NYU Washington Square College - Album Yearbook (New York, NY)

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max a dilemma of long standing. The pre- conceptions of the classical and neo-classical economic theory revolved around ideas of value, cost, utility, and price, the op- eration of which rested on a notion of a free exchange of goods under somewhat primitive economic conditions in which costs measured prices. The downfall of the 'Acost analysis followed the hnal recognition of the non-ex- istent conditions of free exchange, and the function of ability-to-pay price determina- tions. The marginal utility school took the matter up there, and explained the determina- tion of price in terms of the downward slope of the demand curve produced by diminishing utilities. Price being determined at the mar- ginal point. Such men as Veblen and Mitch- ell have attacked this explanation on the grounds that it assumed a balance of supply and demandg that it rested on a concept of homogeneity of desires and utilitiesg that it is normalistic, hedonistic and rationalistic as was this classical theory. In spite of this the theory of its general form is probably accept- able to the large majority of professional economists. Developments of the last few years have cracked it much more obviously than ever be- fore. Under the present monopolistic condi- tions and the efforts at control, organizing on an assumption of freely operating forces of supply and demand takes on the appearance ol' blindness and intellectual astigmatism. The dilemma is the existence of a body of doctrine which does not ht realities, but the apparent difhculty of a well-knit theory grow- ing out of the realities. Economists of the ex- nt-me left have interpreted modern trends as the evidence of a system in the throes of decay and imminent death. Efforts to stem the tide of destruction are therefore efforts of a ration- al capitalism to save itself. At the opposite ex- treme are the die-hards who insist that al- though there are logical and psychological shortcomings of the cost and marginal theory, it possesses essential integrity, a consider- able resemblance to the facts, pedagogi- cal compactness, logical coherence and avail- ability, and a large measure of economic truth. In practical affairs they hark back to the innnutable laws of economic life, and maintain that departures from the traditional routines will cause grass to grow in the market place. Obviously this group has been both active and intellectually unhappy under the pressure of recent events. The most hopeful group is one which stands, not in between, but separate from either ol' the two above. This group, following a great variety of paths is unwilling to accept authoritative promulgations about the natur- al laws of economic activity, or the behavior of man, without subjecting the operation of the going concern to the closest scrutiny. Some of them contend that there is no virtue whatsoever in the old categories. Others say if they are to serve any function whatever, a theory of value must be based on up-to-date knowledge of human nature. Economic sci- ence must be based on realistic studies of the functioning of economic institutions. The rapid economic and social revolutions through which the United States has been passing has and will continue to give wide scope to such endeavors to formulate a realistic theory of economics. Lois hftll-JONALD 92

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slate cleanf' through permitting mortgages to be foreclosed and bankruptcies to operate in wholesale fashion, No effective and gener- ally designated methods have been applied, although in almost every major depression there have been pressures in the direction of control at some point or other. The crisis of the early 1930's created a situation in which the pressures were tremend- ously increased, primarily because the highly integrated system of modern production came near collapsing under its own weight, and the widespread effect of prospective ruin covered a wider base than ever before. The control measures of the New Deal were created to meet the extreme need. Those measures, new only in the sense of their num- ber and inclusive covering, were designed for immediate relief, but also bore evidences of a desire to affect long-run reforms. In the Hrst category were credit institutions organized and financed by the federal government through which business and finance might obtain tem- porary relief: a program of Public Wo1'ks to stimulate buying and employ workmen, a National Industrial Recovery Act, setting up codes -of fair business practices, limiting pro- duction, and recognizing labor's claim by min- imum wage, maximum hour and collective bargaining sectionsg the attempted effort to achieve a rising trend of prices by adjustments in the money and credit system, tending in many respects to depart from the system of hard money and actually going off the gold standard: the efforts at crop control, and re- lief for the agricultural population, and the steps taken for relieving directly the distress of the unemployed. In the second category are the more long- run reform measures: control of the issue and sale of securities, closer integration of credit institutions through revamping the banking 29 lawsg insurance of batik depositsg utilities leg- islationg the T.V.A.g housing and resettlement programsg soil conservationg national control of labor relations through guarantee of col- lective bargainingg a program of social legis- lationg and, finally a proposal for reform of the Supreme Court, to permit effective action in these areas. It would be erroneous to assume that these trends toward reform are consistent or entirely effective. They represent on the whole the resultant of pressures of various groups, all concerned over their own futures and the protection of their vested interests. Some have been overturned by the courtsg others have been discarded or rendered ineffective in ac- tual practice. The significant practical re- sults are achieved by the abilities of interest groups to mold conditions to their liking. For example, the open permit to restrict competi- tion under the NIRA doubles the drift toward monopoly in instances where business men were in position to make use of an unusual situation. Organized labor likewise has made use of the situation to consolidate gains, as evidenced by the immediate activity of the unions in 1933, the upsurge culminating in the C.I.O. in the years following. Practically, these developments have re- asserted the concept of human welfare as against the inviolability of vested property holdings. The sit-down strikes, though prag- matic in their outlook, are nevertheless as- serting in their action this new type of vested right. Attention has been focussed also upon the achievement and maintenance of a not- too-fluctuating purchasing power, and the at- tainment of a reasonably good standard of liv- ing for the whole population as a prerequisite to economic prosperity and stability. Theoretically these trends have produced resounding repercussions, bringing to a cli-

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