The Economics of Distribution

by J.A. Hobson

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Genres: Economics

372 pages, Paperback

First published January 1, 1972

About the author

John Atkinson Hobson (1858–1940), was an English economist, social scientist and critic of imperialism, widely popular as a lecturer and writer.

Hobson studied at Derby School and Lincoln College, Oxford, afterwards teaching classics and English literature at schools in Faversham and Exeter.

When Hobson relocated to London in 1887, England was in the midst of a major economic depression. While classical economics was at a loss to explain the vicious business cycles, London had many societies that proposed alternatives. While living in London, Hobson was exposed to the Social Democrats and Henry Mayers Hyndman, Christian Socialists, and Henry George's Single-tax system. He befriended several of the prominent Fabians who would found the London School of Economics, some of whom he had known at Oxford. However, none of these groups proved persuasive enough for Hobson; rather it was his collaboration with a friend, the famous businessman and mountain climber Albert F. Mummery, that would produce Hobson's contribution to economics: the theory of underconsumption. First described by Mummery and Hobson in the 1889 book Physiology of Industry, underconsumption was a scathing criticism of Say's law and classical economics' emphasis on thrift. The forwardness of the book's conclusions discredited Hobson among the professional economics community. Ultimately he was excluded from the academic community.

During the very late 19th century his notable works included Problems of Poverty (1891), Evolution of Modern Capitalism (1894), Problem of the Unemployed (1896) and John Ruskin: Social Reformer (1898). They developed Hobson's famous critique of the classical theory of rent and his proposed generalization anticipated the Neoclassical "marginal productivity" theory of distribution.

Soon after this period Hobson was recruited by the editor of the newspaper The Manchester Guardian to be their South African correspondent. During his coverage of the Second Boer War, Hobson began to form the idea that imperialism was the direct result of the expanding forces of modern capitalism. He believed the mine owners, with Cecil Rhodes, who wanted control of the Transvaal, in the vanguard, were manipulating the British into fighting the Boers so that they could maximize their profits from mining. His return to England was marked by his strong condemnation of the conflict.

His publications during the next few years demonstrated an exploration of the associations between imperialism and international conflict. These works included War in South Africa (1900) and Psychology of Jingoism (1901). In what is arguably his magnum opus, Imperialism (1902), he espoused the opinion that imperial expansion is driven by a search for new markets and investment opportunities overseas. Imperialism gained Hobson an international reputation, and influenced such notable thinkers as Vladimir Lenin and Leon Trotsky, and Hannah Arendt's The Origins of Totalitarianism (1951).

Hobson wrote for several other journals before writing his next major work, The Industrial System (1909). In this tract he argued that maldistribution of income resulted, through oversaving and underconsumption, in unemployment and that the remedy was in eradicating the "surplus" by the redistribution of income by taxation and the nationalization of monopolies.

Hobson's opposition to the First World War caused him to join the Union of Democratic Control. His advocacy for the formation of a world political body to prevent wars can be found clearly in his piece Towards International Government (1914). However, he was staunchly opposed to the League of Nations.