Tag: Thünen

Henry L. Moore was an early pioneer of econometrics whose most important disciple was Henry Schultz who later brought econometrics to the University of Chicago. Today’s posting is a summary of Moore’s presentation to the “economics conference” at Johns Hopkins in March 1893. Moore’s dissertation,“Von Thünen’s Theory of Natural Wages”, was published in the Quarterly Journal of Economics, Vol. IX, Nos. 3 and 4 (April and July, 1895) and reprinted as a book with that title by George H. Ellis of Boston in the same year.  An overview of Moore’s career is provided in George Stigler’s article in the International Encyclopedia of Social Sciences (1968). 

While Moore was a graduate student at Johns Hopkins, John Bates Clark offered a series of lectures on the economics of distribution.  The intense personal bond between Clark and Moore, at least felt on Moore’s side judging from the letters he wrote to his revered “Pater”, most certainly can be traced to that time.

Here is a “fun” link to the von Thünen Estate Museum in Tellow, Germany. While the website is in German, there are some nice pictures. 

______________________

If you find this posting interesting, here is the complete list of “artifacts” from the history of economics I have assembled thus far. You can subscribe to Economics in the Rear-View Mirror below. There is also an opportunity for comment following each posting….

_______________________________

[The Economics Conference of the Johns Hopkins University, 1892-93]

 

Dr. [Sydney] Sherwood has conducted on alternate Fridays throughout the year a voluntary conference of nineteen graduate students, giving special attention to economics. The work was devoted mainly to the investigations of recent tendencies in economic theory, and was carried on with great enthusiasm by the members. Several valuable contributions were made to economic literature. Among the papers read and discussed at the Conference may be mentioned the following: “The Theory of Final Utility in its Relation to Money and the Standard of Deferred Payments,” by L. S. Merriam, published in the Annals of the American Academy of Political and Social Science, January, 1893; “Value and its Measurement,” by David I. Green, published in abstract in the University Circulars, May, 1893; “The Place of Abstinence in the Theory of Interest,” by T. N. Carver, published in abstract in the above named Circular; “Mill’s Fourth Fundamental Proposition concerning Capital,” by J. H. Hollander, published in abstract in the above named Circular, “The Logical Content of the Terms Labor and Capital,” by Frank I. Herriott, published in abstract in the above named Circular; “The Wage Theory of Von Thünen,” by H. L. Moore, published in abstract in the above named Circular; and “Marshall’s Theory of Distribution,” by A. F. Bentley.

 

Source: Eighteenth Annual Report of the President of the Johns Hopkins University. (Baltimore, Maryland: 1893), p. 61.

_______________________________

 

Some Notes on von Thünen. By H. L. Moore.
[From a paper read before the Economic Conference, March 10,1893.]

Johann Heinrich v. Thünen was descended from a noble Frisian family. He was born June 24, 1783, upon his father’s estate, Kanarienhausen, in Jeverland, and received his first training at the high school at Jever. Later, he studied agriculture under Thaer at Celle, and spent the two semesters of 1803-1804 at Gottingen.

In consequence of his betrothal to a lady of Mecklenburg, he left Jeverland, and in 1810, he purchased his Tellow estate in Mecklenburg, where he remained, pursuing his favorite studies agriculture and political economy until his death, September 22, 1850.

Von Thünen’s chief work is “Der Isolirte Staat.” [The Isolated State] The scope of the first part of this work, well indicated by its title: “Untersuchungen über den Einfluss, den die Getreidepreise, der Reichthum des Bodens und die Abgaben auf den Ackerbau ausüben,” [Investigations on the Impact of Grain Prices, Land Fertility and Levies on Agriculture] is more concisely pointed out by the statement of Rodbertus that it teaches “the law of the relative worth of each system of husbandry.” This part of the work first published in 1826, was translated into the French by Laverrière in 1851.

The second part of Der Isolirte Staat, which is by far the more important, is entitled “Der naturgemässe Arbeitslohn und dessen Verhältniss zum Zinsfuss und zur Landrente.” [The Natural Wage and it Relation to the Rate of Interest and Land Rent] It was published for the first time in 1850, and was translated into the French in 1857 by Mathieu Wolkoff under the title: “Le Salaire Naturel.”

This work, i. e. Der naturgemässe Arbeitslohn, like every other great work in economics, was the outgrowth of the spirit of the age in which it was written. The great labor agitations which originated in France about the time of the French Revolution did not reach Germany with all their force until shortly before the Revolution of 1848. Von Thünen was among the first to take up the discussion. He profoundly feared a dangerous conflict between the middle class and the proletariat, and went to work to avert, if possible, what he believed to be an impending calamity. After almost twenty-five years of labor, he completed his work, arriving at what he supposed to be a solution of the question.

The primary object of his work is to ascertain the natural wage. As, however, in complex modern society so many forces operate to obscure the proposed problem, von Thünen makes an ideal state the groundwork of his investigation. This state, isolated from the rest of the world by means of a wilderness capable of cultivation, is a plain of uniform fertility. Its only city, in which are concentrated all of its non-agricultural industries, is located at its centre. Neither railroads nor navigable waters are found in this ideal state. Its population is constant, and individual differences in the character of the laborers are not considered.

With these conditions placed upon the isolated state, von Thünen obtains by means of very complex mathematical reasoning the formula for the natural wage, viz.: , where a represents the means of subsistence of the laborer, and p the product of his labor when he uses a definite amount of capital. Since , he expresses the result of his work as follows: “The natural wage is the mean proportional between the means of subsistence of the laborer, and the product of his labor.” Von Thünen thought so much of this formula that he directed that it should be placed upon his tombstone.

A criticism of the formula cannot be given here, but the result to which it led must be noted. In the formula, , the means of subsistence, is supposed to be constant for all men. Therefore as p, the product, increases, the natural wage must increase, since the natural wage is equal to . In other words, according to von Thünen, the natural wage demands that as the product increases, the wage must increase also. Convinced of the correctness of his work, he followed up his belief by instituting in 1847 a system of profit-sharing on his Tellow estate. This was the first instance that was made known of agricultural profit-sharing in Germany.

One peculiar feature of the system founded by von Thünen was that the share of the laborer was not paid him in cash, but was credited to his account. On the sum credited to each laborer, von Thünen allowed 4 1/6 per cent. interest, which was paid out in cash at Christmas. When the laborer was sixty years of age, he was permitted to draw the capital sum. If, however, he died before attaining that age, the sum went to his widow.

Although the heirs of von Thünen had full power to abolish the system which he established, they continued it with no important change. In a letter dated November 22, 1881, Herr A. von Thünen, the grandson of the economist, wrote Mr. Sedley Taylor the following: “The results of the participatory arrangement here are very gratifying.”

Von Thünen’s work was a masterly attempt to solve the great social question of his day, and in view of the fact that it was published before the works of Rodbertus, Marx, and Lassalle, it may reasonably be asked, “Why has von Thünen received so little attention?” The answer is found in the extremely abstract mathematical character of his work. Pythagoras himself could not have attached more importance to mathematics. Von Thünen confesses that in his work he is unable to make progress unless he has a mathematically secure foundation.

However, those who undismayed by the multiplicity of figures and formulas have studied the book would doubtless join Prof. Roscher in saying: “Sollte unsere Wissenschaft jemals sinken, so gehören die Werke von Thünen’s zu denjenigen, an denen sie die Möglichkeit hat, sich wieder aufzurichten.” [“Should our science ever be lost, von Thünen’s contributions would be among those works that would allow us to reconstitute it once again.”]

 

Source: The Johns Hopkins University Circular, Vol. XII, No. 105 (May 1893), pp. 88-89.

Image: Close-up of Thünen’s grave taken by Irwin Collier in June 2008.