Commons, John R.
Commons, John R.
As an adventurous economic historian and theorist, John Rogers Commons (1862–1945) was a leader in the development of a number of vital areas of investigation, especially industrial relations and monetary economics. His academic talents, along with a sanguine temperament and a gift for economic statesmanship, made him a major architect of economic reform in the period of American history that covers Theodore Roosevelt’s Square Deal, Woodrow Wilson’s New Freedom, and Franklin D. Roosevelt’s New Deal.
Commons was born in Hollandsburg, Ohio, in 1862; his parents were active abolitionists. His religious Calvinist mother, hoping that he would become a minister, sent him, in 1882, to her alma mater, Oberlin College. He paid part of his expenses by working as a printer, at which time he became interested in trade-unionism and Henry George’s single-tax movement.
After receiving a b.a. in 1888, he attended The Johns Hopkins University for two years of graduate study. There he was attracted to the two leading movements for the reform of the dominant classical economics. His teacher, Richard T. Ely, was a prominent figure in one, namely, the infusion into classical economics of the viewpoint of the German historical school, which emphasized the use of history, statistics, comparative economic development, jurisprudence, and ethics. The objective was to develop a sound economics for social guidance. The other movement was the marginalist, or utility, approach, in which some of Commons’ friends among the graduate students took a prominent part. This school he viewed as providing a more logically unified theory of price determination than did classical economics. Thus armed with the latest tools of inquiry and an overwhelming interest in practically all the controversial social and economic issues of the day, in 1890 he began his academic career. Before the decade was over he had taught at four schools—Wesleyan, Oberlin, Indiana, and Syracuse. The abolition of his chair of sociology at Syracuse in 1899 temporarily ended his academic career. In 1904, Ely, who had moved to the University of Wisconsin, brought his protégé there. The period at Wisconsin proved to be Commons’ most creative one.
Commons soon made a reputation as the leading student of American labor problems. With the collaboration of disciples, he published the pioneering A Documentary History of American Industrial Society (1910–1911) and History of Labour in the United States (1918–1935). His theory of the origin and development of the American trade-union movement as a response to the scope of product markets, which he presented most clearly in “American Shoemakers, 1648–1895: A Sketch of Industrial Evolution” (1909), is still the most widely accepted one. The trade-union movement, he held, arose out of the efforts of individual workmen to protect their job rights against cheaper labor. The effectiveness of unions in improving wages and other major terms of employment depends upon their ability to control and standardize conditions within the product market areas in the industry in which they operate. The market area for some goods and most services is local; for others the region is important; for most goods the market area has become the entire nation, and in such cases success of the union depends on its ability to organize the whole industry.
Commons had extraordinary success as a policy maker. He helped prepare most of the legislation that made Wisconsin the laboratory in social and economic reform for other states and the federal government. This included, notably, legislation for civil service, public utility and railroad regulation, workmen’s accident compensation, and unemployment insurance. He not only helped to draft the bill creating the Wisconsin Industrial Commission to supervise the state’s labor laws but also was a member of the first commission, from 1911 to 1913. He did similar work for the federal government in 1901 as a member of the Industrial Commission, which made the first comprehensive inquiry into the American economy, and in 1914–1915 as a member of President Woodrow Wilson’s Industrial Relations Commission. The major designers of the epoch-making Social Security Act of 1935 were his students. He also played a leading role in the development of the notion of having the federal authority manage the monetary system, to maintain, as he put it in the famous Strong Bill of 1928, “the stability of commerce, industry, agriculture, and employment, … and a more stable purchasing power of the dollar …” (H.R. 11806).
Commons wrote three major treatises in economic theory. The first, The Distribution of Wealth (1893), was an ingenious attempt to combine marginalist economics with the emphasis of the German historical school on the fundamental importance of jurisprudence for achieving sound economic growth and equitable distribution of income. In the other two, Legal Foundations of Capitalism (1924) and Institutional Economics (1934a), which should be read with his early essay “A Sociological View of Sovereignty” (1899–1900), he sought to demonstrate the importance for economic theory of collective action in all its varieties. These included not only the state but also a host of voluntary associations, such as the corporation and the trade union; in fact, collective action conceptually embraced all institutions, since Commons defined an institution as “collective action in control of individual action.”
From the standpoint of the theory of collective action, he developed, as the basic economic unit of investigation, “the transaction,” which included both social and individual action. He borrowed from Thorstein Veblen the concept of transactions performed by going concerns, but he broadened it so that it applied to any form of desirable organized economic activity, containing conflicting but reciprocal interests. The principles of the going concern are the network of “working rules,” or customs. To Commons, these controls are “laws” broadly conceived; they are the outgrowth of experience and make possible the orderly growth of individual action. Some type of judge ultimately determines the appropriateness of the working rule. Thus, he viewed the Supreme Court of the United States as “the supreme faculty of political economy” for the nation.
A major pivot in Commons’ analysis was the role of the administrative process. The germ of this idea dates back to his Proportional Representation (1896). He believed that the sound enactment of new working rules takes place through “collective bargaining” between the representatives of the affected organized group interests. His model was the Wisconsin Industrial Commission with its advisory committees. Such quasi-judicial commissions, he maintained, were a fourth branch of government and had as their ideal “reasonable regulation through constructive investigation.” With the world-wide growth of collective action and the consequent problems of adjusting conflicts between organized groups, or “blocs,” Commons’ institutional theory has been found increasingly relevant, and his economic statesmanship continues to be admired.
Joseph Dorfman
[For the historical context of Commons’ work, seeEconomic thought, article onthe institutional school. See alsoEly; Seligman, C. G.]
WORKS BY COMMONS
1893 The Distribution of Wealth. New York and London: Macmillan; New York: Kelley Reprints.
(1896) 1907 Proportional Representation. 2d ed. New York: Macmillan.
1899–1900 A Sociological View of Sovereignty. American Journal of Sociology 5:1–15, 155–171, 347–366, 544–552, 683–695, 814–825; 6:67–89.
(1899–1913) 1913 Labor and Administration. New York: Macmillan. → Contains essays and speeches previously published in various publications.
1909 American Shoemakers, 1648–1895: A Sketch of Industrial Evolution. Quarterly Journal of Economics 24:39–84.
(1910–1911) 1958 Commons, John Rogers et al. (editors) A Documentary History of American Industrial Society. 10 vols. New York: Russell.
1918–1935 History of Labour in the United States. 4 vols. New York: Macmillan.
(1924) 1959 Legal Foundations of Capitalism. Madison: Univ. of Wisconsin Press.
1929 Jurisdictional Disputes. Pages 93–123 in Wertheim Lectures on Industrial Relations. Cambridge, Mass.: Harvard Univ. Press.
(1934a) 1959 Institutional Economics: Its Place in Political Economy. 2 vols. in 1. Madison: Univ. of Wisconsin Press.
(1934b) 1963 Myself. Madison: Univ. of Wisconsin Press. 1936 Institutional Economics. American Economic Review 26:237–249.
(1950) 1956 The Economics of Collective Action. Edited by K. H. Parsons. New York: Macmillan. → Contains a bibliography of Commons’ writings.
WORKS ABOUT COMMONS
Chamberlain, Neil W. 1963 The Institutional Economics of John R. Commons. Pages 63–94 in Joseph Dorfman et al., Institutional Economics: Veblen, Commons, and Mitchell Reconsidered. Berkeley: Univ. of California Press.
Dorfman, Joseph 1949 The Saga of John Rogers Commons. Volume 3, pages 276–294 in Joseph Dorfman, The Economic Mind in American Civilization. New York: Viking.
Dorfman, Joseph 1959a John R. Commons and the Economics of Collective Action. Volume 4, pages 377–395 in Joseph Dorfman, The Economic Mind in American Civilization. New York: Viking.
Dorfman, Joseph 1959b Response of the Elders. Volume 5, pages 664–673 in Joseph Dorfman, The Economic Mind in American Civilization. New York: Viking.
Harter, Lafayette G. JR. 1962 John R. Commons: His Assault on Laissez-faire. Corvallis: Oregon State Univ. Press.
Perlman, Mark 1958 John Commons: Theorist as Policy Maker. Pages 173–190 in Mark Perlman, Labor Union Theories in America. Evanston, Ill.: Row, Peterson.