Taylorists perceived the economic losses induced by recessions to be a form of waste and, as such, considered cycles a topic rightfully falling within their domain of interest. Their appreciation of the contribution that public and private sector managers could make to business stabilization was the key insight that they added to Mitchell's conceptualization of the economics of stabilization.
The melding of the Taylorists' ideas regarding the management of organizations with the institutionalists' critical views on the unfettered market helped give birth to a new approach to economics within the USA. Champions of this perspective, William J. Barber (1985, 4) has noted, converged in support of three fundamental positions:
In the first place they challenged the orthodox view that economic activity was governed by immutable and universal "laws." To the contrary, they insisted that economic performance could be controlled and improved through informal manipulation. Second, they believed that the United States had a mission to serve humanity by demonstrating the superiority of a distinctive "American way." Third, they were in accord about the method appropriate to a new approach to economic affairs. It was to be one of full-blooded empiricism in which the facts were sovereign. …