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.It was alabel he correctly rejected.In his 1889 An Introduction to Political Economy, Ely identifi ed soci-ology as the master social science, with political economy as a subdivisionwithin the broader study of society.Christianity itself “offers us our highestconception of a society which embraces all men, and in that conception setsus a goal toward which we must move.” Society was an organism, and theideas of political economy could not be considered separate and apart fromthat organism.To his credit, Ely did not claim to be writing a comprehensive• 22 •The Principle of Cooperationtreatise, and the list of readers he thanks—Franklin Giddings, John BatesClark, Woodrow Wilson and Amos Warner, as well as his research assistant,John R.Commons—suggests from the beginning a work perhaps more ideo-logical than positive.Ely drew a sharp distinction between monopolies and trusts, acceptingand even praising the latter as big businesses seeking the gains of economiesof scale and therefore greater effi ciency.Indeed, while Ely understood com-petition as “the foundation of our present social order” and believed thatit functioned best among large enterprises, he argued that the “moral andethical level” of competition needed to be raised.But, despite his approvalof competition, Ely, like Clark, saw the evolution of society as heading inthe opposite direction.As he put it, “cooperation is the great law of socialgrowth.” Yet the interdependence among men and their differential statusrequired even cooperation to be regulated.Only regulation could lead tothe realization of “freedom and individuality” that were at the heart of theAmerican ideal.29Edwin Seligman, noting the “serious defects” in free competition, madehis colleagues’ arguments for cooperation appear to be more consistent withtraditional thought by dressing the new collective theories in classical eco-nomic form.Classical economists argued that the individual, working inhis own self-interest, incidentally produced benefi ts for society.Seligmanobserved that corporate combinations also worked for their own benefi t.Butwhile “[t]hey better their own condition, in so doing they often better thepublic condition.” Homo economicus became, in Seligman’s thinking, theeconomic group.Besides, combinations existed and monopolies were facts.They had already so shifted the price system that prices were set by the “arti-fi cial manipulation” of the combinations and not by free competition.Thiswas often to the public good, but there were evils to be prevented.Whilebemoaning the relative ineffi cacy of the Interstate Commerce Commission,Seligman argued that it provided a good regulatory model for trusts thatought to be improved upon and followed.Clark, Adams, Ely and Seligman, like others of their young colleagues,each had different visions of the principle of cooperation.But the new econ-omists almost unanimously agreed that cooperation had become a necessaryprinciple of economic organization and that competition had to be con-trolled if it were to be preserved at all.Even the conservative Arthur Hadley,who would soon join the AEA, wrote that “[a]ll our education and habit ofmind make us believe in competition.” But industrial cooperation was inevi-table and necessary.30• 23 •The Speculation Economyt h e n e e d f o r c o o p e r a t i o nThe new economic thinkers, attuned as they were to social problems, werekeen observers of business.The greatest business reality in America duringthe mid-1880s was the self-destruction of the railroads.And the most signifi -cant barrier to their self-preservation was the absence of legal devices thatcould allow them to cooperate effectively.The railroads had grown up in an era of free competition, althoughironically many were granted monopoly power within some range of theirroads.The trouble was that free competition proved too much in the face ofrapid industrialization and concentrating wealth.In their eagerness to takeadvantage of increasing market opportunities, and as new operators enteredthe market, the railroads became heavily overbuilt, with parallel lines criss-crossing the countryside and converging on the major cities in the East andMidwest.This overbuilding produced competition with a vengeance, com-petition that many of the roads could not handle
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