VARIETIES OF ANTIMONOPOLISM

Distinguishing Populist antimonopolism from the varieties that preceded it is the first step to recognizing how Macune's agenda presented a distinct and coherent alternative to the emerging economic order. Antimonopolism has long been a popular cause in American politics, and the Populists are sometimes understood as a continuation of Jacksonian antimonopolism of the early nineteenth century. Reacting against years of economic distress, Jacksonian antimonopolists demanded that government remove itself from commerce in order to allow the free play of natural economic laws to direct the economy. Scholars who equate Populist antimonopolism with its Jacksonian predecessor argue that Populism failed because its principles remained stuck in the economic understandings of the early nineteenth century and it was therefore unable to accommodate significant developments, such as economies of scale due to technological advances. However, as the next section will show, this equation overlooks the distinctive strategies that made Populism a real alternative to the emerging economic order and a real threat to those in power.

As the United States industrialized during the first half of the nineteenth century, labor expressed many of the same complaints that the Populists would later raise. The boom that followed the War of 1812 turned into a bust in 1819, and fuelled economic instability that lasted through the 1830s.Footnote ²⁶ In response to the bust, the newly formed Bank of the United States (BUS) rapidly abandoned its expansionary monetary policy, furthering the economic chaos, which included the reduction of New York cotton prices by more than half by 1823.Footnote ²⁷ But in the 1830s, prices began to rise again, which delivered substantial profits to speculators, and harmed workers, whose wages did not track increases in the cost of living.Footnote ²⁸ The evident wealth of speculators, and the increased importance of credit in day-to-day business due to the rise of commerce, directed popular indignation toward banks, but in particular toward the BUS, whose handling of the crises was less than helpful.Footnote ²⁹ Martin van Buren had added to the mess by introducing “safety fund banks,” under which “banking became to an unprecedented extent a tightly controlled legal monopoly. The legislature decided who could operate a bank, where it would be located, and how it would be operated.”Footnote ³⁰ Far from laissez-faire, government was deeply involved in the economy in the early nineteenth century, and as their interventions only seemed to make matters worse, the banks became the clear target of the people's discontent.

The Working Men's Parties formed in the mid-1830s partly in response to the dire economic situation facing workers, but also in part because of the transformation of American politics that accompanied the introduction of the party system.Footnote ³¹ With the expansion of suffrage, parties began to appeal to voters on issues that the voters themselves articulated, rather than simply promulgating the views of cliques of elites. Andrew Jackson was particularly effective in this new environment, for he was able to both stimulate and reflect popular sentiments against the elite, and he was able to yoke his electoral goals to his concerns that the BUS challenged his authority.Footnote ³² Jackson's strategy was guided by his engagement with the popular resurgence of Jeffersonian equal rights.

Against the inequalities of the emerging commercial order, New York radicals, such as Thomas Skidmore, had called upon the Jeffersonian doctrine of equal rights to ground their demands for justice. Skidmore inspired multitudes with his 1829 manifesto, “The Rights of Man to Property!” in which he argued that natural law guaranteed to “every human being AN EQUAL AMOUNT OF PROPERTY ON ARRIVING AT THE AGE OF MATURITY, and previous thereto, EQUAL FOOD, CLOTHING, AND INSTRUCTION AT THE PUBLIC EXPENSE.”Footnote ³³ By invoking natural law, Skidmore situated his thought as a continuation of the Founders’, and his calls for equality provided energy for the budding resistance to growing disparities in wealth and power, which were manifest most obviously in the rise of monopoly.Footnote ³⁴

The Working Men's Parties sought to achieve Skidmore's vision of equality, and, consequently, they focused on attacking monopoly power. They defined monopoly as

The target of the Working Men's Parties’ antimonopolism was legislative privilege, because they believed that monopoly was political, arising from corruption rather than purely economic activity, such as the efficiencies afforded by economies of scale. In his account of the movement, Walter Hugins confirms that, “these definitions reveal no conception of economic monopoly.”Footnote ³⁶ While the Working Men's Parties folded in 1831, their formulations of monopoly were carried on by other popular movements, and by Jackson himself.Footnote ³⁷

The Equal Rights Party, better known as the Locofocos, grew out of the Working Men's Parties, and while the two are significantly distinct,Footnote ³⁸ the Locofocos carried on the resistance to monopoly power, which they also saw as arising from legislative privilege rather than purely economic activity.Footnote ³⁹ Organizing themselves as a political party in 1835, the Locofocos were less concerned about the rise of commerce than they were about securing access to its riches.Footnote ⁴⁰ When Jackson vetoed the charter of the Second Bank of the United States in 1832, his veto message reflected the Locofocos’ rhetoric: “Jackson blasted the bank as an engine of the ‘rich and powerful, [who] too often bend the acts of government to their selfish purposes.”’Footnote ⁴¹ Underlying this rhetoric, and indeed the veto itself, as well as the Locofocos’ later legislative victories, was the economic thought of William Leggett.

Leggett was never officially a member of the Locofocos, but he was often taken to be their spokesman, and he nonetheless played an important leadership role in the movement.Footnote ⁴² After his death in 1839, a Locofoco historian stated that, “there never lived a man with more of the true heroic in him, or more truly the hero of the rights of humanity, than William Leggett,” and he was described as a “martyr,” who had died because “the demon spirit of monopoly had condemned him.”Footnote ⁴³ As editor of the Post, and later the Plaindealer, Leggett articulated the antimonopoly views guiding the Locofocos, and thereby set the agenda for a broad swath of Jacksonian antimonopolist thought.

According to Leggett, all the current economic disruptions, whether high prices or low prices, could be laid at the feet of monopoly banking. Reacting to the 1837 bust, which raised prices considerably, Leggett observed that, “The fields, in many places, lie untilled . . . Hence we see flour at fifteen dollars a barrel, and hay at forty dollars a tone.”Footnote ⁴⁴ People were hungry, yet the fields were being traded instead of tilled, because speculators were crafting deals that disrupted the natural functioning of the economy. While ordinary people struggled under the weight of high prices, “the speculator flaunts by in his carriage,” continuing to profit from the vast inequality.Footnote ⁴⁵ Leggett saw the cause of this inequality, as well as the cause of all other economic disruptions, to be rooted in one single source: “the pernicious bank system of our country is the cause!” Footnote ⁴⁶ Similar to the Working Men's Parties that preceded him, Leggett believed that legislation had given exclusive privileges to banks, thereby disabling natural economic laws from regulating their behavior and enabling speculation and other disruptions that harmed ordinary Americans. This unjust legislation had broad effects, which were observable everywhere: “Each fragment of our shattered commerce bears, stamped in characters which he who runs may read, the forceful inscription – ‘THIS IS THE FRUIT OF MONOPOLY LEGISLATION.’”Footnote ⁴⁷

All the problems arising in the 1830s, by Leggett's account, were not the result of economic formations accompanying the rise of commerce, but were instead the unnatural result of government interference. No matter how the economy had developed, government interference would always disrupt natural economic law, because manmade law would never be more than an imperfect approximation. Thus, society must conform to economic law, and Leggett argued that natural law must be allowed to replace manmade laws in the economy. No matter how well intentioned, the imperfections inherent in manmade economic law would only lead to further injustice. The only logical solution was to allow the natural laws of economics to run their course:

In Leggett's eyes, the only plausible solution to the economic disruptions caused by monopolies was to institute a strict policy of laissez-faire. Monopolies would disappear, reasoned Leggett, only if the government would remove itself from the economy. Rather than crafting a series of laws to limit the power of combinations, government needed only one law to address the problem at its source: “Such a law would confer no exclusive or special privileges . . . . leaving capital to flow in its natural channels, and enterprise to regulate its own pursuits.”Footnote ⁴⁹ Without government interference, the economy would deliver efficient and equitable outcomes, directed by the immutable laws of supply and demand.Footnote ⁵⁰

Chief among the obstacles impeding the natural flow of money was the government's banking monopoly. Leggett's solution: dissolve all government banking and treasuries and allow entrepreneurs to establish locally based lending institutions. In Leggett's view, the “safe keeping of money . . . has, properly, nothing to do with the exchanges of this country,” and should therefore “be left to the laws of trade.”Footnote ⁵¹ Recognizing that the government would need to maintain some currency of its own, Leggett argued that government currency should be kept in subtreasuries in various cities, but he stressed that it should not be lent out. During the Bank Wars, these subtreasuries were built according to Leggett's specifications. Doubts remain concerning how closely they followed the prohibition against lending,Footnote ⁵² but the superficial resemblance between the Jacksonians’ subtreasuries and the Populists’ has led some scholars to argue for a direct link between these two varieties of antimonopolism.

According to some scholars, Jacksonian antimonopolism, especially as articulated by Leggett, survived the 1830s and came to be adopted by the Populists in their fight against monopolies at the end of the century. Bruce Palmer, for instance, suggests that Leggett influenced Populist antimonopolism:

While Palmer suggests that Populism failed because it was unable to update its theoretical basis to one that reflected contemporary reality, he does qualify the link between Leggett and the Populists by noting that Populism differed from Leggett's thought in that Populists did not support laissez-faire.Footnote ⁵⁴ Other scholars are less judicious in suggesting a connection between the two schools of thought. Hofstadter, for instance, argues that, “In assuming a lush natural order whose workings were being deranged by human laws, Populist writers were again drawing on the Jacksonian tradition.”Footnote ⁵⁵ While some accounts refer only in passing to the Jacksonian influence on Populist thought,Footnote ⁵⁶ others assign explanatory power to the link in order to ground a broader historical account of the Populist defeat.

Situating Populist thought in Jacksonian antimonopolism allows scholars to explain the Populist defeat as a result of their reliance on outdated economic theory. Jacksonians, such as Leggett, argued that monopolies were caused by legislative privilege, but corporate law, technology, and the structure of the economy had changed by the late nineteenth century, all of which invalidated the Jacksonian analysis. Thomas Goebel, for instance, argues that Populist economic thought is best understood as a holdover from the Jacksonian era, and he suggests that Populists did not need, and did not have, a correct theory of economics. In his view, all that Populists needed was a strong link to the historical memory of protest: “The real strength of Populism did not derive from the way its language and arguments offered a challenge to the American political system but, rather, from the manner in which it connected to a long and rich tradition of oppositional politics in American history.”Footnote ⁵⁷ According to Goebel, Populism was able to mobilize millions because it revived an older antimonopoly sentiment. Leaders like Macune added little to existing arguments, serving mostly as mouthpieces and organizers for ideas that had already proven successful. But while these antimonopoly arguments were successful, Goebel argues that they misunderstood the current economic conditions:

For Goebel, Populist economics relied on the mistaken premise that monopoly was the result of political corruption. Stuck in the mind-set of the early nineteenth century, Populists were unable to update their theories in order to address the realities of modern commerce and industrialization, which were built on the ability of technology to provide economies of scale and scope. With industrialization, monopolies existed because they were efficient, not because their owners solicited political favor. Populist economic theory, argues Goebel, was blind to the role of technology in creating monopolies and was thus unable to correctly describe the economic conditions of its time.

Jacksonian antimonopolism plays a similar role in Scott James's account of the development of the American regulatory state. James shows how the Democratic Party's response to industrialization was shaped in large part by their rejection of agrarian demands. Like Goebel, James presents Populist demands as an extension of Jacksonian antimonopolism. In his view, the Populists’ demand for legislation to improve competition among the railroads proceeded from the Jacksonian analysis that inequality was caused by legislative privilege: “To a majority of agrarians, palpably little had changed since the Jacksonian era. Favoritism and corruption were still thought to explain the disadvantaged market position of the farmer.”Footnote ⁵⁹ While James does include that Populists differed from their predecessors by virtue of demanding government regulation, he still insists on describing them as “antistatist,” and writes that they “turned away from the various visions of national administrative power.”Footnote ⁶⁰ In both Goebel's and James's views, Populism was the extension of a preexisting program of political economy, so that the defeat of Populism in the 1890s did not represent the rejection of an explicit alternative to the dominant order. Instead, Populism was defeated because its outdated economic theory made it unable to recognize, let alone respond to, the actual economic conditions of its time.

However, as the next section will show, Macune's economic theory marks a significant departure from Jacksonian antimonopolism. Many of his strategies, such as the subtreasury plan, were explicitly statist, and others were based on the recognition of economies of scale, such as the Exchange. Drawing attention to these distinctions underscores that, rather than an outdated holdover from a previous era, Macune's economic thought was a perceptive and practical response to the challenges confronting American farmers in the late nineteenth century. This evidence directly challenges Goebel's claim that Populism fell because its economic thought failed to account for modern developments, and it offers a productive amendment to James's. In rejecting Populist demands, the Democratic Party, and later the Progressives, built a set of constraints into American democracy that limited popular sovereignty from the economic sphere. Recognizing how Macune differed from Jacksonian antimonopolism highlights the degree to which his agenda marked a distinct and coherent alternative to the emerging economic order, and highlights the extensive opposition that ultimately defeated it.

MACUNE'S ECONOMIC SCIENCE

Charles Macune was first and foremost a political actor, but his approach to economic knowledge belied a distinctive understanding of the conflict between democracy and the emerging economic order. In his view, economic law was not natural, or in any way prior to popular sovereignty, so the economy should be subject to democratic control along with every other significant realm of public life in a democracy. Against the Jacksonians, who argued that concentration of economic power in monopolies was always harmful, Macune argued that monopolies were acceptable, and in some cases optimal, as long as they were controlled by the people. Insisting that popular sovereignty rule the economic sphere, Macune denied that conflicts between democracy and the economic order were necessary, because popular sovereignty always trumps perceptions of economic necessity. These principles account for the apparent contradiction of lobbying Congress to criminalize monopoly while simultaneously organizing the Farmers’ Alliance into a massive combination in order to control commodity prices. It also explains Macune's singular focus on monetary reform, and why his subtreasury solution took such a peculiar shape. Surely some of his pronouncements were pure rhetoric, and some of his solutions appear simply incorrect to modern eyes, but only by examining what Macune said, wrote, and did, can we grasp the alternative vision of democracy that was rejected with the defeat of Populism.

Macune's economic thought grew directly out of the challenges that faced American farmers in the late nineteenth century. The Texas Farmers’ Alliance elected Macune president during a meeting in Cleburne, Texas, in 1886. The meeting attracted representatives from eighty-four Texas counties, making it the largest meeting the Alliance had held, underscoring the rising desperation of Southern farmers.Footnote ⁶¹ Farmers believed that economic conditions were robbing them of just compensation for their labor: “The Texas Alliance did the arithmetic at its celebrated Cleburne convention in August 1886. European and New England spinning mills paid $80 million a year on Texas cotton. Texas producers only received $64 million for their crop. The $16 million difference was the crux of their problems.”Footnote ⁶² While the Alliance had pursued a number of strategies to improve the farmers’ position, all had failed and it was time to try something new. The Cleburne meeting concluded by issuing seventeen demands, and they elected Macune to lead the charge to realize them. Much of Macune's agenda remained defined by the Cleburne demands and the diagnosis underlying them, which identified the causes preventing farmers from receiving full value for their labor.

Farmers believed that railroads were one of the prime causes for the discrepancy between the value of the commodities they produced and the amount of money they received for their labor. Chief among their complaints was the perception that the railroads charged farmers higher prices than other customers. In his first address to the National Alliance in 1887, Macune observed that, “A car-load of lumber from Galveston to Waco will probably cost you about forty dollars freight; but if you load that very same flat car with cotton and ship to Galveston, the freight will cost about one hundred and fifty dollars.”Footnote ⁶³ Macune believed that price discrimination was the product of market imperfections that prevented competition from properly regulating prices.Footnote ⁶⁴ Railroads were able to form monopolies, pooling freights in one area in order to achieve economies of scale and thereby lower prices while continuing to charge higher rates in other areas.Footnote ⁶⁵ Rural areas with less railroad traffic, primarily where farmers lived, were stuck with higher prices than those areas with heavier traffic, such as towns and cities. In Macune's view, monopolies were not the product of villains’ schemes, but the product of an imperfectly regulated market: “Discriminations are not caused by competition, but are caused by its imperfect and obstructed condition under the prevalent railway methods.”Footnote ⁶⁶ If the market were structured properly, the laws of competition would prohibit monopolies’ pooling of freights, which would bar certain companies from charging higher rates to some customers than others, thereby forcing down the prices farmers had to pay to ship.

On the basis of Macune's analysis, the clear solution to the problem of railroad price discrimination was better legislation, which would enable more perfect competition among railroad companies. Macune's strategy followed the fourteenth Cleburne demand, which called for

Farmers had been agitating for an interstate commerce law for years, and, in 1887, Congress finally passed the Interstate Commerce Act (ICA), bringing into existence the Interstate Commerce Commission (ICC), which was charged with closely regulating railroad business practices. Unsatisfied by the superficial victory represented by the passage of the ICA, Macune pushed for more severe legislation. He suggested that monopolies, such as the railroads, be prohibited under criminal law: “the law should say it is a criminal offense, punishable by imprisonment, to form combinations to suppress competition.”Footnote ⁶⁸ The severity of Macune's approach surely troubled his contemporaries, and presented a real threat to the railroad companies given that farmers had played a role in passing the ICA, but it puzzled them as well. While Macune called for the criminalization of monopolies, he was simultaneously leading an energetic effort to build a massive combination to suppress competition among farmers.

Macune insisted that until government passed legislation to properly regulate competition, farmers must help themselves. One solution to closing the $16 million gap between the value of what farmers produced and the value they received was to form a combination. In his first address to the Texas Alliance in 1887, Macune suggested that farmers “have an adequate and complete remedy in co-operation . . . if the farmers of the cotton belt were all to unite into an organization, they could force the world to pay a just and fair price for the labor expended in raising this staple.”Footnote ⁶⁹ Forming a combination of farmers would address losses due to the railroads’ price discriminations, and it would also challenge the combinations of commodities buyers, who colluded in order to drive down commodity prices. Texan farmers were well aware of the buyers’ strategy:

When Macune suggested that the most appropriate counterstrategy would be forming a farmers’ combination,Footnote ⁷¹ he echoed the early Alliance practice of “bulking.” Prior to 1886, the Texas Alliance would organize county business agents to enter contracts with one merchant, with whom they would negotiate a rate for cotton higher than the local average, in exchange for selling them all the cotton of that county.Footnote ⁷² Farmers were able to receive adequate value for their labor until buyers caught on and reorganized. Bulking ultimately failed because “after several lots had been bulked, and all buyers had combined against it, the sale was sometimes made at a loss, and the plan as a whole, after two years’ experience, was gradually abandoned.”Footnote ⁷³ Macune interpreted the failure of bulking not as evidence that the idea of a farmers’ combination was flawed, but only that it needed to be done on a larger scale.

Until Macune's election to the presidency of the National Alliance in 1887, farmers had combined only at the county level, but once local bulking practices collapsed, Macune led the effort to establish a statewide farmers’ combination. Macune continued to emphasize the importance of achieving economies of scale, as in his 1889 address to the Alliance convention in St. Louis, where he explained how economies of scale could benefit farmers, if only they would organize: “organization could render farming profitable by the introduction of better business methods, in which all would unite and cooperate for the purpose of selling our products higher, and purchasing such commodities as we are compelled to buy, cheaper.”Footnote ⁷⁴

While some farmers surely critiqued monopoly on the basis of the Jacksonian theory of corruption and legislative privilege, Macune recognized that monopolies resulted from an evolution of business practices. The problem was not that buyers and industrialists and the railroad companies had been granted exclusive charters; the problem was that farmers’ business strategies had not kept up with developments in other sectors of the economy: “[F]arm reformers recognized the advantages of size and concentration. They, too, believed that bigger was indeed better. To explain rural poverty they pointed to the farmers’ late entry into the modern business world of combination: hence the necessity of the Farmers’ Alliance and similar organizations.”Footnote ⁷⁵ While Macune did lobby Congress to amend particular laws in order to realize more perfect competition, he also directed energy toward organizing farmers’ combinations, so that they could realize the economies of scale enjoyed by other sectors of the economy.

The Texas Exchange would be, according to Macune's plan, “established for conducting the production and disposition of the cotton crop . . . . They [farmers] could negotiate and consummate arrangements tending to an increased price; and should all negotiations prove of non-effect, they could adopt a graduated scale for the reduction of the cotton crop, which would be an injustice to none.”Footnote ⁷⁶ By combining the cotton crop of an entire state, Macune saw that farmers could interact directly with wholesale buyers on the world market, thereby cutting out the variety of middlemen, including railroads, who would otherwise inflate the $16 million difference between a farmer's labor and his compensation: “In this way the Exchange sold cotton direct to the mills or to Liverpool, and had it shipped from its home depot on a through bill of lading, thereby saving all local freights and other expenses of handling.”Footnote ⁷⁷ In 1892 testimony to Congress, Macune reflected on his experience with the Texas Exchange: “in the year 1888 I handled the crop for the Farmers’ Alliance of Texas, and I visited the mills of Massachusetts and I made my arrangement for shipping to them direct, and I sold and shipped direct a great deal of cotton to them.”Footnote ⁷⁸ The official Alliance history reports that the Exchange was initially a success: “There can be no doubt that this effort . . . . raised the price of cotton to the farmers of that State at least one-half of one cent per pound . . . This, on the crop of 1,300,00 bales of 500 pounds each, was a saving to the farmers of $3,252,000 that had previously gone into the pocket of the speculator.”Footnote ⁷⁹ Macune's combination was a small but successful step toward closing the $16 million gap identified by the Cleburne demands. Success, however, proved short-lived.

In 1889, after less than two years, the Exchange failed because farmers did not provide enough cash to cover its operating costs. Alliance members were asked to pay dues of one dollar, but many farmers were unable to come up with the cash.Footnote ⁸⁰ One major obstacle was that many farmers were unable to choose when they planted. Many rarely used cash because they had exchanged liens on their crops for credit with local merchants, so that, at harvest, they exchanged crops directly for supplies. Their cash flow was strictly dependent on the holder of the lien.Footnote ⁸¹ Realizing that the Exchange rested on such a precarious foundation, Macune attempted to set up an Alliance mortgage system so that farmers could receive cash advances on their crops.Footnote ⁸² But this too failed, and “when the Board of Directors met in March, they found that only about $17,000 of the capital stock had been paid in,” far too little to cover operating costs, let alone the costs of the building the Alliance had purchased for the Exchange.Footnote ⁸³ The Exchange “failed; not because the system was faulty, or the management bad, but because the people did not put in capital stock in proportion to the credit they asked, and because many of them did not pay their indebtedness.”Footnote ⁸⁴ While Macune interpreted the failure of the Exchange as a symptom of the failure of the monetary system to provide sufficient capital for farmers’ needs, this was not the only possible interpretation: “The dearth of cash among Texas farmers partly explains the failure to collect even these minimal assessments. Explanation, however, must also be sought within the mix of opinions among Alliance members about the Exchange.”Footnote ⁸⁵ Farmers did not participate in the Exchange in part because they were uncomfortable with what looked very much like a monopoly. Because Macune's plans challenged widespread contemporary conceptions of monopoly, farmers were not the only observers confounded by the Alliance's efforts at combination.

Macune's contemporaries, farmers and congressmen alike, recognized the similarities between the combinations that Macune targeted and the combinations that he organized. In The Populist Vision, Charles Postel reports a conversation between two Texans in 1888:

Other contemporaries of Macune were less charitable toward the Alliance's business efforts. Postel describes the Alliance receiving “stinging letters” directed especially at its business activities.Footnote ⁸⁷ Debates preceding the 1890 passage of the Sherman Antitrust Act demonstrate similar puzzlement over whether the Alliance was a monopoly. Senator Teller, a Colorado Democrat, objected to Sherman's bill on the grounds that it might interfere with the Alliance: “But there has been recently organized all over this country what is called the Farmers’ Alliance . . . . Is it possible that we are putting it in the power of some men to coerce and force the farmers to abandon these organizations?”Footnote ⁸⁸ Other senators seemed unwilling or unable to even define what a monopoly might be. Senator Turpie, an Indiana Democrat, insisted in a late March debate that, “To describe it [monopoly] is impossible.”Footnote ⁸⁹ Later that day, Senator Blair, a Republican from New Hampshire, argued that, on the contrary, “Everybody knows what a monopoly is, and nobody will object to prohibiting a monopoly.”Footnote ⁹⁰ Macune's seemingly contradictory stance on the question of monopoly reflects his challenge to the deductive orthodoxy of late nineteenth-century economics and emphasizes the distinctiveness of his economic theory. Because Macune's challenge to the established order extended beyond a concrete political program to include the very method of understanding economic facts and laws, his strategies appear contradictory unless his own understanding is taken into account.

Macune did believe that, under the correct conditions, the laws of supply and demand would distribute value in a just way, and his efforts to lobby Congress for more adequate regulation of competition reflect that belief. Once the conditions necessary for competition were achieved, the laws of supply and demand would function, and farmers would receive adequate value for their labor. At the same time, as long as the conditions necessary for competition were absent, farmers had every right to ensure that they received just compensation. The use of combination was only a temporary effort, designed to achieve the adequate purchasing power necessary for competition:

Macune believed that by securing greater value for farmers’ labor, the Alliance combinations would build the conditions so that competition could replace their efforts, ensuring that farmers continued to receive the value they earned. In this central respect, Macune's leadership of the Farmers’ Alliance marks a departure from Jacksonian antimonopolism. Not only did Macune appeal directly for federal intervention in the economy, but he also called for farmers to form their own combinations. Each of these tactics was decisively rejected by Jacksonian antimonopolism, which relied on the belief that economic laws were natural and must therefore guide government action, rather than vice versa.

Against the Jacksonians, Macune's economic thought was thoroughly inductive and empirical, in that he believed that economic laws were not natural, but instead were descriptions of contingent social conditions. He expressed the significance of this contingency in his 1892 testimony to Congress concerning commodities futures trading, where he instructed the committee: “You will remember our old political economists always gave us an important modification of supply and demand, the prices being regulated by supply and demand, it always presupposes the ability to purchase is perfect or ample. Whenever it is not, it is a basic modification of the law.”Footnote ⁹² The laws of supply and demand may accurately describe phenomena in a given situation, but their validity depends upon the conditions of that situation. Macune was wise to emphasize this seemingly technical point to the committee, given that much of Macune's strategy depended on assuming a particular methodology that was unambiguously foreign to the deductive orthodoxy of the time.

The congressmen to whom Macune addressed his testimony most likely followed the common views of the time and treated economic analysis as a deductive exercise. On the deductive view, often described by Macune's contemporaries as the “English method,” economic laws are seen as natural, rational, universal, and therefore normative and predictive, regardless of context. Deductive economics reasons from laws to facts, thereby viewing economic laws prior to any conceptions of democracy. Gresham's law, for instance, which posits that a high value currency will always drive a low value currency out of an economy, was a popular belief among deductive economists and was deployed to support arguments for the gold standard. The law is deductive because it predicts certain economic phenomena on the basis of assumptions untethered to facts. Macune considered the deductive approach unfounded, and he critiqued Gresham's law in the Alliance's newspaper, the National Economist:

While Macune appreciated the utility of deductive economics, he denied its validity. His experiences of the farmers’ plight had made it clear to him that economic laws were no better than the facts on which they were based.

Macune's economic thought is largely an extension of Edward Kellogg's, a nineteenth-century American economist whose Labor and Other Capital, was taken up by a variety of popular movements.Footnote ⁹⁴ Kellogg opens Labor with the fundamental principle of induction: “We reason from known facts to the hidden power governing them.”Footnote ⁹⁵ In this view, supply and demand may determine the price of a commodity, but the relationship of supply to demand is not natural and unchanging, but is instead invalid once removed from the specific conditions in which it is observed. One upshot of Macune's debt to Kellogg was the role of Kellogg's labor theory of value in shaping Macune's diagnoses of the national economy. Kellogg believed that in modern economies, where the division of labor was well established, all economic actors were deeply interdependent, because each was forced to depend on others in order to satisfy his wants and needs.Footnote ⁹⁶ But because all value originated in labor, and labor cannot easily be traded, modern economies require the use of money as a means of exchange.Footnote ⁹⁷ In Kellogg's view, labor is natural because it is constituted simply by human activity, but money is artificial, because it is created by laws in order to represent labor, so that the value of labor can be exchanged.Footnote ⁹⁸ While money may seem to follow the dictates of natural law, such that, in some circumstances, a high value currency will replace a low value currency, Kellogg's emphasis on the artificial, legal nature of money implies that money's ability to represent value is entirely contingent on manmade law.Footnote ⁹⁹ Thus, if some economic actors fail to receive currency that adequately represents the value of their labor, this is the product of imperfect manmade law.Footnote ¹⁰⁰ Macune's interpretation of Kellogg is what led him to advocate monetary reform as a means of making up the $16 million gap between the value of farmers’ labor and the value they received.

Viewing Macune in light of his debt to Kellogg, his activities against monopolies appear secondary to his fight to reform the monetary system. This strategy was based on the fundamentally inductive view that monetary value does not accrue naturally, but is the result of a contingent social process, shaped largely by manmade laws and institutions. Business combinations may indeed have extracted value from farmers’ labor, but Macune did “not believe that this was the result of any rascality on the part of any one man, but . . . the legitimate result of this system.”Footnote ¹⁰¹ The flawed system at the root of farmers’ troubles was the overly rigid monetary system, which, combined with farmers’ production cycles, created conditions easily manipulated at farmers’ expense:

While those relying on deductive, rationalist economics would argue that government should not interfere with the monetary system because the distribution of value is simply the effect of natural laws, which are always superior to manmade laws, Macune's methodology led him to a different conclusion. Proceeding from Kellogg's theory, Macune argued that the monetary system was the product of manmade laws and institutions, so there was nothing natural that should be left free from government interference. In a democracy, human laws should always be subject to popular sovereignty, and by denying the naturalness and universality of economic laws, Macune was led to the conclusion that popular sovereignty must extend to the economy.Footnote ¹⁰³

The Alliance had been focused on monetary issues since the 1886 Cleburne demands,Footnote ¹⁰⁴ but Macune's proposal of the subtreasury system at the 1889 National Alliance convention brought the issue to the fore. Macune recognized that the Alliance's previous efforts—lobbying Congress, building the Exchange, and so forth—had not yet closed that gap between the value of farmers’ labor and the value they received for their commodities.Footnote ¹⁰⁵ On the last day of the convention, Macune formed the Alliance's top leaders into the Committee on the Monetary System and issued a report that set out the Alliance's new goal:Footnote ¹⁰⁶

The report represented a shift in Alliance tactics from alleviating the symptoms of the farmers’ condition to attacking its cause directly. The subtreasury system was designed to accomplish three goals: “first, the increase of the volume of money; second, a flexible volume of money, and third, the issue of money direct to the people, without the intervention of banks.“Footnote ¹⁰⁸ In order to achieve these goals, the Alliance demanded that the federal government

These subtreasuries, placed close enough to farmers so that they were easily accessible, would provide currency in exchange for agricultural products, thus giving farmers access to currency that would be flexible enough to account for their production cycles. After depositing their products at the subtreasury, the subtreasury officers would give farmers “a certificate of deposit showing the amount and quality, and that United States legal tender paper money equal to eighty per cent of the local current value of the products deposited has been advanced on same, on interest at the rate of one per cent per annum.”Footnote ¹¹⁰ Macune surely realized that if his planned subtreasury system had existed a couple years earlier, then the Texas Exchange would not have failed. But furthermore, if it had existed a few years earlier, the Texas Exchange would not have been necessary.

The subtreasury system marked a break with the current monetary regime because it “brought the nation's monetary system under democratic control and gave millions of citizens access to capital at low interest.”Footnote ¹¹¹ Macune's reliance on inductive, empirical economics led him to believe that the economy was no more natural than a system of manmade law, and therefore, in a democracy, popular sovereignty must extend to the economy. In Macune's view, there was no necessary conflict between democracy and the emergent capitalist order, but because Macune's methodology was not widely held, the plan directly challenged popular views that government should not intervene in the monetary system, nor any other economic matter.Footnote ¹¹²

Macune's contemporaries argued that popular sovereignty had no place in the economy, and that the subtreasury plan was unconstitutional, representing an overreach of governmental power. Critics argued that the government simply “does not and can not embrace lending the people's money to any class of the people themselves.”Footnote ¹¹³ These critics saw a crucial difference between tax-funded public projects and the type of fiscal scheme represented by the subtreasury system.

In Macune's eyes, the subtreasury system should be seen as an extension of the government's power to coin money, which is included in the Commerce Clause,Footnote ¹¹⁴ and he offered a telling counterexample to refute the charge that the subtreasury system represented unprecedented government intervention in the economy: “If it is wrong for the Government to give even temporary relief to the farmer, by what process of reasoning is it made right to anticipate millions of interest whenever Wall street is being squeezed?”Footnote ¹¹⁵ Macune insisted that no difference distinguished the government's support of bankers from his proposal that it support farmers. If the government is truly democratic, he argued, then it should serve the interests of the people, which extend to economic issues. The current system, by not responding to the people's will, appeared to be less a democracy than a monarchy: “Our monarch is a false, unjust, and statutory power given to money, which calls for a conflict on our part to emancipate productive labor from the power of money to oppress.”Footnote ¹¹⁶ Building on an analogy to the Revolutionary War, Macune called for this monarch to be overthrown, and for reinstating the power of the people.

Opponents of the subtreasury system recognized the power that the government had given financial interests, but in their view, this was not troubling. They argued that democracy would necessarily clash with the economic order, and that the laws of economics must always take precedence over manmade law, in large part because the people are not intelligent enough to make decisions about economics: “The principles of public finance require knowledge derived from much study and observation in order to be understood, and the creation and direction of a financial policy demand the highest kind of expert ability if it is to result in anything but disaster.”Footnote ¹¹⁷ But even worse, the farmers were particularly the type of people who needed to be kept from crafting economic policy:

These critics, engaging the deductive orthodoxy of Macune's time, argued that economic laws are natural, and therefore inherently superior to manmade law, such that manmade law can at best only approximate the perfection of natural law. Relying on this methodology, they sought to remove democracy from economic decisions, insisting that economic institutions must be designed and operated by experts. Experts’ authority was justified, in this view, because their knowledge of the universal natural laws governing economic interactions would allow them to minimize the damage of manmade law. Democracy would always conflict with the economic order because the people would always want to control the economy, but would never understand how it functioned. Macune was an exact representation of the fears of the deductive orthodoxy, because he not only organized resistance to the distribution of resources, but also proposed that economic law was fundamentally contingent on manmade laws. Such an assertion threatened experts’ beliefs and their authority, because Macune's inductive economic theory validated commonsense observations of economic phenomena, thereby denying any epistemic privilege that experts might claim. Without a scientific defense for separating economics from politics, there was no reason for the economy to be protected from popular sovereignty.

Despite its promise to improve farmers’ lives, the plan for the subtreasury system collapsed with Macune's departure from the Alliance in 1892. Macune's relationships with other Alliance leaders, especially Leonidas Polk, had deteriorated, as Polk and others positioned the Alliance to enter electoral politics.Footnote ¹¹⁹ Eventually, Macune was accused of conspiring to undo Polk's efforts to form the People's Party, and he was forced out.Footnote ¹²⁰ A version of the subtreasury system was eventually established in the Progressive Era, but it was done so in service of a constrained conception of democracy. Other Populist leaders, such as Leonidas Polk, Thomas Nugent, and Marion Todd, continued to struggle for the rights of farmers and producers, but none articulated Macune's conception of robust democracy with such detail, and none mobilized such organizational resources to realize that vision. Lawrence Goodwyn describes Macune as “the boldest single theorist of the agrarian revolt. He was also, in economic terms, one of the most creative public men of Gilded Age America.”Footnote ¹²¹

Macune's tenure as president of the Farmers’ Alliance was short, but in the span of three years, he was able to lead the Alliance to take decisive steps toward alleviating farmers’ hardships. His efforts to lobby Congress for antimonopoly legislation, build farmers combinations, and establish the subtreasury system all responded to the initial demands from the 1886 Cleburne meeting. What made Macune's economic science so distinctive was his articulation of the link between state and economy, which represented a direct challenge to the economic theory of his day and our own, as well as a decisive break with the economic theory that preceded him. Many of Macune's proposed reforms were achieved in the period following his leadership of the Farmers’ Alliance. However, his distinct vision of a democracy where popular sovereignty extends to the economy was lost, in large part due to the defeat of an economic method that treated economic law as inductive, contingent on social conditions.

ECONOMICS IN AMERICA

Macune's economic thought was a distinctive, but not unique, articulation of political protest against America's emerging economic order. The demands he proposed on behalf of the Farmers’ Alliance contrasted sharply with those of the Jacksonians, but they were echoed to a large extent by the economists who founded the American Economic Association (AEA) in 1885. Distinguishing Macune from the Jacksonians makes clearer how his economic thought relied on contextualizing economic law, and it highlights the degree to which the early AEA shared Macune's basic assumptions about economics. Furthermore, emphasizing the role of contingency and induction in Macune and the AEA shows how that methodology offered a more expansive conception of democracy by subordinating economic laws to popular sovereignty. Until its decisive defeat at the close of the nineteenth century, an alternative economics founded on induction, empiricism, and institutionalism was a valid discipline; the struggle for democracy unconstrained by economic order was a conceivable and realistic political project.

The differences between Macune's economic thought and Jacksonian antimonopolism extend from conflicting first principles to opposing views on national economic policy, and can be observed directly in their competing plans for a substreasury system. Macune and Leggett both advocated a locally based system of subtreasuries, but Macune's plan was based on the government providing credit to farmers, while Leggett's was designed to prohibit the government from lending. The Jacksonian subtreasury plan was introduced in order to allow the natural laws of economics to drive economic development, while the Populist subtreasury plan was introduced to alter the manmade law on which those contingent economic laws relied. The differences between the two plans illustrate the deep distinctions between the two approaches.

Jacksonians, such as Leggett, believed in universal natural economic laws, so state involvement to remove monopoly power would only be temporary.Footnote ¹²² But because Macune denied the independence of natural economic laws, he insisted that the state must be recognized, and managed, as a constant presence in the economy. For Macune, it was Populist agitation that should be temporary, pursued only until the government would step in and fulfill its role, “to protect the weak, sustain the right, and prevent the wrong.”Footnote ¹²³ According to Macune's methodology, the economic order is always constituted by economic laws that depend directly on manmade laws, so a democratic government must ensure that those laws are the true expression of the people's will. While Leggett argued that democracy could be reconciled with the economic order only through laissez-faire, Macune insisted that democracy could be reconciled with the emerging capitalist order only through the extension of popular sovereignty to the economy.

Macune's reliance on empirical, inductive, institutionalist economics allowed him to formulate an economic theory that acknowledged modern conditions, the most notable of which were the economies of scale afforded by developments in technology. For Macune, monopolies were clearly the result of technological development, especially the steam engine: “The direct source from which these giant modern enemies to society have sprung are the vast strides made in invention, the application of steam to industrial pursuits.”Footnote ¹²⁴ In his eyes, monopolies were “enemies to society” in large part because they had been poorly regulated and allowed to turn against society's interests, but the reason for their existence was not corrupt legislation, but technology. Unlike the Jacksonians, whose method engaged observation and historical investigation only to test timeless natural laws, Macune's inductive economics drew all its conclusions from observation and analysis of those conditions that constituted economic history. The National Economist concluded a series of articles on political economy by noting that, “This series of articles on political economy would lose a large part of the power for good if lessons for the present were not drawn from experiences of the past.”Footnote ¹²⁵ By orienting economic analysis to history, Macune's method identified the economic changes to which Populist organizing needed to respond. Had his analysis ignored history, Macune recognized that it would be wrong and would fail to provide a useful guide for strategy.Footnote ¹²⁶ But the strength of Macune's strategy was also its undoing.

Through most of the nineteenth century, Americans learned economics in the tradition of the “English School,” which was based in a rationalist, deductive, naturalist methodology and proposed laissez-faire as the system most likely to enable the unchanging natural laws of economics to properly function. E. L. Godkin had a great appreciation for the English School, and because he edited The Nation until 1881, and was then editor of the Post until 1899, he ensured that these ideas had national circulation, and that they circulated among the right people.Footnote ¹²⁷ He wrote for a group of upper-class men who believed in liberal economics and conservative politics, comprised of gentlemen as well as social scientists and experts.Footnote ¹²⁸ Godkin had, in the words of William James, “towering influence in all thought concerning public affairs.”Footnote ¹²⁹ He used this influence to shore up the position that, because history was pushed forward by natural laws, expressed in economics, but also more broadly in evolution, the state should be directed only by individuals who understand those laws.

The foundation of Godkin's thought was his unwavering belief in the independent natural authority of economic law.Footnote ¹³⁰ In his eyes, economics was an extension of nature, rather than politics, so economic analysis must proceed just as natural science, by deducing conclusions from a priori assumptions. The assumption that man is rational and self-interested played the role of gravity in Godkin's economics:

Just as science proceeds by abstracting from reality to deduce general laws from assumptions, so should economics, in Godkin's view, proceed by abstracting from the messy reality of everyday interactions in order to deduce general laws. Because these laws constitute the essential assumptions of his method, they are prima facie valid in every instance, and therefore, Godkin insisted, they also hold predictive power. With reference to Gresham's law, for instance, Godkin writes:

While Godkin does refer to “observation” in deducing Gresham's law, this is not the same type of observation used by Macune and other inductive, empirical, institutionalist economists. Induction directs the formulation of contingent laws based on observation of actual phenomena, but when Godkin refers to observation, he is referring to a procedure in which the economist imagines how the hypothetical “Economic Man” would react if he were given a choice between two competing currencies.

Godkin's naturalistic approach to economics led him to argue that economics must be kept free from the political realm. In his eyes, it was simply a “fact of nature” that the scientific search for natural truth was foreign to activities that defined political life.Footnote ¹³³ To illustrate the perils of combining politics and science, Godkin invited his readers to “suppose our acceptance of the law of gravitation had been delayed by the war of 1812, or our belief in the atomic theory shaken by the Alabama case.”Footnote ¹³⁴ Because politics works at cross-purposes to scientific analysis, it would be disastrous to allow politics to interfere with the economy. Thus, Godkin's favored policy, like Leggett and other the deductive economists, was laissez-faire: “[A]ny attempt to provide by law any other measure of a man's deserts in the social state than the amount of his own labor, or the value put on the product of his labor by his fellows in free and open market, would in the long run be destructive to civilization, or at least to our civilization.”Footnote ¹³⁵ While Godkin certainly echoes Leggett's endorsement of laissez-faire, and the disaster that necessarily results from government interference in the economy, his approach to reconciling democracy with the economy marks a significant departure.

In Godkin's eyes, democracy is a particularly dangerous form of government, because the people will always try to control the economy, despite being unable to understand it. Economic truths may appear clear to the experts, but the people exhibit a remarkable tendency to ignore those truths,Footnote ¹³⁶ and because the people are unable to adequately perceive economic truth, they are unfit to make economic decisions. Democracy, however, invests the people with decision-making power through voting. Godkin invoked an analogy for his nineteenth-century readers in order to illustrate the absurdity of the value placed on voting:

Instead of allowing the people to determine their fate through voting, argued Godkin, government should be directed by experts, those who understand the scientific laws underlying reality. He took some solace in observing that Americans were increasingly receptive and respectful of “scientific men.”Footnote ¹³⁸ Calling for a reorientation of authority from politicians and the people to experts, Godkin and his group came to be called the Mugwumps, from the Algonquin word for “Chief.”Footnote ¹³⁹

Many of those in Godkin's Mugwump sphere followed his invocation of deductive, rationalist, naturalistic economics, and some were eventually involved in designing and implementing essential Progressive Era reforms. Godkin's approach to economics reflected a broader view of the relation between nature, society, and progress, which energized political debates and set the terms for academic disputes. As history pushed America forward at the end of the nineteenth century, many wondered whether and how America's essential character would survive such great transformations. Evolution provided social scientists the most developed theory for asking how essential group traits change over time, but interpretations were sharply divided.

On the one hand were the followers of William Graham Sumner, who argued that societies developed as natural organisms, “determined by a natural process of selection linked to the market, and impervious to the intervention of reason, politics, and morality.”Footnote ¹⁴⁰ This theoretical standpoint led Sumner to argue that America's essential character would not be diluted, as long as these natural processes of selection were left unhampered. Chief among these processes was the market, and Sumner was a leading advocate of laissez-faire. On the other hand, Francis Amasa Walker and a handful of others argued that what Sumner took for natural processes were not independent of, but instead directly contingent on, broader social conditions. Walker demonstrated convincingly that the creation of economic value depended less on the laws of supply and demand than it did on the productivity of labor.Footnote ¹⁴¹ While a seemingly technical point, Walker argued that this demonstrated that the state could not treat economic laws as independent of society, especially its laws and institutions. Ensuring prosperity, in Walker's view, would require the state to guarantee labor productivity, and doing so might require actions that contradict the laws of supply and demand. Walker was suggesting, in other words, that the natural processes of selection were functional only when placed within broader social context. Walker's challenge to Sumner's universalistic, naturalistic methodology led to his dismissal from Yale, and it foreshadowed the conflict that would erupt between the two approaches before the end of the century.

Through the 1870s and 1880s, the deductive economistsFootnote ¹⁴² consolidated their power in academia, and they played a major role in establishing American social science by forming associations, securing professorships, and publishing in academic and popular presses.Footnote ¹⁴³ In the 1870s, they advocated laissez-faire economics through their participation in the American Social Science AssociationFootnote ¹⁴⁴ and in the newly formed Political Economy Club.Footnote ¹⁴⁵ By the mid-1870s, the deductive economists had successfully established a stronghold in academia, from which they could study contemporary conditions and offer expert advice. Relying on academic credentials to justify their activities as experts, the deductive economists introduced a new role for American social scientists as policy advisors and unelected de facto political leaders. Wielding significant power over politics without necessarily being subject to the whims of electoral politics, journalists had previously enjoyed similar influence, Godkin foremost among them.

Young, ambitious, and dedicated to social issues, Henry Carter Adams had intended to be a journalist, and looked to Godkin as his role model. But when Adams had a chance to meet with Godkin during an 1876 trip to Cambridge, Godkin encouraged him to study social science instead.Footnote ¹⁴⁶ Adams followed Godkin's advice, accepted his help, and enrolled at Johns Hopkins University, where he eventually received the first doctoral degree in social science. Hopkins was based on the German model of graduate education, and, midway through his program, Adams left Hopkins to continue his studies in Germany.

In the nineteenth century a significant number of American economists received their training in Germany, and having studied economics under professors identified with the Historical School, they brought the Historical School's methodology back to the United States. Henry Adams, Richard Ely, Edmund James, and Edwin Seligman, among others, all studied in Germany, and were impressed not just by the ideas they learned, but also by the academic institutions built by their professors, especially the Verein für Sozialpolitik. The Verein had been founded in 1872 to bring together German intellectuals to address the pressing problems of the day, and its members became well known for their role in the Methodenstreit, a long-running protest against the Austrian school of economics. On the basis of their own inductive, empirical, historicist approach, members of the Historical School vigorously objected to the Austrians’ deductive, axiomatic approach, insisting that economic facts cannot be separated from national context, particularly because of economics’ relationship to a nation's history and culture, as well as its specific issues of policy and distribution.Footnote ¹⁴⁷ The opposition to universal economic laws put the Historical School in direct opposition to laissez-faire, which was purported to apply to all economies, regardless of national distinction. Adams and the other American economists returned to the United States thoroughly convinced of inductive, historicist, empirical, institutional economics and ready to challenge the orthodoxy, ascendant in its commitment to deduction, rationalism, naturalism, and universalism.

In 1885, Adams, Ely, and other American economists who had studied in Germany founded the American Economic Association (AEA) in order to, in Ely's words, “accomplish in America what the Verein für Socialpolitik has done in Germany.”Footnote ¹⁴⁸ The AEA's original statement of principles began by declaring, “laissez faire is unsafe in politics and unsound in morals; and it suggests an inadequate explanation of the relations between the state and the citizens.”Footnote ¹⁴⁹ The journal Science, sensing a controversy, invited the founding members of the AEA to state their principles in a series of articles in 1886. What followed was a heated exchange between the “new school,” that challenged the orthodoxy on first principles by insisting that economic science must be inductive, empirical, institutional, and the “old school,” that invoked the principles of deduction to argue that the scientific validity of economics depended on recognizing economic laws as natural and universally valid.Footnote ¹⁵⁰

Adams penned one of the opening salvos in an issue of Science from early July 1886. According to the view of the new school, economic analysis must take into account not only “the economic nature of man,” but also “the material surroundings of men,” as well as “the legal structure of society.”Footnote ¹⁵¹ Rejecting the abstracted assumptions of the orthodox approach, Adams insisted that economic life does not occur in a vacuum, but is embedded in society, and unless social factors are taken into account, economic analysis will fail to describe reality. Economic science, for Adams, was a discipline whose responsibility included not just accurate observation and portrayal of economic reality, but its findings must be useful for government officials and policymakers. In order to be useful, economic analysis would need to take social context into account.

The old school did not take these challenges lying down. Arthur T. Hadley responded to Adams's piece in the next issue of Science, where he diagnosed Adams's problem: “The error lies in confounding the material to which a science is applied, with the material out of which it is built; or—to put the same thing in another form—in identifying the material of a science with the materials of an art.”Footnote ¹⁵² Hadley distinguished between science and art in order to restrict the scope of economic analysis. In his view, the context in which man is situated, whether material or legal, was irrelevant to economic analysis.Footnote ¹⁵³ Instead, those material or legal conditions are precisely what should be the subject of economic policymaking. Economic science should provide the information necessary to make decisions regarding public administration, but, argued Hadley, to base that economic science on previous decisions of public administration would be illogical. The laws on which economics relies are always valid, independent of particularities of context.

Adams did not let the point go, and he replied to Hadley in the following issue, where he insisted that context must be relevant to economic science and that Hadley's conception of context was overly narrow. “Lego-historical facts,” he wrote, “are material out of which to construct an economic science.”Footnote ¹⁵⁴ Against the orthodox view that economic science should be deductively sound, logically derived from first principles, Adams insisted that it must be “analytical and constructive,” because economic life is always embedded in, and therefore secondary to, the social.Footnote ¹⁵⁵ Hadley seemed to understand social context as being completely constituted by a legal framework, thereby denying Adams's position that social reality is constructed out of a multitude of interactions, some voluntary and others not. Adams mocked Hadley's understanding by comparing him to an astronomer, and his method to the “astronomical method of investigation,” whereby one constructs a system of thought to build a straight line and then measures how crooked it is in reality.Footnote ¹⁵⁶ According to the AEA, economists relying on the deductive approach mistakenly focused on measuring imaginary theories, thereby overlooking the actual facts constituting economic reality.

The AEA attacked the orthodoxy on two levels. Their method caused economists to overlook the pressing facts of economic reality, and because they overlooked the facts, their theories were therefore invalid. Against this view, the AEA insisted on an inductive, empirical, institutionalist method, which required that the scientific validity of economic laws rest on social facts, such as material and legal conditions. According to the AEA's view, a world of difference existed between economics and astronomy, the most important being that humans create economic facts but do not create astronomical ones. Induction provided a framework for economists to observe how economic facts are causally reducible to a collection of social facts. For the AEA, economic laws were produced through inference based on observation. Social facts, such as laws, history, and material surroundings, constituted the content of relevant observations. Members of the AEA may have been primed for such an approach by their German professors, but they found that induction most accurately captured their intuitions about contemporary American life. Laissez-faire was destroying the social fabric. Induction, empiricism, and institutionalism provided the AEA with the framework to observe and interpret that doctrine's effects, and to craft potential solutions.

Elements of the debate were surely scholastic, but the implications for the discipline of economics were profound because the split between inductive and deductive foundations led to opposing views on pressing social issues, not the least of which was monopoly.Footnote ¹⁵⁷ According to the new school, the old school's disregard for facts had led them to argue that monopolies could not, and should not, be regulated because only by allowing the laws of supply and demand to function would the most efficient and just outcome be achieved. The new school distinguished themselves by centering their analysis on the material and legal circumstances that made monopolies possible, and it was on these grounds that they argued for government regulation, in a manner that echoed Macune's approach.

Indeed, Macune's methodology may have been shaped by the AEA's agitation, for he was certainly aware of their activities. After laying out Macune's position on regulating railroad monopolies through competition, an 1890 issue of the National Economist distinguished Macune's theory from two popular alternatives. Briefly mentioning Hadley's theory of monopoly, James Hudson wrote that, “The other is an ingenious theory of the classification of different classes of business, made by Prof. H.C. Adams, and supported by Prof. E. J. James.”Footnote ¹⁵⁸ Hudson was referring to the theory of “natural monopoly,” which Adams had introduced and James had made popular. The theory of natural monopoly proposed a solution to the monopoly problem orthogonal to Macune's in that Adams argued for direct state control of these businesses, while Macune stressed the importance of reconfiguring the underlying economic structure. Both, however, relied on the same inductive, empirical, institutional methodology, in that both saw monopolies proceeding from economies of scale, rather than political corruption or privilege.

Adams defined natural monopolies as businesses for which expansion would always lead to increased returns. In a sense, if a business saw economies of scale, it was a natural monopoly. Adams identified communication (telegraph and post), transportation (roads and railways), and utilities (gas) as the most common natural monopolies. But, he noted, “There are many other lines of business which conform to the principle of increasing returns, and for that reason come under the rule of centralized control. Such businesses are by nature monopolies.”Footnote ¹⁵⁹ The upshot of Adams's theory of natural monopoly was that such businesses should be publicly owned and run by the state because they were naturally predisposed to centralization.

Natural monopolies, however, were not natural in the a priori sense intended by the orthodox economists. Rather, in Adams's view, a monopoly was natural to the extent that its position was entailed by a web of myriad social conditions, whereby no single cause could be isolated to account for the business's increasing returns. Because of its degree of embeddedness, the only way to control the behavior of a natural monopoly without a far-reaching reconfiguration of the social fabric was to turn its ownership and management over to the state. “We certainly deceive ourselves,” wrote Adams, “in believing that competition can secure for the public fair treatment in such cases [of natural monopoly], or that laws compelling competition can ever be enforced.”Footnote ¹⁶⁰ For Adams, the problem was twofold. First, competition between natural monopolies did not entail adjustments to price according to supply and demand, but caused real destruction to the firms’ productive capacities. Because natural monopolies were founded in economies of scale, reducing output due to competitive pressure led to significant losses, which were suffered not by the firms, but by the public.Footnote ¹⁶¹ Government would ideally be able to craft economic regulations to avoid this pitfall and still achieve an efficient outcome, but Adams questioned this as well, because the regulations would need to be so far reaching, which led to the second problem with regulating natural monopolies.

Even if the orthodox economists recognized the existence of natural monopolies and their potential dangers, they argued that government regulation would likely do more harm than good because it would interfere with the natural laws of economics.Footnote ¹⁶² In their view, government intervention would only further the opportunities for corruption, both moral,Footnote ¹⁶³ and through mismanagement.Footnote ¹⁶⁴

Placed in charge of complex organizations, government officials would fail to understand the natural laws of economics, and would operate businesses in a manner harmful to the public, in part because politicians are subject to political, rather than economic, incentives: if industries are placed under state control, “we should run the risk of having facilities granted and capital invested, not because business needed them, but because they were demanded by doubtful states or influential members of Congress.”Footnote ¹⁶⁵ In Hadley's eyes, the attempts at regulating the railroads that had been pursued following the demands of farmers, the so-called Granger laws, were deeply flawed and ineffective because “a more powerful force than the authority of the courts was working against the Granger system of regulation. The laws of trade could not be violated with impunity.”Footnote ¹⁶⁶ The farmers’ efforts, no matter whether justified by the Supreme Court, could not bend railroad practices to their will, because the natural laws of economics would necessarily prevail. While Hadley's critique of the Granger laws proceeded from a judgment of inefficiency, Godkin's was more direct, describing them as “robbery,” and, when referring to the law, putting “justice” in quotation marks.Footnote ¹⁶⁷

For Adams, however, the law of the land was not economic necessity, but the public good, and he believed that state regulation could and should serve the public. In his eyes, his opponents’ mistake was to take the effects of noninterference as justification for barring state control of private enterprise. But noninterference was itself the problem, argued Adams: “The policy of restricting public powers within the narrowest possible limit tends to weaken government and render it inefficient; this leads to corruption on the part of public officials, which in its turn, invites to yet greater corruption in private practices.”Footnote ¹⁶⁸ Against his laissez-faire-inclined opponents, Adams argued that the choice of noninterference would be more prone to corruption and inefficiency because of the stakes involved. A well-designed Civil Service could enact harmonizing regulations,Footnote ¹⁶⁹ such that the competition between natural monopolies, which was widely recognized to be harmful, would be prevented. According to Adams, an economist who takes up the argument for laissez-faire based on a fear of corruption and inefficiency “commits a grave error of mistaking a result for a cause.”Footnote ¹⁷⁰ Adams's solution to natural monopoly represents an attempt to reconcile the orthodox economists’ concern for economic necessity with a democratic concern for an economic structure that serves the public good. Accordingly, Adams lent support to the Granger laws: “Certain businesses are regarded as of a quasi-public character, and on that ground are adjudged to be under the control of the law . . . the decisions in the so-called Granger cases established for law, and in public opinion, the right of the states to control railroad property.”Footnote ¹⁷¹ Demonstrating that support for the Granger laws could be formulated on scientific grounds, Adams directly challenged the position of the orthodox economists.

The AEA upstarts thus presented a threefold challenge to the old school economists who advocated deduction and laissez-faire. They disputed the first principles that undergirded the deductive methodology, they questioned the conclusions of the old school regarding laissez-faire, and, by presenting an argument against laissez-faire in the language of science, the AEA threatened to validate the demands of farmers and labor for an increased role of the state in the economy.Footnote ¹⁷² Sharing Macune's view that in a democracy popular sovereignty must extend to the economic sphere, the AEA proposed an expansive conception of democracy that challenged the existing economic distribution. The old school had relied on their authority as experts to repel demands for more equitable distribution of resources by claiming that such demands were ungrounded in science.Footnote ¹⁷³ Godkin, for instance, wrote “[W]e trust they [the public] will ask themselves, not how many votes the new movement probably numbers, but whether it has a solid reason for existence; whether the arguments of its supporters are true, or mere hollow imitations of reasoning.”Footnote ¹⁷⁴ While the deductive economists had once commanded exclusive control over expert authority, the credentialed economists of the AEA presented the possibility that experts would lend their authority to validating the Populists’ and labor parties’ demands.Footnote ¹⁷⁵ In order to prevent widespread acceptance of increased economic intervention, the old school economists were presented with two strategies: either they could undercut the credentials of the AEA upstarts, or they could invalidate the AEA's inductive method on scientific grounds. They did both.

DEFEATING CONTINGENCY

Mugwump leaders like Godkin led a charge against members of the AEA that resulted in many losing their academic positions, and those who remained in the academy were forced to strategically adapt their views. This development of the economics profession left an enduring legacy because it was academic credentials that enabled economists to lead the Progressive reforms central to early twentieth-century American state building. Those economists who retained their credentials, such as Adams, directed Progressive reforms along the lines dictated by a deductive, rationalist, naturalistic method, thus structuring reforms that reflected a conception of democracy constrained by economic laws. Seen from this angle, the Progressive Era represents not only a marked shift in American economics, but suggests that the defeat of Populism can be understood as the stabilization of a constrained conception of American democracy, where popular sovereignty cannot extend to the economic sphere.

Because Americans had been observing the revolutions unfolding in Europe over the course of the nineteenth century, when the Haymarket Affair occurred in May 1886, public fears of revolution ran high. It was the perfect opening for the AEA's opponents to attack. Unfortunately for Ely, his book on the labor movement was published directly following Haymarket, even though he had written it beforehand.Footnote ¹⁷⁶ Presented the opportunity to connect Ely's economic theory with the public's fears about revolution, Godkin and his associates began a campaign to have Ely fired from his professorship at Johns Hopkins.Footnote ¹⁷⁷ While he was able to keep his position, Ely's influence steadily waned, and his career was repeatedly threatened over the following years. He gave up his position as secretary of the AEA in 1892, and, following the 1894 Pullman Strike, found himself on trial at the University of Wisconsin for his views.Footnote ¹⁷⁸ Adams, too, came under serious pressure. Following a speech at Cornell in March 1886, where he endorsed the labor movement, he lost his position there, and when he went to assume the professorship he had arranged at the University of Michigan, the university president pushed him to publicly renounce his views.Footnote ¹⁷⁹ Other AEA members were also pressured, including Edward Bemis, who was forced out of the University of Chicago,Footnote ¹⁸⁰ and Edmund James, who was forced out of the Wharton School.Footnote ¹⁸¹

In addition to attacking the careers of the AEA economists, the opponents of the AEA also attacked the scientific validity of the AEA approach. Godkin, for instance, charged that the AEA was engaged only in political, rather than scientific, debate. Deeply committed to the deductive program of a priori natural laws, Godkin saw no scientific value in the AEA's program: “There is hardly a trace of science in their [AEA members’] talk any more than in that of city missionaries. What they are asking us to do is simply to try a hazardous experiment in popular government.”Footnote ¹⁸² The members of the AEA responded in kind, shaping their work to meet the standards of the profession, as articulated by the old school.

Richard Ely and John Bates Clark both changed their views considerably in order to tailor their research away from threatening the old school's deductive, rationalist, naturalistic, and laissez-faire principles,Footnote ¹⁸³ but Adams's shift was the most illustrative.Footnote ¹⁸⁴ In 1897, he published The Science of Public Finance, which one can read as his attempt to reestablish scientific credibility in a profession overtly hostile to induction, empiricism, historicism, and institutionalism. While some passages echo his earlier commitments,Footnote ¹⁸⁵ his articulation of the “science of public finance” is explicitly deductive and naturalistic:

By emphasizing the importance of grounding research in previously formulated hypotheses, Adams echoes Godkin's articulation of the deductive method. The inductive, empirical method employs hypotheses as well, but according to that method, hypotheses must proceed from observation, and they are always subject to invalidation by conflicting observations. This is why Adams's former professors of the German Historicist School had insisted that economists must first gather statistics before they were able to formulate any theories about the economy.Footnote ¹⁸⁷ Adams stated his goal in the present volume as the exact opposite. He wrote that, while the necessary statistics do not yet exist, his goal is to formulate a theory in order to guide future investigations:

Despite Adams's attempts to qualify his explicit rejection of induction,Footnote ¹⁸⁹ his seeming reversal did not go unnoticed.

Edwin Seligman, one of the cofounders of the AEA, reviewed Adams's The Science of Public Finance in Political Science Quarterly, and his comments reveal the distance Adams had travelled from his previous position. Seligman suggested that Adams's privileging of theory may be valuable in its own right, but “we miss not only historical examples, but also any detailed statement of actual fiscal methods in America and any comparison with the institutions of other countries.”Footnote ¹⁹⁰ Praising Adams where he does present historical examples,Footnote ¹⁹¹ Seligman also slyly notes the change in Adams's methodology: “In this detail Professor Adams has forgotten the general doctrine which he elsewhere so eloquently inculcates.”Footnote ¹⁹² And while Adams had earlier identified himself as a socialist,Footnote ¹⁹³ Seligman notes that his position now “lies midway between the two extremes of laissez faire and socialism.”Footnote ¹⁹⁴ The shift in Adams's thought from challenge to capitulation illustrates the general trend among other AEA economists, as he began to treat economics as a technical field removed from political struggle, rather than viewing economics as a field on which to fight those struggles.Footnote ¹⁹⁵ And while the AEA had “quietly abandoned its statement of principles,” including its opposition to laissez-faire, as early as 1888, the organization grew steadily less politically charged, and moved further from its founding methodology, as the nineteenth century drew to a close.Footnote ¹⁹⁶

By 1898, American economics had been transformed so significantly that Arthur Hadley was elected president of the AEA. While the AEA had abandoned its principled opposition to laissez-faire and its scientific commitment to an alternative methodology, Hadley and others had changed their views as well. Emerging from the disputes between the inductive and deductive economists was a new synthesis, which accepted the role of the state in the economy, but still clung to the deductive, universalistic method.Footnote ¹⁹⁷ Adams's The Science of Public Finance illustrates the methodological background of the synthesis,Footnote ¹⁹⁸ but Hadley's 1898 presidential address set the tone for how economists would employ this synthesis through their political involvement in the coming years of the Progressive Era.Footnote ¹⁹⁹

In his address, Hadley argued that economists could and should play a key role in navigating the necessary conflict between democracy and the economic system. Echoing Godkin's admonitions against popular government, Hadley perceived a necessary conflict between democracy and economics: “Under the current system of political ethics there is in fact a direct antagonism between the theory of economics and the practical working of representative government.”Footnote ²⁰⁰ The problem, in his eyes, was that representatives acted only in terms of the interests of their constituents, and not for the nation as a whole. The solution was for economists to take a more central role in directing government policy. While his advice was offered in relation to imperial projects, there is reason to believe that it also applied to the domestic situation.Footnote ²⁰¹

Accordingly, Hadley directed economists away from interacting with, and educating, the people, and instead suggested that they focus on commissions, advisory boards, and other such positions from which they would have direct access to the executive and other key decision makers. Hadley's advocacy for economists to involve themselves in politics marked an “amazing reversal” from his position in the 1880s, but he had not rejected the necessity of allowing natural economic laws to function free of democratic intervention.Footnote ²⁰³

While continuing to advocate the necessary role of the state, the new synthetic view of the AEA explicitly rejected the view that popular sovereignty should extend to the economy. Despite having earlier formulated a methodology that mirrored Populist economic thought, the early members of the AEA became active reformers during the Progressive Era under the mantle of the deductive, rationalist, naturalistic approach that undergirded the new synthesis.Footnote ²⁰⁴ To the extent that Progressive reforms reflected Populist demands, the purge of inductive, empirical, institutional economics ensured that none of those reforms embodied the key elements of Populist thought.

From 1887 through the Progressive Era, academic economists played a key role in shaping railroad regulations. Economists recognized that railroads posed broad questions for social science regarding the relation of state to economy, and the issue was widely taken up in the academy.Footnote ²⁰⁵ Hadley, for instance, had published an influential book on the topic in 1885,Footnote ²⁰⁶ and Adams's 1887 “Relation of the State to Industrial Action”Footnote ²⁰⁷ had also pushed the discussion forward. Hadley and Adams had both been involved in the passage of the 1887 Interstate Commerce Act (ICA), which had brought the ICC into existence, but they had, at the time, disagreed over the proper method of regulation, with Adams's invocation of induction and empiricism undergirding his defense of an unequivocally strong role for the state. The ICC, however, remained ineffective until Progressive Era reforms updated its administrative and enforcement capabilities,Footnote ²⁰⁸ and while Hadley and Adams were again involved in this effort, their engagement was now defined by Hadley's program.Footnote ²⁰⁹

The resurgence of economists’ attention to government action in the economy coincided with the birth of the Progressive Era, and their views were taken up by reformers aiming to apply scientific solutions to political conflicts. At the turn of the century, no conflict had more influence over the shape of the American state than the regulation of railroads. The struggles over railroad regulation “became a public conflict over the institutional norms by which twentieth-century Americans would define the nature of democratic citizenship, market landscape, state structure, and the relationship between public and private.”Footnote ²¹⁰ These widespread impacts depended on the minutiae of regulation, one of which was the ICC's efforts to mediate the disagreements between shippers, who argued that the railroads’ rates were too high, and railroads, who argued that they would be bankrupted if rates were reduced. At issue was the larger question of governmental authority, and, especially, what role the state should play in the emerging capitalist order.Footnote ²¹¹ Despite Hadley and Adams's earlier disagreement over the role of the state in the economy, once Adams abandoned his views about method, his analysis of the railroad problem complemented Hadley's.

Adams had written extensively on railroad rates since 1887, but at the turn of the century, he offered a new analysis. The ICC had regulated railroad rates based on the overall financial structure of each railroad company, evaluating its debt structure and securities holdings in order to determine what a “reasonable” rate would be. In 1901, however, Adams told the Commission that, “he no longer trusted the long-standing practice of evaluating reasonable rates according to whether they provided sufficient revenue to pay interest on bonds.”Footnote ²¹² Debt, argued Adams, does not properly signify the value of property. Instead, the ICC should set rates based on assessments of the actual physical value of railroad property. Conveniently for the ICC, Adams's position corresponded with the Supreme Court's ruling in Smyth v. Ames (1898), and, in 1911, the ICC successfully formed a commission under the Mann-Elkins Act to perform a physical valuation of the railroads.Footnote ²¹³ Adams provided the justification for the commission in a series of works after 1901, and the commission itself was led by Hadley.Footnote ²¹⁴

The involvement of the AEA in the Mann-Elkins Act demonstrates the degree to which their inductive, empirical economic method was rejected. In 1886, Adams's challenge to the deductive orthodoxy had taken the form of proposing a solution to the railroad question fundamentally at odds with Hadley's. But, in 1911, Adams was not only working with Hadley, but had fully abandoned the inductive, empirical program.Footnote ²¹⁵ The Hadley-led commission gave the ICC the resources and justification for setting rates on a basis they described as factual, rather than political, social, or legal. By nominally rooting their approach in science instead of politics, the commission hoped to avoid the intractable disputes that had previously prevented effective regulation, but their new method was far from perfect:

The problem facing the ICC was that their new regulatory scheme required disaggregating a collection of economic facts that were contingent on one another. Most striking about the failure of the ICC's new scheme is that it would have avoided this particular problem had it been structured according to inductive, empirical, institutional economics. The major flaw of the regulatory framework was that it took the concept of economic value as a natural fact rather than an observation embedded in social and political context.Footnote ²¹⁷ Because the Mann-Elkins Act considerably increased the ICC's regulatory ability and had far-reaching consequences, this distinction, based on Adams's economic reasoning, combined with the Court's decision in Smyth v. Ames, was not lost on contemporaries. Legal scholar Gerard Henderson, for instance, complained that, contrary to the ICC's focus on apparent facts of value, actual railroad rates “depend on compromise and practical adjustment rather than deductive logic. The whole doctrine of Smyth v. Ames rests upon a gigantic illusion.”Footnote ²¹⁸ But illusion or not, the hegemony of deductive, rationalist, naturalistic economics had a lasting influence on the ICC, and by extension, the path of the twentieth-century American political development.

The passage of Mann-Elkins revived the ICC from decades of ineffectiveness by introducing a new framework for regulation and, with it, a new role for the American state. By significantly altering accepted regulatory practices, the act was “a landmark of Progressive Era legislation.”Footnote ²¹⁹ The ICC had originally been designed to enact meaningful state regulation of railroad business activities, but it was only with the changes brought by Mann-Elkins that such regulation was possible.Footnote ²²⁰ The framework evolved over the next decade, so that “the Interstate Commerce Commission (ICC) emerged in the 1920s as the signal triumph of the Progressive reconstitution,” and it set the standard for the Progressive Era's other reform efforts.Footnote ²²¹ That standard mandated a “pattern of regulation by agencies that were independent from politics and staffed by experts, [and thereby] it established the American mode of regulation.”Footnote ²²² As the ICC provided an effective model for other agencies, the diffusion of its framework held broader significance, as “it became a symbol of a new democracy and a new political economy.”Footnote ²²³ According to this new model, the relationship of state to economy had to be adjudicated by the strict limitations of deductive, universalistic economics. The state may play a role in the economy, but only so long as democracy is not allowed to interfere with economic laws, for under this new system, it was broadly recognized that, “the laws of trade were stronger than the laws of men.”Footnote ²²⁴

Some have recognized alternative streams of thought embedded in the Progressive Era, emphasizing for instance the more experimentalist approach of Louis Brandeis and the Federal Trade Commission (FTC).Footnote ²²⁵ Certainly the Progressive Era was not entirely overrun by deductive, universalistic economics and a constrained conception of democracy, but it must be acknowledged that the exception proves the rule. Brandeis may have offered an approach to economics that was not strictly deductive, and the FTC may have pursued a novel regulatory strategy.Footnote ²²⁶ Despite the potential that each of these alternatives may have held for a conception of democracy that extended popular sovereignty to economics, they represent only a marginal aspect of Progressive reform, for the underlying consensus ran deep:

Progressive reforms largely followed the model of the ICC, which relied on expert commissions, staffed by economists trained in deductive, universalistic economics who directed government to meet the requirements of economic law. Even recognizing that Progressives represented a diverse range of thought from left to right,Footnote ²²⁸ it must be emphasized that beliefs about the universal validity of natural laws undergirded the dominant viewpoints. Herbert Croly, for instance, a major leader of Progressive thought,Footnote ²²⁹ rejected strict laissez-faire, but he did emphasize that popular sovereignty needed to bend to natural economic law, which “stirred anxieties even in his own mind about the role that would remain for democratic citizens.”Footnote ²³⁰ Decades earlier, there had been a handful of alternative approaches for leading American democracy into the future, but the Progressive Era marked the decisive rejection of a more robust conception of democracy: “this reduced vision of democracy, its sphere narrowed by administration and its authority limited to a kind of veto power, extended the deferential role mugwumps and Whigs had assigned to the people.”Footnote ²³¹ According to Progressive reformers, the same processes of natural selection applied in the Progressive Era as the Gilded Age, and the imperative for government action to follow their direction had not diminished. As such, the foundation of the twentieth-century American state was built on a conception of democracy in which popular sovereignty must be limited by natural and universal economic laws.

Progressive Era reforms may bear a superficial resemblance to the Populists’ demands, but they mark a direct rejection of the Populist vision of expansive democracy. While some of the economists who were involved with the reforms of the Progressive Era had previously defended the inductive, empirical, institutionalist methodology that grounded the strategy of Populist leaders like Macune, by the turn of the century this methodology had been thoroughly rejected. Some of the former inductive economists, such as Adams, abandoned their views, while those who did not, such as Bemis, were removed from the profession. Indeed, given that railroad regulation provided the model for Progressive reform, it is likely that, “if the coming of managerial capitalism placed unassailable constraints upon twentieth-century state structure and democratic politics, one is sure to find them in this industry.”Footnote ²³² One such constraint was the commitment to deductive, rationalist, naturalistic economics. By discrediting inductive methodology, orthodox economists limited Progressive Era reforms from realizing a greater role for popular sovereignty in the economy. Instead, while accepting the increased role of the state, the economists who shaped those reforms were careful to ensure that the underlying natural laws of the economic order remained undisturbed by the popular will.Footnote ²³³ Despite having achieved many of the piecemeal reforms he proposed, Macune's overarching vision of democracy unconstrained by economic laws remained unfulfilled.

Treating the Populist legacy as based in the enduring institutions of the Progressive Era overlooks the extent to which Macune's expansive vision of democracy was defeated as soundly as the People's Party. The state responded to Populist demands, but did so from within a deductive, rationalist, naturalistic framework, thereby necessarily constraining democracy to the demands of the economic order. The Federal Reserve, for instance, could be seen as the extension of Macune's demands for a distributed system of subtreasuries, but while Macune's subtreasury plan revolved around an extension of popular sovereignty, Progressive Era reforms entailed a “peculiar sort of democracy.”Footnote ²³⁴ Livingston notes how the Federal Reserve actually restricted the role of popular sovereignty regarding economic issues, such as the control of the money supply: “Not until the Federal Reserve System was in place were such issues finally removed from congressional jurisdiction and hence from normal political discourse.”Footnote ²³⁵ While deductive economists, such as Hadley, came to recognize the necessity of regulating the economy, they did so from the perspective of “intervention,” which implicitly treated economic laws as natural, universal, independent, and superior to manmade law. Following the advice and specifications of experts, policy was crafted to follow economics, rather than the will of the people because, in the economists’ view, the people were uneducated and unappreciative of the complexities of economic law, unable to choose the correct economic policy. This limited conception of democracy, where popular sovereignty is constrained by economic laws, defined the twentieth-century growth of the American state, and continues to define the political economic crises of the twenty-first.Footnote ²³⁶