The Worldly Philosophers

Robert Owen was an industrialist, a working class leader, and a Utopian Socialist who not only argued that the working classes could be uplifted but also put his ideas into practice. Owen created the factory community of New Lanark in Scotland. In contrast to the horrifying working conditions elsewhere in England, in New Lanark workers had adequate living space. Their children were educated instead of forced to work, management considered workers’ feedback, and managers punished workers only in extreme circumstances. Furthermore, New Lanark was marvelously profitable, demonstrating that capitalism could thrive without condemning the working class to inhumane conditions.

Prior economists had largely ignored the working class in their analysis, considering them passive beings with poor self-control who were doomed to live a subsistence lifestyle in poor conditions. Although Owen was not an economist, Heilbroner characterizes him as a worldly philosopher for his then-radical idea that man is a creature of his environment—and for his quest to put his ideas into practice through the creation of utopian communes called Villages of Cooperation. 

John Stuart Mill, considered the greatest economist of his age, made palatable the ideas of the Utopian Socialists and argued that capitalism could be reformed and managed as society saw fit. Notably, after marrying and having a daughter, Mill had an emotional awakening to humanity’s basic rights and also became an early advocate of women’s rights.

Mill’s great work, Principles of Political Economy, argued that the laws of distribution were not fixed; society could redistribute wealth as it saw fit. He argued that economic law only applied in the realm of production, but such laws had nothing to do with the distribution of wealth once it was produced; distribution depended more on laws and customs, and society could tax and redistribute wealth in any way that seemed appropriate. Mills’s arguments that capitalism could be reformed and managed were radical in his time but have since become key, common-sense components of modern capitalism. 

Karl Marx was a German revolutionary, philosopher, and economist. He is best known for The Communist Manifesto (co-written with his close friend and collaborator Friedrich Engels), which argued that capitalism would inevitably collapse and produce socialism as its successor. His greatest economic work was Das Kapital, of which he only completed the first volume when he was alive. Engels compiled the final volumes to publish it as a whole.

In Kapital, instead of pointing out capitalism’s manifest shortcomings, Marx created a paradigm of the purest, most perfect model of capitalism and then argued that even this perfect version would produce a series of worsening crises that would eventually destroy the system. Marx invented a new form of inquiry: the critique of economics itself. Many of his predictions came true, although his prediction that capitalism would collapse has not completely come to pass. 

John Hobson, a frail academic who saw economics as fundamentally humanist rather than as an impersonal science, was a member of what Heilbroner calls the Victorian underworld. A businessman, he wrote a book arguing that excess savings caused economic depressions, which ran counter to the orthodoxy of his day. Excluded from the respectable world of economics in England, he turned his attention to African colonialism, the great political problem of his day.

Hobson argued that imperialism was merely capitalism rescuing itself from economic troubles at home through foreign commercial conquest and colonialism. He believed colonialism brought the imperial powers into conflict, creating the constant risk of war. While Marx similarly argued that capitalism was doomed due by its inherent contradictions, he argued that capitalism would be replaced by a more humane successor. Hobson, on the other hand, argued that capitalism would end in conflict between imperialist powers. 

Thorstein Veblen, a farm boy from an immigrant Norwegian family, lived a pioneer life as a youth. He completed a Ph.D. but lacked job prospects and so spent the next seven years living with his family, infuriating them with his pestering and laziness. He eventually got a job at the University of Chicago, where peers recoiled from his prickly personality. He had the appearance of a peasant farmer and was an eccentric, isolated hermit almost completely alienated from society.

Veblen developed the concept of the leisure class based on his research of precapitalist societies. He posited that workers did not oppose the leisure class, but looked upon them with admiration and dreamed of joining them. Veblen argued that American society, like that of feudal Japan, was dominated by a leisure class that used the financial system to appropriate the real wealth produced by the engineers who ran the machines.

Veblen was first American worldly philosopher; Heilbroner makes the case Veblen’s extreme social isolation, an outgrowth of his difficult temperament, enabled him to see the American market system clearly. Veblen had no interested in using economics to justify societal structure and the free market; his interest lay in exploring the sociological nature of economic man. 

Born to a successful family in England, Keynes’s life was marked by achievement and success. Although a child prodigy and extremely intelligent, Keynes found he could not achieve great wealth in academia, so he joined the civil service and went to India. He hated his work in the colonies, so he took a post at Cambridge and became one of England’s most prominent English intellectuals. During World War I, he was a key figure in the Treasury; following the war, he worked on the resettlement of Europe, arguing that the Allies’ vindictive peace accords would lead to a resurgence of German militarism.

In the 1930s, Keynes turned his attention to the Great Depression, a seemingly unsolvable economic stagnation that should have been impossible according to the economic theories of the day. Keynes argued that depressions were caused by disruptions in the savings-investment channels, when there was both a lack of savings and a shortage of profitable investment opportunities. Economies could become stuck in depression; only through government intervention would they return to growth.

Programs of government intervention were already operating when Keynes published his General Theory, but Keynes was the first to offer an in-depth analysis and justification for massive government spending. He exerted such influence that between 1940 and 1960, Keynesianism completely dominated the field of economics. After this, his influence began to wane, hitting a low point in the 1980s, but resurged in the public discourse following the economic downturn of 2008; as President Nixon once said during the stagflation of the 1970s, “we are all Keynesians now.”