Babbage's Legacy: The Origins of Microeconomics in On the Economy of Machinery and Manufactures
| DOI | http://doi.org/10.1111/sjpe.12047 |
| Published date | 01 July 2014 |
| Date | 01 July 2014 |
| Author | Mustafa Erdem Ozgur |
BABBAGE’S LEGACY: THE ORIGINS
OF MICROECONOMICS IN ON THE
ECONOMY OF MACHINERY AND
MANUFACTURES
1
Mustafa Erdem Ozgur*
ABSTRACT
British mathematician Charles Babbage (1791–1871) spent immense energy to
build mechanical calculating engines. Hoping that it might help him in designing
and building his engines, he visited numerous workshops and factories in both
England and Continental Europe. One of the consequences of these visits was his
On the Economy of Machinery and Manufactures, published in 1832. Through
his observations, Babbage grasped the advantages of machinery and economies
of scale. In micro terms, he acknowledged the cost-reducing features of econo-
mies of location, vertical integration, and division of labor –beyond Adam
Smith’s analysis –as well as the efficacy of clustering. He also pointed out the
relationship between firm size, economic crisis, and innovation.
II
NTRODUCTION
The 1870s, as a result of the works of Menger, Walras, and Jevons, and 1890,
as a result of Marshall’s Principles of Economics, are considered important
time periods in the history of neoclassical microeconomics. Nevertheless, Ekel-
und and H
ebert (2002, p.212) suggest that a genuine and functioning toolkit
for neoclassical microeconomics had been around long before Marshall’s Prin-
ciples were published. This toolkit had existed even before ‘the legendary tri-
umvirate of Menger, Jevons and Walras circa 1870’. They present a list of
intellectuals from different countries who were vital in providing the tools and
ideas used and developed in microeconomic theory. Their list includes William
Whewell, Mountifort Longfield, W.F. Lloyd, J.S. Mill, and Dionysius Lardner
from Great Britain (Ekelund and H
ebert, 2002, p.199). The claim of this
paper is that another name from Britain, Charles Babbage, is also one of the
original contributors to microeconomic theory. Our main emphasis is to
display the contributions of Babbage to microeconomics which originated
*Dokuz Eylul University
1
An early version of this paper was presented at the 8th European Social Science History
Conference (ESSHC), 13–16 April 2010, Ghent, Belgium, with the title The Contributions of
a Factory-Visiting Mathematician to Political Economy.
Scottish Journal of Political Economy, DOI: 10.1111/sjpe.12047, Vol. 61, No. 3, July 2014
©2014 Scottish Economic Society.
322
from his empirical approach, and at the same time compare some of his views
with his contemporary political economists. The cost-minimizing effects of
machinery, division of labor, location of enterprises and integration, econo-
mies of scale, and crises and innovation, in a factory setting will be stressed
throughout this paper as notable contributions of Babbage to neoclassical
microeconomics.
Charles Babbage (1791–1871) is a well-known English mathematician,
inventor, philosopher, and engineer. He was born in London in 1791, and he
arrived at Trinity College, Cambridge in 1810. Being disappointed with the
mathematics program available at Cambridge, he founded the Analytical Soci-
ety in 1812 with John Herschel and George Peacock. He worked as a mathe-
matician in his twenties. He was a vivacious member of British scientific
circles and he was among the founders of the Astronomical Society in 1820,
the British Association for the Advancement of Science in 1831, and the Sta-
tistical Society of London in 1834. He was the Lucasian chair of mathematics
at Cambridge from 1828 to 1839. He spent enormous time and energy to
build mechanical calculating engines, which he called the Difference Engine
and the Analytical Engine, but he was unable to complete his machines.
According to Rosenberg (1974, p.105) and Miller (1990, p.74), Babbage’s fail-
ure in completing his machines resulted from the technical limitations of the
time. Contemporary technology and engineering were not developed enough
to realize Babbage’s engines. However, there are opposing views also. Turvey
(1991, p.166) argues that ‘the reasons for Babbage’s failure were personal,
political and financial rather than technical’. The problematic relationship
between Babbage and his master engineer Joseph Clement played an impor-
tant role in the failure of Difference Engine No.1. After working 10 years on
the project, as a result of a dispute about compensation for moving his work-
shops from Lambeth to Babbage’s own house in Marylebone, Clement
downed tools, fired his men, and quit the project (Schaffer, 1994, p.215).
2
Although Stigler (1991, p.1151) maintains that ‘there is no evidence that he
had a close relationship with any of the important economists of his age’, in
his memoires, Babbage tells us that he was acquainted with Richard Whately
and Thomas Robert Malthus (Babbage, 1969, pp. 369, 387). He had also
known Reverend Richard Jones and William Whewell as undergraduates at
Cambridge (Goldman, 1983, p.593; Ozgur, 2010, p.14). Romano (1982, p.403)
points out the vast volume of correspondence between Babbage and the lead-
ing scientific, literary, and political figures of his time, including the political
economists mentioned above, and others such as Tooke and Senior. Babbage
was interested in many intellectual fields and he accomplished a great deal
throughout his life, such as achieving important results in cryptography,
designing a cowcatcher to clear rail tracks, inventing the ophthalmoscope, and
pioneering work in lighthouse signaling. He even anticipated renewable energy
2
Although several reasons were posited for the failure of the construction of Difference
Engine No.1, we should note that his Difference Engine No.2 was constructed by the Science
Museum in Kensington using Babbage’s original design (Swade, 2005).
THE ORIGINS OF MICROECONOMICS 323
Scottish Journal of Political Economy
©2014 Scottish Economic Society
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