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Contexts of Transformation
1. Nelson’s (1993) essay in the volume celebrating the first hundred years of economics at
the University of Wisconsin is a nice example. Nelson is interested in the fact that Ely was a
Social Gospeler, but she does not quite know what to make of it. The exception that proves the
rule is Gonce’s (1996) excellent essay on Commons.
who have been forced to uncover the tacit dimensions of earlier times
in order to make sense of past intellectual debates, we are dealing with
a significant well-developed and explicit dimension of public life. The
forces that swept the Social Gospel off the historical stage, however,
were themselves a part of the increasing secularization of American
life and of a significantly altered vision within the Protestant commu-
nity after the Second World War. Thus, from our perspective today, we
cannot easily see what was important then; what was obvious has
become nearly invisible.
But although we are dealing with an important and easily identifiable
part of American history, it was a complex phenomenon with its own
complicated trajectory.2 Thus, just as E. Roy Weintraub argues in this
volume that one must consider the changing nature of mathematics and
mathematical economics to fully understand the evolution of economics,
one must also consider the changing ground of American Protestantism
to fully understand the story of early-twentieth-century economics.
Because of its complicated trajectory, the Social Gospel has been
subject to changing interpretations over time. Recently Luker (1991)
has looked at the Reconstruction period and argued that the roots of the
movement are more obviously found early in the nineteenth century in
the Second Great Awakening than is sometimes understood and that it
was a much more regionally driven phenomenon than was allowed by
earlier church historians who wanted to see it as a movement centered
in New England and the East. Thus, for instance, one can focus on the
Social Gospelers who were concerned with race relations and find
explicit links with the abolitionist ferment that arose from the Second
Great Awakening. Looking at the later years of the movement, Gorrell
(1988) has found that in the first two decades of the twentieth century it
achieved a sudden and unexpected victory when the mainline Protes-
tant churches institutionalized its agenda in the Social Creed of the
Churches, a document focused on industrial relations that committed
the churches to an activist agenda.3
The changes and continuities in the life of the Social Gospel are both
important to our story not just because they are uniquely American but
also because they help explain the force and ambiguous legacy of the
2. Perhaps the best recent attempt at a historiography of the Social Gospel is Luker 1991,
1 – 6, 419 – 32. For more standard histories, see Ahlstrom 1975, May 1949, and Schlesinger
1932. Marty 1984 and 1986 provide a richer, more contemporary picture.
3. I make more of Gorrell’s (1988) argument later.
4. The Social Gospel and Christian socialism also had important careers in England, but
they reached their prime earlier there. And the economists who defined late-nineteenth-
century British economics are distinguished from their American counterparts by having lost
their religious faith before becoming economists.
5. The best history of the Kingdom movement is Handy (1950).
6. Gates, who would later serve as president of both Pomona and Fisk Colleges, is poorly
served by historians. The best source is still Isabel Smith Gates’s 1915 biography.
7. See Marty 1984 for a nice history of Strong in the Social Gospel movement. After read-
ing an earlier draft of this essay, a non-American questioned the significance of comparing
Strong’s book to Stowe’s. This is a good question, although not one that would likely occur to
an American reader. Uncle Tom’s Cabin was the nation’s greatest commercial publishing suc-
cess at midcentury and is often credited with inciting American Protestants (in the North)
against slavery. Stowe was the daughter of one of the most famous early-nineteenth-century
Protestant ministers and was married to a well-known minister. The success of Strong’s book
both indicates the magnitude of his influence and points to the fact that by the end of the cen-
tury the country’s fundamentally Protestant makeup was still strong enough to determine the
success of a best-selling book. Strong used his fame to revitalize the interdenominational
(Protestant) movement called the Evangelical Alliance.
8. This account of the idea of the Kingdom of God in America draws heavily on Niebuhr’s
1937 classic.
9. For more about Macy, see his autobiographical writings posthumously edited by Noyes
(1933). Commons and Macy shared common Quaker roots; both men’s families had migrated
from North Carolina to Indiana at the same time to get out of slave territory. Commons
(1894a, 1894b, 1894c, 1894d, 1895a, 1895b, 1896, 1898) best demonstrate the explicitly evan-
gelical nature of his early work.
entire group: the owners of capital. And like Billy Sunday, his most
prominent premillennialist adversary, he then proceeded to lay out their
sins slowly and carefully before calling for their repentance and offer-
ing them salvation. In his sermon “The Christian Revival of the
Nation,” Herron (1895, 179) stated: “We have failed. We have betrayed
our trust, and forsaken our mission. God is disappointed in this nation.
We are a fallen nation, an apostate people.” After his arrival at Iowa
College in 1893, Herron moved beyond his simple biblical exhorta-
tions, however. On the one hand, he edged closer and closer to an out-
right call for socialist revolution, and on the other, he called for a redef-
inition of Christian sociology along nonempirical, purely evangelical
lines:
We are in the beginnings of a revolution that will strain all existing
religious and political institutions, and test the wisdom and heroism
of the earth’s bravest souls; a revolution that will regenerate society
with the judgments of infinite love. (“The Social Revolution,” in Her-
ron 1893, 14)
What I have here to say treats of work, wages, and wealth; of the
rights and duties of capital and labor. And I approach the social prob-
lem, not from the standpoint of the political economist, but of the
Christian apostle; Christ did not save the world by a scientific study
of the economic conditions of society. Nor shall I make use of statis-
tics, the value of which is largely fictitious; it is a fallacy that statis-
tics cannot lie.10 (11)
Any, or all, of this might have been too much for Ely. Other promi-
nent academics, such as Albion Small, warned him to dissociate him-
self from Herron and the American Institute of Christian Sociology
(Furner 1975, 151; Ross 1991, 126 – 27). And although Ely was almost
certainly comfortable with a call to reexamine the relationship between
capital and labor, he may not have been so keen on Herron’s increasing
use of the word “revolution.” Nor would he have been likely to feel com-
fortable with Herron’s preaching style. Ely had escaped his Methodist
background early on to find a home in the Episcopal Church, so Her-
ron’s revivalist intensity may have been unappealing. At any rate, Ely
moved away from the institute after 1894, first trying unsuccessfully to
10. The best statement of Herron’s (1894) version of Christian sociology is in his sermon
“The Scientific Ground of a Christian Sociology.”
move the summer institute to New York in 1895 and then abandoning it
altogether.
Commons was put off by Herron almost immediately. Although
Commons was recruited by Ely to serve as the secretary for the insti-
tute, he heard Herron preach in Chicago in 1893 and was instantly wary
of his message. In fact, he claims in his autobiography that after hear-
ing Herron, he determined to change the focus of his research.
At Bloomington I made my first venture in activities outside the aca-
demic field. The American Institute of Christian Sociology was orga-
nized, in 1893, to support an American version of what had been
known in Europe as Christian Socialism. The aim was to present
Christ as the living Master and King and Christian law as the ulti-
mate rule for human society, to be realized on earth. I was made Sec-
retary of the Institute. An eminent minister of the Gospel was made
our lecturer. I became upset as to the meaning of Christian Socialism
and Christian Sociology. On one night of his series our lecturer iden-
tified Christianity with pure Anarchism; on the next night he identi-
fied it with Communism. He identified each with the love of God.
But I now became mystified on the meaning of Love itself. I could
not make out whether Christian Socialism meant Love of Man or
Love of Woman. On this issue our Institute of Christian Sociology
split and disappeared.
I became suspicious of Love as the basis of social reform. I visited
the Amana community of Christian Communists in Iowa. They dis-
tinguished rigidly between love of man and love of woman. I studied
Mazzini, the great Italian leader of Christian Socialism fifty years
before. He founded Christian Socialism on the Duties of Man,
including duties to wife and family. Eventually, after many years, in
working out my institutional economics, I made Duty and Debt,
instead of Liberty and Love, the foundations of institutional eco-
nomics. (Commons 1934, 51 – 52)11
In the summer of 1893, Commons did not attend the institute because
of family illness, and in 1894 he again failed to attend. But he was
happy to publish in The Kingdom, and he worked out some of his best
early ideas there between 1894 and 1898.
11. Commons’s recollection here is not completely accurate. The questions of “free-love”
and the sanctity of marriage did not become central to Herron’s career for another four to five
years. Commons is conflating several years of Herron’s life into one year.
An Unexpected Turn
The tone and feel of American economics in the next two decades
almost certainly could not have been predicted in 1900. The profession
was now the home of several prominent former advocates of Christian
socialism, all of whom had made their own compromises with their for-
mer position.
The most prominent, of course, was John Bates Clark. After leading
the call for Christian socialism in the 1870s and 1880s, Clark was now
the foremost marginalist in the American profession and the “scien-
tific defender” of American capitalism.13 Ely was the giant of ethical
economics, and his Outlines of Economics (1893) remained the best-
selling economics textbook in the country until the Second World
War.14 Commons came back from exile in the private sector and began
building his distinguished career as the founder of American labor eco-
nomics and the leader of institutional economics (Commons 1934).
The story, however, involves much more than just the ways each
man changed and adapted his message, although this point is important.
Although each of the three would go a different way in his professional
12. Ely’s trial at the University of Wisconsin took place in 1894. The trustees of Syracuse
University voted in March 1899 to discontinue Commons’s chair. For the best account of these
and other academic trials, see Furner 1975.
13. For quite different accounts of the trajectory of Clark’s career, see Everett 1946 and
Morgan 1994, on the one hand, and Henry 1995, on the other. The term “scientific defender,”
applied to Clark’s defense of capitalism, is Henry’s.
14. In its revised editions, Outlines of Economics sold 350,000 copies between the First
and Second World Wars. See Rader 1966, 160 – 61.
work, together they demonstrate the tension that was central to the plu-
ralism that existed up to the Second World War. Clark, who moved
away from Christian socialism a decade before Ely and Commons, was
the leading American figure in both marginalist and theoretical eco-
nomics, but his work was nonetheless suffused with a strong moral tone
(Morgan 1994). Indeed, one might argue that the moral tone was even
more important after 1900, as Clark was finished by then with true
theoretical innovation. And as long as Ely’s textbook served as the
standard-bearer of the profession and as the first text of most students,
marginalism would stay in the protective wrapping of an ethical mes-
sage much less conservative than Clark’s. Ely’s text introduced the stu-
dent to marginalism but made it very clear that utility maximization
and profit maximization were not the only, or the most important,
behaviors of the people economists studied.15 Commons was actually
carrying out the hard work of building the historical, institutional eco-
nomics that Ely championed in his text. Even a prominent economist
with absolutely no background in the Social Gospel movement like
E. R. A. Seligman (1902, 1905) was engaged in working out the same
pattern of concerns and tensions that Clark, Commons, and Ely had
helped bring to the center of American economics (Ross 1991, 188–95).
The particular historical contingencies that had brought the evangel-
ical economists to the fore during the Gilded Age crisis had thus largely
defined the ways American economics was done after the turn of the
century. Marginalism and historical analysis were the two theoretical
poles in the American profession, each informed by a strong desire for
social amelioration. Thus, even as marginalism progressed, it was
never separated from provisos that allowed for the importance of larger
social concerns and for an explicit acceptance that not all behavior was
self-centered and maximizing. The Social Gospel message was com-
patible with several types of economic analysis, as long as the focus of
the analysis was clearly ethical in nature; both Clark’s concern with the
fairness of marginal productivity pricing and Commons’s analysis of
the nature and fairness of market transactions could fall within the
acceptable realm of the dominant Protestant sensibility. Thus, during
the first two decades of the twentieth century, the Social Gospel mes-
15. Although Ely was already the author of An Introduction to Political Economy (1889),
he wrote Outlines expressly for the purposes of making a more analytically rigorous textbook
and introducing marginal utility analysis, albeit wrapped in a tight ethical jacket.
16. I am using “progressivism” as this movement’s name even though an older, rich sec-
ondary literature disputes whether “progressivism” or “reform” should be used to label the
political activity these terms describe. “Reform” was the more common term at the time,
although “progressivism” is the term most often used now.
17. The sense of the collapse of the movement at the end of the 1890s, including Herron’s
scandal, and its unexpected rebirth are captured nicely in Hopkins 1940.
18. The council amended the creed in 1912 to include the provisions demanding one day in
seven as a day of rest, acceptance of a “minimum living wage” in every industry, and an effort
to pay “maximum possible wages” in any case.
ers of Henry George and anyone else with religious roots and a pro-
gressive agenda. Even old Social Gospelers like Clark were swept
along by this tide; in fact, Ely’s text made the presence of marginalism
perfectly welcome in the mainstream by qualifying and cosseting it in
the language of higher ethical aims.
19. In retrospect, it seems clear that the idea of a “religious depression” during the 1920s
and 1930s was largely descriptive of the mainline Protestant experience. Church history was,
even at midcentury, largely about the Protestant churches.
20. Another related current in American society at this time was the secularization of the
universities. This was a complex process in which trustees were often anxious to point to reli-
gious life on campus while, in fact, religious tests and affiliations were being formally elim-
inated. See Marsden 1994.
21. Both Thompson (1987) and Danbom (1987) discuss the impact of the First World War
on Christian Progressives and scientific Progressives.
hallmark of the interwar era for political and cultural reasons. Although
Warren Harding had promised to return the country to “normalcy” in
the 1920 presidential race, by which he clearly meant that he would
move away from Wilson’s preachy moralizing, he was nonetheless
motivated to ameliorate friction between labor and capital. “Efficiency”
served his purpose perfectly because of its explicit promise to increase
both wages and profits through increased productivity and output. But
in addition to providing a rhetoric that was seen as more “realistic”
than Wilson’s old calls for a higher, more ethical public conduct, it also
helped assuage the unease and uncertainty spawned by the new culture
of mass production and consumerism. Between 1916 and 1920, the
number of registered automobiles jumped from one million to eight
million; between 1920 and 1929, it increased from eight million to
twenty-three million. In this new world of assembly-line production
and the changing nature of work, the idea of efficiency was not just
about making the old system more productive and fair but also about
making sure that the newly evolving system would work well and in
everyone’s favor.
In this new “realistic” world of efficiency and scientific management,
the institutionalists made a much bigger initial impact than the neo-
classicists. Drawing from Thorstein Veblen’s ideas about the impor-
tance of engineers to the new industrial system and Ely’s and Com-
mons’s legacy of collecting data to interpret the evolving nature of
economic activity, institutionalists set out after the First World War to
build a science of controlling the economy. Wesley Clair Mitchell is the
epitome of this movement in the history of American economic
thought. When he set up the National Bureau of Economic Research
(NBER) in 1920, he represented both the impulse toward a “scientific”
understanding of the economy and the institutionalists’ central place in
that enterprise. But, of course, he was not alone; John Maurice Clark,
Sumner Slichter, Walton Hamilton, and Rexford Tugwell were some of
the leading names in American economics in the 1920s, and each was an
institutionalist. The titles of their articles in the post–World War I period
reveal their interests: “An Example of Municipal Research,” “Overhead
Costs in Modern Industry,” “Economical Theory in an Era of Social
Readjustment,” “Industrial Morale,” “Economic and Social Aspects of
Increased Productivity,” “Lines of Action, Adaptation, and Control,”
“Law and Economics,” “The Institutional Approach to Economic The-
ory,” “The Economic Basis of Business Regulation,” “The Principle of
Act, between 1933 and 1935 must have taken some of the sheen off
institutionalism’s star.
More was involved, however, than just a run of bad luck. Already by
the beginning of the 1930s marginalists were busy attacking institu-
tionalism; the tolerance and pluralism of the first two decades of the
century were breaking down. Knight’s vicious attack on Slichter’s new
textbook in 1932 is emblematic of the changing environment. Knight’s
review ran over forty pages and elicited a long reply from Slichter
(1932b). Likewise, the attack on “Measurement without Theory” by
Tjalling Koopmans in 1947 was a new kind of direct confrontation in
which the older spirit of pluralism was eviscerated. Koopmans’s attack
was especially devastating because a large part of the vitality of insti-
tutionalism in the 1920s had depended on its self-concept as “scien-
tific.” Because institutionalists collected data and examined them to
establish tentative theories and hypotheses, they had seen themselves
as more scientific than marginalists, who depended on a priori assump-
tions about human behavior and insisted on focusing on equilibrium
outcomes. Koopmans’s attack, however, put the very definition of sci-
ence in dispute. If economic science could be redefined so that it
required strong a priori theoretical assumptions, the validity of the
entire enterprise set up by Mitchell at the NBER would be in question,
at least in the way he had envisioned it.
In addition to attacks from marginalists and statisticians, institution-
alism also faced a threat from the new Keynesian consensus that
formed at the end of the interwar period. Here the problem was not
unfriendly attack, however, but the attraction of Keynesianism to insti-
tutionalists, especially those in government.22 As Keynesianism sup-
planted the many other kinds of planning that had been available in the
late 1920s and early 1930s and became the dominant framework for
economic policy and for the amelioration of capitalist dysfunction,
older institutionalist research into industry structure and business
cycles fell out of fashion. For some institutionalists, the functional
forms and geometry of the Keynesian model must have seemed a wel-
come apparatus in the face of growing charges that institutionalists
were nontheoretical. But this was a chimera, of course, for the neo-
22. Collins (1990) discusses how the institutionalist Leon Keyserling established the
Council of Economic Advisers as a government stronghold for institutional economists who
had become Keynesians.
Cleared Ground
At this point, we are back to the triumvirate of mathematics, formal-
ism, and physics envy, the primary characteristics of the neoclassicism
that pushed institutionalism off the stage and came to dominate Amer-
ican economics. But the success of the particular brand of marginalist
analysis that triumphed in this story was not foreordained; it came
about through a series of sometimes unlikely twists and turns.
When John Bates Clark developed his marginalist ideas at the end of
the nineteenth century, his work was highly mathematical. But despite
his renown, his work did not become predominant. On the contrary, it
became one type of a larger American economics that focused on “eth-
ical” solutions to social problems. Ely’s and Commons’s work in a more
historical, less theoretical mode was equally valued as a part of this
“ethical economics.”
But after the First World War, the ground shifted. The old Protestant
influence of the Social Gospel was swept away after 1918, and a new
sensibility began to define American economics. Now, instead of an
ethical economics that sought to reform the nation, America had a sci-
entific economics that sought to make the nation more efficient and to
control its economy. At first this new environment continued to support
plural approaches to economics, but eventually pluralism gave way.
Whereas institutional economics seemed perfectly “scientific” in 1922,
by 1947, it was no longer unquestionably regarded as such.
Institutionalism had suffered other setbacks and unfortunate turns,
particularly its identification with the First New Deal and the rise of
23. The charge that institutionalists were nontheoretical or antitheoretical was false, of
course. It is more accurate to say that they were multitheoretical. Institutionalists openly
debated many theoretical points of view but could not agree on any one theory. Institution-
alists in the first half of the twentieth century certainly could not agree that simple utility and
profit maximization sufficiently defined economic theory.
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