“Intuition” is usually taken to refer to knowledge acquired without conscious reasoning (this is the phrase typically used by the dictionaries). I am using it here in a way that follows roughly from that, but with the more specific sense that an intuition may be a guide for conscious reasoning. That is, especially at the beginning of a line of thought, a thought sometimes comes to us through which we feel that we are beginning to grasp something of whatever it is we seek to understand. I am using the word “intuition” for such a thought. This is neither quite the normal use, nor the more technical meaning of the word in philosophy, in Kant, for example. But it is close enough that it seems to me the right word. We are already thinking about whatever it is when we have the thought, so it is not entirely independent of conscious reasoning. Still, when it arrives we do have the sense of it coming to us; and once arrived we feel that it helps us to see into the subject in a new way. Intuition gives insight, and this is what allows us to think that we are beginning to have a grasp of the matter (the German word Begriff – from greiffen, to grasp – translated as “idea”, “notion”, “concept”, helps here: the intuition, giving us a grasp, helps us to form notions, concepts about the matter).

It seems to me that in the origin and development of economic thought two things, that I am going to call intuitions in the above sense, have had an especial formative influence. I certainly cannot prove that those who did the originating and developing thought of them in this way, or even ever stated them in the simple form that suits them best. Nonetheless, they help me to understand the origins and development of economics, and perhaps they will help others. In any event, fortunately, I don’t think that anyone can disprove the claim, so off we go.

Let us call them, rather grandly, two founding intuitions of economics:

             Money is different from the things it buys

            We buy things because we want them

Both seem entirely plausible, even obvious and commonplace. Neither seems controversial, nor do they seem to contradict one another. Nonetheless, they do have an obvious difference: one makes a distinction, the other forms a unity. This difference leads us, at length, to recognize, first, that they are far from obvious and commonplace; second, that they do contradict one another.

So, just for the sake of argument, accept that they are “founding intuitions”. But, then, they occupy historically different positions. The first is the intuition of Classical Political Economy, the second of “Neoclassical” Economics (I put “Neoclassical” in quotation marks because, although it has become the standard term, it is highly misleading). The first corresponds to the origin of economics, the second to its “development” (again, I put “development” in quotation marks because it may be development in an entirely mistaken direction).

Now, we must try to work out where their obvious difference leads, and why it is important. So, the difference is between distinction and unity. It leads to two different sets of terms for understanding two concepts that all economists agree must be understood: usefulness, the way in which things or people are useful in the satisfaction of wants or needs; exchangeability, the way in which things exchange with one another in a quantitatively comparable manner.

Money is different from the things it buys implies that exchangeability and usefulness also are different from one another: money is tied to exchange, the things bought are tied to use. So, to understand the two concepts, it will be necessary to begin with two terms, one for each of them, use-value, exchange-value.

We buy things because we want them establishes a connection between exchangeability and usefulness, they are of the same kind, or parts of one larger whole, buying and wanting together, that can be unified in one concept, utility.

So:

           Money is different from the things it buys → use-value | exchange-value

           We buy things because we want them → utility

This is all fairly obvious, but there is another implication that is less so, at least, it has been either ignored or unnoticed:

Money is different from the things it buys, in distinguishing between the money and the things, also distinguishes between two different spheres, or loci, of activity: money and buying belong in the one, the things and their use in the other. We buy things in one place, use them in another. We call one place “the economy”, the other the “private sphere” of family and friends.

In the origins of economics, in the century or more of sporadic works on disparate subjects gradually consolidating as they led to the first two systematic accounts (by two Scottish writers) – James Steuart’s Principles of Political Economy (1767), and Adam Smith’s Wealth of Nations (1776) – and in those two works themselves, there is not so much a clear or systematic statement of the distinction between spheres of activity, but a groping towards it. Fortunately, it happens that in the early nineteenth century, a writer who was nothing if not systematic, had carefully read his eighteenth-century predecessors, and, especially, both Steuart and Smith, and presented that towards which they were groping. Hegel delineates modern society as constituted by three spheres:

                                                          Family   |   Civil Society  |   State

                                                                         (including Economy)

The crucial point is that this depicts only modern society, earlier societies managed perfectly well with no more than Family and State, if that. Modern society requires the third, intermediate, sphere, Civil Society. The distinctive feature of Civil Society, the modern sphere, is that in it, for the first time in history, individuals confront one another as isolated, self-interested beings, using each other only as means to their own ends … and yet, in so doing, they create a system of total inter-dependence. Hegel drew the foundational idea of the necessary unity of the seeming opposites, self-interest and inter-dependence, from Steuart and Smith, both of whom, in their different ways, make it explicit and necessary. All three also see participation in what Hegel terms Civil Society as only one aspect of human activity: in Hegel’s terms, Family and State require something quite different from individuals than their self-interested activity in Civil Society. Individuals, then, are complex beings, who can only be as they are in Civil Society because of what they are as family members and citizens of states.         

We buy things because we want them, uniting buying and wanting, implies that all human activity is of the same kind, and, therefore occurs in the same, or the same kind of, place. No theoretical distinction can be made between where we buy things and where we use them. The most consistent neoclassicals (Becker, above all), and all Austrian economists, are clear about this: human beings are economic beings by nature, so “the economy” is all, there is nowhere else to go – nowhere else to run to. Moreover, it follows (and this is the necessary outcome of the concept of utility) that individuals are self-contained beings isolated by self-interest. That is, they are nothing more than that part of individuality manifest in Civil Society; and they are so by nature: just as no other sphere exists than the economy, so no qualitative change occurs over the course of history; modernity is the same as all earlier epochs. The details are worked out over time, but they are already implicit in the simple statement we buy things because we want them.

Perhaps this is enough to show that the two intuitions

                                                    Money is different from the things it buys

                                                    We buy things because we want them

are not only different, but lead in entirely different, opposed, directions, and that if we want to have any kind of understanding of economics we had better work the differences through.