The Common Sense of Political Economy (LFB)

The Common Sense of Political Economy is a book of profound importance in its time that came to be lost in the shuffle. It is as mighty and significant as Adam Smith's Wealth of Nations or Ludwig von Mises's Human Action, and like these books, it is not just a dusty old tome but one that speaks directly to the great issues of our time.

Laissez Faire Books is the publisher of this new edition, the first modern edition with American spellings, correct graph placements, cleaned up citations, and perfect navigation. Our edition also includes a great introduction by Professor Peter Boettke of George Mason University, who puts the book in the context of the history of ideas and explains its modern relevance.

The author is Philip Wicksteed (1844-1927), and his enthusiasm, even love, for the topic itself is obvious on every page. He is like a tour guide in a great castle who turns on lights in room after room and proceeds to explain everything in the room with precision and excitement. The reader can detect this in his prose. Why does he put the phrase "common sense" in the title? There are two meanings. He sought to bring a certain unity to the opinions and debates within economics at the time. The principle of marginal utility had been written about and taught for several decades. Once you get the principle, the functioning of the world becomes clearer to you. What was previously mysterious now seems rather obvious. What had previously baffled you now seems perfectly clear.

The marginalist way of thinking becomes, in the most colloquial use of the phrase, "common sense." If you stick with Wicksteed's argument from the beginning to the end, your thinking will be permanently affected. You will see marginal utility all around, in every economic action. It will provide new ways of thinking of prices and resources and human behavior. You will have an impenetrable edifice against the fallacy of thinking of the value of whole classes of goods and services and instead see value as exclusively attached to the incremental choice of the acting person.

What is marginalism? It was the discovery that economic value extends from incremental choice, one unit at a time. The classic puzzle that marginal utility sought to solve was this: Why are diamonds so much more valuable in the market than water, even though water is obviously more necessary for life? Just on the face of it, shouldn't it be the reverse? Marginalism solves the issue. The choice for one or the other is made on the incremental unit, not on anyone's opinion of the value of the whole class of goods. From the point of view of human choice, water is usually far more plentiful and available than diamonds, whereas diamonds are much less so and therefore have a much higher value per unit. The situation could reverse itself in a different social context. A man dying of thirst in the desert will pay far more for water than diamonds.

Marginalism helps illuminate many other economic concepts, such as opportunity cost (the real cost of anything is the thing you give up to get it), subjective value (economic value resides in the human mind, not the physical good), diminishing marginal utility (the more of each additional unit you buy, the less you are willing to pay for it), and the relationship of cost and price (the cost of a good never dictates its market prices; indeed, the reverse is true). It provides insight into nearly every aspect of human behavior.

Once you begin to think about the margin, the scales truly do fall from your eyes. You will notice that the book is gigantic. But it is also a joy to read because Wicksteed's own enthusiasm is infectious.

To search for titles from Laissez Faire Books, enter a keyword and LFB; e.g., Economics LFB