Dr. Edwin Cannan
On April 8th, Dr. Edwin Cannan died at the age of seventy-four. From 1907, until his retirement in 1926, he was Professor of Political Economy at the University of London. He was the author of numerous books on Economics, of which the two most important were perhaps Theories of Production and Distribution (1893) and A Review of Economic Theory (1929). In those two books he made a very penetrating analysis of the English economists from Adam Smith to Marshall, and at the same time indicated, by inference, the main lines of his own economic theories. It is significant that The Times, in its obituary notice, mentioned neither this latter work, which contains a criticism of Marshall, the founder of the dominant school of economic thought, nor his [Modern] Currency and the Regulation of its Value (1932), in which he opposed the popular views on banking and credit.
Dr. Cannan was neither a member of, nor a sympathiser with, the party: why then should we bother to record his passing ? It is because we feel that, as an economist, he was of more than usual significance in the development of economic thought. During his life he did not receive the recognition he deserved. He did not court reputation. He was more concerned with expounding economic truths, as he saw them, even if they were unpopular. We think, however, that his work will last when that of others more nimble of wit and glib of tongue has been forgotten.
His particular significance for us lies in the fact that he was the first economist after Marx whose thought was conditioned by the realisation that production and distribution take olace within a social framework “resulting from private property and free labour.” This enabled him to resolve the muddle into which the discussion of the problems of production and distribution had been reduced by the economists of the nineteenth century.
The Classical Economists, starting from Adam Smith, based their theories of production and distribution on the existence of three agents of production—Land, Labour and Capital. They then divided income into three classes, corresponding to these three agents of production: Rent—the income from Land; Wages—the income from Labour; and Profit—the income from Capital. Later Profit came to be divided into two parts, one called Profits, which was supposed to represent the “earnings of management” the other Interest, representing the return in respect of “the passive ownership of property.” Dr. Cannan saw through the artificiality of all divisions of this kind and based his theory of distribution on “the division between earnings of Labour as a whole on the one side and the income derived from property, whether rent, quasi-rent, interest or anything else taken as a whole on the other side.” This was the division already made by Marx.
The War caused Dr. Cannan to turn more and more to the consideration of monetary theory, and here again his views come to have a close affinity with those of Marx, particularly his views on banking and credit. He opposed vigorously the popular theory that banks create credit. In THE SOCIALIST STANDARD for April there will be found references to his writings on this subject. He was very appreciative of the Party’s attitude, and in a letter to the writer, in which he referred to the articles on Banks and Credit which appeared in THE SOCIALIST STANDARD towards the end of 1933, he wrote: “The reigning money scnool pronounce me a lunatic on the subject of banks, and it is gratifying to know that there is at least one other person in the world who shares my view. R. (he refers to a well-known monetary economist) recently said my view was a mystery to him, whereas it has always seemed to me that all the mystery was made by him and his friends making bankers’ debts to their customers into a sort of substance which the banks create out of nothing. One would think that all recent experience was enough to knock out for ever the idea that increase of deposits raises commodity prices, and that commodity prices can be regulated by shifting bank rates up and down.”
Perhaps the most typical feature of his economic thought was his refusal to force his theories into nationalistic moulds. He saw that national rivalries and national barriers were impediments in the way of a full utilisation of the productive resources of society and did not hesitate to point out that “no one, so far as I know, has ever contended that the pursuit of self-interest by individual States tends invariably to the common good of the whole.”
In a brief note, such as this, it is not possible to do justice to all his contributions to economic thought, but it must be pointed out that he was practically the only well-known economist in this country who kept his head in 1931 and refused to subscribe to the revival of the eighteenth century mercantilist theories regarding the balance of trade with which stunt journalists and politicians scared the public.
Independence of thought and simple directness of statement were the two chief characteristics of his writings. Both of these features are too rare in contemporary economists. The world of economic thought is the poorer for his passing, and popular error and superstition more free to parade unchecked.
B.S.