Dark Tales from the Early Days of the American Economic Association

The American Economic Association was founded in 1885 with a view that an Economics based in history and statistics was necessarily Scientific, and that Government based on this ‘Economic Science’ would necessarily be a force for good. As the founding Statement of Principles expressed it: “We take no partisan attitude” towards the “industrial and commercial policy of governments” which should be based on an Economics developed “not so much [by] speculation as [by] the historical and statistical study of actual conditions of economic life”. “We regard the state as an agency whose positive assistance is one of the indispensable conditions of human progress.”

The view of the founding members of the AEA that policy should strongly socially proactive fitted their largely Protestant backgrounds: twenty-three of the fifty-five charter members were clergymen. They viewed economic policy as something to be decided by experts in the service of society. These experts should make decisions based on science and proceed to implement them. As Arthur Hadley put it in his 1898 AEA Presidential address, the greatest opportunity for economics lay “not with students but with statesmen”, and the brightest future for economists was in “the leadership of an organized body politic.”

This view that experts should be the ones actively making decisions, not just influencing or implementing them, was premised in the idea that the economic experts were superior people. Putting experts in charge, and side-lining inferiors, went far beyond the modern conception of public policy where technical tasks with well-defined objectives should be handed over to experts for implementation. It had more in common with Plato’s Republic in which the wise men should be put in charge to the exclusion of others.

Case in point was Richard T. Ely, a key founder and the 6th President of the AEA. The keynote lecture at the annual AEA meeting is named the Richard T. Ely Lecture. Ely was of the opinion that economic reform required the leadership of “superior men”.  Economics needed to abandon the outmoded doctrine that all men were equal. Economics must become less dismal! Ely once stated that New York City would be better run “if thirteen per centum of the poorest and most dependent voters were disenfranchised.” In 1922 he went further stating that the “human rubbish heap” was far larger than “a submerged tenth”, pointing to intelligence testing of US Army recruits as scientifically demonstrating that 22 percent were inferior.

In a similar vein Irving Fisher, President of the AEA in 1918, declared that “the world consists of two classes—the educated and the ignorant—and it is essential for progress that the former should be allowed to dominate the later.” Economists he clearly considered the former, “not only can society be reformed but to do so is the principle service of economic and social sciences”.

If Economists were to play the role of scientific professionals there would need to be plenty of them. In 1880 US universities employed just three academics who dedicated themselves to political economy. The number of university courses in Latin outnumbered those in Economics by ten-to-one. Fortunately the founding of the AEA coincided with an explosion in economics and by 1900 the ratio of Latin courses to Economics was down to two-to-one, with parity in the leading schools. By 1912 only English had more undergraduate majors than Economics at Yale University. Many of these students went on to roles in government, as epitomized by Woodrow Wilson who attended Ely’s economics course at Johns Hopkins University and went on to become US President.

If some people were superior and others inferior then the experts must make sure that the future belonged to the superior men. Race suicide —superior people having less children than their inferiors and therefore being out-bred and overrun— was a risk! Francis Amasa Walker began his 1890 Presidential address to the AEA warning of the threat to the Anglo-Saxon race in the US posed by immigration. Walker felt that the superior American worker rightly refused to lower his standards compete with the immigrant who accepted low wages and chose instead to have less children. His evidence? Population forecasts for 1850s US made in the early nineteenth century were quite accurate, despite assuming little to no immigration. The 2.3 million Immigrants who had arrived in the US in the intervening decades had therefore not added to the population, but simply displaced natives by causing Americans to have less children. Walker described these immigrants from Austria, southern Italy, Hungary, and Russia as “beaten men from beaten races, representing the worst failures in the struggle for existence.” who would displace their superiors, the “native” Americans. This anti-immigrant view was not just held by a few bad apples in the AEA; in 1888 the AEA offered a prize for the best essay on the evils of unrestricted immigration!

In 1907, fearing the threat of race suicide, President Roosevelt supported establishing The Dillingham Commission to look at immigration as part of the response. The job of summarizing the findings was given to the Economists Jeremiah Jenks (9th President of the AEA) and his protégé Jett Laucke. They described their task as that of objective scientists: We are not “advocates, but interpreters of facts.” The commission built on racial taxonomies such as Races of Europe by William Ripley (President of the AEA in 1933) which classified racial groups by measurements such as head size and eye colour. Part of Jenks contribution was as coauthor of a Dictionary of Races which set out to establish “whether there may not be certain races that are inferior to other races… to show whether some may be better fitted for American citizenship than others.”

These views on immigration of course did not apply to the colonialists. Richard Mayo-Smith, another AEA co-founder, described Native Americans as a “few thousand savages” over whom the colonialists were victorious because the later were of higher civilization, and progress required that the superior be granted “the moral right to triumph”.

Naturally the view that experts were superior, together with putting experts in charge of policy, led eventually to policies targeting the inferior. One particularly egregious example where policy was explicitly based on the idea that some people were better than others was sterilization or fertility control. While policies on birth control nowadays tend to be more about preventing access to birth control in the past the focus was on forcing its use on those deemed undesirable or inadequate. These policies were largely outside the remit of Economists and involved sterilization of both men and women; the US forcibly sterilized over 20,000 people in the 1930s.

While Economists did not set sterilization policy many were still in favour. Frank Taussig, 1904 President of the AEA, authored Principles of Economics, the most widely used undergraduate Economics textbook of the its time. In Principles he wrote among those not productive enough to find employment under regulations requiring minimum labour standards included some people, namely those “helpless from causes that tend to be cumulative, such as congenital feebleness of body and character, alcoholism, dissolute living” who should “be simply stamped out”, they should not “be allowed at large. Still less should be allowed to breed. We have not yet reached the age where we can chloroform them once for all; but at least they can be shut up in refuges and asylums and prevented from propagating their kind. The opinion of civilized mankind is rapidly moving to the conclusion that so far at least we may apply the principle of eugenics, and thus dispose of what is the simplest phase of the problem of the unemployable.”

Along with Immigration another policy issue closer to home for Economists was the minimum wage. The argument here began from the premise that certain people were unemployable, not in the sense that they couldn’t find jobs but in the sense that they should be excluded be excluded from employment. Journalist Walter Lippman, two-time Pulitzer prize winner and founding editor of the New Republic, captured the idea writing that workers who were “old, or weak-minded, or physically feeble, or so utterly untrained and illiterate that under American conditions they cannot be employed at a living wage” should not be permitted “to debauch the labor market, to wreck by their competition the standards of other workers”. Or as William Z. Ripley, 1900-01 Vice-President of the AEA, put it the “American worker is underbid by the Scandinavian. He in turn is cut under by the Jew and Bohemian. The Pole will take even less than these, and finds at last his standard of living undermined by the Syrian and the Armenian.” With this in mind the minimum wage debates of the 1910s included many of the same arguments we continue to see today with one added twist: some argued for minimum wages precisely to exclude some workers from the labor market! Those to be excluded were a mix of the disabled, certain races, and women. Henry Seager, 1922 President of the AEA, argued that a minimum wage protected American workers by “merely extend[ing] the definition of defectives to embrace all individuals, who even after having received special training, remain incapable of adequate self-support” and would thus become unemployed under a minimum wage.

Eugenics. Racism. Sexism. The early days of the AEA were not so Dismal. But they were certainly Dark!



Fortunately todays American Economic Association bears little resemblance to that described here.

Case for the Defense :P The racism evident in the Economics of this time was by no means unique to Economists. Racism was widespread in society, and more immediately interestingly was also widespread in Science in the form of Eugenics which was favorably viewed at the time. While Eugenics is nowadays held in contempt, back in the early 20th century it was widely considered as scientific. Supporters of Eugenics included many Statisticians of the day, such as Karl Pearson whose contributions include such fundamental statistical concepts as the correlation coefficient and the p-value. Eugenics found especially deep rooted support among Biologists. Artists were by no means exempt. Virginia Woolf (an otherwise favourite author of mine) wrote in her diary that imbeciles should be “should certainly be killed”. D. H. Lawrence went so far in 1908 as to pen the disturbingly prescient extermination fantasy that “I would build a lethal chamber as big as the Crystal Palace.” Nor is this about laissez-fair vs interventionist Economics; plenty of laissez-fair Economists of that time agreed with the eugenics and racism, they simply thought that the best way to further those ends was to let the free market select for the fit and eliminate the inferior or unemployable.

The ‘scientific’ legitimacy of Eugenics in the early 20th century might be trivialized as a cautionary tale on the difference between correlation and causation, and the problems of endogeneity. ;)

The AEA was founded with a set of Objectives and a Statement of Principles. Other than being renamed as Purposes the Objectives remain largely unchanged. The Statement of Principles has been long-since jettisoned having only been intended as a statement as not as a binding condition of membership. Interestingly, while it never made it into the AEA’s founding principles the proposed platform included the phrase “we hold that the doctrine of laissez-faire is unsafe in politics and unsound in morals”.

One Economist who comes out of this whole affair looking particularly good is John Bates Clark —a founding member of the AEA after whom the AEA’s Young Economist award is named— who often provides a voice of caution and reason on many of the issues described above. Richard T. Ely does not. He even argued that food-aid for famine in India should be suspended, saying “let the famine continue for the sake of race improvement.”

The post is heavily based on the book,
Thomas C. Leonard – Illiberal Reformers: Race, Eugenics & American Economics in the Progressive Era
almost all quotes were sourced from there. If you found this post interesting the book contains much more. Much of two of my sentences, that on Mayo-Smith and that on Lippmann, should come in quotation marks as sourced from Leonard, but this would involve quotes of quotes so I mention it here instead. My focus was on Economists, the AEA, and Racism, but the book also discusses sexism, looks at how these issues were bipartisan in manifesting on both the left and right sides of politics, and includes journalists, business leaders and social workers.

The following other sources were also used
Ely, Richard (1910) – The American Economic Association 1885-1909
Taussig, Frank (1911) – Principles of Economics [Specifically Vol. II, Chpt 56.]

A criticism/review of the book:
Steinbaum & Weisberger (2017) – The Intellectual Legacy of Progressive Economics: A Review Essay of Thomas C. Leonard’s Illiberal Reformers


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