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Book Review: Collected Works of Edwin Cannan

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Collected Works of Edwin Cannan
in 8 volumes, edited by Alan Ebenstein (London/New York: Routledge/Thoemmes Press, 1998); $900.

In 1951, Austrian economist Friedrich A. Hayek wrote an essay entitled “The Transmission of the Ideals of Economic Freedom.” He pointed out, “At the end of the First World War the spiritual tradition of [classical] liberalism was all but dead.” But, Hayek explained, in the period between the two world wars, the flame of intellectual understanding and appreciation for economic liberty was kept alive by a handful of men who wrote books, delivered lectures, and taught a new generation of young minds to comprehend the significance and value of a free-market economy.

Hayek highlighted three individuals in particular who had served as keepers of economic freedom’s flame: Ludwig von Mises in Austria and the European continent, Frank H. Knight in the United States, and Edwin Cannan in Great Britain. “The oldest, and perhaps the least known outside his own country, was the Englishman, Edwin Cannan,” Hayek wrote. The “simplicity, clarity and sound common sense” of Cannan’s works on economic theory and policy, he said, “make them models for the treatment of economic problems.”

But “Cannan’s greatest merit … was the training, over many years, of a group of pupils at the London School of Economics: it was they who later formed what probably became the most important center of the new [classical] liberalism” in Europe, Hayek pointed out.

Most people today, including professional economists, probably know nothing about Edwin Cannan or his writings. Yet, during the 50 years between 1885 and 1935, when he died, Cannan defended the market economy against the socialist, nationalist, and interventionist critics of his day with a unique and calm eloquence. He also tried to keep the ideas of earlier proponents of economic freedom alive. The “Cannan edition” of Adam Smith’s Wealth of Nations, first published in 1903, is still in print.

Alan Ebenstein has recently edited the Collected Works of Edwin Cannan in eight volumes. It includes all of Cannan’s published books and collections of essays. Volume 1 contains an excellent intellectual biography of Cannan by Ebenstein, as well as most of the reviews written of Cannan’s books and reminiscences of him written by friends and admirers following his death in 1935.

Cannan was considered one of the leading experts in the history of economic ideas, and volumes 3 and 8 reprint his two major works in this field, A History of the Theories of Production and Distribution (1893) and A Review of Economic Theory (1929).

Unfortunately, like many of the classical liberal economists of the 19th and early 20th centuries, Cannan was not an uncompromising advocate of laissez faire. Especially in his earlier writings, he gave a limited sympathetic ear to some socialist ideas, most particularly on the topic of inequality of wealth and income. But increasingly in the years just before and then during and after the First World War, he became more and more critical of practically all schemes for socialism and interventionism.

This shows through most of his writings. There were few clearer defenders of the benefits of an international division of labor on the basis of unrestricted free trade and free migration. In his hands, the benefits from the invisible hand of the unregulated market was made to seem commonsensical and obvious. This theme dominates his works. Elementary Political Economy (1888) and Wealth (1914), reprinted here as volumes 2 and 5. There is no greater avenue for rising prosperity for all, he insists, than individual freedom, private property, free exchange, and the incentives of family. Volume 4 reprints his 1912 book, The Economic Outlook. It contains his masterful essay “The Incompatibility of Socialism and Nationalism,” in which he shows that if socialists were to institute national central planning, it would threaten and finally destroy the basis of the global economy and any normal cosmopolitan civilization.

Cannan was also considered a major contributor to monetary theory and policy. Volume 7 contains his two major works on this theme, Money (1918) and Modern Currency and the Regulation of Its Value (1931), and his collection of essays, Economic Scares (1933). He believed in a gold standard to prevent the recurrent abuses of the printing press by governments. And if governments do abuse their money-creating powers, causing first an inflation and then a depression, Cannan forcefully argues that government intervention to prevent the necessary market corrections for a return to balance and profitability would only prolong the agony of adjustment.

In my opinion, Cannan’s most brilliant work is An Economist’s Protest (1927), reprinted as volume 6. It contains the articles and essays he wrote during and after the First World War criticizing the monetary and interventionist policies of the British and European governments. He begins the volume by saying, “What should I answer if anyone had the impertinence to ask me, ‘What did I do in the Great War?’ … The best answer I can think of is ‘I protested.’”

Cannan insightfully attacks the British government’s recourse to the printing press to finance its war expenditures, showing its disastrous effects on wealth, production, savings, and investment, as well as its immorality of deception. He forcefully argues that prosperity can return to England and Europe only through a policy of monetary stability based on a gold standard, the renewal of unrestricted freedom of trade, the protection of private property and the free market, the abolition of the heavy burden of taxation, and an equal treatment of all before the law.

Cannan was one of the soundest and most honorable economists of the first half of the 20th century. His collected works show him as both.

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    Richard M. Ebeling is a professor of economics at Northwood University. He was formerly president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).