John Rae (economist)

John Rae (1796, Footdee, Aberdeen – 1872, New York), Scottish/Canadian economist, was an adventurous Scotsman who emigrated to Canada in 1822, worked for a long time as a schoolmaster and finally ended up as a medical inspector in Hawaii.

He studied medicine for a number of years at Edinburgh University, but was probably forced to give up his studies due to financial problems of his father [ James (1965), p. 14] . He emigrated and worked in different parts of Canada, and in very different occupations, until 1849, when his wife died of cholera. He then moved on to California that attracted many adventurers in the "Gold rush". In 1851 he settled on the Hawaiian island of Maui, where he was appointed a Medical Agent for the Board of Health, involved in mass vaccination schemes against smallpox.

His contribution to economics

In spite of some noteworthy contributions in such diverse areas as geology, linguistics, epidemiology, history and sociology, he is mainly remembered for his 1834 "Statement of Some New Principles on the Subject of Political Economy". He wrote this book while being engaged in the lumber trade in Godmanchester, a district in the vicinity of Montreal. As he had no formal training in economics he had to develop most of his concepts on his own. In this book Rae introduced a remarkable theory of capital, that can be characterised as proto-marginalist, and that was subsequently further developed by Böhm-Bawerk and the Austrian School.

The book was not very well received, probably because of some protectionist statements that it contained, and hardly noticed outside Canada. More than a decade later it was discovered by Nassau Senior, who used it in his lectures in Political Economy at Oxford University, and also brought it to the attention of John Stuart Mill. The latter, in his "Principles of Political Economy" (1848) mentions Rae' book in very generous terms::"(...) I can refer with equal confidence to another, though a less known work, "New Principles of Political Economy", by Dr. Rae. In no other book known to me is so much light thrown, both from principle and history, on the causes which determine the accumulation of capital" (Mill, 1848/1927, p.165, Ashley ed.) [ It was only five years later that Rae heard about this. He wrote to Mill to thank him, noting that "it is the only thing connected with that publication that has afforded me any gratification, James (1965), p. 169] As a result of the reference in Mill's treatise, Rae's book found its way into vol. XI of the "Biblioteca dell' economista", together with Ricardo's "Principles" and works by other prominent English economists [ His work appeared in this collection under the impressive title "Dimostrazione di taluni nuovi principii sull'economia politica, dimonstrante gli errori del sistemo de commercio libero, e di altre dottrine contentue nella "Richezza delli Nazioni", James (1965), p. 170] .

At the turn of the century things finally changed for the better, as the Austrian economist von Böhm-Bawerk recognised the importance of Rae's theoretical innovation. This in turn led to recognition by such prominent economists as Edgeworth, Wicksell, and Irving Fischer, who even dedicated his "Theory of Interest" (1930) to Rae (and Böhm-Bawerk). [ Fischer's dedication reads "To the memory of John Rae and Eugen von Böhm-Bawerk,who laid the foundations on which I have endeavoured to build"] .

References

ources

*Goodwin, Craufurd D.W. (1961) - "Canadian Economic Thought: The Political Economy of a Developing Nation 1814-1914", Duke University Press
*James, R. Warren (1965) - "John Rae, political economist. An account of his life and a compilation of his main writings" (2 vols.), Toronto.
*Schumpeter, Joseph Aloys (1954) - "History of Economic Analysis", New York.

External links

* [http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/rae/newprin.html Full text of "Statement of Some New Principles on the Subject of Political Economy"]