Economic Man in the Garden of Eden

It has always been a puzzle why nineteenth century political economists were quite so gloomy. Why did they picture economic actors as motivated so single-mindedly by self-interest? Why did they see ahead the negative effects of diminishing returns, especially falling profit rates and rising rent shares, while all around them the evidence was pointing in the other direction? Why did they go on about the stationary state at a time when technical change was everywhere the norm? This gloom was hardly foreshadowed by the eighteenth century founders of political economy—Hume, Smith, and the Physiocrats (although for a contrary view see Robert Heilbroner 1973). It seems to have begun with Malthus and Ricardo, but it remained strong in the marginalist economists as well. Alfred Marshall and his followers rested their case for the necessity of careful marginal allocation of resources, and the intolerability of the costs imposed by trade unions and other rent seekers, on the ground that there were just not enough goods and services to go around. The notion of scarcity legitimized gloom.