Parkinson, Webbs, Von Mises and Hobson 243best and the most moral system is the free market economy;
human nature not only requires it, human nature demands it.
John A. Hobson (1858-1940)
John Hobson was a social reformer, a teacher, and an author.
His entry into the field of economics caused great controversy,
since he brought the views of a reformer to the study and attacked
nationalism, imperialism, and capitalism. His major interest
was in alleviating the suffering of the poor and much of his
writing deals with the equalization of the distribution of wealth.
His major contribution is considered to be his concept of
social cost. Hobson was the first to put forth the idea that the cost
of production— wages, capital, and rent—was an inadequate
measure. Poor working conditions, inadequate ventilation or
lighting, or lack of safety precautions can cause illness, disabil
ity, slow production, and create unseen costs that traditionally
have not been taken into consideration. Hobson insisted that
those costs (to individuals and the community) must be included
as real costs of production.
Hobson shocked the economic community with his assertion
that economic slumps are the result of excessive savings. He
concluded that the workers were being paid at a wage that
precluded their buying anything but the meager essential goods.
The unequal distribution of income led to the rich having to save
an inordinate amount. Since neither the rich nor the poor were
consuming enough, new markets had to be found lest economic
downturns take hold. Hobson’s conclusion from this analysis is
his most startling and important contribution to economic theory.
In his book Imperialism: A Study, Hobson maintained that
imperialism was a necessary outgrowth of capitalism. Since
capitalism on the domestic level could not survive, it had to look
outward for markets, and imperialism was the result. The conse
quence of imperialism, in addition to the negative social affects
on those conquered by the industrial nations, was war. War was
the natural outgrowth of the competition between imperial
powers and a world at war was the consequence.
While Hobson’s theory has been taken to task by those who
claim that war between nations existed long before industrial
powers competed for foreign markets, Lenin took Hobson’s