Economics, Volume 1: Economic Principles

Professor Fetter's 'Economic Principles' is the first half of a two-volume treatise on economics. The second half 'Modem Economic Problems' deals with the applications of principles. In general Professor Fetter's theory may be described as mechanistic and Austrian. To call it mechanistic signifies that, like the usual type of economic theory, it treats the industrial and business system as being somewhat analogous to a mechanism, in that the operations of this system are explained in terms of practically contemporaneous causes and effects without reference to the changes in its structure which take place with the passage of time. Here ' mechanistic ' is substituted for the less appropriate 'deductive' as a description of the classical type of theory. Mechanistic explanation contrasts especially with ' genetical ' explanation, though it seems doubtful if a precise line can in the last analysis be drawn between the two. Fetter's book shows a pride in its own novelties, but as far as methodology is concerned it is as mechanistic as the work of Ricardo, or the theory of interest of Irving Fisher, or the theory of distribution of John Bates Clark. And this is as it should be. For economics is best described as the study of the structure and action of the industrial system, with an object in view, namely, that of making us good judges of questions of the policy of the state (or of any body of persons, such as organized labor or capital) toward the industrial system. That is, the touchstone of importance and relevancy in economics is applicability to questions of public policy. It is on the strength of this test of relevancy that Fetter's methodology is pronounced the right one. It is also merely the dominant methodology of all the leading general texts past and present.