Herbert J. Davenport
Encyclopedia
Herbert Joseph Davenport (1861 – 1931) was an American
economist
of the Austrian School
.
, Davenport began his formal career as assistant professor at the University of Chicago
in 1902. During his previous 41 years, he had attended Harvard Law School
, the University of Leipzig
, Ecole Libre des Sciences Politiques
in Paris
, the University of South Dakota
, and the University of Chicago. He also made and lost a fortune in business, largely in land speculation. Following his degree at Chicago on 1898, he became a high school principal before returning to Chicago as a faculty member. He moved to the University of Missouri
to become department head and first dean of the College of Business in 1908. The Herbert J. Davenport Society is the University of Missouri College of Business's alumni organization. In 1916, he transferred to Cornell
, where he finished his academic career.
At Chicago, he studied for a year or so under Thorstein Veblen
, with whom he formed a lifelong friendship. His studies were apparently motivated, like many other revolutionary political economists of his time, by a desire to find the flaws in socialism (Homan: 1931: 696).
and the American Economic Review
.
He also wrote several major books. His first article, written while an undergraduate in South Dakota, was "The Formula of Sacrifice" (1894), an exploration of the concept of subjective opportunity cost. Viewed in retrospect, his "Outlines of Economic Theory" was a preliminary version of his 1908 Value and Distribution (1908). The latter was a full-fledged critical examination of the major economic doctrines of classical and early neoclassical thought. Among other things, it contained critiques of marginal utility
, of the contemporary Austrian
theories of capital
and cost, and of Frank Fetter
's theory of market interest.
While he had a penchant for criticizing the emerging neoclassical economics
, most of his criticism was leveled at vestiges of classical economics
, such as the doctrine of real cost and the tripartite division of factors of production, which had led some classical economists to advocate a tax on land value. Although one biographer and student saw him as a reformer (Homan), another lamented the absence of real reformist ideas and even of the awareness of the need to follow criticism with clear statements about what was right and how it could be achieved (Frank Knight
). His relentless criticism is probably the main reason that his works have, in general, been neglected by historians of economic thought.
The extensive citations and treatment of economic others ideas in this book were omitted in his later book The Economics of Enterprise (1914). This book was a tightly-knit theory of price from the entrepreneur point of view (to be contrasted with the "social" point of view). In that book, he worked out an image of economic interaction in which all phenomena was interpreted through the eyes and minds of entrepreneurs. This theory was complemented by a theory of credit
and money
for the era of free enterprise in banking ("loan fund theory of capital").
An admirer of Thorstein Veblen
, Davenport carved a unique niche in the world of academic economics, avoiding the Institutionalist approach inspired by Veblen, and incorporating insights from the Austrian
and Lausanne
economists. For Davenport, the entrepreneur was central to market activity. He accepted the Austrian concept of opportunity cost (found in the work of Friedrich von Wieser
) but rejected the neoclassical conception of marginal utility. He was a relentless critic of Alfred Marshall
, his last book being a critique of The Economics of Alfred Marshall (1935). In that book, he criticized Marshall as a classical economist who subscribed to the real cost doctrine and his assumption of homogeneity of different costs.
Davenport, along with Frank A. Fetter
, comprised, as Fetter put it, a distinct, if small, school of economics: the American Psychological School
. Frank Knight, a student and admirer of Davenport's, did not succeed in imprinting many of Davenport's ideas onto the Chicago School neoclassical tradition.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
of the Austrian School
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...
.
Life and career
Born in VermontVermont
Vermont is a state in the New England region of the northeastern United States of America. The state ranks 43rd in land area, , and 45th in total area. Its population according to the 2010 census, 630,337, is the second smallest in the country, larger only than Wyoming. It is the only New England...
, Davenport began his formal career as assistant professor at the University of Chicago
University of Chicago
The University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...
in 1902. During his previous 41 years, he had attended Harvard Law School
Harvard Law School
Harvard Law School is one of the professional graduate schools of Harvard University. Located in Cambridge, Massachusetts, it is the oldest continually-operating law school in the United States and is home to the largest academic law library in the world. The school is routinely ranked by the U.S...
, the University of Leipzig
University of Leipzig
The University of Leipzig , located in Leipzig in the Free State of Saxony, Germany, is one of the oldest universities in the world and the second-oldest university in Germany...
, Ecole Libre des Sciences Politiques
École Libre des Sciences Politiques
École Libre des Sciences Politiques , often referred to as the École des Sciences Politiques or simply Sciences Po was created in Paris in February 1872 by a group of European intellectuals, politicians and businessmen, which included Hippolyte Taine, Ernest Renan, Albert Sorel, Pierre Paul...
in Paris
Paris
Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region...
, the University of South Dakota
University of South Dakota
The University of South Dakota ', the state’s oldest university, was founded in 1862 and classes began in 1882. Located in Vermillion, South Dakota, United States, USD is home to South Dakota's only medical school and law school. USD is governed by the South Dakota Board of Regents, and its current...
, and the University of Chicago. He also made and lost a fortune in business, largely in land speculation. Following his degree at Chicago on 1898, he became a high school principal before returning to Chicago as a faculty member. He moved to the University of Missouri
University of Missouri
The University of Missouri System is a state university system providing centralized administration for four universities, a health care system, an extension program, five research and technology parks, and a publishing press. More than 64,000 students are currently enrolled at its four campuses...
to become department head and first dean of the College of Business in 1908. The Herbert J. Davenport Society is the University of Missouri College of Business's alumni organization. In 1916, he transferred to Cornell
Cornell University
Cornell University is an Ivy League university located in Ithaca, New York, United States. It is a private land-grant university, receiving annual funding from the State of New York for certain educational missions...
, where he finished his academic career.
At Chicago, he studied for a year or so under Thorstein Veblen
Thorstein Veblen
Thorstein Bunde Veblen, born Torsten Bunde Veblen was an American economist and sociologist, and a leader of the so-called institutional economics movement...
, with whom he formed a lifelong friendship. His studies were apparently motivated, like many other revolutionary political economists of his time, by a desire to find the flaws in socialism (Homan: 1931: 696).
Scholarly works
Davenport wrote numerous articles which were published in such prestigious economic journals as the Journal of Political Economy, the Quarterly Journal of EconomicsQuarterly Journal of Economics
The Quarterly Journal of Economics, or QJE, is a peer-reviewed academic journal published by the Oxford University Press and edited at Harvard University's Department of Economics. Its current editors are Robert J. Barro, Elhanan Helpman and Lawrence F. Katz...
and the American Economic Review
American Economic Review
The American Economic Review is a peer-reviewed academic journal of economics publishing seven issues annually by the American Economic Association. First published in 1911, it is considered one of the most prestigious journals in the field. The current editor-in-chief is Penny Goldberg . The...
.
He also wrote several major books. His first article, written while an undergraduate in South Dakota, was "The Formula of Sacrifice" (1894), an exploration of the concept of subjective opportunity cost. Viewed in retrospect, his "Outlines of Economic Theory" was a preliminary version of his 1908 Value and Distribution (1908). The latter was a full-fledged critical examination of the major economic doctrines of classical and early neoclassical thought. Among other things, it contained critiques of marginal utility
Marginal utility
In economics, the marginal utility of a good or service is the utility gained from an increase in the consumption of that good or service...
, of the contemporary Austrian
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...
theories of capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
and cost, and of Frank Fetter
Frank Fetter
Frank Albert Fetter was an American economist of the Austrian School. Fetter's treatise, The Principles of Economics, contributed to an increased American interest in the Austrian School, including the theories of Eugen von Böhm-Bawerk, Friedrich von Wieser, Ludwig von Mises and Friedrich...
's theory of market interest.
While he had a penchant for criticizing the emerging neoclassical economics
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...
, most of his criticism was leveled at vestiges of classical economics
Classical economics
Classical economics is widely regarded as the first modern school of economic thought. Its major developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill....
, such as the doctrine of real cost and the tripartite division of factors of production, which had led some classical economists to advocate a tax on land value. Although one biographer and student saw him as a reformer (Homan), another lamented the absence of real reformist ideas and even of the awareness of the need to follow criticism with clear statements about what was right and how it could be achieved (Frank Knight
Frank Knight
Frank Hyneman Knight was an American economist who spent most of his career at the University of Chicago, where he became one of the founders of the Chicago school. Nobel laureates James M. Buchanan, Milton Friedman and George Stigler were all students of Knight at Chicago. Knight supervised...
). His relentless criticism is probably the main reason that his works have, in general, been neglected by historians of economic thought.
The extensive citations and treatment of economic others ideas in this book were omitted in his later book The Economics of Enterprise (1914). This book was a tightly-knit theory of price from the entrepreneur point of view (to be contrasted with the "social" point of view). In that book, he worked out an image of economic interaction in which all phenomena was interpreted through the eyes and minds of entrepreneurs. This theory was complemented by a theory of credit
Credit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...
and money
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
for the era of free enterprise in banking ("loan fund theory of capital").
An admirer of Thorstein Veblen
Thorstein Veblen
Thorstein Bunde Veblen, born Torsten Bunde Veblen was an American economist and sociologist, and a leader of the so-called institutional economics movement...
, Davenport carved a unique niche in the world of academic economics, avoiding the Institutionalist approach inspired by Veblen, and incorporating insights from the Austrian
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...
and Lausanne
Lausanne School
The Lausanne School of economics, sometimes referred to as the Mathematical School, refers to the neoclassical economics school of thought surrounding Léon Walras and Vilfredo Pareto. The central feature of the Lausanne School was its development of general equilibrium theory...
economists. For Davenport, the entrepreneur was central to market activity. He accepted the Austrian concept of opportunity cost (found in the work of Friedrich von Wieser
Friedrich von Wieser
Friedrich Freiherr von Wieser was an early member of the Austrian School of economics. Born in Vienna, the son of Privy Councillor Leopold von Wieser, a high official in the war ministry he first trained in sociology and law...
) but rejected the neoclassical conception of marginal utility. He was a relentless critic of Alfred Marshall
Alfred Marshall
Alfred Marshall was an Englishman and one of the most influential economists of his time. His book, Principles of Economics , was the dominant economic textbook in England for many years...
, his last book being a critique of The Economics of Alfred Marshall (1935). In that book, he criticized Marshall as a classical economist who subscribed to the real cost doctrine and his assumption of homogeneity of different costs.
Davenport, along with Frank A. Fetter
Frank Fetter
Frank Albert Fetter was an American economist of the Austrian School. Fetter's treatise, The Principles of Economics, contributed to an increased American interest in the Austrian School, including the theories of Eugen von Böhm-Bawerk, Friedrich von Wieser, Ludwig von Mises and Friedrich...
, comprised, as Fetter put it, a distinct, if small, school of economics: the American Psychological School
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...
. Frank Knight, a student and admirer of Davenport's, did not succeed in imprinting many of Davenport's ideas onto the Chicago School neoclassical tradition.