Whitehead on Economics

First published 2008

Alfred North Whitehead did not spend much time in his writing directly addressing economics—either the theory or the actual social effects. But it does come up, especially in Science and the Modern World and Adventures of Ideas. He often uses economics as an example of how too much deductive theorizing can have untoward effects, yet he also believes that “commerce” is central to the spread of the effective use of persuasion in civilization, as opposed to coercion. These comments help provide clues to Whitehead’s views about economics. However, much more important for a critique of capitalist economics is his understanding of the usefulness and limits of deductive method, and his critique of the underlying assumptions on which Neoclassical theory (the theoretical foundation of capitalism) is based. Most useful of all is his ontology, which can provide a new foundation upon which to develop a more adequate economics. A review of what Whitehead did actually write about economics, then, is useful even when it does not go as far as one would wish in directly addressing economic issues. Accordingly, the bulk of this article will examine closely Whitehead’s comments about economics, particularly in Science and the Modern World and Adventures of Ideas. Then we will consider some further implications before presenting the work of Herman Daly and John B. Cobb, Jr. as the most important example of Whitehead’s influence on economic thinking.

1. Whiteheadian Economics

1.1. Whitehead’s Observations on Economics and Commerce

We will look at Science and the Modern World, which Whitehead presented as the Lowell Lectures in 1925, before moving on to Adventures of Ideas, first published in 1933. What is probably Whitehead’s longest commentary on economics comes in Chapter XIII of Science and the Modern World, “Requisites for Social Progress.” He begins by observing that the influence of Descartes led to “the assumption of bodies and minds as independent individual substances, each existing in its own right apart from any necessary reference to each other” (SMW 194). This idea soon “degenerated into a mechanism entirely valueless” (SMW 195). According to Whitehead, this was not all bad, because it led to an efficient method for scientific research “within those limited regions which were then best suited for exploration” (SMW 195). The problems inherent in this approach became most apparent in the nineteenth century, “when society was undergoing transformation into the manufacturing system” (SMW 195). Here, “the bad effects of these doctrines have been very fatal” (SMW 195).

There are two reasons given for this. First, this individualism led to understanding ethics as a private matter, leading to a deficient moral outlook that was taken up by “the leaders among the industrialists of that period” (SMW 196). Whitehead does not go on to spell this out, but he seems to be referring to the massive suffering caused by the nineteenth-century factory system, particularly as experienced by children; and to the justification of subsistence (and lower) wages and mistreatment of workers by the application of Malthus’ Iron Law of population[1] and by Spencer’s Social Darwinism. A privatized ethics, which focuses only on the personal behavior of individuals, is blind to social injustice.

The second reason for the fatal effects of Cartesian thought is that it led to the “assumption of the bare valuelessness of mere matter” which in turn was used to justify environmental abuse and to discount the importance of “artistic beauty.” At that time urbanization was reaching a stage of rapid development. Here Whitehead gives examples that are not as relevant to us today, but the point is that many cities were filled with tenement blocks with no trees or anything green whatsoever. Too often, such basic amenities as parks and good architecture, so necessary for personal, social and environmental well-being, were left out of development. And where they already existed they were often destroyed.

In this, Whitehead sees two evils, both of which are now embedded in economics (both capitalist and Marxian). The first is “the ignoration of the true relation of each organism to its environment,” and the second is “the habit of ignoring the intrinsic worth of the environment which must be allowed its weight in any consideration of final ends” (SMW 196). A third problem, which exacerbates the two evils just named, is the result of “the professionalizing of knowledge.” This has produced great efficiency in a limited sphere, but also “produces minds in a groove”:

Each profession makes progress, but it is progress in its own groove. Now to be mentally in a groove is to live in contemplating a given set of abstractions. The groove prevents straying across country, and the abstraction abstracts from something to which no further attention is paid. But there is no groove of abstractions which is adequate for the comprehension of human life (SMW 197).

At this point, Whitehead goes into an examination of the more general consequences of this kind of professionalism. But we can readily see how it applies to Neoclassical economic theory. The theory is based on a set of abstractions from the complexities of human economic activity, as it must be. Whitehead has no quarrel with this. All theories are. The problem comes in when they are rigidified into dogma and applied beyond the limited sphere where the abstractions hold. Even worse, they are enshrined as “value-free science” now freed from any need to return even once a century to examine whether the basic assumptions still hold.[2] Whitehead returns to this a few pages later, when he gives a modern factory as an example of a complex “organism” which should be apprehended in its completeness: “with its machinery, its community of operatives, its social service to the general population, its dependence upon organizing and designing genius, its potentialities as a source of wealth to the holders of the stock […]” (SMW 200). Whitehead goes on to contrast this holistic approach with the consequences of excessive abstraction in economics:

It is very arguable that the science of political economy, as studied in the first period after the death of Adam Smith (1790), did more harm than good. It destroyed many economic fallacies, and taught how to think about the economic revolution then in progress. But it riveted on men a certain set of abstractions which were disastrous in their influence on modern mentality. It dehumanised industry. […Modern science] fixes attention on a definite group of abstractions, neglects everything else, and elicits every scrap of information and theory which is relevant to what it has retained. This method is triumphant, provided that the abstractions are judicious. But, however triumphant, the triumph is within limits. The neglect of these limits leads to disastrous oversights (SMW 200).

These oversights, according to Whitehead, have led to a “materialistic philosophy” that “directed almost exclusive attention to the aspect of struggle for existence in a fixed environment” (SMW 205).

Whitehead does not seem to be aware of the argument of economists that improved productivity is a way out of the struggle because it changes the “fixed” nature of the environment, but he likely would have approved of that aspect of economics. After the litany of nineteenth-century industrial evils, he remarks that the “full conclusion to be drawn from a philosophy of evolution is fortunately of a more balanced character. Successful organisms modify their environment. Those organisms are successful which modify their environments so as to assist each other” (SMW 205). He does not reject competition, but insists that it be balanced with cooperation, and gives as an example the contrast between a single tree trying to survive on its own, and the intricacy of mutual flourishing that takes place in the Brazilian rain forest (SMW 206), where competition and cooperation are in balance. And he never forgets to return to the necessity of re-examining theoretical assumptions and changing them as knowledge and circumstances change. That aspect of Neoclassical economic theory that celebrates itself as “value-free” science would appall him.

We see this concern with the relation of competition and cooperation continued in Adventures of Ideas (1933). He states that “the problem of social life is the problem of the coordination of activities, including the limits of such coordination” (AI 28). He goes on later to assert that “in the immediate present, economic organization constitutes the most massive problem of human relationships” (AI 62). This is as close as he comes to acknowledging the Great Depression, which he does not mention. In a survey of Western history, he points out that slavery was finally abolished while at the same time such ideas as Malthus’ law of population were providing excuses for neglecting the plight of masses of people. Working to counter this, according to Whitehead, were the Wesleyans[3] promoting the “brotherhood of man.” So industrialization and economics developed in a swirl of social change and counter-pressures, but the age was clearly dominated by the focus on competition, which seemed to exist “wherever men looked” (AI 31). The response to this, worked out by Adam Smith and other liberal thinkers, was to assert a faith that “the strife of individuals issued in the progressive realization of a harmonious society (AI 33). This seemed to make it possible to continue to affirm “the brotherhood of man” while unleashing “relentless competition with all individual men” (AI 33). The problem was that it did not work well. According to Whitehead, “after two generations of such industrial development, the widespread misery […] aroused the public conscience” (AI 33). Something very like “industrial slavery” had been produced.

In response to this manifest failure of “the pure doctrine of nineteenth-century liberalism” (which came to be called laissez-faire economics, and ironically is now championed by those calling themselves “conservatives”), England moved to admitting the “necessity for coordination and the failure of free competition” (AI 35). Whitehead concludes that “no one now holds [in 1932] that, apart from some further directive agency, mere individualistic competition, of itself and by its own self-righting character, will produce a satisfactory society” (AI 35). He notes that various ways of doing the “coordination” have been tried and are still fiercely debated, but that is as far as he goes. Nevertheless, based on his views thus far stated, it seems clear that Whitehead would favor seeking out a “balance” of competition and cooperation in an economy, and thus might prefer a “mixed” economy to the extremes of laissez-faire free markets with no government coordination and regulation, on the one hand, and central control of the economy by either government or monopolistic corporations, on the other. We can see hints of this latter view in his chapter on Freedom.

In that chapter, Whitehead makes some comments about the doctrine of “person” that are relevant to economic issues, though, once again, he does not develop their implications. He thinks that one of the reasons the individualistic liberalism of the nineteenth century, which worked for “the trading middle classes” (AI 62), works no longer, is the introduction of the idea that a corporation can be a legal “person” with limited liability. According to Whitehead, “the introduction into the arena of this new type of ‘person’ has considerably modified the effective meaning of the characteristic liberal doctrine of contractual freedom” (AI 62). This makes private property a legal fiction, and plays havoc with concepts of individual rights. The whole idea that social relations are merely contractual, therefore only consciously entered into, is, as far as Whitehead is concerned, nonsense: “The human being is inseparable from its environment […]” (AI 63).

What Whitehead calls “custom,” or the whole inherited complex of social relations, is far more important. Personal freedom is an aspect of this social context: “The environment which the occasion inherits is immanent in it, and conversely it is immanent in the environment which it helps to transmit” (AI 63). This embedded character of human individuals is the main reason that unemployment is not only a question of social justice, but is actually a denial of individual freedom. Human beings cannot develop their very individuality apart from a social context. What would Mozart be without an audience to nurture and encourage his vast talent? Whitehead writes: “The essence of freedom is the practicability of purpose. […] Prometheus did not bring to mankind freedom of the press. He procured fire, which obediently to human purpose cooks and gives warmth” (AI 66). Because of this embeddedness of individuals, neither the laissez-faire ideology that assumes individuals should be left “free” to do what they want with their money, nor social equity policies that substitute cash welfare payments for meaningful participation in society (thus leaving millions dependent on welfare and denied any meaningful role), are adequate. Both are examples of extremely individualistic thinking without regard to the role of social context in individuality.

At the same time that individual freedom requires a social context for its exercise, so too does the larger society need individuals contributing their unique gifts. Given that “there are many types of character” (AI 67), “one general end is that these variously coordinated groups should contribute to the complex pattern of community life, each in virtue of its own peculiarity. In this way individuality gains the effectiveness which issues from coordination, and freedom obtains power necessary for its perfection” (AI 67). While Whitehead does not go beyond this, it is interesting to think about more recent developments in business with this view in mind. For example, in the early part of the twentieth century industrial production was “rationalized” by reducing the process to an assembly-line of mindless steps (known as “Taylorism”), very much in keeping with the assumption that the world is made up of individual parts, all alike, and all interchangeable—including human beings. In the latter part of the same century, a shift began that is organizing workers into teams in which each member brings unique elements to the whole, including expertise in different fields and individual talents. This illustrates, I think, the sort of thinking, and acting, that Whitehead was already advocating when Taylorism was at its height.

The next chapter, “From Force to Persuasion,” is where Whitehead brings up commerce as a positive illustration of how civilizations learn to use persuasion, rather than coercive force, for the good of all. Again, Whitehead makes some observations that give some indication of his views about economics, but does not develop them. He gives a wide definition of commerce, as involving “every species of interchange which proceeds by way of mutual persuasion” (AI 70). (This makes one wonder if he would consider wages that rely on the need of people for work and a lack of other options, really part of “commerce,” since they have a coercive character.) However, despite the broad definition, Whitehead is careful to ground the discussion of commerce in actual economic activity. He is well aware of the psychological aspects of economic interchange and how that affects “value” in business, noting that the value of gold currency is entirely subjective: “so long as the generality of mankind deem gold to be wealth, then it is wealth; and as soon as this opinion passes, gold then becomes a metal of subsidiary importance” (AI 71). This understanding of the psychology of value does not mean, however, that there is no actual physical dimension to value. He claims that demand “may be closely connected with some physical necessity arising out of possession or deprivation, for example, the satisfaction of hunger or starvation” (AI 70). Whitehead seems to think that the subjective aspect of value does not come into play until and unless “there is a complete absence of any such physical necessity […] so that the sole advantages of possession depend on the possibility of renewed exchange” (AI 70). This would seem to provide a basis for considering value in economics at different levels: one level deals with basic needs, while the other comes into play when there really is a genuinely “free” market for exchange where the coercion that comes from physical need is not a factor. At present, economic theory does not allow for this idea of various kinds and levels of “value.” Value is always taken as completely individual and subjective—whatever an individual decides it is. This makes it impossible to assert, for instance, that the desire of a starving person to have something to eat is more important than the desire of a wealthy person to have steak instead of chicken. All desires are equal in economics.[4]

After considering these issues in value, Whitehead concludes:

The upshot of all these considerations is that the doctrines of Commerce have to be founded upon assumptions concerning necessities, habits, technology, and prevalent knowledge. But habits, technology, and knowledge are variable from epoch to epoch, and even in any one epoch differ in different sections of humanity (AI 71-72).

Whitehead criticizes the classical political economy of the nineteenth century for being limited to the aspirations of the middle classes of Northern Europe. He was not writing about the fully-developed Neoclassical economic theory of the twentieth century. Nevertheless, he did anticipate it when he goes on to assert that the preoccupation of the middle classes with “commercial activity as the main occupation of perfected civilization” (AI 72) did lead to “the consideration of economic laws which should hold, and to the neglect of economic procedures which in fact did hold” (AI 72). He is criticizing the choice to develop a deductive theory of economics that would insist on limiting attention to economic considerations, to the exclusion of all other issues. He correctly thinks that this was done for the sake of clarity and simplicity, and at this point he makes one of his famous statements:

In the study of ideas, it is necessary to remember, that insistence on hard-headed clarity issues from sentimental feeling, as it were a mist, cloaking the perplexities of fact. Insistence on clarity at all costs is based on sheer superstition as to the mode in which human intelligence functions. Our reasonings grasp at straws for premises and float on gossamers for deductions (AI 72).

Whether Whitehead had read Alfred Marshall, the great synthesizer of Neoclassical “clarity,” or not, he certainly was aware that economists at least since John Stuart Mill[5] had been working to develop an increasingly abstract and deductive economic theory that could be less and less concerned with “the perplexities of fact.” As we have already seen, this is dangerous, in Whitehead’s view, because it leads to the neglect of important dimensions of society, such as the effects of economic activity on the environment. When economic theories (including Marxism) were developed, the main concern was figuring out how to organize society to maximize the production of goods. Hence, that became the driving goal of economics—accepted even by Marx, who, unlike others of his time, understood very well that the environmental affects of unlimited industrial economic growth would be extreme (e.g. Marx 1906 554-555).

The second area that Whitehead criticizes in the political economy of the nineteenth century is the way the Malthusian Law of Population was used to justify exploitation. Economists thought that geometric population growth would always outrun arithmetic economic development, and consequently the labor pool would always be forced to work for bare subsistence. The fact that some businessmen, most famously the nineteenth-century factory owner Robert Owen, could and did make a good profit with fair wages and labor practices, was ignored. It was even the case, as Whitehead notes, that factories “managed on fanciful humanitarian lines” were driven out of business by those who opposed the use of fair labor practices (AI 73).

In this area Whitehead does agree with the development in economics of the understanding that productivity increases can make it possible for a growing population to coincide with a growing standard of living: “History has only disclosed three ways of escape—expanding Commerce, improving Technology, and utilization of Empty Regions. […] In the wide sense of the term, Commerce covers all three conditions. […] The central factor is Commerce; and more than that, it is Commerce developed adventurously” (AI 77). Whitehead agrees with Neoclassical theory in seeing nature as “plastic;” furthermore, he asserts that human beings are “that factor in Nature which exhibits in its most intense form the plasticity of nature” (AI 78). So economic growth and development that utilize non-coercive Commerce and Technology are a great boon to civilization, in Whitehead’s view.

But notice the caveats: he assumes (and would insist) that Commerce is non-coercive. And he firmly and consistently places humankind in Nature, not above and apart from it. Insofar as economic practices operate coercively, as when traditional peoples are forced to lose their lands and go to “work” in the cities, they are wrong and should be changed. The same is true for economic practices that ignore the inherent embeddedness in and dependence of human beings on the rest of nature to live, so that nonsustainable and environmentally damaging practices are justified as necessary for “jobs” and economic “growth.” These failures of economics are not just wrong; they endanger the Earth and everything in it, including human life. Given these views on the plasticity of nature and human embeddedness in it, Whitehead might agree with the proposition that we should affirm the genius of capitalism in overcoming the perceived limits to nature, but—and this is a very important “but”—we must learn how to move those boundaries (by finding sustainable and non-polluting sources of energy, for example), rather than crossing them by destroying species, using up resources non-sustainably, and disrupting crucial natural cycles (see e.g. Johnston 1998 114).

Whitehead would applaud the element of mainstream capitalist economics that allows for what he calls “adventure” and creativity; in fact, he would likely see that as the best feature of free markets. And he would certainly insist that any improved economics must take this into account, because he sees this as a basic human need. The “intrinsic energies” of cultures are sustained by “physical and spiritual adventure” (AI 82). One of the most important failures of Marxian economies has been the squeezing out of creativity by centralized control. So one of the most important challenges for an economics that is sustainable and just is that it not fall prey to the same problem, but figure out how to retain the creativity unleashed in capitalism and direct it to more socially responsible, sustainable ends.

While stressing creativity and adventure, Whitehead at the same time points to the underlying necessity of “routine” as the basis that makes creative advance possible:

Routine is the god of every social system; it is the seventh heaven of business, the essential component in the success of every factory, the ideal of every statesman. […] When the routine is perfect, understanding can be eliminated (AI 90).

This is the reason that Taylorism was so effective in its day—and, indeed, at the time that Whitehead was writing these sentences. Faced with floods of immigrant labor in American factories speaking a diversity of languages, Taylorism was a way to rationalize factory production to eliminate “understanding” and make it easy for anyone to do the needed tasks. It was a leap from highly skilled but labor-intensive, slow and expensive hand-work to completely unskilled, fast and cheap assembly-line production. The problem was that the work became too routine; in fact, it was mind-numbingly boring. In recent decades manufacturers have been learning how to balance routine with more input from workers—more allowance for enough creativity to make the work interesting and therefore allowing for gains in productivity brought by enlisting practical intelligence. Whitehead appreciates both routine and creativity, each in its right balance. Without routine, the wheel has to be re-invented every day. With too much routine, nothing is invented at all, and society stagnates.

Interestingly, Whitehead thinks that most people of his day are still conditioned to think in terms of a background of social stability, while change is accelerating all around them. He thinks that this “assumption subtly pervades the premises of political economy, and has permitted it to confine attention to a simplified edition of human nature” (AI 93). As happens frustratingly often, he does not elaborate the point, but I would venture to guess that he has in mind John Stuart Mill’s homo economicus (which he does refer to here), and perhaps also Adam Smith’s assumption that it is safe to allow individuals to act in their own wealth-maximizing self-interest in the market, because the social context is intact and ensures that they do not act against the interests of their own larger societies. It can certainly be argued that both capitalism and Marxism actually erode this social context. In many nations in the “globalized” economy, there is now less and less social cohesion to prevent self-interested “utility maximizing” from going against the common good of the society.

Whitehead goes on to remark that the “law” of supply and demand, developed in terms of a stable society, provides for “healthy competition” and “is beautifully simple and with proper elaboration is obviously true” (AI 94). But Whitehead believes that society was now changing so fast that the basic premises of this way of thinking about economics needed to be changed in light of changing circumstances. Unfortunately, once again he does not elaborate. But he does insist that what is needed is not a new set of “laws” so much as a different mentality: “an unspecified aptitude for eliciting generalizations from particulars and for seeing the divergent illustration of generalities in diverse circumstances” (AI 97). In other words, a fully elaborated “model” that can then be applied without further recourse to actual effects will not be adequate. Rather, what is needed is an inductive method that can elicit useful generalities from a constantly shifting welter of events. In a context of constant change and the irruption of unpredictable creativity, it is not safe to base decisions on seeming “trends” in past events; rather Whitehead calls for “forecasting” that is more sensitive to the possibilities emerging from novelties. Who would have predicted the economic impact of computers thirty years ago? It is the quite unexpected uses of inventions that are having the most economic impact now, not the predictable uses of the past. Nevertheless, there must be a balance. According to Whitehead, the business manager of the future would need both the ability to manage routine, and “a philosophic power of understanding the complex flux of the varieties of human societies […] such instinctive grasp of the relevant features of social currents is of supreme importance” (AI 97).

Finally, Whitehead insists that “the motive of success is not enough,” because it “produces a short-sighted world which destroys the sources of its own prosperity” (AI 98). Whitehead blames the cycles of economic depressions on this “disease of short-sighted motives.” Since the larger community depends on business, it is important that business people have a larger view of their function than profit: “A great society is a society in which its men of business think greatly of their functions (AI 98).” This is fundamental to civilization, because every epoch “has its character determined by the way its populations react to the material events which they encounter” (AI 99). These reactions are shaped by basic beliefs. Consequently, philosophy has as much to do with economics as with social character, and is much too important to be left to “irritable professors” (AI 98). Business, economics—and the character of civilization itself—all need and indeed are shaped by “those fundamental beliefs” that philosophy must attempt to clarify.

1.2. Underlying “Laws of Nature”

It is in his attention to the underlying “laws of nature” that Whitehead is most useful for those interested in rethinking economics and economic theory. In Adventures of Ideas Whitehead devotes a whole section, entitled “Cosmology,” to this endeavor. He develops these most fully in his masterwork of metaphysics, Process and Reality. But a review of the basics set out in “Cosmology” is sufficient here.

First, Whitehead draws on twentieth-century physics, especially the conclusions of quantum physics, to reconceive the basis on which “laws” of nature can be determined. Physics shows that everything is related to everything else, and that “laws” are based on patterns in those relations that emerge from them. This means that as the patterns of relations change, the “laws” change (AI 112). This is quite different from the viewpoint of Newtonian mechanics (and the Cartesian philosophy) and generally presupposed by economics, that self-existent entities are only related externally and non-essentially, rather than internally and inherently. It is also assumed that “laws,” once “discovered,” can be enshrined in the theory and henceforth depended on to stay the same. So, for example, since Newtonian physics was based on the belief that the world is made up of self-existent individuals, this belief, since “scientific,” was taken up in economics and enshrined at the center of capitalist economics systems. Then economics was widely proclaimed to be scientific and “value-free,” thereby ignoring its implicit commitment to self-existent individuality above all aspects of human life. Similarly, Newtonian mechanics was enshrined as the foundation of the economic theory with no further revisions, and in the process the revolution that science itself has undergone with respect to these very so-called foundations was ignored.

Second, we have already seen how Whitehead repeatedly criticizes the deductive method that abstracts too much from actual events and then ignores changing contexts. In one passage, he calls this the “Dogmatic Fallacy”:

The error consists in the persuasion that we are capable of producing notions which are adequately defined in respect to the complexity of relationship required for their illustration in the real world (AI 145).

One area he thinks is particularly prone to this fallacy is Political Economy, in which “there is hardly a question to be asked which should not be fenced round with qualifications as to how much, and as to what pattern of circumstances” (AI 153). The use of mathematics, he thinks, “is too narrow” because “the essential connectedness of things can never be safely omitted” (AI 153). He seems to be aware that using mathematics in areas like economics can provide a “sharp tool,” as economist Alfred Marshall called it, but what it cuts may too easily go wrong. One reason is that what works perfectly in one context, when shifted to another, may be all wrong. Whitehead remarks that “all science suffers from the vice that it may be combining various propositions which tacitly presuppose inconsistent backgrounds” (AI 154). It is important to keep reminding ourselves that Whitehead does not object to using deductive methods and mathematics: he is only constantly reminding us that the basic assumptions and context much be repeatedly re-tested. In fact, he is more aware than most that “mentality is an agent of simplification” (AI 213) and all theory has to be based on high levels of abstraction: “every method is a happy simplification” (AI 221). What is crucial is “noting its scope of useful application and its failure beyond that scope” (AI 221).

Whitehead was right to worry about this. In the actual development of both capitalist and Marxian models of economics, their social policy advocates were (and in capitalism still are) far more interested in implementing the model as already elaborated than in adjusting and re-thinking the model as circumstances change. The price for this has been high in both economic systems. Where societies have refused to modify the pragmatic working of the economic theory to fit social needs and changing circumstances, the economies have failed or the societies have experienced violent and costly revolutions. It is widely acknowledged that capitalism survived the excessive exploitation brought on by zealous implementation of the economic theory in its most individualistic form only where social policies were modified to mitigate its worst effects on the working masses. The same is true of Marxism, which has failed all over the world, and still hangs on in China mostly because the Chinese government has abandoned the disastrous attempt to implement purely Marxian economic theory. The Marxian ideologues who still believe that Marxian economics should be implemented are now few and quite discredited, but there are still many capitalist ideologues who retain a blind faith in pure laissez-faire economics.

1.3. Adventure

Before we finish this survey of Whitehead’s explicit statements on economics in Adventures of Ideas, we need to say a word about his category of “Adventure.” Because reality is essentially always “becoming,” change is inevitable. There can be no static perfection, only many “perfections” that are realized and then pass away. Civilizations must pursue the perfections that are possible to them, or stagnate. But the perfections, once achieved, do inevitably pass. When civilizations pass, there can be varying periods of chaos. Interestingly, Whitehead believes that it is possible to have “quick transitions,” but only when “thought has run ahead of realization” (AI 278). Through “adventures of the imagination,” it is possible to prepare for a new civilization and help it to happen: “The world dreams of things to come, and then in due season arouses itself to their realization” (AI 279). We can only hope that by working to develop a more adequate economic theory, we can contribute to such a new civilization—one that is sustainable and just, and better exemplifies what Whitehead calls the five qualities of civilization, Truth, Beauty, Adventure, Art, and Peace (AI 274).

Unfortunately, despite the pragmatic changes that have taken place with actual economies, the theoretical work of re-examining and re-thinking economic theories in light of the changing understandings of the world and of human nature, that took place in the twentieth century, has barely begun. And the constructive work of transforming our actual societies to move in the direction of more sustainable, more just, and more participatory economies, is in urgent need of this theoretical work. The good news is that this really is an adventure worthy of our best energies and imaginations, and that more people are discovering the satisfaction that comes from working for these changes.

2. Rethinking Economics

In response to the looming environmental and social crises—crises exacerbated by both capitalist and Marxian economic policies—the work of rethinking economics is indeed being done, and “thought” is running “ahead of implementation” in the hope that when societies are ready to change, the needed thinking will already be in place. To date, the most important theoretical work in the tradition of Whitehead has been that of Herman E. Daly and John B. Cobb, Jr., and, most notably, their 1989 book, For the Common Good: Redirecting the Economy Toward Community, the Environment, and a Sustainable Future. Another book that was strongly influenced by Whitehead is my The Wealth or Health of Nations: Transforming Capitalism from Within (1998). For the most part, economists have shown little interest in either feminism or ecology, and even less in Whitehead. But there is also some evidence that this is changing, in some circles. For instance, Julie Nelson is one U.S. economist who has been influenced both by Whitehead and feminist analysis; she has contributed an article to this volume.

Although the book by Cobb and Daly was published first, the Wealth or Health of Nations is more historical and has less-developed proposals for a new economic theory. Hence, I will summarize it first.

Economic theories, both capitalist and Marxian, have been developed in a long historical process that really began with the seventeenth-century French Physiocrats and with the work of Adam Smith in the eighteenth century. Along the way, a number of crucial value choices and assumptions were embedded in the theories that have become dominant. In the process of refining and sharpening the deductive power of the theories, some crucial aspects of reality got lost, ultimately with severe repercussions. To summarize, the central goal of both capitalist and Marxist economic policies was growth in the production of goods, to the exclusion of all other considerations. This brought rampant industrialization in both systems; the cost to families, communities, and the environment were all but ignored. Furthermore, economists have always asserted that there are three factors of production—land, labor, and capital. The Physiocrats emphasized the importance of land as foundational to the support of labor and capital, but John Locke’s argument for the labor theory of value, and some contemporary political issues persuaded Adam Smith to shift the emphasis to labor as the main source of value. Marx too developed the labor theory to the exclusion of both land and capital. The political economists who developed capitalism gradually shifted to emphasize capital—treating both land and labor as different forms of capital. Consequently, in both capitalism and Marxism, “land” as a unique factor with unique issues, was swept aside, at great cost to the environment. In addition, both economies have also ignored human communities, and dealt with human beings as interchangeable individuals who can be moved around to suit the needs of industrialization—or in the present, globalization—without regard to the consequences to families and communities, which are defined out of consideration.

There can be no denying that Capitalism has achieved its goal supremely well: sustained growth in the production of economic goods is now taken for granted. However, while many Western nations have learned to manage the costs well enough to sustain their populations, the problems keep mounting. Human and natural communities continue to pay a high price for the largely unrestrained use of natural and human resources needed to sustain high levels of economic growth in production. These problems are a by-product built into the way capitalism is structured, and will not be solved until and unless there is a thorough re-structuring, from basic theoretical assumptions to the actual implementation of better policies. In the last chapter, I offer a Whiteheadian approach to some fundamental aspects of such a re-structuring.

First and most importantly, economics should recur to the proposal of economist Alfred Marshall that the goal of economics should be increase in the production of “health” rather than of “wealth” (1925, 139). Rather than building an economic theory around John Stuart Mill’s homo economicus, we need to build one around homo salutaris—the healthy person. Healthy human beings need healthy families, communities, and ecosystems to sustain them, and they also need healthy, meaningful ways to contribute their individual gifts to others. Daly and Cobb discuss this at much more length, describing human beings as “persons-in-community.” A second proposal of Alfred Marshall was to acknowledge the unique aspects of each of the three factors of production and find better ways to take these into account. This would make it easier to pay more attention to the consequences of economic policies on human and natural communities—and stop treating them as if they are “extra” and “external” issues that someone else (not economists and economic policy-makers) can deal with. Behind these recommendations is a Whiteheadian ontology rather than a Newtonian one: every entity is internally related to every other, so that individuality arises out of and contributes to a relational context; and, consequently, every entity has some degree of intrinsic value that must not be discounted. Most importantly, no theory is final or “value-free,” but must be re-examined frequently and re-framed as circumstances change.

Now we can turn to the book by Herman E. Daly and John B. Cobb, Jr., For the Common Good: Redirecting the Economy Toward Community, the Environment, and a Sustainable Future. Much more extensive than The Wealth or Health of Nations, this work includes a thorough critique of economics as a discipline and suggests foundations for a new economic theory, an extensive section on specific policy issues, and ideas about how to move from capitalism to an economy that will be more just and sustainable. John Cobb is a well-known process theologian well-versed in Whitehead. Herman Daly is an economist who pioneered an ecologically responsible economic theory, which he calls “steady-state economics.” Both have found an audience for their proposals, and even had some attention paid by the World Bank, though it is too soon to know what the long-term influence of the work will be.

Like The Wealth or Health of Nations (which I was writing as a student of Cobb, at the same time that Daly and Cobb were collaborating on For the Common Good), Daly and Cobb use Whitehead’s critique of the misuse of deductive method and “the fallacy of misplaced concreteness” to detail its economic consequences with respect to such areas as the market, measures of economic success like GNP (Gross National Product), the extreme individualism of homo economicus, and the disappearance of any consideration for “land” as a unique factor of production. Then they offer ideas to promote the development of a new economics. They begin with the need to shift intellectual work from the confines of academic disciplines, which have become too narrow, too isolated from real-world issues and from the insights of other disciplines, and which do not examine their own foundations once established—which has been the biggest problem with economics. They propose to reorganize intellectual work around real social problems instead, going beyond even interdisciplinary work to critique basic assumptions as well as share insights. They propose that emphasis be shifted from short-term profit maximizing to oikonomia, the management of the “household” (the Earth) for the long-term good of the whole. This will require a host of changes in thinking, including shifting from individualism to human beings as “persons-in-community,” from the “cosmopolitanism” of globalization to “communities-of-communities” which manage their economies to be as self-sufficient as possible and fully sustainable, and in which trade is truly “free”—i.e. entered into freely after basic needs at the local level have been met.

Having laid the foundations for a sustainable, ecological, and more just economics, Daly and Cobb give suggestions for applying these ideas in the policy areas of global trade, population, land use, agriculture, industry, labor, income policies and taxes, and national security. The book ends with a discussion of the constructive role of the religious vision, and an appendix about how an “Index for Sustainable Economic Welfare” might replace the currently used GNP.

Adam Smith, discontented with the monopolistic economics of his day, set out to think his way through to a more adequate way of conceiving and then advocating for a political economy. His suggestions, coherent and timely, succeeded beyond his wildest dreams, and today drive the global economy. But they would not have done so if they had not been recognized as potentially effective, and further developed by generations of thinkers in political economy and practicioners and policy makers in actual economic life. Alfred North Whitehead, in his turn, worked out a way of thinking about the world and how it works that is potentially as likely as Smith’s work to change the world. It is incumbent upon us—those of us who believe that the need for better thinking about how to achieve a more just and more sustainable and healthier world for all can be built on the work of Whitehead—to move the work forward. If they could do it in their day, we can do our part in ours.


[1] Thomas Malthus argued in the early 1800s that it would be impossible to pay more than subsistence wages to factory laborers, because population always grows exponentially while the economy and agriculture only grow arithmetically. Hence there will always be too many laborers clamoring for too few jobs and too little food.

[2] For the classic example of such a refusal, see the essay by Lionel Robbins, “The Nature and Significance of Economic Science” (1984); it was first published in England in 1935 and recognized immediately as a classic defense of deductive economic theory. Robbins sneers at all requests for economists to reexamine basic assumptions in the light of new knowledge and changing understandings of human nature.

[3] This religious reform movement, begun in the 1700s by John Wesley in England, became famous for its concern for factory laborers and their families.

[4] For the classic argument in favor of radical individualism in values, see the essay by Nobel-prize winning economist Kenneth Arrow, “Social Choice and Justice” (1983). The foundational assumption of capitalist economics, that individual choices in the market are the only admissible “good,” makes it impossible to argue for a “common good” or that some needs take priority over “wants” in the market.

[5] See Mill’s essay “On the Definition and Method of Political Economy” (1984, originally published in 1836) for the first great attempt to articulate economics on the basis of deductive assumptions about how it “should” be, and to deliberately leave out all other considerations for the sake of clarity and effectiveness.

Works Cited and Further Readings

Arrow, Kenneth. 1983. “Social Choice and Justice,” in Collected Papers (Cambridge MA, Harvard University Press).

Daly, Herman B., and John B. Cobb, Jr. [1989] Second edition, 1994. For the Common Good: Redirecting the Economy Toward Community, the Environment, and a Sustainable Future (Boston, MA, Beacon Press).

Daly, Herman E. 1977, 1991. Steady-State Economics (San Francisco, Freeman

Daly, Herman E. 1996. Beyond Growth: The Economics of Sustainable Development (Boston, Beacon Press).

Daly, Herman E. and Farley, Joshua. 2004. Ecological Economics: Principles and Applications (Washington, Island Press).

Daly, Herman E. and Townsend, Kenneth N. (eds.). 1993. Valuing the Earth: Economics, Ecology, Ethics (Cambridge, Mass., MIT Press).

Johnston, Carol. 1998. The Wealth or Health of Nations: Transforming Capitalism From Within (Cleveland Ohio, Pilgrim Press).

Marshall, Alfred. 1925. Principles of Economics, 8th Edition (London, Macmillan).

Marx, Karl. 1906. Capital, 3rd edition, edited by Frederick Engels, translated by Samuel Moore and Edward Aveling (New York, The Modern Library).

Mill, John Stuart. 1984 [1836]. “On the Definition and Method of Political Economy,” in The Philosophy of Economics, edited by Daniel M. Hausman (Cambridge, Cambridge University Press).

Robbins, Lionel. 1984 [1935]. “The Nature and Significance of Economic Science,” in The Philosophy of Economics: An Anthology, edited by Daniel L. Hausman (Cambridge, Cambridge University Press).

Author Information

Carol F. Johnston
Christian Theological Seminary, 1000 W. 42nd St., Indianapolis, IN 46208 USA

How to Cite this Article

Johnston, Carol F., “Whitehead on Economics”, last modified 2008, The Whitehead Encyclopedia, Brian G. Henning and Joseph Petek (eds.), originally edited by Michel Weber and Will Desmond, URL = <http://encyclopedia.whiteheadresearch.org/entries/thematic/economy/whitehead-on-economics/>.